Leading U.S. low-cost carrier
Southwest Airlines Co.
) reported better-than expected first quarter 2013 results,
thanks to fleet restructuring, introduction of various customer
friendly programs and the effects of the AirTran integration.
The company's adjusted earnings of 7 cents per share beat the
Zacks Consensus Estimate of 3 cents. The results improved
considerably from the prior-year quarter loss of 2 cents per
Quarterly revenues moved up 2.3% year over year to $4.1 billion
and were in-line with the Zacks Consensus Estimate of $4.1
billion. On an annualized basis, Passenger, Freight and Other
revenues increased 2.3%, 5.4% and 2.0%, respectively.
Airlines traffic, measured in billions of revenue passenger
miles, increased just 0.3% year over year to 23.8 billion in the
first quarter. Capacity or available seat miles increased 0.6% to
30.8 billion, while load factor (percentage of seats filled with
passengers) dipped 20 basis points year over year to 77.1%.
Passenger revenue per available seat mile (PRASM) inched up 1.8%
year over year.
Operating Expenses & Operating Income
For the first quarter, non-GAAP operating income was $112
million, up from $10 million in the year-ago quarter. Total
operating expenses, excluding special items, decreased 0.2% year
over year to $3.9 billion. Fuel price (economic) accounted for
$3.29 per gallon, down from $3.44 in the year-ago quarter.
Consolidated unit cost or cost per available seat mile (CASM),
excluding fuel and special items, increased 3.4% to 8.26 cents.
At the end of the first quarter, Southwest had $1.3 billion in
cash and short-term investments. The company currently has
replaced the previous $800 million credit facilities with a $1.0
billion five-year unsecured revolving credit facility. The
company had long-term debt (including current portion) of $3.0
million, representing debt-to-capitalization ratio of 30.0%.
In the first quarter, Southwest generated operating cash flow of
$983 million and capital expenditures were $534 million. The
company repurchased 9 million shares for approximately $115
million and paid total dividend of $15 million. As of Mar 31,
2013, return on invested capital (before taxes and excluding
special items) was 8%.
Based on current traffic trends, Southwest expects unit revenues
to grow again in the coming months. Fuel price (economic) in the
second quarter is estimated at $3.00 to $3.05 per gallon.
Other Airline Stocks
Delta Air Lines
) reported first-quarter 2013 adjusted earnings of 10 cents,
surpassing the Zacks Consensus Estimate of 7 cents. The results
also improved considerably from the year-ago adjusted loss of 5
cents. Revenues nudged up 1% year over year to $8.50 billion but
fell short of the Zacks Consensus Estimate of $8.51 billion.
Southwest - which carries the maximum number of U.S. passengers
compared to any other player such as
United Continental Holdings
) - currently holds a Zacks Rank #3, implying a Hold rating.
We believe that Southwest's cost-cutting measures, fleet
rightsizing, diversification into untapped territories, revenue
management program and the launch of attractive service offerings
will help it to register better results in the coming
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
To read this article on Zacks.com click here.