Southwest Manages To Make A 1Q Profit
DALLAS (AP) – By the thinnest of margins, Southwest Airlines Co. made money in the first quarter despite higher fuel prices.
Southwest also says it expects to close its $1.4 billion purchase of AirTran Airways on May 2, increasing Southwest’s size overnight by one-fourth.
Southwest said it earned $5 million, or a penny per share. Not counting one-time costs, Southwest met Wall Street’s expectations.
Of the five biggest U.S. airline companies, analysts expected only Southwest to report a first-quarter profit. United Continental and American Airlines lost a combined $649 million. JetBlue reported a small profit of $3 million. Delta Air Lines and US Airways are scheduled to report next week.
Southwest’s spending on fuel jumped 26 percent from a year ago, to more than $1 billion, surpassing labor as the airline’s biggest cost.
Revenue rose 18 percent, to $3.1 billion.
Southwest is doing a better job than competitors at overcoming high fuel prices with a combination of more passengers — traffic on the discount airline has been growing faster than at bigger rivals — and fare increases. Just this week, Southwest joined other airlines in raising most U.S. prices by $10 per round trip, the seventh broad increase this year.
CEO Gary Kelly said leisure passengers will eventually fly less if fares move too high, but that hasn’t happened yet.
“We wouldn’t have taken a fare increase this week unless we were reasonably confident it would be effective,” he said.
The airline has been setting records for the percentage of seats filled, and Kelly said it won’t scale back plans to add capacity this year.
“We’re not thinking about grounding airplanes, we’re not thinking about furloughing employees, we’re not thinking about making any changes to our 2011 published schedules,” he said.
Southwest has been adding new cities to its route network, and it will add Atlanta — the biggest U.S. city it doesn’t serve yet — and destinations in Mexico and the Caribbean with the AirTran deal.
Government antitrust regulators have been reviewing the deal, which will combine Southwest, the oldest and biggest low-cost airline, with one of its largest low-fare imitators.
Kelly said Thursday the company has talked to regulators and has received no signal that the government will block or put conditions on the deal. A Justice Department spokeswoman said the matter is pending and declined further comment.
A Southwest executive, Bob Jordan, will become AirTran’s president next month. Southwest said it will take two years to fully combine the airlines.
Southwest said that without costs for hiring consultants to advise on the AirTran purchase, it would have earned 3 cents per share in the first quarter, matching the forecast of analysts surveyed by FactSet.
Southwest shares fell 32 cents to close at $11.31.
(Copyright 2011 by The Associated Press. All Rights Reserved.)