May 14, 2014

Southwest ups stock dividend by 50%

The Dallas-based airline says it is sticking with plans to add nonstop routes from Dallas Love Field in October when the Wright Amendment expires.

Southwest Airlines will share more of its profits with shareholders.

At its annual shareholder meeting Wednesday in Dallas, the carrier increased its quarterly dividend by 50 percent to 6 cents a share. The company also authorized a new share repurchase program of $1 billion.

Under the airline’s previous repurchase program, it has bought back $1.7 billion in shares since August 2011.

Chief Executive Gary Kelly said it has reduced outstanding shares by 15 percent. With the new program, Southwest will initially buy back $200 million worth of its common stock.

“Our balance sheet is very strong and our liquidity is very strong,” Kelly told shareholders at the Crescent Hotel in Dallas.

The company’s shares (ticker: LUV) closed down 7 cents at $24.91, mirroring a decline in stocks overall Wednesday.

In reviewing the carrier’s operations over the past decade, Kelly told shareholders that because of higher fuel costs, Southwest has transformed itself from a short-haul carrier that served only 58 destinations in 2001 to a more versatile airline serving 96 cities.

“Higher fares means fewer people fly. High fuel costs mean higher fares. Short-haul markets have been especially impacted over the past 12 years,” Kelly said.

With the integration of AirTran Airways, which it bought in 2011, expected to be complete by the end of the year, Kelly said the Dallas-based airline continues to have growth opportunities, particularly in the near-international market with places like Canada, Mexico and Central America.

“We have more opportunities than we have airplanes over the next four or five years,” Kelly said.

Part of the growth will come at Southwest’s headquarters airport, Dallas Love Field, as the airline adds destinations and longer flights when the Wright Amendment restrictions expire in October.

Kelly said he is disappointed that Dallas awarded two gates to competitor Virgin America.

But he said his airline is moving forward with plans for its 16 gates at Love Field. Southwest had announced that it would launch nonstop flights to 15 new destinations in October.

“We haven’t made any material changes to what we were thinking then versus now,” Kelly said when asked whether losing the two gates to Virgin America changed its plans. “Just stay tuned as we will very soon get our fares and schedule announced.”

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