Southwest Airlines posted a $140 million loss for the third quarter because of accounting charges related to its fuel hedges.
The Dallas-based airline had to report $239 million in non-cash charges as the value of its fuel hedges for 2012 through 2015 had dropped significantly during the third quarter. The loss compares to a $205 million profit in the third quarter of 2010.Revenues grew 35.1 percent to $4.3 billion as Southwest had its first full quarter that included AirTran Airways, which it purchased in May."Despite the cautious economic outlook, our booking trends remain strong," said Southwest chief executive Gary Kelly. "Importantly, business travel has remained stable since spring."Excluding the fuel hedge charge and $23 million in charges related to its integration of AirTran, Southwest had a $122 million profit, or 15 cents a share, beating Wall Street analysts estimates. Analysts, who do not include one-time accounting charge, had expected the company to post a profit of 14 cents per share, according to FactSet Research.Southwest has reported non-cash charges related to its fuel hedges in the past, but usually, the value has not swung as dramatically as those in the fourth quarter. Fuel prices have fluctuated this year, dropping 17 percent during the third quarter, from $95.30 on June 30 to $78.93 on Sept. 30.According to general accounting practices, Southwest can report the value of its fuel hedge when the hedge contract has been settled. But in this case, these hedges did not meet accounting rule requirements and the value of these hedges have to be reported each quarter even though the hedge contract has not been completed.Kelly said that since Sept. 30, its future fuel hedge portfolio has gained back $300 million of its value.Southwest executives are scheduled to have a conference call with analysts and investors at 11:30 a.m. CDT to discuss the earnings results.Andrea Ahles, 817-390-7631
