Southwest Airlines Q4 Results Beat Street View; Expects To Be Profitable In FY22, Except Q1

Southwest Airlines Co LUV reported fourth-quarter FY21 operating revenue growth of 150.9% year-over-year to $5.05 billion, beating the consensus of $5.01 billion. Operating revenue declined by 11.8% compared to 4Q19.

• Adjusted EPS improved to $0.14 compared to $(1.29) in 4Q20, beating the consensus of $0.08.
• The airline reported an adjusted operating income of $209 million, compared to a loss of $(1.19) billion a year ago. Total operating expenses increased by 52.6% Y/Y to $4.86 billion.
• Southwest Airlines cash provided by operating activities for FY21 was $2.32 billion, compared to cash used of $1.13 billion a year ago.
• The company held cash and equivalents of $15.5 billion and a fully available revolving credit line of $1.0 billion as of December 31, 2021. The company had debt obligations that totaled $10.7 billion.
• The operating revenue per available seat mile was 13.77 cents, a decrease of 3.8%, driven by a passenger revenue yield decrease of 4.1% and a load factor decrease of 2.1 points, compared with 4Q19.
• Following strong travel demand during the holiday period, the company said it is experiencing a revenue headwind in 1Q22 due to a softness in bookings and an increase in trip cancellations.
• "With the Omicron variant and weather impacting our results, we expect losses in January and February and a return to profitability in March 2022. Based on our current plan, while we no longer expect to be profitable in first quarter, we expect to be profitable for the remaining three quarters of this year, and for full year 2022," said Incoming CEO Bob Jordan.
• Q1 Outlook (compared with 1Q19): The company expects Operating revenue to be Down 10% - 15%. The company expects Q1 ASMs to be down ~9% (prior expectation down ~6%).
• FY22 Outlook (compared with FY19): Capacity to be down ~4% (prior Down 3% - Up 2%).
• Price Action: LUV shares are trading lower by 0.82% at $43.35 during the premarket session on Thursday.