Southwest Airlines 1998 Annual Report Download - page 32

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32
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
OPERATING EXPENSES Consolidated operating expenses for 1997 were $3,292.6
million, compared to $3,055.3 million in 1996, an increase of 7.8 percent, compared to
the 9.2 percent increase in capacity. Operating expenses per ASM decreased 1.3
percent in 1997, compared to 1996, primarily due to lower jet fuel prices; lower aircraft
engine repair costs; and favorable results from numerous Companywide cost reduction
efforts.
Salaries, wages, and benefits per ASM increased 1.8 percent in 1997. This increase
resulted primarily from a 2.4 percent increase in 1997 average salary and benefits cost
per Employee, partially offset by slower growth in the number of Employees. The
increase in average salary and benefits cost per Employee primarily is due to
increased health care costs.
The Company’s Flight Attendants are subject to an agreement with the Transport
Workers Union of America, AFL-CIO (TWU), which became amendable May 31, 1996.
The Company reached an agreement with the TWU, which was ratified by its
membership in December 1997. The new contract becomes amendable in May 2002.
Profitsharing and Employee savings plans expense per ASM increased 30.4 percent
in 1997, primarily due to higher earnings available for profitsharing.
Fuel and oil expenses per ASM decreased 6.7 percent in 1997, primarily due to a 4.6
percent decrease from 1996 in the average jet fuel cost per gallon, coupled with a slight
decrease in the average fuel burn rate from 1996. The average price paid for jet fuel in
1997 was $.6246 compared to $.6547 in 1996. During fourth quarter 1997, the average
cost per gallon decreased 17.5 percent to $.6040 compared to $.7323 in fourth quarter
1996.
Maintenance materials and repairs per ASM decreased 6.5 percent in 1997,
compared to 1996, primarily as a result of lower engine overhaul costs in the first three
quarters of 1997, when compared to the same periods in 1996.