Southwest Airlines has published its second quarter 2023 results, which confirms that the airline has placed an order for more aircraft in recent months.
According to a statement released on July 27, 2023, since its previous disclosure in April 2023 Southwest has exercised options for an additional 18 Boeing 737 MAX 7 aircraft.
However, the airline added that the delivery timing for the MAX 7 is dependent on the Federal Aviation Administration (FAA) issuing required certifications and approvals to Boeing.
“The FAA will ultimately determine the timing of the -7 certification and entry into service, and the Company therefore offers no assurances that current estimations and timelines are correct,” Southwest said in its statement.
The carrier also confirmed that it had converted 16 existing MAX 7 firm orders into MAX 8 firm orders.
Overall, Southwest has declared that it is ending the second quarter with 803 aircraft, after it received 21 MAX 8 aircraft and retired 11 Boeing 737-700s.
Second quarter financial results
Reuters reported that shares were down around 10% following the announcement of Southwest’s second quarter results, over concerns that domestic travel was slowing.
In its statement, Southwest confirmed that it expects its revenue per available seat mile (RASM) to fall as much as 7% in the third quarter compared to a year ago.
The carrier said this was driven by “challenging comparisons from the pent-up travel demand surge in 2022, and higher than seasonally-normal growth, as the company works to close out the restoration of the network and normalizes the utilization of the fleet”.
RASM is used as a yardstick to compare the efficiency of airlines. Generally, the higher the RASM, the more profitable the airline is.
Nevertheless, the airline’s president and CEO Bob Jordan remained very positive and praised a “solid quarter amid continued strong demand”.
“We generated all-time record quarterly operating revenues, produced a very strong operational performance, and delivered healthy net income. The resilient demand environment, especially for close-in leisure travel, drove second quarter 2023 operating revenue per available seat mile to the high end of our expectations,” Jordan said.
He added: “Based on current revenue and cost trends, we expect record operating revenue and a profitable outlook again for third quarter 2023 and continue to expect year-over-year margin expansion for full year 2023.”
The results noted that the second quarter operating revenues were an all-time quarterly record of $7billion, a 4.6 percent increase, year-over-year.
“Although our network is largely restored, it is not yet optimized. We are working to align our network, fleet plans, and staffing to better reflect the current business environment. While business revenues continue to recover, they are not back to pre-pandemic levels—therefore, we are revamping our 2024 flight schedules to reflect post-pandemic changes to customer travel patterns,” Jordan continued.
He concluded: “We estimate these meaningful network optimization efforts, and the continued maturation of our development markets, will contribute roughly $500 million in incremental year-over-year pre-tax profits in 2024, which we believe will support another year of margin expansion.”
