Southwest Profits Soar in Third Quarter
By Sandra Arnoult, ATW Daily News | Oct. 19, 2007
Southwest Airlines reported a third-quarter profit of US$162 million, more than triple than the US$48 million earned in the year-ago period, even as operating income fell slightly.
Special gains more than made up the difference, and CEO Gary Kelly promised that barring an economic slowdown, revenue and schedule initiatives will bear fruit in the fourth quarter.
Third-quarter operating revenue rose 10.5% to US$2.59 billion, a company record, while costs climbed 12.3% to US$2.34 billion, dropping operating profit 3.8% to US$251 million from US$261 million in the 2006 quarter. Kelly admitted that "year-over-year comparisons were favorably impacted by the August 2006 terrorist threat and related carry-on restrictions," but said low fares helped drive a record third-quarter load factor of 76.6%.
SWA incurred charges of US$25 million related to its voluntary retirement program and US$11 million related to a change in income tax law. Total nonoperating result swung to a US$26 million profit from a US$183 million loss, however, thanks to unrealized gains associated with derivative instruments and hedging.
The carrier flew 19.69 billion RPMs during the quarter, up 9.3%, against an 8.1% rise in capacity to 25.72 billion ASMs. Load factor climbed 1.9% to the aforementioned 76.6%. Yield fell 0.8% to 12.61 cents although unit revenue was up 2.1% to 10.06 cents. CASM increased 3.9% to 9.09 cents, or 2.2% to 6.52 cents excluding fuel.
"Our fourth-quarter 2007 revenue initiatives are well underway and on track with our planned implementation schedule. We began slowing our capacity growth rate this month and have trimmed our route system," Kelly said. "Based on current revenue trends, bookings and planned revenue initiatives, and barring a slowdown in the domestic economy, we expect fourth-quarter 2007 operating unit revenues to exceed year ago levels." SWA plans to take delivery of nine 737-700s during the current quarter and "no more than 19 net aircraft" next year, he said.
Nine-month net profit of US$533 million represented a 20.6% improvement over the US$442 million earned in the year-ago period. Operating profit fell 12.6% to US$664 million.