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Q4 brings mixed results for Southwest

By Hpanchal on January 20, 2012

Operating revenue for Southwest Airlines’ freight sector reached $36 million in the fourth quarter of 2011, a 12.5 percent, year-over-year, gain. This increase is on par with Southwest’s operating revenue growth for the year, which rose 11.2 percent from 2010; such gains were partially offset by increased costs incurred during this period, however.

Overall, net income for Southwest (including special items) reached $152 million in the fourth quarter of 2011, an 16 percent, year-over-year, jump. However, this number belies the carrier’s net income for the year, which totaled $178 million, compared to $459 million in 2010.

Southwest’s costs also rose considerably in 2011, due to its May acquisition of AirTran Airways. According to a press release issued by the carrier, “unfavorable special items” in 2011 totaled $152 million; in 2010, this figure was only $91 million.

Rising fuel prices also contributed to this phenomenon, Southwest CEO Gary Kelly explained. “While it’s always disappointing to report a year-over-year decline in profits (excluding special items), the fourth quarter and full-year declines were primarily caused by significantly higher fuel prices,” he said in a statement.

“Our fourth-quarter economic fuel costs per gallon increased 33.7 percent to $3.29, compared to our combined fuel costs of $2.46 per gallon in the fourth quarter last year,” Kelly continued.

2012 is expected to see similar prices, he said. “Based on market prices as of January 13, our first-quarter 2012 economic fuel costs, including fuel taxes, are estimated to be approximately $3.35 per gallon, compared to our combined economic fuel costs, including fuel taxes, of $2.95 per gallon in the first quarter of last year,” Kelly said in a statement.

Sky-high fuel prices or not, Southwest’s operations are likely to receive a boost in February when the carrier opens its 26,000-square-foot cargo facility at Hartsfield-Jackson Atlanta International Airport to coincide with its initiation of passenger service to Atlanta. Southwest will also take delivery of 33 Boeing 737-800 series aircraft this year.

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