Tags: US | Southwest | Shareholders

Southwest CEO Calls Fuel Prices Biggest Threat

Wednesday, 19 May 2010 03:19 PM

The CEO of Southwest Airlines says the outlook for 2010 is much better than a year ago, but high fuel prices could spoil it.

Gary Kelly said at the company's annual meeting Wednesday that traffic and revenue trends are improving and bookings through June look strong. Leisure travel has held up well, but business travel is still depressed, Kelly said.

Analysts consider Southwest to be less reliant than other airlines on corporate travelers, who tend to spend more on air travel.

"The biggest risk to Southwest Airlines near-term and long-term is rising jet fuel prices," Kelly said.

Southwest's first-quarter fuel spending jumped 18 percent even though it used 6 percent less fuel than a year ago.

Once a rapidly growing airline, Southwest shrank last year as the recession cut into travel, and Kelly said the company has no plans to grow its fleet significantly.

In a crowded U.S. airline industry, Southwest is trying to stand out by not charging customers for their first two checked bags. Kelly said the absence of bag fees helped Southwest take a larger share of the U.S. travel market.

Kelly had wavered in the past on whether Southwest might charge bag fees, but he was more emphatic Wednesday in ruling out the likelihood, at least for now.

To stress that point, the highlight of the shareholders meeting was an appearance by the ramp workers who starred in Southwest's TV commercials, their chests painted to spell out "Bags fly free."

Shareholders had reason to feel relieved Wednesday. After falling sharply in late 2008, Southwest shares rose 32.6 percent in 2009 and were up 10.6 percent more this year through Tuesday. In midday trading Wednesday, the shares were down 31 cents, or 2.5 percent, at $12.33 — cheaper than the shares of rival airlines that have been posting huge losses in recent years.

A shareholder asked Kelly about speculation that Warren Buffett might be interested in Southwest. Kelly said he hadn't heard anything about interest by Buffett.

"But we're a public company," he said. "People are in and out of our stock all the time."

Buffett would seem like an unlikely buyer. The Berkshire Hathaway founder has described airlines as a terrible investment and once wrote that if a prescient capitalist had been at Kitty Hawk, he could have done others a favor by shooting Orville Wright.

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The CEO of Southwest Airlines says the outlook for 2010 is much better than a year ago, but high fuel prices could spoil it.Gary Kelly said at the company's annual meeting Wednesday that traffic and revenue trends are improving and bookings through June look strong. Leisure...
US,Southwest,Shareholders
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2010-19-19
Wednesday, 19 May 2010 03:19 PM
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