This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Southwest CEO Doesn't Yet See Blue Skies

Stocks in this article: LUV

DALLAS ( TheStreet) -- Southwest (LUV) exceeded third-quarter expectations, both its own and Wall Street's, but the carrier nevertheless provided a glum economic outlook.

Airlines are lagging economic indicators, so perhaps what Southwest -- the world's second largest carrier, by passenger count -- has to say is what we already know, or should know. That is, "the economy will continue to bump along," according to CEO Gary Kelly, on an earnings conference call. "I don't believe the worst is behind us.

"I think there's a tremendous amount of relief to find in the fourth quarter that things haven't gotten worse," he said. "That extends clearly to air travel. For Southwest, we've seen a remarkable improvement in the third quarter. (But) I don't think it's the economy that's moved us" from a 6% second-quarter decline in revenue per available seat mile to a 2.2% increase in third quarter. Rather, he credited Southwest employees, increased fee revenue, reduced capacity and successful allocation of aircraft.

Southwest's meager earnings, excluding items, of $23 million were hardly spectacular in what is normally the strongest quarter for airlines. But what is more troubling is the carrier's outlook. In selling seats, airlines have two choices. One is to maintain high fares for in-close bookings, selling to business travelers who fly because they believe they can generate profits for their employer. The lesser choice is to reduce fares enough to attract discretionary leisure fliers.

Kelly said the current environment is all about the latter strategy. "We're not counting on a return of the business traveler anytime sooner," he said. "It is a low fare environment. (Overall) domestic capacity is down 8%. The demand, in other words, is down. People are spending less. There's certainly been a sharp drop in business travel. And we're expecting that's going to continue."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs