Southwest Airlines reports record Q4 net income

Southwest Airlines Co. (NYSE: LUV) has reported record fourth quarter net income of USD591 million, or USD.90 per diluted share, compared with fourth quarter 2014 net income of USD404 million, or USD.59 per diluted share, the airline said.

The company´s fourth quarter 2015 total operating revenues increased 7.5 percent, year-over-year, to USD5.0 billion, largely driven by fourth quarter 2015 passenger revenues of USD4.6 billion.

Operating unit revenues (RASM) decreased 0.7 percent, on an 8.3 percent increase in available seat miles, as compared with fourth quarter 2014. Based on current trends, the company expects its first quarter 2016 RASM to be in line with its first quarter 2015 RASM.

Fourth quarter 2015 total operating revenues included approximately USD125 million, recorded as a result of the amended co-branded credit card agreement with Chase during third quarter 2015 and the required change in accounting methodology.

This USD125 million net benefit reflects an approximate USD175 million increase to other revenues offset by an approximate USD50 million reduction to passenger revenues. An estimated first quarter 2016 total operating revenue benefit from the amended Chase agreement of approximately USD110 million is included in the company´s first quarter 2016 RASM outlook.

Total operating expenses in fourth quarter 2015 decreased 1.4 percent to USD4.0 billion, as compared with fourth quarter 2014. During fourth quarter 2015, the company expensed USD139 million related to union contract bonuses, which is a special item. Excluding special items in both periods, total operating expenses were USD4.0 billion in fourth quarter 2015, compared with USD3.9 billion in fourth quarter 2014.

For 2015, total operating revenues increased 6.5 percent to USD19.8 billion, which includes a USD172 million special revenue adjustment recorded in third quarter 2015 from a required change in accounting methodology as a result of the amended co-branded credit card agreement with Chase.

This special item was excluded from the company´s 2015 reported RASM. In addition, the combined impact of the amended agreement and the required change in accounting methodology benefited 2015 total operating revenues by approximately USD255 million, the impact of which was included in the company´s 2015 RASM.

Total operating expenses for 2015 were USD15.7 billion, including special charges (before profitsharing and taxes) of USD39 million associated with the acquisition and integration of AirTran and USD334 million associated with union contract bonuses. Operating income for 2015 was a record USD4.1 billion, and USD4.0 billion, excluding special items, compared with USD2.2 billion and USD2.4 billion, respectively, in 2014.

Annual net income for 2015 was USD2.2 billion, or USD3.27 per diluted share, compared with USD1.1 billion, or USD1.64 per diluted share, for the same period last year. Excluding special items, annual 2015 net income was USD2.4 billion, or USD3.52 per diluted share, compared with USD1.4 billion, or USD2.01 per diluted share, for the same period last year.