Southwest Airlines 1994 Annual Report Download - page 7

Download and view the complete annual report

Please find page 7 of the 1994 Southwest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 42

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42

To Our Shareholders
Southwest Airlines – 1994 Annual Report Page 7
Our 1994 fourth quarter earnings of $20.3 million represented a 47 percent decline from the record $38.4
million of fourth quarter 1993. The principal causes for this decline were our own aggressive 30 percent
expansion in Southwest’s capacity, as roughly 20 percent of our available seat miles were devoted to
newly developing markets; Continental Airlines’ repetitive “50 percent off” sales, which both deprived us
of Customers and reduced yields per revenue passenger mile; and, to a lesser extent, the introduction of
the United Shuttle in our Oakland markets. We also experienced a technological problem with our
Reservations System, which has since been cured.
We presently expect the aftereffects of fourth quarter 1994 to persist through first quarter 1995, resulting
in reduced load factors; lower yields; and substantially reduced earnings, as compared to first quarter
1994. As our most recent fare increases begin to take effect and our penetration of our new markets
continues, we currently anticipate that our yields and load factors will begin to improve in the second
quarter of 1995, with a hoped for full recovery occurring in third quarter 1995, barring any profound
changes in the fortunes of the airline industry or of the economy. Our battle with the United Shuttle will
continue in 1995, but we expect our California operations to be profitable for the year. Excluding fuel and
profitsharing, we also are planning to reduce our 1995 operating costs per ASM below those of 1994.
In 1994, our People made an enormous investment in the future of Southwest Airlines. Only Southwest’s
People could have effectively handled so much change so successfully. While a number of other airlines
may attempt to imitate Southwest, none of them can duplicate the spirit, unity, “ can do” attitudes, and
marvelous esprit de corps of the Southwest Employees, who continually provide superb Customer Service
to each other and to the traveling public. Just as the past has belonged to Southwest because of our
People’s goodwill, dedication, and energy, so shall Southwest seize the future!
Most sincerely,
Herbert D. Kelleher
Chairman, President, and
Chief Executive Officer
February 9, 1995