LUV Q2 2022 Earnings

Call Details

• Call Title: Southwest Airlines Company Q2 2022 Earnings Call
• Date: July 28, 2022 at 4:30 PM UTC
• Management Team:
  • Ryan Martinez (Vice President of Investor Relations)
  • Bob Jordan (President and CEO)
  • Tammy Romo (Executive Vice President and CFO)
  • Andrew Watterson (Executive Vice President and Chief Commercial Officer)
  • Mike Van de Ven (President and Chief Operating Officer)
  • Linda Rutherford (Chief Administration and Communications Officer)

Call Summary

Financial Performance

• Q2 operating revenues were $6.7B, up 13.9% versus Q2 2019, which the company described as an all-time quarterly record.
• The call referenced a quarterly net income figure of $825M but the transcript inconsistently described that figure as both including and excluding special items.
• Operating margin excluding special items was reported at 17.4%, which exceeded second quarter 2019 levels.
• Second quarter non-fuel CASM-X was reported up 13.1% versus Q2 2019 and was stated as favorable to prior guidance.
• The company reported that its fuel hedge saved $330M in fuel expense in Q2 2022 versus market prices.
• Cash and short-term investments ended the quarter at $16.4B and the company stated it is in a net cash position with leverage at 53%.

Guidance

• The company expects Q3 operating revenues to increase 8% to 12% versus Q3 2019 and expects to be profitable in Q3, Q4, and for full-year 2022.
• Q3 capacity is expected to be roughly flat with Q3 2019 while Q4 capacity is expected to be down 1% to 2% versus Q4 2019.
• The company expects Q1 2023 capacity to be up about 10% versus Q1 2022 based on currently published schedules.
• Management disclosed two sequential Q3 revenue headwinds: a five-point headwind from the flight-credit expiration policy change and a two-point headwind from network restoration focused on short-haul markets.
• The company reaffirmed its full-year 2022 CASM-X guidance at up 12% to 16% versus 2019 levels.
• The company estimated a one-time revenue impact of $250M to $300M in Q3 from eliminating flight credit expirations and stated the ongoing impact beyond Q3 is expected to be immaterial.