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Southwest Airlines Annual Report, Year Ended Dec 31, 2000

Filing Date
Filed January 26, 2001
Period End
December 31, 2000
Security
LUV
In the record · 2016–202610-K1210-Q338-K204

LUV filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 204 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Jan ’17Jan ’17
  2. FY2018 annual report10-K · Feb ’19Feb ’19
  3. Leadership change8-K · Nov ’21Nov ’21
  4. Material agreement8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed January 26, 2001. Cited figures are marked; the original filing is the authoritative source.

Southwest Airlines Co. reported a record 2000 for its 28th consecutive year of profit and its ninth consecutive record annual profit, despite the highest jet fuel prices since 1990.

Operating revenues rose to $5.65 billiona from $4.74 billion in 1999, and operating income reached $1.02 billion, up from $781.6 million. Net income after the cumulative accounting change was $603.1 million ($1.14 per diluted share), compared with $474.4 million ($.89 per diluted share) in 1999. The filing attributes the results to increased capacity, strong demand, and revenue management, with operating margin of 18.1 percent and net profit margin before the accounting change of 11.1 percent.

Costs rose sharply on fuel: fuel and oil expense was $804.4 millionb, or $.0134 per ASM, up 44.1 percent per ASM, and the average fuel price was $.7869 per gallon. Hedging gains of $113.5 million partly offset this. The company hedged about 80 percent of its 2001 anticipated jet fuel requirements and forecasts a first-quarter 2001 fuel price no higher than first-quarter 2000's $.82 per gallon.

Operating cash flow was $1.3 billionc, net capital expenditures were $1.1 billion, and cash and equivalents were $523 million at year-end, with no borrowings under its $475 million revolving credit line. Looking ahead, the company plans capacity growth of about 11 percent in 2001 with a net addition of 21 aircraft, including 25 new Boeing 737-700 deliveries. Firm aircraft commitments total about $4.0 billion through 2007, of which $668.3 million relates to 2001.

The company also announced a three-for-two stock split payable February 15, 2001, and a commission rate cut for travel agents beginning January 1, 2001. An IRS revenue ruling of December 21, 2000 supports the industry's deduction of aircraft inspection and maintenance costs, which management believes will not have a materially adverse effect on results.

02—Key points

Key Highlights

  1. Record 2000 operating revenues of $5.65 billion, up from $4.74 billion in 1999, and record operating income of $1.02 billion.
  2. Net income after the cumulative accounting change was $603.1 million, or $1.14 per diluted share, versus $474.4 million, or $.89 per diluted share, in 1999.
  3. Fuel was the main cost headwind: average jet fuel cost reached $.7869 per gallon, the highest annual average since 1984, and fuel and oil expense rose 44.1 percent per ASM.
  4. Hedging gains of $113.5 million offset part of fuel cost increases, and about 80 percent of 2001 anticipated jet fuel requirements were hedged at year-end 2000.
  5. Operating cash flow was $1.3 billion, and net capital expenditures were $1.1 billion, mainly for 33 new and one used 737-700 aircraft.
  6. Capacity is expected to grow about 11 percent in 2001, with a net addition of 21 aircraft and 25 new 737-700 deliveries.
  7. A three-for-two stock split is payable February 15, 2001, and the fleet of 344 Boeing 737s had an average age of 8.2 years at year-end.

03—Questions

Frequently Asked Questions

  1. How did Southwest perform financially in 2000?

    Southwest posted its 28th consecutive annual profit and a record ninth consecutive year of record annual profit. Operating revenues rose 19.3 percent to $5.65 billion, and operating income rose 30.7 percent to $1.02 billion. Net income after the accounting change was $603.1 million, or $1.14 per diluted share.

  2. How much did rising fuel costs affect the company?

    Fuel and oil expense was $804.4 million, and the average fuel cost per gallon was $.7869, up from $.5271 in 1999 including hedging. Fuel and oil expense per ASM rose 44.1 percent. Hedging gains of $113.5 million reduced the net fuel price.

  3. What is the company's outlook for 2001?

    Southwest expects capacity to grow about 11 percent with 21 net aircraft additions. It anticipates positive year-over-year unit revenue comparisons in the first quarter of 2001 and expects a first-quarter 2001 fuel price no higher than $.82 per gallon, though these are forward-looking statements subject to uncertainty.

  4. What are the company's capital commitments and financial position?

    Firm aircraft commitments total about $4.0 billion through 2007, of which $668.3 million relates to 2001. At year-end, cash and cash equivalents were $523 million, long-term debt less current maturities was $760.9 million, and the $475 million revolving credit line was undrawn.

  5. Are there material legal or regulatory risks disclosed?

    The company disputes an IRS notice of deficiency on deductions for aircraft inspection and maintenance costs for 1989 through 1991. A December 21, 2000 IRS revenue ruling supports the deductibility of such costs, and management believes the final resolution will not have a materially adverse effect on financial position or results of operations.

04—Continue

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