SOUTHWEST AIRLINES CO. Item 7.01 Regulation FD Disclosure.
The following table presents updated selected financial guidance for second quarter 2022. These projections are based on current booking trends and the Company's current outlook, and actual results could differ materially.
2Q 2022 Estimation Previous estimation
Operating revenue compared with 2019 (a) Up 12% to 15% No change
Load factor 85% to 87% ~85%
Available seat miles (ASMs, or capacity) Down ~7% No change
compared with 2019 (a)
Economic fuel costs per gallon1 (b) $3.30 to $3.40 No change
Fuel hedging premium expense per gallon $0.05 No change
Fuel hedging cash settlement gains per gallon $0.70 $0.65
CASM-X (c) compared with 20192 (a) Up 14% to 18% No change
(a) The Company believes that comparison with 2019 is a more relevant measure of
performance due to the significant impacts in 2020 and 2021 from the pandemic.
(b) Based on the Company's existing fuel derivative contracts and market prices
as of June 16, 2022 .
(c) Operating expenses per available seat mile, excluding fuel and oil expense,
profitsharing, and special items.
The Company continues to experience strong load factors and bookings for summer
travel. The Company experienced strong revenue performance in April and May and,
thus far, strong passenger bookings and yield strength has continued in June
2022 . The Company's managed business revenues continued to improve and were down
approximately 31 percent and 23 percent in April and May 2022 , respectively,
both compared with their respective 2019 levels. The Company currently expects
second quarter 2022 managed business revenues to be down in the range of 20
percent to 25 percent, compared with second quarter 2019 levels.
The Company's 2022 cost and capacity plans remain stable and in line with
previous estimations, and its flight schedule was recently extended through
The Company has a multi-year fuel hedging program to provide insurance against spikes in jet fuel prices with significant fuel hedging protection in 2022. As ofJune 16, 2022 , the fair market value of the Company's fuel derivative contracts settling in the remainder of 2022 was an asset of approximately$758 million , which would bring full year 2022 to an asset of approximately$1.2 billion . In addition, the fair market value of fuel derivative --------------------------------------------------------------------------------
contracts settling in 2023 and 2024 was an asset of approximately
Barring any unforeseen events and based on current trends, the Company continues to expect solid profits, excluding special items, in second quarter 2022 and for the remaining quarters of this year, and for full year 20223. As ofJune 16, 2022 , the Company had cash and short-term investments of approximately$16.3 billion , well in excess of debt outstanding. The Company's adjusted debt4 to invested capital (leverage) is currently 53 percent, and it remains the onlyU.S. airline with an investment-grade rating by all three rating agencies. 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. 3Projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate those items or expenses or their 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 these projected results is not meaningful or available without unreasonable effort. 4Adjusted debt is calculated as short-term and long-term debt, including the net present value of aircraft rentals related to operating leases.
-------------------------------------------------------------------------------- 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 expectations and projected results of operations, including factors and assumptions underlying the Company's expectations and projections; (ii) the Company's plans and expectations with respect to load factors and capacity, including factors and assumptions underlying the Company's plans and expectations; and (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. 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 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; (ii) the Company's dependence on its workforce, including its ability to employ sufficient numbers of qualified Employees to effectively and efficiently maintain its operations; (iii) the impact of labor matters on the Company's business decisions, plans, and strategies; (iv) the impact of any negative developments related to COVID-19, fears or actual outbreaks of other 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, fears of terrorism or war, socio-demographic 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; (v) the impact of governmental regulations and other governmental actions on the Company's business plans and operations; (vi) the Company's dependence on third parties, in particular with respect to its fuel supply, and the impact on the Company's operations and results of operations of any third party delays or non-performance; (vii) 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; and (viii) other factors, as described in the Company's filings with theSecurities 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 endedDecember 31, 2021 . 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.
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