Southwest posts wider-than-expected loss as toll of holiday crisis stretches into 2023

Southwest Airlines lost $159 million in the first quarter as the financial impact of its holiday meltdown stretched well into 2023.

The carrier had canceled more than 16,000 flights in the final days of December when staffing software couldn’t keep pace with scheduling changes during coast-to-coast storms. The incident resulted in a $325 million revenue impact for the first quarter, Southwest said.

The company had warned of a loss for the quarter in January and said it logged an increase in customer cancellations early this year.

Southwest shares were down more than 4% in premarket trading.

Here’s how Southwest performed in the first quarter, compared with Wall Street expectations according to Refinitiv consensus estimates:

• Adjusted loss per share: 27 cents vs an expected loss of 23 cents.
• Total revenue: $5.71 billion vs an expected $5.73 billion.

Revenue of $5.71 billion represents a 21.6% increase from year-ago levels. Southwest’s net loss for the period of $159 million is likewise improvement over the same period last year, when it lost $278 million.

But the Dallas-based carrier said it expects revenue headwinds into the second quarter. Still, it forecast a profit for the three months ending June 30.

Southwest said revenue per available seat mile, a measure of how much an airline is generating for how much it flies, would be down 8% to as much as 10% in the second quarter from last year with capacity up 14%.

The carrier said its sales outlook was impacted by about $300 million “breakage revenue” because of a “higher-than-normal amount related to flight credits issued during the pandemic that were set to expire unused.” Southwest said it eliminated expiration dates on flight credits last summer.

The carrier expects second-quarter costs, excluding fuel, to be up 5% to 8%, a cost outlook that includes wage accruals for labor contracts that are currently under negotiation, including for its pilots and flight attendants.

Southwest will hold a call with analysts to discuss results and its outlook at 12:30 p.m. ET on Thursday.