Southwest Airlines has reported record third quarter results. The carrier recorded a 61.8% increase in net income to $382 million compared to $241 million in the year-ago period, exceeding analysts’ expectations.
Southwest recorded an operating income of $614 million, which, excluding special items, was $649 million.
Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, "We are very pleased to report another record quarterly profit performance, which resulted in a $100 million third quarter 2014 profitsharing expense for our Employees. Excluding special items, third quarter 2014 net income was $382 million, or $.55 per diluted share, and operating income was $649 million, resulting in a 13.5 percent operating margin. The 386 basis point year-over-year improvement in operating margin, excluding special items, was driven by strong revenues, lower jet fuel prices, and a solid cost performance.”
Total operating revenues for the airline were $4.8 billion – a 5.6% increase from a year ago – this is despite a 4% decline in trips and 2% fewer seats flown, since the airline is transiting AirTran aircraft.
“Our traffic and revenue trends were strong throughout the third quarter,” said Kelly, “generating a 4.5% year-over-year increase in unit revenues, despite a large percentage of our route system in development or conversion as we continued to transition AirTran flying to Southwest. Our third quarter 2014 revenue strength was driven by record load factors and a strong performance in our Rapid Rewards frequent flyer program. Thus far, revenue momentum has continued into October 2014, with favorable load factor and unit revenue trends. Current bookings for November and December are also good.”
The third quarter results also benefited from lower jet fuel prices and the airline’s fleet modernisation efforts. Kelly said: “With these trends continuing, we are poised for another solid cost performance for fourth quarter 2014. Based on current cost trends, and excluding fuel and oil expense, profitsharing, and special items, we expect full year 2014 unit costs to increase approximately two percent compared to last year.”