Wed | Jan 23, 2019

Southwest tops forecasts

Published:Thursday | April 30, 2015 | 11:02 PM

Southwest is spending about a buck less on every gallon of fuel, and that's helping the airline post record profits quarter after quarter.

The airline says April bookings have been strong, but it expects a key revenue figure to decline in the second quarter.

Southwest Airlines Co. said Thursday that first-quarter net income tripled from a year ago, to a record US$453 million. The results were slightly better than Wall Street expected.

The biggest reason was fuel. Southwest's fuel bill dropped 33 per cent, thanks to the sharp slide in oil prices since last summer. The airline paid US$2 per gallon, down from US$3.08 a year ago, and the savings added up to US$437 million -- more than the entire increase in profit.

Southwest is also stuffing more passengers on planes by holding growth below the increase in travel demand. Southwest increased passenger-carrying capacity by 6 per cent, but people flew 7 per cent more miles than they did a year earlier, so the average flight was 80.1 per cent full, a record for the usually weak first quarter.

The average one-way fare nudged higher by less than 1 per cent, to US$158.01.

Dallas-based Southwest, the nation's fourth-biggest airline, said it earned 66 cents per share and the first quarter was the eighth straight quarter of record profit.

The results edged the average estimate of 18 analysts surveyed by FactSet, who expected 65 cents per share. A year ago, net income was US$152 million.

Revenue rose 6 per cent to US$4.41 billion, matching the FactSet forecast.

Fuel spending dropped to US$877 million from US$1.31 billion a year earlier. Labour topped fuel as Southwest's biggest expense -- spending on wages and benefits rose 11 per cent to US$1.42 billion.

CEO Gary Kelly said that April bookings have been strong. But, he said, the company faced a difficult job in matching strong results during last year's second quarter.

For the April-through-June quarter, Southwest predicted that a key figure -- revenue for every seat flown one mile -- will decline by about 2 per cent compared with the same period last year.

Southwest shares rose 82 cents to US$43.67 in morning trading. They began the day up 1 per cent in 2015, close to the 2 per cent rise in the Standard & Poor's 500 index. Last year, Southwest clobbered the index by gaining 125 per cent.