Southwest's third quarter net profit dips to $388 million
Southwest Airlines Boeing 737-8H4 WL N8654B (msn 37045) BFI (Brandon Farris). Image: 925364.Bruce Drum (AirlinersGallery.com), from
Bruce Drum (AirlinersGallery.com)on Oct 26
Southwest Airlines Company on October 26, 2016 reported its third quarter 2016 results:
Net income of $388 million, or $.62per diluted share, compared with third quarter 2015 net income of $584 million, or $.88per diluted share.
Excluding special items1, net income of $582 million, or $.93per diluted share, compared with third quarter 2015 net income of $623 million, or $.94per diluted share. This compared to First Call third quarter 2016 consensus estimate of $0.88per diluted share.
Operating income of $695 million, resulting in an operating margin2of 13.5 percent.
Excluding special items, operating income of $972 million, resulting in an operating margin3of 18.9 percent.
Operating cash flow of $856 million; free cash flow1of $392 million; returned $312 millionto Shareholders through a combination of dividends and share repurchases.
Return on invested capital (ROIC)1 for 12 months ended September 30, 2016 of 32.3 percent.
Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, "We are pleased to report another quarter of strong cash flows and healthy margins. We benefited from low fuel prices and record third quarter traffic levels in a competitive fare environment. I am very grateful for our People and their hard work. They did an outstanding job and produced superb results, especially considering the operational challenges caused by the technology outage in July. Their efforts to serve our Customers were truly heroic, and I am very appreciative.
"We are delighted to have reached tentative agreements with our Facilities Maintenance Technicians, Pilots, Flight Attendants, and Aircraft Appearance Technicians. These proposed agreements are subject to a ratification vote of each respective Employee group.
"The successful implementation of our new reservation system is a top priority for this quarter. The first release is currently scheduled for December, and final technology readiness is progressing as planned.
"We are excited about the fourth quarter 2016 scheduled launch of new service to Cubafrom Florida4, as well as Mexicoservice from Los AngelesInternational Airport. Also, we are on track for completion of a new five-gate international terminal in Ft. Lauderdale with new international routes planned for mid-2017.
"We also have exciting growth opportunities beyond those planned for next year. We will continue to manage our growth prudently in light of the revenue environment and increasing fuel prices. We plan to slow our 2017 available seat mile growth rate to less than 4.0 percent, year-over-year, with approximately 2.0 points of the increase relating to domestic growth."
The Company ended third quarter 2016 with 714 aircraft in its fleet. This reflects the third quarter 2016 delivery of 11 new Boeing 737-800s, and the retirement of 16 Boeing 737 Classic aircraft, including the last -500 aircraft in the Company's fleet. The Company plans to end this year with 723 aircraft, with 2016 available seat mile growth in the five to six percent range, year-over-year.