Southwest Airlines Reports Fourth Quarter Earnings Up 64.9 Percent And 28th Consecutive Year of Prof

Southwest Airlines` (NYSE: LUV) net income
for fourth quarter 2000 increased 64.9 percent to $154.7 million, compared to
$93.8 million in fourth quarter 1999.  Diluted net income per share for fourth
quarter 2000 was $.29, compared to $.18 in fourth quarter 1999.  This exceeded
First Call`s consensus estimate of $.28 per share.
 
Southwest Airlines also reported its 28th consecutive year of
profitability, with annual net income (excluding the previously reported
cumulative effect of a change in accounting principle) of $625.2 million
($1.18 diluted net income per share), compared to 1999`s net income of
$474.4 million ($.89 diluted net income per share), an increase of
31.8 percent.  Southwest Airlines` 2000 load factor of 70.5 percent was the
highest annual load factor in the Company`s history.
 
Total operating revenues for fourth quarter 2000 increased 21.8 percent to
$1.47 billion, compared to $1.20 billion for fourth quarter 1999.  Operating
income of $251.1 million increased 62.9 percent, resulting in an operating
margin of 17.1 percent.  Revenue passenger miles (RPMs) increased 15.9 percent
in fourth quarter 2000 as compared to a 13.0 percent increase in available
seat miles (ASMs), resulting in a 1.7 point increase in load factor to
69.0 percent. This was the highest fourth quarter load factor in the Company`s
history.  The passenger revenue yield per RPM increased 5.7 percent to $.1312
from $.1242 in fourth quarter 1999.  Operating revenue yield per ASM increased
7.8 percent to $.0935 from $.0867 in fourth quarter 1999.
 
Operating expenses per ASM for fourth quarter 2000 increased 2.5 percent
to $.0775, compared to $.0756 for fourth quarter 1999, primarily due to a
20.5 percent increase in average jet fuel prices, net of hedging gains.  The
Company`s hedging program resulted in the recognition of $64.1 million in
gains during fourth quarter 2000.  Excluding fuel and oil expense, operating
expense per ASM for fourth quarter 2000 was $.0638, compared to $.0640 for
fourth quarter 1999, a decrease of 0.3 percent.
 
Herbert D. Kelleher, Chairman, President, and Chief Executive Officer,
said:  “Our fourth quarter 2000 earnings were gratifying and a splendid way to
end 2000, our 28th consecutive year of profitability.  In spite of high fuel
prices and adverse weather conditions in December, our fourth quarter 2000
earnings increased 64.9 percent to $154.7 million.  Strong Customer demand for
our low fares; excellent yields; and disciplined cost control efforts by our
People all contributed to this outstanding performance.
 
“Our fourth quarter 2000 revenue performance was exceptional.  Although we
benefited somewhat from operational issues experienced by several of our
airline competitors, the underlying demand for our low fares was strong.
Despite growing capacity 13.0 percent, we achieved a record fourth quarter
load factor performance of 69.0 percent.  Even considering last year`s fourth
quarter revenue diminution associated with Customer Y2K apprehensions, our
year-over-year unit revenue growth of 7.8 percent was superb.  The modest fare
increases we have taken and the excellence of our marketing and revenue
management certainly contributed to this outstanding performance.
 
“We continue to mitigate higher energy costs with our fuel hedging
program, saving Southwest $64.1 million in fourth quarter 2000 and
$113.5 million for full year 2000.  Excluding fuel and salaries, wages, and
benefits, every unit cost category was down.  For fourth quarter 2000,
Southwest accrued $60.5 million in contributions to Employee Profitsharing and
savings plans, which resulted in an increase in our salaries, wages, and
benefits expense.
 
“Our current outlook for first quarter 2001 is favorable as we continue to
enjoy strong revenue momentum.  Based on current traffic and revenue trends,
we expect January`s load factor and unit revenue to exceed year ago levels.
Bookings for February and March are also good.  While we expect unit revenue
growth for first quarter 2001, we do not expect to match our superb fourth
quarter 2000 growth rate of 7.8 percent, year-over-year.
 
“We have hedged 80 percent of our projected 2001 fuel consumption at crude
oil prices averaging $22 per barrel.  Considering current market prices and
including estimated hedging gains and the impact of the adoption of Statement
of Financial Accounting Standards (SFAS) No. 133, `Accounting for Derivative
Instruments and Hedging Activities,` we estimate first quarter 2001 jet fuel
prices will roughly approximate first quarter 2000 prices.  Excluding fuel and
based on current trends, we believe first quarter 2001 unit costs will be
roughly flat as compared to first quarter 2000.

“We have accelerated the delivery of four new Boeing 737-700 aircraft from
first half 2002 to fourth quarter 2001.  These changes bring our total planned
deliveries to 25 and 27, for 2001 and 2002, respectively.  We are excited
about bringing our low fares and friendly Customer Service to our 58th city,
West Palm Beach, Florida, beginning January 21, 2001 and expect to add at
least one more new city this year.  We initiated service to Buffalo, New York
in October 2000 and are enjoying an excellent Customer response.
 
“As we enter 2001, I extend my sincere and profound gratitude to the
29,000+ Southwest Employees who have made 2000 such a rewarding year.  Our
People have put forth a tremendous effort this year to ensure that we maintain
our competitive cost advantage.  As a result of our financial strength and low
cost structure, we are well prepared to meet future challenges as we continue
to bring low fares to new markets and cities across America.  Because of our
Employees` devotion, Southwest Spirit, and big hearts, Southwest Airlines was
recognized by Fortune magazine as one of the top five companies to work for in
America for the fourth straight year.  Our Employees` efforts have also
resulted in a very financially rewarding year for our Employee-Shareholders
and non-Employee Shareholders, with an appreciation in LUV of 107.2 percent.
We also accrued for our Employee Profitsharing and Employee Savings Plan
contributions of $241.5 million for the year 2000.  Their accomplishments over
the past year are truly remarkable and I salute each and every one of our
wonderful Employees for their many achievements.”
 
Operating revenues for the year ended December 31, 2000 increased
19.3 percent to $5.65 billion while operating expenses increased 17.1 percent
to $4.63 billion, resulting in operating income of $1.02 billion.  Net income
for 2000, before the cumulative effect of a change in accounting principle,
was up 31.8 percent to $625.2 million versus $474.4 million in 1999.  Diluted
net income per share for the year, before the cumulative effect of a change in
accounting principle, was $1.18 in 2000, versus $.89 in 1999.  As of
January 1, 2000, Southwest changed the way it accounted for the sale of flight
segment credits to companies participating in its Rapid Rewards frequent flyer
program.  This change resulted in a cumulative charge to earnings of
$22.1 million (net of income taxes of $14.0 million) in first quarter 2000.
After consideration of the accounting change, net income was $603.1 million
and diluted net income per share was $1.14 per share for 2000.
 
Southwest Airlines will conduct a conference call to discuss its quarterly
earnings today at 11:30 a.m. Eastern Time.  A live broadcast of the conference
call will be available via the World Wide Web at http://www.southwest.com.
 
The outlook commentary of this news release contains forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995.
All forward-looking statements involve risks and uncertainties that could
cause actual results to differ materially from the plans, intentions, and
expectations reflected in or suggested by the forward-looking statements.
Some of the factors that could significantly impact revenues, unit revenues,
unit costs, earnings per share, and capacity include, but are not limited to:
the airline pricing environment, industry capacity decisions, competitors`
route decisions, the success of the Company`s cost control efforts, the cost
of crude oil and jet fuel; the success of fuel hedging strategies; the results
of union contract negotiations and their impact on labor costs; operational
disruptions as a result of bad weather, industry consolidation, air traffic
control-related difficulties, and the impact of labor issues; the growth of
e-commerce ticket sales; the implementation of Customer Service improvement
strategies; actions of the U.S. and local governments; the stability of the
U.S. economy; inflation; the economic environment of the airline industry and
the economic environment in general.  The Company undertakes no obligation to
publicly update or revise any forward-looking statements to reflect events or
circumstances that may arise after the date of this press release.  Additional
information regarding these and other factors may be contained in the
Company`s SEC filings, including without limitation, the Company`s Annual
Report on Form 10-K for the year ended 1999.

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