Southwest Airlines Earnings Up, Helped by Lower Fuel Prices
Source: Dow Jones News
Southwest Airlines Co.'s earnings increased 31% in the June quarter, topping analysts' views, as the airline continued to benefit from lower fuel and operating costs.
Traffic during the quarter increased 7.9% and capacity rose 7%. The portion of seats filled, or load factor, increased 0.7 percentage points.
"Our second quarter 2015 operating unit revenue performance was impacted by challenging year-over-year comparisons, longer average stage length, higher average seats per trip, and a softer yield environment," said Chief Executive Gary C. Kelly.
The sharp drop in oil prices has been generally favorable to airlines. Though some airlines are less affected due to agreements called fuel hedges, Southwest is exposed to 80% of the fall in oil prices.
Fuel savings were nearly $500 million, which led to a 12% reduction in unit costs in the June quarter, the company said. Fuel costs were $2.02 per gallon, compared with $3.02 per gallon the year before. For the current quarter, the company expects fuel costs of $2.20, down from $2.94 in the year-ago period.
However, Southwest's revenue per available seat mile, a key measure of performance for the airline industry, fell 4.6% from a year earlier, driven mostly by a decline in passenger revenue yields.
Overall, Southwest reported a profit of $608 million, or 90 cents a share, up from $465 million, or 67 cents a share, a year earlier. Excluding certain items, earnings were $1.03 a share, up from 70 cents.
Revenue increased to to $5.11 billion from $5.01 billion a year earlier.
Analysts polled by Thomson Reuters had called for earnings of $1.02 a share on revenue of $5.14 billion.
Separately, Southwest said it plans to repurchase an additional $500 million of common stock under an accelerated share repurchase program soon. This would bring the total repurchases this year to nearly $1.2 billion.
