EXHIBIT 99.1 2ND QUARTER 2008 FINANCIAL RESULTS
Published on July 24, 2008
Exhibit 99.1
CONTACT: Investor
Relations (214) 792-4415
SOUTHWEST
AIRLINES REPORTS SECOND QUARTER EARNINGS
DALLAS,
TEXAS – July 24, 2008 – Southwest Airlines (NYSE:LUV) today reported its second
quarter 2008 results. Net income for second quarter 2008 was $321
million, or $.44 per diluted share, compared to $278 million, or $.36 per
diluted share, for second quarter 2007. Excluding special
items, second quarter 2008 net income was $121 million, or $.16 per diluted
share, compared to $195 million, or $.25 per diluted share, for second quarter
2007. The second quarter 2008 results exceed First Call’s mean
estimate of $.12 per diluted share. Refer to the reconciliation
in the accompanying tables for further information regarding special
items.
Second
Quarter 2008 Financial Highlights:
|
·
|
Record
quarterly revenues of $2.9 billion, up 11.1 percent from second quarter
2007
|
|
·
|
Net
income, excluding special items, of $121 million, down 37.9
percent
|
|
·
|
Net
income per diluted share, excluding special items, of $.16, down 36
percent
|
|
·
|
Favorable
cash settlements of $511 million from fuel contracts were reflected in net
income, excluding special items
|
Gary C.
Kelly, Chairman of the Board, President, and Chief Executive Officer,
stated: “With the weak domestic economy and unprecedented jet fuel
prices, we are pleased to report our 69th
consecutive quarter of profitability. Although we have prepared
ourselves well for today's challenging environment and are proud of our ability
to sustain profitability, we cannot stand still. We must continue to
make the necessary adjustments to adapt to higher jet fuel prices and restore
our profit margins.
"In
addition to our major revenue initiatives underway, we continue to raise fares
to avoid nickel and diming our Customers with added fees. With new
schedule planning tools and processes and fleet flexibility, we believe we are
well-positioned to respond to a rapidly changing environment and have the
flexibility to adjust our flight schedule, as necessary, to eliminate
unproductive flying. At present, we plan to grow our year-over-year
available seat mile (ASM) capacity no more than four percent in 2008 to
primarily meet Customer demand in developing markets, such as
Denver. Customers have responded exceptionally well to Southwest
service in Denver. As a consequence, we will grow to 115 daily
departures to 32 markets in November. We are evaluating our
current fleet plans and may not grow our ASM capacity in 2009.
"As
previously outlined, we have much work underway to grow revenues, and I am proud
of the progress we are making. Despite the tough economy and more
difficult year-over-year comparisons caused by Easter falling in March this year
(versus April last year), we reported record operating revenues of $2.9 billion
for the second quarter 2008 and an operating revenue per available seat mile
(RASM) year-over-year growth rate of 5.3 percent . Based on revenue
and booking trends so far this quarter, we are expecting strong yield growth but
with lower load factors versus third quarter 2007. Thus far, our RASM
growth rate in July has surpassed our second quarter year-over-year
increase.
“Although
our revenue trends are strong, energy prices continue to soar. Even
with $511 million in favorable cash settlements from derivative contracts in the
second quarter 2008, our economic fuel costs increased 35.2 percent to $2.19 per
gallon. Although better than we anticipated, the considerable
year-over-year increase in fuel costs was by far the most significant driver of
the 10.5 percent increase in our second quarter 2008 unit costs, excluding
special items. We have derivative contracts for approximately 80
percent of our third quarter 2008 estimated fuel consumption at an average
crude-equivalent price of approximately $61 per barrel (compared to
approximately 90 percent at approximately $51 per barrel for third quarter
2007). Based on this derivative position and current market prices,
we currently anticipate our third quarter 2008 economic fuel cost per gallon to
be in the $2.50 range.
“The
current market value of our fuel derivative contracts for third quarter 2008
through 2012 is approximately $4.3 billion as a result of the extraordinary
increase in fuel prices this year. In addition to our third quarter
2008 derivative contracts, we currently have derivative contracts for
approximately 80 percent of our estimated fuel consumption for the fourth
quarter 2008 at an average crude-equivalent price of approximately $58 per
barrel; approximately 70 percent in 2009 at an average crude-equivalent price of
$66 per barrel; approximately 40 percent in 2010 at an average crude-equivalent
price of approximately $81 per barrel; and over 20 percent in 2011 and 2012 at
an average crude-equivalent price of approximately $77 and $76 per barrel,
respectively.
“Excluding
fuel, second quarter 2008 unit costs increased 1.8 percent from a year ago,
which was better than we anticipated. Based on current trends,
we expect our third quarter 2008 unit costs, excluding fuel and special items,
to be in line with second quarter 2008’s 6.72 cents.
"Although
we have enormous cost challenges, primarily due to persistently higher fuel
costs, we believe we have equally large opportunities to improve our revenue
production. At the same time, we are enhancing our already strong
brand and Customer Experience. The responses to our Business Select
product, new boarding method, and makeover of the gate areas have been
overwhelmingly positive. We are also making progress with our efforts
to expand our network through codeshare arrangements and are excited about our
recently announced plans to codeshare with WestJet to Canada by the end of
2009.
"While
our Employees are working harder than ever to secure our future, they continue
to deliver warm, caring, and friendly Southwest-style service. Our
People have incredible Warrior Spirits and huge hearts, which is why we lead the
industry in Customer Satisfaction according to the American Customer
Satisfaction Index and most recently captured The Reputation Institute's top
ranking of the U.S. airlines by reputation. Their efforts are
remarkable, their results superb, and I and am very grateful to each of
them. Our People are, truly, the core strength of our
Company."
Southwest
will discuss its second quarter 2008 results on a conference call
at
12:30
p.m. Eastern Time today. A live broadcast of the conference call will
be available at southwest.com.
/more
Operating
Results
Total
operating revenues for second quarter 2008 increased 11.1 percent to $2.9
billion, compared to $2.6 billion for second quarter 2007. Total
second quarter 2008 operating expenses were $2.7 billion, compared to $2.3
billion in second quarter 2007. Operating income for second quarter
2008 was $205 million compared to $328 million in second quarter
2007. Excluding special items, operating income was $242 million in
second quarter 2008 compared to $328 million last year. Operating
income, excluding special items, reflects fuel and oil expense of $857 million
and $607 million for second quarter 2008 and 2007, respectively, which is based
on the Company's true economic cost of fuel, including the benefit of cash
settlements from derivative contracts of $511 million and $173 million,
respectively.
“Other income” was $324 million for
second quarter 2008, compared to $119 million for second quarter
2007. The $205 million increase principally resulted from higher
unrealized gains associated with Statement of Financial Accounting Standard
(SFAS) 133, “Accounting for Derivative Instruments and Hedging Activities,” as
amended. These unrealized gains represent the most significant
difference between the Company’s net income and net income, excluding special
items. The cost of the hedging program (which includes the premium
costs of derivative contracts) of $14 million in second quarter 2008 and second
quarter 2007 is also included in "other (gains) losses.” The $20
million year-over-year increase in net interest expense for second quarter 2008
resulted from lower interest rates on cash, cash equivalents, and investments
and lower Boeing aircraft progress payments, which generated less capitalized
interest.
Net cash
provided by operations for the six months ended June 30, 2008 was $3.3
billion, which included a $2.4 billion increase in fuel derivative collateral
deposits related to future periods, and capital expenditures were $587
million. During second quarter 2008, the Company borrowed $600
million under a new term loan secured by 21 aircraft. The Company
ended second quarter 2008 with $5.8 billion in cash and short-term investments,
which included $4.4 billion in fuel derivative collateral deposits (with a
corresponding liability recorded in Accrued Liabilities). At present,
the value of the Company’s fuel derivative contracts for third quarter 2008
through 2012 is approximately $4.3 billion with corresponding fuel derivative
collateral deposits of $3.7 billion. In addition, the Company had a
fully available unsecured revolving credit line of $600 million.
Total
operating revenues for the six months ended June 30, 2008 increased 12.9 percent
to $5.4 billion, while total operating expenses increased 16.9 percent to $5.1
billion, resulting in operating income in first half 2008 of $293 million versus
$412 million in first half 2007. Excluding special items, operating
income was $341 million and $398 million, respectively, for the six months ended
June 30, 2008 and 2007. Net income for the six months ended June 30,
2008 was $355 million, or $.48 per diluted share, compared to $371 million, or
$.47 per diluted share, for the same period last year. Excluding
special items, net income for the six months ended June 30, 2008 was $164
million, or $.22 per diluted share, compared to $228 million, or $.29 per
diluted share, for the same period last year.
This news release contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Specific forward-looking statements
include, without limitation, statements relating to (i) the Company's
expectations regarding future results of operations; (ii) its strategies,
initiatives, and revenue opportunities; and (iii) its growth
plans. These forward-looking statements are based on the Company's
current intent, expectations, and projections and are not guarantees of future
performance. These statements involve risks, uncertainties,
assumptions, and other factors that are difficult to predict and that could
cause actual results to vary materially from those expressed in or indicated by
them. Factors include, among others, (i) the price and availability
of aircraft fuel and the Company’s ability to overcome increased fuel costs
through fare increases or other revenue initiatives; (ii) the Company's ability
to timely and effectively prioritize its revenue and cost reduction initiatives
and its related ability to timely implement and maintain the necessary
information technology systems and infrastructure to support these initiatives;
(iii) the impact of governmental regulations and inquiries on the Company’s
operating costs, as well as its operations generally; (iv) competitor capacity
and load factors; and (v) other factors, as described in the Company's filings
with the Securities and Exchange Commission, including the detailed factors
discussed under the heading "Risk Factors" in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2007.
/more
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
||||||||||||||||||||||||
|
(in
millions, except per share amounts)
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Three
months ended
|
Six
months ended
|
|||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||
|
Percent
|
Percent
|
|||||||||||||||||||||||
|
2008
|
2007
|
Change
|
2008
|
2007
|
Change
|
|||||||||||||||||||
|
OPERATING
REVENUES:
|
||||||||||||||||||||||||
|
Passenger
|
$ | 2,747 | $ | 2,475 | 11.0 | $ | 5,161 | $ | 4,587 | 12.5 | ||||||||||||||
|
Freight
|
37 | 33 | 12.1 | 71 | 63 | 12.7 | ||||||||||||||||||
|
Other
|
85 | 75 | 13.3 | 167 | 131 | 27.5 | ||||||||||||||||||
|
Total
operating revenues
|
2,869 | 2,583 | 11.1 | 5,399 | 4,781 | 12.9 | ||||||||||||||||||
|
OPERATING
EXPENSES:
|
||||||||||||||||||||||||
|
Salaries,
wages, and benefits
|
839 | 814 | 3.1 | 1,639 | 1,581 | 3.7 | ||||||||||||||||||
|
Fuel
and oil
|
894 | 607 | 47.3 | 1,647 | 1,171 | 40.6 | ||||||||||||||||||
|
Maintenance
materials and repairs
|
191 | 154 | 24.0 | 333 | 291 | 14.4 | ||||||||||||||||||
|
Aircraft
rentals
|
38 | 40 | (5.0 | ) | 76 | 79 | (3.8 | ) | ||||||||||||||||
|
Landing
fees and other rentals
|
159 | 140 | 13.6 | 330 | 276 | 19.6 | ||||||||||||||||||
|
Depreciation
and amortization
|
148 | 137 | 8.0 | 293 | 272 | 7.7 | ||||||||||||||||||
|
Other
operating expenses
|
395 | 363 | 8.8 | 788 | 699 | 12.7 | ||||||||||||||||||
|
Total
operating expenses
|
2,664 | 2,255 | 18.1 | 5,106 | 4,369 | 16.9 | ||||||||||||||||||
|
OPERATING
INCOME
|
205 | 328 | (37.5 | ) | 293 | 412 | (28.9 | ) | ||||||||||||||||
|
OTHER
EXPENSES (INCOME):
|
||||||||||||||||||||||||
|
Interest
expense
|
32 | 29 | 10.3 | 60 | 58 | 3.4 | ||||||||||||||||||
|
Capitalized
interest
|
(6 | ) | (14 | ) | (57.1 | ) | (14 | ) | (27 | ) | (48.1 | ) | ||||||||||||
|
Interest
income
|
(5 | ) | (14 | ) | (64.3 | ) | (12 | ) | (27 | ) | (55.6 | ) | ||||||||||||
|
Other
(gains) losses, net
|
(345 | ) | (120 | ) |
n.a.
|
(307 | ) | (188 | ) |
n.a.
|
||||||||||||||
|
Total
other expenses (income)
|
(324 | ) | (119 | ) |
n.a.
|
(273 | ) | (184 | ) |
n.a.
|
||||||||||||||
|
INCOME
BEFORE INCOME TAXES
|
529 | 447 | 18.3 | 566 | 596 | (5.0 | ) | |||||||||||||||||
|
PROVISION
FOR INCOME TAXES
|
208 | 169 | 23.1 | 211 | 225 | (6.2 | ) | |||||||||||||||||
|
NET
INCOME
|
$ | 321 | $ | 278 | 15.5 | $ | 355 | $ | 371 | (4.3 | ) | |||||||||||||
|
NET
INCOME PER SHARE:
|
||||||||||||||||||||||||
|
Basic
|
$ .44 | $ .36 | $ .48 | $ .48 | ||||||||||||||||||||
|
Diluted
|
$ .44 | $ .36 | $ .48 | $ .47 | ||||||||||||||||||||
|
WEIGHTED
AVERAGE SHARES OUTSTANDING:
|
||||||||||||||||||||||||
|
Basic
|
732 | 769 | 733 | 778 | ||||||||||||||||||||
|
Diluted
|
737 | 780 | 736 | 790 | ||||||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||||||||||||||||||
|
RECONCILIATION
OF REPORTED AMOUNTS TO NON-GAAP ITEMS (SEE NOTE)
|
||||||||||||||||||||||||
|
(in
millions, except per share amounts)
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Note
regarding use of non-GAAP financial measures
|
||||||||||||||||||||||||
|
The
financial results provided in this news release "excluding special items"
are non-GAAP results that are provided as supplemental
information. These results
|
||||||||||||||||||||||||
|
should
not be relied upon as alternative measures to Generally Accepted
Accounting Principles (GAAP) and primarily reflect items calculated on an
"economic"
|
||||||||||||||||||||||||
|
basis,
which excludes certain items that are recorded as a result of SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," as
amended.
|
||||||||||||||||||||||||
|
Items
calculated on an "economic" basis consist of gains or losses for
derivative instruments that settled in the current accounting period, but
were either
|
||||||||||||||||||||||||
|
recognized
in a prior period or will be recognized in a future period in GAAP
results. The items excluded from economic results primarily include
ineffectiveness,
|
||||||||||||||||||||||||
|
as
defined, for future period instruments, and changes in market value for
future period derivatives that no longer qualify for special hedge
accounting, as defined
|
||||||||||||||||||||||||
|
in
SFAS 133. The special items referred to in this news release also reflect
adjustments for other special items that management believes it should
take into
|
||||||||||||||||||||||||
|
consideration
to more accurately measure and monitor the Company's comparative
performance on a consistent basis; therefore, management wants to
provide
|
||||||||||||||||||||||||
|
the
transparency to Investors regarding its views as to a more accurate
reflection of the Company’s on-going operations.
|
||||||||||||||||||||||||
|
The
Company's management utilizes both the GAAP and the non-GAAP results in
this news release to evaluate the Company's performance and believes
that
|
||||||||||||||||||||||||
|
comparative
analysis of results can be enhanced by excluding the impact of the
unrealized items. In part, since fuel expense is such a large part of the
Company's
|
||||||||||||||||||||||||
|
operating
costs and is subject to extreme volatility, the Company believes it is
useful to provide Investors with the Company's true economic cost of fuel
for the
|
||||||||||||||||||||||||
|
periods
presented, which reflects the cash settlements from derivative contracts
for the applicable period.
|
||||||||||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||
|
Percent
|
Percent
|
|||||||||||||||||||||||
|
2008
|
2007
|
Change
|
2008
|
2007
|
Change
|
|||||||||||||||||||
|
Fuel
and oil expense - unhedged
|
$ | 1,368 | $ | 780 | $ | 2,413 | $ | 1,422 | ||||||||||||||||
|
Less:
Fuel hedge gains included in fuel and oil expense
|
(474 | ) | (173 | ) | (766 | ) | (251 | ) | ||||||||||||||||
|
Fuel
and oil expense - GAAP
|
$ | 894 | $ | 607 | 47.3 | $ | 1,647 | $ | 1,171 | 40.6 | ||||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts (1)
|
(37 | ) | - | (48 | ) | 14 | ||||||||||||||||||
|
Fuel
and oil expense - economic
|
$ | 857 | $ | 607 | 41.2 | $ | 1,599 | $ | 1,185 | 34.9 | ||||||||||||||
|
Operating
income, as reported
|
$ | 205 | $ | 328 | $ | 293 | $ | 412 | ||||||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts (1)
|
37 | - | 48 | (14 | ) | |||||||||||||||||||
|
Operating
income, non-GAAP
|
$ | 242 | $ | 328 | (26.2 | ) | $ | 341 | $ | 398 | (14.3 | ) | ||||||||||||
|
Other
(gains) losses, net, as reported
|
$ | (345 | ) | $ | (120 | ) | $ | (307 | ) | $ | (188 | ) | ||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts (1)
|
361 | 134 | 337 | 217 | ||||||||||||||||||||
|
Other
(gains) losses, net, non-GAAP
|
$ | 16 | $ | 14 | 14.3 | $ | 30 | $ | 29 | 3.4 | ||||||||||||||
|
Net
income, as reported
|
$ | 321 | $ | 278 | $ | 355 | $ | 371 | ||||||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts (1)
|
(324 | ) | (134 | ) | (289 | ) | (231 | ) | ||||||||||||||||
|
Income
tax impact of fuel contracts
|
124 | 51 | 110 | 88 | ||||||||||||||||||||
| $ | 121 | $ | 195 | $ | 176 | $ | 228 | |||||||||||||||||
|
(Deduct):
Change in Illinois state income tax law, net
|
- | - | (12 | ) | - | |||||||||||||||||||
|
Net
income, non-GAAP
|
$ | 121 | $ | 195 | (37.9 | ) | $ | 164 | $ | 228 | (28.1 | ) | ||||||||||||
|
Net
income per share, diluted, as reported
|
$ | .44 | $ | .36 | $ | .48 | $ | .47 | ||||||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts
|
(.28 | ) | (.11 | ) | (.24 | ) | (.18 | ) | ||||||||||||||||
| $ | .16 | $ | .25 | $ | .24 | $ | .29 | |||||||||||||||||
|
Add:
Impact of special items, net
|
- | - | (.02 | ) | - | |||||||||||||||||||
|
Net
income per share, diluted, non-GAAP
|
$ | .16 | $ | .25 | (36.0 | ) | $ | .22 | $ | .29 | (24.1 | ) | ||||||||||||
|
(1)
See Reconciliation of Impact from Fuel Contracts
|
||||||||||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||||||||||
|
RECONCILIATION
OF IMPACT FROM FUEL CONTRACTS (SEE PREVIOUS NOTE)
|
||||||||||||||||
|
(in
millions, except per share amounts)
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Fuel & Oil
Expense
|
||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||
|
included
in Other (gains) losses, net
|
$ | (6 | ) | $ | (9 | ) | $ | 17 | $ | (26 | ) | |||||
|
Add/(Deduct):
Other impact of fuel contracts settling in the
|
||||||||||||||||
|
current
or a prior period
|
(31 | ) | 9 | (65 | ) | 40 | ||||||||||
|
Impact
from fuel contracts to Fuel & Oil Expense
|
$ | (37 | ) | $ | - | $ | (48 | ) | $ | 14 | ||||||
|
Operating
Income
|
||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||
|
included
in Other (gains) losses, net
|
$ | 6 | $ | 9 | $ | (17 | ) | $ | 26 | |||||||
|
Add/(Deduct):
Other impact of fuel contracts settling in the
|
||||||||||||||||
|
current
or a prior period
|
31 | (9 | ) | 65 | (40 | ) | ||||||||||
|
Impact
from fuel contracts to Operating Income
|
$ | 37 | $ | - | $ | 48 | $ | (14 | ) | |||||||
|
Other (gains)
losses
|
||||||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||
|
settling
in future periods
|
$ | 369 | $ | 129 | $ | 373 | $ | 200 | ||||||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling in future
periods
|
(14 | ) | (4 | ) | (19 | ) | (9 | ) | ||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||
|
included
in Other (gains) losses, net
|
6 | 9 | (17 | ) | 26 | |||||||||||
|
Impact
from fuel contracts to Other (gains) losses
|
$ | 361 | $ | 134 | $ | 337 | $ | 217 | ||||||||
|
Net
Income
|
||||||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||
|
settling
in future periods
|
$ | (369 | ) | $ | (129 | ) | $ | (373 | ) | $ | (200 | ) | ||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling in future
periods
|
14 | 4 | 19 | 9 | ||||||||||||
|
Add/(Deduct):
Other impact of fuel contracts settling in the
|
||||||||||||||||
|
current
or a prior period
|
31 | (9 | ) | 65 | (40 | ) | ||||||||||
|
Impact
from fuel contracts to Net Income *
|
$ | (324 | ) | $ | (134 | ) | $ | (289 | ) | $ | (231 | ) | ||||
|
*
Excludes income tax impact of unrealized items
|
||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||||||||||||||||||
|
COMPARATIVE
CONSOLIDATED OPERATING STATISTICS
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Three
months ended
|
Six
months ended
|
|||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||
|
2008
|
2007
|
Change
|
2008
|
2007
|
Change
|
|||||||||||||||||||
|
Revenue
passengers carried
|
23,993,342 | 23,442,019 | 2.4 | % | 45,498,163 | 43,402,952 | 4.8 | % | ||||||||||||||||
|
Enplaned
passengers
|
27,550,957 | 26,889,424 | 2.5 | % | 52,259,572 | 49,792,497 | 5.0 | % | ||||||||||||||||
|
Revenue
passenger miles (RPMs) (000s)
|
19,811,541 | 19,018,769 | 4.2 | % | 37,403,700 | 35,127,840 | 6.5 | % | ||||||||||||||||
|
Available
seat miles (ASMs) (000s)
|
26,335,085 | 24,982,676 | 5.4 | % | 51,528,522 | 48,661,051 | 5.9 | % | ||||||||||||||||
|
Load
factor
|
75.2 | % | 76.1 | % |
(.9)
|
pts. | 72.6 | % | 72.2 | % |
.4
|
pts. | ||||||||||||
|
Average
length of passenger haul (miles)
|
826 | 811 | 1.8 | % | 822 | 809 | 1.6 | % | ||||||||||||||||
|
Average
aircraft stage length (miles)
|
636 | 630 | 1.0 | % | 632 | 628 | 0.6 | % | ||||||||||||||||
|
Trips
flown
|
303,432 | 290,647 | 4.4 | % | 598,222 | 567,547 | 5.4 | % | ||||||||||||||||
|
Average
passenger fare
|
$114.48 | $105.60 | 8.4 | % | $113.42 | $105.68 | 7.3 | % | ||||||||||||||||
|
Passenger
revenue yield per RPM (cents)
|
13.86 | 13.02 | 6.5 | % | 13.80 | 13.06 | 5.7 | % | ||||||||||||||||
|
Operating
revenue yield per ASM (cents)
|
10.89 | 10.34 | 5.3 | % | 10.48 | 9.82 | 6.7 | % | ||||||||||||||||
|
CASM,
GAAP (cents)
|
10.12 | 9.03 | 12.1 | % | 9.91 | 8.98 | 10.4 | % | ||||||||||||||||
|
CASM,
GAAP excluding fuel (cents)
|
6.72 | 6.60 | 1.8 | % | 6.71 | 6.57 | 2.1 | % | ||||||||||||||||
|
CASM,
excluding special items (cents)
|
9.98 | 9.03 | 10.5 | % | 9.82 | 9.01 | 9.0 | % | ||||||||||||||||
|
CASM,
excluding fuel and special items (cents)
|
6.72 | 6.60 | 1.8 | % | 6.71 | 6.57 | 2.1 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (unhedged)
|
$3.51 | $2.08 | 68.8 | % | $3.16 | $1.95 | 62.1 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (GAAP)
|
$2.29 | $1.61 | 42.2 | % | $2.15 | $1.61 | 33.5 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (economic)
|
$2.19 | $1.62 | 35.2 | % | $2.09 | $1.63 | 28.2 | % | ||||||||||||||||
|
Fuel
consumed, in gallons (millions)
|
388 | 374 | 3.7 | % | 761 | 726 | 4.8 | % | ||||||||||||||||
|
Fulltime
equivalent Employees at period-end
|
34,027 | 33,261 | 2.3 | % | 34,027 | 33,261 | 2.3 | % | ||||||||||||||||
|
Size
of fleet at period-end
|
535 | 500 | 7.0 | % | 535 | 500 | 7.0 | % | ||||||||||||||||
|
CASM
(unit costs) - Operating expenses per ASM
|
||||||||||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
||||||||
|
(in
millions)
|
||||||||
|
(unaudited)
|
||||||||
|
June
30,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 4,653 | $ | 2,213 | ||||
|
Short-term
investments
|
1,185 | 566 | ||||||
|
Accounts
and other receivables
|
447 | 279 | ||||||
|
Inventories
of parts and supplies, at cost
|
301 | 259 | ||||||
|
Fuel
derivative contracts
|
2,278 | 1,069 | ||||||
|
Prepaid
expenses and other current assets
|
65 | 57 | ||||||
|
Total
current assets
|
8,929 | 4,443 | ||||||
|
Property
and equipment, at cost:
|
||||||||
|
Flight
equipment
|
13,714 | 13,019 | ||||||
|
Ground
property and equipment
|
1,591 | 1,515 | ||||||
|
Deposits
on flight equipment purchase contracts
|
416 | 626 | ||||||
| 15,721 | 15,160 | |||||||
|
Less
allowance for depreciation and amortization
|
4,551 | 4,286 | ||||||
| 11,170 | 10,874 | |||||||
|
Other
assets
|
3,163 | 1,455 | ||||||
| $ | 23,262 | $ | 16,772 | |||||
|
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 903 | $ | 759 | ||||
|
Accrued
liabilities
|
6,097 | 3,107 | ||||||
|
Air
traffic liability
|
1,303 | 931 | ||||||
|
Current
maturities of long-term debt
|
71 | 41 | ||||||
|
Total
current liabilities
|
8,374 | 4,838 | ||||||
|
Long-term
debt less current maturities
|
2,590 | 2,050 | ||||||
|
Deferred
income taxes
|
3,193 | 2,535 | ||||||
|
Deferred
gains from sale and leaseback of aircraft
|
100 | 106 | ||||||
|
Other
deferred liabilities
|
275 | 302 | ||||||
|
Stockholders'
equity:
|
||||||||
|
Common
stock
|
808 | 808 | ||||||
|
Capital
in excess of par value
|
1,216 | 1,207 | ||||||
|
Retained
earnings
|
5,123 | 4,788 | ||||||
|
Accumulated
other comprehensive income
|
2,699 | 1,241 | ||||||
|
Treasury
stock, at cost
|
(1,116 | ) | (1,103 | ) | ||||
|
Total
stockholders' equity
|
8,730 | 6,941 | ||||||
| $ | 23,262 | $ | 16,772 | |||||
/more
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
|
Net
income
|
$ | 321 | $ | 278 | $ | 355 | $ | 371 | ||||||||
|
Adjustments
to reconcile net income to
|
||||||||||||||||
|
cash
provided by operating activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
148 | 137 | 293 | 272 | ||||||||||||
|
Deferred
income taxes
|
135 | 125 | 129 | 167 | ||||||||||||
|
Amortization
of deferred gains on sale and
|
||||||||||||||||
|
leaseback
of aircraft
|
(3 | ) | (4 | ) | (6 | ) | (7 | ) | ||||||||
|
Share-based
compensation expense
|
5 | 13 | 9 | 26 | ||||||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
3 | 1 | 3 | (29 | ) | |||||||||||
|
Changes
in certain assets and liabilities:
|
||||||||||||||||
|
Accounts
and other receivables
|
(97 | ) | (43 | ) | (167 | ) | (80 | ) | ||||||||
|
Other
current assets
|
(234 | ) | (92 | ) | (208 | ) | (148 | ) | ||||||||
|
Accounts
payable and accrued liabilities
|
2,151 | 447 | 2,768 | 830 | ||||||||||||
|
Air
traffic liability
|
105 | 112 | 372 | 322 | ||||||||||||
|
Other,
net
|
(198 | ) | 6 | (248 | ) | (127 | ) | |||||||||
|
Net
cash provided by operating activities
|
2,336 | 980 | 3,300 | 1,597 | ||||||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Purchases
of property and equipment, net
|
(223 | ) | (338 | ) | (587 | ) | (663 | ) | ||||||||
|
Purchases
of short-term investments
|
(2,226 | ) | (1,158 | ) | (3,447 | ) | (2,072 | ) | ||||||||
|
Proceeds
from sales of short-term investments
|
1,185 | 963 | 2,645 | 1,931 | ||||||||||||
|
Net
cash used in investing activities
|
(1,264 | ) | (533 | ) | (1,389 | ) | (804 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Issuance
of Long-term debt
|
600 | - | 600 | - | ||||||||||||
|
Proceeds
from Employee stock plans
|
17 | 14 | 27 | 92 | ||||||||||||
|
Payments
of long-term debt and capital lease obligations
|
(6 | ) | (6 | ) | (25 | ) | (15 | ) | ||||||||
|
Payments
of cash dividends
|
(3 | ) | (3 | ) | (10 | ) | (11 | ) | ||||||||
|
Repurchase
of common stock
|
- | (464 | ) | (54 | ) | (674 | ) | |||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
(3 | ) | (1 | ) | (3 | ) | 29 | |||||||||
|
Other,
net
|
(6 | ) | - | (6 | ) | 1 | ||||||||||
|
Net
cash provided by (used in) financing activities
|
599 | (460 | ) | 529 | (578 | ) | ||||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
1,671 | (13 | ) | 2,440 | 215 | |||||||||||
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
2,982 | 1,618 | 2,213 | 1,390 | ||||||||||||
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 4,653 | $ | 1,605 | $ | 4,653 | $ | 1,605 | ||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||||||||||
|
BOEING
737-700 DELIVERY SCHEDULE
|
||||||||||||||||
|
AS
OF JULY 24, 2008
|
||||||||||||||||
|
Purchase
|
||||||||||||||||
|
Firm
|
Options
|
Rights
|
Total
|
|||||||||||||
|
2008
|
29 | 29 | * | |||||||||||||
|
2009
|
14 | 14 | ||||||||||||||
|
2010
|
16 | 6 | 22 | |||||||||||||
|
2011
|
13 | 19 | 32 | |||||||||||||
|
2012
|
13 | 27 | 40 | |||||||||||||
|
2013
|
19 | 1 | 20 | |||||||||||||
|
2014
|
10 | 8 | 18 | |||||||||||||
|
2015
|
11 | 6 | 17 | |||||||||||||
|
Through
2018
|
54 | 54 | ||||||||||||||
|
Total
|
125 | 67 | 54 | 246 | ||||||||||||
|
*
Currently plan to reduce fleet by 14 aircraft, bringing 2008 net additions
to 15.
|
||||||||||||||||
***