Southwest Airlines 1999 Annual Report Download - page 16

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Southwest Airlines Co. Annual Report 1999
Financial Review
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
YEAR IN REVIEW
In 1999, Southwest posted a profit for the 27th consecutive year. The Company posted record
operating revenues; record operating income; the highest operating profit margin since 1981 of 16.5
percent; and a record load factor of 69.0 percent. The Company also experienced a record annual
profit for the eighth consecutive year. We experienced strong revenue growth and continued strong
demand for our product. Fuel prices in fourth quarter 1999 rose to their highest levels since 1991.
At the end of 1999, Southwest served 55 cities in 29 states. We targeted the East Coast for our
1999 expansion, adding service to Islip, New York, on Long Island in March 1999, Raleigh-Durham,
North Carolina, in June 1999, and Hartford, Connecticut, in October 1999 and have been very pleased
with the results in each of these new Southwest cities. The Company recently announced plans to
commence service to Albany, New York, in May 2000 and will begin serving at least one other new
city in 2000. In addition, we plan to continue to add flights between cities we already serve.
Capacity is expected to grow approximately 12 percent in 2000 with the net addition of at least
30 aircraft. The Company will purchase 31 new Boeing 737-700s scheduled for delivery during the
year and has agreed to a long-term lease arrangement to acquire another 737-700 in March of 2000. In
addition, two of the Company’ s older 737-200s are scheduled for retirement during the year.
RESULTS OF OPERATIONS
1999 COMPARED WITH 1998 The Company’ s consolidated net income for 1999 was
$474.4 million ($.89 per share, diluted), as compared to the corresponding 1998 amount of $433.4
million ($.82 per share, diluted), an increase of 9.4 percent. The prior years’ earnings per share amounts
have been restated for the 1999 three-for-two stock split (see Note 8 to the Consolidated Financial
Statements). Operating income increased 14.3 percent for 1999 to $781.6 million.
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