Southwest Airlines’ net income for first quarter 1999 increased 36.9 percent to $95.8 million, compared to $70.0 million in first quarter 1998. Diluted net income per share was $.27 in first quarter 1999 compared to $.20 in first quarter 1998. Included in first quarter 1999 results is a nonrecurring after-tax charge of $6.4 million, or $.02 per diluted share, related to the consolidation of certain software development projects. Excluding this nonrecurring item, net income was $.29 per diluted share, an increase of 45.0 percent compared to first quarter 1998.
Total operating revenues for first quarter 1999 increased 14.1 percent to $1.08 billion, compared to $942.7 million for first quarter 1998. Revenue passenger miles (RPMs) increased 16.6 percent in first quarter 1999, compared to a 10.0 percent increase in available seat miles (ASMs), resulting in a load factor of 64.9 percent versus the first quarter 1998 load factor of 61.2 percent. The passenger revenue yield per RPM decreased 2.3 percent to $.1267 from $.1297 in first quarter 1998. Operating revenue yield per ASM, however, increased 3.8 percent to $.0868 from $.0836 in first quarter 1998.
Operating expenses per ASM for first quarter 1999 decreased .5 percent to $.0733, compared to $.0737 for first quarter 1998, primarily due to a 21.7 percent decline in average jet fuel prices.
“Other expenses (income)” increased $12.9 million year over year. Other losses, net, of $9.6 million for first quarter 1999 primarily consisted of a write-down associated with the consolidation of certain software development projects. Other gains, net, in first quarter 1998 primarily consisted of contractual penalties due from Boeing as a result of scheduled aircraft delivery delays. No penalty payments were due from Boeing during first quarter 1999 as all aircraft deliveries were received in the contract month.
Herbert D. Kelleher, Chairman, President, and Chief Executive Officer, stated: “On behalf of our Employees and Shareholders, I am extremely gratified by the excellence of our first quarter 1999 performance. Our revenue production was superb, with year over year growth of 14.1 percent. Demand for our low fares and high quality Customer Service was very strong, resulting in a superb load factor performance of 64.9 percent, up 3.7 points from first quarter 1998. Thus far, we continue to enjoy strong revenue momentum in April 1999, with favorable load factor comparisons and unit revenue trends. Bookings for the remainder of second quarter 1999 are also good.
“Our overall unit costs were down slightly to $.0733 due to lower jet fuel prices, which averaged 39 cents per gallon. We have hedged our exposure to fuel price increases for a majority of our second quarter 1999 anticipated fuel requirements at prices below second quarter 1998 levels.
“Excluding fuel, our unit costs were up 2.6 percent, driven by an $11.4 million increase in Profitsharing and Employee savings plan contributions, as well as higher maintenance spending. Based on current trends, we expect nonfuel unit cost growth to recede in second quarter 1999.
“We are elated with the Customer response to our new service to MacArthur Airport in Islip, Long Island. We commenced service on March 14, 1999 with a total of 12 daily nonstop departures to four cities: Baltimore/Washington, Chicago Midway, Nashville, and Tampa Bay. During first quarter 1999, we also announced service to our 54th city, Raleigh-Durham, beginning June 6, 1999 with 12 daily nonstop flights to Baltimore/Washington, Chicago Midway, Tampa Bay, and Orlando.
“We are excited about our future growth opportunities and are committed to continue bringing our low, affordable fares to people across America. We recently exercised six future Boeing 737-700 options for accelerated delivery in the year 2000. In addition, we have tentatively agreed to exercise six more future year options for accelerated delivery in late 2000 and early 2001. This would bring our presently committed deliveries for 2000 and 2001 to 54 new aircraft. Thus far in 1999, we have acquired two used Boeing 737-300s, and we are actively reviewing the used aircraft market for additional 1999 aircraft. We remain very gratified by the reliability and overall performance of our Boeing 737 fleet.
“We ended first quarter 1999 with $405.6 million in cash on hand, not including our available and unused bank credit facility of $475.0 million.
“I am very proud of our Employees’ many accomplishments during first quarter 1999. Because of their personal responsibility, unwavering dedication and Southwest Spirit, Southwest Airlines was again recognized by Fortune magazine as one of the best companies to work for in America. Southwest also topped Fortune’s list as the most admired airline for the third consecutive year and was listed as one of America’s most admired corporations. I commend and thank each of our 26,000+ Employees for these outstanding accomplishments.”