Southwest Airlines is on track to be the only US major carrier to be profitable for every 2002 quarter, but is bracing for unit costs to inch up next year.

The Dallas-based low-fares carrier says it is cautiously optimistic of reporting a modest profit for the 2002 fourth quarter. For the first nine months of 2002, Southwest netted income of $198.6 million versus $447.6 million in 2001.

Although Southwest has a comfortable $1.94 billion cash on hand, it expects its cost per available seat mile (CASM), held down to 7.4¢ in the third quarter, to rise over the next five quarters.

Chief financial officer Gary Kelly says the company will target a unit cost of 7.5¢, but admits: "We will have to be aggressive to hit our unit cost goal." In addition to annual airport security bills jumping to $200 million from $30 million and war-risk insurance premiums leaping to $120 million from $20 million, the carrier is also fielding higher labour costs. Contracts were agreed with the airline's pilots and mechanics unions this year.

Southwest plans to hold growth at 4-5% in 2003 and will not add any new cities. But it will add frequencies and new city pairs, including nonstop transcontinental routes. The carrier will have taken delivery of 23 new Boeing 737-700s by the end of 2002, plans to take 17 more next year, and 21 in 2004.

Source: Flight International