Southwest Airlines Posts First-quarter Profit

Southwest Airlines today reported a first quarter 2010 net
income of $11 million compared to a net loss of $91 million for first quarter


“Just to have a profit is a very significant
accomplishment,” CEO Gary Kelly told analysts yesterday. He said over the
long term the LCC has “tremendous growth opportunities” but noted,
“We haven’t met our return on capital target in a decade and that’s just
not acceptable to us. We’re going to err on the side of caution.”

Following the collapse of SWA’s codeshare pact with WestJet, Kelly said the carrier is focusing on implementing its codeshare deal with Mexico’s Volaris this year and is “open” to another codeshare partnership for flights beyond the continental US but is not
actively seeking one.

International service remains on SWA’s radar screen, but Kelly
remained noncommittal on when it might occur. “We’re retooling Southwest
so that ultimately international destinations become a tactical decision rather
than a strategic move,” he explained. Flights outside the US are
“coming,” he said. “We’ll get there eventually. . .Right now
we’re very happy to concentrate on Mexico and Volaris.”

First-quarter revenue rose 11.6% to $2.63 billion while expenses
increased 7% to $2.58 billion, producing operating income of $54 million,
reversed from an operating deficit of $50 million last year. Traffic rose 1.6%
to 17.16 billion RPMs on a 6.4% cut in capacity to 22.62 billion ASMs,
producing a 75.9% load factor, up 6 points. Passenger yield lifted 9.1% to
14.54 cents as RASM jumped 19.3% to 11.63 cents and CASM heightened 14.4% to
11.39 cents. CASM ex-fuel increased 9.8% to 7.76 cents.

Looking ahead, Kelly said positive trends “are strengthening
still” in the current quarter, adding, “We expect another significant
year-over-year unit revenue gain in the second quarter.”

Operationally, our People continued to deliver
outstanding levels of Customer Service, despite severe weather resulting in
significant cancellations during first quarter 2010. “I am very grateful
to all of our 35,000 hard-working and resilient Employees for their tremendous
efforts.  It is because of their unwavering Warrior Spirits that Southwest
Airlines continues to lead the industry and be recognized for excellence.”