Marks 45th Consecutive Year Of Profitability

 Southwest Airlines on Wednesday reported its fourth quarter and annual 2017 results, marking the 45th consecutive year showing a profit.

"Our strong fourth quarter earnings performance capped another year of extraordinary achievements, including 45 straight years of profitability. Last week, for the 24th consecutive year, Southwest was named to FORTUNE's 2018 list of World's Most Admired Companies. I want to thank our People for their exceptional results and congratulate them on this outstanding honor," said Gary C. Kelly, Chairman of the Board and Chief Executive Officer.

"Our strong profits, cash flow, and financial position enabled us to deploy capital wisely and sustain high returns on invested capital. We made significant progress modernizing our fleet, investing in technology and facilities, and returning value in excess of our free cash flow to Shareholders. We celebrated several notable milestones during 2017, including the implementation of our new reservation system; the retirement of our Boeing 737-300 Classic fleet; the launch of the new Boeing 737 MAX 8; the launch of service to Cincinnati, Grand Cayman, and Turks & Caicos; and the announcement of our commitment to serve Hawaii. Our Employees delivered another outstanding year of operational Reliability and Hospitality, including the best baggage delivery rates in our history. These achievements are significant, especially considering the backdrop of unprecedented natural disasters and the competitive industry environment. As ever, the Warrior Spirits and fortitude of our People resulted in an outstanding overall 2017 performance, which earned them $543 million in profitsharing during 2017.

According to the report:

• Record fourth quarter net income and earnings per diluted share of $1.9 billion and $3.18, respectively
• Excluding special items, fourth quarter net income of $459 million, or $.77 per diluted share
• Record annual net income and earnings per diluted share of $3.5 billion and $5.79, respectively
• Excluding special items, annual net income of $2.1 billion, or $3.50 per diluted share
• Annual operating income of $3.5 billion, resulting in an operating margin of 16.6 percent, or 16.3 percent, excluding special items
• Annual operating cash flow of $3.9 billion, and annual free cash flow of $1.8 billion
• Returned approximately $1.9 billion to Shareholders through a combination of $274 million in dividends and $1.6 billion in share repurchases
• Annual return on invested capital (ROIC) of 25.9 percent

"We applaud Congress and the President for the tax reform legislation passed on December 22, 2017. We celebrated the passage of tax reform with our Employees through a $1,000 per person cash bonus paid on January 8, 2018. We also announced an incremental donation to charitable causes and an additional investment in our fleet to support future growth opportunities and fleet modernization. The tax reform is very meaningful to Southwest Airlines, reducing our 2017 deferred tax liability by $1.4 billion. Based on our current outlook, the reduction in the statutory federal rate will result in hundreds of millions in tax savings, which will significantly boost our earnings in 2018.

"As we look to realize ongoing benefits of modernizing our fleet and optimizing our route network, we are enthusiastic about our ability to leverage our strengths and scale to meet Customer demand. We are pleased with the progress made thus far to obtain authorization from the Federal Aviation Administration for Extended Operations (ETOPS) to operate between the mainland and the Hawaiian Islands later this year. In addition, as a complement to our more than forty flights a day to 15 cities nonstop from Seattle-Tacoma International Airport, today we announce our commitment to launch up to five daily flights at a new commercial aircraft facility at Paine Field in Everett, Washington, scheduled to be completed later this year.

"We begin 2018 focused on our goal to expand margins and profits, excluding special items. Our balance sheet and liquidity remain strong, with manageable debt service and capital spending this year. Our 2018 growth plans effectively replace Classics retired last year and further strengthen our robust route network. Based on the current outlook and our commercial initiatives and objectives, our goal remains to achieve positive unit revenue growth in 2018, year-over-year. We continue to expect our new reservation system to produce incremental improvements in pre-tax results of approximately $200 million in 2018, primarily from enhanced revenue management capabilities. We remain focused on improving our productivity and reliability and reducing our year-over-year operating costs per available seat mile, excluding fuel and oil expense, profitsharing expense, and special items, in 2018. Overall, our strong financial performance, solid outlook, healthy balance sheet, and significantly lower federal income taxes, provide the cash flow to continue to reward our Employees, keep our costs and fares low for our Customers, reinvest in our business, return value to our Shareholders, and support our communities."

(Source: Southwest Airlines news release. Image from file)

FMI: www.southwest.com