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swafa
Topic Author
Posts: 50
Joined: Tue Mar 20, 2012 12:33 am

WN reports 2016 earnings

Thu Jan 26, 2017 6:05 pm

http://finance.yahoo.com/news/southwest ... 27057.html

Bullet points:
2016 net income: 2.4 billion
ROIC: 30%
Load factor: 84%
Profit sharing: 586 million

Interesting facts:
Ended 2016 with 723 aircraft. Expect to end 2017 with 703 (due to retirement of 733) and 2018 with 743 aircraft. Even with a reduction in fleet size for 2017 they still expect to grow capacity by 3.5% in 2017.
Last edited by swafa on Thu Jan 26, 2017 6:09 pm, edited 1 time in total.
 
michman
Posts: 901
Joined: Sat Dec 23, 2006 9:51 am

Re: WN reports 2017 earnings

Thu Jan 26, 2017 6:07 pm

Um, that would be 2016 earnings. 2017 has just begun.
 
swafa
Topic Author
Posts: 50
Joined: Tue Mar 20, 2012 12:33 am

Re: WN reports 2016 earnings

Thu Jan 26, 2017 6:09 pm

Thx
 
User avatar
piedmontf284000
Posts: 474
Joined: Wed Jun 15, 2016 12:00 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 6:16 pm

Some other key points:

4th quarter revenues grew 2 percent to $5.08 billion for $522 million in profit

However:

4th quarter operating costs grew 7.1 percent to $4.23 billion and PRASM fell 2.9 percent in the fourth quarter compared to the previous year.

That is not good. WN might have to seriously consider baggage fees ASAP.
 
flyguychi
Posts: 57
Joined: Mon Mar 10, 2014 7:43 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 6:29 pm

piedmontf284000 wrote:
Some other key points:

4th quarter revenues grew 2 percent to $5.08 billion for $522 million in profit

However:

4th quarter operating costs grew 7.1 percent to $4.23 billion and PRASM fell 2.9 percent in the fourth quarter compared to the previous year.

That is not good. WN might have to seriously consider baggage fees ASAP.



You are comparing two different measurements TOTAL costs vs UNIT revenues. A more meaningful measurement is UNIT vs UNIT:

CASM was up 2% (mostly from new labor agreements and accelerated aircraft retirement) while RASM was down 2.9%. Costs should ease over 2017 and RASM numbers are looking better for Q1.

I really don't think SWA is too worried about these numbers like you are..... ROIC of 30% is not an emergency situation :D
 
jbs2886
Posts: 2567
Joined: Wed Apr 01, 2015 9:07 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 6:32 pm

flyguychi wrote:
piedmontf284000 wrote:
Some other key points:

4th quarter revenues grew 2 percent to $5.08 billion for $522 million in profit

However:

4th quarter operating costs grew 7.1 percent to $4.23 billion and PRASM fell 2.9 percent in the fourth quarter compared to the previous year.

That is not good. WN might have to seriously consider baggage fees ASAP.



You are comparing two different measurements TOTAL costs vs UNIT revenues. A more meaningful measurement is UNIT vs UNIT:

CASM was up 2% (mostly from new labor agreements and accelerated aircraft retirement) while RASM was down 2.9%. Costs should ease over 2017 and RASM numbers are looking better for Q1.

I really don't think SWA is too worried about these numbers like you are..... ROIC of 30% is not an emergency situation :D


Basically everyone's costs were up with a lot of new labor agreements and rising fuel expenses. However, it is certainly not doom and gloom like you make it sound with needing to consider baggage fees and "going the wrong way" as you said in the JBLU post.
 
ericm2031
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Joined: Tue Jun 19, 2012 8:46 am

Re: WN reports 2016 earnings

Thu Jan 26, 2017 6:45 pm

I guess increased utilization is where they will get additional capacity? The only way I could see this happening is maybe extending the day some and/or redeyes later this year? Plus bringing online all the used aircraft that are in for painting? Seems like a sizable increase for a significant drop in aircraft.

Pretty amazing they're bringing 67 aircraft into service this year between 73G, 738, 737-8. Retiring 87 classics this year.
 
jetwet1
Posts: 3270
Joined: Thu Jun 14, 2007 4:42 am

Re: WN reports 2017 earnings

Thu Jan 26, 2017 7:03 pm

piedmontf284000 wrote:

That is not good. WN might have to seriously consider baggage fees ASAP.


Why kill the golden goose, seriously, I talk to so many people everyday that fly WN just because of the no baggage fees.
 
alggag
Posts: 438
Joined: Tue Apr 20, 2010 6:34 am

Re: WN reports 2017 earnings

Thu Jan 26, 2017 7:14 pm

jetwet1 wrote:
piedmontf284000 wrote:

That is not good. WN might have to seriously consider baggage fees ASAP.


Why kill the golden goose, seriously, I talk to so many people everyday that fly WN just because of the no baggage fees.


It seems like every single time there is a thread about WN's earnings someone quickly comes along and exclaims that they must institute baggage fees immediately or face dire consequences. I'm pretty sure it's been happening for about as long as baggage fees have been normalized in the industry. :o
Last edited by alggag on Thu Jan 26, 2017 7:15 pm, edited 1 time in total.
 
User avatar
KarelXWB
Posts: 26968
Joined: Sun Jul 15, 2012 6:13 pm

Re: WN reports 2016 earnings

Thu Jan 26, 2017 7:14 pm

Planned aircraft deliveries as follow:

- 39x 737-800
- 14x 737-700
- 14x 737 MAX-8

https://twitter.com/airkarp/status/824657758020628481
What we leave behind is not as important as how we've lived.
 
winginit
Posts: 3063
Joined: Sat Feb 23, 2013 9:23 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 7:19 pm

flyguychi wrote:
I really don't think SWA is too worried about these numbers like you are..... ROIC of 30% is not an emergency situation :D


Their investors certainly aren't... stock is up 8% at time of writing...
 
airliner371
Posts: 2404
Joined: Wed Aug 22, 2012 9:53 pm

Re: WN reports 2016 earnings

Thu Jan 26, 2017 7:21 pm

Full delivery schedule at the bottom of the yearly report.

http://www.swamedia.com/releases/releas ... fitability
 
winginit
Posts: 3063
Joined: Sat Feb 23, 2013 9:23 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 7:21 pm

jetwet1 wrote:
piedmontf284000 wrote:

That is not good. WN might have to seriously consider baggage fees ASAP.


Why kill the golden goose, seriously, I talk to so many people everyday that fly WN just because of the no baggage fees.


This, and honestly why else would you fly southwest? They no longer have a price advantage over ULCCs, they don't have a product, network, or performance advantage over most legacies, and I'll argue that their service is as mixed of a bag as any US carrier really these days. They differentiate by not having baggage or change fees, and they're stuck with that.
 
737max8
Posts: 668
Joined: Thu Dec 10, 2015 4:13 am

Re: WN reports 2016 earnings

Thu Jan 26, 2017 7:31 pm

ericm2031 wrote:
I guess increased utilization is where they will get additional capacity? The only way I could see this happening is maybe extending the day some and/or redeyes later this year? Plus bringing online all the used aircraft that are in for painting? Seems like a sizable increase for a significant drop in aircraft.

Pretty amazing they're bringing 67 aircraft into service this year between 73G, 738, 737-8. Retiring 87 classics this year.


Also remember that all of the new aircraft coming in are 175 seats while those leaving are 143 (or some 137). Helps make up 1 A/C for like every 7. But yes, with 20 less airplanes, curious how much flying will be added in the day or perhaps less spare A/C available?
The thoughts and opinions expressed in my comments do not represent that of any airline or affiliate.
Flown on: 717 733 734 735 736 737 738 739 7M8 744 744ER 752 753 762 763 772 773ER 788 789 A220 A319/20/21 A332 A333 A339 A343 A346 A359 A388
 
flyguychi
Posts: 57
Joined: Mon Mar 10, 2014 7:43 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 7:35 pm

winginit wrote:

This, and honestly why else would you fly southwest? They no longer have a price advantage over ULCCs, they don't have a product, network, or performance advantage over most legacies, and I'll argue that their service is as mixed of a bag as any US carrier really these days. They differentiate by not having baggage or change fees, and they're stuck with that.


I might agree with you on some of these points, but the network thing really depends on where you live. WN is the market leader in 27 of the top 50 metro US areas including LA basin, Phoenix, Denver, DC area, Bay Area, Las Vegas, and tied in Chicago. (Next highest is Delta with 9 cities where they are market leader) They also carry more nonstop passengers than any other carrier in the US. (250,000 daily nonstop pax vs next highest Delta with 150,000).

This network advantage COUPLED with bags fly free and no change fees explains why they are so strong.
 
winginit
Posts: 3063
Joined: Sat Feb 23, 2013 9:23 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 8:14 pm

flyguychi wrote:
winginit wrote:

This, and honestly why else would you fly southwest? They no longer have a price advantage over ULCCs, they don't have a product, network, or performance advantage over most legacies, and I'll argue that their service is as mixed of a bag as any US carrier really these days. They differentiate by not having baggage or change fees, and they're stuck with that.


I might agree with you on some of these points, but the network thing really depends on where you live. WN is the market leader in 27 of the top 50 metro US areas including LA basin, Phoenix, Denver, DC area, Bay Area, Las Vegas, and tied in Chicago. (Next highest is Delta with 9 cities where they are market leader) They also carry more nonstop passengers than any other carrier in the US. (250,000 daily nonstop pax vs next highest Delta with 150,000).

This network advantage COUPLED with bags fly free and no change fees explains why they are so strong.


Fair point, but while depth is one component of a carrier's network advantage, breadth is just as important, and Southwest cannot, and will not in the foreseeable future, have the capability to leverage regional jets to unique points that the legacies can easily access.
 
airplaneboy
Posts: 725
Joined: Sat May 15, 2004 11:59 am

Re: WN reports 2016 earnings

Thu Jan 26, 2017 9:06 pm

Amazing results, while still not charging for checked luggage & change fees- and also having the fewest fees. I suspect their performance will only continue to improve as the new reservation system and other technology upgrades are fully implemented over the next year or two. With an average daily fleet utilization under 12 block hours a day without flying redeye flights (forgot where I read that), even with a reduction in fleet size it's easily possible for the airline to increase capacity and add additional flying. Although the big 3 have closed the gap on WN's cost advantage in previous years via bankruptcy and restructuring, all carriers in the US are enjoying unprecedented profitability which has translated to increased labor costs at *every* airline. WN employees are generally well compensated from my understanding, but are not the highest paid or highest cost in every metric. But they are still the most productive employees overall compared to the big 3 (especially pilots and flight attendants), and I think the airline is still well positioned to compete their peers (both legacy and ULCC carriers). With the arrival of the 737-7/-8 MAX aircraft these next couple of years, and along with all of the planned tech upgrades, it will be exciting to see how the future route map at WN grows. I do not foresee the airline buying a smaller aircraft like some have suggested- WN's vision is not to become a traditional network hub and spoke carrier like Delta or American by flying to smaller markets with regional jets. Customers that can't fly WN to destinations they don't serve still fly WN in markets that they DO serve. Southwest is clearly not overreaching and it's evident they realize they cannot fly everywhere, nor be everything- to everyone. If someone needs to fly to Tokyo or Madison, Wisconsin- they'll fly Delta or United. But if someone needs to fly in a high volume market like Chicago to Kansas City or LA to Las Vegas without change fees and with the flexibility to rebook without penalties, then this same person might definitely look at flying WN.

With regards to the assertion that WN is not always the low fare leader- this is not always the case. The same can be said of every other carrier. WN generally has a lower walk-up fare in markets where they compete with the legacies, and like any airline who flies in markets with little or no competition, they are able to enjoy a better yield than in other more heavily saturated markets. WN may not always have the cheapest fare at the time of booking- but this is also true of carriers like Spirit and Frontier. The ULCCs don't always heavily discount every seat. Every carrier in the US- legacy or otherwise, will enjoy a higher yield premium in markets with little to no competition. Regardless, they definitely have a great revenue management team in working for them.
Last edited by airplaneboy on Thu Jan 26, 2017 9:21 pm, edited 1 time in total.
 
User avatar
piedmontf284000
Posts: 474
Joined: Wed Jun 15, 2016 12:00 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 9:19 pm

jbs2886 wrote:
flyguychi wrote:
piedmontf284000 wrote:
Some other key points:

4th quarter revenues grew 2 percent to $5.08 billion for $522 million in profit

However:

4th quarter operating costs grew 7.1 percent to $4.23 billion and PRASM fell 2.9 percent in the fourth quarter compared to the previous year.

That is not good. WN might have to seriously consider baggage fees ASAP.



You are comparing two different measurements TOTAL costs vs UNIT revenues. A more meaningful measurement is UNIT vs UNIT:

CASM was up 2% (mostly from new labor agreements and accelerated aircraft retirement) while RASM was down 2.9%. Costs should ease over 2017 and RASM numbers are looking better for Q1.

I really don't think SWA is too worried about these numbers like you are..... ROIC of 30% is not an emergency situation :D


Basically everyone's costs were up with a lot of new labor agreements and rising fuel expenses. However, it is certainly not doom and gloom like you make it sound with needing to consider baggage fees and "going the wrong way" as you said in the JBLU post.
flyguychi wrote:
piedmontf284000 wrote:
Some other key points:

4th quarter revenues grew 2 percent to $5.08 billion for $522 million in profit

However:

4th quarter operating costs grew 7.1 percent to $4.23 billion and PRASM fell 2.9 percent in the fourth quarter compared to the previous year.

That is not good. WN might have to seriously consider baggage fees ASAP.



You are comparing two different measurements TOTAL costs vs UNIT revenues. A more meaningful measurement is UNIT vs UNIT:

CASM was up 2% (mostly from new labor agreements and accelerated aircraft retirement) while RASM was down 2.9%. Costs should ease over 2017 and RASM numbers are looking better for Q1.

I really don't think SWA is too worried about these numbers like you are..... ROIC of 30% is not an emergency situation :D


No, it's not all doom and gloom...but it isn't exactly rainbows and sunshine either. Southwest has new contacts with pilots and FA's that will see salaries rise by 30 percent in the next 3 years. Salaries and benefits also rose three percent to $1.7 billion for the fourth quarter. Their current ROIC of 30 percent is going to be severely diluted in 2017 due to these contracts which were just approved in the 4th quarter. They haven't even begun to have an effect on the ROIC.

The new four-year contract includes a 15 percent pay raise, which covers increases for 2013, 2014 and 2015. The pilots will also receive retroactive pay to cover missed wages during the negotiations, as well as 3 percent pay increases in 2017, 2018, 2019 and 2020. Those raises total 29.6 percent over the life of the contract...the average Southwest pilot made $230,626 in 2015. By 2020 the average pilot will make 300K. There are 8400 pilots at WN. In addition to the pilots, the FA's have a new deal which gave them an immediate bump in compensation -- they already got a 6 percent raise on Nov. 1 -- with 3 percent increases in 2017 and 2018. Flight attendants will also get a ratification bonus worth 15.9 percent of their average annual salary to cover the three years they went without pay-scale increases while the deal was being negotiated.

This is all coming into effect while WN has seen it's cost rise for fuel and paid 19 percent more for fuel during the last quarter. In addition, passengers paid an average fare of $144.43, down 3.7 percent. So, while you think costs should ease over 2017, the numbers say otherwise.
 
737tanker
Posts: 387
Joined: Fri Dec 30, 2005 2:47 am

Re: WN reports 2016 earnings

Thu Jan 26, 2017 10:40 pm

There will be no retro pay for the pilots as that was already paid in 2016.
 
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OzarkD9S
Posts: 5760
Joined: Tue Oct 23, 2001 2:31 am

Re: WN reports 2016 earnings

Thu Jan 26, 2017 10:55 pm

If anything WN might charge for the second piece of checked luggage, so "First Bag Free" but doesn't have the same marketing cachet. Congrats to WN on their results.
"My soul is in the sky". -Pyramus- A Midsummer's Night Dream
 
MIflyer12
Posts: 8781
Joined: Mon Feb 18, 2013 11:58 pm

Re: WN reports 2017 earnings

Thu Jan 26, 2017 11:15 pm

flyguychi wrote:
I might agree with you on some of these points, but the network thing really depends on where you live. WN is the market leader in 27 of the top 50 metro US areas including LA basin, Phoenix, Denver, DC area, Bay Area, Las Vegas, and tied in Chicago. (Next highest is Delta with 9 cities where they are market leader) They also carry more nonstop passengers than any other carrier in the US. (250,000 daily nonstop pax vs next highest Delta with 150,000).

This network advantage COUPLED with bags fly free and no change fees explains why they are so strong.


I'm guessing you're quoting only the domestic market, and excluding the affiliated regional carriers, because, systemwide, AA and DL both have far more passenger boardings than WN. Plus, by RPMs or ASMs, AA, DL and UA are all larger.
 
usflyguy
Posts: 1757
Joined: Thu Jan 12, 2012 7:29 am

Re: WN reports 2017 earnings

Fri Jan 27, 2017 1:13 am

piedmontf284000 wrote:
jbs2886 wrote:
flyguychi wrote:


You are comparing two different measurements TOTAL costs vs UNIT revenues. A more meaningful measurement is UNIT vs UNIT:

CASM was up 2% (mostly from new labor agreements and accelerated aircraft retirement) while RASM was down 2.9%. Costs should ease over 2017 and RASM numbers are looking better for Q1.

I really don't think SWA is too worried about these numbers like you are..... ROIC of 30% is not an emergency situation :D


Basically everyone's costs were up with a lot of new labor agreements and rising fuel expenses. However, it is certainly not doom and gloom like you make it sound with needing to consider baggage fees and "going the wrong way" as you said in the JBLU post.
flyguychi wrote:
piedmontf284000 wrote:
Some other key points:

4th quarter revenues grew 2 percent to $5.08 billion for $522 million in profit

However:

4th quarter operating costs grew 7.1 percent to $4.23 billion and PRASM fell 2.9 percent in the fourth quarter compared to the previous year.

That is not good. WN might have to seriously consider baggage fees ASAP.



You are comparing two different measurements TOTAL costs vs UNIT revenues. A more meaningful measurement is UNIT vs UNIT:

CASM was up 2% (mostly from new labor agreements and accelerated aircraft retirement) while RASM was down 2.9%. Costs should ease over 2017 and RASM numbers are looking better for Q1.

I really don't think SWA is too worried about these numbers like you are..... ROIC of 30% is not an emergency situation :D


No, it's not all doom and gloom...but it isn't exactly rainbows and sunshine either. Southwest has new contacts with pilots and FA's that will see salaries rise by 30 percent in the next 3 years. Salaries and benefits also rose three percent to $1.7 billion for the fourth quarter. Their current ROIC of 30 percent is going to be severely diluted in 2017 due to these contracts which were just approved in the 4th quarter. They haven't even begun to have an effect on the ROIC.

The new four-year contract includes a 15 percent pay raise, which covers increases for 2013, 2014 and 2015. The pilots will also receive retroactive pay to cover missed wages during the negotiations, as well as 3 percent pay increases in 2017, 2018, 2019 and 2020. Those raises total 29.6 percent over the life of the contract...the average Southwest pilot made $230,626 in 2015. By 2020 the average pilot will make 300K. There are 8400 pilots at WN. In addition to the pilots, the FA's have a new deal which gave them an immediate bump in compensation -- they already got a 6 percent raise on Nov. 1 -- with 3 percent increases in 2017 and 2018. Flight attendants will also get a ratification bonus worth 15.9 percent of their average annual salary to cover the three years they went without pay-scale increases while the deal was being negotiated.

This is all coming into effect while WN has seen it's cost rise for fuel and paid 19 percent more for fuel during the last quarter. In addition, passengers paid an average fare of $144.43, down 3.7 percent. So, while you think costs should ease over 2017, the numbers say otherwise.


I'm pretty sure the pilots received their retro pay in December, so that's already accounted for in these results.
My post is my ideas and my opinions only, I do not represent the ideas or opinions of anyone else or company.
 
airplaneboy
Posts: 725
Joined: Sat May 15, 2004 11:59 am

Re: WN reports 2016 earnings

Fri Jan 27, 2017 8:59 pm

Can anyone knowledagble with airline financials provide a comparison between WN and the other carriers who have reported thus far for Q4 2016 and fiscal year 2016?

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