UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 13, 2023
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure.
Southwest Airlines Co. (the "Company") is providing updated guidance regarding selected financial trends.
The following table presents updated selected financial guidance for fourth quarter 2023. These projections are based on current booking trends and the Company's current outlook, and actual results could differ materially.
| 4Q 2023 Estimation | Previous estimation | |||||||||||||
| RASM (a), year-over-year | Down 9% to 10% | Down 9% to 11% | ||||||||||||
| ASMs (b), year-over-year | Up ~21% | No change | ||||||||||||
Economic fuel costs per gallon1 (c) | $3.00 to $3.10 | $2.90 to $3.00 | ||||||||||||
CASM-X (d), year-over-year2 | Down 16% to 19% | No change | ||||||||||||
| Scheduled debt repayments (millions) | ~$7 | No change | ||||||||||||
| Interest expense (millions) | ~$63 | No change | ||||||||||||
(a) Operating revenue per available seat mile ("RASM" or "unit revenues").
(b) Available seat miles ("ASMs" or "capacity"). The Company's flight schedule is currently published for sale through August 4, 2024.
(c) Based on the Company's existing fuel derivative contracts and market prices as of December 6, 2023. Includes fuel taxes and fuel hedging premium expense of $0.05 per gallon and favorable cash settlements from fuel derivative contracts of $0.12 per gallon, compared with previous expectations of fuel hedging premium expense of $0.05 per gallon and favorable cash settlements from fuel derivative contracts of $0.19 per gallon.
(d) Operating expenses per available seat mile, excluding fuel and oil expense, special items, and profitsharing ("CASM-X").
Fourth quarter 2023 travel demand and yields continue to be healthy. Leisure demand remains strong with record revenue over the Thanksgiving holiday period. Close-in bookings, including managed business bookings, have performed at the better end of expectations in November and December-to-date. As a result, the Company now expects fourth quarter unit revenues to improve to the better end of its previous guidance range, and continues to expect record fourth quarter operating revenues and record fourth quarter passengers.
The Company’s expected ASM year-over-year growth range of 14 percent to 15 percent for full year 2023 remains unchanged. The Company also continues to expect first quarter 2024 capacity to increase in the 10 percent to 12 percent range, and full year 2024 capacity to increase in the range of 6 percent to 8 percent, year-over-year. The annual goal for capacity beyond 2024 is now for low- to mid-single-digit year-over-year ASM growth with low-single-digit year-over-year trip growth. The planned capacity moderation, relative to the Company's previous goal of mid-single-digit year-over-year ASM growth, is to support the Company's long-term financial goal to deliver after-tax return on invested capital ("ROIC") well above the weighted average cost of capital ("WACC").
The Company’s fourth quarter 2023 CASM-X guidance range remains unchanged and is inclusive of market wage rate accruals for all open labor contracts related to the fourth quarter 2023 time period.
The information furnished in this Item 7.01 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
1Economic fuel cost projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate the hedge accounting impact associated with the volatility of the energy markets or the impact to its financial statements in future periods. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for projected results is not meaningful or available without unreasonable effort.
2Projections do not reflect the potential impact of fuel and oil expense, special items, and profitsharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, especially considering the significant volatility of the fuel and oil expense line item. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for projected results is not meaningful or available without unreasonable effort.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include, without limitation, statements related to (i) the Company's financial outlook, goals, plans, expectations, and projected results of operations, including returns on invested capital and including factors and assumptions underlying the Company's expectations and projections; (ii) the Company’s plans, expectations, and goals with respect to capacity, including number of trips and other factors and assumptions underlying the Company’s plans and expectations; (iii) the Company's expectations with respect to its fuel costs, premium expenses, hedging gains, and the Company's related management of risks associated with changing jet fuel prices, including factors underlying the Company's expectations; (iv) the Company’s plans and expectations related to repayment of debt; and (v) the Company’s expectations with respect to travel demand, including number of passengers. These forward-looking statements are based on the Company's current estimates, intentions, beliefs, expectations, goals, strategies, and projections for the future and are not guarantees of future performance. Forward-looking statements involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors include, among others, (i) the impact of fears or actual outbreaks of diseases, extreme or severe weather and natural disasters, actions of competitors (including, without limitation, pricing, scheduling, capacity, and network decisions, and consolidation and alliance activities), consumer perception, economic conditions, banking conditions, fears or actual acts of terrorism or war, sociodemographic trends, and other factors beyond the Company's control, on consumer behavior and the Company's results of operations and business decisions, plans, strategies, and results; (ii) the Company's ability to timely and effectively implement, transition, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives; (iii) the emergence of additional costs or effects associated with the cancelled flights in December 2022, including litigation, government investigation and actions, and internal actions; (iv) the Company's dependence on its workforce, including its ability to employ and retain sufficient numbers of qualified Employees to effectively and efficiently maintain its operations; (v) the Company’s ability to obtain and maintain adequate infrastructure and equipment to support its operations and initiatives; (vi) the impact of fuel price changes, fuel price volatility, volatility of commodities used by the Company for hedging jet fuel, and any changes to the Company's fuel hedging strategies and positions, on the Company's business plans and results of operations; (vii) the Company's dependence on Boeing and Boeing suppliers with respect to the Company's aircraft deliveries, fleet and capacity plans, operations, maintenance, strategies, and goals; (viii) the Company's dependence on Boeing and the Federal Aviation Administration with respect to the certification of the Boeing MAX 7 aircraft; (ix) the Company's dependence on other third parties, in particular with respect to its technology plans, its plans and expectations related to operational reliability, fuel supply, maintenance, environmental sustainability; Global Distribution Systems, and the impact on the Company's operations and results of operations of any third party delays or non-performance; (x) the Company’s ability to timely and effectively prioritize its initiatives and focus areas and related expenditures; (xi) the impact of labor matters on the Company's business decisions, plans, strategies, and results; (xii) the impact of governmental regulations and other governmental actions on the Company's business plans, results, and operations; and (xiii) other factors,
as described in the Company's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 2022. Caution should be taken not to place undue reliance on the Company’s forward-looking statements, which represent the Company’s views only as of the date this report is filed. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SOUTHWEST AIRLINES CO. | ||||||||
| December 13, 2023 | By: | /s/ Tammy Romo | ||||||
| Tammy Romo | ||||||||
| Executive Vice President & Chief Financial Officer | ||||||||
| (Principal Financial and Accounting Officer) | ||||||||