American Airlines provided more evidence of the airline industry’s recovery on Thursday, reporting a higher-than-expected profit for the fourth quarter, while Southwest Airlines lost money due to massive flight cancellations last month.
Southwest also predicted another loss in the first quarter of 2023, despite being encouraged by March booking trends.
Southwest reported a $220 million loss after incurring a $800 million loss due to the cancellation of approximately 16,700 flights in the final ten days of December, according to airline executives during the carrier’s fourth-quarter earnings call on Thursday.
The Transportation Department is looking into whether Southwest scheduled more flights than it could realistically handle, which would violate federal anti-deceptive trade practises laws. Southwest claims that its schedule was “thoughtfully designed,” and that it had adequate staffing.
Southwest attributes the outage to a “unprecedented storm” that swept through the country around Christmas. Other airlines recovered more quickly, while Southwest’s widespread cancellations lasted for days.
On Thursday, CEO Robert Jordan apologised once more for the meltdown.
“We disrupted thousands and thousands of customers at a critical time,” he said on the earnings call. “At the end of the day, that type of disruption will never happen again.”
The Dallas-based company has hired outside experts and formed a board committee to investigate the events and reevaluate Southwest’s technology priorities.
Early findings indicate that the company’s automated crew scheduling system was unable to cope with the large number of close-to-departure cancellations that occurred in late December during what they dubbed “the event,” according to executives on the call, but they added that a software update is already being implemented to mitigate the risk of a similar problem occurring again in the future.
“The disruption uncovered a functional gap in our technology,” Southwest’s chief operating officer Andrew Watterson said during the conference call.
American Airlines also reported a profit of $803 million on Thursday. Earnings per share were $1.17 after excluding special items. According to FactSet, analysts expected $1 per share.
Revenue was a fourth-quarter record of $13.19 billion, a 40% increase from the previous year and higher than analysts expected, resulting in record annual revenue.
The Fort Worth, Texas-based carrier turned a profit for the full year and forecasts earnings of $2.50 to $3.50 per share in 2023. Based on demand and fuel trends, American expects to break even in the first quarter.
American’s results added to the picture of strong demand for air travel, which was reflected in United Airlines’ $843 million profit and Delta Air Lines’ $828 million profit.
JetBlue Airways also reported a net income of $24 million for the fourth quarter, up from a loss in the same period last year. And Alaska Air reported a $22 million profit in the fourth quarter, as well as the highest annual revenue in the company’s history of $9.65 billion.