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Southwest profit up on higher fares, cheaper fuel

Published on NewsOK Modified: October 24, 2013 at 4:16 pm •  Published: October 24, 2013
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DALLAS (AP) — Average fares are rising on Southwest Airlines Co., the fuel bill is shrinking, and profit is soaring.

The airline is gearing up for the holiday travel season, and officials say that bookings for November and December are strong.

Southwest released third-quarter results Thursday and gave more evidence that the airline industry continues to rebound from the 2008 recession. Mergers have reduced the number of competitors, and the remaining airlines are boosting fares by controlling growth and limiting seats.

The results sent Southwest shares up 61 cents, or 3.7 percent, to close at $17.02.

Southwest said that third-quarter net income jumped to $259 million, or 37 cents per share, from $16 million, or 2 cents per share, a year earlier.

Excluding special items such as fuel-hedging, the company said it would have earned 34 cents per share. That matched analysts' forecast of adjusted profit.

Revenue rose 5.5 percent to a record $4.55 billion. Analysts were expecting $4.54 billion, according to FactSet.

The average one-way fare on Southwest increased 11.3 percent, to $159.39. That reflects longer flights — the average trip was 1,000 miles, an extra 41 miles — and long-term trends in fuel prices, Southwest officials said.

The airline was forced to boost fares to offset fuel prices that rose for several years, "and finally we're getting caught up," Chairman and CEO Gary Kelly said on a conference call with analysts and reporters. "If fuel prices are flat next year, I would hope that we wouldn't have to have fare increases."

Over the past three years, Southwest's price per gallon of fuel has risen faster than the average fare — fuel 26 percent, fares 20 percent. Over four years, fuel is up 37 percent while the average fare is up 40 percent.

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