Thursday, April 26, 2018

Southwest reports 37% 1Q profit increase; takes 40 737 MAX options

Southwest Airlines has exercised 40 Boeing 737-8 options, bringing its total 737 MAX firm orders to 280 aircraft, and plans to retire 40 737-700s as it takes delivery of the additional 737-8s from 2019-2022.

The latest MAX orders were announced as the Dallas-based carrier reported a first-quarter net profit of $463 million, up 36.6% from net income of $339 million in the 2017 first quarter. The profit rise was achieved despite revenue increasing just 1.9% year-over-year (YOY) to $4.9 billion as Southwest contended with what CEO Gary Kelly characterized as “overly aggressive discounting” by competitors in many of the markets it serves.

But fuel hedging helped insulate the carrier from the cost spikes that rivals that do not hedge, such as American Airlines, have been facing. First-quarter expenses increased only 1.9% YOY to $4.3 billion, including a relatively modest 6.5% increase in fuel costs (American, by comparison, reported a 25.8% YOY increase in first-quarter fuel costs).

First-quarter operating income of $616 million was up 1.7% YOY from an operating profit of $606 million in the 2017 March quarter. Southwest’s first-quarter traffic increased 3.7% YOY to 30.4 billion RPMs on capacity growth of 1.8% to 37.4 billion ASMs, producing a load factor of 81.5%, up 1.6 points. Yield decreased 2.8% YOY to 15.06 cents.

Southwest continues to aim to start operating flights to Hawaii this year, but has not named a start date yet. It did, however, announce the Hawaiian airports it will serve: Honolulu International Airport, Lihue Airport, Kona International Airport (in Keahole) and Kahului Airport.

(Aaron Karp - Aviation Daily / ATWOnline News)

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