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Thursday, January 21, 2016

Southwest Sees Big 2015 Profits from Fleet Modernization, Lower Fuel Prices

Juliet Van Wagenen

Southwest Airlines has seen record profits as a result of lower fuel prices and fleet modernization efforts
Southwest Airlines has seen record profits as a result of lower fuel prices and fleet modernization efforts. Photo: Southwest

[Avionics Today 01-21-2016] Southwest Airlines has reported a yearly annual net income of $2.4 billion, compared to $1.4 billion in 2014. The company also reported fourth quarter income income of $591 million compared with fourth quarter 2014 net income of $404 million.

“We generated strong free cash flow of $1.1 billion in 2015, allowing us to return $1.4 billion to Shareholders. Based on our current outlook, we expect strong free cash flow to continue in 2016,” Southwest Chairman of the Board, President, and Chief Executive Officer Gary C. Kelly, said. "On the cost side, we continue to benefit from significantly lower jet fuel prices and our fleet modernization. Excluding special items, fourth quarter unit costs declined 6.9 percent year-over-year. As expected, our annual 2015 economic fuel costs were $1.3 billion lower than 2014. With energy prices near 12-year lows, and assuming current market prices, we are expecting another significant year-over-year decline in economic fuel costs in 2016.”

Southwest ended 2015 with 704 aircraft in its fleet including the delivery of 19 new Boeing 737-800s and 24 pre-owned Boeing 737-700s, as well as the retirement of four Boeing 737 classic aircraft during the year. At the end of December 2015, the company revised its future firm delivery schedule to reflect 33 additional 737-800s, and the conversion of its remaining 25 -700 firm orders to 737-800s. In addition, two pre-owned 737-700s were added to its delivery schedule.

The company continues to plan for modest year-over-year fleet growth through 2018 of no more than two percent, on average and plans to further accelerate the retirement of its classic fleet to no later than mid-2018, as compared to the previous plan of 2021. The revised delivery schedule is currently estimated to increase the company's firm aircraft capital commitments by $400 million beyond 2015 by replacing older aircraft with more efficient and cost effective models.

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