Southwest Airlines (LUV)
Q1 2013 Earnings Call
April 25, 2013 12:30 pm ET
Gary C. Kelly - Chairman, Chief Executive Officer, President and Chairman of Executive Committee
Tammy Romo - Chief Financial Officer and Senior Vice President of Finance
Robert E. Jordan - Chief Commercial Officer, Executive Vice President and President of Airtran Airways
Linda B. Rutherford - Vice President of Public Relations & Community Affairs
Duane Pfennigwerth - Evercore Partners Inc., Research Division
Jamie N. Baker - JP Morgan Chase & Co, Research Division
James D. Parker - Raymond James & Associates, Inc., Research Division
Helane R. Becker - Cowen Securities LLC, Research Division
John D. Godyn - Morgan Stanley, Research Division
David E. Fintzen - Barclays Capital, Research Division
Bob McAdoo - Imperial Capital, LLC, Research Division
Michael Linenberg - Deutsche Bank AG, Research Division
Glenn D. Engel - BofA Merrill Lynch, Research Division
Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division
Previous Statements by LUV
» Southwest Airlines' Management Presents at JPMorgan Aviation, Transportation and Defense Conference (Transcript)
» Southwest Airlines Management Discusses Q4 2012 Results - Earnings Call Transcript
» Southwest Airlines' CEO Hosts 2012 Investor Day (Transcript)
At this time, I'd like to turn the call over to Ms. Marcy Brand, Director of Investor Relations. Please go ahead, ma'am.
Thank you, Tom. Good morning, everyone, and welcome to today's call to discuss our first quarter results. Joining me on the call is Gary Kelly, our Chairman, President and CEO; Tammy Romo, Senior Vice President, Finance and CFO; Bob Jordan, Executive Vice President and Chief Commercial Officer and President of AirTran Airways, who is actually joining us on the phone from Atlanta; Mike Van De Ven, Executive Vice President and COO; and Ron Ricks, Executive Vice President and Chief Legal and Regulatory Officer.
Today's call will begin with opening comments from Gary, followed by Tammy providing a review of our first quarter results and current outlook. We will move to the Q&A portion of the call following Tammy's remarks, and all of our executives joining the call today will be available to take your questions.
Please be advised that today's call will include forward-looking statements. Because these statements are based on the company's current intent, expectations and projections, they are not guarantees of future performance. And a variety of factors could cause actual results to differ materially, as this call will include references to non-GAAP results, excluding special items. Please reference this morning's press release in the Investor Relations section of southwest.com for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results.
And with that, Gary, I will turn it over to you for opening remarks.
Gary C. Kelly
Thank you, Marcy, and good morning, everybody, and thanks for joining us on our first quarter 2013 earnings call. We're off to a very solid start in 2013. Essentially, right on plan. We had record traffic and revenue performances in the quarter. Until March, at least, we had a very stable revenue environment dating back to last fall, and that was despite all the noise surrounding personal income tax increases and the whole federal sequestration.
We did hit a soft patch in March. That's continued on into April. I would attribute that to the above noise and along with the timing of the Easter and Passover holidays. So we are seeing booking strength return for May and June. And assuming that these May, June trends continue, they should be strong months.
We have wild swings in jet fuel prices already since the beginning of the year. Prices have dropped from our first quarter peak over $0.50 a gallon, and fortunately, this has roughly offset the revenue softness that we've been experiencing of late. And so assuming that these fuel cost trends also continue along with the May, June booking trends, we'll have a very strong second quarter.
There's much frustration, of course, with the FAA's implementation of sequestration. All that's in the news. And the Airlines for America, which is our trade association, is already in litigation over this. And the furloughs, of course, just started Sunday. So there's not a whole lot more to add at this early point, other than it just needs to end very quickly.
I want to thank the Southwest Airlines people for an excellent start to 2013. There are a number of initiatives that are contributing to the first quarter results. There are a number that are still under construction. Our top priority in terms of deliverables this year was connecting the separate route networks of Southwest and AirTran, and that was done, of course, it's done on time, done schedule, and it seems to be producing significant incremental bookings for future travel.
The network connectivity, of course, sets the stage for us to aggressively optimize the networks this year. We've already opened up 6 new Southwest cities as of April 14 -- 5, in fact, on April 14, as a part of our optimization efforts. And we announced that we will de-hub AirTran's Atlanta operation with what will end up being essentially the same number of daily departures just scheduled on a point-to-point basis, and that will happen in November. That will be a tremendous amount of work for our Atlanta AirTran ground operations employees, and I want to extend to them a special thanks for all of their very hard work and excellent results.
And with that very quick overview, I'd like to turn the call over to Tammy Romo, our CFO.
Thank you, Gary, and thanks to everyone for joining us today. Our first quarter 2013 net income, excluding special items, was $53 million or $0.07 per diluted share. And that was ahead, of course, the First Call's consensus estimate of $0.02, and that was primarily due to our cost coming in better than we expected, which I'll cover here in just a minute. Our revenue -- and just a note on the profit, that was a significant improvement over first quarter 2012's $18 million net loss, which was driven by record profit in March.
Our revenue performance for the quarter was strong on relatively flat year-over-year available seat miles, and our operating revenues were a first quarter record of $4.1 billion, largely driven by record passenger revenues of $3.8 billion. On a unit basis, our passenger revenues grew 1.8% year-over-year. As Gary mentioned, our trends were steady through February, and our January and February PRASM were each up over 2%, and that was followed by a flat year-over-year March unit revenue performance.
Our unit revenue trends remain stable and on plan. But of course, March was negatively impacted by softer yielding traffic, weather and weakness in close-in bookings, which was more than offset -- which more than offset the benefit from Easter travel. Although a little softer than we expected, it's worth noting that our year-over-year March PRASM outperformed the industry on a capacity adjusted basis.