Southwest CEO: Demand strong despite Ebola scare

Earnings beat lifts LUV

Southwest Airlines is the latest air carrier to turn in better-than-expected third-quarter earnings as fuel costs spiraled down.

Southwest on Thursday posted earnings of 55 cents a share, 2 cents better than analysts had expected. Revenue was $4.8 billion for the quarter.

The 27 percent rise in quarterly profits reflected an increase in passenger boardings and lower fuel costs.

"For us, a lot of things are coming together here in 2014," Southwest CEO Gary Kelly said on CNBC's "Squawk Box." "From a macro perspective, the economy's been more stable this year, energy prices have been very stable for close to the last two years until the recent drops. And then travel demand has been very strong."

Despite being headquartered in Dallas, Kelly said the company had not seen any downturn in passenger demand following several cases of Ebola in the area. He also said concerns over the disease were not necessarily the only reason that the company's stock recently declined despite falling oil prices.

"There are different factors. Declining oil prices actually present a concern to many in the investment community that economies around the world are weakening and therefore travel demand will weaken. But that has not materialized, and I don't expect that," said Kelly.

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Southwest realized modest gains from oil hedging in the third quarter, according to Kelly, who added that the company is in a strong hedging position through 2018.

Analysts had expected the company to report earnings of 53 cents a share on $4.79 billion in revenue, according to a consensus estimate from Thomson Reuters.

A Southwest Airlines airplane departs Ronald Reagan National Airport in Washington.
Andrew Harrer | Bloomberg | Getty Images

Southwest Airlines' stock was about 2 percent higher in late morning trading. (Get the latest quote here.)

Along with other U.S. airlines, Southwest raised base fares on many domestic flights last week even though it's getting a windfall from lower fuel prices.

Airlines: Dropping fuel costs, higher ticket prices

JetBlue Airways raised fares by $4 per round trip on a small number of routes last week, and Delta Air Lines picked up and greatly expanded the breadth of the increase, according to FareCompare.com CEO Rick Seaney and JPMorgan analyst Jamie Baker.

The move got an important boost when Southwest matched it a day later. Other airlines often drop price hikes if they are resisted by Southwest, which carries the most domestic passengers.

—The Associated Press and Reuters contributed to this report.