Southwest Q4 Profit Drops But 2016 A Record Year

Southwest Airlines posted fourth quarter net income of USD$522 million, a 2.6 percent drop from the previous year.

Operating revenue for the quarter to end December was $5.08 billion, a 2 percent increase, but expenses rose 7.1 percent to $4.23 billion.

For the full year, Southwest reported a net profit of $2.24 billion, a 2.9 percent increase over 2015.

Revenue for 2016 was up 3.1 percent over 2015 at $20.42 billion, while expenses of $16.66 billion was a 6.1 percent increase on the previous year. The resulting operating profit of $3.76 billion was down from 2015’s $4.12 billion.

Passenger traffic (in revenue passenger miles - RPM) was up 6.2 percent on a capacity increase (available seat miles - ASM) of 5.7 percent. The resulting load factor of 84 percent was up 0.4 of a percentage point from 2015.

“We are delighted to report record annual profits for 2016, our 44th consecutive year of profitability, chief executive Gary Kelly said in a statement. “We carried a record number of customers while improving our on-time performance, baggage delivery rate, and net promoter score.”

Kelly said fourth quarter unit costs increased, due to higher fuel costs, pay increases, and depreciation expenses from the accelerated retirement of Boeing 737-300s. The airline expects to retire the last of its 737-300 fleet this year.

Southwest expects 1Q17 operating unit revenues will be flat to down one percent on the same period of 2016.