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Fresh Ebola fears hit airline stocks

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Southwest Airlines' 2Q profit slips 2 percent
 

 

DAVID KOENIG, AP Airlines Writer

 

DALLAS (AP) — Southwest Airlines is getting a small break at the fuel pump, and that's helping it beat Wall Street expectations for profit.

CEO Gary Kelly said Thursday that travel demand was still suffering from "the lingering effects" of automatic government spending cuts earlier this year and higher taxes, but he said third-quarter trends "are encouraging."

The company's revenue per mile — a closely watched figure in the industry — has been about 3 percent higher this month than in July 2012, and bookings for August and September "also look solid," he said.

Southwest Airlines Co., which owns AirTran Airways, said that net income in the second quarter was $224 million, or 31 cents per share, down 2 percent from $228 million, or 30 cents per share, a year ago.

Southwest said that stripping away special items — mostly changes in the value of fuel-hedging bets — it would have earned 38 cents per share in the latest quarter. That's a penny better than analysts surveyed by FactSet were expecting.

Revenue increased less than 1 percent to $4.64 billion. Southwest said that was a second-quarter record, but it fell short of analysts' forecasts of $4.66 billion.

Traffic increased about 3 percent, and the average one-way fare rose less than a buck — to $151.23. The rate of fare increases has slowed from 2011, when airlines raised prices quickly to offset higher fuel costs.

Southwest and AirTran added flights in the quarter, so the average plane was 81.6 percent full, down slightly from 81.9 percent a year earlier. But capacity in June hit a record 85 percent as the summer vacation season hit full stride.

Lower oil prices early in the April-to-June quarter helped Southwest save 6 percent on fuel, its biggest expense. But labor, the next biggest item, rose 6 percent.

Kelly said the company was on schedule to repaint AirTran planes in Southwest colors and combine the two carriers by the end of next year. Southwest will complete the update of its reservations system next year, allowing it to handle international flights, he said.

Its shares finished at $13.76 on Wednesday.

 

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