Leading U.S. low-cost carrier
Southwest Airlines Co.
) reported third quarter 2013 adjusted earnings of 34 cents per
share, surpassing the Zacks Consensus Estimate of 32 cents. The
results improved from the prior-year quarter adjusted earnings of
13 cents per share on fleet re-designing, optimization of network
and less fuel expense.
Quarterly revenues moved up 5.5% year over year to $4,545
million and marginally beat the Zacks Consensus Estimate of
$4,525 million. On a year-over-year basis, Passenger and Freight
revenues increased 6.1% and 5.1% respectively, while Other
revenues dropped 7.0%.
Airlines traffic, measured in billions of revenue passenger
miles, decreased 0.6% year over year to 27.0 billion in the third
quarter. Capacity or available seat miles increased 1.0% to 33.4
billion, while load factor (percentage of seats filled with
passengers) dropped 130 basis points year over year to 80.8%.
Passenger revenue per available seat mile (PRASM) moved up 1.0%
year over year.
Operating Expenses & Operating Income
For the third quarter, non-GAAP operating income was $439 million
as compared to $208 million in the prior-year quarter. Total
operating expenses, excluding special items, remained flat year
over year at $4.1 billion. Fuel price (economic) accounted for
$3.06 per gallon, down from $3.16 in the year-ago quarter.
Consolidated unit cost or cost per available seat mile (CASM),
excluding fuel and special items, increased 2.6% year over year
to 8.01 cents.
At the end of the third quarter, Southwest had $3,328 million in
cash and short-term investments as compared to $2,970 million at
the end of 2012. The company has $1,000 million in unsecured
revolving credit facility. Long-term debt (including current
portion) was $2,875 million, representing debt-to-capitalization
ratio of 29.1%.
In the third quarter, Southwest generated operating cash flow of
$428 million and invested $268 million. The airline repurchased
11.5 million shares for approximately $150 million in the
reported quarter and paid total dividend of $28 million. As of
Sep 30, 2013, return on invested capital (before taxes and
excluding special items) was 11%.
Fuel price (economic) in the fourth quarter is estimated at
$3.05 to $3.10 per gallon, which is same as third quarter
Another Airline Stock
Delta Air Lines Inc.
) third-quarter 2013 adjusted earnings of $1.41 surpassed the
Zacks Consensus Estimate of $1.34. The results also improved from
the year-ago adjusted earnings of $1.23. The company's
performance was buoyed by strong sales and reduced interest
Southwest - which operates with the likes of
United Continental Holdings Inc.
JetBlue Airways Corp.
) - currently holds a Zacks Rank #3 (Hold rating).
We believe that the company will benefit from the implementation
of a number of strategies to increase revenues and reduce costs
over the next three years. These include efficiency in
operations, introduction of various customer friendly programs,
network optimization and capacity management.
Nevertheless, high non-fuel operating costs, a new advertising
policy along with intense competition and heavy investments are
expected to limit the company's earnings potential.
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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