Wednesday, May 16, 2018

Southwest Airlines finds no fan blade failures, but sends 'several dozen' for further examination

After inspecting all the fan blades in its fleet of engines, Southwest Airlines found no structural problems like the one that caused the left engine aboard Flight 1380 to fail last month and kill a passenger.

"The engine inspections are complete, the findings have been zero, which is obviously expected but good news," said Gary Kelly, Southwest's CEO, during the airline's annual meeting Wednesday in Maryland.

However, Kelly also told reporters after the meeting that several dozen fan blades were sent to General Electric for further inspection, according to Bloomberg.

Those fan blades had some coating anomalies, said Southwest chief operating officer Mike Van de Ven, adding that they were sent to GE "out of an abundance of caution." Kelly added that he didn't think the examinations would turn up any problems.

The place where the fan blade was attached to the engine that failed during the April 17 flight showed signs of metal fatigue, according to a preliminary investigation by the National Transportation Safety Board after the accident. New Mexico businesswoman Jennifer Riordan died from injuries suffered when she was sucked partially out of the window that blew out after being struck by engine shrapnel.

As a result, the CFM56-7B engine model — made by CFM International, a joint venture between GE and Safran — faced increased regulation scrutiny from the Federal Aviation Administration.

The FAA issued an airworthiness directive, or AD, that called for expedited inspection times of fan blades within the engine model. Southwest inspected the fan blades on its engines quicker than the AD called for.

Increased dividends

The Dallas-based airline also announced an increase to its quarterly dividend Wednesday. The new dividend will increase to 16 cents from 12.5 cents a share, a 28 percent jump.

The new dividend will be paid out June 27. Annualized, the increase amounts to more than $370 million for the airline's shareholders, Kelly said.

The company's board of directors also announced it intends to repurchase $2 billion in shares. This latest share repurchase program will commence after its previous $2 billion share repurchase program, which started in May 2017, finishes its last $350 million of share purchases.

So far, the company has repurchased approximately 19.8 million shares under the May 2017 plan.

"We remain committed to maintaining an investment grade balance sheet and strong financial position," Kelly said in a prepared statement.

Low-fare summer

The carrier also announced a mega sale for the summer months with one-way fares starting at $49 for select routes.

The sale is good through May 18 at 11:59 p.m. in whatever time zone the originating city is in. In addition to the $49 price point, Southwest is also offering one-way flights at $79, $99 and $149.

The sale could be meant to spur ticket sales after the company booked fewer passengers than normal after Flight 1380's accident. In the company's first quarter earnings call, it estimated the accident had between a $50 million and $100 million impact on bookings.

"The full revenue impact isn't totally clear," said Tom Nealon, Southwest president, on the earnings call. "But we do expect there to be a continued impact for a period of time."

That reduced number in bookings was in part because of a self-inflicted drop in website traffic. After the accident, Southwest halted its marketing channels. Things like its Twitter feed, television ads, and emails promoting flight deals were stopped in wake of the accident.

Those marketing channels draw a lot of eyeballs to Southwest's website, Nealon said. Website traffic to Southwest's homepage is more important than the other big airlines, considering Southwest doesn't use third parties like Google Flights or Kayak to help sell flights.

(Evan Hoopfer - Dallas Business Journal)

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