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Thursday, January 24, 2019

=Southwest Air (LUV) reported earnings on Thur 24 Jan 2019 (b/o)

Southwest Air beats by $0.09, reports revs in-line -- expects strong Q1 financial performance
  • Reports Q4 (Dec) earnings of $1.17 per share, excluding non-recurring items, $0.09 better than the S&P Capital IQ Consensus of $1.08; revenues rose 8.5% year/year to $5.7 bln vs the $5.68 bln S&P Capital IQ Consensus.
    • Fourth quarter 2018 operating revenue per ASM (RASM, or unit revenues) increased 1.8 percent, year-over-year, driven largely by a passenger revenue yield increase of 3.7 percent, year-over-year, offset by a load factor decline of 1.5 points, year-over-year, to 83.5 percent. The Company experienced stable passenger demand and strength in passenger yields, including close-in yields, throughout fourth quarter 2018.
  • Outlook:
    • Based on current revenue trends, our cost outlook, and energy futures, we are currently expecting a strong first quarter 2019 financial performance. We are well-positioned to generate stellar annual after-tax returns on capital in 2019, barring any unforeseen events.
    • We continue to expect 2019 available seat miles (ASMs, or capacity) to increase no more than five percent, year-over-year. As we continue to optimize our flight schedules, we announce today our decision to cease operations at Benito Jurez Mexico City International Airport on March 30, 2019, and reallocate these resources to better opportunities within our existing route network.
    • Passenger demand is healthy across the booking curve, and current yield trends, including close-in bookings and corporate travel, remain strong. Thus far in January, the negative revenue impact from the ongoing government shutdown is estimated to be $10 million to $15 million. Based on these trends, and assuming no further significant impact on bookings from the ongoing government shutdown, the Company currently estimates first quarter 2019 RASM to increase in the four to five percent range, compared with first quarter 2018. The Company's outlook for first quarter 2019 RASM includes an estimated 1.5 point year-over-year benefit from its revenue management enhancements implemented in 2018, as well as an estimated 1.5 point year-over-year tailwind due to several items: its first quarter 2018 sub-optimal schedule from the accelerated retirement of its Boeing 737-300 (Classic) fleet; the prior year competitive fare environment; and the March 2018 Spring Break holiday shift impact. These expected year-over-year benefits to first quarter 2019 RASM are offset slightly by an estimated $40 million negative revenue impact in first quarter 2019 due to the timing shift of Easter to second quarter 2019.
    • Based on current cost trends, the Company estimates first quarter 2019 unit costs, excluding fuel and oil expense and profitsharing expense, to increase approximately six percent, compared with first quarter 2018's 8.65 cents, which excludes fuel and oil expense, profitsharing expense, and special items. The year-over-year increase is driven largely by the Company's underutilization of its fleet in first half 2019 due to the delay in its impending service to Hawaii, and the resulting one-time start-up costs; higher airport costs; higher depreciation and ownership costs; and the timing of maintenance events and technology investments.

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