Southwest Airlines (Dallas) today (April 22) reported first quarter 2010 net income of $11 million, or $.01 per diluted share, compared to a net loss of $91 million, or $.12 loss per diluted share, for first quarter 2009. First quarter 2010 results included special items (net of taxes) of $13 million, related to non-cash, mark-to-market, and other items associated with a portion of the Company’s fuel hedge portfolio. Excluding special items for both periods, first quarter 2010 net income was $24 million, or $.03 per diluted share, compared to a net loss of $20 million, or $.03 loss per diluted share, in first quarter 2009. The first quarter 2010 net income per diluted share, excluding special items, is in line with Thomson’s First Call mean estimate of $.03 net income per diluted share.
As anticipated, first quarter 2010 economic fuel costs increased 33 percent year-over-year to $2.34 per gallon, which included approximately $44 million in unfavorable cash settlements from derivative contracts. For the remainder of 2010, including second quarter, Southwest currently has derivative contracts in place for approximately 65 percent of estimated fuel consumption at crude-equivalent prices up to approximately $100 per barrel; approximately 40 percent if market prices settle in the $100 to $120 per barrel range; and approximately 60 percent if market prices exceed $120 per barrel. Based on the current 2010 fuel hedge portfolio and market prices (as of April 20, 2010), the Company estimates economic fuel costs, including fuel taxes, for second quarter will be in the $2.40 to $2.45 per gallon range. Beyond 2010, the Company has derivative contracts in place for over 60 percent of its estimated 2011 fuel consumption; approximately 50 percent for 2012; approximately 25 percent for 2013, and a modest position for 2014.
Excluding fuel, first quarter 2010 unit costs increased 9.8 percent from the same period a year ago, largely due to a 6.4 percent decline in first quarter year-over-year available seat miles (capacity). Based on current cost trends and flat year-over-year capacity, the Company anticipates second quarter 2010 unit costs, excluding fuel, will exceed second quarter 2009’s 6.91 cents.
Copyright Photo: Boeing 737-7H4 N727SW (msn 27859) dressed in the Nevada One special livery arrives at the Baltimore/Washington hub.