Southwest Soars Despite Upsetting Sales Due To Government Shutdown

Southwest Airlines

Southwest Airlines Co., (LUV: NYSE)

Shares of Southwest Airlines gained 6% on Thursday after the air carrier posted better-than-expected results for its fourth quarter. However, the airline lost about $10 million to $15 million due to the ongoing government shutdown. The Dallas-based company expressed concerns that the shutdown was affecting its plan of launching service to Hawaii as it has to get approval from the federal government.

Last week, rival Delta Airlines said that the shutdown will cost it approximately $25 million in January. Southwest Airlines issued upbeat revenue outlook for the first quarter thanks to resilient overall travel demand.

LUV Earnings & Forecast

Southwest Airlines said it had net income of $654 million, or $1.17 per share, down from $1.7 billion, or $2.94 per share, in the year-earlier period. Adjusted for things such as stock-based compensation and changes in the U.S. tax code, earnings were $1.17 a share compared with $0.77 in the year-ago quarter.

Revenue rose to $5.70 billion from $5.27 billion in the year-ago period. Analysts surveyed by Refinitiv expected earnings of $1.07 per share on revenue of $5.67 billion. Passenger revenue grew 8.6% to $5.32 billion topping consensus estimate of $5.27 billion. Load factor declined 1.5 points to 83.5% missing expectations of 84.4%. Passenger revenue yield rose 3.7% while revenue per available seat mile climbed 1.8%.

Operating expenses per available seat mile grew 1.5% mainly due to increased jet fuel prices. South West Airlines projects first quarter revenue per available seat mile increase of 4% to 5%.

Southwest Airlines CEO Comments

Southwest Airlines Chief Executive Gary C. Kelly, stated, “2018 was an incredible year of resilience and achievement. We finished the year strong, with record fourth quarter net income and earnings per diluted share, excluding special items. This was driven by strong yields, record revenues, and a solid cost performance.”

“Hawaii remains our expansion focus for 2019, and we are in the final phase of obtaining authorization from the Federal Aviation Administration (FAA) for Extended Operations (ETOPS) to operate between California and the Hawaiian Islands. Our remaining work is currently suspended until the government reopens and the FAA is allowed to resume normal certification activities. We are anxious for the government to resolve this shutdown so we can bring low fares and a boost to Hawaii’s travel and tourism industry,” added Kelly.

Southwest Airlines Profile

Southwest Airlines Co. engages in the management of a passenger airline. It operates in U.S. states, District of Columbia, the Commonwealth of Puerto Rico, Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.

The company was founded by Rollin W. King and Herbert D. Kelleher on March 15, 1967 and is headquartered in Dallas, Texas. Southwest Airlines competes with United Continental Holdings, Delta Air Lines, Ryanair. – CNN Money