Excluding a $271 million cash reimbursement from the government for security-related costs, the nation's sixth-largest airline earned $103 million, or 13 cents a share, up 23% from the year-ago quarter's $84 million, or 10 cents a share. Analysts expected Southwest to earn 11 cents a share.
With the government grant added in, the airline earned $246 million, or 30 cents a share.
"Considering the challenges we faced in the second quarter with the Iraq war and the difficult airline industry pricing environment, we are proud of our better-than-expected earnings performance," the company said in a statement.
"Although bookings softened early in the quarter as a result of the war in Iraq, traffic and revenues began to improve in mid-June," the company said. "Thus far, traffic and load factors for this month and bookings for the remainder of July and August are strong due to high demand for vacation travel. Thus far, in the third quarter of 2003, unit revenues are exceeding year-ago levels."
As a result, the company said third-quarter earnings would top last year's $75 million profit; it also made changes to its aircraft delivery schedule. The company said it exercised options to add 17 more 737-700s in 2004, even bumping up the delivery of two planes originally not due until 2005. All told, Southwest plans to increase its fleet size by 42 planes in 2004, a capacity increase of between 6% and 7%, and quite a contrast from network carriers like
, which recently delayed the delivery of planes for the next two years.
Revenue came in at $1.52 billion, up 2.9% from year-ago levels, while revenue per available seat mile, also known as RASM, rose 4.6% in the second quarter. RASM, which is a key metric that helps gauge the overall profitability of an airline, was slightly better than the 4.2% increase in available seat miles, helping boost load factor to 70.1% from 69.9%.
The company said its revenue yield came in at 11.67 cents, down 1.8% from the year-ago 11.88 cents. One reason for the slump in yield is rising costs along with relatively flat ticket prices. The company said operating expenses came in at $1.38 billion in the quarter, up 7.1% from last year.