The Prussian
Stecknadelkopf
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AP
Southwest Cuts Growth Plans Again
Tuesday December 4, 10:30 am ET
By David Koenig, AP Business Writer Southwest Cuts Growth Plans for Second Time; Expects 4-5 Percent in 2008
DALLAS (AP) -- Southwest Airlines Co. said Tuesday it would slow its planned growth in 2008, the second time this year that the low-cost carrier has reined in expansion as it struggles with high fuel costs.
The airline said it would grow 4 percent to 5 percent next year, compared with earlier expectations of 6 percent in 2008. The company will retire planes faster than it adds new ones in a bid to boost profits.
"We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices," Chief Executive Gary C. Kelly said in a statement.
Southwest's announcement came a day after rival Continental Airlines Inc. cut its growth expectations for next year to between 2 percent and 3 percent, down from 3 percent to 4 percent.
Dallas-based Southwest also reported Tuesday that November traffic grew 2.6 percent, measured by miles flown by paying passengers. That growth, however, failed to keep up with a 6.4 percent increase in capacity.
As a result, average occupancy on Southwest flights slipped to 69.3 percent from 71.8 percent in November 2006.
The airline plans to add five to 10 new planes next year, down from its previous plans for 19 Boeing 737s. Chief Financial Officer Laura Wright said the airline would also retire more older jets than previously planned.
Southwest first cut its growth plans from 8 percent to 6 percent in June, and Kelly hinted in November at further tightening.
Southwest has options to buy fuel at below-market rates, which gives it an advantage over its rivals. Still, rising fuel costs are making it harder for the airline to hit its financial goals.
In addition, Wright told investors in New York that nonfuel costs will also rise next year, citing higher maintenance needs.
The airline is also in negotiations with pilots for a new contract that could lead to higher labor costs.
Southwest is trying to offset higher costs by generating more revenue from ticket sales to business travelers. It recently began offering business travelers extra perks, such as early boarding and a drink for a slightly higher fare.
Southwest shares rose a penny to $13.74 in morning trading.
Southwest Cuts Growth Plans Again
Tuesday December 4, 10:30 am ET
By David Koenig, AP Business Writer Southwest Cuts Growth Plans for Second Time; Expects 4-5 Percent in 2008
DALLAS (AP) -- Southwest Airlines Co. said Tuesday it would slow its planned growth in 2008, the second time this year that the low-cost carrier has reined in expansion as it struggles with high fuel costs.
The airline said it would grow 4 percent to 5 percent next year, compared with earlier expectations of 6 percent in 2008. The company will retire planes faster than it adds new ones in a bid to boost profits.
"We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices," Chief Executive Gary C. Kelly said in a statement.
Southwest's announcement came a day after rival Continental Airlines Inc. cut its growth expectations for next year to between 2 percent and 3 percent, down from 3 percent to 4 percent.
Dallas-based Southwest also reported Tuesday that November traffic grew 2.6 percent, measured by miles flown by paying passengers. That growth, however, failed to keep up with a 6.4 percent increase in capacity.
As a result, average occupancy on Southwest flights slipped to 69.3 percent from 71.8 percent in November 2006.
The airline plans to add five to 10 new planes next year, down from its previous plans for 19 Boeing 737s. Chief Financial Officer Laura Wright said the airline would also retire more older jets than previously planned.
Southwest first cut its growth plans from 8 percent to 6 percent in June, and Kelly hinted in November at further tightening.
Southwest has options to buy fuel at below-market rates, which gives it an advantage over its rivals. Still, rising fuel costs are making it harder for the airline to hit its financial goals.
In addition, Wright told investors in New York that nonfuel costs will also rise next year, citing higher maintenance needs.
The airline is also in negotiations with pilots for a new contract that could lead to higher labor costs.
Southwest is trying to offset higher costs by generating more revenue from ticket sales to business travelers. It recently began offering business travelers extra perks, such as early boarding and a drink for a slightly higher fare.
Southwest shares rose a penny to $13.74 in morning trading.
