Southwest Airlines Posts $212 Million Fourth-quarter Profit

Southwest Airlines more than doubled its fourth-quarter profit

Jan. 23--Southwest Airlines more than doubled its fourth-quarter profit as more passengers paying higher fares filled its planes during the busy holiday travel season.

The Dallas-based carrier reported that net income rose 171 percent to $212 million in the quarter as revenues grew 6 percent to $4.4 billion.

Southwest, which expects to complete its integration of AirTran Airways this year, said strong travel demand and solid bookings have continued into 2014.

"Our outlook right now for the economy is very stable," Southwest chief executive Gary Kelly told analysts and investors on a conference call Thursday morning. "The uncertainties we had a year ago, hopefully, they won't return."

Later this month, Southwest plans to unveil its new international reservation system and will migrate AirTran's international flights into the Southwest system. Currently, AirTran serves Mexico City, Cancun, Punta Cana, Nassau, Montego Bay, Aruba and San Jose del Cabo.

"We are days away from announcing what our international plans are," Kelly said, adding that Southwest hopes to expand international service in 2015, particularly at Houston's Hobby Airport where it is building a five-gate international terminal.

International service won't come to Dallas Love Field as the Wright Amendment restrictions on international service will remain in place even when domestic flight restrictions are lifted in October. Kelly, who noted that the Wright Amendment restrictions will go away in 38 weeks, said the carrier is not yet ready to reveal its plans for Dallas Love Field and what new routes it will operate out of the airport.

Cowen and Company analyst Helane Becker told investors that she expects the international announcement next week and believes the airline's growth will boost its stock.

"We believe this international expansion will be a game-changer for the company," Becker wrote in a research note to investors on Thursday.

Shares of Southwest (ticker: LUV) closed at $21.24, down 53 cents on Thursday.

The airline said its average passenger fare increased 5.4 percent to $156.05 and it had over 33 million enplaned passengers, up 1.3 percent for the quarter. It also added capacity to its network, up 2.2 percent, and planes were slightly fuller with the load factor up 0.8 percentage points to 80.4 percent.

Southwest said it paid less for fuel in the fourth quarter, about $3.05 a gallon, compared to $3.32 a gallon in the fourth quarter of 2012. The airline expects fuel costs to remain stable, around $3.05 to $3.10 a gallon in the first quarter.

Excluding one-time accounting items, Southwest said its net income was $236 million, or 33 cents per share, beating Wall Street estimates of 29 cents per share, according to FactSet Research.

For the full 2013 year, Southwest posted a $753 million profit, up 79 percent from 2012. Total revenues also grew 3.6 percent to $17.7 billion.

With the company's strong financial performance, Southwest gave employees $228 million in 2013 as part of the airline's profit-sharing plan, up from $107 million in 2012.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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