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Southwest Airlines Reports $514M Fourth Quarter Net Income, $2.3B for Full Year 2019

Southwest Airlines announced their 47th consecutive annual profit on Thursday. The airline reported a net profit of $514M or a diluted earnings per share of $0.98 for the fourth quarter and $2.3B or a diluted EPS of $4.27 for the full year.

Southwest Airlines Boeing 737 NG - Photo Credit: Stephen Keller/Southwest Airlines

Today, Southwest Airlines (NYSE: LUV) reported a fourth quarter net income of $514M or diluted earnings per share (EPS) of $0.98. The company reported their 47th consecutive annual profit with a net income of $2.3B or a diluted EPS of $4.27. Fourth quarter and full year EPS was reduced by $0.18 due to a $97M employee profitsharing award associated with the Boeing 737 MAX settlement compensation. For 2019, Southwest reported a record operating revenue of $22.4B with an operating margin of 13.2% and net margin of 10.3%. The airline also reported a cash flow of $4B and record free cash flow of $3.4B for the year. A total of $2.4B was returned to shareholders in 2019 through share repurchases and dividends. In Thursday’s announcement, Southwest Airlines’ Chairman of the Board and Chief Executive Officer, Gary C. Kelly said in part,

“Our operational and financial performances in 2019 were truly remarkable considering an estimated $828 million reduction in operating income and the significant reduction in planned flights due to the MAX groundings. We currently have 34 MAX aircraft in our fleet, and at the beginning of last year, we expected to have 75 at the end of 2019, and another 38 deliveries in 2020. With the ongoing uncertainty regarding the timing of the MAX return to commercial service, we remained nimble and adjusted our 2019 plans, as necessary, without abandoning our long-term goals. Our financial strength and preparedness for unexpected challenges allowed for sustained high levels of profits, earnings per share, returns on capital, cash flows, and returns to Shareholders; continued capital investments and growth in California and Hawaii; and job security for our resilient employees. Our People performed superbly and delivered industry-leading Customer Service, record annual operating revenues, prudent cost control, our best operational performance in years, and our 47th consecutive year of profitability. Once again, Southwest was named to FORTUNE’s 2020 list of the World’s Most Admired Companies. I am extremely grateful to our Employees for their extraordinary efforts, for which we have accrued a record $667 million in profitsharing for 2019, including a discretionary, special $124 million pre-tax contribution – authorized by the Southwest Board of Directors during the fourth quarter 2019 – in light of the Boeing compensation related to the 2019 MAX groundings.”

During the fourth quarter operating revenues increased 0.4% YoY to a record $5.7B with a 0.9% reduction in capacity. Revenue per available seat mile (RASM) increased 1.3%, which was offset slightly by a load factor decline of 0.4 points to 83.1%. For the first quarter of 2020, Southwest expects a RASM increase of between 3.5 and 5.5%. For 2019, full year operating revenue increased 2.1% to a record $22.4B and RASM reached a record 14.26 cents, a 3.7% increase YoY. Cost per available seat mile (CASM) increased 4.6% during Q4 as compared to the fourth quarter of 2018, while CASM-ex (CASM excluding fuel and profitsharing expenses) increased 5.0% YoY. The company expects CASM-ex to increase between 6-8 percent for the first quarter of 2020, on lower capacity due to the continued grounding of the Boeing 737 MAX.

At the end of last year, Southwest Airlines had $4.1B in cash and equivalents along with a full-available $1B unsecured revolving line of credit. The airline ended 2019 with a fleet of 747 aircraft, including three 737 MAX 8s leased prior to the grounding order. A total of 34 of the Airline’s MAXs have been grounded since March 13, 2019 and once the FAA approves the aircraft’s return to service, Southwest expects to receive 27 MAX 8s that were produced but not delivered. Boeing suspended MAX production in January 2020 but expects to reopen production by mid-year. In afternoon trading Thursday, Southwest Airlines (NYSE: LUV) shares were trading up around 2% at $54.52/share (12:50 EST).

Source: Southwest Airlines


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