- Associated Press - Thursday, July 29, 2010

DALLAS (AP) — Southwest Airlines Co. added an upbeat note to a strong quarter for the airline industry by reporting a $112 million profit for spring and early summer.

The nation’s biggest discount airline said Thursday that its adjusted earnings were 29 cents per share in the second quarter, enough to beat analysts’ expectations.

Revenue rose 21 percent thanks to a 15 percent increase in average fares during the start of the summer vacation period.

The Dallas-based airline said business travel has strengthened but not fully recovered from pre-recession levels. But its core customer — the leisure traveler — has been packing planes. Southwest could set an all-time record for the percentage of seats filled in July.

Southwest was the last of the big six carriers to report second-quarter results. All except American Airlines parent AMR Corp. made money due to higher fares and new fees on passengers.

Although it has imposed several new fees in the last two years, Southwest alone among the largest airlines doesn’t charge customers to check one or two bags, and CEO Gary C. Kelly said that policy was attracting new passengers.

Kelly said the airline expects third-quarter revenue will rise over the same period last year.

Southwest’s net income equaled 15 cents per share, compared with $91 million, or 12 cents per share, a year earlier. The gain was 29 cents per share after excluding what Southwest called special items. Analysts, who also exclude those items from their forecasts, expected 27 cents per share.

Revenue climbed to $3.17 billion, slightly above the analysts’ forecast of $3.15 billion.

Southwest boasts about offering low fares, but that’s not how it hit its financial targets. Traffic rose a modest 2.2 percent over the same quarter last year, while the average fare rose to $128.60 from $112.13 in the same quarter last year.

Southwest’s cost of carrying each passenger one mile, a closely watched measurement in the industry, jumped 6.4 percent not counting fuel. That’s a much bigger increase than overall inflation, but Southwest said it held costs down by reducing advertising and getting a rebate on excess security fees it has paid to the Transportation Security Administration since 2005.

The airline said it expects a similar increase in costs in the third quarter.

In premarket trading Southwest shares rose 49 cents, or 4.1 percent, to $12.50.




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