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Cuma, 22 Eylül 2023

Southwest Airlines Reports First Quarter 2010 Profit


Southwest Airlines (NYSE: LUV) today reported first quarter 2010 net income of $11 million, or $.01 per diluted share, compared to a net loss of $91 million, or $.12 loss per diluted share, for first quarter 2009. First quarter 2010 results included special items (net of taxes) of $13 million, related to non-cash, mark-to-market, and other items associated with a portion of the Company’s fuel hedge portfolio. Excluding special items for both periods, first quarter 2010 net income was $24 million, or $.03 per diluted share, compared to a net loss of $20 million, or $.03 loss per diluted share, in first quarter 2009. The first quarter 2010 net income per diluted share, excluding special items, is in line with Thomson’s First Call mean estimate of $.03 net income per diluted share.


Gary C. Kelly, CEO, stated: "We are extremely pleased to report a profitable start to the year, especially in this challenging economic environment exacerbated by persistently high energy costs. As the quarter progressed, we began to see modest improvement in demand for business travel, as measured by the increase in full-fare traffic. Overall demand for our Low Fares and high quality Customer Service remained strong, resulting in a record first quarter performance for load factor, passenger yield, and passenger revenues. Furthermore, first quarter 2010 operating unit revenues, and the corresponding 19.3 percent year-over-year increase, represent all-time quarterly records. To achieve this revenue performance in, seasonally, the weakest quarter, is notable. To do so in a recovering economic environment is truly remarkable. Thus far, strong load factor and yield trends have continued in April and, assuming trends continue, we expect another significant year-over-year unit revenue gain in second quarter 2010.




"Our network optimization and revenue management efforts continue to contribute significantly to this industry-leading revenue performance. Efforts to enhance our already exceptional Brand and Customer Experience also have contributed. We were recently recognized by Business Week in its fourth annual listing of Customer Service Champs. As the only domestic airline to receive an award, the publication attributed our Bags Fly Free policy and proactive Customer Service as the primary reasons for our recognition."




As anticipated, first quarter 2010 economic fuel costs increased 33 percent year-over-year to $2.34 per gallon, which included approximately $44 million in unfavorable cash settlements from derivative contracts. For the remainder of 2010, including second quarter, Southwest currently has derivative contracts in place for approximately 65 percent of estimated fuel consumption at crude-equivalent prices up to approximately $100 per barrel; approximately 40 percent if market prices settle in the $100 to $120 per barrel range; and approximately 60 percent if market prices exceed $120 per barrel. Based on the current 2010 fuel hedge portfolio and market prices (as of April 20, 2010), the Company estimates economic fuel costs, including fuel taxes, for second quarter will be in the $2.40 to $2.45 per gallon range. Beyond 2010, the Company has derivative contracts in place for over 60 percent of its estimated 2011 fuel consumption; approximately 50 percent for 2012; approximately 25 percent for 2013, and a modest position for 2014.




Excluding fuel, first quarter 2010 unit costs increased 9.8 percent from the same period a year ago, largely due to a 6.4 percent decline in first quarter year-over-year available seat miles (capacity). Based on current cost trends and flat year-over-year capacity, the Company anticipates second quarter 2010 unit costs, excluding fuel, will exceed second quarter 2009’s 6.91 cents.




"As part of our continual efforts to adapt to dramatically higher energy prices, we remain focused on improving productivity to combat cost pressures, with a three percent reduction in headcount per aircraft over first quarter last year," stated Kelly. "We anticipate year-over-year nonfuel cost pressures will be more in the first half of 2010, but should ebb, somewhat, in the second half of the year with modest capacity additions.




"We have made great progress on numerous strategic revenue initiatives, and work continues on enhancements to our frequent flyer,, and revenue management systems. Although we announced last week that we are terminating our Canadian codeshare agreement with WestJet, our efforts continue uninterrupted to enable international connecting itineraries to Mexico with Volaris.




"Operationally, our People continued to deliver outstanding levels of Customer Service, despite severe weather resulting in significant cancellations during first quarter 2010. I am very grateful to all of our 35,000 hard-working and resilient Employees for their tremendous efforts. It is because of their unwavering Warrior Spirits that Southwest Airlines continues to lead the industry and be recognized for excellence."

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