* Profit compares with year-earlier loss
* Adjusted 3rd-qtr profit 13 cents vs estimate of 12 cents
* Average airfares down as demand weakened at end of quarter
Oct 18 (Reuters) – Southwest Airlines reported that
it swung to a third- quarter profit against a year-earlier loss,
but total revenue was flat and average ticket prices edged lower
as demand weakened in September.
Excluding special items, profit was better than analysts
expected.
The carrier on Thursday said a key revenue measure was
trending stronger so far this month than a year ago, but added
it would need to more forcefully control costs over the next
year in the wake of rising fuel prices.
“Right now, early indications are somewhat positive that the
quarter may be better than September, but it still is very
early,” said Ray Neidl, an aerospace analyst with Maxim Group.
Chief Executive Gary Kelly told CNBC-TV that while consumer
demand held up, airfares bought mainly by business passengers
softened in the third quarter. Southwest’s average fare in the
period eased to $142.86 from $143.03 a year earlier.
“Business travelers were there, but it felt like we needed a
little bit more of aggressive pricing to entice them,” Kelly
said.
Net income was $16 million, or 2 cents a share in the third
quarter, compared with a loss of $140 million, or 18 cents a
share, a year earlier.
Excluding items of $81 million, profit was 13 cents per
share. On that basis, analysts expected 12 cents on average,
according to Thomson Reuters I/B/E/S.
Total revenue was flat at $4.3 billion, a bit softer than
analysts expected.
Passenger revenue per available seat mile, an important
pricing measure referred to as unit revenue, rose 1 percent in
the quarter, compared with a reported rise of about 6 percent in
the 2011 period. Southwest said it expected a solid increase in
that metric in the fourth quarter.
Dallas-based Southwest, the traditional U.S. low-fare
leader, acquired AirTran last year, gaining entry to big U.S.
markets such as Atlanta. The carrier is facing more pressure to
lower overall expenses to be able to better compete against its
rivals that have restructured.
“Not only are there macroeconomic challenges with the weak
economy, but there’s micro-company challenges related to the
integration of AirTran and re-doing their model,” Neidl said.
In the third quarter, operating expenses rose 4.2 percent
even as fuel and oil costs fell 3.7 percent. Costs for
maintenance materials and repairs rose 10 percent and expenses
tied to salaries and wages grew nearly 4 percent.
Southwest expects an average fuel price of $3.45 a gallon in
the current fourth quarter, compared with $3.16 a gallon in the
third quarter.
