Southwest nets $246 million in quarter, adds more aircraft
Dateline: Tuesday July 22, 2003
Based on its second-quarter financial performance, it will take more than a war to slow down Southwest Airlines.
The carrier reported net income of $246 million for the three months ended June 30, more than twice the net income of $102 million in the year-ago period. Excluding special items in both years, second-quarter 2003 net income increased 22.6% to $103 million from $84 million in the 2002 quarter.
Special items in the current period included $271 million pre-tax in security fee rebates that resulted in an extra $41 million in employee profit-sharing at the operating level. Second-quarter 2002 results included $36 million in passenger revenue from a reduction in estimated future refunds and exchanges in air traffic liability.
"Although bookings softened early in the quarter as a result of the war in Iraq, traffic and revenues finally began to improve in mid-June," Vice Chairman and CEO James Parker said. Based on the current revenue and cost outlook, he expects third-quarter earnings to exceed third-quarter 2002 earnings of $75 million, which included $48 million pre-tax in government funds.
And while most US Majors scaled back capacity in light of the Iraq war and the SARS outbreak, Southwest continued to grow. RPMs for the quarter increased 4.6% to 12.55 billion and ASMs climbed 4.2% to 17.89 billion compared to the prior-year period.
The carrier is not stopping there. Executive VP
-Finance and CFO Gary Kelly said Southwest will take eight more 737-700s than intended in 2004. It had planned to take 17 and will now add 25 by bringing forward deliveries of two firm and six option aircraft originally set for 2005.
Total operating revenues rose 2.9% to $1.52 billion in the second quarter while operating expenses climbed 7.1% to $1.38 billion. As a result, operating income dropped 25.9% to $140 million from $189 million in the year-ago period. Excluding special items in both years, however, operating income increased 13.8% to $181 million from $159 million in the 2002 period, the company said.
Yield per RPM decreased 1.8% to 11.67 cents. Operating RASM fell 1.3% to 8.47 cents while CASM rose 2.7% to 7.68 cents owing to higher profit-sharing expense on the government grant. Parker said unit revenues thus far in the third quarter are exceeding year-ago levels. The company expects third-quarter 2003 unit costs excluding fuel to exceed last year's figure of 6.23 cents as well.
For the six months ended June 30, net income more than doubled to $270 million compared to net income of $123 million in the previous year. Operating revenues rose 5% to $2.87 billion and operating expenses jumped 7.5% to $2.68 billion, producing an operating income of $186 million, a 21.8% drop compared to operating income of $238 million in the year-ago period.--Loren Farrar
Firings, if well done, are good for employee morale.