DALLAS — Southwest Airlines Co. reported its profit almost doubled in the fourth quarter, but the airline said today that fuel costs in the current quarter will rise substantially.
Southwest said net income rose to $111 million, or 15 cents per share, compared to a year-earlier profit of $57 million, or 7 cents per share. Revenue rose to $2.49 billion from $2.28 billion a year earlier. Excluding special items, the company reported a profit of 12 cents per share.
Analysts surveyed by Thomson Financial expected profit of 10 cents per share on revenue of $2.48 billion. Those estimates typically exclude one-time items.
Its shares fell 2 cents, to $11.96 in morning trading. They have ranged from $11.02 to $16.96 in the past year.
For the current quarter, Southwest estimated fuel costs of about $2 a gallon, up from $1.72 per gallon in the fourth quarter. Fuel is usually an airline’s second-largest expense after labor.
Chief Executive Gary Kelly said the quarter and full-year profit “fell short of our earnings goals” due to high costs and operational challenges regarding bad weather, traffic and security.
Southwest has also been taming its rapid growth in a bid to fly fuller planes, though its capacity increases outpaced traffic growth during the fourth quarter. That led to emptier, less profitable flights.
Jamie Baker, an analyst with JPMorgan, said Southwest beat expectations by holding down fuel and other costs. Still, he said the airline would have to boost revenue strongly to hit Wall Street’s targets for 2008 profits.
“Anything’s possible, and ancillary revenue could contribute, but (revenue per passenger) growth of this magnitude would exceed Southwest’s recent run-rate,” Baker said in a note to clients.
Southwest has also begun a multimillion dollar initiative to renovate its gate areas and marketing and said today it will begin installing equipment to test on-board Internet service. The airline has been gradually changing its boarding method from its long time “cattle call” to assigned spots in line at the gate, and it has launched a special business flyer program with higher ticket prices for in-flight extras.
