Southwest pondering international routes
NEW YORK - Southwest Airlines, which reported a higher-than-expected profit on Thursday, said it would push for more business travelers over the next year and consider flying internationally.
The discount domestic airline has built its fortune on serving primarily vacationers and leisure travelers flying shorter routes. Over the past few years, Southwest has also turned its attention to business travelers.
The airline now sells a business select service that gives passengers priority boarding among other amenities. The company is looking to offer wireless Internet on its flights by around 2013 and upgrade its frequent flier program.
"We'll have a bigger push and a stronger message for business travel over the next 12 months," Chief Executive Gary Kelly said during a call with analysts and reporters.
Kelly also said during the call that the airline would decide this year whether to fly international routes. If the airline were to pursue routes outside the United States, it would take a multiyear effort, he said.
"We're built as an all-domestic carrier," Kelly told reporters during the call. "If we want to pursue international opportunities, it's a multiyear construction effort for us."
Shares were little changed, up 2 cents at $12.03 on the New York Stock Exchange. The stock rose as much as 2.8 percent earlier in the session.
JULY UNIT REVENUE SEEN UP 17 PCT
Southwest is the last major airline to report results for the second quarter. The airline industry has been able to command higher fares this year as travel demand bounced back.
For July, Southwest estimated that unit revenue would jump 17 percent, below what at least one analyst had forecast. The airline said July 2010 improvements were set against July 2009, a month when the company's operations began to improve.
Bookings for August and September appear strong, the airline said during the call.
Last year, carriers reduced capacity, as measured by available seat miles, to cut costs. Avoiding excess capacity is seen as key to the recovery for the industry.
Southwest said its capacity in 2010 would be even with 2009 levels. The company forecast no fleet growth in 2011 and a "modest" capacity increase, which Chief Financial Officer Laura Wright said during the call could be around 2 percent.
Southwest has no plans to increase its fleet in 2012.
In the second quarter, net income rose to $112 million, or 15 cents per share, from $91 million, or 12 cents per share, a year ago. Revenue rose 21.1 percent to $3.2 billion.
Excluding costs related to the company's fuel hedge portfolio, the company earned 29 cents per share. The average estimate of analysts was 27 cents per share, according to Thomson Reuters I/B/E/S.
Second-quarter unit costs, excluding special items, rose 13.6 percent due to a jump in fuel prices. The company received an $18 million refund from the Transportation Security Administration for excess security fees charged since 2005.