Southwest announces record 3Q profit

Southwest Airlines has reported its third quarter 2013 (3Q13) results, including record third quarter net income of $259 million which included $18 million (net) of favourable special items, which was up on the net income of $16 million in 3Q12, which included $81 million (net) of unfavourable special items.
Excluding special items, the 3Q13 net income of $241 million was still a record. The 3Q12 net income, excluding special items, was $97 million.
The company returned approximately $178 million to shareholders during 3Q13 through the payment of $28 million in dividends and the repurchase of approximately $150 million in common stock under an accelerated share repurchase programme executed in September 2013.
Gary Kelly, chairman of the Board, president and CEO, commented, "We are very pleased to report a record third quarter earnings performance. Our people delivered very strong year-over-year earnings growth as we continued to transform our company for the future. Our continued focus on strategic initiatives is paying off, and I am very proud of our outstanding employees for a very solid third quarter financial performance.
"Third quarter revenues were also a third quarter record, with total operating revenues per available seat mile (unit revenues) increasing 4.5% year-over-year. Especially considering our increase in stage length and seat density, this is a very strong performance,” Kelly continued. “Further, we continue to have a high number of markets under development as we convert AirTran routes into Southwest routes and optimise our combined networks. About 15% of our system is still operating under the AirTran brand. As the network stabilises in the future, AirTran becomes fully converted, and fewer schedule changes are made, this should provide a further boost to unit revenues. While unit revenue trends were impacted by the recent government shutdown, current bookings for the combined November/December holiday period are strong.
"Our plan to add international capabilities for Southwest in 2014 is on track,” confirmed Kelly. “We reached an exciting milestone last month with the ground breaking on Southwest's first international terminal in our 43-year history. The five-gate facility at Houston's William P. Hobby Airport, planned to open in 2015, will accommodate Southwest service to potential destinations in the Caribbean, Mexico, Central America, and northern South America.
"Our third quarter economic fuel costs declined 5.7% year-over-year driven by lower prices per gallon and less fuel consumed per available seat mile. We currently expect another significant year-over-year decrease in our fourth quarter 2013 economic fuel costs. Based on relatively stable current market prices and our existing fuel derivative contracts, as of 21 October, we expect our fourth quarter economic fuel price per gallon to be comparable to our third quarter 2013 economic fuel price per gallon.
"Excluding fuel, special items, and profitsharing, our unit costs increased slightly compared to third quarter last year, as expected. Based on current trends and ongoing benefits anticipated from our fleet modernization efforts, we expect our fourth quarter 2013 unit costs, excluding fuel, special items, and profitsharing, to be roughly flat versus a year ago.
"It is imperative that we preserve our financial health and return value to our stakeholders. Our balance sheet, liquidity, and cash flows are strong, and we are aggressively managing our debt and total invested capital,” concluded Kelly.

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