Southwest Airlines’ financial performance has resulted in an overall profit at year end. However, the situation has not been easy for the airline. Many airlines have been having issues due to the pandemic as well as the difficulties in recovering due to mass cancellations and delays due to staff shortages when restrictions were lifted (as many had been laid off during the pandemic). However, Southwest Airlines has been facing additional problems. In December 2022, the airline had mass delays and cancellations due to storm Elliot which swept across the US during this time.
Southwest Airlines’ Financial Performance
In terms of Southwest Airlines’ financial performance, it was still able to make a profit overall in the year 2022, thanks to better performance in previous quarters. However, in the most recent fourth quarterly release for the three months up to December 31st, the company reported a loss of 220 million US dollars. This is a steep drop from the profit made in the third quarter in the three months up to September 30th, when the company made a profit of 277 million US dollars. However, the loss was not as dire as predicted. Because of the adverse events, the company was expecting a net loss of between 725 to 825 million US dollars. So at least, it did better than expected.
However, Southwest Airlines’ financial performance resulted in a profit of 539 million US dollars in terms of the year-end figures. This was 76.6% less than the profit made in pre-pandemic 2019, when Southwest Airlines financial performance resulted in a profit of 2.3 billion US dollars. So clearly, the airline has a long way to go before it reaches its pre-pandemic levels of profitability. However, many airlines are in the situation where they have not reached pre-pandemic levels of profitability yet.
In terms of Southwest Airlines’ revenue, the figures released show that it has improved from pre-pandemic times with an operating revenue (money received from services provided) of 23.814 billion US dollars. This is a 6.2% improvement in the operating revenue achieved in pre-pandemic 2019, which stood at 22.428 billion US dollars. The fact that revenue has increased is a good sign because it shows that the company is generating more business. So in this respect, Southwest Airlines’ financial performance has improved. However, the fact that revenue has improved, but profit has decreased indicates that the company is finding it harder to control costs.
The Company’s Response
In response to the figures released, the company’s President and Chief Executive Officer, Bob Jordan, commented that there were 16,700 flight cancellations in December due to operational difficulties, which affected Southwest Airlines’ financial performance resulting in the fourth quarterly loss. He apologized to employees and customers alike and has stated that the company will aim to bolster its operational resilience and conduct a review of the events that took place in December.
It is clear from this that the company has acknowledged the problems it faced during the adverse weather conditions in December and the impact on Southwest Airlines’ financial performance. It will no doubt reflect on this to improve on future occasions. However, Jordan points out that it made an overall profit this year and is encouraged by bookings made for March this year. Based on current trends, however, although he expects an improvement in performance at year-end 2023, the first quarter of this year is likely to result in a net loss.
As one can see, Southwest Airlines’ financial performance has taken a dip in the fourth quarter due to operational difficulties dealing with the adverse weather in December 2022. However, in terms of the year as a whole, the company did make a profit. The immediate future, however, will not be easy as the company expects to make a loss in the next quarter. The projections for the longer time, however, are optimistic. We have to wait to see how this progresses.
