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...

"We benefited from significantly lower year-over-year economic jet fuel costs in first quarter 2009. Even with $65 million in unfavorable cash settlements from derivative contracts, our first quarter 2009 economic jet fuel costs decreased 16.2 percent to $1.76 per gallon. With oil prices rising, we have begun to rebuild our 2009 and 2010 hedge positions, using purchased call options, to provide protection against significant fuel price spikes. These new positions present no additional exposure to cash collateral requirements. Furthermore, we have modified our major fuel hedge counterparty agreements to allow us to use collateral other than cash to limit our cash collateral exposure to comfortable levels. Based on our second quarter derivative position and market energy prices as of April 14, 2009 , we currently anticipate our second quarter 2009 economic jet fuel costs, including taxes, to be in line with first quarter 2009 (or the $1.75 per gallon range)."

The Company has derivative contracts in place for approximately 50 percent of its second quarter 2009 estimated fuel consumption, capped at a weighted average crude-equivalent price of approximately $66 per barrel; approximately 40 percent for the remainder of 2009 capped at a weighted average crude-equivalent price of approximately $71 per barrel; and approximately 30 percent in 2010 capped at a weighted average crude-equivalent price of approximately $77 per barrel. The Company has modest fuel hedge positions in 2011 through 2013. The current market value (as of April 14, 2009 ) of its net fuel derivative contracts for 2009 through 2013 reflects a net liability of approximately $950 million.

Gary Kelly stated, "Our plans to reduce staffing via our voluntary early-out program will help mitigate cost pressures next year. Our first quarter 2009 unit costs, excluding fuel, increased 8.4 percent over last year, which was in line with our expectations. We were very pleased to have reached tentative agreements with our Flight Attendants and Pilots during the quarter. In addition, our Ramp, Operations, Provisioning, and Freight Agents and our Mechanics voted to ratify their tentative agreements. These Employees demonstrated their commitment to maintain Southwest's competitive position while enabling the Company to sustain its financial strength in an increasingly tough economy. Based on these agreements and current cost trends, we expect our second quarter 2009 unit costs, excluding fuel, to be in line with first quarter 2009.

"Presently, we still plan to accept 13 new Boeing 737-700s in 2009, and retire 15 aircraft by the end of the year. Through continued focus on maximizing the efficiency and profitability of each published flight schedule, we have the ability to grow in exciting new and developing markets, such as Denver , Minneapolis-St. Paul , New York LaGuardia, and Boston Logan, while reducing our available seat miles, currently estimated to decline in the five percent range versus 2008."

The Company previously announced its service from New York LaGuardia airport to begin with five flights to Chicago Midway and three flights to Baltimore/Washington on June 28, 2009 ; and its Boston Logan service to begin on August 16, 2009 with five flights to both Chicago Midway and Baltimore/Washington.

For the thirteenth year in a row, Fortune magazine recognized Southwest Airlines in its annual survey of corporate reputations. Among all industries, Southwest Airlines was named the seventh most admired Company in the World, making it the only U.S. airline to make the list of the World's Top 50 Most Admired Companies. Institutional Investor magazine once again named Southwest Airlines as America's Most Shareholder-Friendly Airline in its survey of investors and analysts. Finally, Southwest Airlines Cargo was recently named "Airline of the Year" by the Express Delivery & Logistics Association, for the fifth consecutive year in a row, honoring its excellence in air cargo delivery service.

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