Tag Archives: AirTran Airways

Southwest Airlines issues its 2014 One Report

Southwest Airlines (Dallas) has issued its 2014 One Report on the performance of the airline during 2014 including the integration of AirTran Airways:

Southwest 2014 logo-1

On the heels of the airline’s Annual Meeting of Shareholders and announcement of expanded international service, Southwest Airlines® released its sixth annual, award-winning integrated report, found at southwestonereport.com. Southwest Airlines Chairman, President, and CEO Gary Kelly (above and below) shared his thoughts on the 2014 One Report and the carrier’s successful year on his LinkedIn Influencer page.

Southwest CEO Gary Kelly

Kelly said, “I am immensely proud to say that 2014 will go down as one of the most monumental years in Southwest’s history, chock-full of major milestones and historic events—a banner year that we started planning for in 2010 when we laid out our five-year strategic plan. In short, 2014 was epic!

“It marks the end of one era and the dawn of another as the restrictions of the Wright Amendment were lifted*, allowing us to offer additional nonstop service from our home in Dallas. Of equal significance, we spread our wings into international territory and expanded our presence in markets that were once inaccessible to us, like New York City and Washington, D.C.

“We continued our commitment to efficient operations by signing an agreement to purchase low-carbon renewable jet fuel and remained on track with our fleet modernization efforts. I suppose it is only fitting that 2014 culminated with the completion of the AirTran Airways integration, which has been arguably the biggest project in our Company’s history.

“In celebration of all these exciting changes, we introduced a bold, new look with a new livery and logo (below).

Southwest new heart logo

The new look is centered around a heart, which serves as our foundation and symbolizes our commitment to remain true to our Core Values and low-fare philosophy as we seek to spread our Hospitality and Reliability to the rest of the world, because without a Heart, it’s just a machine. We accomplished all of this and more in 2014 while returning significant value to our Shareholders, surpassing our financial target of at least 15 percent pre-tax return on invested capital, excluding special items (ROIC); maintaining a job-secure environment for our People; spreading our Hospitality to our communities; and achieving our 42nd consecutive year of profitability—a record that is unmatched in the U.S. airline industry. Further, our common stock (LUV) was the top performer of the S&P 500. Indeed, 2014 was proof positive of our ongoing commitment to the triple bottom line.”

The carrier’s triple bottom line approach takes into account Southwest’s Performance and productivity, the importance of its People and the communities it serves, and its commitment to efficiency and the Planet. The 2014 One Report also features the major headlines of the year, including the launch of international service, the repeal of the Wright Amendment, the integration of AirTran Airways, the airline’s innovative LUVSeat upcycling Program, and the opening of a brand new LEED® (Leadership in Energy and Environmental Design) Silver-certified Training and Operational Support facility in Dallas.

Key highlights that can be found in the 2014 One Report include:


Reported record net income of $1.1 billion
Recognized as the top stock performer of the S&P 500 with a 125 percent increase
Returned $1.1 billion to Shareholders through repurchases of $955 million of common stock (33 million shares) and payment of $139 million in dividends
Reduced long-term debt and capital lease obligations by $261 million, net of debt issuance Completed the integration of AirTran Airways, achieving net pre-tax synergies of approximately $500 million (excluding acquisition and integration expenses)


Transitioned AirTran Airways Employees into Southwest, creating one Family
Allocated the largest total dollar amount ever to the Company’s ProfitSharing Plan
Introduced a multi-year program, Heart of the Community, as part of Southwest’s community outreach in placemaking
In 2014, Southwest donated more than $20 million in corporate monetary, in-kind, and ticket donations to the communities the carrier serves


Reached 26 percent improvement in jet fuel efficiency on revenue ton miles per gallon basis compared with 2005
Decreased absolute greenhouse gas emissions for the second year in a row due to continued improvements in fuel efficiency
Continued renewable energy commitments for a total of more than 50 million kilowatt-hours of renewable energy in 2013 and 2014
Ranked first among the four largest U.S. domestic passenger airlines and fourth overall for in-service fuel efficiency, according to the International Council on Clean Transportation (ICCT) report

Based on the Company’s outstanding year in 2014, the airline has again been named to Corporate Responsibility Magazine’s 100 Best Corporate Citizens List for its commitment to Employees and the communities in which they work and live. Southwest Airlines was named in the top 25 and the only commercial airline to make Corporate Responsibility Magazine’s List, with especially high scores in the following categories:

Financial performance
Human rights
Environmental activity
Climate change

Southwest’s strong performance in these categories underscores the airline’s commitment to a triple bottom line of Performance, People, and Planet.

To arrive at Corporate Responsibility Magazine’s 100 Best Corporate Citizens List, the program audits and ranks Russell 1000 companies across seven corporate and social responsibility initiatives: environmental activity, climate change, human rights, employee relations, corporate governance, philanthropy and financial performance. Corporate Responsibility Magazine collects data on each company, including sending out an extensive questionnaire and asking companies to verify Corporate Responsibility Magazine’s initial report. Learn more about the methodology here.

* Restrictions still apply with respect to destinations beyond the 50 United States or District of Columbia.

Video above: CEO Gary Kelly introduces the 2014 One Report.

Copyright Photo below: Jacques Guillem Collection/AirlinersGallery.com. Boeing 737-76N N7733B (msn 32678) taxies to the runway at Fort Lauderdale-Hollywood International Airport in the new 2014 livery.

Southwest Airlines aircraft slide show (current livery only): AG Airline Slide Show

Planely Speaking: The Battle for the Big Peach

Assistant Editor Aaron Newman

Assistant Editor Aaron Newman

Assistant Editor Aaron Newman

The Battle for the Big Peach

By Aaron Newman.

The world’s busiest airport will become the latest low-cost battleground this spring and summer as Spirit Airlines and Frontier Airlines deem Atlanta as their newest expansion target. By September 2015, Spirit will provide service to 15 cities from Atlanta; while Frontier will expand to 16 cities by the end of this month. With competition from Southwest and of course the hometown favorite, Delta Airlines; does Spirit and Frontier stand a chance at success in the big peach?

Frontier Airlines and Spirit Airlines routes from Atlanta

Frontier-Spirit ATL Graph

In the case of Frontier, Delta serves all of the above markets, and Southwest will compete on seven of the markets. In the case of Spirit, Delta operates service to all of the above markets except Atlantic City; while Southwest again competes on seven of the above routes.

It’s likely this aggressive growth stems from the purchase of AirTran Airways by Southwest; AirTran’s disappearance from ATL left a void for a true low-cost carrier in Atlanta. Frontier and Spirit perceive Atlanta as an opportunity to use their low-cost model to attract cost conscious north Georgia residents to travel where they otherwise wouldn’t.

Data from the US Department of Transportation demonstrates that during the 3rd quarter of 2014, Atlanta’s average domestic fare was $439, while, the average US domestic fare was $397–Spirit and Frontier advertise fares starting as low as $19 one-way.

Spirit ATL Map

Source: Spirit Airlines.

In a contrast to Cleveland, another market where Frontier and Spirit are doing battle in 2015, Atlanta is not an airport where any major airline has made a substantial cutback. Southwest has made some minor changes to its route network post-merger, but nothing like the 60% capacity reduction seen by United Airlines at Cleveland. Frontier and Spirit are aware that they are in for a battle before one airline eventually wins out. Can both of these airlines survive the threat from each other, as well as the size of Delta and the loyal followings of Southwest’s customers?

Frontier ATL Fares

Source: Frontier Airlines.

Who wins out?

Above Copyright Photo: Tony Storck/AirlinersGallery.com. Spirit Airlines Airbus A319-132 N503NK (msn 2470) prepares to land at its Fort Lauderdale-Hollywood International Airport (FLL) base.

Spirit has been growing quickly and their experience as an established ULCC (ultra-low cost carrier) gives them the upper hand in this turf war with Frontier. Spirit has a slightly lower CASM (cost per available seat mile) than Frontier (marketrealist.com), giving them the ability to offer lower fares while still maintaining profitability. The newly announced routes come at a time in which Spirit is preparing for a wave of aircraft deliveries (15 aircraft in 2015) that will push its fleet to 80 aircraft by the end of 2015–an added incentive to make Atlanta work for their bottom line. Spirit had long considered an Atlanta expansion, calculating that the Southwest Airlines acquisition of AirTran Airways would increase fares. What Spirit may not have expected, however, was that Frontier Airlines would try the same approach at the same time.

Copyright Photo Above: Ken Petersen/AirlinersGallery.com. Frontier Airlines’ Airbus A320-214 N227FR (msn 6184) is pictured at Raleigh/Durham.

Frontier’s route network is accustomed to change and though I believe one ULCC can gain market share in Atlanta, I predict Frontier will eventually leave or drastically reduce service in Atlanta due to disappointing bookings and slim margins caused by over-capacity. Ultimately, consumers will make the decision, regarding which ULCC they prefer, specifically on routes in which the two carriers overlap, such as Atlanta to Chicago (O’Hare) and Las Vegas. But, as mentioned, Spirit is believed to retain a slight cost advantage over Frontier, ultimately giving them the upper hand.

Surviving the big guys

In a recent presentation to investors, Spirit Airlines estimated Delta has an adjusted cost per available seat mile (CASM) 59% higher than Spirit (Atlanta Journal Constitution). Even though Delta has created a new low-fare class with limited perks in an attempt to compete with ULCC’s, Spirit predicts legacy carriers will eventually narrow their focus to high-yield passengers on over-lapping routes. This allows Spirit to concentrate their efforts on their favorite audience—the leisure traveler. Additionally, Spirit has historically coexisted well in other fortress hubs, like; Detroit, Minneapolis, Houston (IAH), and Dallas (DFW), proving they can effectively compete with larger, legacy carriers.

ATL Market Share

I conclude that Spirit and Frontier are not entering Atlanta to gain market share from Delta, but rather Southwest. Delta’s numerous frequencies, extensive network, and corporate contracts are no match for Frontier and Spirit. The two ULCC’s believe they can use their ultra-low fares to stimulate cost-sensitive passengers that have otherwise been priced out of air travel. This business model does not directly compete with Delta, but rather Southwest.

The decisions by Spirit and Frontier to grow in Atlanta demonstrate that Southwest is no longer the low fare leader it once was. Their cost structure is higher than that of the ULCC’s competing for lower yield passengers. In a recent interview, Frontier’s president Barry Biffle called Southwest a “mid-cost carrier,” and said that in Atlanta, “fares are relatively high compared to the average,” (Atlanta Journal Constitution) creating an opportunity for a ULCC to come in and thrive.

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:


<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.


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

Delta to introduce the Boeing 717 on five routes from the Minneapolis/St. Paul hub

Delta Air Lines (Atlanta) continues to expand Boeing 717 operations as more aircraft are released from AirTran Airways. As previously reported, AirTran will operate its last flight on December 28.

Delta will introduce the 717 to the Minneapolis/St. Paul hub starting on January 6, 2015 with a route to Charlotte. Kansas City, Madison and Philadelphia will be added on February 13 followed by Detroit on March 2 per Airline Route.

Delta is also assigning the 717 to two new routes from the Atlanta hub to both Georgetown (December 20) and Nassau (January 12) in the Bahamas.

Copyright Photo: Brian McDonough/AirlinersGallery.com. Boeing 717-231 N929AT (msn 55075) arrives at Washington (Dulles).

Delta Aircraft Slide Show (current livery): AG Slide Show