Southwest Has 19.3% Unit Revenue Gain

The carrier reported a profit and said second-quarter unit revenue trends are strong.
By Ted Reed ,

DALLAS (

TheStreet

) --

Southwest

(LUV) - Get Report

said first-quarter unit revenue soared a record 19.3%, enabling a first-quarter profit.

Excluding items, the largest low-fare airline reported net income of $24 million, or 3 cents a share, in line with estimates. Revenue rose 11.6% to $2.6 billion, also in line with estimates.

A year earlier, excluding items, Southwest carrier lost $20 million, or 3 cents a share.

Including items related to fuel hedge contracts, the carrier earned $11 million, or 1 cents a share, in the quarter of 2010, compared with a net loss of $91 million, or 12 cents a share, in the first quarter of 2009.

"We are extremely pleased to report a profitable start to the year, especially in this challenging economic environment exacerbated by persistently high energy costs," said CEO Gary Kelly, in a prepared statement. "As the quarter progressed, we began to see modest improvement in demand for business travel, as measured by the increase in full-fare traffic."

Kelly said the 19.3% increase in unit revenue was an all-time quarterly record, achieved in what is normally the weakest quarter for most airlines. "Thus far, strong load factor and yield trends have continued in April and, assuming trends continue, we expect another significant year-over-year unit revenue gain in second-quarter 2010," he said.

On the cost side, excluding fuel, cost per available seat mile grew by 9.8% due largely to a 6.4% decline in capacity. Estimated second-quarter CASM, excluding fuel, will exceed the 6.91 cent figure recorded in the second quarter of 2009. Kelly said the carrier has reduced headcount per aircraft by 3% during the past year.

Southwest has returned strongly to the practice of hedging fuel. For the remainder of the year, it has hedged 65% of estimated fuel consumption. For 2011, it has hedged 60%. For 2012, it has hedged 50%.

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

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