Southwest posts $68 million 4Q profit, expects higher costs

Passenger queues up to check in at the counter for Southwest Airlines Monday, Jan. 3, 2022, in the main terminal of Denver International Airport in Denver. (AP Photo/David Zalubowski)

In this April 20, 2021 file photo, a Southwest Airlines Boeing 737 passenger plane takes off from Fort Lauderdale-Hollywood International Airport in Fort Lauderdale, Fla. Thanks to strong passenger traffic over the winter holidays, Southwest Airlines is reporting a $68 million profit for the fourth quarter. Southwest said Thursday, Jan. 27, 2022 it was the airline's first profit without federal pandemic aid since late 2019. (AP Photo/Wilfredo Lee)

DALLAS (AP) — Southwest Airlines posted a narrow $68 million profit for the fourth quarter, aided by full flights during the holidays, but the airline warned Thursday that it expects to lose money in the first three months of 2022.

The rise of the omicron variant of COVID-19, along with a bad stretch of winter weather, will lead to losses in January and February, but the Dallas-based airline predicted it will be profitable for the remainder of the year.

Robert Jordan, who will take over as CEO on Feb. 1, said the omicron variant of the virus has delayed an improvement in ticket sales that Southwest had expected in early 2022.

New reported cases of COVID-19 cases remain extremely high, but began to decline last week. Citing that trend, Jordan said, “the worst appears to be behind us, and we are optimistic about current bookings and revenue trends for March.”

Delta, United and American all previously warned that omicron will delay the recovery of travel demand. Delta forecast this month that bookings will pick up around the President's Day holiday weekend in late February.

Southwest attempted to grow faster than other U.S. airlines as travel rebounded last year, but the strategy backfired, as staffing shortages contributed to high numbers of canceled flights last summer and fall.

When other airlines started canceling flights around Christmas because of employees being out with COVID-19, Southwest was not hit as hard. Helane Becker, an analyst for financial-services firm Cowen, said Southwest seemed to have been prepared – it trimmed the December schedule to a more manageable size after its own struggles with cancellations and delays earlier in 2021.

At an investor event last month, Southwest executives pledged to improve reliability and return the company to growth, which has been crimped the last couple years because of the grounding of its Boeing 737 Max planes and the pandemic.

The fourth-quarter profit was a reverse from a loss of $908 million a year earlier. Excluding special costs, Southwest earned 14 cents per share. Analysts expected adjusted earnings of 7 cents per share, according to a FactSet survey.

Revenue more than doubled to $5.05 billion, topping analysts' forecast of $4.97 billion.

Labor and fuel costs jumped in the fourth quarter, when Southwest boosted pay for employees to pick up extra work. Southwest, which shrank by thousands of workers in 2020, went on a hiring spree last year and expects to add another 8,000 workers this year.

Shares of Southwest Airlines Co. were little changed nearly two hours before the start of regular trading Thursday.