Southwest Airlines 1998 Annual Report Download - page 26

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26
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
Also during 1998, the Company’s Customer Service and Reservations Sales Agents,
represented by the International Association of Machinists and Aerospace Workers,
AFL-CIO, and Flight Dispatchers, represented by the Southwest Airlines Employees
Association, ratified collective bargaining agreements which will run through the years
2002 and 2009, respectively. In addition, in September 1998, the Company’s pilots
voted to continue their ten-year agreement with the Company which next becomes
amendable in 2004.
RESULTS OF OPERATIONS
1998 COMPARED WITH 1997 The Company’s consolidated net income for 1998 was
$433.4 million ($1.23 per share, diluted), as compared to the corresponding 1997
amount of $317.8 million ($.93 per share, diluted), an increase of 36.4 percent. The
prior years’ earnings per share amounts have been restated for the 1998 three-for-two
stock split (see Note 7 to the Consolidated Financial Statements).
OPERATING REVENUES Consolidated operating revenues increased by 9.1 percent
in 1998 to $4,164.0 million, compared to $3,816.8 million for 1997. This increase in
1998 operating revenues was derived primarily from an 8.9 percent increase in
passenger revenues as a result of a 10.8 percent increase in revenue passenger miles
(RPMs) offset by a 1.7 percent decrease in passenger revenue yield per RPM. While
Southwest’s passenger revenues increased 8.9 percent in 1998, the RPM yield decline
resulted from the higher load factors, a 6.0 percent increase in passenger trip lengths,
and higher federal excise taxes on domestic tickets. Assuming load factors and
passenger trip lengths continue to be above year-ago levels, RPM yields will continue
this trend. (The immediately preceding sentence is a forward-looking statement which
involves uncertainties that could result in actual results differing materially from
expected results. Such uncertainties include, but may not be limited to, competitive
responses from other air carriers and general economic conditions.)