Southwest Airlines reported a quarterly profit that topped estimates as higher fares helped blunt rising fuel costs, and its shares rose nearly 3 percent on Thursday.
Fourth-quarter net income at Southwest was USD$152 million, compared with USD$131 million a year earlier.
Revenue rose 32 percent to USD$4.1 billion. Average fares were up 10 percent. Passenger unit revenue was up 8.2 percent in the quarter and Southwest said it expected a 7 percent to 8 percent rise in that metric for the first quarter.
Operating expenses were up about 37 percent, with fuel and oil costs up 59 percent from the year-earlier period.
Southwest said its strong passenger revenue momentum was continuing into the current quarter.
"The industry has set itself up to continue to grow in 2012 but the wild card here is the general economy," said Matthew Jacob, an airline analyst with ITG Investment Research. "We're not seeing any indication that demand for air travel is slowing at this point."
Southwest, the traditional low-fare leader among major US airlines, acquired AirTran last year and gained entry to East Coast cities such as Atlanta, which it had not previously served. Southwest-branded flights will start in Atlanta next month.
The carrier is also upgrading its planes, having reached a deal late last year to buy 208 Boeing 737s, including 150 of the upcoming 737 MAXs that will have new engines. Southwest announced this week that it will upgrade cabin interiors and add six seats to more than 350 existing planes.
The AirTran purchase "is going to be a major game changer for them," said Helane Becker, an analyst with Dahlman Rose.
She said Southwest will face major challenges managing merger expenses and higher energy costs and making sure worker productivity stays at a high level to maintain a competitive cost structure against rivals that have restructured.
Source: Reuters
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