Southwest Airlines 2000 Annual Report Download - page 22

Agency commissions per ASM decreased 10.0 percent,
primarily due to a decrease in commissionable revenue.
Approximately 31 percent of the Company’s 2000 revenues
were attributable to direct bookings through the Company’s
Internet site compared to approximately 19 percent in the
prior year. The increase in Internet revenues contributed to
the Company’s percentage of commissionable revenues
decreasing from 34.3 percent in 1999 to 29.1 percent in
2000. The Company recently announced a change in its
commission rate policy. Beginning January 1, 2001, the
Company will decrease the commission it pays to travel
agents from ten percent to eight percent for ticketless
bookings, and from ten percent to five percent for paper
ticket bookings. The Company will continue to pay no
commission on Internet agency bookings. Based on the
policy change, the Company expects agency commissions to
decrease on a per-ASM basis in 2001. (The immediately
preceding sentence is a forward-looking statement involving
uncertainties that could result in actual results differing
materially from expected results. Such uncertainties include,
but may not be limited to, changes in consumer ticket
purchasing habits.)
Aircraft rentals decreased 13.2 percent primarily due to a
lower percentage of the aircraft fleet being leased.
Approximately 27.3 percent of the Company’s aircraft were
under operating lease at December 31, 2000, compared to
30.8 percent at December 31, 1999. Based on the
Company’s current new aircraft delivery schedule and
scheduled aircraft retirements for 2001, we expect a decline
in aircraft rental expense per ASM in 2001. (The immediately
preceding sentence is a forward-looking statement involving
uncertainties that could result in actual results differing
materially from expected results. Such uncertainties include,
but may not be limited to, changes in the Company’s current
schedule for purchase and/or retirement of aircraft.)
Landing fees and other rentals per ASM decreased 4.3
percent primarily as a result of a decrease in landing fees per
ASM of 6.7 percent, partially offset by a slight increase in
other rentals. Although landing fees declined on a per-ASM
basis, they were basically flat on a per-trip basis. The growth
in ASMs exceeded the trip growth primarily due to a 5.8
percent increase in stage length (the average distance per
aircraft trip flown).
Other operating expenses per ASM decreased 3.4 percent
primarily due to Company-wide cost reduction efforts. The
Company also reduced its advertising expense 9.5 percent
per ASM, taking advantage of our national presence,
increasing brand awareness, and strong Customer demand.
OTHER “Other expenses (income)” included interest
expense, capitalized interest, interest income, and other
gains and losses. Interest expense increased 29.1 percent
due primarily to the Company’s issuance of $256 million of
long-term debt in fourth quarter 1999. Capitalized interest
decreased 11.9 percent primarily as a result of lower 2000
progress payment balances for scheduled future aircraft
deliveries compared to 1999. Interest income increased 59.0
percent primarily due to higher invested cash balances and
higher rates of return. Other losses in 1999 resulted primarily
from a write-down associated with the consolidation of certain
software development projects.
INCOME TAXES The provision for income taxes, as a
percentage of income before taxes, decreased slightly to
38.54 percent in 2000 from 38.68 percent in 1999.
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. Operating income increased 14.3
percent to $781.6 million.
OPERATING REVENUES Consolidated operating
revenues increased 13.7 percent primarily due to a 13.8
percent increase in passenger revenues. The increase in
passenger revenues was primarily due to a 9.3 percent
increase in revenue passengers carried and a 16.1 percent
increase in RPMs. The passenger yield decreased 2.0
percent to $.1251 primarily due to an increase in average
length of passenger haul of 6.2 percent, partially offset by a
4.1 percent increase in average passenger fare.
The 16.1 percent increase in RPMs exceeded the 11.2
percent increase in ASMs, resulting in an increase in load
factor from 66.1 percent in 1998 to 69.0 percent in 1999. The
1999 ASM growth resulted from the net addition of 32 aircraft
during the year.
Freight revenues increased 4.6 percent compared to 1998
primarily due to added capacity and modest rate increases.
Other revenues increased 26.2 percent primarily due to an
increase in charter revenue.
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