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Southwest Enjoys Strong Demand; Profit Soars

Southwest Airlines, the leading U.S. low-cost carrier, posted higher quarterly earnings Thursday as more flights and fuller planes boosted revenue and offset higher fuel costs.

Southwest Airlines.
AP
Southwest Airlines.

Southwest, which in late September said costs for the period would increase more than revenue, said third-quarter net profit rose to $162 million, or 22 cents per share. That compared with $48 million, or 6 cents per share, a year earlier, when a security scare weakened airline earnings.

On an adjusted basis, Southwest earned 18 cents per share.

The company said earnings were burdened by a charge of 2 cents per share related to an employee buyout program and 1 cent per share related to an Illinois state income tax change.

Excluding these charges, Southwest's earnings were in line with Wall Street expectations of 21 cents per share, according to Reuters Estimates.

Second-quarter operating revenue rose 10.5 percent to $2.59 billion, helped by an 8.1 percent increase in capacity and fuller planes. Operating expenses rose 12.3 percent, boosted by a 17 percent jump in fuel expenses.

Southwest, the largest U.S. carrier by market value, has slowed its expansion plans and is gearing up to launch new business initiatives, including inflight Internet service and the sale of hotel rooms on its Web site.

In the quarter, Southwest booked gains of $189 million from its fuel-hedging program, which is gradually unwinding, reducing its fuel-cost advantage over other carriers. In the same quarter last year, the company had a fuel-hedging gain of $200 million.

Southwest's share price has fallen about 11 percent over the last 52 weeks.

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