To bad we are only going to take half the deliveries were supposed to next year.
Gary was quoted on the company website saying that we may not get rid of the 22 planes previously mentioned based on what has happened to the industry this month.
UPDATE: Southwest 1Q Net Down 63%, To Cut Fleet Growth
DOW JONES NEWSWIRES
Southwest Airlines Co. (LUV) posted a 63% decline in first-quarter net income, weighed down by surging fuel prices that are expected to push most U.S. airlines into the red.
It also announced more fleet-growth cuts, saying plans for 2009 have been ratcheted back in the face of the fuel costs.
The discount carrier reported net income of $34 million, or 5 cents a share, compared with $93 million, or 12 cents a share, a year earlier. Excluding fuel hedges, earnings rose to 6 cents a share from 4 cents.
Revenue rose 15% to $2.53 billion.
On average, analysts polled by Thomson Financial had expected earnings, excluding items, of 1 cent a share on revenue of $2.49 billion.
The result was in contrast to concerns that Southwest would report its first loss in 17 years amid the challenges facing the airline industry. The carrier hasn't reported a loss since the first quarter of 1991, when the first Iraq war took place.
The latest test of Southwest's durability as a generator of profits comes as fuel costs and a weak U.S. economy are expected to push most U.S. airlines to a first-quarter loss. Carriers are benefiting from international expansion, but fierce competition and a roughly 30% spike in fuel prices since January have driven several small airlines to file for Chapter 11 bankruptcy protection. Airlines are trying to offset surging fuel prices by reducing flights, trying to raise fares and adding new charges, like fees to check a second bag.
Southwest has been able to avoid previous unprofitable periods seen by other airlines, thanks partly to its vaunted fuel-hedging program in which it has paid upfront for the right to buy fuel at certain prices. When fuel prices began rising earlier this decade, Southwest was able to lock in below-market prices for most of its fuel. The carrier has hedged 70% of its 2008 fuel needs at the equivalent of $51 a barrel for crude oil - less than half the current price of oil.
In the first quarter, Southwest's unhedged per-gallon fuel costs rose 53% to $ 2.79. Overall fuel and oil costs jumped 33%. Last week, Southwest projected a 2008 fuel-bill jump of about 20% to more than $3 billion. It said it will try to offset fuel costs by raising more revenue and controlling other costs.
Chief Executive Gary C. Kelly said Thursday that he expects second quarter jet-fuel costs "in the $2.35 per gallon range, significantly higher than first quarter even with anticipated hedging gains significantly higher than first quarter." Based on current cost trends, he expects second-quarter unit costs, excluding fuel, to increase from first quarter's 6.7 cents.
At Southwest, revenue passenger miles, or one paying passenger flown one mile, grew 9.2% as capacity rose 6.4%. Load factor, or the percentage of available seats filled, rose 1.8 percentage points to 69.8%.
Revenue per available seat mile, considered the best measure of revenue for airlines, climbed 8.2%.
Looking ahead, Kelly said Southwest will reduce its 2009 fleet growth to no more than 14 planes, "half our previous plan, assuming no retirements." The company also will defer 14 aircraft deliveries to 2015 and has moved 12 2010 deliveries into 2013 to 2015.
Southwest briefly grounded 41 planes from its fleet of all-Boeing Co. (BA) aircraft last month in the wake of U.S. government and internal investigations into its maintenance procedures. The FAA has proposed a $10.2 million civil penalty against Southwest for using planes that had missed inspections for cracks in the fuselage. The grounding was disturbing news for an airline that owes its success to operating leanly and keeping costs low.
Southwest shares were inactive in recent premarket trading; they closed Wednesday at $12.50.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
[email protected]