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Southwest Airlines to launch new fare level in 2022

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.
Credit: AP
FILE - This Wednesday, July 17, 2019 file photo shows Southwest Airlines planes at Phoenix Sky Harbor International Airport in Phoenix.

Southwest Airlines said Wednesday that it expects to turn a profit in the fourth quarter and throughout 2022 as air travel recovers from the pandemic, and that the new COVID-19 variant is not hurting bookings.

Company executives said travel demand was strong over Thanksgiving and leisure bookings have continued to be better than expected into December.

Dallas-based Southwest said fourth-quarter revenue will still be 10% to 15% below the same period in 2019. However, that is an improvement over Southwest's earlier forecast that revenue would fall short of 2019 levels by 15% to 25%.

Southwest, the nation's fourth-largest airline by revenue, reported a profit in the third quarter, but only because of federal pandemic relief. Excluding the taxpayer help, the airline posted an adjusted loss of $135 million.

“With any luck, last quarter was our last losing quarter,” CEO Gary Kelly told analysts at an investor event in New York.

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 a new, fourth fare level above its current cheapest fare in mid-2022.

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.

Credit: AP
A Southwest Airlines jetliner taxis down a runway for take off from Denver International Airport Friday, July 2, 2021, in Denver.

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 Feb. 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% in afternoon trading, less than other major U.S. airlines.

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