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  • Southwest 10Q Mx Notes
    Posted by Sean Broderick 7:42 PM on Oct 23, 2009

    A few maintenance-related bits pulled directly from Southwest's most recent 10Q:
    • Maintenance materials and repairs expense for the three months ended September 30, 2009 decreased $6 million on a dollar basis compared to third quarter 2008, but increased 2.8 percent on a per-ASM basis compared to third quarter 2008.  The decrease on a dollar basis primarily was due to a decline in engine expense as a result of the decrease in engine hours flown versus the prior year.  Virtually all of the Company’s engine costs are covered by third-party “power-by-the-hour” maintenance agreements in which expense is based on and recorded commensurate with engine hours flown.  The increase on a per-ASM basis primarily was associated with a larger decrease in ASMs than the decrease in expense.  The Company expects Maintenance materials and repairs per ASM for fourth quarter 2009 to be in the .75 cents per ASM range, based on currently scheduled airframe maintenance events and projected engine hours flown.
    • Maintenance materials and repairs expense for the nine months ended September 30, 2009, increased $34 million, or 6.5 percent, on a dollar basis compared to the first nine months of 2008, and increased 11.9 percent on a per-ASM basis compared to the first nine months of 2008.  On both a dollar and a per-ASM basis, the increases compared to the first nine months of 2008 were due to higher engine costs related to the Company’s 737-700 aircraft.  For the first six months of 2008, these aircraft engines had been subject to an agreement in which repairs were performed on a time and materials basis, and there were relatively few repair events for these engines during that period.  This was due to the fact that the 737-700 is the newest aircraft type in the Company’s fleet, and there were not yet a significant number of engines on these aircraft that were due for their first major overhaul.  In late June 2008, the Company transitioned to a new engine repair agreement for these aircraft and since the risk for contractually covered engine repairs has effectively been transferred to a third party, expense is now based on and recorded commensurate with engine hours flown.  The expense for 737-700 engines recognized in the first nine months of 2009 associated with the current agreement significantly exceeded the expense recognized in the first nine months of 2008, when the majority of repairs had been accounted for on a time and materials basis.

    Tags: om99, maintenance, financial, Southwest

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