Despite extreme weather conditions, leading U.S. carrier
Southwest Airlines Co.
) reported impressive first quarter 2014 results. The company
reported earnings of 18 cents per share, surpassing the Zacks
Consensus Estimate of 16 cents. The results were way above the
prior-year quarter earnings of 7 cents.
Quarterly revenues moved up 2.0% year over year to $4,166
million, in line with the Zacks Consensus Estimate. On a
year-over-year basis, Passenger and Freight revenues increased
2.5% and 2.6% respectively, while Other revenues decreased 6.8%.
Notably, the company cancelled 7,500 flights owing to harsh
winter in January and February.
Airline traffic, measured in billions of revenue passenger
miles moved up 1.7% year over year to 24.15 billion in the first
quarter. Capacity or available seat miles decreased 1.1% to 30.47
billion, while load factor (percentage of seats filled with
passengers) leaped 220 basis points year over year to 79.3%.
Passenger revenue per available seat mile (PRASM) increased 3.53%
year over year.
Operating Expenses & Operating Income
For the first quarter, operating income increased to $215
million from $70.0 million in the year-ago quarter. Total
operating expenses decreased 1.6% year over year to $3,951
million due to lower fuel prices, maintenance costs and aircraft
rentals. Fuel price (economic) accounted for $3.08 per gallon,
down from $3.29 in the year-ago quarter. Consolidated unit cost
or cost per available seat mile (CASM), excluding fuel and
special items, increased 4.0% year over year.
At the end of first quarter, Southwest had $3,498 million in
cash and short-term investments and $1 billion in undrawn
revolving credit facilities. The company had long-term debt
(including current portion) of $2,814 million, representing
debt-to-capitalization ratio of 28.1%.
In the first quarter of 2014, Southwest generated operating
cash flow of $1,119 million and capital expenditures were $407.0
million. The company repurchased 12 million shares for
approximately $315 million and paid total dividends of $56
million. As of Mar 31, 2014, return on invested capital (before
taxes and excluding special items) for the past one-year period
The company announced that it has started the second quarter
on a brighter note due to shift of Easter holidays to April and
stable fuel prices. Based on current revenue and booking trends,
Southwest expects unit revenue to grow again in the ongoing
The company also expects a 2-3% increase in the second quarter
and 2014 unit costs, excluding fuel, profit sharing and special
items. Fuel price (economic) is estimated at approximately $3.06
Other Airline Stocks
Delta Air Lines Inc.
) reported first-quarter 2014 results on Apr 23, with adjusted
earnings of 33 cents coming ahead of the Zacks Consensus Estimate
of 29 cents. The bottom line leaped 230.0% from the year-ago
adjusted profit of 10 cents.
Other carriers like
Alaska Airlines Group Inc.
Spirit Airlines Inc.
) will release first quarter financial results on April 25 and
Southwest currently holds a Zacks Rank #1 (Strong Buy).
Several strategies including fleet restructuring, introduction of
international services, increased ancillary product offerings and
capacity management are expected to boost the company's revenue
and reduce expenses. Further, integration of AirTran along with
slot pair wins in New York's LaGuarida and Washington's Reagan
National are expected to enhance the company's performance.
ALASKA AIR GRP (ALK): Free Stock Analysis
DELTA AIR LINES (DAL): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
SPIRIT AIRLINES (SAVE): Free Stock Analysis
To read this article on Zacks.com click here.