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Southwest Airlines 8-K Report, Financial Results (Jan 25, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed January 25, 2024
Period End
January 25, 2024
Security
LUV
In the record · 2016–202610-K1210-Q338-K204

LUV filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 204 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Jul ’17Jul ’17
  2. Material agreement8-K · Jul ’20Jul ’20
  3. Leadership change8-K · Sep ’22Sep ’22
  4. Material agreement8-K · Nov ’26Nov ’26

01—Abstract

Summary

Summary of the 8-K filed January 25, 2024. Cited figures are marked; the original filing is the authoritative source.

Southwest Airlines Co. furnished its earnings release for the fourth quarter and full year 2023 under Item 2.02 of this Form 8-K, filed January 25, 2024.

The company reported a fourth-quarter net loss of $219 milliona, or $0.37 per diluted share, and full-year net income of $498 million, or $0.81 per diluted share. Excluding special items, fourth-quarter net income was $233 million ($0.37 per diluted share) and full-year net income was $986 million ($1.57 per diluted share). Record fourth-quarter and full-year operating revenues were $6.8 billion and $26.1 billion.

Liquidity was $12.5 billionb against debt outstanding of $8.0 billion. Management said it had not yet delivered on its financial targets and is working to restore profit margins to historical levels. For 2024, the company expects capacity (ASMs) to grow about 6 percent, all carryover from 2023 network restoration, and it plans to hire below attrition so that year-end headcount is flat to down.

It expects initiatives to contribute roughly $1.5 billionc in incremental year-over-year pre-tax profit, double-digit operating revenue growth, and operating margin expansion excluding special items. Full-year 2024 CASM-X is guided up 6 to 7 percent, with economic fuel costs of $2.55 to $2.65 per gallon, capital spending of $3.5 to $4.0 billion, and an effective tax rate of 23 to 24 percent. The company also expects to end 2024 with about 847 aircraft, and it cited the Boeing 737-7 certification as a key uncertainty.

The filing notes a $426 milliond fourth-quarter increase in the Pilot ratification bonus estimate, of which $318 million was treated as a special item for full-year 2023. It also records a $107 million DOT settlement charge tied to the December 2022 operational disruption. The company ended 2023 with $11.5 billion in cash and short-term investments, a net cash position of $3.5 billion, and leverage of 46 percent.

02—Key points

Key Highlights

  1. Q4 2023 net loss of $219 million ($0.37 loss per diluted share); excluding special items, Q4 net income was $233 million ($0.37 per diluted share).
  2. Full-year 2023 net income of $498 million ($0.81 per diluted share); excluding special items, $986 million ($1.57 per diluted share).
  3. Record full-year 2023 operating revenues of $26.1 billion, up 9.6 percent year-over-year.
  4. 2024 guidance calls for roughly 6 percent ASM growth, all carryover from 2023, with about $1.5 billion in expected incremental pre-tax profit from initiatives.
  5. Full-year 2024 CASM-X guided up 6 to 7 percent; economic fuel costs estimated at $2.55 to $2.65 per gallon; capital spending of $3.5 to $4.0 billion.
  6. A $426 million Q4 change in estimate for the Pilot ratification bonus, with $318 million treated as a special item for full-year 2023; a $107 million DOT settlement charge also recorded.
  7. Liquidity of $12.5 billion versus $8.0 billion of debt outstanding; net cash position of $3.5 billion and leverage of 46 percent at December 31, 2023.

03—Questions

Frequently Asked Questions

  1. Did Southwest Airlines report a profit for the fourth quarter of 2023?

    On a GAAP basis, the company reported a fourth-quarter net loss of $219 million, or $0.37 per diluted share. Excluding special items, it reported fourth-quarter net income of $233 million, or $0.37 per diluted share.

  2. What is the company's 2024 outlook for capacity, costs, and profitability?

    The company expects full-year 2024 ASMs to rise about 6 percent, all from 2023 network restoration, with no net-new capacity. CASM-X is guided up 6 to 7 percent. It expects double-digit operating revenue growth, operating margin expansion excluding special items, and roughly $1.5 billion in incremental pre-tax profit from its initiatives.

  3. Why did fourth-quarter 2023 operating expenses rise?

    Operating expenses increased 9.5 percent year-over-year to $7.2 billion. The filing attributes $426 million of the total to an increase in the Pilot ratification bonus estimate. Of that amount, $318 million relates to periods before 2023, and the company treated that portion as a special item for full-year 2023.

  4. What is the company's liquidity and balance sheet position?

    At year-end 2023, the company had $11.5 billion in cash and short-term investments and a fully available $1.0 billion revolving credit line, for total liquidity of $12.5 billion against $8.0 billion of debt outstanding. It reported a net cash position of $3.5 billion and leverage of 46 percent.

  5. What are the main risks to the 2024 plan?

    The filing cites the timing of Boeing 737-7 certification by the FAA, Boeing's supply chain challenges that could affect aircraft deliveries, fuel price volatility, and labor cost pressures. The company also said its pilot ratification bonus amount is subject to change until it is finalized.

04—Continue

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