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Higher fares can’t save Southwest’s Q4 profit

Jan. 24, 2013, Dallas, Tx. - Southwest Airlines Co. says fourth-quarter earnings fell by nearly half on higher spending for fuel, labour and maintenance.


January 24, 2013
By Carey Fredericks

The airline's revenue rose slightly, however, as the average fare climbed almost $8 higher than a year ago.

Southwest also said that bookings for the first three months of 2013 look strong. It said that based on bookings and ticket prices so far, a key revenue measure should rise by 2 per cent to 3 per cent in January compared with the same month last year.

Southwest, the nation's fourth-biggest airline, said Thursday that net income was $78 million, or 11 cents per share. That's down from $152 million, or 20 cents per share, a year earlier.

Excluding items such as fuel contracts, the net income would have been 9 cents per share, beating the 7-cents-per-share forecast among analysts surveyed by FactSet.

Revenue ticked up 1.6 per cent to $4.17 billion but fell short of the $4.20 billion that analysts expected.

Expenses rose faster, however, by 3.1 per cent. That includes a 4.5 per cent increase in labour costs and a 13 per cent jump in maintenance as the airline continued to overhaul the cabins inside many of its planes.

Spending on fuel, the airline's biggest expense, rose a modest 0.7 per cent. Southwest estimated that its fuel bill in the first quarter, which ends March 31, will drop to $3.30 per gallon from $3.44 in the first quarter of 2012, which CEO Gary Kelly called "an encouraging trend.''

The average fourth-quarter fare on Southwest and its AirTran Airways subsidiary was $148.02, up 5.4 per cent from $140.38 a year earlier.

Passengers flew 1.4 per cent fewer miles on Southwest than a year earlier, and planes were less full — 79.6 per cent occupancy, down from 80.5 per cent.

For all of 2012, Southwest earned $421 million, up from $178 million the year before and its 40th straight profitable year, which Kelly said was "a remarkable feat and a record unmatched in the airline industry.''


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