Free cash flow takeaway
A quick read on the company's cash generation and what it means for investors.
Southwest Airlines generated negative free cash flow in the third quarter of fiscal 2023, as capital expenditure exceeded operating cash flow. The result improved significantly from the same quarter last year but weakened from the prior quarter.
- The company converted a portion of its revenue into operating cash flow, but capital spending outpaced that cash generation, leading to a free cash flow deficit and a negative margin.
- Compared to the prior quarter, revenue was lower, operating cash flow weakened substantially, capital expenditure decreased modestly, and free cash flow turned from positive to negative. Versus the same quarter a year earlier, revenue was higher, operating cash flow improved, capital expenditure was lower, and free cash flow was less negative.
FCF snapshot
Quarterly and TTM cash-flow metrics with the minimum valuation context.
TTM free cash flow
-$852.0M
Trailing twelve-month free cash flow.
Quarter free cash flow
-$226.0M
Free cash flow in the selected fiscal quarter.
Operating cash flow
$616.0M
Cash generated by operations before capital spending.
CapEx
$842.0M
Capital spending and related asset purchases.
FCF margin
-3.5%
The share of revenue converted into free cash flow.
Cash flow trend
A short quarterly history shows whether FCF is scaling with revenue or only spiking for one period.
| Period | Revenue | Operating CF | CapEx | FCF | FCF margin |
|---|---|---|---|---|---|
| 2022-12-31 | $6.2B | $579.0M | $1.4B | -$777.0M | -12.6% |
| 2023-03-31 | $5.7B | $706.0M | $1.0B | -$340.0M | -6.0% |
| 2023-06-30 | $7.0B | $1.4B | $925.0M | $491.0M | 7.0% |
| 2023-09-30 | $6.5B | $616.0M | $842.0M | -$226.0M | -3.5% |
Cash conversion quality
Checks that separate high-quality free cash flow from accounting noise or working-capital timing.
| FCF / net income | -117.1% | Shows whether accounting earnings convert into cash. |
| CapEx / revenue | 12.9% | Lower capital intensity usually supports FCF margin. |
| Net cash | n/a | Cash and equivalents minus total debt. |
Recent events shaping cash flow
Near-term business events that help explain the free cash flow result.
Higher Ticket Sales and Travel Demand
The filing notes that operating cash flows were largely impacted by a rise in air traffic liability from higher ticket sales, which were tied to increased travel demand.
This driver supported the year-over-year improvement in operating cash flow.
What the cash flow says
How to interpret the company's free cash flow beyond the headline number.
The company converted a portion of its revenue into operating cash flow, but capital spending outpaced that cash generation, leading to a free cash flow deficit and a negative margin.
Compared to the prior quarter, revenue was lower, operating cash flow weakened substantially, capital expenditure decreased modestly, and free cash flow turned from positive to negative. Versus the same quarter a year earlier, revenue was higher, operating cash flow improved, capital expenditure was lower, and free cash flow was less negative.
Monitor the impact of fuel derivative instrument purchases on operating cash flow, as noted in the filing as a partial offset to higher ticket sales.