The second biggest airline operating in the Valley has a competitive edge — a voluminous hedge on soaring jet fuel costs, said Southwest Airlines CEO Gary Kelly on Thursday.
The company saved $133 million in first quarter by buying fuel at previously agreed-upon discounted prices, Kelly said.
But even with three quarters of the Dallas-based carrier’s fuel needs for the year locked up at $36 a barrel, energy prices sapped a big chunk of first quarter profits, Kelly said.
Revenue for the quarter that ended March 31, was up 21 percent compared with the same quarter a year earlier, but because of a 62.8 percent higher jet fuel tab, net earnings barely squeaked past those of first quarter 2005.
Kelly said the fuel hedge plus cost-saving operational efforts led Southwest to its 60th consecutive profitable quarter and expectations of continued profitability throughout the year and the decade.
He said the discounted fuel guarantee continues through 2009, but with diminishing quantities hedged in future years.
That means the company can remain profitable without having to raise fares more than a modest amount.
That’s good news for Valley travelers.
But Kelly also on Thursday touted efforts to boost business at his home field by battling a 27-year-old law that restricts Southwest’s ability to fly from Love Field to most U.S. destinations, including Phoenix Sky Harbor International Airport.
That may not be such good news for Valley economic leaders hoping to woo the airline’s headquarters to friendlier skies near Sky Harbor if Dallas isn’t appreciative of the thriving business.
Kelly said Thursday that he is “thrilled with our progress towards repealing the Wright Amendment. We’re pursuing efforts to set Love Field free.”
Kelly predicts that skyrocketing energy costs and the need for some airlines to raise fares to compensate for them may cause customer backlash and some fallout within the airline industry.
REVENUE: $2.02 billion
REVENUE FIRST QUARTER 2005:
$1.66 billion EARNINGS: $61 million, 7 cents per share
EARNINGS FIRST QUARTER 2005: $59 million, 7 cents per share
21.4 percent EARNINGS: 3.4 percent