01—Abstract
Summary
Summary of the 8-K filed February 6, 2024. Cited figures are marked; the original filing is the authoritative source.
Southwest Airlines Co. filed this Form 8-K on February 6, 2024 to update its fourth quarter and full year 2023 results, previously furnished on January 25, 2024.
The update reflects an additional $51 milliona of expense for the Pilot ratification bonus accrual, including related payroll taxes, recorded in Salaries, wages, and benefits within Operating expenses. After an $8 million decrease in Profitsharing expense, the net impact is a $43 million reduction to operating income. Updated full year 2023 operating income is $224 million and GAAP net income is $465 million, or $0.76 per diluted share, compared with $498 million, or $0.81 per diluted share, previously reported.
Fourth quarter 2023 GAAP net loss widened to $252 millionb, or $0.42 per diluted share, from $219 million, or $0.37 per diluted share. The company also lowered its first quarter 2024 CASM-X guidance to an increase of 5 to 6 percent year-over-year, from 6 to 7 percent, reflecting an offsetting decrease in Salaries, wages, and benefits outlook for the first quarter. Full year 2024 CASM-X guidance was revised to an increase of 5.5 to 7 percent year-over-year, from 6 to 7 percent.
The company's other 2024 guidance, including capacity, economic fuel cost per gallon, interest expense, effective tax rate, and capital spending of $3.5 to $4.0 billionc, was not updated. The filing also presents non-GAAP results excluding special items.
Full year 2023 net income excluding special items was $980 milliond, or $1.56 per diluted share, versus $986 million, or $1.57 per diluted share, previously. Investors should note that the revision is primarily a timing and accounting-estimate adjustment tied to the newly ratified pilot contract, and that the company will include the final 2023 figures in its Form 10-K.
02—Key points
Key Highlights
- Additional $51 million Pilot ratification bonus accrual, including payroll taxes, recorded in Q4 2023 Salaries, wages, and benefits, partly offset by an $8 million decrease in Profitsharing expense
- Full year 2023 GAAP operating income revised to $224 million from $267 million; net income revised to $465 million from $498 million
- Q4 2023 GAAP net loss revised to $252 million, or $0.42 per diluted share, from $219 million, or $0.37 per diluted share
- Full year 2023 diluted GAAP EPS revised to $0.76 from $0.81
- Q1 2024 CASM-X guidance lowered to an increase of 5% to 6% year-over-year from 6% to 7%
- Full year 2024 CASM-X guidance revised to an increase of 5.5% to 7% year-over-year from 6% to 7%
- Other 2024 guidance not updated, including 847 aircraft at year end, 23% to 24% effective tax rate, and $3.5 to $4.0 billion capital spending
03—Questions
Frequently Asked Questions
Why did Southwest revise its fourth quarter and full year 2023 results?
The company completed a more detailed analysis of its Pilot ratification bonus accrual as of December 31, 2023, including related payroll taxes. The ratification date of the collective bargaining agreement with the Southwest Airlines Pilots' Association was January 22, 2024, and the earlier estimate in the January 25, 2024 earnings release was subject to change because of the complexity and short timeframe.
How much did the revision affect 2023 earnings?
Full year 2023 operating income was revised to $224 million from $267 million, and GAAP net income was revised to $465 million from $498 million. Diluted GAAP EPS was revised to $0.76 from $0.81. Excluding special items, net income was revised to $980 million, or $1.56 per diluted share, from $986 million, or $1.57 per diluted share.
What changed in the company's 2024 outlook?
The final Pilot accrual assessment resulted in an offsetting decrease to first quarter 2024 Salaries, wages, and benefits. As a result, first quarter 2024 CASM-X guidance was lowered to an increase of 5% to 6% year-over-year from 6% to 7%, and full year 2024 CASM-X guidance was revised to an increase of 5.5% to 7% from 6% to 7%. Other guidance was not updated.
What are the company's expectations for capacity in 2024?
The company expects full year 2024 ASMs to increase about 6% year-over-year. Second quarter 2024 capacity is expected to rise 8% to 10% year-over-year, and third quarter 2024 capacity is expected to rise 3% to 5% year-over-year. The flight schedule is published for sale through October 2, 2024.
Where will the final 2023 financial results be reported?
The 2023 financial statements reflecting the incremental expense will be included in the Company's Annual Report on Form 10-K. The updated results are furnished as Exhibit 99.1 to this Form 8-K.
04—Continue