Southwest Profit Tops Views, Warns About Revenue Slowdown
July 21 2016 - 8:10AM
Dow Jones News
Southwest Airlines Co.'s profit again soared above expectations
in the most recent quarter, propelled by cheap fuel and
unit-revenue growth.
But Chief Executive Gary Kelly warned of a challenging fare
environment and softening close-in yields in recent weeks. The
airline said it anticipates unit revenue to fall 3% to 4% in the
current quarter. The stock fell 4.8% to $40 in premarket
trading.
In the quarter ended June 30, Southwest's unit revenue—the
amount taken in per seat flown a mile—rose 0.6% from the year-ago
quarter, "despite a very competitive fare environment." The metric
is closely watched as a sign of demand and how well an airline is
generating sales. Unit revenues have been declining across the
industry because of relatively rapid expansions.
Fuel and oil expenses fell 10% in the quarter, and the average
cost of fuel dropped to $1.81 a gallon, from $2.02 in the year-ago
quarter. The No. 4 U.S. carrier by traffic estimated fuel costs of
$2.05 in the current quarter.
Southwest and its U.S. airline peers have broadly benefited from
less competition and the swoon in fuel prices.
Dallas-based Southwest became the fourth-largest domestic
carrier over the past four decades by flying exclusively within the
continental U.S. But with dwindling growth opportunities at home,
it has been expanding abroad.
Load factor rose to 85.6% from 84.6% a year earlier. Traffic
climbed 6%, while capacity increased 4.8%.
In all for the quarter, Southwest posted a profit of $820
million, or $1.28 a share, up from $608 million or 90 cents a
share, a year earlier. Excluding special items, earnings on a
per-share basis rose to $1.19 from $1.03 a year ago.
Revenue rose 5.3% to $5.38 billion.
Analysts surveyed by Thomson Reuters were looking for earnings
of $1.21 a share on $5.41 billion in revenue.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
July 21, 2016 07:55 ET (11:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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