Southwest Airlines 2014 Annual Report Download - page 69

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2013 compared with 2012
The Company’s 2013 net income of $754 million ($1.05 per share, diluted) increased by $333
million, or 79.1 percent, compared with its 2012 net income of $421 million ($0.56 per share, diluted).
Excluding the impact of special items, the Company’s 2013 net income on a non-GAAP basis
increased 93.0 percent, compared with 2012. Both significant increases were primarily due to a
combination of (i) higher passenger revenues, primarily achieved through higher average airfares, and
(ii) lower fuel costs, primarily due to lower jet fuel prices.
Operating Revenues
Operating revenues for 2013 increased by $611 million, or 3.6 percent, compared with 2012.
The majority of this increase was due to a $628 million, or 3.9 percent, increase in Passenger revenues.
Approximately 60 percent of the increase in Passenger revenues was attributable to the 2.4 percent
increase in Passenger yield and driven by increased fares. The remainder of the increase in Passenger
revenues was due to the 1.7 percent increase in capacity.
Freight revenues for 2013 increased by $4 million, or 2.5 percent, compared with 2012,
primarily due to higher average rates charged as a result of fuel surcharges. Other revenues for 2013
decreased by $21 million, or 2.5 percent, compared with 2012. This was primarily due to a decrease in
ancillary revenues as a result of the adoption of Southwest’s more Customer-friendly fee policies for
Customers that purchased travel on AirTran through southwest.com. Other revenues for 2013 included
approximately $105 million in baggage fees collected from AirTran Customers, versus approximately
$146 million for 2012.
Operating expenses
Historically, except for changes in the price of fuel, changes in most Operating expenses for
airlines are largely driven by changes in capacity, or ASMs. However, 2013 was affected by a
significant decrease in Acquisition and integration expense which was not driven by capacity. The
following table presents the Company’s Operating expenses per ASM for 2013 and 2012, followed by
explanations of these changes on a per ASM basis and/or on a dollar basis:
Year ended December 31, Per ASM Percent
change(in cents, except for percentages) 2013 2012 change
Salaries, wages, and benefits 3.86¢ 3.69¢ 0.17¢ 4.6 %
Fuel and oil 4.42 4.78 (0.36) (7.5)
Maintenance materials and repairs 0.83 0.88 (0.05) (5.7)
Aircraft rentals 0.28 0.28 — —
Landing fees and other rentals 0.85 0.81 0.04 4.9
Depreciation and amortization 0.66 0.66 — —
Acquisition and integration 0.07 0.14 (0.07) (50.0)
Other operating expenses 1.63 1.61 0.02 1.2
Total 12.60¢ 12.85¢ (0.25)¢ (1.9)%
Operating expenses for 2013 decreased by $44 million, or 0.3 percent, compared with 2012,
while capacity increased 1.7 percent, compared with 2012. Operating expenses per ASM for 2013
61