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.
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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