Southwest Airlines reports first quarter loss

Southwest Airlines has reported a first quarter 2009 net loss of $91 million, compared to net income of $34 million, for first quarter 2008.

First quarter 2009 results included special charges totalling $71 million (net), relating to non-cash, mark-to-market and other items associated with a portion of the company's fuel hedge portfolio.

Operating loss for 1Q09 was $50 million compared to operating income of $88 million in first 1Q08. Excluding special items, operating income was $31 million in 1Q09 compared to $99 million for the same period last year.

Total operating revenues for 1Q09 decreased 6.8% to $2.4 billion, compared to $2.5 billion for 1Q08. Total 1Q09 operating expenses were $2.4 billion, in line with first quarter 2008.

"Other expenses" were $57 million for 1Q09, compared to $51 million for 1Q08. In both periods, "other losses" included unrealised gains/losses associated with the airline’s fuel hedging programme. The cost of the hedging programme (which includes the premium costs of derivative contracts) of $32 million in first quarter 2009 and $14 million in first quarter 2008 is also included in "other (gains) losses."

During 1Q09, the company closed on the second five aircraft tranche of the sale and leaseback transaction entered into at the end of 2008 for ten Boeing 737-700s. Including the $173 million in proceeds from this transaction and net of the $300 million the company posted in cash collateral with a counterparty at 31 March 2009, the company ended the quarter with $2.1 billion in unrestricted cash and short-term investments.

Southwest’s CEO Gary Kelly commented, "Our first quarter 2009 financial results are disappointing, but not surprising given the current economic environment. We face the toughest revenue environment in our history. A rapid weakening in passenger demand during the first quarter, particularly among business travellers, led to our first quarter net loss. Although competitively strong and financially resilient, we are not immune to the challenges the worldwide recession is having on air travel.

"Still, I am very proud of the efforts of our people. Our operations and customer service delivery continues to be outstanding. Our revenue trends continue to outperform our US competitors. These revenue results demonstrate the strength of our low fare brand, the benefits of our aggressive flight schedule optimisation, and the effectiveness of our marketing and revenue management efforts.

"Our recent promotions and discounting activities have been successful in stimulating traffic. Our first quarter 2009 load factor of 69.9% was a record first quarter performance, despite the impact of Easter shifting to April this year versus March last year. However, yields were down 2.8% from a year ago, resulting in a unit revenue decline of 2.9%. Although our April results should benefit from the timing of the Easter holiday, we currently expect another year-over-year decline in our second quarter 2009 operating unit revenues, based on revenue and booking trends thus far."