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Southwest 1Q earnings seen steady
Among airlines, no loss would be good news
By Jim Jelter, MarketWatch
Last Update: 1:03 AM ET April 8, 2005
SAN FRANCISCO (MarketWatch) -- Southwest Airlines Co. is preening itself for an April 14 earnings announcement that analysts expect to be one of the few bright spots among the troubled airline industry's first quarter results.
In an environment of soaring fuel costs, far too many seats and fierce competition for passengers to fill them, any airline that shows a profit over the past three months - even a meager one -- has reason to crow. Most analysts expect the U.S. airline industry overall to lose at least $2 billion this year unless there's a dramatic drop in jet fuel prices.
Against this grim backdrop, analysts polled by Thomson First Call said they expect Southwest to produce net earnings of 4 cents a share, matching year-ago results, on revenue of $1.65 billion, a slight increase from $1.48 billion brought in a year ago.
If Southwest meets those expectations, it will likely be one of the few this quarter. The Amex Airline Index, which includes Southwest as one of its 10 component companies, is down 17% since the start of the year. Southwest shares have not been immune, but they have shed only 7% of their value during the same period.
Despite tough times, discount airlines like Dallas-based Southwest have been racking up points with passengers, which placed second in a March passenger satisfaction survey conducted by J.D. Power after low-fare rival JetBlue Airways.
The reputation apparently is paying off, with Southwest reporting incremental increases in passenger traffic for all three months of the quarter and nudging its load factor - a measure of passengers to available seats - up to 65.4% for the quarter from 64.2% a year ago.
Like its competitors, the soaring price of fuel - an airline's second biggest cost after personnel - has cut deeply into profit margins. And like others, Southwest last month bumped up fares a modest $1 to $3 on one-way tickets to recover some of the cost.
But with margins as thin as they are, even tiny fare hikes could drive finicky passengers to other carriers, so analysts will be watching Southwest closely to gauge whether its fare adjustments are helping or hurting the bottom line.
Meanwhile, Southwest continues to keep pressure on the bigger legacy carriers, announcing plans in February to add 10 flights daily to Pittsburgh, a key US Airways hub, starting May 4. It is also expanding service to Chicago Midway airport, Las Vegas, Orlando and Philadelphia.
Southwest shares closed Thursday at $14.53, up 31 cents, in a range this past year that has reached from a high of $17.06 to a low of $13.18.
Among airlines, no loss would be good news
By Jim Jelter, MarketWatch
Last Update: 1:03 AM ET April 8, 2005
SAN FRANCISCO (MarketWatch) -- Southwest Airlines Co. is preening itself for an April 14 earnings announcement that analysts expect to be one of the few bright spots among the troubled airline industry's first quarter results.
In an environment of soaring fuel costs, far too many seats and fierce competition for passengers to fill them, any airline that shows a profit over the past three months - even a meager one -- has reason to crow. Most analysts expect the U.S. airline industry overall to lose at least $2 billion this year unless there's a dramatic drop in jet fuel prices.
Against this grim backdrop, analysts polled by Thomson First Call said they expect Southwest to produce net earnings of 4 cents a share, matching year-ago results, on revenue of $1.65 billion, a slight increase from $1.48 billion brought in a year ago.
If Southwest meets those expectations, it will likely be one of the few this quarter. The Amex Airline Index, which includes Southwest as one of its 10 component companies, is down 17% since the start of the year. Southwest shares have not been immune, but they have shed only 7% of their value during the same period.
Despite tough times, discount airlines like Dallas-based Southwest have been racking up points with passengers, which placed second in a March passenger satisfaction survey conducted by J.D. Power after low-fare rival JetBlue Airways.
The reputation apparently is paying off, with Southwest reporting incremental increases in passenger traffic for all three months of the quarter and nudging its load factor - a measure of passengers to available seats - up to 65.4% for the quarter from 64.2% a year ago.
Like its competitors, the soaring price of fuel - an airline's second biggest cost after personnel - has cut deeply into profit margins. And like others, Southwest last month bumped up fares a modest $1 to $3 on one-way tickets to recover some of the cost.
But with margins as thin as they are, even tiny fare hikes could drive finicky passengers to other carriers, so analysts will be watching Southwest closely to gauge whether its fare adjustments are helping or hurting the bottom line.
Meanwhile, Southwest continues to keep pressure on the bigger legacy carriers, announcing plans in February to add 10 flights daily to Pittsburgh, a key US Airways hub, starting May 4. It is also expanding service to Chicago Midway airport, Las Vegas, Orlando and Philadelphia.
Southwest shares closed Thursday at $14.53, up 31 cents, in a range this past year that has reached from a high of $17.06 to a low of $13.18.
