Southwest Airlines' optimism regarding Boeing's ability to deliver an increasing amount of planes to the carrier is on the rise after an up-close assessment, executives said on a Thursday earnings call.
Southwest president and CEO Bob Jordan said he visited Boeing last week and is "pleased with the progress" he saw. "They appear to be on a good path, and we're feeling more optimistic," he said. Southwest is an all-Boeing carrier.
The airplane manufacturer suffered through a dismal 2024, including the temporary grounding of its Max 737-9 model and consequent challenges meeting contractual delivery deadlines.
At the beginning of 2024, Southwest expected to receive 79 Boeing aircraft during the year. The number in March 2024 was reduced to 46, then 20. The final number of aircraft delivered was 22.
Southwest expects to receive 38 Boeing aircraft in 2025, a conservative estimate considering the contractual number to be delivered stands at 136, but Jordan and outgoing Southwest CFO Tammy Romo said that number has the potential to go as high as 55.
Although the carrier projects growing its fleet 1 percent to 2 percent over the next three years, it plans to reduce its total aircraft count by year-end. Romo noted that the growth "does not require additional aircraft as it is funded by efficiency initiatives."
Still, Southwest wants "as many deliveries as possible to modernize our fleet and reach our goal of an all -7, -8 fleet in 2031," Romo said. "To that end, we are planning to retire 51 aircraft this year, and in addition, we are contemplating the sale of an additional 10 -800NGs."
To support that plan, Southwest needs those 38 deliveries from Boeing, Romo said. "All incremental deliveries beyond 38 offer an opportunity to accelerate the execution of our fleet modernization strategy."
Southwest Q4, FY2024 Metrics
Southwest reported fourth-quarter passenger revenue of $6.3 billion, a 1.5 percent increase year over year, on total revenue of more than $6.93 billion, which was up 1.6 percent for the period. Full-year passenger revenue increased 5.7 percent compared with 2023 to $24.98 billion. Total 2024 revenue was more than $27.48 billion, representing a 5.3 percent increase year over year.
Citing the transformation initiatives it announced during its September investor day, Jordan said, "We are already seeing the benefits of the work we did last year, and the plan is well underway. I am very pleased with the momentum we are carrying into 2025 as a result of that effort."
Fourth-quarter net income was $261 million, up from a loss of $252 million reported a year prior. Southwest's net income for 2024 remained even with that from 2023 at $465 million. Q4 capacity declined 4.4 percent year over year. Full-year capacity increased 4.1 percent. The quarter's average fuel cost was $2.42 per gallon, with full-year average fuel costs at $2.66 per gallon.
Capacity guidance for 2025 included a first-quarter decrease of 2 percent to 3 percent year over year, a second-quarter increase of 1 percent to 2 percent compared with Q2 2024, and a full-year increase of 1 percent to 2 percent versus 2024. Planned capacity growth in the second half of the year "is driven by an increase in aircraft utilization provided by redeye flying and turn-time-reduction initiatives," according to Southwest. The carrier projects first-quarter fuel costs to average $2.50 to $2.60 per gallon.
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