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Alexkid

Southwest posts 2Q profit of $161 million
DAVID KOENIG
(The Associated Press)




05:18:49PM (DST) Thursday,August 4,2011.

DALLAS (AP) — Southwest Airlines Co. set records for full planes, and higher fares boosted revenue as the summer vacation season kicked into high gear.

But on Thursday Southwest said its fuel costs soared, its second-quarter profit fell short of analysts' expectations, and it will scale back growth plans for next year.

Southwest shares tumbled 64 cents, or 6.6 percent, to $9.01 in afternoon trading after hitting a 52-week low of $8.85 earlier. The percentage decline was more than twice that of the Dow Jones industrial average.

Chairman and CEO Gary Kelly said that business travel, a key market for airlines, slowed during the summer and he was not sure when it will recover.

"I'm concerned about the U.S. economy, I'm concerned about fuel prices," Kelly said.

At least temporarily, the airline is getting a break from the expiration of federal airline taxes. By raising prices to replace the taxes, Southwest took in about $36 million during the first 10 days after the taxes expired last month.

Kelly said Southwest needs the extra money to offset fuel costs, but he hopes for an end to the dispute in Congress that caused the taxes to expire and partially shut down the FAA.

Southwest reported Thursday that its net income in the April-through-June quarter rose to $161 million, up from $112 million a year ago.

If you subtract special items such as gains on fuel-hedging contracts, the company's profit fell by nearly half, to 15 cents per share. Analysts expected adjusted profit of 21 cents per share, according to FactSet.

The average fare per mile increased 8.4 percent, reflecting price increases earlier this year. Traffic jumped 28 percent and revenue spiked 31 percent, due largely to the May acquisition of AirTran Airways.

Revenue was $4.14 billion, a bit higher than the $4.10 billion estimate from analysts.

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Of course fuel costs and maintenance will cut into the profits.
Fare increases are on automatic pilot(no pun intended).
I'm expecting more economic news from Southwest later.

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