Southwest Airlines 1996 Annual Report Download - page 28

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28
Aircraft rentals per ASM increased 11.9 percent in 1995. The increase primarily resulted
from second and third quarter 1995 sale/leaseback transactions involving ten new 737-300
aircraft and a higher percentage of the fleet consisting of leased aircraft.
Other operating expenses per ASM decreased 2.8 percent in 1995 compared to 1994.
This decrease was primarily due to operating efficiencies resulting from the transition of Morris
operating functions to Southwest commencing first quarter 1994, and lower communications
costs. Communications costs decreased approximately 15 percent per ASM primarily due to
lower negotiated rates, increased reservations operations efficiencies, and enhancements to the
Company’s ticket delivery system.
In August 1993, the Revenue Reconciliation Act of 1993 was enacted, which, among
other things, included an assessment of a 4.3 cents per gallon tax on commercial aviation jet fuel
purchased for use in domestic operations, which became effective September 30, 1995. This
additional fuel tax increased 1995 “ other operating expenses” by $7.4 million.
OTHER
“Other expenses (income)” included interest expense, capitalized interest, interest
income, and nonoperating gains and losses. Interest expense increased $5.4 million in 1995 due
to the March 1995 issuance of $100 million senior unsecured 8% Notes due 2005. Capitalized
interest increased $5.0 million in 1995 as a result of higher levels of progress payments on
aircraft compared to 1994. Interest income for 1995 increased $10.9 million primarily due to
higher invested cash balances and higher short-term interest rates.
INCOME TAXES
The provision for income taxes as a percentage of income before taxes was relatively
unchanged year-over-year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations was $615.2 million in 1996, compared to $456.4 million
in 1995. During 1996, additional funds of $330.0 million were generated from the sale and
leaseback of ten new 737-300 aircraft subject to long-term operating leases (increasing total
commitments for operating leases by $588.8 million).