Southwest Airlines 1998 Annual Report Download - page 27

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27
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
The 10.8 percent increase in RPMs in 1998 exceeded the 6.9 percent increase in
available seat miles (ASMs), resulting in an increase in load factor from 63.7 percent in
1997 to 66.1 percent in 1998. The 1998 ASM growth resulted from the net addition of
19 aircraft during the year. The load factor was 59.2 percent in January 1999, up 5.2
points from January 1998.
Freight revenues in 1998 were $98.5 million, compared to $94.8 million in 1997. The
3.9 percent increase in freight revenues fell short of the 6.9 percent increase in ASMs
for the same period. United States mail revenue declined 2.5 percent in 1998 and 9.4
percent for fourth quarter 1998 as the postal service continues to shift away from
commercial carriers. This trend is expected to continue in 1999. Other air freight
revenues increased 8.5 percent in 1998 due to increased capacity.
Other revenues increased by 22.7 percent in 1998 to $101.7 million, compared to
$82.9 million in 1997. This increase is primarily due to increased revenues from the
sale of frequent flyer segment credits to participating partners in the Company’s Rapid
Rewards frequent flyer program.
OPERATING EXPENSES Consolidated operating expenses for 1998 were $3,480.4
million, compared to $3,292.6 million in 1997, an increase of 5.7 percent, compared to
the 6.9 percent increase in capacity. Operating expenses per ASM decreased 1.1
percent in 1998, compared to 1997, primarily due to a 26.9 percent decrease in
average jet fuel price. The decrease in average jet fuel prices was offset by a $36.1
million increase in Profitsharing and Employee savings plan contributions and an
increase in maintenance costs primarily due to unusually low aircraft engine overhaul
costs in the first half of 1997.