Southwest Airlines 1997 Annual Report Download - page 31

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31
SOUTHWEST AIRLINES CO. ♥ FIVE SYMBOLS OF FREEDOM
In December 1995, because of the impasse in the federal budget, Congress allowed
the ten percent federal excise tax to lapse. This benefited Southwest’s revenues until
late August 1996 when Congress reimposed the tax through December 31, 1996. The
reimposition of the excise tax negatively impacted Revenue trends in third and fourth
quarters 1996, as compared to revenue trends in the first half of 1996.
In celebration of the Company’s 25th Anniversary, Southwest launched a fare sale in
July 1996 for travel between August 19 and October 31, 1996. The sale was extremely
popular and resulted in record advance bookings, with more than four and a half million
seats sold. Although July and early August load factors and revenues were negatively
impacted by telephone line congestion experienced during the sale, revenues for
September and October 1996 were positively impacted with very heavy passenger
volumes.
Freight revenues in 1996 were $80.0 million, compared to $65.8 million in 1995. The
21.5 percent increase in freight revenues exceeded the 12.6 percent increase in ASMs
for the same period primarily due to increased air freight volumes and United States
mail services.
Other revenues increased by 23.3 percent in 1996 to $56.9 million, compared to
$46.2 million in 1995. This increase primarily was due to increased charter revenue.
OPERATING EXPENSES Consolidated operating expenses for 1996 were $3,055.3
million, compared to $2,559.2 million in 1995, an increase of 19.4 percent, compared to
the 12.6 percent increase in capacity. Operating expenses per ASM increased 6.1
percent in 1996 compared to 1995, primarily due to significantly higher jet fuel prices
along with a 4.3 cent per gallon federal jet fuel tax implemented October 1, 1995.
Excluding jet fuel costs and related taxes, operating expenses per ASM were up 3.1
percent in 1996 compared to 1995.
Salaries, wages, and benefits per ASM increased 2.3 percent in 1996. This increase
resulted primarily from a 16.2 percent increase in 1996 average headcount, which
outpaced the 1996 capacity (ASM) increase of 12.6 percent, and offset a .8 percent
decrease in average salary and benefits cost per Employee. The 16.2 percent increase
in average headcount primarily was the result of a 24.3 percent increase in
Reservations Sales Agents in 1996. Excluding Reservations Sales Agents, total
average headcount increased 13.1 percent, in line with capacity.
Fuel and oil expenses per ASM increased 17.8 percent in 1996, primarily due to an
18.6 percent increase in the average jet fuel cost per gallon from 1995. The average
price paid for jet fuel in 1996 was $.6547 compared to $.5522 in 1995. During fourth
quarter 1996, the average cost per gallon increased 25.0 percent to $.7323 compared
to $.5859 in fourth quarter 1995.
Maintenance materials and repairs per ASM increased 3.3 percent in 1996, compared
to 1995, primarily as a result of increased scheduled airframe inspections during 1996.
Agency commissions per ASM increased 2.9 percent in 1996, compared to 1995,
which was slightly slower than the 5.2 percent increase in passenger revenues per
ASM.