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SWA 2nd Quarter Earnings (Bring a truck!)

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'LUVIN LIFE

No Matter the Situation
Joined
Apr 23, 2005
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45
Southwest Airlines Reports Record Second Quarter EarningsDALLAS, July 19 /PRNewswire-FirstCall/ -- Southwest Airlines (NYSE: LUV) today reported second quarter 2006 net income of $333 million, or $.40 per diluted share, compared to $144 million for second quarter 2005, or $.18 per diluted share.
The Company's second quarter 2006 and 2005 net income included unrealized gains/losses associated with Statement of Financial Accounting Standard (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. Excluding these unrealized SFAS 133 gains/losses, net income for second quarter 2006 increased 87.0 percent to $273 million, or $.33 per diluted share, compared to $146 million, or $.18 per diluted share for second quarter 2005. These results exceeded First Call's mean estimate of $.26 per diluted share for second quarter 2006.
Gary C. Kelly, CEO, stated: "We are delighted to report a record quarterly earnings performance. Excluding SFAS 133 items, our second quarter 2006 earnings of $273 million increased 87 percent over last year's earnings of $146 million, despite significantly higher fuel prices. Our strong earnings growth resulted from record quarterly revenues of $2.45 billion, which increased 26 percent, or 17.5 percent per available seat mile. With reduced capacity by our airline competitors, demand for Southwest service was robust, resulting in a record quarterly load factor performance of 78.0 percent, up 5.5 points from second quarter 2005. We generated higher revenue yields to offset significantly higher jet fuel prices, but clearly remain the Low Fare Leader in America. We are committed to maintaining our low cost/high value service for our Customers. Thus far, strong load factor trends have continued in July, and Customer bookings for the remainder of third quarter 2006 are strong. Based on our July results to date, we expect strong year-over-year unit revenue trends again in third quarter 2006.
"Our unit costs increased 11.6 percent largely due to higher jet fuel prices. We had a $225 million second quarter 2006 cash benefit from our fuel hedging position; however, our second quarter 2006 jet fuel costs per gallon increased 39.2 percent to $1.42 per gallon. We are over 73 percent hedged for the remainder of 2006 at approximately $36 per barrel; 65 percent in 2007 at $41 per barrel; 38 percent in 2008 at $40 per barrel; 34 percent in 2009 at $44 per barrel; and 12 percent hedged in 2010 at $61 per barrel. While we cannot control the price of energy, we have insured ourselves with years of price protection that will allow us time to make the necessary changes to maintain our profitability and financial health.
"Based on our third quarter 2006 hedge position and current market prices, we expect our third quarter 2006 jet fuel cost per gallon (economic) to substantially increase from third quarter 2005's 95 cents and exceed second quarter 2006's $1.42. We have many efforts underway to conserve fuel, and we are pleased to announce our decision to install Aviation Partners Boeing Blended Winglets on up to 90 of our Boeing 737-300 aircraft with 59 firm orders and 31 options. Installations are planned to begin in early 2007.
"Excluding fuel, unit costs increased 4.9 percent to 6.68 cents in large part due to higher revenues and profits. Revenue driven costs, such as credit card discounts, rose 22.4 percent to $73 million and, profit-sharing expense rose 63.3 percent to $74 million in second quarter 2006. Based on current unit operating cost trends, excluding fuel, we expect the year-over-year increase in third quarter 2006 to be less than the second quarter 2006 increase of 4.9 percent. Our Employees have done an excellent job containing costs and improving productivity over the past several years. As a result of their outstanding efforts, we were as prepared as we could be for today's high fuel prices. Still, we had to impose several modest fare increases to offset the enormous fuel cost increases. Our People understand our cost pressures and the importance of our Low Cost Leadership. In turn, they are devoted to our Low Fare Brand and Leadership. They never stand still and are continually finding ways to reduce costs and improve our operational efficiency, demonstrating over and over that they are the very best and most innovative in the airline industry. Our People are the reason Business Week named Southwest one of the World's Most Innovative Companies and why I am confident we will overcome tomorrow's cost challenges and make our airline even stronger than it is today.
"We continue to grow our route system. We recently announced service to Washington Dulles International Airport to begin on October 5, 2006 with 12 nonstop flights to four cities: Chicago Midway, Orlando, Tampa Bay, and Las Vegas. Dulles will be a great complement to our Baltimore service. The Customer response to our Denver service, which began in January 2006, has been outstanding, and we will already be up to 32 daily departures by early August 2006. We also continue to add flights throughout our existing network to meet very strong Customer demand.
"We are very excited about our near-term growth opportunities and pleased with our earnings momentum. Our year-to-date earnings are up 77.9 percent, excluding unrealized SFAS 133 items. Therefore, assuming continuance of the current healthy revenue environment, we expect to easily exceed our 15 percent 2006 annual earnings growth goal. Although our earnings comparisons are much more difficult in the second half of 2006, barring any unforeseen events, we expect another year-over-year increase in third quarter 2006 earnings from last year's earnings of $155 million, excluding SFAS 133 items."
Southwest will discuss its second quarter 2006 results on a conference call at 11:30 a.m. Eastern Time today. A live broadcast of the conference call will be available at: http://www.southwest.com/jp/luvhome.shtml?src=IR_2qtr_071906 .
Operating ResultsTotal operating revenues for second quarter 2006 increased 26.0 percent to $2.45 billion, compared to $1.94 billion in second quarter 2005. Operating income increased 57.0 percent to $402 million from $256 million in second quarter 2005. Excluding the impact of SFAS 133 items, operating income increased 67.6 percent to $429 million from $256 million in second quarter 2005. Revenue passenger miles (RPMs) increased 15.3 percent in second quarter 2006, as compared to a 7.2 percent increase in available seat miles (ASMs), resulting in a 5.5 point increase in load factor to 78.0 percent. The passenger revenue yield per RPM increased 9.7 percent to 13.24 cents from 12.07 cents in second quarter 2005. Operating revenue yield per ASM (RASM) increased 17.5 percent to 10.70 cents from 9.11 cents in second quarter 2005.
Total second quarter 2006 operating expenses were $2.05 billion, compared to $1.69 billion in second quarter 2005. Operating expenses per ASM (CASM) for second quarter 2006 increased 13.1 percent to 8.95 cents, compared to 7.91 cents in second quarter 2005. Excluding SFAS 133 items, CASM for second quarter 2006 increased 11.6 percent to 8.83 cents, compared to 7.91 cents for second quarter 2005. CASM, excluding fuel, for second quarter 2006 increased 4.9 percent to 6.68 cents from last year's 6.37 cents.
Second quarter 2006 "other income" of $113 million consisted of $112 million in "other gains" resulting primarily from SFAS 133 items. Excluding these SFAS 133 items, "other losses" were $11 million for second quarter 2006, consisting primarily of costs associated with the Company's fuel hedging program. The second quarter 2006 income tax rate of 35.3 percent reflects a $13 million net adjustment to reduce deferred taxes related to a revision in the State of Texas Franchise Tax law enacted during the quarter. The Company currently expects an effective tax rate of approximately 38 percent for second half 2006.
Net cash provided by operations for the six months ended June 30, 2006 was $1.58 billion, which included a $340 million increase in fuel hedge-related collateral deposits, and capital expenditures were $665 million. During second quarter 2006, the Company repaid $99 million in debt. Approximately $470 million will be repaid during the second half of the year. The Company ended second quarter 2006 with $3.0 billion in cash and short-term investments. In addition, the Company had a fully available unsecured revolving credit line of $600 million.
In May 2006, the Company's Board of Directors authorized purchases of up to $300 million of the Company's outstanding common stock. As of July 18, 2006, the Company completed the program, resulting in the repurchase of 18.7 million shares of common stock. Including the $300 million buyback program the Company initiated in January 2006 and completed in April 2006, the Company has repurchased a total of 36.5 million shares of common stock this year.
Total operating revenues for the six months ended June 30, 2006 increased 23.9 percent to $4.47 billion, while total operating expenses increased 21.3 percent to $3.97 billion, resulting in operating income in first half 2006 of $500 million versus $337 million in first half 2005.

For all the numbers go to: http://www.southwest.com/about_swa/press/prindex.html
 
Wow...congrats guys!!
 
Now that's yield mgt!!! Great Job to all the folks at SWA. Consensus was around .26 per share. I think the pilots should ask for a raise, and to hell with the E-jets.:)

AMR is supposed to make around $200M. We'll have to see if the trend for beating the analcysts continues.

:pimp:
 
WOW, congrats guys!
 
"We had a $225 million second quarter 2006 cash benefit from our fuel hedging position.."

Managment actually deserves thier bonus! I am glad to see not every management team is looting. Good job.
 
Now that's yield mgt!!! Great Job to all the folks at SWA. Consensus was around .26 per share. I think the pilots should ask for a raise, and to hell with the E-jets.:)

AMR is supposed to make around $200M. We'll have to see if the trend for beating the analcysts continues.

LOWECUR....are you feeling alright?

I think the end of the world is coming......

(I thought I would never see the day)

:eek:
 
LearAv8r said:
LOWECUR....are you feeling alright? Hey, give credit where it's due. Of course, the E-jet statement & raise are a little humor, but all in all it was a great Q.

I think the end of the world is coming......I think Mike Boyd said that first.

(I thought I would never see the day) or the night.

:eek:
.....

:pimp:
 

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