Southwest earns profit

only big airline to do it

Discount carrier never cut flights after terror attacks

April 19, 2002|By Paul Adams | Paul Adams,SUN STAFF

Southwest Airlines, the main engine for growth at Baltimore-Washington International Airport in recent years, reported an 82 percent drop in net income yesterday as a post-Sept. 11 decline in air travel continued to hammer the nation's airline industry.

The Dallas carrier earned first-quarter income of $21.4 million, or 3 cents per share, compared with net income of $121 million, or 15 cents per share, in the first-quarter of 2001.

Revenue was $1.26 billion, down 12 percent from $1.43 billion reported in first quarter last year.

The results were in line with the expectations of airline analysts, who recently have lowered industry forecasts to reflect rising fuel costs and a growing realization that air travel is not returning to normal as quickly as anticipated.

Southwest is the only major carrier to report a profit after last year's terrorist attacks. It is also the only carrier that has not reduced the number of its flights or announced other cutbacks.

"When Southwest only makes $21 million, it clearly shows that air travel has a problem," said Michael Boyd, an Evergreen, Colo., aviation consultant. "We have a passenger problem out there. People don't want to fly."

Southwest shares closed down 45 cents to $18.55 per share in trading yesterday.

The low-fare airline's reduced expectations are evident at BWI. Southwest consistently has posted double-digit year-over-year gains in passengers at the airport over the past few years, helping to make it a destination for leisure travelers looking for cheap fares.

But recent months have seen the airline post nearly flat results at BWI, and indications are that the trend may continue for a while.

"We continue to recover from last fall's terrorist attacks," said James F. Parker, vice chairman and chief executive officer of the airline, in a statement reporting the results. "We expect profitability to steadily improve, although earnings for second-quarter 2002 probably will fall well below last year's profit of $175.6 million, primarily due to continued weakness in demand for air travel."

Analysts said Southwest has remained profitable because it has the lowest operating costs in the industry and is less dependent on business travelers, who have sharply cut back air travel as a result of last year's recession and Sept. 11

"It's just a different business model," said Robert W. Mann of R.W. Mann & Co. Inc., the New York aviation consultant.

Mann said Southwest is forcing traditional network carriers to reassess their business plans: "They [network carriers] are going to have to review whether structuring their business the same way they did in year 2000 makes any sense going forward."

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