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Southwest Airlines on Thursday reported fourth-quarter net income of $78 million, or 11 cents per share, and full-year 2012 net income of $421 million, or 56 cents per share — the 40th consecutive year of profitability for the Dallas-based carrier.
The fourth-quarter results compare with net income of $152 million, or 20 cents a share, in the same quarter of 2011.
The fourth-quarter results include $13 million of favorable special items while 2011’s fourth quarter included $86 million of favorable special items, company executives said.
Fourth-quarter revenue was $4.17 billion, an increase of 1.6 percent compared with 2011’s fourth quarter revenue of $4.11 billion.
Southwest’s full-year net income of $421 million included $4 million of favorable special items versus $152 million of favorable special items in 2011.
Revenue in 2012 was $17.09 billion, a 9.1 percent increase compared with 2011 revenue of $15.66 billion.
Southwest Chairman, President and CEO Gary Kelly said 2012 was a year of significant achievements, including a 26 percent increase in earnings compared with a year earlier, and the 40th straight year of profitability.
“Without a doubt, this is a remarkable feat and a record unmatched in the airline industry,” he said. “These solid earnings were achieved despite significant efforts and costs related to critical strategic initiatives” that include the integration of AirTran Airways, which Southwest acquired in 2011.
“I expect these initiatives to produce substantial returns over the next several years,” Kelly said. “For 2012, these initiatives contributed to the 49 percent surge in our cash flow from operations, to $2.1 billion. … Our strong fourth quarter 2012 operating revenue performance was driven by record yields, continued high load factors and an impressive freight revenue performance.
“As with the full-year profits, these strong revenues were achieved despite the transitional state of the AirTran route network. While there was much change in 2012, significant optimization efforts are planned in 2013 for the AirTran network.”
Based on bookings and revenue so far in January, Southwest executives expect passenger unit revenue this month to increase between 2 percent and 3 percent on unchanged seating capacity from a year ago.
Total operating expenses in the fourth quarter were $4.08 billion, up 3.1 percent from 2011’s fourth quarter.
Fuel and oil expenses were $1.5 billion in the fourth quarter, a 0.7 percent increase compared with the same quarter last year, while salaries, wages and benefits totaled $1.197 billion, up 4.5 percent from the fourth quarter of 2011.
Southwest’s 694 aircraft consumed 444 million gallons of jet fuel in the fourth quarter, down 3.1 percent from a year earlier, at an average price of $3.32 per gallon, down 3 cents a gallon from 2011’s fourth quarter.
Southwest’s average passenger fare in the fourth quarter was $148.02, a 5.4 percent increase compared with 2011’s average fourth quarter fare of $140.38.
Kelly said Southwest obtained $142 million of net, annualized, pre-tax synergies during 2012 as a result of the AirTran acquisition, and the company expects to achieve its targeted synergies of $400 million in 2013.
AirTran will be fully integrated with Southwest by the end of 2014, Kelly said.
“This month, we are on track to begin testing connecting itineraries between the Southwest and AirTran networks in a handful of markets, with significant offerings planned in February and more in March,” Kelly said. “Once fully implemented in April, we expect the connected networks to contribute incremental revenue in 2013 and provide significant opportunities to optimize the combined network.”
Southwest ended the fourth quarter with $2.97 billion in cash and short-term investments, down from $3.14 billion a year earlier.
The carrier’s long-term debt on Dec. 31 was $2.88 billion, down from $3.1 billion at the end of 2011.
Southwest Airlines’ fourth quarter and 2012 financial results (compared with a year earlier)
Net income: $78 million ($152 million)
Net income per share: 11 cents (20 cents)
Revenue: $4.17 billion ($4.11 billion)
Full year 2012
Net income: $421 million ($178 million) Net income per share: 56 cents (23 cents)
Revenue: $17.088 billion ($15.66 billion)
Source: Southwest Airlines Co.
(c)2013 Tulsa World (Tulsa, Okla.). Distributed by MCT Information Services.