Southwest Airlines Manages To Make Q1 Profit
DALLAS (AP) - By the thinnest of margins, Southwest Airlines Co. says it 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 Thursday 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.
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.
CEO Gary Kelly has said business travel is continuing to strengthen but that leisure passengers may be more sensitive to recent fare increases.
"As airlines try to push fares up to cover fuel costs, I think it's inevitable that you're going to see some pushback" from consumers, Kelly said Thursday on CNBC.
Southwest said that without costs for hiring consultants to advise on the AirTran purchase, it would have earned 3 cents per share. That matched the forecast of analysts surveyed by research firm FactSet.
The company expects revenue per seat mile to rise again in the second quarter. That's a measure of revenue divided by seats times miles flown, and it rose 9.2 percent in the first quarter compared with a year ago but climbed even faster at smaller JetBlue Airways.
Southwest will need the higher revenue because it also said fuel spending will keep rising.
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.
This month, Southwest grounded 79 planes -- about one-seventh of its fleet -- and canceled nearly 700 flights after one of its older Boeing 737 jets sprung a 5-foot hole in the roof. Five other planes were found to have cracks indicating metal fatigue and were repaired.
Rival JetBlue reported a small profit of $3 million on Thursday. United Continental posted a $213 million loss. American Airlines reported a $436 million loss on Wednesday. Delta Air lines and US Airways are scheduled to report quarterly earnings next week.
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