SWA CEO says profitability will last
 

Southwest CEO says profitability to last
DAVID KOENIG
Associated Press

DALLAS - Southwest Airlines Co. can remain profitable by adding planes and keeping occupancy rates at record levels, even as the amount of jet fuel it has bought at lower prices begins to fall, CEO Gary C. Kelly told shareholders Wednesday.

The Dallas-based discount carrier also might expand to international routes in a few years, he said.

There were no tough questions but plenty of laughs during Southwest's investor meeting. Shareholder questions sounded more like testimonials for the Dallas-based low-cost carrier, which has earned more than $2 billion since 2001.

Southwest's profit is largely due to its long-term fuel hedging, or buying gas far in advance at lower prices. However, that advantage is diminishing and will virtually disappear by 2010. Southwest expects to spend $600 million to $700 million more on fuel this year than last year.

"I feel really good about our performance thus far, and the outlook for the rest of the year is a stronger revenue environment than we've seen in some time," Kelly said.

Southwest has raised fares seven times in the past 15 months, pushing its average fare over $100. Kelly said any future increases would be "modest" - a few dollars each way.

Southwest convened its annual shareholder meetings on the same day as local rival AMR Corp., the parent of American Airlines. It has done so for several years for the convenience of investors who own shares of both. The two meetings were held just a couple hours and a few miles apart, yet they could hardly have been more different in tone.

Fort Worth-based AMR has lost more than $8 billion since the beginning of 2001.

The company has made massive spending cuts, including thousands of layoffs, but not enough to offset fuel costs - $5.6 billion last year, up more than $1.6 billion from 2004. Arpey said American was "gaining steady traction" but must keep cutting costs to compete with low-cost rivals such as Southwest and carriers that have used bankruptcy protection to shed pension liabilities.

Southwest continues to lobby Congress to expand flights to and from Dallas Love Field. American has a hub at nearby Dallas-Fort Worth International Airport, and opposes more long flights at Love Field.