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Southwest Reports Q1 Profit On Fuel Hedge Gains

Low-cost airline operator Southwest Airlines Co. (LUV: Quote) reported Thursday a profit for the first quarter due primarily to fuel hedge gains. Stripping off one-time items, the company reported a loss, which was narrower than analysts' estimates, as revenue, traffic and capacity increases mitigated the impact of higher fuel costs.

The results include those of AirTran's since the May 2, 2011 acquisition date. The company noted that it achieved a key milestone in the integration of AirTran in the first quarter with the approval by the Federal Aviation Administration (FAA) of its Single Operating Certificate.

"Despite a modest loss, excluding special items, our first quarter results were notable, with outstanding revenue production and, except for jet fuel, better-than-expected operating costs," Chairman, President and CEO Gary Kelly said in a statement.

The Dallas, Texas-based airline reported net income of $98 million or $0.13 per share for the first quarter, higher than $5 million or $0.01 per share in the prior-year quarter.

Excluding items, adjusted net loss for the quarter was $18 million or $0.02 per share, compared to net income of $20 million or $0.03 per share in the year-ago quarter.

On average, 14 analysts polled by Thomson Reuters expected the company to report a loss of $0.05 per share for the first quarter. Analysts' estimates typically exclude special items.

Total operating revenues for the quarter rose 28.6 percent to $3.99 billion from $3.10 billion in the same quarter last year, but missed eleven Wall Street analysts' consensus estimate of $4.01 billion by a whisker.

"Record first quarter revenue results were produced with strong revenue management and network optimization, along with benefits from the AirTran acquisition and All-New Rapid Rewards," Kelly added.

Passenger revenues grew 27 percent to $3.74 billion from last year. Operating expenses increased 27 percent to $3.97 billion, primarily reflecting 46 percent increase in fuel and oil expenses and nearly 20 percent rise in salary, wages and benefits. Economic fuel costs per gallon increased 16.2 percent to $3.44 from $2.96 per gallon last year.

Southwest's consolidated traffic grew 23.4 percent to 23.68 billion revenue passenger miles or RPMs on a 25 percent growth in capacity to 30.63 billion available seat miles or ASMs. Southwest's first-quarter load factor reached 77.3 percent, which was 1 percentage point lower than 78.3 percent reported last year.

The company said, "Energy price increases continue to pressure costs, which only serve to reinforce our commitment to eliminate waste and maximize efficiency throughout our Company."

LUV closed Wednesday's regular trading session at $7.89, down $0.17 on a volume of 10.58 million shares. In the past 52-week period, the stock has been trading in a range of $7.15 to $12.44.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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