Try to think of an industry with which you are familiar that has routinely suffered financial losses in recent years. For many people, one of the first to come to mind is the airline industry. Many of the major carriers have not only reported large losses but also have filed for bankruptcy.
Southwest Airlines is one of very few carriers that did not contribute to the dismal record posted by the airline industry as a whole. According to the company’s web site, the Dallas based carrier is the lone profitable airline throughout the worst five year period in the his tory of the industry. In fact, 2006 marked the 34th consecutive year that Southwest Airlines was profitable, a record few companies in any industry can claim. As shown on the accompanying comparative income state ments, bottom line net income reached nearly $500 mil ion in 2006.
How has the company been able to post a record that is the envy of its peers? By now, you know that in its simplest form, earnings (or net income) is the result of deducting expenses from revenues. The first line on the comparative income statements begins to tell the story of the company’s success. The company has historically offered some of the lowest fares in the industry, and customers have responded by regulatory
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Porter Norton….pdf