Southwest Posts Record Net Income



Southwest Airlines earned net income of $2.18 billion in 2015, up 92% over a net profit of $1.14 billion in 2014, marking the Dallas-based carrier’s 43rd straight year of profitability.

The annual net profit was the best-ever reported by the company—the second straight year it has posted a record net profit. CFO Tammy Romo called 2015 “exceptionally strong” even for an airline that has consistently been one of the industry’s top performers. The carrier’s return on invested capital (ROIC), long a key indicator highlighted by Southwest, was a record 32.7% for the 12 months ended Dec. 31.

Southwest’s 2015 revenue was up 6.5% year-over-year to $19.82 billion, a notable increase given that most US airlines are reporting flat revenue or year-over-year declines. Annual expenses dropped 4.1% to $15.7 billion and the company’s 2015 operating profit was $4.12 billion, up 85% over operating income of $2.23 billion in 2014.

Southwest’s 2015 traffic grew 8.8% to 117.5 billion RPMs on a 7.2% increase in capacity to 140.5 billion ASMs, producing a load factor of 83.6%. Yield fell 4.7% to 15.57 cents.

With the continued growth of ultra low-cost carriers (ULCC) Spirit Airlines, Frontier Airlines and Allegiant Air in the US, Southwest president, chairman and CEO Gary Kelly conceded that Southwest—the original LCC—is for the first time facing serious competition from airlines that “clearly” have lower operating costs than Southwest.

Kelly told analysts and reporters that Southwest is up against “more intense competition today than we ever have had in our history, [which places] an obligation on us to innovate so we don’t lose our low-fare leadership position in the country.” He added that, despite the heavy competition, “Southwest has never been stronger,” citing in particular its route network and balance sheet.