Executive Vice President and Chief Financial Officer at Southwest Airlines
Thank you, Bob, and hello, everyone. First, I'd also like to thank our employees for their resilience in yet another challenging quarter impacted by the pandemic and weather disruptions. The rapid rise of the Omicron variant significantly impacted our business in January and February, resulting in a first quarter net loss of $191 million, excluding special items. March, however, was a much different story as we experienced a rebound in demand and surge in bookings during the month, driving March operating revenues higher in March 2019. This was our first monthly revenue increase relative to respective 2019 levels since the pandemic began. Last month, cash sales also represented a monthly record as bookings surged for spring and summer travel. And we posted healthy double-digit margins for the month of March despite the significant rise in market jet fuel prices. Needless to say, I am excited about the strong revenue trends in second quarter, as Andrew will cover in more detail in a minute.
Taking a look at nonfuel cost, we are tracking in line with our 2022 cost plan with first quarter CASM-X coming in at the favorable end of our previous guidance range at up 17.9% compared with first quarter 2019. Thankfully, favorable airport settlements, better operational performance in March and lower-than-expected incentive pay created some end period cost relief in first quarter relative to our guidance. As we look ahead, we continue to experience unit cost pressure from operating at suboptimal productivity levels as well as higher inflationary cost pressures, primarily in salaries, wages and benefits. We are leaving our full year CASM-X guidance unchanged at up 12% to 16% versus 2019 as we are still not able to fully utilize our assets or achieve optimal productivity levels due primarily to staffing challenges. That said, we do expect second half 2022 CASM-X growth rate relative to 2019 to ease sequentially from first half 2022. For our second quarter, we currently estimate CASM-X to increase in the range of 14% to 18% when compared with 2019 levels. Roughly half of that increase is a result of continued inflationary pressures in both labor and airport rates, which now includes labor rate increases across all work groups as best as we can estimate at this point given the current labor market and our current outlook for profitability this year.
We estimate the incremental labor accruals to be roughly one point to CASM-X. The remaining half of the CASM-X increase is attributable to headwinds from operating at suboptimal capacity and productivity levels. Our outlook for second quarter capacity remains down approximately 7% from 2019 levels. And while our moderated capacity plans are designed to provide operational relief given our current available staffing challenges, it continues to create unit cost headwinds, particularly with a shorter stage length as we add back higher-frequency business routes, which Andrew will speak to shortly.
Turning to fuel. Market prices have been on a rise and highly volatile given the current geopolitical climate. Our fuel hedge is providing excellent protection against rising energy prices and significantly offsets the market price increase in jet fuel in first quarter 2022. We are at 63% hedged for second quarter and estimate our second quarter fuel price to be in the $3.05 to $3.15 per gallon range, which is roughly $0.80 higher than our first quarter fuel price. That includes an estimated $0.61 of hedging gain, which represents cost savings of more than $290 million in second quarter alone. Of course, this is a snapshot of our fuel guidance at a point in time and market oil prices and heating cracks have been moving pretty materially on a daily basis. By the way, the current energy environment is exactly why we hedge fuel. Even though the hedging gains in the second quarter won't fully offset the rise in market fuel costs, our hedging portfolio is providing meaningful cost mitigation. The fair market value of our fuel hedge in 2022 is estimated at roughly $1 billion.
Turning to our fleet. We recently adjusted our order book with Boeing to replace the majority of our -7 MAX firm orders with -8 MAX firm orders in the short term, along with other adjustments, which we outlined in our earnings release this morning. I won't reiterate all the details, but will note a few key highlights. Our current order book now reflects 21 -7 firm orders, 81 -8 firm orders and 12 remaining MAX options in 2022. If you recall from our previous order book as of the end of last year, we had no -8 firm orders in 2022. While we are eager to bring the -7 aircraft into our fleet and remain confident in the aircraft, we simply wanted to go ahead and rebound our 2022 order book to provide more near-term certainty given the ongoing certification process for the -7. We are grateful for the flexibility we have in our order book to shift between -7 and -8 and our plans this year to take 114 aircraft delivery and retire 28 -700 remain unchanged. While our capex guidance assumes we will exercise the remaining 12 options this year, we maintain flexibility to evaluate that intention as decision points arise each month. And given that the certification for the -7 has been going on for some time, we contemplated the possibility of taking some -8s this year into our 2022 capex estimate. Therefore, our capex guidance of approximately $5 billion remains unchanged.
As I have mentioned before, we don't expect to incur a CASM-X penalty from holding on to extra aircraft versus accelerating -700 retirement while our capacity remains temporarily moderated. So from an economic standpoint, we may not decide to accelerate further aircraft retirements this year despite having more aircraft in our fleet than needed for current 2022 capacity plans. We are also mindful of aircraft and growth needs for 2023 as we plan to continue restoring the network. On our balance sheet, we ended the quarter with cash and short-term investments of $15.7 billion. Our leverage is at a very manageable 56%, and we continue to pay down and retire debt as opportunities arise as we have done with a portion of our convertible debt. We continue to be the only U.S. airline with an investment-grade rating by all three rating agencies, which remains one of our key competitive advantages. In closing, our second quarter financial trends are strong. Barring any unforeseen events or trend changes, we expect solid second quarter profit and operating margins. Our financial position and ample liquidity allows us to continue investing for the future so that we are ready to resume growth as soon as we are first able to restore our network and get staffing to desired levels. And we intend to grow. We are a growth airline. We have great momentum, and we are excited about the ample opportunities in front of us.
With that, I will turn it over to Andrew.