Southwest Posts Q2 Profit On Lower Costs

Southwest Airlines posted a quarterly profit Tuesday after three straight quarters of losses as lower costs boosted its bottom line.

Southwest earned USD$54 million, or 7 cents per share, in the second quarter, compared with USD$321 million, or 44 cents per share, a year ago.

Excluding special items, Southwest earned USD$59 million.

Revenue fell about 9 percent to USD$2.6 billion, while unit costs fell 4.6 percent.

Southwest said it continued to see the benefits of the drop in oil prices from last summer.

The low-cost carrier also said about 1,400 employees, or roughly 4 percent of its workforce, opted to participate in a voluntary buyout program during the second quarter. Southwest expects USD$70 million in additional costs in 2009 and 2010 from the early-out program.

Southwest said its economic fuel costs fell 22.8 percent to USD$1.79 per gallon, including taxes.

Based on Southwest's third quarter derivative position and current energy prices, it expects third quarter jet fuel costs to fall sharply to about USD$2.15 per gallon.

Southwest currently has derivative contracts in place for more than 30 percent of its third quarter fuel consumption.

CEO Gary Kelly said the company could not predict a third-quarter profit due to weak travel demand and fuel price volatility.

Barring a rebound in the economy, Southwest expects third quarter unit revenue to fall more than the 6 percent decline seen during the second quarter due to more difficult comparisons, the company said.