Checking In on Southwest Airlines
I've grown increasingly peripatetic in my old age, and I fly quite a bit, but somehow never boarded a Southwest Airlines (NYSE: LUV) flight until I flew the airline for the first time yesterday. The very first article I wrote for the Fool was about Southwest, and I've decided to take this opportunity to revisit the company.
The airline is perhaps best known for its unwavering commitment to customer service and its friendly culture. My flight was on Valentine's Day, and the Southwest gates at the San Diego International airport were decorated accordingly. So was the plane, for that matter, with paper hearts taped to the overhead compartments covered with messages that read "Happy Valentine's Day," "LUV'n You is What We Do!" and my personal favorite, "LUV is in the Air."
My bag flew for free, just as advertised. I appreciated this for two reasons. One, I'm cheap. Two, I've waited longer to board a city bus than I did to get on this plane. When airlines charge for bags, passengers go to great lengths to cram everything they need into bulky carry-ons. When everyone has a carry-on, it takes forever to stow belongings in the overhead compartments and take a seat, often leading to delayed departure times and generally disgruntled passengers. My flight took off on time and landed on time, pleasing all passengers.
Per its reputation, Southwest delivers a quality product.
Unfortunately, in the airline industry, a quality product will only take you so far. Southwest has no choice but to watch fuel prices decimate its balance sheet. In the fourth quarter, "fuel and oil" was the largest operating expense, coming in 58.9% higher than the same period the previous year.
It wasn't all bad news for the airline, however, as the company finished 2011 in the black. Full-year net income was $330 million, excluding special items. Though that was a decline compared to $550 million last year, revenue passengers were up 22.6%, a good sign for continued profitability.
As far as the competition goes, it wasn't a terrible year for anyone but American Airlines. Alaska Airlines (NYSE: ALK) reported full-year net income of $287.4 million, Delta (NYSE: DAL) brought in $1.2 billion, and United Continental (NYSE: UAL) took top prize, reporting $1.3 billion. All figures exclude special items.
Update on the Airtran merger
The merger between Southwest and AirTran Airways isn't expected to be finalized until 2015, though two crucial stages will be completed in 2012.
First on the agenda is getting approval from the Federal Aviation Administration to add AirTran's jets to the Southwest fleet. The FAA is expected to grant permission to combine operations by March 1.
Second on the agenda is combining flight schedules. Right now, Southwest and AirTran continue to maintain separate schedules, which means customers cannot book a Southwest flight with an AirTran connection. That is expected to change later this year.
The AirTran merger made it possible for the nation's largest domestic airline to provide service to and from the world's busiest airport. Southwest's initial schedule for Atlanta's Hartsfield-Jackson airport provides 15 nonstop flights to five cities, with connecting service to 48 other locations. That schedule is expected to expand as the year goes on.
The seats are comfortable, and there is plenty of leg room. I look forward to flying Southwest again, but in the meantime, I'm going to add the company to My Watchlist, to monitor the company's financials and stay up to date on the merger.
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