Southwest Airlines has posted a profit of $446 million for the three-month period from July to September. The positive result comes after what the airline’s CEO called “a challenge for us operationally”. The airline reported an increase in operating revenues of 161% year on year.
While the Delta variant of the COVID-19 virus has set the US aviation recovery back slightly, the industry is continuing to bounce back. American Airlines, United Airlines, and Alaska Airlines have all posted a profit for the third quarter of 2021. Alaska Airlines’ profit was even its first since the COVID-19 pandemic began.
It seems as though Southwest Airlines is almost back to normal. The airline’s operating revenue for the third quarter of 2021 was only 17%, down from the third quarter of 2019. The airline had anticipated that this would be slightly worse at 18-20% down. Despite this, the airline’s load-factor was bang on what it hoped at 81%, compared to an expectation of 80-85%.
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The airline is in a good position as the vast majority of its flights are domestic. According to schedule data from aviation experts Cirium, 305,918 domestic flights were scheduled for Q3, accounting for 99% of total operations. This compares to just 3,183 international flights over the same period. With a heavy focus on domestic flying, the airline sees little impact from international border restrictions.
An uncertain future
Southwest Airlines is looking at the current quarter with slightly less certainty. The airline expects its operating revenue to be anywhere from 15-25% down compared to Q4 in 2019. The airline has hit a little turbulence so far in October. The lingering effects of the Delta variant are expected to cost the airline around $40 million. Meanwhile, recent weekend flight cancelations are expected to set it back by $75 million. Despite this, the airline’s CEO expects Q4 to be better than Q3, commenting,
“With respect to our fourth quarter 2021 revenue outlook, while there are lingering effects from the summer COVID-19 surge and recent operational challenges, we are encouraged with 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.”
What’s going on with the fleet?
The airline is continuing with its fleet renewal through the pandemic, albeit at a slower pace. So far, the airline has taken 69 Boeing 737 MAX jets off of Boeing’s hands. Just one of these was delivered in Q3, and none are planned to arrive in Q4.
Just 24 of the airline’s fleet remains grounded due to fewer scheduled flights. These are all Boeing 737-700 aircraft, with one to be returned to the lessor in Q4. This will mean that 18 aircraft will have been removed from the fleet during the calendar year, giving a total fleet size of 728 jets by the end of the year.
At the start of October, Southwest exercised options for 16 Boeing 737-7 MAX jets to be delivered evenly in 2022 and 2023. This means that the airline now has firm orders for 399 MAX jets (250 -7s and 149 -8s), while a further 252 options can be exercised. These could be from either variant of the MAX family. The order book currently runs from 2021 to 2031. Over half of the aircraft on order are expected to replace the airline’s 461 remaining 737-700 aircraft.
What do you make of Southwest’s Q3? Will things get better in Q4? Let us know what you think in the comments!