Southwest Airlines Shares the Wealth With Investors

In another sign of airlines’ profitability, Southwest Airlines is sending more cash to shareholders with a 50 percent bigger dividend and plans to repurchase $1 billion more of its stock. Last week, Delta Air Lines hiked its dividend by a similar amount, to 9¢ per share, and boosted its share repurchase plans to $2 billion.

Southwest will pay 6¢ per share, up from 4¢, and said its prior $1.5 billion buyback program had ended last week. The only U.S. carrier with an investment-grade credit rating, it repurchased $540 million in stock in 2013. It has paid a dividend since 1976. “After the rough decade that Southwest Airlines and its shareholders have endured, today is definitely a cause for celebration,” Southwest Chief Executive Gary Kelly said today at the airline’s annual meeting in Dallas.

Southwest shares have gained 32 percent this year and 78 percent over the past 12 months, outpacing the 58 percent increase of the Bloomberg U.S. Airlines Index.

Southwest will launch its first international service on July 1, with AirTran Airways flights replaced by the parent company. Southwest will retire the AirTran brand by year’s end. It purchased the airline in May 2011. Southwest flies to 96 destinations, and Kelly said the company sees potential service to as many as 50 more. “We have more opportunities than we have airplanes over the next five or six years, and that’s a good thing,” Kelly said.

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