Southwest Airlines 1998 Annual Report Download - page 29

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29
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
Salaries, wages, and benefits per ASM increased 4.0 percent in 1998. This increase
resulted primarily from a 6.9 percent increase in 1998 average salary and benefits cost
per Employee. The increase in average salary and benefits cost per Employee
primarily is due to higher effective wage rates, lower productivity in 1998 caused by
Boeing aircraft delivery delays, and increased health care and workers’ compensation
costs.
Profitsharing and Employee savings plans expense per ASM increased 16.7 percent
in 1998, primarily due to higher earnings available for profitsharing.
Fuel and oil expenses per ASM decreased 26.1 percent in 1998, primarily due to a
26.9 percent decrease from 1997 in the average jet fuel cost per gallon. The average
price paid for jet fuel in 1998 was $.4567 compared to $.6246 in 1997. During fourth
quarter 1998, the average cost per gallon decreased 28.0 percent to $.4346 compared
to $.6040 in fourth quarter 1997. In January 1999, fuel prices averaged approximately
$.38 per gallon. Year-over-year decreases in jet fuel prices are expected to continue in
first quarter 1999 due to the continued oversupply of crude oil and related products,
along with the effects of the Company’s current fuel hedging positions. (The
immediately preceding sentence is a forward-looking statement which involves
uncertainties that could result in actual results differing materially from expected
results. Such uncertainties include, but may not be limited to, the largely unpredictable
levels of jet fuel prices.)
Maintenance materials and repairs per ASM increased 10.3 percent in 1998,
compared to 1997, primarily as a result of an unusually low number of aircraft engine
overhauls in the first six months of 1997. Fourth quarter 1998 maintenance materials
and repairs per ASM increased 3.2 percent over fourth quarter 1997. We expect
modest year-over-year unit-cost growth for maintenance materials and repairs in 1999.
(The immediately preceding sentence is a forward-looking statement which involves
uncertainties that could result in actual results differing materially from expected
results. Such uncertainties include, but may not be limited to, any unanticipated
required aircraft airframe or engine repairs.)