Southwest Earnings Surge on Higher Demand, Low Fuel Prices

Southwest Airlines Co.'s earnings more than doubled in the first quarter, as customer demand led to a record-high load factor and the airline continued to benefit from lower fuel prices.

Shares were up about 1.4% in premarket trading Thursday.

Traffic during the quarter increased 7.1% and capacity rose 6%. The portion of seats filled, or load factor, grew to a record 80.1% from 79.3%.

The sharp drop-off in oil prices has been generally favorable to airlines. Though some airlines are less affected due to agreements called fuel hedges, Southwest is exposed to 80% of the fall in oil prices.

For the company, this means that first-quarter unit costs were at $2.01 a gallon including fuel tax, down from $3.10 a year earlier. For the current quarter, Southwest sees fuel costs at about $2 a gallon. The latest quarter included $19 million in mark-to-market losses from fuel hedges.

Total unit costs were down 12%. For the current quarter, Southwest expects unit costs to fall 1% to 2%. Total operating expenses fell 8%.

The company is planning to increase its fleet about 2% in 2016 and is on track to add six international destinations.

Overall, Southwest reported a profit of $453 million, or 66 cents a share, up from $152 million, or 22 cents a share, a year earlier.

Revenue grew 6% to $4.41 billion.

Analysts polled by Thomson Reuters had called for earnings of 65 cents a share on revenue of $4.42 billion.

Southwest's revenue per available seat mile, a key measure of performance for the airline industry, edged up 0.3% from a year earlier.

Write to Angela Chen at [e-mail]

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