Southwest Beats Despite Higher Fuel

DALLAS TheStreet) - Southwest (LUV) narrowly beat estimates despite a 34% fuel cost increase.

Excluding items, the carrier reported net income of $66 million, or 9 cents a share. Analysts were expecting earnings of 8 cents. Revenue was $4.1 billion, in line with estimates, reflecting a 32% increase from a May 2 merger with AirTran.

In the same quarter a year earlier, excluding items, Southwest earned $115 million, or 15 cents a share.

Including items, Southwest earned $152 million, or 20 cents a share, in the fourth quarter of 2011, including $86 million in favorable special items, compared with $131 million, or 18 cents, a year earlier.

"Fourth-quarter passenger revenues were strong, driven by record yields and continued high load factors," said CEO Gary Kelly, in a prepared statement. During the quarter, passenger revenue per available seat mile increased 8.2%. However, economic fuel costs per gallon increased 34% percent to $3.29, compared to combined fuel costs of $2.46 per gallon in the same period a year earlier.

Excluding fuel and special items, cost per available seat mile rose 0.5% to 7.72 cents.

Looking ahead, "based on current traffic and booking trends, we expect another strong passenger revenue performance in first quarter of 2012," Kelly said. "High energy prices demand continued focus on improving productivity and eliminating waste."

For the full year 2011, net income was $330 million, or 43 cents a share, a decline from $550 million, or 74 cents, in 2010. Results included $80 million in net pretax synergies from the merger with AirTran.

"We accomplished everything we set out to do in 2011, with soaring fuel costs the only disappointment," Kelly said.

-- Written by Ted Reed in Charlotte, N.C.

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