SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions except per share amounts)
(unaudited)
		Three months ended												Six months ended
		June 30,												June 30,
										Percent												Percent
		2007				2006				Change				2007				2006				Change
OPERATING REVENUES:
Passenger		$	2,475			$	2,362				4.8			$	4,587			$	4,300				6.7
Freight			33				38				(13.2	)			63				74				(14.9	)
Other			75				49				53.1				131				95				37.9
Total operating revenues			2,583				2,449				5.5				4,781				4,469				7.0
OPERATING EXPENSES:
Salaries, wages, and benefits			814				786				3.6				1,581				1,502				5.3
Fuel and oil			607				518				17.2				1,171				1,019				14.9
Maintenance materials and repairs			154				119				29.4				291				224				29.9
Aircraft rentals			40				39				2.6				79				80				(1.3	)
Landing fees and other rentals			140				126				11.1				276				246				12.2
Depreciation and amortization			137				127				7.9				272				250				8.8
Other operating expenses			363				332				9.3				699				648				7.9
Total operating expenses			2,255				2,047				10.2				4,369				3,969				10.1
OPERATING INCOME			328				402				(18.4	)			412				500				(17.6	)
OTHER EXPENSES (INCOME):
Interest expense			29				34				(14.7	)			58				68				(14.7	)
Capitalized interest			(14	)			(14	)			-				(27	)			(26	)			3.8
Interest income			(14	)			(21	)			(33.3	)			(27	)			(39	)			(30.8	)
Other (gains) losses, net			(120	)			(112	)			n.a.				(188	)			(114	)			n.a.
Total other expenses (income)			(119	)			(113	)			n.a.				(184	)			(111	)			n.a.
INCOME BEFORE INCOME TAXES			447				515				(13.2	)			596				611				(2.5	)
PROVISION FOR INCOME TAXES			169				182				(7.1	)			225				217				3.7
NET INCOME		$	278			$	333				(16.5	)		$	371			$	394				(5.8	)
NET INCOME PER SHARE:
Basic			$ .36				$ .42								$ .48				$ .49
Diluted			$ .36				$ .40								$ .47				$ .47
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic			769				798								778				800
Diluted			780				825								790				831

 

SOUTHWEST AIRLINES CO.
RECONCILIATION OF REPORTED AMOUNTS TO NON-GAAP ITEMS (SEE NOTE)
(in millions, except per share amounts)
(unaudited)
		Three Months Ended												Six Months Ended
		June 30,												June 30,
										Percent												Percent
		2007				2006				Change				2007				2006				Change
Fuel and oil expense - unhedged		$	780			$	716							$	1,422			$	1,333
Less: Fuel hedge gains included in fuel and oil expense			(173	)			(198	)							(251	)			(314	)
GAAP fuel and oil expense, as reported			607				518				17.2				1,171				1,019				14.9
Add/(Deduct): Impact from current period settled contracts
included in Other (gains) losses, net			(9	)			(28	)							(26	)			(10	)
Add/(Deduct): Fuel contract impact recognized in earnings
in prior periods for contracts settling in the current period			9				1								40				(34	)
Fuel and oil expense - economic basis		$	607			$	491				23.6			$	1,185			$	975				21.5
Operating income, as reported		$	328			$	402							$	412			$	500
Add/(Deduct): Impact from current period settled contracts
included in Other (gains) losses, net			9				28								26				10
Add/(Deduct): Fuel contract impact recognized in earnings
in prior periods for contracts settling in the current period			(9	)			(1	)							(40	)			34
Operating income - economic fuel basis		$	328			$	429				(23.5	)		$	398			$	544				(26.8	)
Other (gains) losses, net, as reported		$	(120	)		$	(112	)						$	(188	)		$	(114	)
Add/(Deduct): Mark-to-market impact from fuel contracts
settling in future periods			129				88								200				130
Add/(Deduct): Ineffectiveness from fuel hedges settling
in future periods			(4	)			7								(9	)			(4	)
Add/(Deduct): Impact from current period settled contracts
included in Other (gains) losses, net			9				28								26				10
Other (gains) losses, net - economic fuel basis		$	14			$	11				n.a.			$	29			$	22				n.a.
Net income, as reported		$	278			$	333							$	371			$	394
Add/(Deduct): Mark-to-market impact from fuel contracts
settling in future periods			(129	)			(88	)							(200	)			(130	)
Add/(Deduct): Ineffectiveness from fuel hedges settling in
future periods			4				(7	)							9				4
Add/(Deduct): Fuel contract impact recognized in earnings
in prior periods for contracts settling in the current
period			(9	)			(1	)							(40	)			34
Income tax impact of unrealized items			51				36								88				36
Net income - economic fuel basis		$	195			$	273				(28.6	)		$	228			$	338				(32.5	)
Net income per share, diluted, as reported		$	.36			$	.40							$	.47			$	.47
Add/(Deduct): Impact of fuel contracts, net of income taxes			(.11	)			(.07	)							(.18	)			(.06	)
Net income per share, diluted - economic fuel basis		$	.25			$	.33				(24.2	)		$	.29			$	.41				(29.3	)
Note regarding use of non-GAAP financial measures
The non-GAAP items referred to in this news release are provided as supplemental information, and should not be relied upon as alternative measures to
Generally Accepted Accounting Principles (GAAP). These non-GAAP measures include items calculated by the Company on an "economic" basis, which
excludes certain unrealized items that are recorded as a result of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", as amended.
The unrealized items consist of gains or losses for derivative instruments that will settle in future accounting periods or gains or losses that have been
recognized in prior period results, but which have settled in the current period. This includes ineffectiveness, as defined, for future period instruments and
the change in market value for future period derivatives that no longer qualified for special hedge accounting, as defined in SFAS 133.
The Company's management utilizes both the GAAP and the non-GAAP results in this news release to evaluate the Company's performance and believes
that comparative analysis of results can be enhanced by excluding the impact of the unrealized items. Management believes in certain cases, the Company's
GAAP results are not indicative of the Company's operating performance for the applicable period, nor should they be considered in developing trend analysis
for future periods. In addition, since fuel expense is such a large part of the Company's operating costs and is subject to extreme volatility, the Company
believes it is useful to provide investors with the Company's true economic cost of fuel for the periods presented, based on cash settlements from hedging
activities, but excluding the unrealized impact of hedges that will settle in future periods or were recognized in prior periods.

 

 

SOUTHWEST AIRLINES CO.
COMPARATIVE CONSOLIDATED OPERATING STATISTICS
(unaudited)
		Three months ended												Six months ended
		June 30,												June 30,
		2007				2006				Change				2007				2006				Change
Revenue passengers carried			23,442,019				21,999,256				6.6	%			43,402,952				41,198,739				5.4	%
Enplaned passengers			26,889,424				25,306,858				6.3	%			49,792,497				47,322,342				5.2	%
Revenue passenger miles (RPMs) (000s)			19,018,769				17,843,848				6.6	%			35,127,840				33,124,345				6.0	%
Available seat miles (ASMs) (000s)			24,982,676				22,883,984				9.2	%			48,661,051				44,963,442				8.2	%
Load factor			76.1	%			78.0	%		(1.9)		pts.			72.2	%			73.7	%		(1.5)		pts.
Average length of passenger haul (miles)			811				811				0.0	%			809				804				0.6	%
Average aircraft stage length (miles)			630				619				1.8	%			628				618				1.6	%
Trips flown			290,647				270,947				7.3	%			567,547				533,396				6.4	%
Average passenger fare			$105.60				$107.38				(1.7	)%			$105.68				$104.38				1.2	%
Passenger revenue yield per RPM (cents)			13.02				13.24				(1.7	)%			13.06				12.98				0.6	%
Operating revenue yield per ASM (cents)			10.34				10.70				(3.4	)%			9.82				9.94				(1.2	)%
Operating expenses per ASM (GAAP, in cents)			9.03				8.95				0.9	%			8.98				8.83				1.7	%
Operating expenses per ASM (economic, in cents)			9.03				8.83				2.3	%			9.01				8.73				3.2	%
Operating expenses per ASM, excluding fuel (cents)			6.60				6.68				(1.2	)%			6.57				6.56				0.2	%
Fuel costs per gallon, excluding fuel tax (unhedged)			$2.08				$2.08				0.0	%			$1.95				$1.97				(1.0	)%
Fuel costs per gallon, excluding fuel tax (GAAP)			$1.61				$1.50				7.3	%			$1.61				$1.51				6.6	%
Fuel costs per gallon, excluding fuel tax (economic)			$1.62				$1.42				14.1	%			$1.63				$1.44				13.2	%
Fuel consumed, in gallons (millions)			374				344				8.7	%			726				673				7.9	%
Fulltime equivalent Employees at period-end			33,261				31,734				4.8	%			33,261				31,734				4.8	%
Size of fleet at period-end			500				462				8.2	%			500				462				8.2	%

 

SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)
		June 30,				December 31,
		2007				2006
ASSETS
Current assets:
Cash and cash equivalents		$	1,605			$	1,390
Short-term investments			509				369
Accounts and other receivables			321				241
Inventories of parts and supplies, at cost			182				181
Fuel derivative contracts			633				369
Prepaid expenses and other current assets			56				51
Total current assets			3,306				2,601
Property and equipment, at cost:
Flight equipment			12,330				11,769
Ground property and equipment			1,423				1,356
Deposits on flight equipment purchase contracts			741				734
			14,494				13,859
Less allowance for depreciation and amortization			4,007				3,765
			10,487				10,094
Other assets			1,060				765
		$	14,853			$	13,460
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	746			$	643
Accrued liabilities			2,094				1,323
Air traffic liability			1,122				799
Current maturities of long-term debt			123				122
Total current liabilities			4,085				2,887
Long-term debt less current maturities			1,518				1,567
Deferred income taxes			2,328				2,104
Deferred gains from sale and leaseback of aircraft			113				120
Other deferred liabilities			382				333
Stockholders' equity:
Common stock			808				808
Capital in excess of par value			1,167				1,142
Retained earnings			4,534				4,307
Accumulated other comprehensive income			752				582
Treasury stock, at cost			(834	)			(390	)
Total stockholders' equity			6,427				6,449
		$	14,853			$	13,460