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Southwest Airlines Profitable Again But Expects Slower Start to 2022



Southwest Airlines is reporting a $68 million profit for the fourth quarter. (Shutterstock)
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Southwest Airlines posted a narrow $68 million profit for the fourth quarter, aided by full flights during the holidays, but the airline warned Thursday that it expects to lose money in the first three months of 2022.

The rise of the omicron variant of COVID-19 and continuing weak business travel will cut revenue by $330 million and lead to losses in January and February, Southwest said. But the airline predicted it will be profitable for the remainder of the the year.

Nearly 6,000 Flights Canceled in January

Southwest said large numbers of employees missed work early this month because of COVID-19, contributing to the roughly 5,700 flights it has canceled so far in January, according to data from FlightAware. The Dallas-based airline said absenteeism has recently declined.

Robert Jordan, who will take over as CEO on Feb. 1, said the omicron variant of the virus has also delayed an improvement in ticket sales that Southwest had expected in early 2022.

New reported cases of COVID-19 cases remain extremely high, but began to decline last week. Citing that trend, Jordan said, “the worst appears to be behind us, and we are optimistic about current bookings and revenue trends for March.”

The CEOs of JetBlue and Alaska Airlines gave similar upbeat outlooks Thursday that virus numbers will come down and travel will rise by spring and summer.

Delta, United and American all previously warned that omicron will delay the recovery of travel demand, with Delta forecasting this month that bookings will pick up around the President’s Day holiday weekend in late February.

Airline Recovery Likely to be Uneven

Airline leaders said the recovery won’t be even, however — it will go through peaks and valleys and could drop if other variants cause the virus to surge again.

Southwest attempted to grow faster than other U.S. airlines as travel rebounded last year, but the strategy backfired, as staffing shortages contributed to high numbers of canceled flights last summer and fall.

When other airlines started canceling flights around Christmas because of employees being out with COVID-19, Southwest was not hit as hard. Helane Becker, an analyst for financial-services firm Cowen, said Southwest seemed to have been prepared – it trimmed the December schedule to a more manageable size after its own struggles with cancellations and delays earlier in 2021.

At an investor event last month, Southwest executives pledged to improve reliability and return the company to growth, which has been crimped the last couple years because of the grounding of its Boeing 737 Max planes and the pandemic.

Reversal of Losses a Year Earlier

Southwest’s fourth-quarter profit was a reverse from a loss of $908 million a year earlier. Excluding special costs, Southwest earned 14 cents per share. Analysts expected adjusted earnings of 7 cents per share, according to a FactSet survey.

Revenue more than doubled to $5.05 billion, topping analysts’ forecast of $4.97 billion.

Labor and fuel costs jumped in the fourth quarter, when Southwest boosted pay for employees to pick up extra work. Southwest, which shrank by thousands of workers in 2020, went on a hiring spree last year and expects to add another 8,000 workers this year.

JetBlue Airways posted a $129 million loss. The New York airline said high COVID-19 numbers in the Northeast led to more cancellations and weak bookings in late 2021, and first-quarter revenue will be 11% to 16% lower than the same period in pre-pandemic 2019, but a decline in omicron infections should lead to a profitable second quarter and strong summer.

Alaska Airlines’ parent company eked out an $18 million profit, and CEO Ben Minicucci said the Seattle airline expects to return to full pre-pandemic flying by summer.

In early trading Thursday, shares of Alaska Air Group rose 5%, JetBlue rose 2%, and Southwest gained less than 1%.

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