Southwest’s Kelly and the real bottom line


Even the angels are having pains. Name two airlines that make money: that’s right, Southwest and Allegiant. And Allegiant is really a sort of travel company rather than an airline. So Southwest comes along and puts out another stellar quarter, its 69th profitable earning period. Net earnings of $321 million in the quarter, pumped up by a few special items. Without them, a net of $121 million. Wow, Sort of. Listen to the earnings call and you’ll hear chief executive Gary Kelly tell the tale of the hedges: without Southwest’s famous fuel hedges, the Dallas-based discount king would have lost $134 million in the second quarter. As Kelly said, “Nobody at Southwest Airlines intends to lose money, but I can’t guarantee that won’t be the case.”



Even though legacies and others are cutting about 15% of their capacity on Southwest routes, “we are essentially not growing. Since the end of June and for the balance of 2008, we are trimming some markets, we are adding some flights in other markets, but we are already in a mode where we are not growing Southwest Airlines so it’s not too hard to believe that we will continue that on into 2009. ..Right now, we are not bullish on adding flights at all, versus where we are operating today.” 

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