Southwest Airlines Q3 Profit Down a Third

Southwest Airlines reported third quarter net income of USD$388 million, a drop of a third on the previous year.

Southwest said the 33.6 percent drop was partly due to a revenue adjustment of USD$172 million because of a change to its co-branded credit card agreement with Chase Bank, and a resulting change in accounting methodology. A computer outage in July also caused a USD$55 million reduction in third quarter 2016 revenue, the airline said.

Total operating revenue for the quarter was USD$5.15 billion, down 3.4 percent from the prior year period. Operating expenses came in 8.6 percent higher at USD$4.44 billion.

Unit revenue (per available seat mile) was down 4.1 percent at 13.57 cents, while unit costs (per available seat mile) were up 4.2 percent at 11.73 cents. Capacity (in available seat miles) rose 4.2 percent in the quarter.

Load factor dropped 0.1 percentage points to 85.3 percent.

Looking forward, the airline said that “the overall revenue yield environment remains soft. Based on these trends, the shift in holiday timing, and bookings thus far, the company expects fourth quarter 2016 RASM to decline in the 4 to 5 percent range, compared with fourth quarter 2015 RASM.”

Chief executive Gary Kelly said "We will continue to manage our growth prudently in light of the revenue environment and increasing fuel prices. We plan to slow our 2017 available seat mile growth rate to less than 4.0 percent, year-over-year, with approximately 2.0 points of the increase relating to domestic growth."