Southwest Airlines Reports Q4 Results (LUV)
Southwest Airlines Co. (NYSE: LUV) reported on Thursday that its fiscal fourth-quarter profit plunged 49% due to decline in passenger traffic, higher operating expenses and low gains on fuel-hedge; however, shares gained a tad as the U.S’s fourth largest airline company provided an upbeat outlook on the fiscal first quarter, thanks to strong bookings.
The Company said that looking at the current trend in bookings and ticket prices thus far, revenue could rise 2 to 3 percent in January from the same period of last year.
Southwest Airlines, which introduced the concept no-frills business, is expanding its traction in domestic market through the acquisition of Air Tran, even as it intends to start international services. According to the Company’s Chairman and Chief Executive, Garry Kelly, the company was on track to fully integrate Air Tran’s business by the end of fiscal 2014. The move will is allowing Southwest Airlines to offer more connecting flights.
For the fiscal fourth quarter, the airline company reported a net income of $78 million, or 11 cents a share compared to income of $152 million, or 20 cents a share, in the corresponding period of last year.
After excluding onetime gains such as gains on fuel contracts, net income came in at 9 cents a share, 2 cents above analysts’ expectation.
Revenue during the period rose 1.6% to $4.17 billion as average fare jumped $8 from the year earlier period; nevertheless, it fell short of Street’s average estimate of $4.20 billion.
Nonetheless, the pace of rise in expenses outpaced the revenue growth. While labor costs during the quarter jumped by 4.5 percent, maintenance costs leaped 13 percent.
Fuel cost, which is Airline Company’s biggest cost component, increased merely by 0.7%. In the first quarter which ends March 31, Southwest is expecting fuel bill will fall to $3.30 a gallon from $3.44 a gallon, in the same period of last year. CEO Gary Kelly described falling fuel cost as an “encouraging trend”.
The average fourth-quarter fare, a key gauge on airline company’s performance, was $148.02, up 5.4 percent from $140.38, in the year earlier quarter.
For fiscal 2012, Southwest earnings stood at $421 million, up from $178 million, in fiscal 2011, a 40th successive profitable year.