01—Abstract
Summary
Summary of the 10-K filed February 7, 2023. Cited figures are marked; the original filing is the authoritative source.
Southwest Airlines Co. reported record 2022 operating revenues of $23.8 billiona, up from $15.8 billion in 2021 and above 2019 levels, driven by strong leisure demand and higher yields.
Net income fell to $539 millionb from $977 million in 2021, which benefited from $2.7 billion of Payroll Support grant allocations that did not recur in 2022. Operating income was $1.017 billion, compared with $1.721 billion in 2021. Fuel and oil expense rose to $5.975 billion, and the company cited a $800 million pre-tax financial impact from the late-December 2022 Winter Storm Elliott disruption, which led to more than 16,700 cancelled flights and a fourth-quarter net loss of $220 million.
The balance sheet shows $9.5 billionc in cash and cash equivalents plus $2.8 billion in short-term investments at December 31, 2022, against total long-term debt of $8.0 billion. Capital expenditures reached $3.9 billion, largely reflecting aircraft progress and delivery payments, and the company guides to $4.0 to $4.5 billion in 2023 capital spending. The company reinstated a $0.18 quarterly dividend in December 2022 after suspending payouts during the pandemic, and it has suspended share repurchases with about $899 million remaining under its authorization.
Key forward-looking items include the Boeing 737 MAX delivery schedule, with 46 contractually due 2022 aircraft rolled into 2023 and about 100 deliveries now estimated for 2023, and the FAA certification timing for the -7 model. Approximately 83 percent of employees are unionized, and several major groups, including pilots and flight attendants, are in negotiations. The company also disclosed pending securities, derivative, and consumer class actions, along with a U.S. Department of Transportation investigation opened in January 2023 related to the December disruption.
02—Key points
Key Highlights
- Record 2022 operating revenues of $23.8 billion, up from $15.8 billion in 2021 and exceeding 2019 levels, led by a 27.3 percent increase in passenger yield per RPM.
- Net income of $539 million (diluted EPS $0.87) versus $977 million in 2021, which included $2.7 billion of Payroll Support allocations; non-GAAP net income was $723 million.
- Winter Storm Elliott disruption in late December 2022 cancelled more than 16,700 flights and was estimated at roughly $800 million pre-tax, producing a fourth-quarter 2022 net loss of $220 million.
- Liquidity of $12.3 billion in unrestricted cash and short-term investments at December 31, 2022, with operating cash flow of $3.8 billion and $3.9 billion of capital expenditures.
- Capital spending guidance of $4.0 to $4.5 billion for 2023, with about 100 expected Boeing 737 MAX deliveries; 417 firm MAX orders and 147 options remain, and the -7 certification timing is uncertain.
- Dividend reinstated at $0.18 per quarter in December 2022; share repurchases remain suspended with approximately $899 million left under the authorization.
- Labor and litigation pressure: about 83 percent of employees are unionized, several major groups are in contract negotiations, and multiple securities and consumer class actions are pending, including one filed in January 2023.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 7, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $23.81B$15.79B | +50.8% |
| Operating Income | $1.02B$1.72B | −40.9% |
| Net Income | $539.00M$977.00M | −44.8% |
| EPS (Basic) | $0.91$1.65 | −44.8% |
| EPS (Diluted) | $0.87$1.61 | −46.0% |
| Shares Outstanding (Basic) | 593.00M592.00M | +0.2% |
| Shares Outstanding (Diluted) | 642.00M609.00M | +5.4% |
05—Questions
Frequently Asked Questions
How did Southwest perform financially in 2022 compared with 2021?
Operating revenues rose 50.8 percent to a record $23.8 billion, while operating income fell to $1.017 billion from $1.721 billion. Net income declined to $539 million from $977 million, largely because 2021 included $2.7 billion of Payroll Support grant allocations that were not repeated in 2022.
What caused the fourth-quarter 2022 net loss?
The company attributed a net loss of $220 million in the fourth quarter to the wide-scale operational disruption from Winter Storm Elliott. It estimated the pre-tax impact at about $800 million, including roughly $410 million of lost operating revenue and about $390 million of net higher operating expenses.
How much cash does Southwest have and what are its capital spending plans?
At December 31, 2022, the company had $9.5 billion in cash and cash equivalents and $2.8 billion in short-term investments. It expects 2023 capital spending of $4.0 to $4.5 billion, including approximately $1.2 billion of non-aircraft spending and roughly 100 MAX deliveries.
Is Southwest returning cash to shareholders?
The company reinstated a quarterly dividend of $0.18 per share, declared in December 2022 and paid January 31, 2023, and intends to keep declaring dividends quarterly. Share repurchases are suspended, with about $899 million remaining under the existing authorization.
What risks could affect Southwest's Boeing fleet plans?
The company depends on Boeing as its sole manufacturer of 737 aircraft, and delivery of the 737-7 depends on FAA certification whose timing the company cannot control. Of 2022 contractual deliveries, 46 aircraft were undelivered and rolled into 2023, and the company now expects delivery delays to extend into 2024.
06—Continue