Sky Talk

Southwest increases quarterly dividend, restructures contract with Boeing

At its annual shareholder meeting on Wednesday, Southwest Airlines announced it has increased its quarterly dividend to 4 cents per share, up from a penny.

The board of directors increased the carrier's share repurchase authorization from $1 billion to $1.5 billion. Since Southwest began buying back its stock in 2011 the company has repurchased $725 million in shares, reducing its outstanding shares by 10 percent, said Southwest chief executive Gary Kelly.

Southwest also announced it is restructuring its aircraft purchase contract with Boeing, deferring several options until after 2019 when it can get the Boeing 737MAX-7 aircraft.

The Dallas-based carrier has converted five Boeing 737-700 firm order into 737-800s, exercised five options for 737-800s and relinquished five purchase options in 2014. It has also relinquished five purchase options in 2015.

Southwest has agreed to buy ten pre-owned Boeing 737-700s for delivery in 2014 and 2015 and has deferred 41 737 next-generation aircraft options from 2014 to 2018 and converted them into 737MAX options to beyond 2024. An additional 20 Boeing 737 next-generation firm orders in 2017 and 2018 were converted into 737MAX firm orders in 2019 through 2021.

Kelly said the changes will save the carrier more than $500 million in capital spending for firm orders over the next five years and has pushed $2 billion in optional aircraft spending beyond 2017.

"We believe we have ample opportunities to maintain our fleet and also to grow our in service fleet in 2015 and beyond should the right opportunities arise," Kelly said.

-Andrea Ahles

Southwest wins DOT approval for slots at Reagan National

Southwest Airlines received approval from the Department of Transportation to operate new service between Washington's Reagan National airport and Houston's Hobby airport.

The slot exemptions became available when Spirit Airlines stopped using its slots for flights between Reagan National and Fort Lauderdale.

"Southwest's service will provide air travelers with a new, low-cost option when they fly between Reagan National and Houston," said Transportation Secretary Ray LaHood in a statement.

Southwest beat out US Airways and JetBlue Airways who had also applied for permission to use the slots. US Airways had proposed service to Oklahoma City while JetBlue wanted to start service to Jacksonville, Fla.

Southwest will have to begin its new service to Houston by August 5, according to the DOT ruling.

-Andrea Ahles

 

Southwest says passenger traffic grew 1.5 percent in April

Southwest Airlines said passenger traffic rose 1.5 percent in April as the Dallas-based carrier increased capacity by 4.1 percent.

Its load factor dropped 2 percentage points to 77.8 percent in April. Unit revenues also declined in the four to five percent range, the carrier said.

-Andrea Ahles

DOT fines Southwest $150,000 for late responses to customer complaints

The Transportation Department fined Southwest Airlines $150,000 on Wednesday, saying the Dallas-based carrier was not responding to consumer complaints in a "timely manner."

The DOT found that Southwest did not respond to a large number of disability-related complaints received from June 2011 through January 2012. There was a problem with the carrier's website and when responses were sent it did not contain information that the DOT requires, the agency said.

"When airlines receive complaints from passengers, we expect them to provide prompt responses that appropriately answer the specific complaints," Transportation Secretary Ray LaHood said in a statement.

Southwest spokesman Brad Hawkins said the carrier learned of a technical glitch that unintentionally rerouted customer complaints. Following the issue, Southwest put in safe-guards to ensure similar website errors would not occur in the future.

"In this situation, Southwest refunded the full ticket amount of every customer affected," Hawkins said.

-Andrea Ahles

Southwest posts $59 million first quarter profit

Southwest Airlines reported a $59 million profit in the first quarter, down 40 percent from the same period last year.

Higher fares helped boost the Dallas-based carrier's revenues up 2.3 percent to $4.08 billion in the first quarter even as the airline kept its capacity relatively flat, up only 0.6 percent.

"While we are cautious about April trends and the potential effects from government sequestration, recent bookings for May and June have been solid, and lower fuel prices have roughly offset the revenues weakness thus far in April," said Southwest chief executive Gary Kelly.

Fuel costs dropped 4.4 percent to $3.29 per gallon, compared to $3.44 per gallon in the first quarter of 2012. It expects fuel costs to continue to decline and be in the range of $3.00 to $3.05 per gallon in the second quarter.

Excluding one-time accounting charges, which included gains from its fuel hedging portfolio, Southwest's net income was $53 million, or 7 cents per share, beating Wall Street analysts' estimates of 2 cents per share, according to First Call.

The carrier also announced it will implement its new "no show" policy starting on fares purchased after May 10, for travel on or after September 13. If a passenger, who purchased a cheaper, nonrefundable ticket that Southwest calls Wanna Get Away and Ding fares, does not show up for their flight, they will lose the value of the unused part of their ticket itinerary and the rest of the reservation will be cancelled.

Southwest does not charge for the first two checked bags but has implemented several other fees recently including charging for early boarding at the gate.

-Andrea Ahles

 

Southwest CEO Kelly receives $4 million in executive compensation for 2012

Southwest Airlines chief executive Gary Kelly received $4.031 million in salary, bonus and stock awards for his compensation in 2012, up 15 percent from the year before.

Kelly's compensation, revealed in a Securities and Exchange Commission filing, includes a $675,000 salary and a $961,000 cash bonus. Most of his compensation game in stock awards which are valued at $2.25 million.

He also received $129,802 in other compensation including for travel benefits, home security and 401(k) plan contributions.

Chief operating officer Michael Van de Ven received the second-highest compensation among Southwest executives with $2.22 million. Chief financial officer Tammy Romo, who was promoted last year, received $1 million.

-Andrea Ahles

Southwest says passenger traffic rose 4.0 percent in March

Southwest Airlines said its passenger traffic grew 4.0 percent in March as the Dallas-based carrier increased its capacity by 3.8 percent.

Its load factor also rose 0.2 percentage points to 82.0 percent.

However, Southwest said it expects its unit revenues to be about flat compared to March 2013.

-Andrea Ahles

Southwest gets new $1 billion credit line

Southwest Airlines said Thursday that it has received a five-year, $1 billion revolving credit facility from a group of banks.

According to a filing with the Securities and Exchange Commission, the banks supplying the credit include JPMorgan Chase, Citibank, Bank of America, Barclays, Deutsche Bank, Goldman Sachs and Wells Fargo.

-Andrea Ahles

Southwest ground workers picket outside Dallas Love Field

 

Photo provided by TWU Local 555

Southwest Airlines ground workers picketed Dallas Love Field on Thursday afternoon as the union continues to negotiate a new contract with the carrier.

The Transport Workers Union Local 555 has been in talks with Southwest since July 2011 but the two sides have been unable to reach a deal as the Dallas-based airline has proposed outsourcing jobs, increasing part-time workers and reducing medical benefits.

"We simply can’t understand why management would compromise our tradition of excellence by making demands at the bargaining table to outsource our work, cut into our sick days, and make it harder for our members to be on the job," said TWU Local 555 president Charles Cerf in a statement. "If we’re not there, who is going to provide our passengers with the quality of service they have come to expect at Southwest?"

Local 555 represents 9,400 ground crew workers at Southwest. Both parties filed for federal mediation last fall as contract talks stalled between union and company negotiators.

The picketing at Dallas Love Field was part of the union's national campaign to raise awareness about its contract talks. The union also picketed at 15 other airports across the U.S.

UPDATE: Southwest issued this statement on Thursday afternoon.

"Southwest Airlines is aware that some of our Ramp and Operations Employees are participating in informational picketing—this is often times part of the negotiating process. We have always supported, and will continue to support, our Employees’ right to express themselves.

"Southwest will continue to actively participate in negotiations as we make every effort to reach agreements with our unions that are rewarding, flexible, and secure; ones that provide wage and benefit levels that are fair to Employees, allow Southwest to be competitive, and ensure our long-term success."

-Andrea Ahles

Delta carried the most passengers in 2012, BTS says

Delta Airlines carried the most passengers last year of any U.S. airline, according to a new report released on Tuesday.

However, Southwest Airlines had the most domestic passengers, more than any other carrier, the Bureau of Transportation Statistics said.

As an industry, U.S. airlines carried 0.8 percent more passengers in 2012 for a total of 736.6 million. Airlines carried 642.2 million passengers domestically, up 0.6 percent from the previous year while they carried 94.4 million passengers internationally, up 2.0 percent from 2011.

According to the BTS numbers, Fort Worth-based American Airlines ranked fourth. Third-place United Continental, which had several operational problems with its merger integration last spring, carried 3.4 percent fewer passengers in 2012.

The top three airports all increased their enplaned passenger numbers including third-ranked Dallas/Fort Worth Airport which had 1.6 percent more passengers for 27.5 million. Atlanta retained the top spot with 45.1 million passengers, up 3.2 percent while Chicago O'Hare had 29.9 million enplaned passengers.

Rank	Carrier	2012 Enplaned Passengers	2011 Enplaned Passengers	Pct. Change
1	Delta	116.445	113.485	2.6
2	Southwest**	112.234	110.587	1.5
3	UA/CO Combined***	92.367	95.611	-3.4
	United***	92.367	50.474	NA
	Continental	-	45.138	NA
4	American	86.335	86.042	0.3
5	US Airways	54.238	52.921	2.5
6	EV/XE Combined****	32.376	30.412	6.5
	ExpressJet****	32.376	16.194	NA
	Atlantic Southeast	-	14.218	NA
7	JetBlue	28.934	26.353	9.8
8	SkyWest	26.163	24.408	7.2
9	AirTran	21.745	24.596	-11.6
10	American Eagle	18.731	17.348	8.0

 

-Andrea Ahles