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Southwest Airlines Reports Strong Performance

July 30, 2010 By: George Dooley

Southwest Airlines has reported second quarter 2010 net income of $112 million compared to net income of $91 million for the second quarter of 2009. Both years' results included special items related to non-cash, mark-to-market, and other items associated with a portion of the company's fuel hedge portfolio. The airline said although business demand has not fully recovered, it has strengthened, and consumer travel demand is robust.

Excluding special items for both periods, second quarter 2010 net income was $216 million compared to $59 million for second quarter 2009. The results exceeded the expectations of some analysts, Southwest said.

"Total operating revenues reached an all-time quarterly record of $3.2 billion, a year-over-year increase of 21 percent,"  Gary C. Kelly, chairman, president and CEO said. "On a unit basis, our revenues increased approximately 22 percent, compared to second quarter last year, also an all-time quarterly record. Second quarter pretax margin (excluding special items) was 11 percent. Our second quarter 2010 earnings performance (excluding special items) was second-best in our history, behind second quarter 2006. This was, indeed, a strong performance, despite significantly higher fuel prices and other cost pressures."

"We have made excellent progress toward generating revenue levels sufficient to reach our 15 percent pretax return on invested capital target. Although business demand has not fully recovered, it has strengthened, and consumer travel demand is robust. We experienced record traffic levels during the quarter, despite flat year-over-year capacity, demonstrating a continuing and significant market share shift to Southwest, in part due to our unique and successful 'Bags Fly Free' policy. Further, we led the industry with our year-over-year domestic passenger revenue and corresponding unit revenue performance,” Kelly said.

"We are very pleased with the Customer response to our service to Panama City Beach, which commenced on May 24, 2010 with eight daily nonstop departures to four cities: Nashville, Houston Hobby, Orlando, and Baltimore/Washington," stated Kelly. "During the quarter, we also celebrated the one-year anniversary of our successful introduction of the Southwest brand to the New York market out of LaGuardia, and we announced our intent to serve South Carolina with service to Charleston and Greenville-Spartanburg in 2011,” Kelly said.



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