DALLAS /PRNewswire/ -- Southwest Airlines Co. (NYSE:LUV) (the "Company") today reported its second quarter 2014 results:
Record quarterly net income, excluding special items, of $485 million, or $.70 per diluted share, compared to second quarter 2013 net income, excluding special items, of $274 million, or $.38 per diluted share. This exceeded the First Call consensus estimate of $.61 per diluted share.
Record quarterly net income of $465 million, or $.67 per diluted share, which included $20 million (net) of unfavorable special items, compared to second quarter 2013 net income of $224 million, or $.31 per diluted share, which included $50 million (net) of unfavorable special items.
Record quarterly operating income of $775 million. Excluding special items, record quarterly operating income of $819 million, resulting in a 16.3 percent operating margin.
Return on invested capital, before taxes and excluding special items, for the 12 months ended June 30, 2014, of 17.1 percent, as compared to 8.5 percent for the 12 months ended June 30, 2013. Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, "We are very pleased with our strong second quarter earnings performance. Net income, excluding special items, of $485 million, or $.70 per diluted share, represents our fifth consecutive quarter of record profits. The successful execution of our strategic initiatives continues to contribute significantly to these record profits. Second quarter 2014 total operating revenues reached an all-time quarterly high of $5.0 billion, benefiting from an 8.5 percent year-over-year increase in passenger revenues. Also, we were very pleased with our cost performance. Operating expenses benefited from our strategic initiatives, as well, and were comparable to second quarter last year.
"My hearty congratulations and thanks go to our hard-working and dedicated Employees for our outstanding second quarter results, which resulted in record quarterly profitsharing expense of $127 million. Over the last twelve months, our exceptional earnings performance, combined with our actions to prudently manage our invested capital, produced a 17.1 percent pre-tax return on invested capital, excluding special items (ROIC). This positions us well to meet or exceed our 15 percent pre-tax ROIC target for full year 2014.
"Our network development and optimization efforts continue, and we are very pleased with the performance across our system. Second quarter load factor and passenger revenue yield were records, even with a large percentage of the route system in the conversion or development stage. We announced our initial nonstop offerings from Dallas Love Field with the upcoming sunset of the Wright Amendment restrictions on October 13, and nearly tripled the flights we currently offer at Reagan National Airport, effective November 2 this year. On July 1, we inaugurated international service on Southwest Airlines, with flights to Oranjestad, Aruba; Montego Bay, Jamaica; and Nassau/Paradise Island in The Bahamas. We plan to fully convert AirTran's remaining international markets and domestic flying by the end of this year. We expect roughly flat 2014 available seat miles, year-over-year, and intend to expand the network in a disciplined manner. For 2015, we currently expect our available seat miles to increase, year-over-year, largely driven by a two to three percent growth in seats from the upgauging of our fleet, along with a higher percentage of our fleet in revenue service post-integration.
"During second quarter, we announced the selection of Amadeus to implement the Altéa reservations solution to support our domestic network, following the successful implementation of Amadeus' international solution this year. This allows us to replace the legacy reservation system used by Southwest. The AirTran reservation system is expected to be retired at this year's end.
"Our balance sheet, liquidity, and cash flows remain strong. At the end of second quarter 2014, we had $4.0 billion in cash and short-term investments. For first half 2014, net cash provided by operations was $2.46 billion, and capital expenditures were $907 million, resulting in strong free cash flow* of $1.55 billion. We repaid $119 million in debt and capital lease obligations during first half 2014, and intend to repay an additional $440 million in debt and capital lease obligations in the second half of this year. Thus far this year, we have returned $652 million to Shareholders through the payment of $97 million in dividends and the repurchase of $555 million in common stock. As always, we are committed to maintaining our financial strength and enhancing value to our Shareholders."
Financial Results and Outlook
The Company's second quarter 2014 total operating revenues increased 7.9 percent, while operating unit revenues increased 8.4 percent, on a 0.4 percent decrease in available seat miles and a 2.2 percent increase in average seats per trip, all as compared to second quarter 2013. Second quarter 2014 passenger revenues were $4.8 billion, which was an increase of 9.0 percent on a unit basis, as compared to second quarter 2013. A change to previously recorded estimates of tickets expected to spoil in the future resulted in additional passenger revenue of $47 million in second quarter 2014.
Thus far, July passenger revenue trends and bookings are strong. Based on these trends, and considering the strength of the year-ago comparison, the Company expects July 2014 passenger unit revenues to increase in the three percent range, as compared to July 2013.
Total operating expenses in second quarter 2014 increased 0.6 percent to $4.2 billion, as compared to second quarter 2013. Second quarter 2014 profitsharing expense was a record $127 million, compared to $78 million in second quarter 2013. The Company incurred costs (before profitsharing and taxes) associated with the acquisition and integration of AirTran, which are special items, of $38 million during second quarter 2014, compared to $26 million in second quarter 2013. Cumulative costs associated with the acquisition and integration of AirTran, as of June 30, 2014, totaled $466 million (before profitsharing and taxes). The Company expects total acquisition and integration costs to be approximately $550 million (before profitsharing and taxes). Excluding special items in both periods, total operating expenses in second quarter 2014 increased 0.7 percent to $4.2 billion, as compared to second quarter 2013.
Second quarter 2014 economic fuel costs were $3.02 per gallon, including $.05 per gallon in favorable cash settlements from fuel derivative contracts, compared to $3.06 per gallon in second quarter 2013, including $.05 per gallon in unfavorable cash settlements from fuel derivative contracts. Based on the Company's fuel derivative contracts and market prices as of July 21, 2014, third quarter 2014 economic fuel costs are expected to be in the $2.95 to $3.00 per gallon range, compared to third quarter 2013's economic fuel costs of $3.06 per gallon. As of July 21, 2014, the fair market value of the Company's hedge portfolio through 2018 was a net asset of $381 million. Additional information regarding the Company's fuel derivative contracts is included in the accompanying tables.
Excluding fuel and oil expense, profitsharing, and special items in both periods, second quarter 2014 operating costs increased 1.1 percent from second quarter 2013, and increased 1.7 percent on a unit basis. Based on current cost trends, and excluding fuel and oil expense, profitsharing, and special items, the Company expects a year-over-year increase in its third quarter 2014 unit costs, comparable to the second quarter 2014 year-over-year increase.
Operating income in second quarter 2014 was $775 million, compared to $433 million in second quarter 2013. Excluding special items, operating income was $819 million in second quarter 2014, compared to $479 million in the same period last year, a 71.0 percent increase year-over-year.
Other expenses in second quarter 2014 were $29 million, compared to $70 million in second quarter 2013. The $41 million decrease primarily resulted from $3 million in other losses recognized in second quarter 2014, compared to $47 million recognized in second quarter 2013. In both periods, these losses included ineffectiveness and unrealized mark-to-market amounts associated with a portion of the Company's fuel hedging portfolio, which are special items. Excluding these special items, second quarter 2014 had $15 million in other losses, compared to $12 million in second quarter 2013, primarily attributable to the premium costs associated with the Company's fuel derivative contracts. Third quarter 2014 premium costs related to fuel derivative contracts are currently estimated to be $15 million, compared to $22 million in third quarter 2013. Net interest expense in second quarter 2014 was $26 million, compared to $23 million in second quarter 2013.
For the six months ended June 30, 2014, total operating revenues increased 5.2 percent to $9.2 billion, while total operating expenses decreased 0.4 percent to $8.2 billion , resulting in operating income of $991 million, compared to $503 million for the same period last year. Excluding special items, operating income was $1.1 billion for first half 2014, compared to $591 million for first half 2013.
Net income for first half 2014 was $617 million, or $.88 per diluted share, compared to $283 million, or $.39 per diluted share, for the same period last year. Excluding special items, net income for first half 2014 was $611 million, or $.87 per diluted share, compared to $328 million, or $.45 per diluted share, for the same period last year.
Balance Sheet and Cash Flows
As of June 30, 2014, the Company had $4.0 billion in cash and short-term investments, and a fully available unsecured revolving credit line of $1 billion. Net cash provided by operations during second quarter 2014 was $1.34 billion, and capital expenditures were $500 million, generating strong free cash flow of $838 million. The Company repaid $73 million in debt and capital lease obligations during second quarter 2014.
During second quarter 2014, the Company returned $282 million to its Shareholders through the payment of $42 million in dividends and the repurchase of $240 million in common stock, or 7.6 million shares. The Company completed its previous $1.5 billion share repurchase program with the repurchase of $20 million in common stock in early May. On May 14, 2014, the Company's Board of Directors authorized a new $1 billion share repurchase program, along with a 50 percent increase in the Company's quarterly dividend. Under the new $1 billion share repurchase program, the Company repurchased an additional $220 million in common stock during second quarter 2014, including $200 million repurchased under an accelerated share repurchase program with a third party financial institution. During second quarter 2014, pursuant to the accelerated share repurchase program, the Company advanced $200 million to the financial institution and received six million shares of the Company's common stock, representing an estimated 75 percent of the shares the Company expects to purchase under the accelerated share repurchase program. The specific number of shares that the Company ultimately will repurchase under the accelerated share repurchase program will be determined generally based on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period to be completed during third quarter 2014. At settlement, under certain circumstances, the third party financial institution may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required to deliver shares of its common stock or may elect to make a cash payment to the third party financial institution. Pursuant to the settlement of the $200 million accelerated share repurchase program executed in first quarter 2014, the Company received an additional 1.7 million shares in common stock during second quarter 2014, bringing the total shares repurchased under the first quarter accelerated share repurchase program to 8.6 million.
During second quarter 2014, the Company's fleet increased by seven to 683 aircraft at period end. This reflects the second quarter 2014 delivery of 12 new Boeing 737-800s and three pre-owned Boeing 737-700s, as well as the retirement of one Boeing 737-500. In addition, the Company removed seven Boeing 717-200s from service during second quarter 2014 in preparation for transition out of the fleet. Additional information regarding the Company's aircraft delivery schedule is included in the accompanying tables.
Source: Southwest Airlines
Posted by: just4airlines.com at 1253h UTC Jul 24, 2014
An MD-11 freighter in the Lufthansa Cargo fleet will in future be bearing the name "Konnichiwa Japan" (Good Day Japan) on flights in the carrier's global network. The aircraft with the registration D-ALCG, was named by Peter Gerber, Chairman and CEO of Lufthansa Cargo, Dr. Hans Carl von Werthern, Ambassador of the Federal Republic of Germany in Japan, and Tokuhisa Takano, Senior Vice President of Narita International Airport Corporation, at a ceremony at Tokyo's Narita Airport. In keeping with Japanese tradition, a barrel of sake was ceremoniously opened for the plane to be sprinkled with Japan's customary beverage.
The freighter has been christened "Konnichiwa Japan", symbolising the significance of Japan as one of the most important markets for global air freight services. Peter Gerber, CEO of Lufthansa Cargo, states: "The ‘Konnichiwa Japan' greeting also illustrates the special bond between Lufthansa Cargo and Japan. Lufthansa Cargo is the market leader of the air cargo business from Japan to Europe." It has long standing connections with the customers in the air cargo industry since 1961 and grew further with the first freighter operations in 1969." Lufthansa Cargo is offering today 47 weekly flights between Japan and Europe including the services of Lufthansa Passenger Airlines and Austrian Airlines.
The D-ALCG is the first MD-11 in the Lufthansa Cargo fleet to be named following similar naming ceremonies for four Boeing 777 freighters operated by Europe's leaduing cargo airline.
The idea of giving the aircraft this name originated from the winning submission in a creative public competition held by Lufthansa Cargo to find a naming convention for its entire fleet. The key message "Say hello around the world" was chosen by the jury with the endorsement of the Executive Board from more than 40,000 entries with name-the-plane suggestions, which were submitted to Lufthansa Cargo in the space of six weeks.
Source: Lufthansa Cargo
Posted by: just4airlines.com at 1232h UTC Jul 24, 2014
Reported record second quarter net income, excluding special items, of $157 million - a 50% increase over the second quarter of 2013.
Reported adjusted earnings per share of $1.13 per diluted share, a 53% increase over the second quarter of 2013 and ahead of First Call analyst consensus estimate of $1.11 per share.
Earned net income for the second quarter under Generally Accepted Accounting Principles (GAAP) of $165 million or $1.19 per diluted share, compared to net income of $104 million, or $0.74 per diluted share in 2013.
Recorded $54 million of incentive pay through the first six months of 2014. This includes each Air Group employee earning at least $550 by meeting or exceeding monthly customer satisfaction and operational performance goals and tracking to earn above-target payouts for full-year goals.
Grew operating revenues by 9%.
Generated record adjusted pretax margin in the second quarter of 18.3% compared to 13.5% in 2013.
Generated 14.9% pretax margin for the trailing 12-month period ended June 30, 2014, compared to 11.8% for the same period in the prior year.
Ranked in the Fortune 500 for the first time in Air Group's history.
Achieved trailing 12-month return on invested capital of 16.1% compared to 13.0% in the 12-month period ended June 30, 2013.
Rated BBB- by Fitch Ratings. Air Group is one of only two U.S. airlines with investment grade credit ratings.
Declared a 2-for-1 stock split that was effective July 9, 2014. All stock and per-share figures reflect the split retroactively.
Announced an additional $650 million repurchase program, representing approximately 10% of our stock market capitalization at the time of announcement.
Repurchased 1,108,334 shares of common stock for $53 million in the second quarter of 2014.
Paid a $0.125 per-share quarterly cash dividend on June 10, bringing total dividend payments so far this year to $34 million.
Lowered adjusted debt-to-total-capitalization ratio to 32%.
Produced operating cash flows of $1 billion and free cash flows of $366 million for the 12-month period ended June 30, 2014.
Held $1.5 billion in unrestricted cash and marketable securities as of June 30, 2014.
Maintained fully funded pension plans and had no net debt.
Customer Service and Operational Highlights:
Ranked "Highest in Customer Satisfaction Among Traditional Carriers" in 2014 by J.D. Power for the seventh year in a row.
Ranked highest by frequent fliers in the J.D. Power's first-ever Airline Loyalty/Rewards Program Satisfaction Report.
Held the No. 1 spot in U.S. Department of Transportation on-time performance among the eight largest U.S. airlines for the twelve months ended May 2014.
Named No. 1 on-time carrier in North America for the fourth year in a row from FlightStats in February 2014.
Received Airline Business Magazine's 2014 Airline Strategy Award for Technology, Environment and Operations.
Signed a new five-year contract with Alaska's clerical, office, and passenger service employees (COPS).
Reached agreement on a six-year contract with Horizon's aircraft technicians and fleet service agents, represented by the International Brotherhood of Teamsters.
Completed 44% of the cabin improvement project, with 41 out of 94 aircraft upgraded with Recaro seats and power at every seat.
Added split scimitar winglets to 12 aircraft.
Increased fuel efficiency (as measured by seat-miles per gallon) by 2.5% as part of our effort to be the airline leader in environmental stewardship.
Became the launch customer of Boeing's new, innovative, high-capacity 737 Space Bins, which will increase bag capacity in the cabin by 48%.
Sponsored Seattle's bike share program that is guaranteed to put 500 bikes and 50 docking stations throughout the city of Seattle.
Committed to $1.5 million in grants to support job training for workers at the Seattle-Tacoma airport, in addition to a voluntary wage increase to $12 per hour for certain vendors.
Pledged $2.5 million to Seattle's Museum of Flight to help create the Alaska Airlines Aerospace Education Center to guide students toward a future in science, technology, engineering and math (STEM), and sponsored Alaska Airlines Aviation Day in May 2014 to inspire youth to pursue careers in aviation.
SEATTLE - Alaska Air Group, Inc., (NYSE: ALK) today reported second quarter 2014 GAAP net income of $165 million, or $1.19 per diluted share, compared to $104 million, or $0.74 per diluted share in the second quarter of 2013. Excluding the impact of mark-to-market fuel hedge adjustments of $13 million ($8 million after tax, or $0.06 per diluted share), the company reported record adjusted net income of $157 million, or $1.13 per diluted share, compared to adjusted net income of $105 million, or $0.74 per diluted share, in 2013.
"We're pleased to report our 21st consecutive quarterly profit and a record second quarter result," said CEO Brad Tilden. "Through strong demand, a growing network, and steady support from our loyal customers, we were able to overcome the impact of substantial new competition."
"I want to thank our people for continuing to work together to provide outstanding service to our customers. For the seventh consecutive year, Alaska employees recently earned the J.D. Power award for 'Highest in Customer Satisfaction Among Traditional Carriers'. I am very proud of our team."
Source: Alaska Air
Posted by: just4airlines.com at 1212h UTC Jul 24, 2014
TAIPEI, Taiwan -- GE Capital Aviation Services Limited (GECAS), the commercial aircraft leasing and financing unit of GE, has signed an agreement to lease four Boeing 777-300ER aircraft to EVA Airways, following a lease of two B777-300ER aircraft in February 2014. Delivery of the six aircraft is scheduled for 2016 and 2017. The B777-300ERs will modernize EVA's long-range fleet with high fuel-efficiency, more payload capabilities and additional flexibility in serving the nonstop routes stemmed from Taipei, Republic of China.
"We have a strong and positive long-term relationship with EVA that dates back more than 10 years ago," said Norman C.T. Liu, president and chief executive officer of GECAS. "We are delighted to help them upgrade and expand their fleet with the latest long-haul aircraft available."
"GECAS is a leader in providing flexible solutions for the leasing and financing of aircraft. With its global expertise, GECAS continuously offers fleet solution that meets EVA's operational and financial needs. The conclusion of leasing six B777-300ERs reflects the unique strength of GECAS and long-term mutual respectful business relationship between EVA and GECAS." said KW Chang, Chairman of EVA Airways.
GECAS currently lease 11 aircraft to EVA including three Airbus A330-200s, four A321-200 and four Boeing 747-400SF freighters. GECAS signed an agreement in 2011 to lease eight A321-200s to EVA and will deliver remaining three A321-200s in 2014.
EVA Airways began operations in 1991 and is now one of the fastest growing airlines in Asia. With an extensive fleet of 68 aircraft, EVA operates passenger and cargo routes to 66 cities around the world. EVA Airways is a member of Star Alliance since June 18th, 2013.
Source: General Electric Company
Posted by: just4airlines.com at 1207h UTC Jul 24, 2014