Third-quarter profit takes off at Southwest Airlines

Posted Thursday, Oct. 24, 2013  comments  Print Reprints
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Passengers flew farther and paid higher fares on Southwest Airlines in the third quarter, lifting the Dallas-based carrier to a $259 million profit.

Lower fuel costs also bolstered profits, which increased significantly from the third quarter of 2012, when the airline posted a slim $16 million profit. Revenue in the quarter grew 5.5 percent to $4.5 billion, even though the airline carried 4.6 percent fewer passengers.

The average fare grew 11.3 percent to $159.39 while the average length of a passenger’s trip was 1,000 miles, up 4.3 percent. The carrier increased capacity by 1 percent and, as a result, its load factor dropped 1.3 percentage points to 80.8 percent.

Southwest, which bought AirTran Airways in 2011, said it expects to fully integrate AirTran by the end of 2014. About 15 percent of its network is still operating under the AirTran brand.

“We are in the midst of a major merger integration, and despite all of the noise that comes along with that, we’re producing record earnings,” Southwest Chief Executive Gary Kelly said on a conference call with analysts Thursday.

Excluding one-time accounting items, Southwest said, it earned $241 million, or 34 cents per share, which matched Wall Street estimates, according to First Call.

Shares of Southwest (ticker: LUV) increased 61 cents to close at $17.02.

Cowen and Co. analyst Helane Becker said the financial outlook is improving for Southwest as bookings in November and December remain strong.

“We believe Southwest true earnings potential will be seen in 2015, as AirTran will be fully integrated, restrictions from the Wright Amendment go away, and the company introduces international service from Houston Hobby Airport,” Becker wrote in a research note to investors Thursday.

Kelly would not reveal which nonstop routes Southwest may launch when the Wright Amendment restrictions at Love Field end next October. But he said the carrier is ready to fly anywhere domestically from the Dallas airport.

“Gosh, it feels like it’s 1971 all over again,” Kelly said. “We have a lot more opportunities than we have airplanes, so we will be doing our best to prioritize what we do first.”

He also said Southwest would be interested in obtaining more takeoff and landing slots at Washington Reagan and New York LaGuardia airports if American Airlines and US Airways divest slots there to win government approval for their merger. But he said he has not discussed buying these slots with either airline or with the Justice Department.

Separately, United Continental Holdings reported a profit of $379 million as revenue rose 3 percent to $10.23 billion. The airline missed Wall Street earnings expectations as it struggles to integrate United Airlines and Continental Airlines.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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