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Southwest Airlines reinstates dividend after nearly three years as travel rebounds

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

The $54 billion in federal aid that airlines received to keep paying employees during the pandemic prohibited dividends and share buybacks, restrictions that lifted this fall. Southwest is the first major U.S. airline to reinstate its dividend.

The 18-cent dividend will be paid at the end of January., 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, a sign higher fares continue to drive airlines’ recovery.

The Dallas-based airline said it expects to grow capacity next year by up to 15% compared with 2022.

At the company’s investor presentation Wednesday, executives fielded questions about costs, pilot hiring and pending labor contracts.

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

“I think 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 New York Stock Exchange ahead of the investor day presentation.

The planes are currently subject to new cockpit alert standards and lawmakers haven’t issued a waiver before a year-end deadline under the rules, 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 new planes. The airline has both 737 Max 8 and Max 7s on order.

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

Southwest shares closed down nearly 5%, dropping along with other airline stocks.

This article originally appeared on CNBC

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