- The Washington Times - Tuesday, April 14, 2009

DALLAS (AP) - Southwest Airlines Co. reports first-quarter earnings on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Southwest is the only big U.S. airline expected to post a first-quarter profit, although analysts say it will be a slim one.

If Southwest finished the quarter in the black, it did so largely because its traffic has held up better than other carriers’ in the recession.

Over the first three months of the year, Southwest’s traffic fell 4 percent, and just 0.4 percent in March, when several other major airlines reported declines of 8 to 10.9 percent.

Southwest isn’t recession-proof. For the first time in its history, the discount airline planned a capacity cutback. Through March, Southwest has flown 4.1 percent fewer available seat miles.

But Southwest is also targeting areas to grow. It began service to Minneapolis in the first quarter, and it plans to launch service at New York’s LaGuardia and Boston’s Logan airports later this year.

BY THE NUMBERS: Analysts, on average, expect Southwest to report first-quarter profit of 2 cents per share on sales of $2.40 billion, according to a survey by Thomson Reuters.

A year ago, the airline earned $34 million, or 5 cents per share, on revenue of $2.53 billion.

ANALYST TAKE: Helane Becker of Jesup & Lamont Securities, who expects a break-even first quarter, said Southwest is hanging on to more traffic than others because it tends to have a smaller percentage of business traffic, and leisure travel has held up better.

Becker said Southwest has also benefited from its U.S.-only business because there is still too much capacity in international markets.

WHAT’S AHEAD: Uncertainty. Both in the economy and the airline industry.

Southwest Chief Executive Gary Kelly said last month it was hard to know whether the travel business had hit bottom. He said it was wise to plan for “a really tough environment and one that lasts for a long time.”

Business travel has tailed off, which is bad for Southwest because those customers often buy full-price tickets at the last minute. Southwest hopes service at LaGuardia and Logan will appeal to business travelers who don’t like driving out to far-flung secondary airports.

The airline is also experimenting with in-flight Internet service, and it expects to start selling travel to Canada and Mexico aboard partner airlines around year-end. Both moves could bring in additional revenue.

On the labor front, Southwest reached a tentative contract agreement with flight attendants late last month and now has tentative or approved labor deals with nearly all its union workers, including pilots and mechanics. The agreements have included raises for workers and more flexible work rules for the airline.

STOCK PERFORMANCE: Shares of Dallas-based Southwest fell 27 percent in the first quarter, from $8.62 to $6.33, but that was far less than declines at other carriers. Over the same three months, shares of American Airlines parent AMR plunged 70 percent, US Airways sank 67 percent, United parent UAL skidded 59 percent, and Delta and Continental lost 51 percent.

In the past year, Southwest shares have ranged from $4.95 to $16.77.

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