Tammy Romo
Executive Vice President and Chief Financial Officer at Southwest Airlines
Thank you, Bob, and hello everyone. I'll provide a quick overview of our overall financial results and some color on our outlook. On a GAAP basis, we generated a $446 million profit in third quarter, our $0.73 per diluted share, and this was driven by the $763 million of PSP proceeds that offset a sizable portion of salary, wages and benefits expenses. Excluding this temporary PSP benefit and other smaller special items, our net loss was $135 million, a $0.23 loss per diluted share. Our third quarter results are clearly not where we need them to be and we are disappointed by the step back in revenue trends as a result of the Delta variant.
Even so, we are pleased our bottom line came in above expectations and improved sequentially from second quarter. And we currently have $16.2 billion of cash and short-term investments on our balance sheet. This is well in excess of our outstanding debt. And it is relatively in line with where we were at the time of July earnings before the impact of the Delta variant began. Overall, travel demand has proven to be more resilient today and the overall impact of this variant has been much less than what we previously experienced since the pandemic began.
Before I get into the specifics, I want to offer my thanks and appreciation to our employees. Their warrior spirits have been in full effect since the pandemic began and I commend them for continuing to work together to combat this pandemic. I am also pleased for them that we were able to accrue additional profit sharing in third quarter as a result of our GAAP profits. Third quarter available seat miles and non-fuel unit costs were within our guidance ranges. And I am pleased with our overall cost control throughout the quarter. Operating revenues were better than guidance, and that was primarily due to improving revenue and booking trends in the second half of September soon after our last investor update as COVID-19 cases began to decline.
And fuel cost per gallon was slightly better than guidance. We provided a lot of color for you in our press release regarding revenue and cost trends as well as fleet plans. So I will just add a few additional thoughts. We had four points of notable cost pressure in the third quarter and these four points were primarily due to premium pay as well as other ramp up costs. In terms of premium pay going forward we currently anticipate that we will need less in the fourth quarter as we have reduced our flight schedules to provide more staffing cushion. The reduction in premium pay provides a roughly 2 point unit cost tailwind from third to fourth quarter. Our two largest ongoing inflationary cost categories are salary, wages and benefits and airport cost.
These two categories alone are driving 3 points to 4 points of unit cost inflation in fourth quarter on a year-over two-year basis. First on salary, wages and benefits, which represents roughly 3 points of the unit cost pressure, we have higher than normal wage rate inflation, including the recent increase in the minimum hourly wage. It is a tight labor market, which is also putting pressure on wages. In addition, we should have nearly everyone back from extended leave by year-end and we are hiring across all work groups to support the current operation.
Second, on airport cost; by year-end, we will have 18 new airports in our network. So our overall properties footprint has increased and we are experiencing rate pressure across the board. The rate increases we are anticipating continue to be much higher than inflation, especially in this environment. Our fourth quarter trips are expected to be down 13% compared with fourth quarter 2019, which under-utilizes our space and exacerbates the inflation we're currently seeing. I expect better operating leverage from our airport facilities in the future as we are able to add depth and frequency back to our network over the next few years.
Also in fourth quarter, we have 4 points to 5 points of notable cost pressure above and beyond general inflation. These cost pressures are attributable to hiring our vaccination incentive pay program and lower productivity than historical norms. We expect cost pressures from lower productivity to persist in the near term and subside as we are able to restore the majority of the network. Even with these inflationary pressures, our fourth quarter bottom line outlook is trending better than third quarter except for higher fuel prices. Fuel prices even after factoring in higher hedging gains are $0.26 higher in fourth quarter than in third quarter, which is roughly $120 million more in fuel expense sequentially.
That said, our strong fuel hedge is currently expected to provide $0.18 of hedging gains here in fourth quarter and underlying revenue trends have picked up, which is encouraging even though we are expecting a loss for the fourth quarter in this high fuel price environment. Our flight schedules are currently published through April 24. We have reduced our fourth quarter capacity to down 8% on a year-over-year basis and we currently expect our first quarter 2022 capacity to be down 6% compared with first quarter 2019.
We currently have 72 firm orders and 42 options next year and we will continue to evaluate option exercises as decision points arise. Regardless of our capacity plans next year, we continue to believe that taking the additional 2022 options will yield a positive net present value on aircraft replacement if we don't deploy them in the network. As far as other commentary on 2022, we will share more about our fleet and capacity plans and our financial outlook at Investor Day. And I'm looking forward to seeing you all there.
So with that, I will turn it over to Andrew.