Southwest Airlines Posts Narrower Than Expected Adj. Loss In Q3; Warns On Q4

Southwest Airlines Co. (LUV) reported Thursday a net profit in its third quarter, compared to last year's loss, with significantly higher revenues. Adjusted loss per share was narrower than expected by analysts, and revenues beat market view.

Looking ahead for the fourth quarter, the company said it does not expect to be profitable based on the current cost outlook, and despite the current momentum in revenue trends.

For the third quarter, net income was $446 million or $0.73 per share, compared to last year's loss of $1.16 billion or $1.09 per share. The latest results reflected a $763 million offset of salaries, wages, and benefits expenses related to the receipt of Payroll Support Program or PSP proceeds under the American Rescue Plan Act of 2021.

Adjusted net loss in the third quarter was $135 million or $0.23 loss per share, compared to net loss of $1.17 billion or $1.99 per share a year ago.

On average, 17 analysts polled by Thomson Reuters expected loss of $0.27 per share for the quarter. Analysts' estimates typically exclude special items.

Third-quarter operating revenues were $4.68 billion, up 161 percent from last year's $1.79 billion, but down 17 percent from the pre-pandemic 2019. Analysts estimated revenues of $4.58 billion for the quarter.

Available seat miles or ASMs, or capacity per gallon declined 4.5 percent year-over-year, due to the return to service of more of the company's least fuel-efficient aircraft, Boeing 737-700.

Gary Kelly, Chairman of the Board and Chief Executive Officer, said, "Despite the deceleration of traffic in August and September due to surging COVID-19 cases, the third quarter 2021 demand and revenue performance was quite strong and a dramatic improvement from a year ago. That was a bright and encouraging sign of recovery."

With respect to fourth-quarter revenue outlook, while there are lingering effects from the summer COVID-19 surge and recent operational challenges, the company sees renewed momentum in leisure and business traffic, revenues, and bookings—especially over the holidays.

Except for higher fuel prices, fourth quarter 2021's overall results are trending better than third quarter 2021.

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