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Southwest Airlines reports Q4 and full year results

Southwest Airlines has reported fourth quarter net income of $522 million compared with fourth quarter 2015 net income of $ 536 million. Excluding special items, fourth quarter net income was $463 million, compared with fourth quarter 2015 net income of $591 million.

The airline posted record annual net income of $2.24 billion, compared with 2015 net income of $ 2.18 billion.    Excluding special items, this figure was $2.37 billion, compared with $2.36 billion in the prior-year period.

Southwest reported an annual operating income of $3.76 billion, resulting in an operating margin 2 of 18.4 percent.

Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “We are delighted to report record annual profits for 2016, our 44th consecutive year of profitability. Our total operating revenues reached a record $20.4 billion, with sustained demand for our legendary low fares and superior Customer Service. Our profit margins were very strong, and our ROIC was a near-record 30.0 percent. Our record profits and balance sheet discipline generated record free cash flow, allowing us to return significant value to our Shareholders. Operationally, our performance was also very solid. We carried a record number of Customers while improving our ontime performance, baggage delivery rate, and net promoter score. My thanks and congratulations to the superb People of Southwest for these outstanding results, which earned them $ 586 million in profitsharing during 2016.

The Company’s fourth quarter 2016 total operating revenues were a record $ 5.1 billion, driven largely by record fourth quarter passenger revenues of $4.6 billion. As compared with fourth quarter 2015, total operating revenues increased 2.0 percent on a 5.0 percent increase in available seat miles, resulting in a 2.9 percent decline in operating unit revenues (RASM). Strong demand for low fares resulted in a fourth quarter record 84.4 percent load factor, and a 3.8 percent year-over-year decline in fourth quarter passenger revenue yield. Based on revenue and booking trends thus far in January, the company expects its first quarter 2017 RASM to be flat to down one percent, as compared with first quarter 2016.

Annual 2016 total operating revenues increased 3.1 percent, year-over-year, to a record $ 20.4 billion. Annual operating revenues for 2015 included a one-time special revenue adjustment of $172 million recorded as a result of the July 2015 amendment of the Company’s co-branded credit card agreement with Chase Bank and a resulting required change in accounting methodology. Excluding this special item, annual 2016 total operating revenues increased 4.0 percent, year-over-year.

Fourth quarter 2016 total operating expenses increase d 7.1 percent to $ 4.2 billion , and increased 2.0 percent on a unit basis, as compared with fourth quarter 2015 . Excluding special items in both periods, which primarily related to the Company’s fuel hedge derivative contracts, total operating expenses increased 8.1 percent to $ 4.3 billion, and increased 2.9 percent on a unit basis, year-over-year.

Southwest ended 2016 with 723 aircraft in its fleet. This reflects the delivery of 38 new Boeing 737-800s and 23 pre-owned Boeing 737-700s, as well as the retirement of 42 Boeing 737-300/500 aircraft during the year. By the end of third quarter 2017, the company intends to retire the 87 Boeing 737-300s that remained in its fleet at December 31, 2016, as previously announced.

Date: January 26, 2017
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