Southwest's quarterly profit dips 2.1% due to jet-fuel costs, Hurricane Floyd

October 20, 1999|By BLOOMBERG NEWS

DALLAS -- Southwest Airlines Co., the dominant carrier at Baltimore-Washington International Airport, said yesterday that its third-quarter profit fell 2.1 percent as jet-fuel costs rose and Hurricane Floyd forced it to cancel flights.

Net income fell to $127 million, or 24 cents a share, from $129.6 million, or 24 cents a share, a year earlier, matching forecasts. Revenue rose 13 percent to $1.23 billion from $1.09 billion.

Southwest's fuel and oil costs jumped 48 percent to $142.6 million. Fuel costs are among airlines' largest expenses, accounting for as much as 15 percent of operating costs.

"Southwest showed superb revenue growth, but they were obviously hurt by fuel prices," said Candace Browning, a Merrill Lynch & Co. analyst.

Fuel costs also contributed to lower earnings at Delta Air Lines Inc. and Continental Airlines Inc., which were announced Monday. Dallas-based Southwest particularly was affected because it hedged only about 30 percent of its second-half fuel purchases, down from about 80 percent in the first half.

Hedging involves locking in prices in advance and hoping they don't fall.

Fuel costs will have a greater impact on Southwest in the fourth quarter because it doesn't have any price hedges in place, said Glenn Engel, a Goldman, Sachs & Co. analyst. Still, the carrier is benefiting from its stronger market share in the western United States, he said.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.