Southwest Airlines Reports Sharply Lower 3Q Profit

Southwest Airlines Co. said Thursday its third-quarter profit fell sharply, with the low-cost carrier citing rising fuel costs and a downturn in air travel after a terror threat in August.

Southwest said it earned $48 million, or 6 cents per share, in the July-September quarter compared to $210 million, or 26 cents per share, a year earlier.

Excluding one-time items including a write-down in value of fuel price-hedging contracts, the Dallas carrier said it would have earned $154 million, or 19 cents per share.

On that basis, analysts were looking for 20 cents per share, according to a survey by Thomson Financial.

Revenue increased 17.7 percent, to $2.34 billion from $1.99 billion a year ago. Analysts expected $2.36 billion.

Chief Executive Gary C. Kelly called the results "solid" in light of higher fuel costs since last year.

Fuel costs rose 67.1 percent to $563 million, even though Southwest said it saved $200 million by hedging its fuel spending.

Southwest has paid extra to lock in lower prices for about 85 percent of its fuel purchases through next year, but it has less protection against high fuel prices after that.

Kelly said Southwest lost more than $40 million in revenue from August and September because of a downturn in travel after authorities in London said they broke up a terror threat.

That threat was said to target trans-Atlantic flights, routes that Southwest doesn't operate, but Kelly said increased safety measures on U.S. flights hurt overall demand for air travel.

The average Southwest jet flew 74.7 percent full in the third quarter, down from 74.9 percent a year ago. Most U.S. carriers have been seeing occupancy rates rising.

In the first nine months of the year, Southwest earned $442 million, or 53 cents per share, compared with $414 million, or 52 cents per share, in the same period of 2005. Revenue has increased 21.7 percent, to $6.81 billion from about $5.60 billion.

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