Southwest Airlines` (NYSE: LUV) net
income for first quarter 2001 was $121.0 million, compared to first quarter
2000 net income (before the cumulative effect of an airline industry change in
accounting principle) of $95.6 million, an increase of 26.6 percent.  After
giving effect to the three-for-two stock split distributed February 15, 2001,
diluted net income per share was $.15 for first quarter 2001, compared to
$.12 (before the change in accounting principle) in first quarter 2000.  All
share and per share amounts included in the Condensed Consolidated Statement
of Income have been retroactively restated to give effect to the stock split.
 
Total operating revenues for first quarter 2001 increased 15.0 percent to
$1.43 billion, compared to $1.24 billion for first quarter 2000.  Revenue
passenger miles (RPMs) increased 12.8 percent in first quarter 2001, compared
to a 12.0 percent increase in available seat miles (ASMs), resulting in a load
factor of 67.3 percent versus the first quarter 2000 load factor of
66.8 percent.  The passenger revenue yield per RPM increased 2.0 percent to
$.1295 from $.1269 in first quarter 2000.  Operating revenue yield per ASM
increased 2.6 percent to $.0901 from $.0878 in first quarter 2000.
 
Operating expenses per ASM for first quarter 2001 were essentially flat at
$.0769, compared to $.0768 for first quarter 2000.  Excluding fuel, operating
expenses per ASM for first quarter 2001 were $.0636, an increase of
1.1 percent.
 
“Other losses” were $11.7 million in first quarter 2001 versus first
quarter 2000 “other gains” of $4.1 million.  The “other losses” of
$11.7 million consisted primarily of charges made in accordance with Statement
of Financial Accounting Standard No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS 133), which the Company adopted on
January 1, 2001.  SFAS 133 changed how financial derivative instruments, such
as the Company`s fuel hedge contracts, are accounted for in financial
statements.  As a result of adopting SFAS 133, the Company recorded charges
for changes in the time value of fuel hedge derivatives and ineffectiveness
from hedging activities, as defined.  “Other gains” for first quarter 2000 of
$4.1 million primarily resulted from the favorable conclusion of a lawsuit.
 
Herbert D. Kelleher, Chairman, President, and Chief Executive Officer,
stated:  “We are pleased with our first quarter earnings results, particularly
in light of the slowing domestic economy and the overall dampening of air
travel demand.  While Southwest is not completely immune to an economic
downturn, we are uniquely positioned to do comparatively well as a result of
our low-fare philosophy and low cost structure.
 
“Although February and March load factors were down slightly from the
historically high levels of a year ago, demand for our low fares by
increasingly cost conscious air travelers remained quite strong.  Our
passenger revenue yield per RPM increased 2.0 percent (January 2000 was
weakened, somewhat, due to Y2K apprehensions).
 
“Our overall unit costs were essentially flat with last year.  We
continued to benefit from a successful fuel hedging program, which resulted in
a 4.2 percent decline in fuel cost per gallon.  We recognized $24.4 million of
effective hedging gains in first quarter 2001 `fuel and oil expense` versus
$3.2 million last year.  Excluding fuel, our unit costs increased modestly to
$.0636, primarily due to higher unit labor costs.  Profitsharing expense rose
29.9 percent to $34.8 million for first quarter 2001.
 
“We initiated service to West Palm Beach, Florida on January 21, 2001 and
are pleased with the positive response from our Customers.
 
“Although the economy may continue to decelerate, at this juncture, we
expect to be solidly profitable in the second quarter.  Based on current
traffic and booking trends thus far in April, and considering an estimated
increase in available seat miles of 11.6 percent for the second quarter, we
expect monthly load factors to continue to trend lower versus year-ago levels.
RPM yields are also softening, compared to first quarter 2001 trends.
 
“We are 80 percent hedged for the remainder of 2001 at crude oil prices
averaging $22 per barrel.  Based on current market prices and hedging
effectiveness, we estimate our second quarter 2001 jet fuel price per gallon
to be lower than our second quarter 2000 average cost per gallon of $.78.
Excluding fuel, we expect a modest year-over-year unit cost increase in second
quarter 2001, similar to first quarter 2001.
 
“We ended first quarter 2001 with $684.7 million in cash on hand, not
including our available and unused bank credit facility of $475.0 million.
 
“It is in difficult times that our Employees` ongoing accomplishments and
efforts become especially visible.  While overall industry earnings were down
in first quarter 2001, Southwest produced a very solid earnings performance.
These results were possible because our wonderful People are devoted to
maintaining our competitive cost advantage, which enables us to keep our fares
low, our Profitsharing high, and our jobs secure.  It is because of our
People`s caring dedication and unwavering Southwest Spirit that FORTUNE
magazine once again listed Southwest as one of the most admired companies in
America.  Southwest was also recognized in Business Ethics magazine`s listing
of 100 Best Corporate Citizens.”
 
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.

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