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Southwest Airlines Navigates Challenges, Achieves Record Revenues in 2023

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2024 Vision: Southwest Airlines Outlines Strategic Plan for Growth and Profitability

Southwest Airlines (NYSE: LUV) reported its financial results for the fourth quarter and full year 2023, indicating a net loss of $219 million in Q4 but a full-year net income of $498 million. The company achieved record operating revenues of $6.8 billion in Q4 and $26.1 billion for the full year. Despite challenges, Southwest Airlines maintained a liquidity of $12.5 billion, surpassing its outstanding debt of $8.0 billion. CEO Bob Jordan highlighted achievements in 2023, including network restoration, labor agreements, and a strong investment-grade balance sheet.

Financial Highlights:

  • Q4 net loss: $219 million, or $0.37 loss per diluted share.
  • Q4 net income (excluding special items): $233 million, or $0.37 per diluted share.
  • Full-year net income: $498 million, or $0.81 per diluted share.
  • Full-year net income (excluding special items): $986 million, or $1.57 per diluted share.
  • Record operating revenues: $6.8 billion in Q4 and $26.1 billion for the full year.
  • Liquidity: $12.5 billion, exceeding outstanding debt of $8.0 billion.

CEO Statement: Bob Jordan emphasized significant progress in 2023, acknowledging achievements in network restoration, labor agreements, and maintaining an investment-grade balance sheet. Despite a net loss in Q4, Jordan expressed confidence in the company’s 2024 plan, focusing on profitability, cost control, and strategic initiatives.

2024 Outlook:

  • Expected double-digit year-over-year operating revenue growth and operating margin expansion.
  • Initiatives contributing to approximately $1.5 billion in incremental pre-tax profits.
  • Anticipated growth in available seat miles (ASM) by approximately 6% in 2024.
  • Focus on regaining efficiencies and managing costs amid inflationary pressures.

Fuel Costs and Hedging:

  • Q4 2023 economic fuel costs: $3.00 per gallon.
  • Full-year 2023 economic fuel costs: $2.89 per gallon.
  • Fuel efficiency improved by 4.0% year-over-year in Q4 2023.
  • Fair market value of fuel derivative contracts as of January 17, 2024: Asset of $252 million.

Costs and Expenses:

  • Operating expenses increased 9.5% year-over-year in Q4 2023.
  • Q4 2023 CASM-X decreased by 18.1% year-over-year.
  • Q4 2023 profit-sharing expense accrued: $118 million.

Capacity, Fleet, and Capital Spending:

  • Q4 2023 capacity increased 21.4% year-over-year.
  • Full-year 2023 capacity increased 14.7% year-over-year.
  • Estimated 2024 capital spending: $3.5 billion to $4.0 billion.
  • Planning for approximately 79 MAX aircraft deliveries in 2024, with 847 aircraft in the fleet by year-end.

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