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Southwest reinstates dividend after three years as travel rebounds

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Southwest Airlines is reinstating its quarterly dividend that it suspended firstly of the Covid-19 pandemic in 2020, the newest sign of the airline industry’s recovery.

The $54 billion in federal aid that airlines received to maintain paying employees throughout the pandemic prohibited dividends and share buybacks, restrictions that lifted this fall.

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The 18-cent dividend shall be paid after the market closes on Jan. 31., Southwest said in a filing Wednesday, ahead of an investor presentation.

U.S. airlines have returned to profitability and CEOs have been upbeat about continued travel demand, even while business leaders in other industries including banking and technology have warned about economic weakness.

“Today’s announcement reflects the strong return in demand for air travel and the Company’s solid operating and financial results since March 2022,” said Southwest CEO Bob Jordan in a news release.

Southwest reiterated it expects fourth-quarter revenue to be up as much as 17% over 2019, before the pandemic, an indication higher fares proceed to drive airlines’ recovery.

The Dallas-based airline said it expects to grow capability next 12 months by as much as 15% compared with 2022.

At the corporate’s investor presentation Wednesday, executives were expected to handle questions on costs, pilot hiring and pending labor contracts.

Southwest is currently in tense contract talks with its pilots and flight attendants for brand spanking new contracts.

“I believe today really put an exclamation point about where their priorities are,” Casey Murray, president of the Southwest Airlines Pilots Association, the pilots’ labor union, told CNBC.  “Today, with the announcement of dividends with really no real commitment to closing this contract, it’s disappointing.”

Southwest pilots picketed outside of the Recent York Stock Exchange ahead of the investor day presentation.

The planes are currently subject to recent cockpit alert standards and lawmakers have not issued a waiver before a year-end deadline under the principles, put in place after two Max crashes in Indonesia and Ethiopia.

Southwest said its 2023 capital expenditures would range from $4 billion to $4.5 billion, largely payments to Boeing for brand spanking new planes. The airline has each 737 Max 8 and Max 7s on order.

The carrier expects to take delivery of about 100 planes next 12 months, fewer than outlined in its order book due to Max 7 certification delays and anticipated Boeing supply chain problems, it said within the presentation.

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