Southwest Airlines 1998 Annual Report Download - page 31

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31
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
INCOME TAXES The provision for income taxes, as a percentage of income before
taxes, was unchanged from 1997 to 1998.
1997 COMPARED WITH 1996 The Company’s consolidated net income for 1997 was
$317.8 million ($.93 per share, diluted), as compared to the corresponding 1996
amount of $207.3 million ($.61 per share, diluted), an increase of 53.3 percent.
OPERATING REVENUES Consolidated operating revenues increased by 12.1
percent in 1997 to $3,816.8 million, compared to $3,406.2 million for 1996. This
increase in 1997 operating revenues was derived primarily from an 11.3 percent
increase in passenger revenues as a result of a 4.7 percent increase in RPMs and a
6.4 percent increase in passenger revenue yield per RPM. Southwest’s passenger
revenues benefited from a strong U.S. economy, strong demand for air travel,
increased fares, and a favorable mix of higher yielding fares.
The 4.7 percent increase in RPMs in 1997, coupled with a 9.2 percent increase in
ASMs, resulted in a decrease in load factor from 66.5 percent in 1996 to 63.7 percent
in 1997. The decrease in load factor was primarily the result of less promotional fare
activity in 1997. The 1997 ASM growth resulted from the addition of 18 aircraft during
the year.
Freight revenues in 1997 were $94.8 million, compared to $80.0 million in 1996. The
18.4 percent increase in freight revenues exceeded the 9.2 percent increase in ASMs
for the same period primarily due to an increase in United States mail services and
increased air freight volumes resulting, in part, from the United Parcel Service labor
strike during third quarter 1997.
Other revenues increased by 45.6 percent in 1997 to $82.9 million, compared to
$56.9 million in 1996. This increase is primarily due to the sale of frequent flyer
segment credits to participating partners in the Company’s Rapid Rewards frequent
flyer program.