Southwest Airlines will pay a dividend to its shareholders of record as of January 10, 2023. This may not seem like a notable move for a carrier that has paid dividends for most of 50-plus year existence but it is: Southwest will be the first U.S. airline to resume shareholder returns since the pandemic.
Shareholder returns, including dividends and stock buybacks, were barred at any airline that took federal aid under the U.S. CARES Act until this September. Most carriers have also returned to profitability on the back of strong travel demand. Dallas-based Southwest made a $277 million net profit in the third quarter.
Other U.S. carriers may not be far behind Southwest. Alaska Airlines Chief Financial Officer Shane Tackett said in October that the carrier’s management would discuss the possibility of resuming “potential shareholder returns” with Alaska’s board in November. There is no word yet on any decision from the Seattle-based carrier.
U.S. airlines, including Southwest and Alaska, are seeing strong travel demand into the new year. Delta Air Lines CEO Ed Bastian in October went as far as to claim that travel is “countercyclical” to the macroeconomic trends of high inflation and a potential U.S. recession.
Airlines practice of giving some cash back to shareholders was in the spotlight when the industry was pushing for federal relief in the CARES Act. Some noted that, had the industry not paid dividends our bought back shares in the years prior to the crisis, they may not need the government hand out. Airlines pushed back on this claim, rightly arguing that such returns were standard practice across businesses and not just airlines.
Southwest will pay its investors an $0.18 per share dividend for the fourth quarter on January 31, it said Tuesday. The carrier estimates the dividends will total roughly $428 million.