VOL. 128 | NO. 145 | Friday, July 26, 2013
Southwest Airlines' Second-Quarter Profit Slips 2 Percent
DAVID KOENIG | AP Airlines Writer
DALLAS (AP) – Southwest Airlines is getting a small break at the fuel pump, and that's helping it to slightly beat Wall Street expectations for profit.
The company saved 16 cents a gallon on fuel in the second quarter, which added up to $88 million. That made a difference in a quarter during which revenue barely grew.
CEO Gary Kelly said Thursday that demand is still suffering from automatic federal spending cuts that have reduced government travel and from higher taxes, but he said third-quarter trends "are encouraging."
The company's revenue per mile – a closely watched figure in the industry – has been about 3 percent higher this month than in July 2012, and bookings for August and September "also look solid," he said.
Southwest officials declined to comment Thursday on the investigation into an accident this week at New York's LaGuardia Airport.
The National Transportation Safety Board is trying to determine why the nose gear of a Nashville-to-New York Southwest Boeing 737 collapsed upon landing Monday night, causing the plane to skid off the runway with its nose on the ground. Several passengers and flight attendants were treated for injuries.
Through Wednesday, the shares were up 34 percent for the year, nearly the same as the rise in the Arca index of airline stocks.
The stocks have rallied as investors grow more confident about sustained profits in an industry that lost billions last decade. Mergers have reduced competition, the airlines have curtailed flights to push up fares, and they've added revenue from a flock of fees for various services.
Southwest Airlines Co., which owns AirTran Airways, said that second-quarter net income was $224 million, or 31 cents per share, down 2 percent from $228 million, or 30 cents per share, a year ago.
Southwest said that stripping away special items – mostly changes in the value of fuel-hedging bets – it would have earned 38 cents per share in the latest quarter. That's a penny better than analysts surveyed by FactSet were expecting.
Revenue increased less than 1 percent to $4.64 billion. Southwest said that was a second-quarter record, but it fell short of analysts' forecasts of $4.66 billion.
Traffic increased about 3 percent, and the average one-way fare rose less than a buck – to $151.23. The rate of fare increases has slowed from 2011, when airlines raised prices quickly to offset higher fuel costs.
Southwest and AirTran added flights in the quarter, so the average plane was 81.6 percent full, down slightly from 81.9 percent a year earlier. But capacity in June hit a record 85 percent as the summer vacation season hit full stride.
Lower oil prices early in the April-to-June quarter helped Southwest save 6 percent on fuel, its biggest expense, and the company cut maintenance spending by 3 percent, or $10 million. But labor, the second-biggest expense, rose 6 percent, or $76 million.
Kelly said the company was on schedule to repaint AirTran planes in Southwest colors and combine the two carriers by the end of next year. Southwest will complete the update of its reservations system next year, allowing it to handle international flights, he said.
Southwest will begin flying out of Memphis International Airport in November.
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