Southwest Airlines net income for fourth quarter 1998 was $100.4 million, as compared to fourth quarter 1997 s net income of $80.6 million, an increase of 24.6 percent. Diluted net income per share was $.29 in fourth quarter 1998 versus $.23 in fourth quarter 1997. Southwest s net income for the year ended December 31, 1998 was $433.4 million, as compared to 1997 s net income of $317.8 million, an increase of 36.4 percent. Diluted net income per share was $1.23 in 1998, as compared to $.93 in 1997.
Total operating revenues for fourth quarter 1998 increased 7.4 percent to $1.05 billion, compared to $975.6 million for fourth quarter 1997. Revenue passenger miles increased 8.1 percent in fourth quarter 1998 as compared to a 6.8 percent increase in available seat miles (ASMs), resulting in a load factor of 63.8 percent, compared to 63.0 percent for the same period of a year ago. Despite increased ticket taxes effective October 1, 1998, operating revenue per ASM increased .5 percent to $.0853 in fourth quarter 1998.
Operating expenses per ASM for fourth quarter 1998 decreased 1.9 percent to $.0723, compared to $.0737 for fourth quarter 1997, due to a 24.2 percent decline in fuel costs.
Herbert D. Kelleher, Chairman, President, and Chief Executive Officer, said: We are extremely pleased with our fourth quarter 1998 results. We enjoyed another quarter of strong revenue momentum, despite a tough year-ago comparison and the increase in federal ticket taxes that occurred on October 1, 1998. Demand for travel was robust, resulting in a strong fourth quarter load factor. Thus far, favorable load factor and revenue trends have continued in January, 1999, and bookings look strong for the remainder of January and February.
Our quarterly earnings were also enhanced by lower overall unit costs, attributable to lower jet fuel prices. Our average cost of $.4350 per gallon for fourth quarter 1998 was in-line with the second and third quarters of 1998, but 28 percent below fourth quarter 1997 levels. We took advantage of falling prices in the latter part of the fourth quarter and aggressively locked-in a substantial majority of our first quarter 1999 jet fuel needs at prices well below first quarter 1998 levels.
Excluding fuel, our unit cost growth in the fourth quarter was 2.9 percent, led by higher profitsharing and Employee savings plan contributions. We are hopeful that our nonfuel unit cost growth rates will recede in 1999 based on our many cost control initiatives.
Based on what we have seen thus far with respect to first quarter revenues, bookings, and costs, our first quarter earnings outlook is quite optimistic. We will also experience a benefit in 1999 due to revision in the depreciable lives for our Boeing 737-300/500 aircraft from 20 to 23 years.
We continue to be extremely pleased with the superb performance of the new Boeing 737-700 model aircraft. As of the end of 1998, we have received 25 -700s. This aircraft has proven to be more fuel efficient, quieter, as well as less maintenance intensive, than its -300 counterpart.
We recently reconfirmed our confidence in Boeing s Next Generation 737-700 by exercising a future year option on one -700 for accelerated delivery to 1999 and by additionally accelerating four -700 deliveries to 1999 that were originally scheduled for 2000 and 2003. Most of these additional aircraft are now scheduled for fourth quarter 1999 delivery. These changes bring our total planned deliveries for 1999 to 32 and our future commitment thereafter to 135 aircraft. We are also actively reviewing the used aircraft market for additional 1999 aircraft.
We are very excited about introducing our convenient, low fare, high value service to MacArthur Airport at Islip, Long Island, beginning March 14, 1999. Southwest will operate 12 daily nonstop departures to four cities: Baltimore/Washington, Chicago Midway, Nashville, and Tampa.
We were delighted to learn recently that Duff and Phelps had upgraded our rating on certain secured debt to A+. At the end of the year, our financial leverage was less than 50 percent for the first time in over a decade. Our cash balance was $378.5 million, not including our fully-available line of credit of $475 million. We are exceptionally well prepared to continue growing Southwest Airlines.
As we enter 1999, I have the joyful opportunity of again paying tribute to the Employees of Southwest for their endless dedication and tremendous spirit. Because of our remarkable people and their unwavering Southwest Spirit, Southwest Airlines has again been recognized by FORTUNE as one of the best companies to work for in America! Southwest s success continues because of our People s goodwill, and caring natures, and I salute each and every one of them for this well-deserved honor.