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

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed April 25, 2024
Period End
April 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 April 25, 2024. Cited figures are marked; the original filing is the authoritative source.

Southwest Airlines Co. (NYSE: LUV) reported a first quarter 2024 net loss of $231 milliona, or $0.39 per diluted share, and a net loss excluding special items of $218 million, or $0.36 per diluted share.

Operating revenues were a first quarter record of $6.3 billionb, up 10.9 percent year-over-year, while RASM was flat year-over-year at the low end of guidance. Operating expenses rose 12.2 percent to $6.7 billion, and CASM-X increased 5.0 percent. Liquidity was $11.5 billion against debt outstanding of $8.0 billion.

The company cut its 2024 outlook. Boeing aircraft delivery delays now limit planned 737-8 deliveries to approximately 20 in 2024, versus a previous expectation of 46, and the company plans 35 retirements, down from 49. Full-year 2024 capacity is now expected to rise about 4 percent, and full-year CASM-X is expected to increase 7 to 8 percent.

Full-year 2024 capital spending is now estimated at roughly $2.5 billionc, down from $3.5 to $4.0 billion. Management expects full-year operating revenue growth approaching high-single digits, down from its earlier double-digit expectation, and says earning its cost of capital is now more realistic beyond 2024. Southwest also plans to cease service at Bellingham, Cozumel, Houston Bush Intercontinental, and Syracuse Hancock on August 4, 2024, and expects network and initiative benefits of $1.0 billion to $1.5 billion in 2024 pre-tax profits, versus an initial plan of roughly $1.5 billion.

Balance sheet liquidity remained strong, with $10.5 billiond in cash and short-term investments and a $1.0 billion revolver fully available at quarter-end. The company reported a net cash position of $2.5 billion and adjusted leverage of 47 percent as of March 31, 2024.

Cash fell $921 million in the quarter, driven mainly by a $1.35 billion pilot contract ratification bonus payout. The filing furnishes the earnings release as Exhibit 99.1 under Item 2.02.

02—Key points

Key Highlights

  1. Q1 2024 net loss of $231 million ($0.39 per diluted share); excluding special items, net loss was $218 million ($0.36 per share)
  2. Record first quarter operating revenues of $6.3 billion, up 10.9 percent year-over-year; RASM flat year-over-year
  3. Operating expenses rose 12.2 percent to $6.7 billion; CASM-X increased 5.0 percent
  4. Boeing delivery delays cut planned 2024 737-8 deliveries to approximately 20 (from 46) and full-year 2024 capacity growth to about 4 percent
  5. Full-year 2024 CASM-X now expected to rise 7 to 8 percent; capital spending cut to roughly $2.5 billion from $3.5 to $4.0 billion
  6. Four airports to close August 4, 2024 (Bellingham, Cozumel, Houston Bush Intercontinental, Syracuse Hancock); 2024 initiative benefits estimated at $1.0 to $1.5 billion pre-tax
  7. Liquidity of $11.5 billion against $8.0 billion of debt; net cash position of $2.5 billion and leverage of 47 percent

03—Questions

Frequently Asked Questions

  1. Why did Southwest report a net loss in the first quarter of 2024?

    The filing reports a net loss of $231 million, with operating expenses rising 12.2 percent to $6.7 billion, led by a 18.6 percent increase in salaries, wages, and benefits and a 50.4 percent increase in maintenance materials and repairs. Management attributed the CASM-X increase mainly to higher labor cost increases and planned maintenance expenses. Revenue growth of 10.9 percent did not fully offset these costs.

  2. How are Boeing aircraft delivery delays affecting Southwest's 2024 plans?

    Southwest now plans for approximately 20 737-8 deliveries in 2024, down from a previous expectation of 46, and 35 aircraft retirements, down from 49. Full-year 2024 capacity is expected to rise about 4 percent, with third-quarter capacity up in the low-single digits and fourth-quarter capacity down in the low- to mid-single digits. The company says there is no assurance Boeing will meet this schedule.

  3. What changed in Southwest's full-year 2024 financial outlook?

    Full-year operating revenue growth is now expected to approach high-single digits, versus the previous expectation of double-digit growth. Full-year CASM-X is now expected to rise 7 to 8 percent, up from 5.5 to 7 percent, and the effective tax rate is now 24 to 25 percent. Management also said that earning its cost of capital is now more realistic beyond 2024.

  4. How much liquidity does Southwest have?

    Southwest ended the first quarter with $10.5 billion in cash and cash equivalents and short-term investments, plus a fully available $1.0 billion revolving credit line, for total liquidity of $11.5 billion. Debt outstanding was $8.0 billion, and the net cash position was $2.5 billion as of March 31, 2024.

04—Continue

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