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Southwest optimistic after Katrina
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[size=-1]By Trebor Banstetter[/size]
[size=-1]Star-Telegram Staff Writer[/size]
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Southwest Airlines isn’t likely to see significant losses from Hurricane Katrina, despite the airline’s status as the top carrier in New Orleans.
And despite the crushing fuel prices that are devastating other airlines, Dallas-based Southwest hopes to improve its earnings next year by as much as 15 percent.
That was the word from Gary Kelly, the airline’s chief executive, who spoke Wednesday to the Society of Airline Analysts in New York.
"We recognize that there are a lot of obstacles," he said. "But at this point we’re not willing to discard that goal."
Southwest carried about 30 percent of the traffic at Louis Armstrong Airport in New Orleans. The traffic accounted for about 4 percent of the airline’s total daily flights.
So the fallout from the hurricane is "fairly significant," he said, but emphasized that it won’t be a dramatic hit on the airline’s third-quarter earnings.
"It’s not a plus," he said, "but it won’t be a significant impact."
Southwest is the only large airline that remains profitable, and is one of just three major carriers that is flying outside of bankruptcy.
"It’s extraordinary to be in a situation where half of the industry’s capacity is in bankruptcy," he said.
Southwest has a sizeable advantage over competitors because of fuel hedge contracts, which allow it to purchase 85 percent of its jet fuel at lower prices.
Fuel has been a major issue for Southwest’s rivals, and Wall Street has taken notice. Shares in Fort Worth-based AMR Corp., the parent company of American Airlines fell 98 cents, or nearly 9 percent, Wednesday to close at $10.32, largely on fears that Hurricane Rita would further increase fuel prices.
Kelly said the recent bankruptcy filings of Northwest Airlines and Delta Air Lines could create some growth opportunities for Southwest.
"Under the assumption that these various carriers shrink or continue to shrink, clearly there’s a scenario that provides opportunities for us to expand," he said. "We’ll react tactically to opportunities as they become available."
Airline analyst Ray Neidl of Calyon Securities called Southwest "the leader of a troubled pack," and predicts that the airline will earn a profit of 57 cents per share for the year.
"They still remain the best protected of all the airlines, and have four years to figure out a strategy if oil prices stay high," Neidl wrote in an investment report Wednesday.
http://www.dfw.com/images/common/spacer.gif
[size=-1]By Trebor Banstetter[/size]
[size=-1]Star-Telegram Staff Writer[/size]
http://www.dfw.com/images/common/spacer.gif
Southwest Airlines isn’t likely to see significant losses from Hurricane Katrina, despite the airline’s status as the top carrier in New Orleans.
And despite the crushing fuel prices that are devastating other airlines, Dallas-based Southwest hopes to improve its earnings next year by as much as 15 percent.
That was the word from Gary Kelly, the airline’s chief executive, who spoke Wednesday to the Society of Airline Analysts in New York.
"We recognize that there are a lot of obstacles," he said. "But at this point we’re not willing to discard that goal."
Southwest carried about 30 percent of the traffic at Louis Armstrong Airport in New Orleans. The traffic accounted for about 4 percent of the airline’s total daily flights.
So the fallout from the hurricane is "fairly significant," he said, but emphasized that it won’t be a dramatic hit on the airline’s third-quarter earnings.
"It’s not a plus," he said, "but it won’t be a significant impact."
Southwest is the only large airline that remains profitable, and is one of just three major carriers that is flying outside of bankruptcy.
"It’s extraordinary to be in a situation where half of the industry’s capacity is in bankruptcy," he said.
Southwest has a sizeable advantage over competitors because of fuel hedge contracts, which allow it to purchase 85 percent of its jet fuel at lower prices.
Fuel has been a major issue for Southwest’s rivals, and Wall Street has taken notice. Shares in Fort Worth-based AMR Corp., the parent company of American Airlines fell 98 cents, or nearly 9 percent, Wednesday to close at $10.32, largely on fears that Hurricane Rita would further increase fuel prices.
Kelly said the recent bankruptcy filings of Northwest Airlines and Delta Air Lines could create some growth opportunities for Southwest.
"Under the assumption that these various carriers shrink or continue to shrink, clearly there’s a scenario that provides opportunities for us to expand," he said. "We’ll react tactically to opportunities as they become available."
Airline analyst Ray Neidl of Calyon Securities called Southwest "the leader of a troubled pack," and predicts that the airline will earn a profit of 57 cents per share for the year.
"They still remain the best protected of all the airlines, and have four years to figure out a strategy if oil prices stay high," Neidl wrote in an investment report Wednesday.
