Tags: Southwest | Airlines | profit | earnings

Southwest Airlines Profit Soars 42% on Higher Fares

Thursday, 19 Jul 2012 10:02 AM

Rising fares are helping Southwest Airlines Co. more than offset the high cost of jet fuel.

The airline said Thursday that second-quarter profit soared 42 percent on record revenue.

The average one-way fare topped $150, up 5 percent from last summer. Plenty of passengers were willing to pay the higher prices as the peak vacation season began — traffic measured in miles traveled also rose 5 percent.

Southwest, which also runs AirTran Airways, earned $228 million, or 30 cents per share. Excluding special items, the company said it would have earned 36 cents per share, while analysts expected 33 cents per share, according to FactSet.

Revenue rose 11.6 percent to $4.62 billion, above analysts' forecast of $4.59 billion.

Southwest added flights compared with last year, which resulted in a few more empty seats. The average flight was 81.9 percent full, compared with 82.3 percent in early summer 2011.

Southwest has scaled back more-ambitious growth plans until the economy and Southwest's profit margins improve. Earlier this year, the company decided to delay delivery of 30 new Boeing 737s due in 2013 and 2014 by four years. It also will lease smaller planes used by AirTran to Delta Air Lines Inc. starting next year.

"For now, our goal is to keep our fleet relatively flat," CEO Gary Kelly said Thursday.

Thanks to a dip in fuel prices that began in April, Southwest paid slightly less per gallon in the second quarter than it did a year ago. Still, fuel prices are high by historical standards, and with more flights, the airline's fuel spending rose 3 percent to $1.58 billion. Labor costs rose faster — nearly 9 percent — to $1.22 billion.

Southwest carries more U.S. passengers than any airline, although others are bigger by the industry's standard measure of passenger-carrying capacity because they offer international flights. Southwest doesn't fly to foreign destinations, although AirTran does.

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