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Southwest announces new international routes, defers its four remaining Boeing 737-800 options in 2018 and converts them to four Boeing 737 MAX 8 options

Southwest announces new international routes, defers its four remaining Boeing 737-800 options in 2018 and converts them to four Boeing 737 MAX 8 options

Southwest Airlines (Dallas) has announced it will begin international service for Indianapolis travelers with new weekly service to Cancun, Mexico as the carrier extends its schedule through April 6, 2018. The new flights between Cancun and Indianapolis will operate seasonally on Saturdays beginning March 10, 2018.

As part of today’s flight schedule extension, the carrier is also offering new international service beginning March 8, 2018 between Ft. Lauderdale/Hollywood and Aruba. Additionally, new nonstop service offered daily between Milwaukee and Houston (Hobby) will allow connections to destinations such as Belize, Cancun and Mexico City.

Beginning March 8, 2018, fly nonstop daily between:

Fort Lauderdale and Aruba

for as low as $69 one-way*

Milwaukee and Houston (Hobby)

for as low as $69 one-way*

*Purchase from July 27 through August 3, 2017, 11:59 p.m. in the respective time zone of the originating city. Domestic and International travel is valid March 8 through April 6, 2018. Service begins March 8, 2018. Domestic travel is not valid on Fridays and Sundays. International travel is valid Monday through Thursday. 

Southwest begins seasonal weekly service on Saturdays between Detroit and Tampa as well as Omaha and Tampa.

On the financial side, Southwest reported its second quarter 2017 results:

  • Net income of $746 million, diluted earnings per share of $1.23, operating income of $1.25 billion, and operating margin1 of 21.8 percent
  • Excluding special items2, net income of $748 million, diluted earnings per share of $1.24, operating income of $1.21 billion, and operating margin3 of 21.1 percent
  • Second quarter operating cash flow of $746 million and second quarter free cash flow2 of $195 million
  • Returned $476 million to Shareholders through a combination of dividends and share repurchases
  • Return on invested capital (ROIC)2 for 12 months ended June 30, 2017, of 27.5 percent

Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “We are very pleased to report another terrific quarter. As expected, we produced positive unit revenues compared with the strong year-ago performance. We had several notable achievements during second quarter, but the headline was the deployment of our new reservation system on May 9th. It was an historic milestone, the largest technology project in our history, and perhaps, one of the largest ever in the air lines industry. The implementation was virtually flawless, although a new system is always challenging for the users. I want to thank all of our People who were involved in the development and deployment. It was superb. And, I want to thank all of our Frontline Employees for their hard work in learning and using their new system. The operations since May 9th have been superb, also. Once again, our Employees showcased their unmatched Hospitality and delivered a reliable product—a truly impressive achievement considering the record number of flights, Customers, and bags. Congratulations to our People and our Shareholders on a strong financial performance, which generated $202 million in profitsharing and $476 million in Shareholder returns.”

Fleet and Capacity

The Company ended second quarter 2017 with 735 aircraft in its fleet. This reflects the second quarter 2017 delivery of 13 new Boeing 737-800s and 5 pre-owned Boeing 737-700s, as well as the retirement of 10 Classic aircraft. During the second quarter, the Company also added three pre-owned 737-700 aircraft to its fleet order book to be delivered this year for 2018 service. Subsequent to June 30, 2017, the Company added one additional pre-owned 737-700 aircraft to its fleet order book to be delivered this year for 2018 service. With the addition of these four pre-owned 737-700 aircraft to its order book, the Company deferred its four remaining 737-800 options in 2018 and converted them to four Boeing 737 MAX 8 options, two in 2021 and two in 2022.

As of July 25, 2017, there were 67 Classic aircraft remaining in the Company’s fleet that it intends to retire by the end of third quarter 2017. Total aircraft, net of all Classic retirements, is expected to decline to 707 by year-end 2017 and grow to 750 aircraft by year-end 2018, as previously announced.

The Company currently expects its third quarter 2017 available seat miles (ASMs) to increase in the four to five percent range and its fourth quarter 2017 ASMs to increase in the one to two percent range, compared with the same year-ago periods. While the Company has not finalized its 2018 capacity plans, it currently estimates year-over-year ASM growth to be less than four percent in the first half of 2018, and its full year 2018 ASM growth to be less than its 2016 year-over-year ASM growth of 5.7 percent. Additional information regarding the Company’s aircraft delivery schedule is included in the accompanying tables.

The Company continues to fine tune its network and introduce new markets that not only strengthen its Customer brand appeal, but also support its revenue and profitability targets. In late April, the Company began international service daily between San Diego and San Jose del Cabo/Los Cabos, Mexico. In June, the Company consolidated its Ohio operations and launched service to Cincinnati/Northern Kentucky International Airport. The same day, the Company also launched service to Grand Cayman from Ft. Lauderdale-Hollywood International Airport (FLL). Additionally, the Company has announced plans to concentrate its service to Cuba in Havana and will cease operations at Varadero and Santa Clara in September. In November, the Company expects to begin international nonstop service weekly from both Nashville and St. Louis to Cancun (CUN), as well as daily service between Providenciales, Turks & Caicos and FLL beginning in the same month, all subject to requisite governmental approvals. And just this morning, the Company published a flight schedule extension through April 6, 2018, which includes new international service weekly between Indianapolis and CUN that is expected to begin in March 2018 and is also subject to governmental approvals.

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