Southwest Airlines 2015 Annual Report Download - page 60

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Estimated economic jet fuel price per gallon,
including taxes
Average Brent Crude Oil
price per barrel 1Q 2016 (2) Full Year 2016 (2)
$15 $1.20 - $1.25 $1.30 - $1.35
$25 $1.45 - $1.50 $1.50 - $1.55
Current Market (1) $1.65 - $1.70 $1.70 - $1.75
$45 $2.00 - $2.05 $1.95 - $2.00
$55 $2.30 - $2.35 $2.15 - $2.20
Estimated Premium Costs (3) $35 - $40 million $150 - $160 million
(1) Brent crude oil average market prices as of January 15, 2016, were approximately $30 and $33 per barrel for
first quarter 2016 and full year 2016, respectively.
(2) The economic fuel price per gallon sensitivities provided assume the relationship between Brent crude oil and
refined products based on market prices as of January 15, 2016.
(3) Fuel hedge premium expense is recognized as a component of Other (gains) losses, net.
Maintenance materials and repairs expense for 2015 increased by $27 million, or 2.8 percent,
compared with 2014. On a per ASM basis, Maintenance materials and repairs expense for 2015
decreased 4.0 percent, compared with 2014, as the dollar increases were more than offset by the 7.2
percent increase in capacity. On a dollar basis, the majority of the increase was attributable to the
timing of regular airframe maintenance checks, partially offset by reduced engine and avionic repair
expense as a result of the B717 aircraft transitioning out of the Company’s fleet. The Company
currently expects Maintenance materials and repairs expense per ASM for first quarter 2016 to
increase, compared with first quarter 2015.
Aircraft rentals expense for 2015 decreased by $57 million, or 19.3 percent, compared with 2014. On a
per ASM basis, Aircraft rentals expense decreased 22.7 percent, compared with 2014. On both a dollar
and per ASM basis, the decrease was primarily due to the transition of leased B717 aircraft out of the
Company’s fleet for conversion and delivery to Delta. The Company currently expects Aircraft rentals
expense per ASM for first quarter 2016 to be comparable to fourth quarter 2015.
Landing fees and other rentals expense for 2015 increased by $55 million, or 5.0 percent, compared
with 2014. On a per ASM basis, Landing fees and other rentals expense for 2015 decreased 2.4
percent, compared with 2014, as the dollar increases were more than offset by the 7.2 percent increase
in capacity. On a dollar basis, the majority of the increase was due was due to higher space rental rates
at various airports. The remaining increase was due to heavier landing weights for the Company’s
higher capacity 737-800 aircraft, which now make up a larger portion of the Company’s fleet. The
Company currently expects Landing fees and other rentals expense per ASM for first quarter 2016 to
decrease, compared with first quarter 2015.
Depreciation and amortization expense for 2015 increased by $77 million, or 8.2 percent, compared
with 2014. On a per ASM basis, Depreciation and amortization expense remained flat, compared with
2014. On a dollar basis, the majority of the increase was due to the purchase and capital lease of new
and used aircraft since 2014, the majority of which replaced B717s removed from service in late 2014.
The Company currently expects Depreciation and amortization expense per ASM for first quarter 2016
to increase, compared with first quarter 2015, due to the accelerated retirement of the owned 737-300
and 737-500 fleet and the acquisition of new 737-800 and 737-700 aircraft. See Note 1 to the
Consolidated Financial Statements for further information.
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