Southwest Airlines Posts Profit

Southwest's net income was $116 million or 16 cents a share, compared with a loss of $56 million or 8 cents a share a year earlier.
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DALLAS (

TheStreet

) --

Southwest

(LUV) - Get Report

beat estimates but said it expects rising costs and a slow recovery in 2010.

Excluding items, the carrier said it earned $74 million or 10 cents a share. Analysts surveyed by Thomson Reuters had estimated 7 cents a share. Revenue declined 1% to $2.7 billion, in line with estimates. A year earlier, excluding items, Southwest earned $61 million or 8 cents a share.

Net income was $116 million or 16 cents a share, compared with a loss of $56 million or 8 cents a share a year earlier.

"There is no doubt 2010 will be another challenging year," said CEO Gary Kelly, in a prepared statement. "Thus far, the economic recovery is tepid, and we expect record high hedged jet fuel prices for the company, given the current market and our hedge position."

Non-fuel cost per available seat mile will also increase in the current quarter, Southwest said. CASM excluding fuel rose 8.6 % in the fourth quarter, reflecting a capacity decline, and stood at 7.45 cents. Kelly said CASM will increase again in the current quarter, when capacity will decline 5% to 6%.

Southwest has again become active in the fuel hedging market, with contracts in place for approximately 50% of estimated 2010 consumption at prices up to $100 a barrel. Fuel hedging costs in the current quarter are estimated to be about $30 million.

During the quarter, unit revenue rose 7.4%, and Kelly said the carrier expects another increase in the current quarter.

For the full year 2009, Southwest earned $143 million excluding special items, with net income of $99 million. Kelley said the company earned its 37th consecutive annual profit "in what has been, perhaps, the most difficult revenue environment the airline industry has ever faced." He said Southwest's domestic market share rose at least 1% in 2009, a reflection of the success of its Bags Fly Free program.

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

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