Southwest Airlines today reported its fourth quarter and full year 2021 financial results:
- Fourth quarter net income of $68 million, or $0.11 per diluted share
- Excluding special items1, fourth quarter net income of $85 million, or $0.14 per diluted share
- Full year net income of $977 million, or $1.61 per diluted share, driven by a $2.7 billion offset of salaries, wages, and benefits expenses related to the receipt of Payroll Support Program (PSP) proceeds under the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021
- Excluding special items, full year net loss of $1.3 billion, or $2.15 loss per diluted share
- Ended 2021 with liquidity2 of $16.5 billion, well in excess of debt outstanding of $10.7 billion
Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “We ended 2021 on a high note with our first quarterly profit, excluding special items, since fourth quarter 2019 before the COVID-19 pandemic began. Leisure travel demand was strong, particularly during the holidays, and business revenues continued to recover compared with 2019 levels. We also generated incremental revenue from our new co-brand credit card agreement secured in December 2021 with Chase Bank USA, N.A. Our fourth quarter 2021 cost performance was in line with expectations, which included hiring thousands of new Employees. While we continue to manage through an incredibly challenging operating environment, we made much progress in our recovery in 2021 and are well-positioned for future growth with our industry-leading balance sheet.
“We celebrated our 50th anniversary in 2021, opened 14 new airports, returned the Boeing 737 MAX (MAX) back into service, completed our launch of industry-standard corporate bookings through multiple Global Distribution System (GDS) platforms, and implemented a new maintenance record-keeping system—to name just a few major accomplishments despite the pandemic. Our Employees’ resilience, teamwork, and care for Customers and one another has been a marvel to watch. Southwest was, once again, named to FORTUNE’s 2021 list of the World’s Most Admired Companies—a testament to our People—and I am pleased we were able to accrue $230 million of profit sharing in 2021 for their benefit.
“On February 1st, Bob Jordan will become the 6th CEO of Southwest. Since our announcement last June, Bob has been hard at work on the transition and is well-prepared to take on this important role. I have the utmost confidence in Bob, our Leadership Team, and the People of Southwest to lead the Company forward and execute a solid strategy. I am supremely honored and privileged to have served Southwest as CEO for 18 years, and I look forward to continuing to be a part of the Team as Executive Chairman.”
Bob Jordan, Executive Vice President and Incoming Chief Executive Officer, stated, “Despite our fourth quarter profit, we had a challenging start to 2022 as we continue to recover from the pandemic. While we made significant progress in 2021, the Omicron variant has delayed the demand improvement we were previously expecting in early 2022. With COVID-19 cases trending downward, the worst appears to be behind us, and we are optimistic about current bookings and revenue trends for March 2022.
“We are experiencing higher unit cost inflation in 2022 as we continue to navigate the pandemic. The Omicron variant significantly impacted our available staffing beginning in early January 2022, and we temporarily extended incentive pay for Operations Employees through early February 2022, as we strive to maintain sufficient available staffing and minimize flight cancellations. Over the last two weeks we have returned to solid operational performance like we experienced over the holidays in fourth quarter 2021. We met our 2021 hiring goals, and we are planning to add at least 8,000 Employees this year. We are making additional investments to attract and retain talent, including our recent decision to further raise our starting hourly pay rates from $15 per hour to $17 per hour. We are currently in discussions with our workgroups to enact this increase in pay rates. Additionally, we are further moderating our first half 2022 capacity plans to provide additional buffer to the operation. Based on current plans, first quarter 2022 operating expenses per available seat mile (CASM, or unit costs), excluding fuel and oil expense, special items, and profit sharing, is expected to represent a peak, and our plans call for unit costs to ease from there into 2023.
“With the Omicron variant and weather impacting our results, we expect losses in January and February and a return to profitability in March 2022. Based on our current plan, while we no longer expect to be profitable in first quarter, we expect to be profitable for the remaining three quarters of this year, and for full year 2022. As demand for air travel recovers, we intend to substantially grow available seat miles (ASMs, or capacity) to restore the majority of our route network by the end of 2023. We remain laser focused on addressing staffing and cost challenges, and we are working urgently to return to historic productivity levels by the end of 2023, which, combined with planned ASM growth, we believe should enable a decrease in full year 2023 CASM, excluding fuel and oil expense, special items, and profit sharing, compared with full year 2022.
“Looking ahead, I am optimistic about our future. We have a solid strategy and intend to reinforce and build upon the core strengths of Southwest with several initiatives that we expect to create value and deliver significant financial benefits. In addition, we have made great progress in the areas of diversity, equity, and inclusion, as well as environmental sustainability, and we remain steadfast in our focus on these important areas with tangible goals. We have the best Employees and Leadership Team in the industry. I add my thanks and appreciation to our People for persevering when times are difficult and for never giving up on each other or Southwest. I am honored to serve them, our Customers, and our Shareholders, and I appreciate the support of Gary and the Board of Directors as I begin my new role as CEO.”
Notable 2021 announcements and accomplishments include:
- Launched service to 14 airports: Chicago O’Hare International Airport; Sarasota Bradenton International Airport; Colorado Springs Municipal Airport; Savannah/Hilton Head International Airport; Houston’s George Bush Intercontinental Airport; Santa Barbara Airport; Fresno Yosemite International Airport; Destin-Fort Walton Beach Airport; Myrtle Beach International Airport; Bozeman Yellowstone International Airport; Jackson-Medgar Wiley Evers International Airport in Mississippi; Eugene Airport in Oregon; Bellingham International Airport in Washington; and Syracuse Hancock International Airport
- Launched full-participation in Sabre’s GDS platform on July 26, 2021, achieving the Company’s goal of enabling industry-standard corporate bookings through multiple GDS platforms, also including Amadeus and Travelport’s multiple platforms (Apollo, Worldspan, and Galileo)
- Received numerous awards and recognitions, including:
- Named to FORTUNE’s list of World’s Most Admired Companies for 2021; ranked #14
- Named among the highest ranking carriers for customer satisfaction in the J.D. Power 2021 North American Satisfaction StudySM; ranked #2
- Named the top domestic airline for customer service by the 2021 Elliot Readers’ Choice Customer Service Awards
- Named a Top 100 Company by BetterInvesting Magazine
- Named to Glassdoor’s Best Places to Work list for the 12th consecutive year
- Named a Best Employer for Women 2021 by Forbes
- Named as one of MilitaryTimes Best for Vets: Employers 2021
- Named a Best Place to Work for Disability Inclusion after achieving a top score on Disability:IN’s 2021 Disability Equality Index
- Named as A Best Place to Work for LGBTQ Equality in 2021 from the Human Rights Campaign Foundation
- Named one of America’s Most Trusted Travel & Hospitality Brands by Morning Consult; ranked #3
- Named Domestic Carrier of the Year by the Airforwarders Association for the 12th consecutive year
- Ranked #1 for Most Reliable Airline and #4 for Best Airline by WalletHub
- Environmental, Social, and Governance (ESG):
- Announced long-term goal to be carbon neutral by 2050
- Established a plan of action to reduce Southwest’s carbon emissions intensity by at least 20 percent by 2030 and maintain carbon neutral growth every year through the end of the decade
- Announced multiple offtake agreements and memoranda of understanding with sustainable aviation fuel producers
- Partnered with Chooose™ and Customers to offset Southwest’s carbon emissions by providing the first U.S.-based airline carbon offset offer with loyalty points and for every dollar contributed toward offsetting Southwest’s carbon emissions, Southwest will match the contribution3
- Committed $10 million to Yale University’s Center for Natural Carbon Capture to research technological advancements and find new solutions to reduce net greenhouse gas emissions
- Joined the Aviation Climate Taskforce, a new nonprofit founded with a goal to tackle the challenges of reducing carbon emissions in aviation
- Published a Human Rights Policy which formalizes Southwest’s longstanding support of human rights principles
- Outlined the next steps in Southwest’s Continued Commitment to increase racial and gender diversity in Southwest Leadership
- Assisted with humanitarian efforts to relocate Afghanistan refugees, operating 93 domestic charter flights carrying more than 11,000 People across the United States
- Awarded $110,000 to students through the Southwest Airlines® Scholarship Program, continuing Southwest’s focus on providing more equitable education opportunities to college-bound students while promoting diverse academic pathways, and ultimately inspiring future generations to pursue careers within the airline industry
- Expanded citizenship reporting in the Southwest Airlines One Report by aligning with the Sustainability Accounting Standards Board (SASB) and United Nations Sustainable Development Goals (UNSDG) reporting frameworks, in addition to the Global Reporting Initiatives (GRI) Standards
Fleet and Capacity
The Company ended 2021 with 728 Boeing 737 aircraft, including 69 Boeing 737-8 (-8) aircraft. During 2021, the Company retired eight owned -700 aircraft, which were accelerated from 2022 into fourth quarter 2021, and returned 10 leased -700 aircraft, of which one occurred during fourth quarter 2021. In addition, the Company took delivery of 28 -8 aircraft during 2021. As of December 31, 2021, six -700 aircraft remained in temporary storage due to fourth quarter 2021 and first quarter 2022 capacity remaining below respective 2019 levels.
During fourth quarter 2021, the Company exercised 22 -7 options for delivery in 2023, and on January 1, 2022, the Company exercised another 12 Boeing options—five -8 options for delivery in 2022 and seven -7 options for delivery in 2023. Including the options exercised on January 1, 2022, the Company’s order book with Boeing contains 406 MAX firm orders (271 -7 and 135 -8) and 226 MAX options (-7 or -8) for years 2022 through 2031. The Company continues to expect that more than half of the MAX aircraft in its firm order book will replace a significant amount of its 452 -700 aircraft over the next 10 to 15 years to support the modernization of its fleet, a key cost initiative and component of its environmental sustainability efforts. Additional information regarding the Company’s aircraft delivery schedule is included in the accompanying tables.
The Company’s fourth quarter 2021 capacity increased 54.4 percent, year-over-year, but decreased 8.3 percent compared with fourth quarter 2019. Full year 2021 capacity increased 27.6 percent, year-over-year, but decreased 16.1 percent compared with full year 2019. While the Company’s flight schedule is published for sale through September 5, 2022, the Company is in the process of adjusting its published flight schedules for March through May 2022 in light of recent staffing challenges due to the Omicron variant. The Company will continue to monitor staffing trends, along with booking and cancellation trends, and adjust capacity, as needed. As such, the Company’s actual flown capacity may differ from currently published flight schedules or current guidance.
Southwest Airlines aircraft photo gallery: