Southwest Airlines is slowing both expansion and hiring to improve efficiencies as it seeks to offset the ballooning costs that pushed it into the red last quarter.
In reporting its 2023 financial results on 25 January, the Dallas-based carrier also says it does not expect to operate the Boeing 737 Max 7 this year - the type remains in certification limbo.
Southwest lost $219 million in the fourth quarter of 2023 as its operating expenses shot up 9.5% year on year to $7.2 billion, due largely to a 20% bump in salary and wage costs.
Southwest notes it was saddled with a $426 million expense last quarter related to bonuses paid under a newly ratified contract with pilots.
Despite its fourth-quarter loss, Southwest posted a $498 million full-year 2023 profit.
“We have not yet delivered on our financial targets,” says Southwest chief executive Bob Jordan. “As we work urgently to restore our profit margins to historical levels, we believe our 2024 plan provides a line of sight to improve our profitability year-over-year.”
Southwest thinks efficiencies can bolster its financial position. The company has slowed hiring and aims to end 2024 with the same number or fewer employees as it had at the end of 2023.
It also expects full-year 2024 ASKs to rise 6% year-on-year, but says that gain reflects steps it took last year to restore its network to previous levels.
“There is no net-new additional capacity in 2024. With the restoration of our network behind us, we plan to meter growth and continue to make adjustments, including capacity adjustments if needed, as we work vigorously to hit our financial targets,” Jordan says.
Southwest also laid out its 2024 fleet plans, which include an expectation to receive 79 new 737 Max from Boeing. The airline is meanwhile retiring 737NGs.
The airline is eager to receive 737 Max 7s, but that long-delayed type has yet to achieve the Federal Aviation Administration’s certification.
Boeing is now seeking an exemption to allow the FAA to clear the jet even though it does not yet meet certification standards, but that effort faces pushback from unions and at least one influential lawmaker.
As such, Southwest is not planning to operate Max 7s in 2024.
“As certification of that aircraft continues to push out, our 2024 capacity plans will not be impacted,” says Southwest chief financial officer Tammy Romo.
