First quarter earnings announced by Southwest Airlines

Southwest Airlines has reported a first quarter 2011 (1Q11) net income of $5 million, compared with net income of $11 million in the first quarter of 2010.

The airline notes that both periods’ results included special items related to non-cash, mark-to-market, and other items associated with a portion of the company’s fuel hedge portfolio. The 1Q11 results also included approximately $9 million in charges (net of profitsharing and taxes) primarily related to consulting fees in association with the forthcoming acquisition of AirTran. Excluding special items in both periods, 1Q11 net income was $20 million, compared with $24 million in 1Q10.

Operating income in 1Q11 was $114 million, compared with $54 million in 1Q10. Excluding special items in both periods, operating income was $110 million for 1Q11, against a 1Q10 figure of $102 million.

Southwest’s chairman, president, and CEO, Gary Kelly, commented, “While escalating jet fuel prices and inclement weather challenged our first quarter profitability, our people prevailed. Record monthly load factors, combined with solid passenger revenue yields, resulted in a 17.8% year-over-year increase in passenger revenues. Passenger unit revenues increased almost 9%, compared to first quarter last year, representing the sixth consecutive quarter of record passenger unit revenues. Since first quarter 2007, passenger unit revenues have increased 34%. Other operating revenues also grew a healthy 26.7%, compared to a year ago, largely due to growth in our EarlyBird Check-In revenues, which nearly doubled. All in all, a solid start to our 40th year of service.”

First quarter 2011 unit costs, excluding special items, increased 9.2% from 1Q10, mostly due to a 26.5% year-over-year increase in economic fuel costs per gallon. Excluding fuel and special items in both periods, 1Q11 unit costs increased 1.9% from 1Q10, as anticipated.

“The first quarter of 2011 was very active for Southwest, and it was very gratifying,” added Kelly. “After years in development, we launched our All-New Rapid Rewards programme. Growth in our programme has been strong and surpassed our system averages. We launched new service to Charleston and Greenville-Spartanburg airports very successfully. Those markets have been underserved and overpriced, and we were welcomed enthusiastically by the people of South Carolina. We jumped at the opportunity to acquire slots and terminal facilities in Newark, where we also were warmly welcomed when we launched service there [in March]. Much progress was made towards the 2012 introduction of the Boeing 737-800 to our fleet. Finally, we made tremendous progress in our integration planning for the acquisition of AirTran Airways.

“With the overwhelming approval of AirTran stockholders in March, we are ready to move forward with the closing of the transaction, now planned for 2 May. We anticipate that all regulatory approvals needed to move forward will be obtained by that date. We look forward to that milestone day, first and foremost, to finally welcome the AirTran crewmembers to the Southwest family. Together, we can then begin the exciting work to integrate AirTran into Southwest.”

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