DCR Reaffirms Southwest Airlines
Wednesday, September 29, 1999 04:06
CHICAGO, Sept. 29 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has reaffirmed Southwest Airlines' (NYSE: LUV) senior unsecured debt rating of 'A-' (Single-A-Minus) and equipment pass-through and equipment trust certificates rating of 'A+' (Single-A-Plus) following the company's announcement that its board of directors has authorized a $250 million share repurchase program.
DCR believes that the company has the flexibility to direct cash from operations to repurchase its common stock over an extended period of time. However, all or a portion of the share repurchases would likely be financed with debt should management decide to complete the program in the short term. In either case, the company is not expected to incur leverage that would significantly alter its current credit profile.
LUV benefits from a proven strong business model, consistent earnings and solid credit protection measures in an industry that is inherently volatile. The company's operating formula consists of short-haul, high frequency point-to-point service, a homogenous fleet, high asset utilization and a highly productive work force, all of which contribute to maintaining a low operating cost structure.
Throughout 1999, the company continued to benefit from the addition of Boeing 737-700s to its fleet. The new aircraft are faster and more fuel efficient, which has resulted in savings in fuel, productivity and maintenance expenditures.
During the first half of 1999, EBITDAR coverage reached a high of 3.9 times and lease-adjusted debt-to-capital decreased to 46.8 percent. DCR expects that LUV's operating results will enable the company to maintain strong interest coverages and generate excess cash flows. The ratings take into consideration management's ability to successfully maintain its unique operating strategy and strong corporate culture. Serious deviation from these strategies would hurt the ratings' strength.
SOURCE Duff & Phelps Rating Co
CONTACT: Valerie A. Goetsch, 312-368-2082, goetsch@dcrco.com, or Mark A. Oline 312-368-2073, oline@dcrco.com, both of DCR
Quote for referenced ticker symbols: LUV, DCR
¸ 1999, PR Newswire
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