Southwest Airlines reports a loss of $159 million for Q1 2023

Southwest Airlines reported a loss of $159 million for the first quarter, with the financial fallout from the holiday meltdown extending well into 2023. The company was forced to cancel over 16,000 flights in the final days of December 2022 when its staffing software failed to keep up with scheduling changes during coast-to-coast storms. This incident had a significant impact, costing the airline $325 million in revenue for Q1.

Although Southwest warned of a loss for the quarter in January and recorded an increase in customer cancellations early this year, its revenue of $5.71 billion represented a 21.6% increase from the previous year. The net loss of $159 million for Q1 2023 is still an improvement over the same period in 2022, when the airline lost $278 million.

Despite this, the Dallas-based carrier expects revenue headwinds in the second quarter, with revenue per available seat mile projected to be down 8% to 10% from last year, despite capacity being up 14%. The airline’s sales outlook has also been impacted by around $300 million in “breakage revenue” due to a higher-than-normal amount of unused flight credits issued during the pandemic that were set to expire.

Southwest has eliminated expiration dates on flight credits since last summer, but its cost outlook for the second quarter still includes wage accruals for labor contracts currently under negotiation, including for pilots and flight attendants. Excluding fuel costs, the carrier expects its Q2 costs to be up 5% to 8%. Despite these challenges, Southwest still anticipates a profit for the three months ending June 30. As a result of the announcement, Southwest shares fell more than 4% in premarket trading.