Southwest Airlines Reports First Quarter Earnings Up 37.6%

Southwest Airlines' net income for first quarter 1998 increased 37.6 percent to $70.0 million, compared to $50.9 million in first quarter 1997. Diluted net income per share was $.30 in first quarter 1998 compared to $.23 in first quarter 1997.

Total operating revenues for first quarter 1998 increased 6.3 percent to $942.7 million, compared to $887.1 million for first quarter 1997. Revenue passenger miles (RPMs) increased 5.6 percent in first quarter 1998 compared to a 7.2 percent increase in available seat miles (ASMs), resulting in a load factor of 61.2 percent versus the first quarter 1997 load factor of 62.1 percent. The passenger revenue yield per RPM decreased .2 percent to $.1297 from $.1300 in first quarter 1997. Operating revenue yield per ASM decreased .8 percent to $.0836 from $.0843 in first quarter 1997.

Operating expenses per ASM for first quarter 1998 decreased 3.2 percent to $.0737, compared to $.0761 for first quarter 1997, primarily due to a 29.7 percent decline in average jet fuel prices, partially offset by higher aircraft engine overhaul costs.

Herbert D. Kelleher, Chairman, President, and Chief Executive Officer, stated: "I am very proud of our Employees' many accomplishments during first quarter 1998. It is only through our People's continued selfless devotion to making air travel affordable that we continue to produce outstanding earnings for our Shareholders. Because of their unity, dedication, and marvelous Southwest Spirit, Southwest Airlines was recognized during first quarter 1998 by Fortune magazine as the best company to work for in America and as one of the ten most admired companies in America. In addition, our Employees continue to provide superb Customer service, as evidenced by our third consecutive top ranking in the national Airline Quality Rating study, conducted annually by the W. Frank Barton School of Business at Wichita State University and the University of Nebraska at Omaha.

"Our first quarter 1998 earnings of $70.0 million was excellent, up 37.6 percent from last year's record first quarter earnings of $50.9 million. Our passenger revenue growth of 5.4 percent was quite strong considering there was no ten percent ticket tax in effect for most of first quarter 1997. We also enjoyed excellent year-over-year growth in our freight, mail and other revenue.

"We were very pleased with our overall unit cost performance, led by lower jet fuel prices; our hedging program took full advantage of declining prices. Excluding fuel, our unit costs were up 2.2 percent, driven by higher engine repair costs and a $6.5 million increase in Profitsharing and Employee savings plan contributions. Based on current trends, we expect nonfuel unit cost growth again in second quarter 1998.

"Our current outlook for second quarter 1998 is favorable, as we continue to benefit from lower fuel prices and strong demand for our everyday low fares and reliable, high quality Customer service. Based on current traffic and revenue trends, we expect April 1998's load factor to exceed April 1997's load factor of 60.8 percent, resulting in an increase in unit revenue from year ago levels. Thus far, bookings for May and June are also strong.

"We are very excited about bringing our low fares to our 52nd city, Manchester, New Hampshire, beginning June 7, 1998, with nonstop service to Baltimore/Washington, Chicago Midway, Nashville, and Orlando.

"We ended first quarter 1998 with $506.9 million in cash on hand, not including our available and unused bank credit facility of $475.0 million."

This release, as well as past releases, can be accessed on the Southwest Airlines internet site at: http://www.southwest.com

SOUTHWEST AIRLINES CO.
COMPARATIVE CONSOLIDATED OPERATING STATISTICS

CONTACT:
Tammy Romo
Director-Investor Relations
(214) 792-4415