Southwest Profit Soars on Cheap Fuel
January 21 2016 - 6:50AM
Dow Jones News
Southwest Airlines Co. reported it nearly tripled its profit in
the final quarter of the year as the company continues to soar on
cheap fuel and the modernization of its fleet.
The No. 4 U.S. airline by traffic said its fuel and oil expense
dropped 37% in the latest quarter. The average cost of fuel was
$2.03 a gallon, compared with $2.62 in the period last year.
Southwest and its U.S. airline peers have reported strong
financial results in recent quarters, the result of slower growth,
less competition and cheaper fuel.
The airline estimates fuel costs in the current quarter will be
about $1.70 a gallon, compared with $2 a gallon in first quarter
last year.
Chief Executive Gary Kelly pointed to strong free cash flow of
$1.1 billion in 2015, and said Southwest intends to repurchase an
additional $500 million of stock under an accelerated share
repurchase program, to be launched soon.
In the quarter ended December, Southwest's unit revenue—the
amount it takes in per seat flown a mile—edged down 0.7% compared
with the quarter a year ago. The metric is closely watched as a
sign of demand and how well an airline is generating sales. Unit
revenues have been declining across the industry because of
relatively rapid expansions. Last month, the airline warned the key
revenue metric could fall in the quarter, lowering its guidance to
be flat to down 1% compared with the same period last year.
Capacity increased 8.3%, while load factor rose to 84.1% from
82% a year earlier. Traffic shot up 11.1%.
Overall, the company posted a profit of $536 million, or 82
cents a share, up from $190 million or 28 cents a share a year
earlier. Excluding certain items, earnings on a per-share basis
rose to 90 cents a share from 59 cents a year earlier.
Revenue climbed 7.5% to $4.98 billion.
Analysts surveyed by Thomson Reuters were looking for earnings
of 90 cents a share on revenue of $5 billion.
Southwest's results followed Delta Air Lines Inc. reporting
Tuesday it swung to a profit in the final quarter of the year,
aided by a strong tailwind of sharply lower fuel costs.
Shares of Southwest, which have fallen 4.2% over the last three
months, were inactive premarket.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
January 21, 2016 07:35 ET (12:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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