Southwest Airlines reports dip in Q1 profits

Southwest Airlines, US's most consistently profitable airline, reported a dip in Q1 profits to $34 million, reflecting the worsening environment in which it is operating along with other airlines. As with others, Southwest too has pointed to soaring fuel costs as the main reason for the pull back in profits.

While net income rose 30.3% year-over-year to $43 million, Southwest enjoyed record Q1 revenue of $2.53 billion, which was up 15.1%. Yet, it has announced its intention to reduce fleet growth further in 2009 as it considers moves to battle an environment that has seen one merger and four bankruptcies being announced over the last fortnight.

"Although we are pleased with the progress of our revenue initiatives and optimistic that we can continue to grow revenues, we cannot ignore the threat of volatile and unprecedented jet fuel prices," CEO Gary Kelly said. "We will continue to take steps to restore our profit margins, including an ongoing rigorous review of our flight schedule to eliminate nonproductive flying."

The airline said that it will take delivery of 29 new 737-700s this year, as planned, but in 2009 it will only take a maximum of 14, rather than the scheduled 28 (25 firm and three options). The remaining 14 deliveries have been deferred to 2015.

A dozen 2010 deliveries, all options, also have been deferred to 2013-15 while 12 options will now be exercised for delivery in the period 2010-12.

The carrier now has 125 aircraft on firm order through 2015, plus 67 options and 54 purchase rights for delivery through 2018.

Record first-quarter revenue was offset by a 15.5% increase in operating expenses to $2.44 billion as fuel costs climbed 33.5% to $753 million.

SWA carried 21.5 million revenue passengers during the quarter, up 7.7% year-over-year, as traffic grew 9.2% to 17.59 billion RPMs. Load factor was up1.8 points to 69.8%.