Project Paper of Finance Analysis Management

Southwestern Airlines Revenue Analysis

                                               2010                2009                2008                2007               2006

Revenue                                  11,614.0          10,010.0          10,694.0          9,587.0            8,884.0

Other Revenue, Total               490.0               340.0                 329.0              274.0              202.0

Total Revenue                        12,104.0           10,350.0          11,023.0          9,861.0            9,086.0

Cost of Revenue, Total            9,062.0            8,135.0            8,590.0            7,235.0            6,311.0

Gross Profit                             2,552.0            1,875.0           2,104.0            2,352.0            2,573.0

Retrieved from, 2011

Southwestern Airlines Company provides the scheduled air transportation across the United States in a huge market. It thus, provides point-to-point transportation rather than hub and spoke. The above table shows the recent analysis that shows the company’s performance over the course of five years in the industry, in matters of revenue, and profit, as well as the revenue costs. The data provided shows a steady growth increase in the numbers across the years. The only aspect of the data that does not show much of an improvement is the gross profit recorded per year. In fact, it has been showing fluctuation and dipped in 2009.

However, this is understandable due to the hit everyone took when the global crisis came along at that time. Nevertheless, it wasted no time getting back on its feet. In this way, it exhibits a lot of promise due to the figures that almost top the highest recorded figures for gross profit. On news that is more recent it seems that the largest revenue attained by the company in 2010 was in the first quarter and stood at 2.63 billion, which was greater in comparison by 8 percent to the second quarter of the year. It showed mixed results in that year because the third quarter recorded about 3.19 billion in revenue (Airlineberg, 2011). This went on to decrease to 3.16 billion in the last quarter of that financial year. It would seem that the financial year was a bit unstable when it came to productivity, which can only make an investor assume instability as part of the problem. However, this is not such a big problem as this are impressive figures being dealt with and thus would require a bit of leeway in the fluctuation rates.

Expenses and Income Before and After Taxation

                           2010                    2009                  2008                   2007                   2006

Other Operating Expenses, Total






Operating Income












Interest Income (Expense), Net Non-Operating






Gain (Loss) on Sale of Assets






Other, Net






Income Before Tax












Income Tax - Total






Income After Tax






Retrieved from, 2011

When it comes to income taxes and the revenue generated from the airline, most do not know how much of their fare is subtracted from the total. The basic fare on average totals up to 200 dollars. The federal excise tax accounts for about 7.5 percent while the security fee and the flight segment tax both account for 10 and 15 dollars respectively. The former came because of the September 11 terrorist attacks on the United States (Airlineberg, 2011).

Income totals without the tax deductions seem to increase in a similar manner to that of the data shown before on revenue analysis. However, the data stoops during the years of 2008 and 2009 to indicate clearly, when the global crisis hit and this would have affected earnings thus. People usually abstain from what they consider extravagant means of transport when they are struggling economically. However, the recovery period shows regain of the former strength that the airline once possessed. Issues of whether one should invest should be determined in the way of a worst-case scenario.

 The case was the global economic crisis. It tested all companies but the only ways to determine each company’s stability was of one were to check the recovery data and period, which it took to do so. Overall, it would be pertinent to put the company’s position as strong in the financial sense, because it maintained a 33 consecutive year streak as of 2005. The airline was able to maintain a strong financial position in the five years prior to 2006 when many other airlines where struggling to stay afloat. However, it has quite a lot of cost advantages as compared to the other airlines.

This is, as a result, of the extensive fuel hedging that is considered and makes the cost advantage of the company raise considerably more than that of other rival companies. Even when comparing the company to other discount enterprises in the same field, the airline still has a cost advantage despite the other new discount airlines that invest in low maintenance materials and repair.

In 2005, the southwest airlines fuel hedges cover about 85 percent of the fuel use but by 2009, they will only be accountable for 25 percent (Bundgaard, Bejjani and Helmer, 2006). The annual reduction occurring on the hedge costs will significantly increase the effective costs and cost per available seat mile. This applies to a situation where the indirect power that the jet fuel suppliers have over the airlines has severely increased. At the same time, this situation has lessened the influence of the airframe suppliers as well as the power of labor unions. At this time, only two hubs exist as suppliers of commercial airframes, and these are Boeing and Airbus.


Overall, the company has a strong outlook and the strategy is to run point-to-point operations to highly profitable destinations the strategy destinations. The strategy has generated strong generated returns for the company, however; there are still concerns of the operations strategy longer term sustained growth potential. At the time, the only means for growth under the southwestern current growth operations strategy is to enter the new markets upon which it will increase the available seat miles. However, there is still concern that as the company enters new growth markets; these will not be as profitable as they were anticipated to be in the first place.

Whether or not this is true, the company has a reputation for being quite stable and resilient. The results of financial data taken after the global economic downturn and the data for the slump period in the early parts of the slump period in that decade, proves that the corporation is not about to sink and has proven worthy of recognition. In other words, investment in the company would be a wise decision. 

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