Southwest Profit Soars Despite Fuel Costs

Southwest Airlines Co. on Wednesday said its second-quarter profit more than doubled despite higher fuel costs, driven by higher passenger traffic and capacity.

The low-cost carrier said it earned $333 million, or 40 cents per share, in the three months ended June 30 compared to $144 million, 18 cents per share, a year ago. Excluding items related to accounting for derivatives and hedging activities, Southwest posted a profit of $273 million, or 33 cents per share.

Analysts polled by Thomson Financial had predicted earnings per share of 26 cents.

Revenue rose 26 percent to $2.45 billion from $1.94 billion a year ago. Analysts were expecting sales of $2.3 billion.

Unit costs increased 12 percent due to the increased price of jet fuel, Southwest said.

Passenger traffic in the second quarter rose 15.3 percent to 17.84 billion revenue passenger miles. A revenue passenger mile is equal to one paying passenger flown one mile.

Capacity increased 7.2 percent over the three-month period to 22.88 billion available seat miles. Load factor, or occupancy, rose 5.5 points to 78 percent.

"Thus far, strong load factor trends have continued in July, and customer bookings for the remainder of third quarter 2006 are strong. Based on our July results to date, we expect strong year-over-year unit revenue trends again in third quarter 2006," Southwest Chief Executive Gary C. Kelly said in a statement.

The company said it expects fuel costs to substantially increase from the third quarter 2005's 95 cents per gallon and exceed the second quarter 2006's $1.42 per gallon. The company is roughly 70 percent hedged for the rest of 2006 for oil at $36 a barrel.


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