Strong travel demand lifts Southwest Airlines in first quarter

Southwest Airlines (LUV) reported a 1.9% increase in total operating revenues to $4.9 billion for the first quarter of 2018, driven mainly by passenger revenues of $4.6 billion. GAAP net income was $463 million or $0.79 per diluted share.

Adjusted net income was $438 million or $0.75 per diluted share. Adjusted EPS beat analyst estimates.

Strong travel demand resulted in a load factor of 81.5%. Passenger revenue yield dropped 2.8% year over year.

Operating income was $616 million. The company returned $648 million to shareholders during the quarter through dividends and share repurchases.

Capital expenditures for Q1 2018 were $409 million. For full-year 2018, Capex is estimated to be $2 billion to $2.1 billion.

The company ended the first quarter with 717 aircraft in its fleet.

Southwest continues to expect its 2018 year-over-year available seat mile (ASM) growth to be in the low 5% range, with second quarter 2018 year-over-year ASM growth in the 3.5% to 4% range and second half 2018 year-over-year ASM growth in the low 7% range. The airline carrier expects RASM to decrease 1% to 3% in Q2 2018.

The company announced that it would begin service to four Hawaiian airports: Honolulu International Airport, Lihue Airport, Kona International Airport at Keahole, and Kahului Airport. Southwest also agreed with Alaska Airlines to lease 12 slots at New York’s LaGuardia Airport and eight slots at Washington Reagan National Airport.

Southwest Airlines has been facing investigations after an engine explosion killed a passenger recently on one of its flights. The airlines stated that it is cooperating with the authorities on the matter. Southwest also said that following an emergency order from the Federal Aviation Administration, it inspected all engines in its fleet but did not comment further on the outcome of the inspections.