Tag Archives: fleet modernization

Lufthansa orders 34 Boeing 777-9Xs and 25 Airbus A350-900s

Lufthansa logo-1

Lufthansa (Frankfurt) as expected, placed orders for 34 Boeing 777-9Xs and 25 Airbus A350-900s. The group issued issued this statement:

Lufthansa 777-900 (88)(Flt)(Boeing)(LR)

Following a recommendation by the Deutsche Lufthansa AG Executive Board headed by Dr Christoph Franz, the Supervisory Board approved the purchase of 59 ultra-modern aircraft for the Group at its meeting. 34 Boeing 777-9Xs (above) and 25 Airbus A350-900s (below) will be added to the Lufthansa Group’s wide-body fleet. The first of these new aircraft will be delivered as early as 2016. Older Boeing 747-400s and Airbus A340-300s will be phased out by 2025. The new airplanes will primarily serve to replace existing aircraft at Lufthansa.

Lufthansa A350-900 (88)(Flt)(Airbus)(LR)

The investment amount for the Lufthansa Group’s latest order totals EUR 14 billion at list prices and is the largest single private-sector investment in the history of German industry. “This investment will safeguard about 13,000 jobs at Lufthansa alone as well as thousands of jobs at our partners in aviation and other suppliers”, said Christoph Franz, Chairman of the Executive Board and CEO of the Lufthansa Group, explaining the macroeconomic significance of the investment at a press conference in Frankfurt.

This investment in new technology, efficiency and customer comfort is a continuation of the ongoing fleet modernization that is taking place at the Group’s airlines. Lufthansa operates a wide-body fleet of around 107 aircraft, among them ten ultra-modern Airbus A380s and nine Boeing 747-8s as well as the Airbus A330-300 (18 aircraft). The fleet also includes Airbus A340s (48) and Boeing 747-400s (22). In addition to these, the Group subsidiary Swiss has 31 wide-body airplanes, while Austrian Airlines’ wide-body fleet consists of 12 aircraft.

The aim is to reduce the number of different models and fleet complexity in the Passenger Airline Group segment and also replace existing aircraft with state-of-the-art airplanes. In March, the Group approved the purchase of around 100 short and medium-haul aircraft. This order included six new Boeing 777-300 ERs for Swiss, which are also intended to replace older Airbus A340-300s at the airline.

The new aircraft will be operated by ultra-modern, powerful, low-noise engines – the Airbus A350 by the Rolls-Royce ‘Trent XWB 84’ engine and the Boeing 777-9X by General Electric’s ‘GE-9X’ model. The noise footprint of the new models will be at least 30 per cent lower than today’s aircraft.

Lufthansa: AG Slide Show

Southwest Airlines reports a net profit of $224 million in the second quarter, removes the first AirTran Boeing 717

Southwest Airlines Company (Dallas) today reported its second quarter 2013 results.  Second quarter 2013 net income was $224 million, or $.31 per diluted share, which included $50 million (net) of unfavorable special items.  This compared to net income of $228 million, or $.30 per diluted share, in second quarter 2012, which included $45 million (net) of unfavorable special items.  Excluding special items, second quarter 2013 net income was a record $274 million, or $.38 per diluted share, compared to $273 million, or $.36 per diluted share, in second quarter 2012.  This was in line with the First Call consensus estimate of $.38 per diluted share.  Additional information regarding special items is included in this release and in the accompanying reconciliation tables.

Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, “We are  pleased to report record quarterly earnings of $274 million (excluding special items).  This performance benefited from all-time high operating revenues and lower fuel prices.  In addition, our focus on managing costs resulted in modest year-over-year cost inflation despite significant investments in fleet modernization and other strategic initiatives.  I commend our hard-working and dedicated Employees for their efforts to achieve these excellent results, while simultaneously executing on our strategic initiatives.

“While the lingering effects of government sequestration and higher taxes continued to be a drag on air travel demand, second quarter 2013 revenues and passenger traffic still reached record levels.  In addition, we are in the midst of integrating AirTran, launching new city-pairs, and optimizing the combined networks.  We maintained strong load factors and ended the quarter with a record June load factor of 85.0 percent, which is notable considering the increasing mix of larger gauge 737-800s and Evolve -700s.  Although the 2.4 percent year-over-year decline in second quarter unit revenues was below plan1, results improved throughout the quarter. Third quarter 2013 revenue trends are encouraging, thus far.  To date, July unit revenues are approximately three percent above last year’s July, benefiting from Southwest and AirTran network connections and our gradual combined network optimization.  Current bookings for the remainder of the third quarter also look solid.

“We remain on track with our plan to fully integrate AirTran into Southwest Airlines by the end of 2014.  We are on schedule to complete the conversion of AirTran’s Boeing 737-700s to the Southwest livery and deploy the Southwest international reservation system next year.  During second quarter, we transitioned one -700, bringing total aircraft conversions to 12 since the acquisition.  Seven more -700 conversions are planned for this year, with the remaining 33 planned for next year in conjunction with the conversion of AirTran’s eight international markets.  We will be transitioning AirTran’s 88 Boeing 717-200s out of the fleet, beginning next month.

“Connecting the Southwest and AirTran networks was a key milestone this quarter.  As of April 14, Customers can now fly across our combined 97 destinations on a single itinerary.  Our ability to optimize the combined networks and operations is enhanced significantly with connecting capabilities as we continue to transition AirTran markets to the Southwest network.  Earlier this week, we extended our 2014 flight schedule through early March and announced new Southwest service between Hartsfield-Jackson Atlanta International Airport and Ronald Reagan Washington National Airport, beginning in February, which will augment AirTran’s five daily nonstop flights.  During second quarter 2013, Southwest launched new service to Charlotte, North Carolina; Flint, Michigan; Portland, Maine; Rochester, New York; and Wichita, Kansas, which were all AirTran cities.  We also began operating Southwest’s first scheduled service outside of the continental United States, with daily service to San Juan, Puerto Rico, beginning April 14th.  By the end of 2013, we will have a Southwest presence in all AirTran domestic cities retained following the acquisition.  While much of the converted capacity represents new city-pairs, we expect these new routes to develop rapidly.  Our Cargo business also benefited from connecting the networks, coincident with the April 14th launch of cargo on AirTran under the Southwest brand.

“We are excited about our future network opportunities as we add international capabilities and continue the development of our domestic route network.  We were thrilled to be awarded the slot exemption from the U.S. Department of Transportation to begin service between Houston Hobby and Ronald Reagan Washington National Airport next month.  The introduction of this daily Southwest service will complete a triad of nonstop service options between Hobby and the Boston, New York, and Washington, D.C. metro areas.

“We continue to make progress on our fleet modernization efforts.  During second quarter, we added three new Boeing 737-800s into service and retired two Boeing 737-300s.  We also removed the first AirTran 717 from active service during the quarter in preparation for its transition out of the fleet next month.  As of June 30, 2013, all Southwest Boeing 737-700s and 14 Boeing 737-300s have been retrofitted with the Evolve interior, and we plan to retrofit 64 additional -300s in the second half of this year.  In May, we announced revisions to our future aircraft delivery schedule, including the launch of the Boeing 737 MAX 7 in 2019, with three objectives in mind:  efficiently and aggressively manage our invested capital, shift the mix of new aircraft deliveries to the MAX, and replace Boeing 717s and Boeing 737s being retired over the next three years with more economical aircraft.  This includes augmenting our Boeing orders with the acquisition of pre-owned aircraft.  In line with our plan, available seat miles (capacity) for 2013 are estimated to increase two percent year-over-year as a result of larger gauge aircraft.  For 2014, we currently plan to keep our capacity in line with 2013 as we continue to optimize our network and execute our strategic plan.

“Our fleet modernization and other fuel conservation efforts resulted in a 4.1 percent improvement in second quarter available seat miles per gallon.  Second quarter economic fuel costs declined significantly to $3.06 per gallon, as expected, compared to second quarter 2012’s $3.22 per gallon.  Based on our fuel derivative contracts and market prices as of July 22, third quarter 2013 economic fuel costs are expected to be in the $3.05 to $3.10 per gallon range, which is below third quarter 2012’s $3.16 per gallon.

“Our second quarter unit costs, excluding fuel, special items, and profitsharing, increased 1.7 percent, compared to second quarter last year.  Based on current trends and benefits from our fleet modernization efforts, we expect our third quarter 2013 unit costs, excluding fuel, special items, and profitsharing, to increase slightly from third quarter 2012’s 7.72 cents.

“Our balance sheet and liquidity remain strong with approximately $3.7 billion in cash and short-term investments, as of yesterday, and a $1 billion fully available revolving credit facility.  Our second quarter cash flow from operations was $778 million, and capital expenditures were $193 million, resulting in $585 million in free cash flow2.  Our strong cash flow generation and record second quarter profits (excluding special items) reinforce the Board’s authorizations in May 2013 to increase our stock repurchase program from $1 billion to $1.5 billion, along with quadrupling our quarterly dividend to an estimated 1.2 percent annual yield (based on yesterday’s closing stock price of $13.76).  During second quarter 2013, we returned approximately $279 million to our Shareholders through the payment of $28 million in dividends and the repurchase of approximately $251 million, or approximately 18 million shares, under an accelerated stock repurchase program completed in June.  Since August 2011, we have repurchased approximately $975 million, or approximately 100 million shares, under our total $1.5 billion share repurchase authorization.”

Financial Results

The Company’s second quarter 2013 total operating revenues increased 0.6 percent to $4.6 billion, while operating unit revenues decreased 2.4 percent, on a 3.0 percent increase in available seat miles, and approximately four percent increase in average seats per trip, all as compared to second quarter 2012.  Total operating expenses in second quarter 2013 increased 1.3 percent to $4.2 billion, as compared to second quarter 2012.  The Company incurred costs (before taxes) associated with the acquisition and integration of AirTran, which are special items, of $26 million during second quarter 2013, compared to $11 million in second quarter 2012.  Cumulative costs associated with the acquisition and integration of AirTran, as of June 30, 2013, totaled $363 million (before profitsharing and taxes).  The Company expects total acquisition and integration costs to be no more than $550 million (before profitsharing and taxes).  Excluding special items in both periods, total operating expenses in second quarter 2013 were $4.2 billion, compared to $4.1 billion in second quarter 2012.

Second quarter 2013 economic fuel costs were $3.06 per gallon, including $.05 per gallon in unfavorable cash settlements for fuel derivative contracts, compared to $3.22 per gallon in second quarter 2012, including $.04 per gallon in unfavorable cash settlements for fuel derivative contracts.  The Company has derivative contracts in place for approximately 80 and 85 percent of its estimated fuel consumption in the third and fourth quarters of 2013, respectively.  As of July 22nd, the fair market value of the Company’s hedge portfolio through 2017 was a net asset of approximately $102 million.  Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding fuel, special items, and profitsharing in both periods, second quarter 2013 operating costs increased 0.7 percent from second quarter 2012, and 1.7 percent on a unit basis.

Operating income for second quarter 2013 was $433 million, compared to $460 million in second quarter 2012.  Excluding special items, operating income was $479 million for second quarter 2013, compared to $485 million in the same period last year.

Other expenses for second quarter 2013 were $70 million, compared to $92 million in second quarter 2012.  This $22 million decrease primarily resulted from $47 million in other losses recognized in second quarter 2013, compared to $62 million in second quarter 2012.  In both periods, these losses primarily resulted from unrealized mark-to-market gains/losses associated with a portion of the Company’s fuel hedging portfolio, which are special items.  Excluding these special items, other losses were $12 million in second quarter 2013, compared to $14 million in second quarter 2012, primarily attributable to the premium costs associated with the Company’s fuel derivative contracts. Third quarter 2013 premium costs related to fuel derivative contracts are currently estimated to be approximately $22 million, compared to $15 million in third quarter 2012.  Net interest expense declined to $23 million in second quarter 2013, compared to $30 million in second quarter 2012, primarily due to the repayment of AirTran aircraft financing facilities during the first quarter of 2013.

For the six months ended June 30, 2013, total operating revenues increased 1.4 percent to $8.7 billion, while total operating expenses increased 1.2 percent to $8.2 billion, resulting in operating income of $503 million, compared to $481 million for the same period last year.  Excluding special items, operating income was $591 million for first half 2013, compared to $495 million for first half 2012.

Net income for first half 2013 was $283 million, or $.39 per diluted share, compared to $327 million, or $.43 per diluted share, for the same period last year.  Excluding special items, net income for first half 2013 was $328 million, or a record $.45 per diluted share, compared to $255 million, or $.33 per diluted share, for the same period last year.

The Company’s return on invested capital (before taxes and excluding special items) was approximately nine percent for the twelve months ended June 30, 2013.  Additional information regarding pre-tax return on invested capital is included in the accompanying reconciliation tables.

For the six months ended June 30, 2013, net cash provided by operations was $1.8 billion, and capital expenditures were $727 million, resulting in free cash flow2 in excess of $1 billion.  The Company repaid $216 million in debt and capital lease obligations during first half 2013, and intends to repay approximately $100 million more in debt and capital lease obligations during the remainder of the year.

Copyright Photo: Brian McDonough/AirlinersGallery.com. A beautiful banking shot of Boeing 737-8H4 WL N8322X (msn 36997) completing the River Approach into Washington’s Reagan National Airport (please click on the photo for the full-size view).

Southwest Airlines: AG Slide Show

 

South African Airways takes delivery of two new Airbus A320s

South African Airways (SAA) (Johannesburg) has taken delivery of its first two new Airbus A320s out of a total of 20 A320 Family aircraft ordered from Airbus in 2010. The development is set to deliver cost efficiencies and allow SAA to expand its Sub-Sahara regional route network and boost revenue in the rapidly growing market.

The airline’s A320s, powered by IAE-V2500 engines, feature a two class cabin layout, seating 24 passengers in business class and 114 in economy. The A320s will replace its present fleet of 737-800s and will augment the A319s it already has in service and mark the latest phase of SAA’s  fleet modernization plan.

Copyright Photo: Paul Denton/AirlinersGallery.com. SAA currently already operates 2 Airbus A320s and 13 Boeing 737-800s. Airbus A320-232 ZS-SZZ (msn 4990) arrives at the Johannesburg hub.

South African Airways: AG Slide Show

 

Southwest Airlines helps to launch the Boeing 737 MAX 7

Boeing (Chicago) and Southwest Airlines (Dallas) announced today the launch of the 737 MAX 7, the third member of the 737 MAX family. The carrier and launch customer for the 737 MAX program became the first airline to order the 737 MAX 7, when it converted 30 existing orders for Next-Generation 737s into orders for the 737 MAX 7.

Southwest also exercised options to add five more Next-Generation 737-800s to its fleet. These airplanes, along with the 737 MAX 7s, are part of Southwest’s ongoing effort to improve fuel efficiency and profitability. The 737 MAX 7 supports Southwest’s expanding fleet modernization effort. Southwest is expected to take its first 737 MAX 7 delivery in 2019.

“We are thrilled to announce that Southwest Airlines and Boeing have entered into an agreement for Southwest to be the launch customer for the Boeing MAX 7 series, with deliveries beginning in 2019,” said Gary C. Kelly, Southwest Airlines Chairman of the Board, President, and CEO. “The 737 MAX 7 builds on the strengths of today’s Next-Generation 737-700, incorporating the latest CFM International LEAP-1B engines is expected to reduce fuel burn and CO2 emissions by an additional 12 percent over today’s most fuel-efficient single-aisle airplane.”

The 737 MAX 7 (below) brings the most advanced engine technologies to the world’s best-selling airplane, building on the strengths of today’s Next-Generation 737-700. The 110-ft long airplane incorporates the latest CFM International LEAP-1B engines to deliver improved efficiency with the most reliability and passenger comfort in the single-aisle market. The 737 MAX 7 also will extend the range over today’s 737-700 by approximately 400 nautical miles (741 km).

Etihad 777 flight

Image: Boeing.

“Southwest has been a valued partner in the evolution of the 737 program,” said Boeing Commercial Airplanes President and CEO Ray Conner. “We have worked together to launch several models of the 737 including the 737 MAX family in 2011. We are excited to bring the 737 MAX 7 to market with Southwest.”

With the MAX 7 conversions and exercised options for 737-800s, Southwest’s unfilled orders consist of 180 737 MAX airplanes and 137 Next-Generation 737s. The 737 MAX now has orders for 1,315 airplanes.

In other news, Southwest Airlines’ Board of Directors, at its meeting held today, significantly increased the Company’s quarterly dividend to $.04 per share from $.01 per share.  Annualized, this amounts to over $100 million.  The increase in the quarterly dividend will begin with the 147th consecutive quarterly dividend declared today to Shareholders of record at the close of business on June 5, 2013 on all shares then issued and outstanding.  The dividend will be paid on June 26, 2013.  The Board also increased the Company’s existing $1 billion share repurchase authorization to $1.5 billion.  Of the remaining share repurchase authorization, an initial $250 million of Southwest common stock will be repurchased under an accelerated stock repurchase program.

Gary C. Kelly, Chairman of the Board, President, and CEO, stated: “Over the past 24 months, we have returned over 20 percent of our operating cash flows, or approximately $770 million, to Shareholders through share repurchases and dividends. I am pleased to announce several actions taken today by our Board that follow through with our commitment to deploy free cash flow1 to our Shareholders. The Board authorized an increase in our quarterly dividend payment to $.04 per share from $.01 per share.  Based on yesterday’s closing stock price of $13.98, this would provide an approximate one percent annual dividend yield to our Shareholders.  The Board also increased our existing $1 billion share repurchase authorization to $1.5 billion.  To date, $725 million in share repurchases of the $1.5 billion authorization have been completed since August 2011.  This means we have the authority to repurchase an additional $775 million of our common stock.  We intend to execute an agreement today to repurchase $250 million of our shares under an accelerated stock repurchase program, which, upon implementation, will immediately bring shares back into the Company.

Top Copyright Photo: Brian McDonough/AirlinersGallery.com. With this announcement, Southwest exercised options to add five more Next-Generation 737-800s to its growing fleet. Boeing 737-8H4 WL N8308K (msn 36682) arrives at Washington (Reagan National).

Southwest Airlines: AG Slide Show

Nepal Airlines jumps to Airbus for its fleet renewal

Nepal A320-200 WL (Flt)(Airbus)(LRW)

Nepal Airlines Corporation (NAC) (Kathmandu) has jumped from Boeing to Airbus and has signed a Memorandum of Understanding (MOU) to acquire two Airbus A320 aircraft equipped with the Sharklet fuel saving wing tip devices. Sharklets deliver up to four percent savings in fuel consumption making the aircraft a cornerstone of NAC’s fleet modernization.

Nepal Airlines currently operates two Boeing 757-200s for its international routes.

Image: Airbus.

 

Southwest reports 1Q net profit of $59 million, establishes a “No Show” policy

Southwest Airlines Company (Southwest Airlines) (Dallas) today reported its first quarter 2013 results.  First quarter 2013 net income was $59 million, or $.08 per diluted share, which included $6 million (net) of favorable special items.  This compared to net income of $98 million, or $.13 per diluted share, in first quarter 2012, which included $116 million (net) of favorable special items. Excluding special items, first quarter 2013 net income was $53 million, or $.07 per diluted share, compared to a net loss of $18 million, or $.02 loss per diluted share, in first quarter 2012.  This exceeded the First Call consensus estimate of $.02 per diluted share.  Operating income for first quarter 2013 was $70 million, compared to $22 million in first quarter 2012.  Excluding special items, operating income was $112 million for first quarter 2013, compared to $10 million in the same period last year.  Additional information regarding special items is included in this release and in the accompanying reconciliation tables.

Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, “The significant year-over-year improvement in our first quarter results (excluding special items) was driven by record first quarter revenues and a better-than-expected cost performance.  On relatively flat available seat miles year-over-year, total operating revenues of $4.1 billion increased 2.3 percent, or 1.8 percent on a unit basis, compared to first quarter last year.   Passenger revenues were boosted significantly by continued progress on the AirTran integration, fleet modernization efforts, and the Rapid Rewards loyalty program.  Year-over-year passenger unit revenue trends were relatively stable through February, and while worse than expected, March passenger unit revenues outperformed the domestic industry, on a capacity adjusted basis. Soft revenue trends have continued, thus far, in April, and we expect a year-over-year decline in our April passenger unit revenues.  While we are cautious about April trends and the potential effects from government sequestration, recent bookings for May and June have been solid, and lower fuel prices have roughly offset the revenue weakness thus far in April.

“Based on market prices as of April 22nd, second quarter 2013 economic fuel costs, including fuel taxes, are expected to be in the $3.00 to $3.05 per gallon range, well below second quarter 2012’s $3.22 per gallon, including fuel taxes, and below the original forecast included in our 2013 plan1.  Also, we now have derivative contracts in place for the remainder of the year that support estimated fuel costs per gallon below our 2013 plan.  First quarter 2013 economic fuel costs were $3.29 per gallon, which was in line with our expectation, and 4.4 percent lower than first quarter 2012’s all-time high $3.44 per gallon.

“We are pleased with the early results from revenue initiatives implemented in first quarter 2013 and are excited about the incremental benefit expected for future periods.  We launched some of our new 2013 ancillary revenue streams, including selling open premium boarding positions at the gate, increasing our EarlyBird Check-In™ charge, and increasing certain other fees.

“We also phased in the ability for our Customers to fly connecting itineraries between the Southwest and AirTran networks, our top priority this year.  As of April 14th, all 97 destinations within the combined networks can be flown on a single itinerary, a key milestone of our AirTran integration. Bookings on these connecting itineraries, thus far, have been strong, giving us further confidence in our plan to achieve $400 million in net, pre-tax, AirTran synergies in 2013 (excluding acquisition and integration costs).  With connecting capabilities in place, our ability to optimize the combined networks and operations is enabled, particularly in Atlanta.  This is a significant milestone.  We are now in a position to evolve Atlanta to a point-to-point operation in fall 2013, similar to our other top ten Southwest cities.  This will allow our People to be substantially more productive through scheduling our aircraft, flight crews, and ground staff more constantly throughout the day.  Our November schedule (which will open next month) will offer our Atlanta Customers a wider selection of departure times throughout the day, with roughly the same number of daily departures.  We expect these changes will grow our local Atlanta traffic.

“We are enthused about planned initiatives for the remainder of the year.  Today, we are announcing details of a new No Show policy that will apply to Southwest reservations that include Wanna Get Away® or DING!® fares and are made on or after May 10, 2013, for travel on or after September 13, 2013.  The policy is intended to alter behavior, encouraging Customers to cancel unused nonrefundable fares prior to a flight’s departure, allowing us to better predict future inventory and reduce the number of empty seats on aircraft.  Also, later this quarter, we will implement phase one of our new revenue management system.

“While we continue to optimize our network and maintain a relatively flat fleet in 2013, we are also making excellent progress on our fleet modernization efforts.  Thus far this year, we have taken delivery of nine new Boeing 737-800s and two used Boeing 737-700s, retired three older Boeing 737-300s and one Boeing 737-500, and retrofitted more -700s with our new Evolve interior. As of
March 31, 2013, nearly 90 percent of the Southwest -700 fleet had the Evolve interior, and we expect to complete the remainder of the Southwest -700 retrofits in second quarter 2013.  Further, all of Southwest’s -800s and -700s are now equipped with WiFi technology.

“We began operating Southwest’s first scheduled service outside of the continental United States on April 14th, with daily service to San Juan, Puerto Rico, from Orlando and Tampa Bay, Florida. These flights augment AirTran’s existing service between San Juan and Atlanta, Georgia; Baltimore/Washington; and Fort Lauderdale, Florida. Since the beginning of the year, Southwest has also launched service to Branson, Missouri; Charlotte, North Carolina; Flint, Michigan; Portland, Maine; and Rochester, New York.  We are excited about our growing network and opportunities ahead. Further, as part of the Dallas Love Field Modernization project, we reached a significant milestone at our hometown airport with the opening of 11 brand new Southwest gates and new concessions on April 16th.  This impressive project is on budget and on track for full completion in second half 2014.

“Our balance sheet and liquidity remain strong with approximately $3.1 billion in cash and short-term investments at March 31, 2013.  Earlier this month, we replaced our $800 million revolving credit facility with a new $1 billion five-year revolving credit facility.  The $200 million increase enhances our liquidity and financial flexibility.  Despite the uncertainties surrounding the impact to travel demand from government sequestration and increased consumer taxes, we remain focused on our 2013 plan to achieve a 15 percent pre-tax return on invested capital.  In first quarter, we returned $115 million to our Shareholders through repurchasing $100 million of common stock (approximately 9 million shares) and distributing $15 million in dividends.”

No Show Policy

Southwest is implementing a No Show policy that applies to nonrefundable fares that are not canceled or changed by a Customer prior to a flight’s scheduled departure.  If a Customer has booked a nonrefundable fare anywhere in his/her itinerary and that portion of the flight is not used and not canceled or changed by the Customer prior to scheduled departure, all unused funds on the full itinerary will be lost, and the remaining reservation will be canceled. The policy applies to reservations made or changed on or after Friday, May 10, 2013, for travel on or after Friday, September 13, 2013. This policy does not apply to military fares, senior fares, or travel during certain irregular operations, including severe weather conditions.

The No Show policy will not impact Customers who simply cancel a Wanna Get Away or DING! fare prior to scheduled departure; in this case, Customers may reuse their funds toward future travel on Southwest, without a change fee, as they have always done. Customers who are traveling on a fully refundable itinerary that does not contain a Wanna Get Away or DING! fare will continue to have the option of either requesting a refund or holding funds for future travel.

Financial Results and Outlook

The Company’s total operating revenues in first quarter 2013 were $4.1 billion, compared to $4.0 billion in first quarter 2012.  Operating unit revenues increased 1.8 percent from first quarter 2012. Total first quarter 2013 operating expenses of $4.0 billion were comparable to first quarter 2012.  The Company incurred $13 million in special charges (before taxes) during the first quarters of 2013 and 2012 associated with the acquisition and integration of AirTran.  Cumulative costs associated with the acquisition and integration of AirTran, as of March 31, 2013, totaled $337 million (before profitsharing and taxes).  The Company expects total acquisition and integration costs to be no more than $550 million (before profitsharing and taxes). Excluding special items in the first quarters of 2013 and 2012, operating expenses were approximately $4.0 billion in both periods.

First quarter 2013 economic fuel costs, including fuel taxes, decreased 4.4 percent to $3.29 per gallon, compared to $3.44 per gallon in first quarter 2012.  The Company now has derivative contracts in place for approximately 95 percent of its estimated fuel consumption for the remainder of the year.  As of April 22nd, the fair market value of the Company’s hedge portfolio through 2017 was a net liability of approximately $151 million, compared to a net asset of $200 million at March 31st.  Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

First quarter 2013 profitsharing expense was $15 million, compared to no profitsharing expense in first quarter last year.  Excluding fuel, profitsharing, and special items in both periods, first quarter 2013 unit costs increased 2.8 percent from first quarter 2012, which was better than expected largely due to lower workers’ compensation claims, favorable airport settlements, and lower advertising expense. Based on current cost trends, the Company expects a similar year-over-year increase in its second quarter 2013 unit costs, excluding fuel, profitsharing, and special items in both periods.

Operating income for first quarter 2013 was $70 million, compared to $22 million in first quarter 2012.  Excluding special items, operating income was $112 million for first quarter 2013, compared to $10 million in first quarter 2012.

Other income for first quarter 2013 was $24 million, compared to $137 million in first quarter 2012.  This $113 million decrease primarily resulted from $46 million in gains recognized in first quarter 2013, compared to $170 million in gains in first quarter 2012.  In both periods, these gains primarily resulted from unrealized mark-to-market gains/losses associated with a portion of the Company’s fuel hedging portfolio, which are special items.  Excluding these special items, other losses were $5 million in first quarter 2013, compared to $6 million in first quarter 2012, primarily attributable to the premium costs associated with the Company’s fuel derivative contracts.  Second quarter 2013 premium costs related to fuel derivative contracts are currently estimated to be approximately $12 million, which is comparable to second quarter 2012.  Net interest expense declined to $22 million in first quarter 2013, compared to $33 million in first quarter 2012, primarily as a result of the Company’s repayment of its $385 million 6.5 percent notes in March 2012.

Net cash provided by operations was $983 million, and capital expenditures were $534 million, resulting in $449 million in free cash flow2 in first quarter 2013.  The Company repaid approximately $164 million in debt and capital lease obligations during first quarter 2013, and intends to repay approximately $149 million in debt and capital lease obligations during the remainder of the year.  As of April 23rd, the Company had approximately $3.2 billion in cash and short-term investments, and a fully available unsecured revolving credit line of $1 billion.

The Company’s return on invested capital (before taxes and excluding special items) was approximately 8 percent for the twelve months ended March 31, 2013.  Additional information regarding pre-tax return on invested capital is included in the accompanying reconciliation tables.

Southwest Airlines Awards and Recognitions

  • Named seventh Most Admired Company in the world by FORTUNE Magazine
  • Recognized as the top travel brand and fifth overall brand by The Business Journals in the American Brand Excellence Awards
  • Named Domestic Carrier of the Year by the Airforwarders Association
  • Named to the Airline of the Year list by the Express Delivery and Logistics Association
  • Awarded the Air Cargo Excellence Diamond Award by Air Cargo World
  • Named number one in Customer Service by the 2013 Airline Quality Ratings
  • Recognized as one of the 2013 100 Best Corporate Citizens by CR Magazine
  • Awarded the Grassroots Innovation Award for the Free Hobby Campaign by the Public Affairs Council

Copyright Photo: Brian McDonough/AirlinersGallery.com. Boeing 737-7H4 WL N240WN (msn 32503) with “Live in the Vineyard” promotional decal arrives at Baltimore/Washington.

Southwest Airlines: AG Slide Show

Myanma Airways to lease two Embraer ERJ 190s from GECAS

Myanma Airways (formerly Burma Airways and Union of Burma Airways) (Yangon), as the flag carrier of Myanmar, will acquired two Embraer ERJ 190s under a lease agreement with GE Capital Aviation Services (GECAS), the commercial aircraft leasing and financing arm of GE.  The aircraft are the first modern 100-seater jets to be introduced in the country. The E190s will be delivered in November and December 2012.

Each E190 is configured with 100 seats in a single class layout. The two E-Jets are part of the airline’s fleet modernization plan. In addition to deployment on domestic routes, the E190’s 2,400 nm (4.448 km) range gives Myanma Airways the capability to fly to new Asian destinations as the flag-carrier of Myanmar.

At the end of 2012, the airline will launch international flights as the national flag carrier of Myanmar.

Image: Embraer.

Philippine Airlines orders 54 Airbus aircraft

Philippine Airlines (Philippines) (PAL) (Manila) has placed a firm order with Airbus covering 34 A321ceo, 10 A321neo and 10 A330-300s. The aircraft are being purchased under a major fleet modernization programme at the airline, with deliveries starting in 2013.

The single aisle A321 aircraft are being purchased to enhance the airline’s product offerings on domestic and regional routes, as well as to support alliances with its partner airlines. The widebody A330s will be operated on higher demand regional routes and longer range services to the Middle East and Australia. PAL will announce engine selections for all the aircraft at a later date.

Image: Airbus.

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