Southwest Airlines (NYSE:LUV) shares plummeted 9.6% following a first-quarter earnings and revenue report that fell short of Wall Street expectations. The airline reported a loss of $0.36 per share, which was slightly below the analysts' estimate of a $0.33 loss per share. Revenue for the quarter was also below the consensus estimate, coming in at $6.3 billion against expectations of $6.42 billion.
Despite the miss, the company achieved a record for operating revenues in the first quarter, signaling a robust demand for air travel. However, this was overshadowed by the reported net loss of $218 million, excluding special items, and the company's stock took a significant hit in response to the financial underperformance.
President and CEO Bob Jordan expressed disappointment over the first-quarter loss but highlighted that the company ended March with healthy profits and margins. He also noted the record number of passengers carried and the sequential improvement in nominal unit revenue. Jordan attributed these improvements to an acceleration in managed business revenues and network adjustments that began in March.
Southwest is facing challenges due to revised aircraft delivery expectations from Boeing, which are affecting operational and financial planning for 2024 and 2025. In response, the airline has taken actions to mitigate the impact, including closing operations at several airports and implementing cost control initiatives such as limiting hiring and offering voluntary time off programs.
The airline's liquidity remains strong at $11.5 billion, well above its debt outstanding of $8.0 billion. Jordan thanked the airline's employees for their resilience and mentioned that cost reduction actions are starting to show benefits. He also pointed out that labor rates are now certain, with agreements ratified with 11 labor groups over the past 18 months.
Looking ahead, Southwest is intensifying its network optimization efforts and evaluating options to enhance the customer experience. The company expects to end 2024 with approximately 2,000 fewer employees compared with the end of 2023. Jordan remains optimistic about the strategic initiatives underway, which are aimed at enhancing customer experience, delivering operational excellence, and creating new revenue opportunities.
The airline's financial goals remain a top priority, as they work towards financial prosperity and creating value for shareholders amidst various industry challenges. The company plans to share more details at its Investor Day in September.