Southwest Airlines, once again bucking industry trends, reported a profitable first quarter and also outlined plans today to be operating 50 flights a day from Philadelphia International Airport by this summer.
At the same time, an industry analyst warned that if oil prices stay above $50 a barrel, most older traditional airlines - and US Airways in particular - will face a serious liquidity problem in the second half of the year.
Southwest, the first major carrier to report its quarterly resulta, said it continued to use hedging - the purchase of advance, lower-priced contracts - to pay an average of 90 cents a gallon for jet fuel, compared to an industry average of more than $1.30. That saved Southwest $155 million in the first quarter, compared to what it would have paid for fuel in the open market, chief executive officer Gary C. Kelly said.
Southwest made $76 million, or 9 cents a share, in the quarter, three times what it did a year ago. Its revenue for the three months was $1.66 billion, 12 percent more than last year.
Analysts are forecasting that every major carrier except Alaska Airlines and JetBlue Airways will lose money in the first quarter. Revenues have gone up this year as airlines have raised fares, but oil costs are wiping out profits, the analysts said.
Southwest, which started flying to Philadelphia 11 months ago with 14 flights a day, said it plans to add four roundtrips a day to Pittsburgh to the schedule when it begins service there on May 4. Southwest also will add flights from Philadelphia to Chicago Midway Airport on May 31 and to Fort Lauderdale and Orlando, Fla., on July 17, to bring the total to 50, the airline said.
Kelly, in a conference call with reporters, said Southwest would like to rent more than the six gates in Terminals D and E that it has now at the Philadelphia airport, so it can continue to increase service. The airline and the airport staff have studied how to reconfigure the existing gates in both terminals to provide more to Southwest, but there are no simple ways to do that, he said.
"In any case, it involves more construction and other airlines moving," Kelly said.
The analyst, Robert Ashcroft of UBS Securities in New York, said that in addition to US Airways, which is Philadelphia's largest carrier, Delta Air Lines and United Airlines face the most immediate "liquidity crunch." American Airlines is in the best shape of the older major carriers, he said.
US Airways faces the toughest road because it still needs another $100 million in new equity, on top of $250 million it's already raised, to emerge from Chapter 11 bankruptcy protection.
"US Airways is about as encumbered as an airline can be, so outside of something unprecedented, we don't see it raising significant additional cash," Ashcroft said in a report to investors. He added that given its condition, "it's hard to see how their business plan would be attractive to many investors in a $50+ oil world."