Tammy Romo
Executive Vice President and Chief Financial Officer at Southwest Airlines
Thank you, Bob, and hello, everyone.
Our first quarter loss is disappointing and not how we hoped to start 2023. However, the quarter was not without notable accomplishments. Our on-time performance year-to-date through March was solid. Our operations team navigated through a stream of difficult weather conditions successfully with no material impact to our network performance. And despite the negative revenue impact from the December operational disruption, we still had record first quarter passenger revenues and record other revenue. We also ended the quarter with strong double-digit margins for the month of March despite high fuel prices. All of this was made possible by the drive and hard work of our incredible employees.
Ryan and Andrew will speak to our revenue and operations performance and outlook, so I will jump right into our cost performance and outlook.
Beginning with fuels. Our first quarter jet fuel price was $3.19 per gallon, which was on the high end of our guidance range. Throughout first quarter, crude oil prices stayed within a reasonable range. While prices dipped to about $65 per barrel in mid-March, they primarily hovered around $80 per barrel throughout first quarter. On the other hand, refining margins remained volatile during first quarter after hitting a 10-year high last year. Thankfully, market prices have fallen over recent weeks, in particular, crack spreads, which is a welcome relief.
We are 51% hedged for our second quarter and estimate our second quarter fuel price to be in the $2.45 to $2.55 per gallon range, which is roughly $0.69 lower than our first quarter fuel price. That includes an estimated $0.13 of hedging gains, which equates to cost savings of roughly $70 million in second quarter alone. We now estimate our full year 2023 fuel price to be in the $2.60 to $2.70 per gallon range, down a nickel from our previous guidance and still including $0.10 of hedging gains.
Of course, this is a snapshot of our fuel guidance based on the April 19th forward curve and market oil prices and heating cracks can be volatile, which is why we hedge. We recently added to our 2024 fuel hedge portfolio and are now 51% hedged next year as well. We began building our 2025 portfolio and are about 10% hedged. The total market value of our fuel hedge portfolio for second quarter 2023 through 2025 is $419 million. We will continue to see cost-effective opportunities to expand our hedging portfolio with a continued goal to get to roughly 50% hedging protection each year.
Moving to non-fuel costs. Our first quarter year-over-year CASM-X increase of 5.9% was in line with our guidance range. As expected, we experienced inflationary cost pressures, primarily higher labor costs, including market wage rate accruals for all employee groups as well as increased technology spending and higher rates for airport and benefit costs. The remainder of the increase was primarily driven by operational disruption related expenses.
Looking ahead, we currently estimate our second quarter CASM-X to increase in the 5% to 8% range year-over-year, largely driven by general inflationary cost pressures that we expect to persist and are not unique to Southwest. In addition to higher labor rates, we continue to accrue for market wage rate increases for the remaining open labor contracts. And as we further refine our multiyear maintenance planning, we have additional maintenance expense this year for our -800 fleet as more engines come due for heavy maintenance and this is adding further pressure to our second quarter cost inflation.
For full year 2023, we now estimate CASM-X to decrease in the range of 2% to 4% year-over-year compared with our previous guidance of down 3.5% to 5.5%. Approximately 1 point of this year-over-year increase is due to lower capacity as a result of Boeing delivery delays, and the remainder of the change in guidance is driven by the timing of maintenance expenses for our -800 fleet, a continuation of what we are experiencing here in the second quarter.
As a reminder, our full year CASM-X guidance continues to include higher labor rates, including market wage rate accruals for the remaining open labor contracts as well as the estimated tens of millions of dollars of additional investments we expect to incur towards our operational resiliency.
Turning to our fleet. We received a total of 30 aircraft deliveries during first quarter as expected, ending the quarter with 793 aircraft, which is a net of seven -700 retirement, two more than previously planned as we shifted up a couple of retirements from the second half of this year.
Looking at the full year, based on the recent production issues at Boeing, we feel it's prudent to have a more conservative planning assumption and are now planning around 70 -8 aircraft deliveries in 2023 compared with our previous assumption of approximately 90 -8 deliveries. As a result, we have lowered our full year 2023 capacity guidance by roughly 1 point to up 14% to 15% year-over-year, which impacts our second half capacity assumptions, mostly in fourth quarter.
As a reminder, we have a surplus of underutilized aircraft in our fleet due to pilot hiring constraints. Therefore, the reduction in our delivery should not impact our summer flight schedule. We continue to expect our second quarter capacity to be up 14% year-over-year. Our planned deliveries continue to differ from our contractual order book.
In addition to the recent aircraft delivery delays, which are not reflected in our contractual order book, we continue to reflect 46 undelivered 2022 contractual aircraft deliveries as 2023 deliveries in the order book, further outlined in our press release. But to be very clear, we are currently planning our published schedules around the delivery of 70 -8 aircraft this year, and we intend to solidify our order book with Boeing soon.
In regards to our current capex outlook for this year, we now estimate to spend approximately $3.5 billion reflecting our updated delivery assumptions of 70 aircraft this year compared with our previous guidance of approximately $4 billion, which assumed roughly 90 aircraft deliveries.
Lastly, a quick note on our balance sheet. We ended first quarter with cash and short-term investments of $11.7 billion after paying $59 million to retire debt and finance lease obligations in first quarter. We continue to expect a modest $85 million in scheduled debt repayments for full year 2023, including roughly $10 million in scheduled debt repayments here in second quarter. We also paid $214 million in dividends in the first quarter as our pre-pandemic dividend is fully restored.
And based on our current expectations, we continue to expect 2023 interest income to more than offset 2023 interest expense. We continue to be in a net cash position, and we continue to be the only U.S. airline with an investment-grade rating by all three rating agencies.
In closing, this was not the first quarter performance we had planned back at Investor Day. However, I am immensely proud of our people and their perseverance. There is still work to be done to fully recover, but we are currently forecasting a substantial improvement sequentially to the bottom line with solid profitability this quarter. We are laser-focused on managing ongoing inflationary cost increases, regaining better operating leverage and maintaining our competitive cost advantage. We have not lost sight of our goals or the warrior spirit of Southwest Airlines, and I'm eager to move forward along our path of success for many years to come.
And with that, I will turn it over to Ryan.
