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.

Leave a Reply

Your email address will not be published. Required fields are marked *