SWA in the black for 39th year in 2011, despite profit dip

Southwest Airlines (SWA) reported 2011 net income of $178 million, down 61.2% from a net profit of $459 million in 2010. The Dallas-based low-cost carrier attributed the profit decline to "significantly higher fuel prices," but noted that its revenue performance was strong and 2011 marked its 39th year of profitability in a row. 

"We had an outstanding revenue performance," chairman, president and CEO Gary Kelly said in a statement. "Our fourth-quarter operating revenues were a record $4.1 billion. Fourth-quarter passenger revenues were strong, driven by record yields and continued high load factors … Based on current traffic and booking trends, we expect another strong passenger revenue performance in first quarter of 2012."   

SWA posted a 12.7% year-over-year revenue increase in 2011 (on a combined pro forma basis that includes AirTran Airways' 2010 results) to $16.6 billion. Expenses heightened 17.3% to $15.93 billion driven by a 35% leap in fuel costs to $6.01 billion. Pro forma 2011 operating income was $662 million, down 41.9%.

Kelly told analysts and reporters Thursday that SWA had "very strong revenue growth, but not quite enough to completely offset" high fuel costs and avoid a profit dip last year.

Traffic in 2011 increased 2.4% year-over-year on a pro forma basis to 110.15 billion RPMs on a 3.3% rise in capacity to 135.27 billion ASMs, producing a load factor of 80.8%, up 1.1 points. Passenger yield heightened 6.4% to 14.97 cents. "We have no plans to grow the fleet … in 2012," Kelly said. "Our network plans in that respect are conservative and are aimed at boosting unit revenue." SWA/AirTran combined capacity in 2012 will be flat compared to 2011, he said. SWA will take delivery of its first two 737-800s in March. It will receive 33 -800s by the end of this year, but will also retire 40 older 737s in 2012.

SWA acquired AirTran last year. Kelly indicated FAA is likely to grant the carriers a single operating certificate in March. "At that point the visible transformation of AirTran can begin," he said, noting there will be "big schedule changes occurring within" AirTran's network throughout the year. The airlines have already co-located facilities at 22 airports and consolidated their maintenance operations in Orlando and Baltimore.