Southwest Airlines’ net income for third quarter 1998 increased 40.1 percent to $129.6 million, compared to $92.5 million in third quarter 1997. Diluted net income per share was $.37 in third quarter 1998 compared to $.27 in third quarter 1997.
Total operating revenues for third quarter 1998 increased 9.8 percent to $1,094.8 million, compared to $997.2 million for third quarter 1997. Revenue passenger miles (RPMs) increased 11.9 percent in third quarter 1998 as compared to a 6.9 percent increase in available seat miles (ASMs), resulting in a 3.1 point increase in load factor to 68.9 percent. The passenger revenue yield per RPM decreased 1.8 percent to $.1232 from $.1255 in third quarter 1997. Operating revenue yield per ASM, however, increased 2.8 percent to $.0892 from $.0868 in third quarter 1997.
Operating expenses per ASM for third quarter 1998 decreased 1.4 percent to $.0726, compared to $.0736 for third quarter 1997, primarily due to a 24.4 percent decline in average jet fuel prices.
Herbert D. Kelleher, Chairman, President, and Chief Executive Officer, said: “We are very pleased to report our third quarter 1998 earnings of $129.6 million, which were up 40.1 percent over last year’s third quarter earnings of $92.5 million. Our third quarter 1998 net margin of 11.8 percent and operating margin of 18.6 percent were exceptional, up 2.5 points and 3.4 points, respectively, from third quarter 1997. We are grateful to our People for producing such superb returns for all of our Shareholders. This level of profits enables us to sustain our growth, while continuing to provide longterm job security and substantial Profitsharing payments to the deserving Employees of Southwest Airlines.
“Demand for our low fares and our reliable high quality Customer service was strong during third quarter 1998. Our third quarter load factor of 68.9 percent was up 3.1 points from third quarter last year and was among our highest quarterly load factor performances ever. Additionally, our operating revenue per ASM of $.0892 exceeded third quarter 1997’s excellent performance by 2.8 percent.
“Thus far, positive load factor trends have continued into the fourth quarter and Customer bookings for the remainder of fourth quarter 1998 are presently good.
“The 1.4 percent decrease in our unit costs was primarily due to 24.4 percent lower average jet fuel prices. As expected, our unit costs, excluding fuel, were up 2.4 percent, led by higher Profitsharing and Employee savings plan contributions. Thus far in fourth quarter 1998, fuel prices remain well below year-ago levels.
“In July 1998, our Board of Directors approved a three-for-two split of the Company’s common stock and, concurrent with the stock split, increased our regular quarterly dividend 11.9 percent to $.0075 per share, effective with the dividend paid September 23, 1998 to Shareholders of record at the close of business on September 2, 1998. The three-for-two stock split was distributed August 20, 1998 to Shareholders of record at the close of business on July 31, 1998.
“Our Board of Directors also recently increased the Company’s authorization to repurchase shares of Southwest’s outstanding common stock to $100 million. Southwest completed this repurchase program during third quarter 1998, resulting in the repurchase of a total of approximately 4.9 million shares.
“We were pleased with The Boeing Company’s improved 737 production performance, as all of our Boeing 737-700 aircraft to be delivered in third quarter 1998 were received during their respective contract months. During 1998, there have been a number of FAA regulatory issues related to all commercial aircraft and, in some instances, the Boeing 737 aircraft. None of these items have had a significant financial impact, and we remain very gratified by the reliability, and overall performance of our all Boeing 737 fleet.
“We ended third quarter 1998 with $452.2 million in cash on hand, plus our available and unused bank credit facility of $425.0 million.”
Operating revenues for the nine months ended September 30, 1998 increased 9.7 percent, to $3,116.3 million, while operating expenses increased 6.0 percent, to $2,592.2 million, resulting in operating income in the first nine months of $524.2 million. Net income for the nine month period was up 40.4 percent, to $333.0 million in 1998 versus $237.2 million in 1997. Diluted net income per share for the nine month period was up 34.3 percent in 1998, to $.94, versus $.70 in 1997.