Southwest bucks US airline misery as profits rise sharply

Southwest Airlines, the world’s largest low-cost carrier, on Thursday reported a sharp rise in first quarter profits, defying the wider downturn that saw the US aviation industry post its first combined quarterly loss since 1993.

The pioneer of the low-cost airline concept, which has spread through Europe in recent years, reported a net profit of $121m, or 16 cents per share, compared to a profit of $73.5m in the first three months of last year.

The jump in profitability was exaggerated by an accounting change that reduced last year’s first quarter earnings by more than $22m. Stripping out that change, net income rose just under 27 per cent from $95.6m last year.

Herb Kelleher, the airline’s president and chief executive, reaffirmed the views of Wall Street analysts that Southwest will weather any economic downturn better than the rest of the industry. “While Southwest is not immune to an economic downturn, we are uniquely positioned to do comparatively well as a result of our low-fare philosophy and low cost structure,” he said.

Five of Southwest’s six bigger, full-service rivals reported first quarter losses this week and gave a gloomy assesment of current trading. In contrast to that downbeat tone, Mr Kelleher said he expected the airline to be “solidly profitable in the second quarter.”

But he cautioned that traffic would not keep up with the planned 12 per cent growth in capacity, a trend already evident in the first quarter. The airline also identified a “softening” in pricing.

Under Mr Kelleher’s stewardship, Southwest has enjoyed unprecedented success with 27 years of consecutive profits.