Southwest Says it Will Return to Profitability in 4th Quarter After $135M Loss Last Quarter

Southwest Airlines expects to return to profitability in the fourth quarter of 2021 and next year after posting an adjusted loss of $135 million in the previous quarter. The Dallas-based company expressed hope for continued recovery from the COVID-19 pandemic, saying that the emergence of the Omicron variant has not yet taken a toll on its bookings.

Strong travel demand over the Thanksgiving holiday and better-than-expected leisure travel bookings into December, according to company executives, have bolstered the positive projections.

The company said that while projected revenue in the fourth quarter will still fall between 10 and 15 percent below the same time period in 2019, it marks an improvement from earlier estimates of revenue falling between 15 and 25 percent below 2019 levels.

The airline, the fourth-largest in the nation in terms of revenue, technically posted a profit in the third quarter, but the gains were due to federal pandemic aid.

"With any luck, last quarter was our last losing quarter," Southwest CEO Gary Kelly told analysts during an investor event in New York.

One way the company hopes to boost revenue is by adding a fourth type of "fare product" to its current offerings midway through 2022, USA Today reported.

Though the company hasn't released specific details on what the new option would entail, Southwest Executive Vice President and Chief Commercial Officer Andrew Watterson said that it would fall above its lowest-priced fare type and include features for which "customers will happily pay a little bit more."

Southwest Expects Profits
Southwest Airlines says travel was strong over Thanksgiving and that momentum is carrying into December. The airline said December 8, 2021, that as a result, it's offering a better forecast for fourth-quarter revenue—although the current quarter will still be weaker than the same period in 2019, before the pandemic hit. Above, travelers check in at the Southwest Airlines counter as the Thanksgiving Day holiday approaches November 23, 2021, at Denver International Airport in Denver, Colorado. David Zalubowski/AP Photo

Southwest said it hopes to restore dividends and perhaps resume buying back its own shares in 2023. U.S. airlines are prohibited from buying back stock through September 2022 in exchange for taking government aid.

Executives laid out a five-year plan to raise revenue with a new credit-card deal with JPMorgan Chase, by capturing more business travel and adding the new fare level.

Southwest needs revenue to keep up with rising costs. The company has raised pay for some jobs because of the tight labor market, and it is negotiating new contracts with unions for pilots and flight attendants. Southwest expects to spend $1 billion to $2.5 billion a year from 2023 through 2026 to overhaul its fleet with hundreds of new Boeing 737 Max planes.

Southwest struggled with high numbers of canceled flights over the summer and part of October, and several hundred flights a day continue to run late. To fix the operation, Southwest trimmed its schedule and expects to hire about 4,000 workers by year-end to replace some of those who quit during the pandemic.

Southwest, the fourth-largest U.S. airline by revenue, is entering a transition from longtime CEO Kelly to Robert Jordan, the company president, who will become CEO on February 1.

"We are completely aligned in terms of the direction of the company," Jordan said of himself and Kelly. "We are not reinventing the company post-pandemic. It's quite the opposite."

Southwest shares rose about 1 percent in afternoon trading, less than other major U.S. airlines.

The Associated Press contributed to this report.

Southwest COVID Recovery
Southwest Airlines expects to return to profitability in the fourth quarter of 2021 and next year after posting an adjusted loss of $135 million in the previous quarter. Above, A Southwest Airlines airplane taxies from a gate at Baltimore Washington International Thurgood Marshall Airport on October 11, 2021, in Baltimore, Maryland. Kevin Dietsch/Getty Images