Southwest Airlines' passenger revenue increased 1.6 percent
year over year to $4.7 billion in the third quarter, which CEO Gary Kelly said
is "very strong" but also "challenging to interpret."
Hurricanes Harvey and Irma, as well as the Mexico City
earthquake, caused about 5,000 flight cancellations and a $100 million hit in
revenue for Southwest during the quarter, pushing unit revenue from flat into
the negative, Kelly said. Southwest faced a number of additional
"drags" during the quarter, including retirement of its Boeing
737-300 fleet as it began to introduce the Boeing 737 Max 8.
"We have a more aggressive schedule per aircraft
because of the Classic fleet grounding," Kelly said. "That does
present some drag, although overall, we'll definitely have a cost
benefit."
Other one-time hits to revenue and yield during the quarter
included adjustment to Southwest's new Amadeus-based
revenue system and a longer-than-usual extension of the carrier's summer
schedule, he said.
Traffic rose 2.5 percent year over year in the quarter, and
Southwest increased capacity 3.1 percent. As such, its load factor declined 0.5
percentage points to 84.8 percent. The average fare declined 2.2 percent to
$143.67.
Southwest reported a net income of $503 million for the
quarter, up from $388 million in the third quarter of 2016. Last year's third-quarter
net income included a $180 million hit from fuel contracts and related income
tax, which was much lower this year, so adjusted net income decreased 9.3
percent year over year.
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