Southwest Airlines 2015 Annual Report Download - page 63

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2014 Compared with 2013
Operating Revenues
Passenger revenues for 2014 increased by $937 million, or 5.6 percent, compared with 2013. Holding
other factors constant, approximately half of the increase in Passenger revenues was attributable to
the 2.4 point increase in load factor and the majority of the remaining increase was attributable to
higher passenger yields, both driven by strong Customer demand for air travel and successful
execution of the Company’s strategic initiatives. Passenger revenue included an increase due to a
change in estimate, which was recorded on a prospective basis and effective October 1, 2014, of
approximately $55 million. See Note 1 to the Consolidated Financial Statements regarding this change
in accounting estimate.
Freight revenues for 2014 increased by $11 million, or 6.7 percent, compared with 2013, primarily due
to benefits from new and maturing markets as a result of the AirTran integration.
Other revenues for 2014 decreased by $42 million, or 5.2 percent, compared with 2013, primarily due
to a decline in ancillary revenues. The majority of the decline in ancillary revenues was due to the
adoption of Southwest’s more Customer-friendly fee policies for Customers who could purchase travel
on AirTran in 2014 through southwest.com, and the overall reduction in AirTran flights in 2014 as a
result of the integration process. This decline was partially offset by an increase in certain Southwest
specific ancillary revenues, such as EarlyBird Check-in®and A1-15 select boarding positions sold at
the gate.
Operating Expenses
Operating expenses for 2014 decreased by $41 million, or 0.2 percent, compared with 2013, while
capacity increased 0.5 percent over the same period. Historically, except for changes in the price of
fuel, changes in most Operating expenses for airlines are driven by changes in capacity, or ASMs. The
following table presents the Company’s Operating expenses per ASM for 2014 and 2013, 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) 2014 2013 change
Salaries, wages, and benefits 4.14¢ 3.86¢ 0.28 ¢ 7.3 %
Fuel and oil 4.04 4.42 (0.38) (8.6)
Maintenance materials and repairs 0.75 0.83 (0.08) (9.6)
Aircraft rentals 0.22 0.28 (0.06) (21.4)
Landing fees and other rentals 0.85 0.85 — —
Depreciation and amortization 0.72 0.66 0.06 9.1
Acquisition and integration 0.10 0.07 0.03 42.9
Other operating expenses 1.68 1.63 0.05 3.1
Total 12.50¢ 12.60¢ (0.10)¢ (0.8)%
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