Southwest Airlines Posts Q4 Income of $131 Million
DALLAS (AP) - Southwest Airlines Co. is making money on more traffic and higher fares, and it says bookings for January and the rest of the winter look strong.
Southwest said Thursday that it earned $131 million in the fourth quarter, beating analysts' predictions of $116.2 million. Profit increased 13 percent and revenue rose 15 percent from a year ago.
The airline likes to advertise that it offers low fares, but twice this month Southwest went along with fare increases at the other airlines. The average fare on Southwest has jumped 9.1 percent in a year, to $131.17.
The airline industry is on a rebound after getting hammered by falling demand during the recession. Southwest joined Delta in posting a fourth-quarter profit. Although American Airlines parent AMR Corp. lost money, analysts expect all the other major airlines to report profits next week.
But airline executives are spooked by rising fuel prices. Southwest's fuel bill jumped 18 percent in the fourth quarter and it warned that fuel will cost even more in early 2011 -- $2.80 a gallon, up from $2.48 in the fourth quarter.
Southwest, which carries more U.S. passengers than any airline, plans to boost revenue by making its frequent-flier program more appealing to high-dollar business travelers and by expanding its network with the $1.4 billion purchase of AirTran Airways, which is being reviewed by regulators.
The AirTran deal will give Southwest destinations in Mexico and the Caribbean. Southwest also is ordering new, larger planes that could fly to Hawaii.
Jim Corridore, an airline analyst for Standard & Poor's, applauded those moves but said they won't boost revenue fast enough to match rising fuel costs. He cut his estimate of 2011 earnings by 14 percent.
Southwest's fourth-quarter net income equaled 18 cents per share, compared to a gain of $116 million, or 16 cents per share, in the same period last year.
Excluding charges such as costs related to the AirTran deal, Southwest's adjusted net income was 15 cents per share. On that basis, analysts had expected earnings of 16 cents per share, according to FactSet.
Revenue rose to $3.11 billion from $2.71 billion a year ago. Analysts were looking for $3.07 billion.
Southwest, based in Dallas, topped Wall Street's revenue expectations thanks to a 4.4 percent increase in traffic -- miles flown by paying passengers -- and higher fares.
For 2010, Southwest made $459 million on $12.10 billion in revenue, compared with net income of $99 million and $10.35 billion in revenue during 2009. It spent $3.6 billion on fuel last year, an increase of nearly $600 million over 2009.
Southwest shares rose 9 cents to $12.92 in midday trading.
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