Southwest calls BWI its biggest growth market

July 20, 2006|By MEREDITH COHN | MEREDITH COHN,SUN REPORTER

With more people traveling this summer and decreased local competition, Southwest Airlines said yesterday that its Baltimore hub has become the carrier's biggest growth market.

Gary C. Kelly, Southwest chief executive officer, made the comment during a conference call with analysts about the airline's second-quarter earnings, which were a record.

The quarterly passenger increase at Baltimore-Washington International Thurgood Marshall Airport - 17 percent compared with the system increase of 9 percent - was attributed largely to the demise of Independence Air, a deep-discounter based at Washington Dulles International Airport. Southwest had declined to match Independence's ultra-low fares, preferring instead to wait out the airline. Independence closed its doors in January.

Demand has shifted back to BWI, although a spike in new flights isn't expected in Baltimore. Southwest intends to launch service at Dulles in the fall to capture some of the Northern Virginia travelers, and BWI still can handle more people, Kelly said.

"We do want to continue to grow our presence there," said Kelly, noting previously announced direct service to Detroit from BWI in September. The airport is the airline's fourth largest hub after Phoenix, Las Vegas and Chicago.

BWI, where Southwest is the largest carrier, reported that the airline has posted double-digit growth in passengers each month this year over the corresponding months in last year. Southwest said it boarded 25.3 million passengers during the quarter throughout the system, compared with 22.8 million during the corresponding quarter last year.

Southwest reported net income for the three months ending June 30 of $333 million or 40 cents a diluted share, compared with $144 million or 18 cents a diluted share in the second quarter last year. Without a fuel-hedge related gain, the earnings were $273 million, or 33 cents a diluted share.

Revenue was $2.45 billion, up from about $1.95 billion.

The average load factor, a measure of how full the planes are, was 78 percent, also a record.

That increase in business propelled the quarter, as did an average fare increase of 15.5 percent to $107.38. But the biggest benefit to the airline was its fuel-hedging program that allowed the carrier to lock in prices in advance. Fuel and labor are the industry's biggest costs.

Southwest is more than 73 percent hedged for the remainder of this year, although the percentage will decline to about 12 percent by 2010.

The airline's shares closed up $1.30, nearly 8.2 percent, at $17.24 yesterday on the New York Stock Exchange. Southwest was the top gainer in the S&P 500 index.

meredith.cohn@baltsun.com

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