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Southwest Earned 12 Cents a Share in Fourth Quarter

Discount carrier Southwest Airlines reported a fourth quarter profit in line with the consensus estimate.

Southwest said it earned $96 million in the last three months of 2006, or 12 cents a share, compared with $81 million, or 10 cents a share in the same quarter a year ago. The profit matched the estimate of analysts polled by Thomson First Call.

Revenue rose 15% from a year ago, to $2.3 billion, about in line with expectations.

The airline also said outlook for 2007 is favorable and that it hopes to exceed its target for 15% earnings-per-share growth, excluding special items.

Airlines are experiencing a fragile recovery. Several of the largest airlines are expected to report their first annual profit in about six years. The industry is being helped by a stronger worldwide economy, which has allowed many of the companies to increase ticket prices in order to offset higher fuel charges.

This is likely to make the larger carriers more fierce competitors for low-costs carriers such as Southwest.

One of Southwest's advantages has been hedging against high fuel prices. But that would be less of a benefit if oil prices continue to slide. Southwest said it is 95% hedged for 2007 at $50 per barrel.

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