From: Reuters
Published April 17, 2008 07:46 AM

Southwest Air net falls

NEW YORK (Reuters) - Southwest Airlines Co <LUV.N> pulled back on growth plans and posted lower quarterly earnings on Thursday as a weak U.S. economy and record fuel costs took a toll on the leading U.S. discount carrier.

First-quarter net profit fell to $34 million, or 5 cents per share, from $93 million, or 12 cents per share, in the same period last year.

Excluding one-time items, profit was $43 million, or 6 cents a share, compared with $33 million, or 4 cents a share, in the year-ago period. Analysts on average had expected 1 cent a share, according to Reuters Estimates.

Revenue rose 15 percent to $2.53 billion.


Southwest said it would grow its fleet in 2009 by no more than 14 737-700 aircraft -- half its previous plan.

U.S. airlines are suffering under soaring fuel prices and a weakening domestic economy.

Although Southwest has a history of successfully hedging against higher fuel costs, it said on Thursday it was concerned about soaring energy costs.

"We cannot ignore the threat of volatile and unprecedented jet fuel prices," Chief Executive Gary Kelly said in a statement.

"We will continue to take steps to restore our profit margins, including an ongoing rigorous review of our flight schedule to eliminate nonproductive flying," Kelly said.

Tough market conditions helped prompt a proposed merger between Delta Air Lines <DAL.N> and Northwest Airlines Corp <NWA.N> and could spur a wave of consolidation amid fears of falling travel demand.

Kelly said on CNBC television that his company needs to adjust to the changing environment and that Southwest "can't just stand still."

However, he added, "I don't think that means we have to look for a merger partner," saying the best course of action for Southwest may be to do nothing amid the consolidation.

(Reporting by Mark McSherry; Editing by Derek Caney and John Wallace)

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