Southwest profit rises 27 percent as airline travelers seek bargains

First quarter strong in weaker economy

April 20, 2001|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Southwest Airlines said yesterday that its first-quarter earnings rose 27 percent as travelers shopped for cheaper fares amid a weakening economy that has hurt most of the airline industry.

The Dallas-based company, the largest carrier at Baltimore-Washington International Airport, made $121 million in the three months that ended March 31, compared with $95.6 million in the corresponding period last year. Profit per share increased from 12 cents to 15 cents after accounting for a 3-for-2 stock split.

Revenue increased 15 percent to $1.43 billion.

Houston-based Continental Airlines was the only other major carrier that showed gains in the first quarter as the industry was hit by a slip in business travel and rising fuel costs.

Southwest President and Chief Executive Officer Herbert Kelleher said he expects his company to remain "solidly profitable" through the current quarter as well.

"While Southwest is not completely immune to an economic downturn, we are uniquely positioned to do comparatively well as a result of our low cost structure," Kelleher said in a statement.

The number of passengers per Southwest plane was slightly less in February and March than a year ago, company officials said, but not enough to hurt the bottom line, as increasingly cost-conscious travelers have abandoned other airlines for lower fares.

"Because they are so competitive, they actually pick up traffic when you go into an economic slowdown and people are looking for lower prices," said Jeff Dabbs, an analyst with Kercheville & Co.

Southwest also benefited by maintaining lower fuel cost through hedging - buying fuel in advance at set costs to ward off potential price increases. The airline saved 4.2 cents per gallon in the quarter on fuel.

Robert Milmore, an analyst with Arnhold & S. Bleichroeder in New York, said Southwest is 80 percent hedged at $22 a barrel this year and 40 percent hedged for 2002.

"Most people would argue that they're the most recession-proof U.S. carrier," Milmore said.

Southwest, the seventh-largest airline, has been the reason behind much of the growth at BWI, which could soon pass Washington Dulles International as the busiest airport in the Washington area.

Southwest shares closed yesterday at $19.10, up 88 cents.

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