Southwest Airlines 2006 Annual Report Download

Southwest Airlines Co. is the nation’s low-fare, high Customer Satisfaction airline. We primarily serve shorthaul and mediumhaul
city pairs, providing single-class air transportation, which targets business and leisure travelers. The Company, incorporated
in Texas, commenced Customer Service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities—Dallas,
Houston, and San Antonio. At yearend 2006, Southwest operated 481 Boeing 737 aircraft and provided service to 63 airports in
32 states throughout the United States. Southwest has one of the lowest operating cost structures in the domestic airline industry
and consistently offers the lowest and simplest fares. Southwest also has one of the best overall Customer Service records.
LUV is our stock exchange symbol, selected to represent our home at Dallas Love Field, as well as the theme of our Employee,
Shareholder, and Customer relationships.
Consolidated Highlights
(Dollars In Millions, Except Per Share Amounts) 2006 2005 CHANGE
Operating revenues $9,086 $7,584 19.8 %
Operating expenses $8,152 $6,859 18.9 %
Operating income $934 $725 28.8 %
Operating margin 10.3 % 9.6 % 0.7 pts.
Net income $499 $484 3.1 %
Net margin 5.5 % 6.4 % (0.9) pts.
Net income per share — basic $.63 $.61 3.3 %
Net income per share — diluted $.61 $.60 1.7 %
Stockholders’ equity $6,449 $6,675 (3.4) %
Return on average stockholders’ equity 7.6 % 7.9 % (0.3) pts.
Stockholders’ equity per common share outstanding $8.24 $8.32 (1.0) %
Revenue passengers carried 83,814,823 77,693,875 7.9 %
Revenue passenger miles (RPMs) (000s) 67,691,289 60,223,100 12.4 %
Available seat miles (ASMs) (000s) 92,663,023 85,172,795 8.8 %
Passenger load factor 73.1 % 70.7 % 2.4 pts.
Passenger revenue yield per RPM 12.93 ¢ 12.09 ¢ 6.9 %
Operating revenue yield per ASM 9.81 ¢ 8.90 ¢ 10.2 %
Operating expenses per ASM 8.80 ¢ 8.05 ¢ 9.3 %
Size of eet at yearend 481 445 8.1 %
Fulltime equivalent Employees at yearend 32,664 31,729 2.9 %
$600
$500
$400
$300
$200
$100
$188$138
$372
$226 $215 $226
$484
$425
$499
$587
Net Margin GAAP
10%
8%
6%
4%
2%
non-GAAP
See table for a reconciliation of non-GAAP to GAAP results.
Net Income (in millions) GAAP non-GAAP
See table for a reconciliation of non-GAAP to GAAP results.
Reconciliation of Reported Amounts to non-GAAP Items
(See Note on page 15.) (unaudited)
$188 $372 $215
(59)
$484
(7) (2) 11
-
(144)
(25) -
-
(18) --
Impact of fuel contracts, net
Net income, as reported
(in millions)
Impact of government
grant proceeds, net
Impact of passenger
revenue adjustments, net
$138 $425
88
$499
-
-
$587$226 $226
Net income – non-GAAP
2002 2003 2004 2005 2006
2002 2003 2004 2005 2006 2002 2003 2004 2005 2006
3.4% 2.5%
6.3%
3.8% 3.3% 3.5%
5.5%
6.4%
5.6%
6.5%