01—Abstract
Summary
Summary of the 8-K filed March 12, 2024. Cited figures are marked; the original filing is the authoritative source.
Southwest Airlines Co. furnished updated first-quarter 2024 guidance in an Item 7.01 Regulation FD disclosure ahead of CEO Bob Jordan's presentation at the J.P.
Morgan Industrials Conference on March 12, 2024. The company now expects first-quarter 2024 capacity (ASMs) to rise approximately 11%a year-over-year, up from the previous estimate of approximately 10%, reflecting strong operational performance with a completion factor averaging 99.3 percent since February 1, 2024. However, RASM is now expected to be flat to up 2%, down from the prior estimate of up 2.5% to 4.5%, with about one point of the decrease attributed to higher completion factors and the remainder to lower-than-expected close-in leisure passenger volume.
Economic fuel cost guidance was raised to $2.95 to $3.00b per gallon from $2.70 to $2.80, and CASM-X is now expected to increase approximately 6% year-over-year. The company expects a net loss in the first quarter of 2024 but a return to profitability in March. On aircraft deliveries, Boeing has advised Southwest to expect 46 737-8 aircraft deliveries in 2024, down from the previous expectation of 79 737 MAX aircraft, which included 58 -8 aircraft.
The company now assumes no 737-7 deliveries in 2024. As a result, Southwest plans to reduce capacity and re-optimize schedules, primarily in the back half of 2024, which will likely reduce full-year 2024 capacity by at least one point year-over-year. The company is reevaluating all prior full-year 2024 guidance, including capital spending, and will provide updated full-year guidance with its first-quarter results on April 25, 2024.
It has also halted hiring classes for multiple workgroups, including pilots and flight attendants, and now expects year-end 2024 headcount to be down year-over-year. Management stated that demand remains stable, second-quarter 2024 bookings are ahead of seasonally normal trends, and the company expects all-time record second-quarter operating revenues and positive year-over-year RASM trends throughout 2024. The company is also expecting record first-quarter operating revenues.
02—Key points
Key Highlights
- First-quarter 2024 capacity (ASMs) now expected up approximately 11% year-over-year, versus the prior estimate of approximately 10%, supported by a completion factor averaging 99.3 percent since February 1, 2024.
- First-quarter 2024 RASM lowered to flat to up 2% year-over-year from up 2.5% to 4.5%; roughly one point of the decrease is due to higher completion factors and the remainder to lower close-in leisure passenger volume.
- Economic fuel costs per gallon raised to $2.95 to $3.00 from $2.70 to $2.80; fuel hedging cash settlement gains per gallon increased to $0.03 from $0.02.
- First-quarter 2024 CASM-X now expected up approximately 6% year-over-year, versus up 5% to 6% previously, with the company expecting a net loss in the quarter but a return to profitability in March.
- Boeing advised Southwest to expect 46 737-8 deliveries in 2024, down from a previous expectation of 79 737 MAX deliveries (including 58 -8 aircraft); no 737-7 deliveries are now assumed.
- Southwest expects to reduce capacity, primarily in the second half of 2024, likely resulting in at least a one-point reduction to full-year 2024 capacity growth, and will update full-year 2024 guidance with first-quarter results on April 25, 2024.
- Hiring classes halted for multiple workgroups, including pilots and flight attendants; year-end 2024 headcount now expected to be down year-over-year, versus flat to down previously.
03—Questions
Frequently Asked Questions
Why did Southwest lower its first-quarter 2024 RASM guidance?
The company now expects first-quarter 2024 RASM to be flat to up 2% year-over-year, compared with the prior estimate of up 2.5% to 4.5%. About one point of the decrease is due to higher than expected completion factors in February and March, and the remainder is primarily attributable to lower than expected close-in leisure passenger volume.
How many Boeing 737-8 aircraft does Southwest expect to receive in 2024?
Boeing has advised Southwest to expect 46 737-8 aircraft deliveries in 2024, a reduction from the previous expectation of 79 737 MAX aircraft deliveries, which included 58 -8 aircraft. The company now assumes no 737-7 deliveries in 2024.
How will the delivery shortfall affect Southwest's capacity and operations?
Because the delivery schedule is expected to remain fluid, Southwest plans to reduce capacity and re-optimize schedules, primarily for the back half of 2024. This will likely result in at least a one-point reduction to full-year 2024 capacity plans on a year-over-year basis.
When will Southwest provide updated full-year 2024 guidance?
The company is reevaluating all prior full-year 2024 guidance, including the expectation for capital spending, and plans to provide updated full-year 2024 guidance in conjunction with its first-quarter 2024 financial results on April 25, 2024.
What is the outlook for profitability and second-quarter 2024 revenues?
Based on current trends, the company expects a net loss in first-quarter 2024 but still expects a return to profitability in March. Second-quarter 2024 bookings are ahead of seasonally normal trends, and the company expects all-time record operating revenues for the quarter.
04—Continue