OREANDA-NEWS.  Southwest Airlines Co. (NYSE:LUV) (the "Company") today reported its fourth quarter and full year 2013 results:

Record fourth quarter net income, excluding special items*, of USD 236 million, or USD .33 per diluted share, compared to fourth quarter 2012 net income, excluding special items, of USD 65 million, or USD .09 per diluted share.  This exceeded the First Call consensus estimate of USD .29 per diluted share.
Record fourth quarter net income of USD 212 million, or USD .30 per diluted share, which included USD 24 million (net) of unfavorable special items, compared to net income of USD 78 million, or USD .11 per diluted share, in fourth quarter 2012, which included USD 13 million (net) of favorable special items.
Record full year net income, excluding special items, of USD 805 million, or USD 1.12 per diluted share, compared to full year 2012 net income, excluding special items, of USD 417 million, or USD .56 per diluted share.
Record full year net income of USD 754 million, or USD 1.05 per diluted share, which included USD 51 million (net) of unfavorable special items, compared to net income of USD 421 million, or USD .56 per diluted share, in full year 2012, which included USD 4 million (net) of favorable special items.
Return on invested capital* (before taxes and excluding special items) for full year 2013 of 13.1 percent, as compared to 7.2 percent for full year 2012.
Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, "We are happy to report full year 2013 net income of USD 805 million, and fourth quarter 2013 net income of USD 236 million, both excluding special items.  We are extremely proud of these record results and the tremendous progress made on our strategic initiatives, which produced substantial returns and contributed significantly to our superb 2013 financial performance.  Our full year 2013 total operating revenues were a record USD 17.7 billion, and our cost performance was excellent.  We generated strong free cash flow* of USD 1.0 billion in 2013, allowing us to return USD 611 million to our Shareholders, through share repurchases and dividend payments, and reduce debt and capital lease obligations by USD 313 million.  Our pre-tax return on invested capital, excluding special items (ROIC), for full year 2013 was 13.1 percent, nearly double the prior year's performance.  I want to thank the outstanding People of Southwest and AirTran.  They deserve all the credit for producing these strong results, which earned them a USD 228 million contribution to the Profitsharing Plan for the year 2013, up 88.4 percent, or USD 107 million, compared to the prior year.

"We ended 2013 strong, with an exceptional fourth quarter performance.  Total operating revenues  were a fourth quarter record USD 4.4 billion, increasing 6.1 percent compared to fourth quarter last year.  On a unit basis (per available seat mile), our fourth quarter 2013 revenues increased 3.8 percent year-over-year, which is remarkable considering the increase in stage length and seat density.  While traffic was impacted at the beginning of the quarter by the federal government shutdown, we saw a healthy rebound in traffic and revenue trends, resulting in a five percent year-over-year increase in passenger unit revenues for the combined November/December period.  Strong travel demand and favorable year-over-year unit revenues have continued in January, thus far.  And, bookings for the remainder of the first quarter are strong.  Based on these trends, we currently expect year-over-year growth in first quarter 2014 unit revenues.

"We also had an outstanding fourth quarter 2013 cost performance, with unit costs, excluding special items, down 2.8 percent year-over-year.  We benefited from stable fuel prices, our ongoing fleet modernization efforts, and rigorous cost control efforts across the Company.  We closed the year with fourth quarter 2013 economic fuel costs of USD 3.05 per gallon, a decline of approximately eight percent from fourth quarter 2012.  Based on current market prices and our existing fuel derivative contracts, as of January 17th, we expect first quarter 2014 economic fuel costs to be in the USD 3.05 to USD 3.10 per gallon range, which would be a significant drop year-over-year.  Excluding fuel, profitsharing, and special items, our fourth quarter 2013 unit costs declined 0.4 percent year-over-year.  We expect a year-over-year increase in our first quarter 2014 unit costs, excluding fuel, profitsharing, and special items.

"We are on track with our AirTran integration, achieving approximately USD 400 million in annual net pre-tax synergies in 2013, as planned.  Since 2011, we have converted 17 of the 52 AirTran Boeing 737-700s to Southwest, and we have replaced the flying for 13 AirTran Boeing 717-200s transitioned to Delta in 2013, with Southwest 737 service.  Nine more 717s were removed from active service at year end 2013, and the remaining 66 717s are scheduled to be removed from the AirTran network by the end of this year, and transitioned to Delta through 2015.  The remaining 35 AirTran Boeing 737-700s are scheduled to be converted to Southwest this year.  During fourth quarter, we converted Memphis, Pensacola, San Juan, and Buffalo to Southwest, and launched Southwest service to Richmond.  At year end 2013, all remaining domestic AirTran markets had Southwest service.  We are pleased with the rapid improvement of our developing markets as we convert AirTran routes into Southwest and optimize our combined networks.  With our international reservation system scheduled for implementation later this month, we remain on track to convert AirTran's seven international markets, along with its remaining domestic markets, by the end of this year.  As planned, this will allow us to complete the AirTran integration and retire the brand by the end of 2014.

"We plan to launch international service on Southwest Airlines this year, which will be a huge milestone for us.  Construction of a five-gate international facility at Houston's William P. Hobby Airport, expected to open in late 2015, has begun, and can accommodate Southwest service to destinations in the Caribbean, Mexico, Central America, and the northern cities of South America.  We also have future plans to bring Southwest near-international service to Fort Lauderdale-Hollywood International Airport (FLL).  Under a recently executed agreement with Broward County, Florida, which owns and operates FLL, we will oversee and manage the design and construction of the airport's Terminal 1 Modernization Project.  In addition to significant improvements to the existing Terminal 1, the project includes the design and construction of a new five-gate Concourse A with an international processing facility.

"During 2014, we expect to take delivery of 33 new Boeing 737-800s and 12 pre-owned -700s, which will allow us to keep our 2014 capacity relatively flat, year-over-year, as we continue to transition the AirTran 717 fleet to Delta, and retire Classic Boeing 737 aircraft.  We continue to optimize the combined Southwest and AirTran route networks, and announced new travel options in 2014 to some of our Customers' favorite domestic destinations, like San Diego and Portland, Oregon.  We also look forward to expanding service to Dallas Love Field, with the October 2014 repeal of the Wright Amendment.

"We are excited about bringing more flights to New York's LaGuardia Airport with our recent acquisition of 12 takeoff and landing slots, pursuant to American Airlines' required divestiture for its merger with US Airways.  In addition, we gained permanent control of 10 takeoff and landing slots at LaGuardia that Southwest currently operates under lease from American.  In an effort to bring more low fares to Washington's Reagan National Airport, we also have bid on slots that American is required to divest. 

"We enter 2014 financially strong and excited about the opportunities unfolding.  We are proud of our many 2013 accomplishments, most notably our strong financial performance that we believe positions us well to achieve our targeted 15 percent ROIC in 2014.  As ever, we remain focused on providing job security for our Employees;  providing friendly, reliable and low-fare service to our Customers;  and enhancing Shareholder value."