Tammy Romo
Executive Vice President and Chief Financial Officer at Southwest Airlines
Thank you, Bob, and thank you, Mike, my very dear friends for three decades of incredible leadership. And thanks also to all of our employees for their remarkable job throughout the quarter. In addition to delivering a high-quality experience for our customers, their efforts led to a solid third quarter performance. The strong demand trends from summer continued in third quarter, resulted in record third quarter revenue and record third quarter revenue passengers. Our third quarter operating revenues grew a healthy 10.3% versus 2019, aided by a very strong other revenue performance. Andrew will speak to our revenue trends in a minute, so I will turn to our cost performance and outlook. Our people did another great job managing costs in the quarter.
Our fuel hedge continues to perform well in this environment, where market prices remain volatile and elevated, saving the company about $220 million in fuel expense in third quarter alone. We are 61% hedged for fourth quarter, and we currently estimate our fourth quarter fuel price to be in the $3.15 to $3.25 per gallon range, which would be a sequential improvement from third quarter's fuel price based on current prices. That estimate includes $0.37 of hedging gains, which equates to cost savings of more than $185 million in fourth quarter, which would put our full year 2022 fuel hedge benefit at roughly $1 billion. We recently added to our 2023 fuel hedge portfolio and are now 50% hedged, with a fair market value of around $390 million for full year 2023. The fair market value of our fuel hedge portfolio through 2024 is $685 million.
We will continue to seek opportunities to expand our hedging portfolio in 2024 and beyond, but we are in good shape headed into next year, especially given the volatile energy market over the past year that made it tough to materially expand our positions at historical premium cost. Taking a look at nonfuel cost, third quarter CASM, excluding special items and profit sharing, was towards the favorable end of our previous guidance range at up 12.2%, compared with third quarter 2019 due to lower-than-anticipated health and benefit costs as well as higher favorable airport settlements that we expected to receive this quarter, but shifted earlier to third quarter. We currently estimate fourth quarter CASM-X to increase in the range of 14% to 18% compared with fourth quarter 2019. More than half of that increase continues to be driven by headwinds from operating at suboptimal productivity levels, compounded by decreased capacity levels here in fourth quarter relative to third quarter.
The remainder of the CASM-X increase continues to be primarily attributable to inflationary pressures, primarily in higher rates for labor, benefits and airports. All of that said, I am very pleased that we remain on track with our 2022 cost plans, as Bob mentioned, especially in this environment. As we close out the year, our full year 2022 CASM-X guidance has narrowed to up 14% to 15% compared with 2019. As a reminder, this includes labor accruals for all contract labor groups beginning April one of this year, taking into account our best estimate for wage rate increases. Looking ahead to 2023, we continue to estimate full year CASM-X to decrease compared with this year. We now have our first half 2023 flight schedules published for sale, and we currently expect first half 2023 CASM-X to be in the range of flat to up 2% compared with first half 2022. Given the level of first half capacity growth, in a pre-pandemic period, we would have expected CASM-X to be subtly down year-over-year.
However, we expect to continue experiencing unprecedented cost headwinds due to higher-than-expected inflation. And as part of that, keep in mind that we are accruing for all open labor contracts and further wage rate increases in 2023. So that is fully included in our guidance based on our best estimation of market rates. On top of wage rate inflation, we expect to continue hiring at a healthy pace next year to support 2023 capacity and scale for 2024 growth. Our productivity has not returned to pre-pandemic levels, which has required additional hiring to support the operation. It seems that most industries and companies, including our peers, are experiencing a similar workforce dynamic. Based on our assumption that fleet utilization will be limited by pilot staffing constraints for the majority of 2023, these cost headwinds will persist throughout next year, but should improve somewhat in second half relative to first half 2023.
We haven't finalized our second half 2023 capacity plans, but our current estimation is that second half 2023 CASM-X will decrease in the low to mid-single-digit range compared with second half 2022. We continue to be focused on better optimization of staffing levels to our flight activity and improving our efficiency metrics and operating leverage. That work will begin in 2023 and continue into 2024. Turning to our fleet. Our planning assumption for Boeing aircraft deliveries this year remains unchanged from what we shared in July. While our contractual order book still reflects 114 aircraft in 2022, we continue to expect 66 -8 MAX deliveries this year due to supply chain challenges that Boeing is dealing with as well as uncertainty regarding the timing of the -7 MAX certification. However, we are encouraged to have received all 23 -8 MAX aircraft in the third quarter as expected and continue to expect 31 -8 MAX aircraft deliveries here in the fourth quarter.
We do not expect to take delivery of any -7 MAX aircraft this year. We continue ongoing discussions with Boeing and just recently made some modifications to our order book. In short, we converted more -7 MAX aircraft to -8 MAX aircraft in the near term. We outlined the specific changes in our press release this morning, so I won't reiterate all of the fleet details here. In terms of retirements, we now plan to retire a total of 26 -700 aircraft this year, a few less than previously expected, ending the year with an estimated 768 aircraft in our fleet. And our full year 2022 capex guidance remains unchanged at approximately $4 billion. Turning to our balance sheet. We ended the quarter with cash and short-term investments of $13.7 billion after paying $1.9 billion to retire debt and finance lease obligations during third quarter. This included the full $1.2 billion outstanding amount of our 4.75% notes due 2023 and $184 million in principal of our convertible notes.
We have now repurchased a total of $689 million of our convertible notes, roughly 30% of the original issuance, and have $1.6 billion currently outstanding. We remain in a net cash position with leverage at a very manageable 48%. We continue to be the only U.S. airline with an investment-grade rating by all three rating agencies, which remains one of our key long-term competitive advantages in good times and in challenging times. With our strong balance sheet and continued financial strength, we will soon discuss our 2023 capital plans with our Board of Directors, but our capital allocation priorities remain unchanged. We have a long-standing dividend history, and reinstating a dividend remains a high priority. We will also continue to look for opportunities to reduce debt. We will continue investing in the company and our people, and we are focused on wrapping up negotiations with all of our open contract labor groups. Last but not least, and at the right time, we intend to resume share repurchases as part of our shareholder return equation as we have in the past.
And all of these intentions assume that the travel demand environment remains steady, and we continue producing consistent quarterly profits. We are mindful of the economy and recessionary risk, and we would like to monitor the environment to see if there is any noticeable impact on travel demand as we move into 2023. Again, we are not seeing any noticeable impact today, but we would like to preserve a higher-than-normal cash balance for some period of time into next year before we materially reduce our cash reserves. So while I can't commit to anything today, I hope that gives you an idea of how we are evaluating our capital allocation choices. In closing, third quarter represented another profitable quarter in our recovery. Our momentum is building here in fourth quarter, supported by a strong revenue outlook, and I am encouraged with the progress we have made as we look to close the year strong and turn our focus to 2023. We are committed to generating healthy returns on invested capital, and I am very pleased with the direction we are headed.
With that, I will turn it over to Andrew.
