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Southwest Airlines Ratios

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Southwest Airlines was ranked the seventh-largest U.S. airline, according to revenue passenger miles (RPM). Southwest posted a record annual profit for the 6th consecutive year and profit for the 25th year straight. To continue future company domination in the low-fare market, Southwest strategies to grow the list of destination cities, increase services to those towns already being covered and increase the number of actual aircraft. Financial managers and investors used various ratios and factors to analyze and forecast the profitability and efficiency of any businesses. As one type of business, Southwest Airlines has no exceptions. Listed in this section are the factors used for the financial analysis of Southwest Airlines. The most widely …show more content…

Passenger revenues reached a record in 2016 of $18.3 billion, up 3.6 percent from 2014’s which was $17.7 billion. Operating revenues increased 6.5 percent, year-over-year, to a record of $19.8 billion. Also, Operation expenses dropped down from $16,380 million in 2014 to $15,740 million in 2015 financial years. A factor that has had the greatest impact on this – the low oil prices in last two years. However, high revenue results were driven by high demand for a customer friendly and low fares as well as recorded passengers carried, and a record annual load factor of 83.6 percent. For example, Revenue Passenger Miles (RPM) only in Dallas was increased by 150% since 2014, from 118 flights to 16 non-stop destinations to 180 flights with 50 non-stop destinations in 2015. Also, considering the historically large percentage of company network under development, 7.2 percent increase in available seat miles (ASMs), 4.0 percent longer average stage length, and higher average seats per trip. The operating revenue per ASM (unit revenue) performance was solid, particularly in a flexible yield environment that existed since May 2015. Southwest Airlines increased freight and other revenues in 2.3 percent and 51.6 percent, respectively, compared with 2014. Summary highlighted in the below

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