Southwest Airlines 1996 Annual Report Download - page 22

Download and view the complete annual report

Please find page 22 of the 1996 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 56

  • 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
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56

22
SOUTHWEST AIRLINES CO. 1996 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEAR IN REVIEW
Southwest and the airline industry continued to post record profits in 1996. Southwest’s
net income for the first half of 1996 benefited from the lapse in the ten percent federal ticket tax
on December 31, 1995. Net income for the second half of 1996 fell below year ago levels
primarily due to significant increases in jet fuel prices.
Southwest continued to maintain our advantage as the low cost leader in the industry.
Despite this advantage, we continue pursuing numerous cost reduction efforts, which have
proven to be beneficial.
We added 22 new Boeing 737-300 aircraft to our fleet in 1996 and retired three -200s.
Our fleet remains one of the youngest in the industry with an average age of 7.9 years. In
October 1997, we will be the launch customer for the new Boeing 737-700 aircraft. In total for
1997, we will accept delivery of 15 -300s and four -700s. We currently plan to retire four -200s
in fourth quarter 1997.
Our expansion into Florida in 1996 has been successful with strong load factors. We
added Jacksonville, Florida, service beginning January 15, 1997. Service to Providence, Rhode
Island, which began October 27, 1996, also looks promising. Our current plan for capacity
growth in 1997 will be primarily directed to cities we presently serve, either with increased
frequencies or new routings. We may begin service to one more new city later in 1997.
Proposed FAA “funding reform” continues to present uncertainty as to how or if any
changes would impact Southwest. While Congress reinstated the ten percent ticket tax in August
1996, the tax lapsed again as of December 31, 1996. At the current time, Southwest is unable to
predict how this FAA funding issue will be resolved and what impact, if any, resolution of this
uncertainty will have on future operating results.