Southwest Airlines (LUV) Earnings Report: Q1 2015 Conference Call Transcript - TheStreet.com

LISTEN TO THIS TRANSCRIPT

The following Southwest Airlines (LUV - Get Report) conference call took place on April 23, 2015, 12:30 PM ET. This is a transcript of that earnings call:

Company Participants

• Gary Kelly; Southwest Airlines; Chairman, President, CEO
• Tammy Romo; Southwest Airlines; CFO
• Bob Jordan; Southwest Airlines; EVP, CCO
• Mike Van De Ven; Southwest Airlines; EVP, COO
• Linda Rutherford; Southwest Airlines; VP Communications, Outreach

Other Participants

• Julie Yates; Credit Suisse; Analyst
• Hunter Keay; Wolfe Research; Analyst
• Duane Pfennigwerth; Evercore ISI; Analyst
• Jamie Baker; JPMorgan; Analyst
• Savi Syth; Raymond James; Analyst
• Darryl Genovesi; UBS Securities; Analyst
• Dan McKenzie; Buckingham Research Group; Analyst
• Helane Becker; Cowen and Company; Analyst
• Terry Maxon; Dallas Morning News; Media
• Andrea Ahles; Fort Worth Star; Media
• Jeffrey Dastin; Thomson Reuters; Media

MANAGEMENT DISCUSSION SECTION

Operator:

Welcome to the Southwest Airlines First Quarter 2015 Conference Call.

• Southwest Airlines (LUV) Earnings Report: Q1 2015 Conference Call Transcript

  TheStreet | 04/24/15 - 07:12 PM EDT

• Cramer: Own Starbucks but Wait on Dunkin Brands; Unilever Has Good Momentum

  Street Watch | 04/24/15 - 12:45 PM EDT

• Try On This Pair, Conservative Investors

  RealMoneyPro | 04/24/15 - 10:00 AM EDT

• Try On This Pair, Conservative Investors

  RealMoney | 04/24/15 - 10:00 AM EDT

• Southwest Airlines (LUV) Stock Higher Today on Earnings Beat

  TheStreet | 04/23/15 - 10:25 AM EDT

(Operator Instructions)

This call is being recorded and we replay will be available on Southwest.com in the Investor Relations section. Joining the call today we have Gary Kelly, Chairman, President, and CEO; Tammy Romo, Senior Vice President of Finance and CFO; Bob Jordan, Executive Vice President and Chief Commercial Officer; Mike Van De Ven, Executive Vice President and Chief Operating Officer; Ron Ricks, Executive Vice President and Chief Legal and Regulatory Officer; and Marcy Brand, Senior Director of Investor Relations. Please note today's call will include forward-looking statements and because these statements are based on the Company's current intent, expectations, and projections, they are not guarantees of future performance and a variety of factors could cause actual results to differ materially. As this call will include references to non-GAAP results excluding special items, please reference this morning's press release in the Investor Relations section of Southwest.com for further information regarding forward-looking statements and the reconciliation of non-GAAP results to GAAP results. At this time, I will go ahead and turn the call over to Mr. Kelly for opening remarks. Please go ahead, sir. Gary Kelly (Chairman, President, CEO): Thank you very much. Thanks, everybody, for joining us for our first quarter earnings call. It was a great first quarter. I want to start out by congratulating our Southwest employees for these exceptional results. Southwest is doing well because of their hard work and their perseverance and their outstanding customer service. I am delighted to report that each employee earned their share of a total $125 million profit-sharing related to our first quarter profits. That is far greater than any prior first quarter in our history. Of course, lower fuel prices were a big part of the first quarter story. Our economic fuel price per gallon was down 35% to $2 a gallon year-over-year and that alone contributed over $450 million in fuel cost savings. 15% of every fuel dollars savings dollar goes to our employees. So again, a very, very big thank you to our Southwest family. But besides lower fuel prices, there's a lot more to the story and a lot to be pleased with. Our unit revenues were flat. While our core unit costs that is, excluding fuel special items and profit sharing, were down 3.6%. So even if fuel prices had remained constant, our earnings would have been up roughly 80%. So we're beginning to more fully realize the benefit of our strategic initiatives and that is the AirTran merger, the 737-800, our fleet modernization efforts, and our renewed frequent flyer plan. We're also seeing more fully the benefits from our aggressive route schedule optimization over the last five years and these results are really strong despite our renewed low cost capacity growth, but the unusually high percentage of routes that are in development. And that's primarily a function of the AirTran integration, but we also have capacity added strategically to Dallas Love Field, Washington Reagan, and New York LaGuardia. So given all that, we are intentionally growing new markets which are mostly near international at a slow and measured pace. We want to carefully manage our future capacity growth, continue our revenue momentum, and continue to hit our return on capital targets and reward shareholders. So our focus for the near-term will be on the basics and that is operational reliability, hospitable customer service, manageable capacity growth, and healthy shareholder returns. Our top event for this year is the completion of the construction of the Houston International terminal and the launch of International flights in October of this year to six nonstop Latin American destinations. This year, we have a larger than normal increase in flying as we increase the utilization of our roughly 700 aircraft fleet from a low of 88% to a more normal 93% by year's end and that is aircraft that are scheduled to be in service out of our total fleet.

Source: southwest - Google News http://ift.tt/1I7VyGf