Southwest Airlines reports profit for sixth straight quarter

It was a close call, but Southwest Airlines Co. was able to report a profit for the sixth consecutive quarter Thursday despite higher fuel prices.

The Dallas-based airline’s profit was also hurt by bad weather and the additional costs of consultants hired to manage the AirTran Holdings merger.

Southwest reported earnings of
$5 million, or 1 cent per share, for its first quarter ended March 31, compared with earnings of $11 million, or 1 cent per share, a year earlier.

Revenue rose 17.9 percent to $3.1 billion from $2.63 billion.

Southwest is the dominant airline at McCarran International Airport, operating 1,535 flights weekly to and from Las Vegas, which equals about 46 percent of the airport’s activity.

Southwest President and Chief Executive Officer Gary Kelly said the $1.4 billion purchase of AirTran Airways was expected to close on May 2.

Spending on fuel jumped 26.5 percent from a year ago to more than $1 billion. The company paid $2.96 per gallon for fuel, which was expected to rise to $3.35 per gallon in the second quarter.

Southwest earlier this week joined other airlines in raising most U.S. prices by $10 a round trip.

In a statement, Southwest said that without costs associated with its AirTran purchase, it would have earned 3 cents per share. That matched the forecast of analysts surveyed by Yahoo Finance.

Government antitrust regulators have been reviewing the proposed merger. A Southwest executive, Bob Jordan, will become AirTran’s president when the deal is officially closed.

Southwest has said it will take two years to fully combine the airlines. The acquisition of AirTran was expected to net annual synergies of about $400 million by 2013.

Acquiring AirTran will give Southwest access to the largest market it doesn’t serve now, Atlanta. It would also give Southwest more gates at New York’s LaGuardia International Airport and access to Ronald Reagan National Airport just outside Washington, D.C.

During an earnings conference call, Kelly stressed that “safety is our duty and top priority” and that “no airline has a better safety record than Southwest Airlines.”

Kelly’s comments were in response to the April 1 incident in which a plane bound for San Jose, Calif., from Phoenix made an emergency landing in Yuma, Ariz., after a 5-foot hole opened in the roof shortly after takeoff.

Analysts had expected Southwest to be the only airline to show a quarterly profit.

Rival JetBlue reported a first-quarter profit of $3 million on Thursday, reversing a loss of $1 million in the same quarter a year ago. Quarterly revenue at the airline, which also operates at McCarran International, jumped 16 percent to $1.01 billion from $871 million.

United Continental Holdings posted a $213 million first-quarter loss. AMR Corp., the parent of American Airlines, on Wednesday reported a $436 million first-quarter loss.

Delta Air Lines and US Airways are scheduled to report quarterly earnings next week.

Shares of Southwest closed down 32 cents, or 2.75 percent, to $11.31 on heavy volume of 15.2 million shares traded Thursday on the New York Stock Exchange.

Contact reporter Chris Sieroty at
csieroty@reviewjournal.com or 702-477-3893.

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