Southwest Airlines Co. | $LUV Stock | Shares Soar Despite Downbeat Q2 Earnings

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Southwest Airlines Co. (NYSE: LUV)

 

Southwest Airlines shares are up 7 percent Thursday, after the company said it expects fares and bookings to bounce back in the third quarter, several months after one its commercial flights experienced a fatal engine accident.

While announcing its second-quarter financial results, the airline said the April accident wiped $100 million off its revenue.

LUV Earnings & Outlook

The company had net income of $733 million, which amounts to $1.27 per share, down from $743 million or $1.23 per share in the year-ago period.

Adjusted for one-time items, earnings per share came to $1.26, while net sales totaled to $5.742 billion, compared with $5.731 billion in the second quarter of the previous year.

Analysts had expected the company to report adjusted earnings of $1.23 per share on earnings on net sales of $5.768 billion.

Southwest Airlines CEO Comments

Despite higher fuel prices and the expected effects from the Flight 1380 accident, we delivered solid financial results, including record earnings per share for second quarter 2018. I am especially proud of the heroic efforts of our People to address and overcome the challenges resulting from the accident,” commented Gary Kelly, Chief Executive Officer of Southwest Airlines.

“The revenue effects of the accident reduced second quarter 2018 passenger revenues by $100 million. We expect the revenue impact from this headwind to be temporary and subside in third quarter 2018 and are encouraged by the solid rebound in demand. Separately, we deployed additional revenue management tools and techniques during second quarter 2018, and we continue to expect to generate incremental improvements in pre-tax results of $200 million this year from the investment in our new reservation system. Our second half 2018 flight schedule is better optimized, and our Rapid Rewards Program and other ancillary products continue to perform very well.”

Excluding fuel, first half 2018 cost inflation was modest. We are pleased with our second quarter 2018 cost performance, which came in below expectation, mostly due to timing. We expect higher unit costs as we move into second half 2018, due largely to shifting spending from first half 2018. With the completion of major revenue initiatives over the last several years, we will refocus our efforts to control costs and drive efficiency, especially in light of higher fuel prices,” continued Kelly.

Southwest Airlines Company Profile

Southwest Airlines is a passenger airline company that engages in the provision of scheduled air transportation services.

The company operates in the United States, District of Columbia, Puerto Rico, The Bahamas, Costa Rica, Aruba, Mexico, Belize, Jamaica, Dominican Republic, Cuba, Cayman Islands, and Caicos and Turks. 

It also sells frequent flyer points to business partners participating in Rapid Rewards frequent flyer programs, such as hotels, car rental agencies, retailers, and restaurants.

Further, its provides a digital platform suite to support the needs of customers across the travel journey, including mobile.southwest.com, southwest.com, an android app, an iOS app, an email subscription service, and Swabiz.com, and push notification.

Southwest Airlines Company was founded in 1967 by Herbert D. Kelleher and Rollin W. King. Its headquarters are based in Dallas, Texas. –Reuters

 

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