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WSJ on SWA/AT Merger

Dornier 335

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Southwest Airlines Reports Second Quarter Results --Net income of $224 million ...

link

excerpt:

Southwest Airlines Reports Second Quarter Results

--Net income of $224 million --Excluding special items, record net income of $274 million

DALLAS, July 25, 2013 /PRNewswire via COMTEX/ -- Southwest Airlines Co. LUV -0.14% (the "Company") today reported its second quarter 2013 results. Second quarter 2013 net income was $224 million, or $.31 per diluted share, which included $50 million (net) of unfavorable special items. This compared to net income of $228 million, or $.30 per diluted share, in second quarter 2012, which included $45 million (net) of unfavorable special items. Excluding special items, second quarter 2013 net income was a record $274 million, or $.38 per diluted share, compared to $273 million, or $.36 per diluted share, in second quarter 2012. This was in line with the First Call consensus estimate of $.38 per diluted share. Additional information regarding special items is included in this release and in the accompanying reconciliation tables.
Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, "We are pleased to report record quarterly earnings of $274 million (excluding special items). This performance benefited from all-time high operating revenues and lower fuel prices. In addition, our focus on managing costs resulted in modest year-over-year cost inflation despite significant investments in fleet modernization and other strategic initiatives. I commend our hard-working and dedicated Employees for their efforts to achieve these excellent results, while simultaneously executing on our strategic initiatives.
"While the lingering effects of government sequestration and higher taxes continued to be a drag on air travel demand, second quarter 2013 revenues and passenger traffic still reached record levels. In addition, we are in the midst of integrating AirTran, launching new city-pairs, and optimizing the combined networks. We maintained strong load factors and ended the quarter with a record June load factor of 85.0 percent, which is notable considering the increasing mix of larger gauge 737-800s and Evolve -700s. Although the 2.4 percent year-over-year decline in second quarter unit revenues was below plan1, results improved throughout the quarter. Third quarter 2013 revenue trends are encouraging, thus far. To date, July unit revenues are approximately three percent above last year's July, benefiting from Southwest and AirTran network connections and our gradual combined network optimization. Current bookings for the remainder of the third quarter also look solid.
"We remain on track with our plan to fully integrate AirTran into Southwest Airlines by the end of 2014. We are on schedule to complete the conversion of AirTran's Boeing 737-700s to the Southwest livery and deploy the Southwest international reservation system next year. During second quarter, we transitioned one -700, bringing total aircraft conversions to 12 since the acquisition. Seven more -700 conversions are planned for this year, with the remaining 33 planned for next year in conjunction with the conversion of AirTran's eight international markets. We will be transitioning AirTran's 88 Boeing 717-200s out of the fleet, beginning next month.
"Connecting the Southwest and AirTran networks was a key milestone this quarter. As of April 14th, Customers can now fly across our combined 97 destinations on a single itinerary. Our ability to optimize the combined networks and operations is enhanced significantly with connecting capabilities as we continue to transition AirTran markets to the Southwest network. Earlier this week, we extended our 2014 flight schedule through early March and announced new Southwest service between Hartsfield-Jackson Atlanta International Airport and Ronald Reagan Washington National Airport, beginning in February, which will augment AirTran's five daily nonstop flights. During second quarter 2013, Southwest launched new service to Charlotte, North Carolina; Flint, Michigan; Portland, Maine; Rochester, New York; and Wichita, Kansas, which were all AirTran cities. We also began operating Southwest's first scheduled service outside of the continental United States, with daily service to San Juan, Puerto Rico, beginning April 14th. By the end of 2013, we will have a Southwest presence in all AirTran domestic cities retained following the acquisition. While much of the converted capacity represents new city-pairs, we expect these new routes to develop rapidly. Our Cargo business also benefited from connecting the networks, coincident with the April 14th launch of cargo on AirTran under the Southwest brand.
"We are excited about our future network opportunities as we add international capabilities and continue the development of our domestic route network. We were thrilled to be awarded the slot exemption from the U.S. Department of Transportation to begin service between Houston Hobby and Ronald Reagan Washington National Airport next month. The introduction of this daily Southwest service will complete a triad of nonstop service options between Hobby and the Boston, New York, and Washington, D.C. metro areas.
"We continue to make progress on our fleet modernization efforts. During second quarter, we added three new Boeing 737-800s into service and retired two Boeing 737-300s. We also removed the first AirTran 717 from active service during the quarter in preparation for its transition out of the fleet next month. As of June 30, 2013, all Southwest Boeing 737-700s and 14 Boeing 737-300s have been retrofitted with the Evolve interior, and we plan to retrofit 64 additional -300s in the second half of this year. In May, we announced revisions to our future aircraft delivery schedule, including the launch of the Boeing 737 MAX 7 in 2019, with three objectives in mind: efficiently and aggressively manage our invested capital, shift the mix of new aircraft deliveries to the MAX, and replace Boeing 717s and Boeing 737s being retired over the next three years with more economical aircraft. This includes augmenting our Boeing orders with the acquisition of pre-owned aircraft. In line with our plan, available seat miles (capacity) for 2013 are estimated to increase two percent year-over-year as a result of larger gauge aircraft. For 2014, we currently plan to keep our capacity in line with 2013 as we continue to optimize our network and execute our strategic plan.
"Our fleet modernization and other fuel conservation efforts resulted in a 4.1 percent improvement in second quarter available seat miles per gallon. Second quarter economic fuel costs declined significantly to $3.06 per gallon, as expected, compared to second quarter 2012's $3.22 per gallon. Based on our fuel derivative contracts and market prices as of July 22nd, third quarter 2013 economic fuel costs are expected to be in the $3.05 to $3.10 per gallon range, which is below third quarter 2012's $3.16 per gallon. [...]
 

PCL_128

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Holy crap PCL, I agree with a lot of your positions on here. My politics lean left and I credit the "liberals" with creating the middle class and the opportunities in our country for the majority of the population. But your perception that someone should give up the SS investment they made while working because they worked hard and were successful is absurd.
If that concept ever gets seriously considered by democrats it will do more than divide our country further, it would render the Democratic party useless.

Dan, what I propose is actually a complete reworking of SS. It wouldn't be that you keep paying the same amount into it and get nothing out. Rather, the amount that everyone would pay would go down drastically, and it would only be used as a safety net rather than as a retirement plan for everyone. I don't need forcible government retirement savings. I can handle that on my own, thanks. But we do still need to have a safety net so we don't have elderly dying in the streets.
 

jball2

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I firmly believe that it is our responsibility to take care of those who CAN'T take care of theirselves but I refuse to take care of those who WON'T take care of themselves. The level of entitlements right now are enabling the WON'T crowd at lightning speed. Nothing like seeing an Escalade parked in the driveway of a section 8 house.
 
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SWA717

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I firmly believe that it is our responsibility to take care of those who CAN'T take care of theirselves but I refuse to take care of those who WON'T take care of themselves. The level of entitlements right now are enabling the WON'T crowd at lightning speed. Nothing like seeing an Escalade parked in the driveway of a section 8 house.

Bingo!
 

slaquer5

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Wow.

So, by your "logic", you think that the $8,500. a year (or so) that I have paid in every year shouldn't go to me, but should be diverted to a "safety net" for other people instead? Are you out of your %^&^&$ mind?

"Comrade PCL, the local tribunal has decided that your new Jaguar is really too nice of a car to be wasted on a young, single guy such as yourself. We'll be reallocating this asset to a "needy" family we've located. Nobody in the family is currently working, or looking for work, but we're certain that this is due to a lack of transportation. Please be sure to remove all your personal effects, we'll be picking it up tomorrow. Thanks for your contribution to the safety net.

Oh, btw, we have a homeless family that needs a house, as well. We'll be sending you more correspondence on that next week".


I just spit out my Strarbucks. :)
 

waveflyer

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Well said jball-

PCL- I get real ayn rand on this one- and I'm a dem through and through as you know. You seem to contradict yourself- getting a bit libertarian in the revamp of SS. But then talk about the needy.

"Think competition to be the best is tough, try competition to be the least. The most needy. That's REAL tough"
Paraphrased
 

PCL_128

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Well said jball-

PCL- I get real ayn rand on this one- and I'm a dem through and through as you know. You seem to contradict yourself- getting a bit libertarian in the revamp of SS. But then talk about the needy.

Wave, SS is unsustainable in its current form. Something has to be done. Yes, I know my fellow Democrats love to talk about how SS is solvent through the 2020s, but I hate to break it to ya, the 2020s aren't that far off anymore. With the massive increase in draws on the system from retiring baby boomers, SS can't keep going as it is. Something has to give.

Current proposals about a chained CPI just screw over the poor, the people who really need SS. I'm not ok with that. SS needs to be there for the people who really need it, and not so much for the people who don't, like you and I. Solutions need to focus on that.
 

humveedriver

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Wave, SS is unsustainable in its current form. Something has to be done. Yes, I know my fellow Democrats love to talk about how SS is solvent through the 2020s, but I hate to break it to ya, the 2020s aren't that far off anymore. With the massive increase in draws on the system from retiring baby boomers, SS can't keep going as it is. Something has to give.

Current proposals about a chained CPI just screw over the poor, the people who really need SS. I'm not ok with that. SS needs to be there for the people who really need it, and not so much for the people who don't, like you and I. Solutions need to focus on that.

Yes. I feel horrible for the baby boomers. They created this situation and now our generation has to figure it out. Poor them. Between the wars, recession and unemployment. I feel like my life experience is closer to my grandparents than my parents. And maybe that's a good thing.
 

HRDiva

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Yes. I feel horrible for the baby boomers. They created this situation and now our generation has to figure it out. Poor them. Between the wars, recession and unemployment. I feel like my life experience is closer to my grandparents than my parents. And maybe that's a good thing.
I believe the boomers had nothing to do with a law created in 1935.
 

waveflyer

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I believe the boomers had nothing to do with a law created in 1935.

Shall I source the ways SS has changed the way it's funded and where it's funds can go in the boomer era

An era, that thank god is coming to a close
 

humveedriver

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SWA took care of that for you, right?

I certainly hope so. Nothing is a sure thing. 25 years is a long time. But I'm willing to paddle in the same direction and try to make things work. Just so there is no misunderstanding. I don't expect to be "given" anything by SWA. I worked hard at my two former carriers to give the pax a good experience and I'm going to do that at SWA. Same goes for treating my co-workers with respect. This should be a universal concept at all airlines. What SWA management chooses to do between now and when I retire is something that I have very little control over.
 

Wesb737fo

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SS needs to be there for the people who really need it, and not so much for the people who don't, like you and I. Solutions need to focus on that.

Not trying to be a smart AZZ here, but, by your rationale SS then becomes just another vehicle to redistribute wealth i.e just another tax on my wages that I will not be entitled to because I have the ability to save for my retirement. The solution to keep SS viable would be to just raise my taxes. It is separated on my pay stub as SS but it is still a tax if I never get to see a dime of it.
 

doh

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Not trying to be a smart AZZ here, but, by your rationale SS then becomes just another vehicle to redistribute wealth i.e just another tax on my wages that I will not be entitled to because I have the ability to save for my retirement. The solution to keep SS viable would be to just raise my taxes. It is separated on my pay stub as SS but it is still a tax if I never get to see a dime of it.

SS needs to stay a universal. Changing it into another entitlement program just makes it a target for cutting. Keeping it universal means everyone has a stake in saving the program.
 

madjack

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I know we don't want to be Egypt and those able to earn more must pay more taxes (call it an investment in stability) BUT don't f$&@ with my SS
 
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