Southwest Airlines 1994 Annual Report Download - page 18

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Management's Discussion and Analysis of Financial Condition and Results of Operations
Southwest Airlines – 1994 Annual Report Page 18
Results Of Operations
1994 COMPARED WITH 1993 The Company's consolidated net income for 1994 was $179.3 million
($1.22 per share), as compared to the corresponding 1993 amount (before the cumulative effect of
accounting changes) of $154.3 million ($1.05 per share), an increase of 16.2 percent. The increase in
earnings was primarily attributable to an increase in operating income of 8.5 percent and a decrease in
other expenses (nonoperating) of 46.9 percent.
OPERATING REVENUES Consolidated operating revenues increased by 12.9 percent in 1994 to $2,591.9
million, compared to $2,296.7 million for 1993. This increase in 1994 operating revenues was derived
from a 12.7 percent increase in passenger revenues. Revenue passenger miles (RPMs) increased 14.8
percent in 1994, compared to a 16.8 percent increase in available seat miles (ASMs), resulting in a
decrease in load factor from 68.4 percent in 1993 to 67.3 percent in 1994. The 1994 ASM growth resulted
from the addition of 21 aircraft during 1994.
Freight revenues in 1994 were $54.4 million, compared to $42.9 million in 1993. The 26.9 percent
increase in freight revenues exceeded the 16.8 percent increase in ASMs for the same period primarily
due to increased air freight volumes and United States mail services.
OPERATING EXPENSES Consolidated operating expenses for 1994 were $2,275.2 million, compared to
$2,004.7 million in 1993, an increase of 13.5 percent, compared to the 16.8 percent increase in ASMs. On
a per-ASM basis, operating expenses (excluding 1993 merger expenses) decreased 2.3 percent in 1994.
The primary factors contributing to this decrease were an 8.8 percent decrease in average jet fuel cost per
gallon and lower agency commission costs, offset by increased aircraft rentals.
Operating expenses per ASM for 1994 and 1993 (excluding 1993 merger expenses) were as follows:
Operating expenses per ASM 1994 1993
Increase
(decrease)
Percent
change
Salaries, wages, and benefits 2.13¢ 2.12¢ .01¢ 0.5%
Profitsharing and Employee savings plans .22 .21 .01 4.8
Fuel and oil 1.00 1.11 (.11) (9.9)
Maintenance materials and repairs .59 .59 - -
Agency commissions .47 .53 (.06) (11.3)
Aircraft rentals .42 .39 .03 7.7
Landing fees and other rentals .46 .47 (.01) (2.1)
Depreciation .43 .44 (.01) (2.3)
Other 1.36 1.39 (.03) (2.2)
Total 7.08¢ 7.25¢
(.17)¢
(2.3)%