Southwest Airlines sees record revenue for third quarter

Record third-quarter revenue and load factors propelled Las Vegas market leader Southwest Airlines to a profitable quarter, the company reported today.

The Dallas-based airline, the largest domestic air carrier in the country, continued to spend on integrating AirTran Airways routes and aircraft into its mainline system, and the company outperformed Wall Street’s expectations for the quarter that ended Sept. 30.

Southwest reported net income of $16 million, 2 cents a share, on revenue of $4.05 billion for the quarter. That compares with a rare quarterly loss of $140 million, 18 cents a share, on revenue of $4.03 billion for the third quarter of 2011.

Excluding special items, the company’s net income was $97 million, 13 cents a share, for the quarter compared with $122 million, 15 cents a share, in 2011. Earnings per share beat First Call analysts’ expectations of 12 cents a share.

Southwest is continuing to blend AirTran, which it acquired in May 2011, into its system. The company said it produced $110 million in pre-tax synergies after expenses in the first nine months of 2012 with the integration and plans to produce $400 million after expenses in 2013.

Nine AirTran aircraft have taken on Southwest colors and consumers will see Southwest’s route map expand in the months ahead.

“The integration of AirTran into Southwest is our top priority and much progress was made in third quarter,” said Southwest Chairman, President and CEO Gary Kelly.

AirTran’s airport facilities at Seattle and Des Moines, Iowa, have been converted to Southwest; Key West, Fla., will be converted next month; and Branson, Mo. is scheduled for March.

The company’s April schedule, to be published next week, will reflect four more AirTran city conversions at Charlotte, N.C., Flint, Mich., Portland, Maine, and Rochester, N.Y. During the third quarter 2012, AirTran ceased operations at six cities, while Southwest launched new service to Dayton and Akron-Canton, Ohio, and Ronald Reagan Washington National Airport.

“Our operating costs grew in the third quarter, but much of the growth was investment related,” Kelly said. “In particular, we are in the early stages of restructuring and retrofitting our fleet to improve our unit costs and long-term financial performance.”

Kelly said the economy remains a significant concern, but he’s encouraged by October bookings and revenue trends. So far in October, passenger unit revenue is running ahead of the comparable year-ago period by about 4 percent.

But there is a dark cloud on the horizon.

Crude oil and jet fuel prices have soared over the last several months, and based on market prices on Oct. 15, fourth-quarter fuel costs are expected to hit an all-time high $3.45 a gallon.

“This is disappointing, especially given the weak economy and we will need to more aggressively control costs in the next year,” Kelly said.



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