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Southwest Dings Up $321 Million Profit

July 24, 2008

Southwest Airlines reported a $321 million profit for the second quarter, a bright spot amid hefty losses posted by other major carriers.

The profit was up compared to profits of $278 million a year ago. Dallas-based Southwest said it brought in record revenues of $2.9 billion during the quarter, up more than 11 percent compared to last year.

Excluding special items, the discount airline’s profit totaled $121 million, or about 16 cents per share, ahead of Wall Street’s estimates. That’s down from last year’s second-quarter earnings of $195 million.

Southwest is the only large airline to have significant protection from skyrocketing oil prices, thanks to hedging contracts that lock in a majority of its fuel purchases at lower rates.

Still, executives said the financial environment is a challenging one.

“Although we have prepared ourselves well for today’s challenging environment and are proud of our ability to sustain profitability, we cannot stand still,” said chief executive Gary Kelly in a prepared statement. “We must continue to make the necessary adjustments to adapt to higher jet fuel prices and restore our profit margins.”

The airline has been working to boost revenues with a new, more expensive fare category aimed at business travelers, as well as upgrades to its boarding process and airport gates.

Southwest has also gradually been raising fares in many markets. Kelly said that the airline’s increased revenue has allowed it to avoid “nickel and diming” travelers with added fees.

Many other carriers have added a host of new fees this year. American Airlines, for example, has begun charging passengers to check a first piece of luggage. Others are charging for aisle seats, more leg room or beverages in coach class.




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