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Southwest Airlines announces 25% dividend increase, new $1.5b buyback

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Staff writer ▼ | May 14, 2015
Southwest Airlines board increased the company's quarterly dividend by 25 percent and authorized a new $1.5 billion share repurchase program.
Southwest Airlines
Airline   The quarterly dividend will increase to $.075 per share
Under the new $1.5 billion share repurchase authorization, the company intends to repurchase an initial $300 million of Southwest common stock under an accelerated share repurchase program.

The quarterly dividend will increase to $.075 per share from $.06 per share, beginning with the 155th consecutive quarterly dividend declared today to Shareholders of record at the close of business on June 3, 2015 on all shares then issued and outstanding. The dividend will be paid on June 24, 2015.

Annualized, this increased dividend amounts to approximately $200 million based on approximately 667 million1 shares of common stock outstanding.

Gary C. Kelly, chairman of the board, president, and CEO, stated: "Dedicated to returning value to our Shareholders, we returned substantially all of our free cash flow2 to Shareholders in 2014 through $1.1 billion in share repurchases and dividend payments.

"In recognition of our strong financial position, performance, and cash flow outlook, the Board's actions today further reinforce our commitment to create value for our Shareholders. The Board increased our quarterly dividend payment by 25 percent and authorized a new $1.5 billion share repurchase program, representing the largest single authorization in our long-standing history of share repurchase programs.

"Our balance sheet and liquidity remain strong with cash and short-term investments of approximately $3.2 billion1, and a fully available unsecured revolving credit line of $1 billion. We remain the only investment grade U.S. airline by all three credit agencies. Our debt levels are modest, and we continue to prudently manage our invested capital.

"Our future is bright at Southwest Airlines, with 50 destinations we could potentially add to our route map over time. Our 2015 fleet and capacity plans remain unchanged with available seat mile (ASM) growth of approximately seven percent, year-over-year, and roughly 700 aircraft projected by year-end.

"As an extension of our fleet modernization initiatives, we have designated our 31 Boeing firm orders in 2016 as 737-800s rather than 737-700s, which will bring our -800 fleet to 135 by the end of 2016.

"We are planning to grow our total fleet by two percent in 2016, year-over-year. With a significant number of planned retirements, we expect 2016 net aircraft additions to bring our fleet to roughly 715 aircraft by the end of 2016.

"We currently estimate year-over-year ASM growth of six to seven percent in 2016. Approximately five percent of this year-over-year growth represents the full year effect of 2015's expansion. We are delighted with the results of our 2015 expansion efforts, and we remain focused on deploying our capital with a balanced and disciplined approach to produce strong returns to our Shareholders."

For 2015, the company has 19 Boeing 737-800 firm orders, and currently intends to take delivery of 19 pre-owned 737-700 aircraft, including two additional pre-owned 737-700s the company has recently agreed to purchase. For 2016, the company has 31 Boeing 737-800 firm orders, and currently intends to take delivery of four pre-owned 737-700 aircraft.

Based on these fleet plans, the company's firm aircraft capital commitments for 2015 are estimated to be approximately $1.1 billion and in the $1.3 billion to $1.4 billion range for 2016.

The company estimates total capital expenditures in 2015 will be approximately $1.8 billion, excluding assets constructed for others, net of reimbursements, estimated to be in the $50 million to $100 million range