Southwest upbeat on growth or in financial trouble?

Southwest Airlines is currently promoting free give away packages which has investors worried.


Current facts:
* Southwest sees Q4 unit revenue growth, higher fuel

* AMR cites higher unit revenue

* AMR shares up 3.8 pct, Southwest eases

Southwest Airlines Co (LUV.N) said on Thursday that it expected the addition of a bigger plane and its proposed purchase of AirTran Holdings Inc (AAI.N) to drive growth even as fuel prices pose a nearer-term challenge.

The discount carrier, which stands to grow in big U.S. East Coast markets such as Atlanta and Washington should the AirTran deal proceed, told its investor meeting it expected higher fuel prices going into 2011.

“The No. 1 challenge that the industry faces is energy costs,” Chief Executive Officer Gary Kelly said during the webcast.

The airline estimated fuel prices at about $2.50 a gallon for the current fourth quarter, rising to the $2.70-to-$2.75 range in 2011.

Many U.S. airlines have seen revenue trends and profits improve this year, recovering from the recession that sapped corporate and consumer demand for air travel.

American Airlines parent AMR Corp (AMR.N) said in a U.S. regulatory filing on Thursday that its unit revenue for the current quarter would probably rise 6.5 percent to 7.5 percent. Its shares were up nearly 4 percent in midday trading.

Southwest also forecast higher fourth-quarter revenue. Passenger revenue per available seat mile is expected to rise in the high-single-digit percentage range during the quarter, it told the investor conference.

This week, Dallas-based Southwest said it would buy bigger Boeing planes that will give it the potential to expand service to international destinations such as Central America and allow it to carry more passengers in gate-restricted U.S. cities.

The company is also upgrading its reservation system technology so that it will be able to sell to international destinations.

Southwest said its financial plans include boosting earnings by at least 15 percent annually.

Shares of Southwest were off 0.5 percent at $12.54 on the New York Stock Exchange, and AMR gained 3.8 percent to $7.84.

So from the looks of it (at least on paper) everything seem fine, for now.

Netflix Again Faces Lawsuit in recent

lawsuit against netflix

lawsuit against netflixA federal judge granted class-action certification to Netflix Inc. subscribers in their lawsuit against the company and Wal-Mart Stores Inc. for an alleged agreement to monopolize the DVD market.

U.S. District Judge Phyllis Hamilton said that the subscribers bringing suit against the companies in 2009 were “united by common and overlapping issues of fact and law,” in an order dated Dec. 23 and filed in federal court in Oakland, California.

Wal-Mart and the plaintiffs reached a preliminary settlement of the lawsuit that could pay them as much as $40 million in cash or equivalents, according to a motion filed in federal court in Oakland Dec. 14. A hearing on that motion will be Feb. 9. The settlement doesn’t include Netflix.

The plaintiffs charged that Netflix and Wal-Mart conspired in 2005 to divide the market for selling and renting DVDs in order to reduce competition. The companies formed an agreement in which would stop renting DVDs online and Netflix wouldn’t offer them for sale. The agreement came after Blockbuster Inc. began offering DVD rentals online, according to the lawsuits.

“As a result, millions of Netflix subscribers allegedly paid supracompetitive prices,” Hamilton said in her order.

Steve Swasey, a Netflix spokesman, said in a telephone interview that “the case has no merit and we’re going to continue to defend it.” He declined to comment on the Wal-Mart settlement.

‘Fair and Reasonable’

“The plaintiffs believe this settlement is fair and reasonable and they are pleased they were able to reach this resolution with Wal-Mart,” Robert Abrams, one of their attorneys, said in an e-mailed message.

Abrams, who is with Howrey LLP in Washington, said his clients “are pleased with Judge Hamilton’s class certification decision. Plaintiffs also look forward to proceeding with the case against Netflix and resolving it through trial or settlement.”

The trial is set for January 2012, Abrams said.

David Tovar, a Wal-Mart spokesman, didn’t immediately return messages for comment.

According to the lawsuit, the alleged conspiracy began when Reed Hastings, the chief executive officer of Netflix, met John Fleming, then the CEO of, for dinner in January 2005 to discuss how to reduce competition in the DVD market in the U.S. At that time Netflix, based in Los Gatos, California, and were competitors in online DVD rentals.

Netflix fell $3.15, or 1.8 percent, to $176.65 at 1:35 p.m. New York time in Nasdaq Stock Market trading. Wal-Mart, based in Bentonville, Arkansas, dropped 17 cents to $53.90 in New York Stock Exchange composite trading.

The case is In re Online DVD Rental Antitrust Litigation, 09-02029, U.S. District Court, Northern District of California (Oakland)