Southwest CEO Tells CNBC He Doubts Airline Is LBO Candidate

Southwest CEO Gary Kelly played down recent speculation that the airline is a leveraged buyout candidate.

“I don’t think it makes any sense to leverage $9 billion of additional debt on an airline like Southwest," Kelly said on CNBC's "Squawk Box." Kelly said that a buyout “would have to be done in a way that it preserves the special and unique culture that we have at Southwest Airlines and I doubt that it could.”

Southwest shares rose sharply on Wednesday after Roger King, an airline analyst with CreditSights, said in a report that a $15 billion Southwest leveraged buyout was a "no-brainer." Kelly's comments Thursday morning initially sent the stock lower.

"I don't think it makes any sense to leverage $9 billion of additional debt on an airline like Southwest," he said in an interview on the CNBC financial news channel.

Southwest, one of the few U.S. airlines to post consistent profits over the past few years, is under pressure as its hedges, which enabled it to pay below-market prices for fuel, gradually unwind.

Net profit for the largest U.S. airline by market value rose to $93 million, or 12 cents per share, from $61 million, or 7 cents a share, a year earlier.

In a separate segment, CNBC's David Faber said that when you begin to hear speculation about an airline LBO, it's a sign that we could be reaching the top of the LBO market. Faber also said that there has been recent speculation about buyouts of Marsh & McLennan , R.H. Donnelley, Aetna and Electronics Data Systems.

Faber said he does not have information that would support private equity speculation. He does believe that we are reaching the top of the private equity bubble, and lists the Southwest speculation as a key factor.