Southwest Airlines posts record profit in second quarter

AP News
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Posted: Jul 23, 2015 8:29 AM
Southwest Airlines posts record profit in second quarter

DALLAS (AP) — Southwest Airlines is packing more passengers on planes than last summer and paying sharply lower prices for fuel. That's adding up to more record profits at the nation's fourth-biggest airline.

The company's shares rose in premarket trading.

Southwest said Thursday that it earned a record $608 million in the second quarter, up 31 percent from a year earlier. It was the airline's ninth straight quarter of record profit.

Excluding one-time items such as employee bonuses and fuel contracts, the company said the adjusted profit was $1.03 per share, a penny higher than analysts expected, according to a survey by FactSet.

Southwest benefited from the sharp drop in oil prices late last year. The airline saved a whopping $420 million, or 29 percent, on jet fuel compared with the same period last summer.

That savings — about $1 per gallon — more than offset a $201 million increase, or 14 percent, in labor costs. Southwest expects fuel costs to be higher in the July-through-September quarter, but still far below 2014 levels.

Revenue rose a modest 2 percent, to $5.11 billion. FactSet said analysts expected $5.14 billion.

CEO Gary Kelly said results through the first six months of the year "are exceptional, and our current outlook for the second half of 2015 is also strong."

The company forecast that a key figure, revenue for every seat flown one mile, would decline 1 percent in the third quarter compared with a year earlier. By comparison, Delta expects that same figure to drop by between 4.5 percent and 6.5 percent.

Southwest passengers have been less likely to find an empty middle seat this summer. For the first half of the peak travel season, the average flight was 84.6 percent full, up from 83.9 percent a year earlier.

While they had less elbow room, there was happy note for passengers — the average one-way fare dipped 3 percent, a savings of more than $5. Southwest has been running huge fare sales at its home airport in Dallas, where it is competing with Virgin America on new long-haul flights and with flights from American Airlines and Spirit Airlines at nearby Fort Worth, Texas.

Southwest also said it renegotiated its credit card agreement with Chase Bank and expects to earn an extra $400 million in revenue during the rest of the year from the new deal and a change in accounting methods.

Shares of Southwest Airlines Co. rose $1.63, or 4.6 percent, to $36.75 in trading before the opening bell. They ended Wednesday's session down 17 percent in 2015, compared with a 3 percent gain in the Standard & Poor's 500 index. Southwest shareholders had a boom year in 2014, when its share price more than doubled.

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David Koenig can be reached at http://twitter.com/airlinewriter