Low-cost carrier Southwest Airlines Co. said Wednesday its fourth-quarter profit declined 19 percent from a year ago as fuel prices and security costs increased, but operating profit rose on strong revenue growth to meet Wall Street expectations.
Net income fell to $57 million (euro44 million), or 7 cents per share, in the three months ended Dec. 31 from $70 million, or 9 cents per share, a year ago Excluding special items, the airline posted profit of $96 million (euro74 million), or 12 cents per share, up from $81 million, or 10 cents per share, last year.
Revenue grew 15 percent to $2.28 billion (euro1.8 billion) from $1.99 billion in the year-ago period.
The results were in line with analysts' consensus estimates, according to a poll by Thomson Financial.
"Despite growing capacity 10 percent, and the lingering effects of the August London terrorist threat and related carryon restrictions, we achieved a record fourth-quarter load factor of 70.2 percent at healthy yields, which resulted in a steady unit revenue growth rate of 4.2 percent," said Gary C. Kelly, Southwest CEO. "Based upon our traffic and bookings to date, we expect 2007 first quarter year-over-year unit revenue growth to remain steady."
The company said hedged jet fuel cost per gallon increased almost 30 percent during the quarter.
Southwest said it is benefiting from the recent decline in energy prices and is now completely hedged for the first quarter of 2007, capped at an average crude-equivalent price of about $50 per barrel.
"We are very excited about 2007 and are well-positioned to respond to airline industry changes and consolidation," added Kelly. "We have significant growth opportunities with or without consolidation and currently plan to add 37 aircraft in 2007 for an estimated eight percent available seat mile increase. These deliveries will bring our fleet to 518 Boeing 737s by the end of 2007."
Southwest said the outlook for this year is "favorable," and the company predicts it will exceed its 15 percent growth target for operating earnings per share.
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Quarterly profit rose to $227 million with $87 million in one-time gains from its hedging strategy.
The low-cost carrier cited rising fuel costs and a downturn in air travel after a terror threat in August.