SWA profits lower/beat expectations

[ivauir]

SWA profits beat expectations by 10%

Profits Fall at Southwest

By Ted Reed
TheStreet.com Staff Reporter
7/18/2007 8:06 AM EDT
Click here for more stories by Ted Reed


Southwest Airlines (LUV - Cramer's Take - Stockpickr) said second-quarter net income declined by 28.6%, due largely to rising fuel costs, while unit revenue dropped 3.4%.

The carrier also said it will offer an unspecified number of employees an early-buyout program.
Southwest reported net income, after adjustments for fuel-hedging programs, of $195 million, or 25 cents a share. Analysts polled by Thomson Financial had estimated earnings of 22 cents.
Revenue rose 5.5% to $2.6 billion, in line with expectations. A year earlier, the carrier earned $273 million, or 33 cents a share.
"The anticipated decline in our year-over-year second-quarter earnings performance reflects a continued rise in fuel costs and difficult unit revenue comparisons," said CEO Gary Kelly, in a prepared statement.
Revenue per available seat mile fell to 10.34 cents. Load factor was a record 82.1%. Cost per available seat mile, excluding fuel, fell 1.2%. But despite extensive fuel-cost hedging, Southwest said its fuel expenses per gallon rose 14.1% from a year earlier.
Looking forward, Southwest said July traffic trends and bookings have been strong, "suggesting unit revenue comparisons for third quarter 2007 will be better year-over-year than second quarter 2007's performance."
However, cost per available seat mile will also climb, the company expects.
The airline forecast capacity growth of 6% in the fourth quarter and the full year 2008, about two points lower than previously planned. In 2008, Southwest will take delivery of 19 aircraft, 15 fewer than has originally been set. During the latest quarter, Southwest repurchased 32 million shares for $464 million.

 

[Bavarian Chef]

This could be the end of JetBl -- er, I mean Southwest.



They are just trying to soften yall up for contract negotiations.

 

[huronip]

Southwest Airlines Reports Second Quarter Earnings; 65th Consecutive Quarter of Profitability

July 18, 2007: 06:50 AM EST


DALLAS, July 18 /PRNewswire-FirstCall/ -- Southwest Airlines today reported its second quarter 2007 results. Net income for second quarter 2007 was $278 million, or $.36 per diluted share, compared to $333 million, or $.40 per diluted share, for second quarter 2006. Economic net income for second quarter 2007 was $195 million, or $.25 per diluted share, compared to $273 million, or $.33 per diluted share, for second quarter 2006. The $.25 per diluted share in economic net income exceeds First Call's mean estimate of $.22 per diluted share for second quarter 2007. (Refer to the reconciliation in the accompanying tables for further information regarding economic results.)

Second Quarter 2007 Financial Highlights: -- Record second quarter revenues of $2.6 billion, up 5.5 percent -- Economic net income of $195 million, down 28.6 percent -- Economic net income per diluted share of $.25, down 24.2 percent -- Repurchased 32 million shares of common stock for $464 million
Gary C. Kelly, CEO, stated: "The anticipated decline in our year-over-year second quarter earnings performance reflects a continued rise in fuel costs and difficult unit revenue comparisons. As we recently outlined, specific initiatives are well underway to adapt to higher jet fuel cost levels. Through these initiatives, we believe that we can maintain our low fare, low cost leadership while achieving substantially enhanced incremental revenues over the next several years.
"While we reported record operating revenues of $2.6 billion for the second quarter 2007, our unit revenue production has not kept pace with rising fuel costs. Our operating unit revenue of 10.34 cents fell below the exceptional year ago performance. Although softer revenue trends were consistent throughout the second quarter, demand strengthened somewhat in June, and we reported an all-time record load factor of 82.1 percent for the month. Traffic trends and bookings thus far in July are strong, suggesting unit revenue comparisons for third quarter 2007 will be better year-over-year than second quarter 2007's performance.
"Our economic fuel cost per gallon of $1.62 was up 14.1 percent from a year ago. Favorable cash settlements resulting from our prudent fuel hedging program were $173 million for second quarter 2007. We have derivative contracts for approximately 90 percent of our third quarter 2007 estimated fuel consumption, capped at an average crude-equivalent price of approximately $51 per barrel (compared to approximately 81 percent at approximately $41 per barrel for third quarter 2006). Based on this derivative position and current market prices, we currently expect our third quarter 2007 economic fuel costs per gallon to be in the $1.70 range. We currently have derivative contracts for approximately 90 percent of our estimated fuel consumption for the fourth quarter 2007 at an average crude-equivalent price of approximately $51 per barrel. We have derivative contracts for approximately 65 percent of our estimated fuel consumption in 2008 at an average crude-equivalent price of $49 per barrel.
"Excluding fuel, second quarter 2007 economic unit costs decreased 1.2 percent from a year ago, primarily due to lower profitsharing expense. While our Employees have done a commendable job improving efficiency, we must persistently find ways to control costs, including salaries, wages, and benefits, due to continual increases in jet fuel prices. As such, we recently offered certain Employees a voluntary early-out program. Employees eligible under this program must make their election to participate by August 10, 2007. Excluding any charge from this program, we currently expect our third quarter 2007 economic unit costs, excluding fuel, to exceed third quarter 2006's 6.38 cents.
"We look forward to resuming service to San Francisco International Airport on August 26th. We are also very pleased with Customer response to our continued growth in key markets such as Denver, Ft. Myers, New Orleans, Philadelphia, Pittsburgh, and Washington Dulles. We are elated with the strong Customer demand for our new low fare service added to and from Dallas Love Field as a result of the Wright Amendment Reform Act of 2006, which increased second quarter 2007 revenues by almost $30 million.
"Our estimated year-over-year available seat mile (ASM) growth for third quarter 2007 is eight percent. However, in our continuing efforts to restore profit growth, we have adjusted both our fourth quarter 2007 and full year 2008 capacity plans to grow ASMs year-over-year by approximately six percent, or about two percentage points slower than previously planned.
"Prior to adjusting our growth rate, we had 34 737-700 aircraft (33 firm and one option) scheduled for delivery from Boeing in 2008. Now, we plan to grow our fleet by 19 aircraft, 15 fewer than originally planned. We have an agreement with Boeing to defer five of our 2008 deliveries (four firm and one option) to firm orders in 2013, resulting in 29 firm aircraft deliveries from Boeing next year. In addition to deferring five of the 2008 Boeing deliveries, we are currently exploring a variety of alternatives to reduce our fleet growth by another ten aircraft in 2008, which will bring our 2008 planned additions to 19 net aircraft. As part of the agreement with Boeing, we have also agreed to exercise 25 737-700 options (including the one 2008 deferred option) originally scheduled for 2008 through 2011 for delivery in 2013 and 2014, bringing our firm orders from 2008 through 2014 to 106. In addition, we have 86 options, with delivery positions available in 2009 through 2012, and 54 purchase rights for delivery through December 31, 2014. (See accompanying Revised 737-700 Delivery Schedule).
"Although we face earnings challenges, primarily due to escalating fuel costs, we are confident in our future and the Employees of Southwest Airlines. We remain dedicated to upholding our high Customer Satisfaction record and are proud that we were recently recognized by City Business Journals Network as the #1 Brand in the travel segment of the 2007 American Brand Excellence Awards. Southwest Airlines was also named the top U.S. airline on the University of Michigan's American Customer Satisfaction Index, as we have been every year since the index began in 1994."
Southwest will discuss its second quarter 2007 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/?src=IR_071807.
Operating Results
Total operating revenues for second quarter 2007 increased 5.5 percent to $2.58 billion, compared to $2.45 billion for second quarter 2006. Total second quarter 2007 operating expenses were $2.26 billion, compared to $2.05 billion in second quarter 2006. Operating income for second quarter 2007 was $328 million compared to $402 million in second quarter 2006. Economic operating income was $328 million in second quarter 2007 compared to $429 million last year.
"Other income" was $119 million for second quarter 2007, compared to $113 million for second quarter 2006. The $6 million increase primarily resulted from unrealized "other (gains) losses" associated with Statement of Financial Accounting Standard (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The cost of the hedging program (which includes the premium costs of derivative contracts) of $14 million in second quarter 2007 and $12 million in second quarter 2006 is also included in "other (gains) losses."
The second quarter 2007 income tax rate of 37.8 percent was higher than last year's second quarter rate of 35.3 percent, which reflected a $13 million net adjustment to reduce deferred taxes related to a revision in the State of Texas Franchise Tax law enacted during second quarter 2006.
Net cash provided by operations for the six months ended June 30, 2007 was $1.6 billion, which included a $535 million increase in fuel derivative collateral deposits related to future periods, and capital expenditures were $663 million. The Company repurchased 32 million shares of its common stock for $464 million during the second quarter, of which $291 million, or 20 million shares, completed the $300 million repurchase authorization in March by the Company's Board of Directors. The remaining $173 million related to the $500 million repurchase program authorized in May. As of yesterday, the Company had repurchased 20 million shares of its common stock for a total of $295 million under this latest authorization. This brings the total repurchases of common stock to $1.6 billion, or 102 million shares, since January 1, 2006.
The Company ended second quarter 2007 with $2.1 billion in cash and short-term investments, which included $1.1 billion in fuel derivative collateral deposits. In addition, the Company had a fully available unsecured revolving credit line of $600 million. The Company will repay approximately $100 million in debt during third quarter 2007.
Total operating revenues for the six months ended June 30, 2007 increased 7.0 percent to $4.78 billion, while total operating expenses increased 10.1 percent to $4.37 billion, resulting in operating income in first half 2007 of $412 million versus $500 million in first half 2006. Economic operating income was $398 million and $544 million, respectively, for the six months ended June 30, 2007 and 2006. Net income for the six months ended June 30, 2007 was $371 million, or $.47 per diluted share, compared to $394 million, or $.47 per diluted share, for the same period last year. Economic net income for the six months ended June 30, 2007 was $228 million, or $.29 per diluted share, compared to $338 million, or $.41 per diluted share, for the same period last year.

 

[General Lee]

Things not too bad, except LBB/MAF/AMA still served

Southwest earnings fall, buyouts offered

Wed Jul 18, 2007 10:11AM By Chris Reiter
NEW YORK (Reuters) - Southwest Airlines Co. (LUV.N: Quote, Profile, Research), the leading U.S. discount carrier, posted a 16.5 percent drop in second-quarter earnings on Wednesday, but the drop was less than expected as demand rebounded in June.
Nevertheless, higher fuel costs and sluggish demand throughout most of the second quarter took a toll on its profit. The company, which has never laid off staff or cut pay, said on Wednesday it offered employee buyout packages to more than a quarter of its workforce.
Southwest, which recently trimmed its expansion plans to adjust to the tougher market, said net profit fell to $278 million, or 36 cents per share, from $333 million, or 40 cents per share, a year earlier.
Excluding costs and proceeds from the company's fuel hedging program, earnings declined to 25 cents per share, beating Wall Street expectations of 22 cents, according to Reuters Estimates.
In the second quarter, Southwest booked gains of $173 million from its fuel hedging program, which is gradually unwinding, reducing its fuel cost advantage over other carriers. In the same quarter last year, the company had a fuel-hedging gain of $225 million.
Operating revenue rose 5.5 percent to $2.58 billion, boosted by more flights and higher fares. But a 10 percent rise in operating expenses, led by a 17 percent jump in fuel costs, more than offset the higher revenue.
"Although softer revenue trends were consistent throughout the second quarter, demand strengthened somewhat in June," said Chief Executive Gary Kelly, adding he was optimistic going into the third quarter.
"Traffic trends and bookings thus far in July are strong," Kelly said.
He said the improved demand trends suggested that third-quarter unit revenue would be better than in the second quarter, when revenue per available seat mile fell 3.4 percent.

Southwest, one of the few U.S. airlines to consistently post profits, is adjusting its strategy in the face of tougher competition and higher fuel and labor costs.
Last month, the largest airline by market value said it would reduce capacity growth to 6 percent from 8 percent in the fourth quarter and 2008 because of softening travel demand.
Besides the slowed expansion, Southwest has said that it hopes new business initiatives will add more than $1 billion to annual revenue by 2010.
The company's buyout offer, which ends August 10, is available to about 8,700 of Southwest's 33,000 employees. It consists of a cash payment of $25,000 and continued medical, dental, and free travel benefits for limited period of time, Southwest spokeswoman Beth Harbin said.
"We recognize that our labor costs are high," she said.
Southwest shares, which essentially flat from where they were a year ago, rose 6 cents to $15.66 in morning trade on the New York Stock Exchange.
(Reporting by Chris Reiter)




It is amazing the different titles for these articles. Some are positive, and somre are negative. That high labor costs comment could be a little concerning to some people I would bet.


Bye Bye--General Lee

 

[Bake]

Thanks for the kind words General. Congrats to SWA, DAL, and AMR today. We all posted profits. Hope all others do the same. This industry needs to make some money. It will only help us get or keep the pay rates up.

 

[Sedona16]

Southwest earnings fall on higher fuel costs

Wed Jul 18, 2007 7:18AM EDT

NEW YORK (Reuters) - Southwest Airlines Co (LUV.N: Quote, Profile, Research), the leading U.S. discount carrier, said on Wednesday that quarterly earnings fell 16.5 percent on higher fuel costs and sluggish demand.

Southwest, which recently trimmed its expansion plans to adjust to the tougher market, said second-quarter net profit fell to $278 million, or 36 cents per share, from $333 million, or 40 cents per share, a year earlier.
Excluding costs and proceeds related to the company's fuel hedging program, earnings fell to 25 cents per share, beating Wall Street expectations of 22 cents, according to Reuters Estimates.
In the second quarter, Southwest booked gains of $173 million from its fuel hedging program, which is gradually unwinding, reducing its fuel cost advantage over other carriers.
Operating revenue rose 5.5 percent to $2.58 billion, boosted by more flights and higher fares.
Southwest shares, which have traded between $14.03 and $18.20 over the last 12 months, are essentially flat from where they were a year ago.
(Reporting by Chris Reiter)

 

[Tejas-Jet]

I thank God we have the right people in the right positions at this company.

When I was at my former employer it was a consistent loss after loss after loss....seemed like it would never end. Makes one just hang his head and wonder how much longer it can go on. I didn't wait around to find out.

As for the LBB/AMA/MAF layovers...SWA also requires our Capts to do a V-1 cut at 300 RVR during their sim checks. Just one more thing for those who are on the fence....don't come here if you can't hack it...

Like one new hire told me...."In my guard unit all the Delta, AA, UAL, NWA guys were/are always complaining about their company...the SWA guys seemed very happy with what they had...thats why I decided to come here"

SHACK !!!

 

[IronCityBlue]

Congrats to all the airlines posting profits, its good news for all of us. I like the way these brilliant analysts squeal bloody murder about declining fuel hedge positions. So if SWA wasn't as phenominally well hedged in the past and therefore made a couple million less second quarter '06, thereby making today's numbers a year over year increase by comparison, things would be better? Gee, if only they could go back in time and reduce previous profits! Genuis! Maybe they will take analcysts advice and slash worker pay to return to peak hedged profits, that always works!