Southwest's profits soar 52% in quarter Higher air fares, lower fuel prices credited


October 24, 1997|By BLOOMBERG NEWS

DALLAS -- Southwest Airlines Co. reported a 52 percent increase in third-quarter earnings yesterday because of higher air fares and lower fuel prices.

Net income rose to $92.5 million, or 60 cents a share, from $60.9 million, or 40 cents, a year ago. Revenue for the quarter climbed 12 percent, to $997.2 million from $891.5 million.

The results beat an average earnings estimate of 58 cents from 17 analysts surveyed by First Call Corp.

"It's a good indicator of another strong performance to come in the fourth quarter," said Brian Harris, an analyst with Lehman Brothers.

Southwest shares closed off 50 cents at $35.3125.

Dallas-based Southwest is the latest U.S. airline to report higher third-quarter earnings.

Most carriers raised fares in the quarter, which, combined with an increase in passengers during the summer travel season, boosted profits.

Southwest's average fare jumped to $72.93 from $66.61 during the quarter.

The number of passengers Southwest flew rose 1.3 percent in the quarter.

Its capacity, measured by available seats, increased 9.7 percent as the airline added 17 planes to its fleet and service to cities in Florida, and to Providence, R.I.; and Jackson, Miss.

Because of the increased capacity, only 65.8 percent of Southwest's seats were filled in the quarter, down from 70 percent a year ago.

The profit gains offset higher taxes. Like other airlines, Southwest paid a 10 percent federal excise tax on tickets that wasn't in effect last year.

The low-fare carrier trimmed its costs, already among the lowest in the industry, to 7.36 cents a mile for each seat from 7.52 cents. The airline attributed most of the decline to fuel prices, which fell an average of 11.7 percent in the quarter.

Harris said costs may rise in the fourth quarter, particularly maintenance expenses for Southwest's fleet of Boeing 737 jetliners.

Increased revenue could offset the higher costs, he said.

Pub Date: 10/24/97

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