Category Archives: AirTran Airways

AirTran Airways operates its last flight, now fully integrated into Southwest Airlines

AirTran 717-200 N717JL taxies into the gate at TPA (Southwest)(LR)

AirTran Airways (Orlando), as planned ended its operations last night (December 28) on its original Atlanta-Tampa route. Special flight FL 1 arrived at the gate at Tampa International Airport (TPA) at 2339 (11:39) EST. As a result, the AirTran brand was retired and the flight marked the full integration of AirTran into Southwest Airlines (Dallas). The last flight was operated with Boeing 717-2BD B717JL (msn 55042).

Read about the history of AirTran Airways: CLICK HERE

Southwest Airlines issued this statement:

Southwest Airlines embarked on a new era on December 28 as it celebrated the last AirTran Airways revenue flight. At 10:25pm EST, AirTran Airways Flight 1 departed Hartsfield-Jackson Atlanta International Airport to Tampa Bay International Airport.

“With this special flight, we are celebrating history and setting our sights on a bright future for all of Southwest Airlines,” said Bob Jordan, Southwest Airlines’ Chief Commercial Officer and AirTran Airways President, who was on the flight to Tampa. “The work of so many People culminates in this moment as we salute the enormous accomplishments of AirTran and Southwest. For our Customers and Employees, we now move forward with one airline, one Customer Experience, one flight schedule, one Rapid Rewards frequent flyer program, and one award-winning Brand.”

More than 400 AirTran and Southwest Employees and special guests gathered in Atlanta Sunday evening to commemorate the milestone. AirTran Flight 1 retraced a route that is a nod to AirTran’s first commercial flight in October 1993. Flight 1’s flight crew consisted of longtime AirTran Employees, including the airline’s Chief Pilot, Floy Ponder, a 19-year veteran of AirTran Airways. Each of the flight’s 117 passengers, consisting of many former AirTran Employees, retirees, special guests, and aviation enthusiasts received a special keepsake celebrating the historic flight.

“As we’ve grown in both the domestic and international markets, I can’t help but think about all the doors the AirTran acquisition has opened for Southwest Airlines,” said Gary Kelly, Southwest Airlines Chairman, President & CEO, who was in Atlanta for the send-off. “The most important things—which cannot be measured and are irreplaceable—are the great People of AirTran who have worked hard to achieve this milestone, and are all soon to be part of the Southwest Airlines family.”

The acquisition of AirTran was a unique opportunity to extend the Southwest network into key markets it didn’t yet serve, such as Atlanta and the greater Washington, D.C., area, via Ronald Reagan National Airport. The integration gives Southwest the opportunity to serve Customers from 93 airports in the U.S. and near-international destinations, providing Customers more low-fare destinations as it expands the well-known “Southwest Effect” to hundreds of additional low-fare itineraries for the traveling public.

Southwest Airlines acquired AirTran Airways in 2011.

Photo: Southwest Airlines. Boeing 717-2BD N717JL taxies into the gate at TPA ending the history of the airline.

AirTran Airways aircraft slide show: AG Slide Show

Video: Southwest Airlines. The last AirTran flight from Atlanta to Tampa:

Video:

<p><a href=”http://vimeo.com/115567085″>The last departure of AirTran Airways</a> from <a href=”http://vimeo.com/user19954503″>Bruce Drum</a> on <a href=”https://vimeo.com”>Vimeo</a&gt;.</p>

 

AirTran Airways to operate its last flight tomorrow

AirTran Airways (subsidiary of Southwest Airlines) (Orlando) as planned, will fly into the sunset tomorrow night. As previously report, the last flight, flight 1, will operate from the Atlanta former hub to Tampa, Florida, arriving just before midnight on December 28. The last flight will be operated with a Boeing 717.

The original AirTran Airways was founded by AirTran Corporation, the holding Company of Mesaba Airlines (Minneapolis/St. Paul), operating as a Northwest Airlink carrier with hubs in MSP and Detroit. In 1994, AirTran Holdings purchased a start up Boeing 737-200 operator named Conquest Sun Airlines and renamed the carrier AirTran Airways. Conquest Sun, similar to ValuJet Airlines, was an airline started by former Eastern Airlines employees. The original AirTran Airways moved its headquarters to Orlando and grew to 11 Boeing 737-200 aircraft with low-fare leisure flights to Orlando from small markets. In 1995, AirTran Airways was spun off by Mesaba and formed its own independent holding company named Airways Corporation.

Above Copyright Photo: Bruce Drum/AirlinersGallery.com. AirTran Airways acquired this ex-Air South Boeing 737-2L9 (originally delivered to Maersk Air) registered N465AT (msn 21528, ex N359AS) on June 16, 1995. N465AT wears the original 1993 livery.

Above Copyright Photo: Christian Volpati Collection/AirlinersGallery.com.  ValuJet’s Douglas DC-9-32 N906VJ (msn 47379) holds short of runway 09L at Fort Lauderdale-Hollywood International Airport (FLL). Low-fare ValuJet Airlines commenced scheduled flights on October 26, 1993.

On July 10, 1997, ValuJet, Inc., the holding company for ValuJet Airlines announced plans to acquire Airways Corporation, the holding company for AirTran Airways. After bad publicity due to the Everglades crash, ValuJet Airlines (Atlanta) on September 24, 1997 changed its name to AirTran Airlines. For several months in 1997 the two holding companies, even though they had not yet merged, operated under this AirTran brand. On November 17, 1997, ValuJet, Inc., acquired Airways, Inc., and renamed the holding company, AirTran Holdings, Inc. In the summer of 1998, the two airlines merged onto the same FAA certificate and the AirTran Airways name survived. While the hub remained in Atlanta, the headquarters of the new entity was combined in Orlando, on January 28, 1998.

Above Copyright Photo: Bruce Drum/AirlinersGallery.com. AirTran Airways inherited a large McDonnell Douglas DC-9-30 fleet with the merger of AirTran Airlines (formerly ValuJet Airlines) into AirTran Airways (Orlando) in 1998. DC-9-32 N833AT (msn 47489) taxies across the tarmac at Miami dressed in the 1997 color scheme.

Above Copyright Photo: Bruce Drum/AirlinersGallery.com. AirTran Airways introduced the Boeing 717, the former McDonnell Douglas MD-95, on February 23, 1999 as the launch customer. The new type was introduced into revenue service on September 23, 1999 between the Atlanta hub and Washington (Dulles). AirTran was the largest operator of the type. 717-2BD N895AT (msn 55047) taxies to the gate at Miami on January 12, 2010 in the 2004 livery.

Above Copyright Photo: Roy Lock/AirlinersGallery.com. In 2003 AirTran Airways wanted to expand its route system from the Atlanta hub to the U.S. West Coast. However its short-range Boeing 717s (replacing the older DC-9-30s) could not make the West Coast without stops along the way, a competitive disadvantage against the larger Delta Air Lines. The company contracted with Ryan International Airlines to wet lease four Airbus A320s as a stop-gap measure until its new Boeing 737-700s arrived. The first A320 to arrive was N381LF (msn 640) on May 20, 2003. The A320s entered revenue service on June 4, 2003 on the Atlanta-Los Angeles route. This was the only time AirTran operated the A320. Ryan International’s A320-232 N391LF (msn 676) taxies to the gate at Los Angeles after arriving from ATL. It is painted in AirTran’s 1997 livery.

On September 27, 2010 Southwest Airlines (Dallas) announced it had entered into a definitive agreement to acquire all of the outstanding common stock of AirTran Holdings, Inc. (Orlando), the parent company of AirTran Airways (Orlando), for a combination of cash and Southwest Airlines’ common stock. Southwest Airlines and AirTran up until now, have operated as independent companies. The integration of the two companies will now be accomplished with the last flight.

The Boeing 717s are being leased to Delta Air Lines.

Top Copyright Photo: Bruce Drum/AirlinersGallery.com. AirTran Airways took delivery of its first Boeing 737-700 (N126AT) on June 10, 2004. The new type was introduced to revenue service a week later on June 17, 2004 on the Atlanta-Denver route as flight FL 303. Boeing 737-7BD N272AT (msn 33921) arrives in Miami. Blended Winglets were later added. Most of the 737-700s have transitioned to Southwest Airlines.

AirTran Airways operated many special color schemes. See all of them on the aircraft slide show below:

An AirTran Airways TV commercial from 2010:

Below: A route map from 2011.

AirTran logo

AirTran ATL Route Map

 

Southwest takes over AirTran routes to Punta Cana and Mexico City, launches eight new routes from Love Field

Southwest Airlines (Dallas) reached a milestone in the final stage of its integration of wholly owned subsidiary AirTran Airways by launching Southwest-branded flights to Punta Cana, Dominican Republic, and Mexico City. All international flights between seven destinations outside the United States and the carrier’s nine U.S. gateway cities are now flown by Southwest.

Southwest has completed the integration of booking and frequent flyer functions into Southwest.com, referring all Customers who visit airtran.com to Southwest.com. All bookings for remaining flights on AirTran Airways flown through December 28, 2014, will now be made through Southwest.com and all of AirTran’s A+ Rewards Members have Rapid Rewards accounts in the Southwest Airlines Rapid Rewards® frequent flyer program, which offers unlimited reward seats, no blackout dates, and points that don’t expire. (Flight or Partner earning activity required every 24 months. Benefits apply to points transactions. All Rapid Rewards rules and regulations apply.)

The expansion of service at Dallas Love Field continued with the launch of additional eight nonstop destinations, following the launch of nonstop itineraries to seven cities that began last month. New flights began yesterday (November 2) between Dallas (Love Field) and Atlanta, Ft. Lauderdale/Hollywood, Nashville, New York (LaGuardia), Phoenix, Orange County/Santa Ana, San Diego, and Tampa.

Additional nonstop service between the San Francisco Bay Area and North Texas begins after the first of next year when new flights between Dallas Love Field and both San Francisco (SFO) and Oakland (OAK) begin on January 6, 2015.

Copyright Photo: Brian McDonough/AirlinersGallery.com. The sun will be setting next month for AirTran Airways when the last Boeing 717 flight is operated between Atlanta and Tampa on December 28. All of the AirTran 717s will be leased to Delta. Boeing 717-231 N985AT (msn 55090) banks on its final turn on the river approach to Washington’s Reagan National Airport (DCA).

AirTran Airways: AG Slide Show

Southwest Airlines: AG Slide Show

Video: A first for Southwest, a wedding at 32,000 feet:

Southwest Airlines reports a record third quarter net profit

Southwest Airlines Company (Southwest Airlines and AirTran Airways) (Dallas) today reported its third quarter 2014 results:

Record third quarter net income, excluding special items1, of $382 million, or $.55 per diluted share, compared to third quarter 2013 net income, excluding special items, of $241 million, or $.34 per diluted share. This represented a 61.8 percent increase from third quarter 2013, and exceeded the First Call consensus estimate of $.53 per diluted share.

Record third quarter net income of $329 million, or $.48 per diluted share, which included $53 million (net) of unfavorable special items, compared to third quarter 2013 net income of $259 million, or $.37 per diluted share, which included $18 million (net) of favorable special items.

Record third quarter operating income of $614 million. Excluding special items, record third quarter operating income of $649 million.
Returned $241 million to Shareholders through dividends and share repurchases.

Return on invested capital1, before taxes and excluding special items (ROIC), for the twelve months ended September 30, 2014, of 19.0 percent, as compared to 10.6 percent for the twelve months ended September 30, 2013.

Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, “We are very pleased to report another record quarterly profit performance, which resulted in a $100 million third quarter 2014 profitsharing expense for our Employees. Excluding special items, third quarter 2014 net income was $382 million, or $.55 per diluted share, and operating income was $649 million, resulting in a 13.5 percent operating margin2. The 386 basis point year-over-year improvement in operating margin, excluding special items, was driven by strong revenues, lower jet fuel prices, and a solid cost performance.

“Total operating revenues were $4.8 billion, which was a 5.6 percent increase from a year ago, despite a four percent decline in trips and two percent fewer seats flown3, as we work through the transition of AirTran aircraft. Our traffic and revenue trends were strong throughout the third quarter, generating a 4.5 percent year-over-year increase in unit revenues, despite a large percentage of our route system in development or conversion as we continued to transition AirTran flying to Southwest. Our third quarter 2014 revenue strength was driven by record load factors and a strong performance in our Rapid Rewards frequent flyer program. Thus far, revenue momentum has continued into October 2014, with favorable load factor and unit revenue trends. Current bookings for November and December are also good.

“Our third quarter 2014 cost performance benefited from lower jet fuel prices and our fleet modernization efforts. With these trends continuing, we are poised for another solid cost performance for fourth quarter 2014. Based on current cost trends, and excluding fuel and oil expense, profitsharing, and special items, we expect full year 2014 unit costs to increase approximately two percent compared to last year.

“Our third quarter 2014 financial performance was very gratifying, and I commend our outstanding Employees of Southwest Airlines for their unending dedication to providing reliable, low cost operations with our legendary, friendly Customer Service. As an industry leader of low fares and low costs, we are very pleased with the transformative and successful execution of our strategic initiatives that contributed significantly to our 19.0 percent ROIC for the twelve months ended September 30, 2014. Our Employees are the very best in the airline industry, and we were thrilled to unveil a bold, new visual expression of our brand in September. Our Heart aircraft livery, airport experience, and logo marries our past to our present and commemorates the transformation of Southwest in 2014. It is dedicated with much gratitude to our People.

“We are also thrilled with the July 1, 2014, launch of Southwest international service. During third quarter, we began service to Oranjestad, Aruba; Montego Bay, Jamaica; Nassau/Paradise Island in the Bahamas; and San Jose del Cabo/Los Cabos and Cancun, Mexico, all markets previously served by AirTran Airways. Next month, we will initiate Southwest service to Punta Cana, Dominican Republic, and Mexico City, which will complete the conversion of international service from AirTran to Southwest. Also during third quarter, we announced that our first destination in Central America will be Juan Santamaria International Airport in San Jose, Costa Rica. The inauguration of this service is expected to be on March 7, 2015, subject to government approval.

“October 13, 2014, was a momentous day for Southwest Airlines. After 34 years, we are finally free from the Wright Amendment restrictions4, and have proudly launched our initial nonstop offerings from Dallas Love Field to seven popular destinations, with ten more nonstop destinations, previously announced, on the horizon.

“In addition to our strong third quarter 2014 earnings performance, our balance sheet, liquidity, and cash flows support our commitment to maintain our financial strength so that we can continue to take great care of our Employees, Customers and Shareholders. At the end of third quarter 2014, we had $3.6 billion in cash and short-term investments. For the nine months ended September 30, 2014, net cash provided by operations was $2.7 billion, and capital expenditures were $1.3 billion, resulting in strong free cash flow1 of $1.4 billion. We have further strengthened our balance sheet and repaid $517 million in debt and capital lease obligations, thus far in 2014, including $167 million in debt and capital lease obligations repaid during the nine months ended September 30, 2014, and $350 million repaid on October 1st. Thus far this year, we have returned $893 million to Shareholders through the payment of $138 million in dividends and the repurchase of $755 million in common stock.”

Financial Results and Outlook

The Company’s third quarter 2014 total operating revenues increased 5.6 percent, while operating unit revenues increased 4.5 percent, on a 1.1 percent increase in available seat miles, all as compared to third quarter 2013. Third quarter 2014 passenger revenues were $4.6 billion, which was an increase of 4.9 percent on a unit basis, as compared to third quarter 2013.

Total operating expenses in third quarter 2014 increased 0.7 percent to $4.2 billion, as compared to third quarter 2013. Third quarter 2014 profitsharing expense was $100 million, compared to $69 million in third quarter 2013. The Company incurred costs (before profitsharing and taxes) associated with the acquisition and integration of AirTran, which are special items, of $23 million during third quarter 2014, compared to $28 million in third quarter 2013. Cumulative costs associated with the acquisition and integration of AirTran, as of September 30, 2014, totaled $488 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 third quarter 2014 increased 1.1 percent to $4.2 billion, as compared to third quarter 2013.

Third quarter 2014 economic fuel costs were $2.94 per gallon, including $.05 per gallon in favorable cash settlements from fuel derivative contracts, compared to $3.06 per gallon in third quarter 2013, including $.01 per gallon in favorable cash settlements from fuel derivative contracts. Based on the Company’s fuel derivative contracts and market prices as of October 17, 2014, fourth quarter 2014 economic fuel costs are expected to be in the $2.70 to $2.75 per gallon range, compared to fourth quarter 2013’s $3.05 per gallon. As of October 17, 2014, the fair market value of the Company’s hedge portfolio through 2018 was a net liability of $236 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, third quarter 2014 operating costs increased 2.6 percent from third quarter 2013, and increased 1.5 percent on a unit basis.

Operating income in third quarter 2014 was $614 million, compared to $390 million in third quarter 2013. Excluding special items, operating income was $649 million in third quarter 2014, compared to $439 million in the same period last year, a 47.8 percent increase year-over-year.

Other expenses in third quarter 2014 were $89 million, compared to other income of $29 million in third quarter 2013. The $118 million swing primarily resulted from $66 million in other losses recognized in third quarter 2014, compared to $59 million in other gains recognized in third quarter 2013. In both periods, these gains/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, third quarter 2014 had $16 million in other losses, compared to $19 million in third quarter 2013, primarily attributable to the premium costs associated with the Company’s fuel derivative contracts. Fourth quarter 2014 premium costs related to fuel derivative contracts are currently estimated to be $13 million, compared to $22 million in fourth quarter 2013. Net interest expense in third quarter 2014 was $23 million, compared to $30 million in third quarter 2013.

For the nine months ended September 30, 2014, total operating revenues increased 5.3 percent to $14.0 billion, and total operating expenses were $12.4 billion, resulting in operating income of $1.6 billion, compared to $893 million in operating income for the same period last year. Excluding special items, operating income was $1.7 billion for the nine months ended September 30, 2014, compared to $1.0 billion for the same period last year. Net income for the nine months ended September 30, 2014, was $946 million, or $1.36 per diluted share, compared to $542 million, or $.75 per diluted share, for the same period last year. Excluding special items, net income for the nine months ended September 30, 2014, was $993 million, or $1.42 per diluted share, compared to $569 million, or $.79 per diluted share, for the same period last year.

Balance Sheet and Cash Flows

As of September 30, 2014, the Company had $3.6 billion in cash and short-term investments, and a fully available unsecured revolving credit line of $1 billion. Net cash provided by operations during third quarter 2014 was $240 million, and capital expenditures were $433 million. The Company repaid $48 million in debt and capital lease obligations during third quarter 2014, and intends to repay an additional $395 million in debt and capital lease obligations during fourth quarter 2014, including $350 million repaid on October 1, 2014.

During third quarter 2014, the Company returned $241 million to its Shareholders through the payment of $41 million in dividends and the repurchase of $200 million in common stock, or 5.0 million shares, pursuant to an accelerated share repurchase (ASR) program executed during the quarter. This ASR program was completed in early October, and the Company then received an additional 1.1 million shares, bringing the total shares repurchased under the third quarter 2014 ASR program to 6.1 million. During third quarter, the Company also received the remaining 1.4 million shares pursuant to the second quarter 2014 $200 million ASR program, bringing the total shares repurchased under that ASR program to 7.4 million. Thus far in 2014, the Company has returned $893 million to its Shareholders through $138 million in dividends, and the repurchase of $755 million in common stock, or 29.2 million shares. The Company has $580 million remaining under its existing $1 billion share repurchase authorization.

Fleet

During third quarter 2014, the Company’s fleet increased by two to 685 aircraft at period end. This reflects the third quarter 2014 delivery of 11 new Boeing 737-800s and two pre-owned Boeing 737-700s, as well as the retirement of one Boeing 737-500. In addition, the Company removed ten Boeing 717-200s from service during third quarter 2014 in preparation for transition out of the fleet.

Boeing 737 Delivery Schedule:

Southwest 737 Delivery Schedule 9.30.14

Copyright Photo: Eddie Maloney/AirlinersGallery.com. Boeing 737-7H4 N909WN (msn 32458) arrives at Las Vegas.

Southwest Airlines Aircraft Slide Show: AG Slide Show

AirTran Airways Aircraft Slide Show: AG Slide Show

Southwest Airlines launches Mexican flights to Cancun and San Jose del Cabo/Los Cabos

Southwest Airlines (Dallas) launched its initial service to Mexico with inaugural flights over the weekend.  The nonstop routes previously served by wholly owned subsidiary AirTran Airways now operate daily between Orange County/Santa Ana and San Jose del Cabo/Los Cabos, Mexico, and between Cancun and both Atlanta and Baltimore/Washington.

Saturday-only service on Southwest between Milwaukee and Cancun begins August 16, 2014.

The Company plans to fully convert all international and domestic service currently flown by AirTran to Southwest by the end of this year. The carriers’ flights schedules are published through March 6, 2015, and are available for purchase at southwest.com.

AirTran Airways continues to operate daily service between Mexico City and Orange County/Santa Ana until the route converts to Southwest Airlines service on Nov. 2, 2014.

Southwest Airlines began international service on July 1 with flights to Oranjestad, Aruba; Montego Bay, Jamaica; and Nassau, The Bahamas, in the Caribbean. International service from Denver begins Oct. 7. Additional international service from Chicago (Midway), Austin, and San Antonio begins Nov. 2, the same day Southwest Airlines begins serving Punta Cana, Dominican Republic*, and Mexico City.

*subject to Government approvals

Copyright Photo: Bruce Drum/AirlinersGallery.com. Boeing 737-7H4 N228WN (msn 32496) departs from Fort Lauderdale-Hollywood International Airport.

Southwest Airlines: AG Slide Show

Southwest reports record second quarter net income of $485 million

Southwest Airlines Company (Southwest Airlines and AirTran Airways) (Dallas) 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.

Fleet

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.

Boeing 737 NG Delivery Schedule:

Southwest 737NG Delivery Schedule 7.2014 (LRW)

Notes:

*Additional information regarding special items is included in the accompanying reconciliation tables, and see Note Regarding Use of Non-GAAP Financial Measures.
**Operating margin, excluding special items, is calculated as operating income, excluding special items, divided by operating revenues.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 737-7H4 N280WN (msn 32533) in the Penguin One special livery arrives in Los Angeles.

Southwest Airlines: AG Slide Show

AirTran Airways: AG Slide Show

Southwest converts more flights at Akron-Canton

Southwest Airlines (Dallas) has converted four more destinations and added flights from Akron-Canton Airport (CAK). Southwest, the busiest airline operating out of CAK, now offers eight daily nonstop flights from the airport. Destinations with new or additional Southwest service from Akron-Canton include Boston (Logan), New York (LaGuardia), Orlando and Denver (a second seasonal round trip). To celebrate the largest single conversion from AirTran Airways to Southwest Airlines, CAK and Southwest officials will hold a British invasion themed press conference and all day long gate party on June 9. A Beatles® cover band, balloon twisting, trivia contest and colossal #CAKFab4 destinations display will greet customers as the depart and arrive throughout the day.

Southwest Airlines will take over all routes to/from CAK on November 2, 2014 as well as adding a daily nonstop flight to Ronald Reagan Washington National Airport. The last AirTran Airways flight from CAK will be to Atlanta on November 1.

Copyright Photo: Jay Selman/AirlinersGallery.com. Boeing 737-7H4 N449WN (msn 32469) arrives in Las Vegas.

Southwest Airlines: AG Slide Show

AirTran Airways: AG Slide Show