Southwest Airlines Reports First Quarter Results

DALLAS , April 16 /PRNewswire-FirstCall/ -- Southwest Airlines (NYSE: LUV) today reported a first quarter 2009 net loss of $91 million, or $.12 loss per diluted share, compared to net income of $34 million, or $.05 per diluted share, for first quarter 2008. First quarter 2009 results included special charges totaling $71 million (net), relating to non-cash, mark-to-market and other items associated with a portion of the Company's fuel hedge portfolio. Refer to the reconciliation in the accompanying tables for further information regarding special items. Excluding special items, first quarter 2009 net loss was $20 million, or $.03 loss per diluted share, compared to net income of $43 million, or $.06 per diluted share, in first quarter 2008. The first quarter 2009 results, excluding special items, of $.03 loss per diluted share compares to Thomson's First Call mean estimate of $.01 loss per diluted share. Operating loss for first quarter 2009 was $50 million compared to operating income of $88 million in first quarter 2008. Excluding special items, operating income was $31 million in first quarter 2009 compared to $99 million for the same period last year.

First Quarter 2009 Financial Highlights:

Gary C. Kelly , CEO, stated: "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 first quarter, particularly among business travelers, 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 U.S. competitors. These revenue results demonstrate the strength of our Low Fare brand, the benefits of our aggressive flight schedule optimization, and the effectiveness of our Marketing and Revenue Management efforts.

"We have acted to reduce our spending, but also maintain our intense focus on previously announced initiatives to grow revenues. We plan to follow through with the investment in and construction of these strategic revenue initiatives that we believe are vital to our future. However, overall, we have significantly reduced planned capital spending by approximately $1.4 billion for 2009 and 2010 combined by deferring aircraft deliveries, accelerating aircraft retirements, and suspending plans to grow our capacity. As announced to our Employees earlier this morning, we intend to reduce and align headcount to current capacity needs by offering a systemwide voluntary early-out program. Virtually all Employees are eligible under the early-out program and must make their election to participate by June 19, 2009 . We also have a hiring freeze in place and have frozen pay for our officers and senior management. While our balance sheet is strong, we believe these actions, along with our previous decision to suspend growth plans, and our ongoing efforts to bolster our cash reserves, will enable us to weather the current financial storm and remain strong.

"Our recent promotions and discounting activities have been successful in stimulating traffic. Our first quarter 2009 load factor of 69.9 percent was a record first quarter performance, despite the impact of Easter shifting to April this year versus March last year. We continue to enhance our strong brand, Customer Experience, and traffic through our No Hidden Fees campaign. However, yields were down 2.8 percent from a year ago, resulting in a unit revenue decline of 2.9 percent. 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.