Yes, Southwest Airlines (LUV, Financial), the best in the low cost airlines group does it once again. The airlines have reported record first quarter profits of around three times the figure last year. The company has reportedly exceeded expectations in the following categories.
Financial Pointers
- Net Income, excluding special items of $451 million amounting to 266.7% increase compared to 2014 first quarter.
- 6.2% year-over-year increase in passenger revenues and double-digit year-over-year percentage growth in freight revenues which added up to the total operating revenue to a record $4.4billion in the first quarter.
- Operating Income of $780 million, resulting in operating margin of 17.4%.
- Rise in Return on Invested capital from 14.2% to 25.6% compared to last financial year.
Behind the success
- Strong Customer demand is the backbone of southwest airlines which helped to achieve a load factor of 80.1%.
- Passenger revenues increased with increase in available seat mile (ASM).
- The major increase in year-over-year ASM was a result of strong customer response to the new Dallas Love Field services.
- The unit costs also have been benefited due to increased stage length, increased gauge, Lower maintenance costs and substantially lower prices.
Flying colors
This colorful airplane painted in blue is going to see 700 aircrafts by year end, and hopes to increase year-over-year ASM by 7% which will help in expansion plans for 2016. Expansion in international arena also continued during the first quarter; Costa Rica being the sixth country that the airline flies in. Future expansions into international arena are expected further, with the addition of six more international destinations later this year. The airlines increased total gate occupancy at Dallas Love field to 18 after acquiring rights to two more gates. By August 2015, the airlines is expected to run around 180 weekday departures to 50 nonstop destinations. The company aims at managing invested capital aggressively to provide healthy returns to customers.
Expectations peak this year
Since strong customer demand is the prime mover to the ever-expanding company, it is expected that the company performs as predicted or exceed expectations in the next three quarters, as there is less chance of unexpected behavior in near future. Banking on the less fuel prices and adding up ASMs, Southwest Airlines is all set to see new heights this year in terms of revenue and profit margin. The success of Dallas Love field service after the lifting of Wright Amendment Restrictions also is a positive sign for the airlines. Continuing international expansions also helped the first quarter revenues and with further expansions expected down the line, it seems a cakewalk for the low cost airlines.
Earlier this month, the airlines celebrated 30 years in service in the state of Missouri which is again a stupendous accomplishment. It also launched a 3 day fare sales with fares as low as $59 both from Kansas City and St. Louis to select destinations nationwide. It operates 68 nonstop services to 26 destinations daily from Kansas City. With increasing traffic from the Dallas Love field and the existing services from locations such as Missouri, the airlines is well placed and is definitely an eye catcher for the year ahead. It also has plans of adding new functions after it is in place, enabled by new reservation system such as code sharing flights and assigning seats to passengers.
