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Southwest’s future capacity expansion plans and commitments

Tejeshwari Chandrappa

Southwest Airlines – second quarter earnings overview (Part 10 of 12)

(Continued from Part 9)

Capacity expansion plans

As of June, 2014 Southwest had 683 aircrafts. During the second quarter, Southwest took delivery of 15 aircrafts out of which 12 were Boeing 737-800 and 3 were 737-700 aircrafts and for the second half of the year plans to add another nineteen 737-800 and eight 737-700 aircrafts. Total number of aircrafts decreased from 698 in 2Q13 to 683 in 2Q14 reducing Available Seat Miles (or ASMs) by 0.4% in 2Q14. Although capacity decreased, there was an improved efficiency as seen in the increase in load factor. Load factor is the percentage of total available seats occupied. In 2Q14, Southwest’s (LUV) load factor was 83.9% compared to Delta’s (DAL) 86.3%, American’s (AAL) 84%, United’s (UAL) 85.3%, and JetBlue’s (JBLU) 84.6%.

The table above provides details of the aircraft delivery schedule as of June 2014. Financial commitments with regard to these orders totaled $11.5 billion out of which $535 million is due in 2H14 and $827 million in 2015.  With this plan, it expects ASMs to increase by 2% in 3Q14 but remain flat for FY14 as compared to FY13.

Continue to Part 11

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