DALLAS - Southwest Airlines is getting a small break at the fuel pump, and that’s helping it to slightly beat Wall Street expectations for profit.
The company saved 16 cents a gallon on fuel in the second quarter, which added up to $88 million. That made a difference in a quarter during which revenue barely grew.
Chief Executive Officer Gary Kelly said Thursday that demand is still suffering from automatic federal spending cuts that have reduced government travel and from higher taxes, but he said third-quarter trends “are encouraging.”
The company’s revenue per mile - a closely watched figure in the industry - has been about 3 percent higher this month than in July 2012, and bookings for August and September “also look solid,” he said.
Southwest officials declined to comment Thursday on the investigation into an accident this week at New York’s LaGuardia Airport.
The National Transportation Safety Board is trying to determine why the nose gear of a Southwest Boeing 737 collapsed upon landing Monday night, causing the plane to skid off the runway with its nose on the ground. Several passengers and flight attendants were treated for injuries.
After the financial report was released, Southwest shares rose 5 cents to close Thursday at $13.81. Through Wednesday, the shares were up 34 percent for the year, nearly the same as the rise in the Arca index of airline stocks.
The stocks have rallied as investors grow more confident about sustained profits in an industry that lost billions last decade. Mergers have reduced competition, the airlines have curtailed flights to push up fares, and they’ve added revenue from a flock of fees for various services.
Southwest Airlines Co., which owns AirTran Airways,said that second-quarter net income was $224 million, or 31 cents per share, down 2 percent from $228 million, or 30 cents per share, a year ago.
Southwest said that stripping away special items - mostly changes in the value of fuel-hedging bets - it would have earned 38 cents per share in the latest quarter. That’s a penny better than analysts surveyed by FactSet were expecting.
Revenue increased less than 1 percent to $4.64 billion. Southwest said that was a second-quarter record, but it fell short of analysts’ forecasts of $4.66 billion.
Traffic increased about 3 percent, and the average one-way fare rose less than a buck - to $151.23. The rate of fare increases has slowed from 2011, when airlines raised prices quickly to offset higher fuel costs.
UNITED EARNS $469 MILLION
The parent of United Airlines said its profit rose 38 percent in the second quarter as it spent less on fuel and increased fares.
United cut flying by 2 percent compared to a year earlier, but passengers paid slightly more to fly. Also, United’s fuel bill dropped 10 percent as it flew less and the price of fuel dropped.
Lower fuel bills helped all of the big airlines in the most recent quarter. In the quarter ended June 30, the per gallon cost of United’s fuel fell 8 percent. But oil prices have risen in recent weeks, likely dampening the relief for airlines.
A year ago, United was struggling to merge some of its large computer systems with Continental, resulting in problems that frustrated passengers and hurt fares.
A key measure of per-seat passenger revenue rose 1 percent in the most recent quarter as United recovered.
“I am encouraged by the progress we made in the second quarter - in our operations, in our customer service and in our financial performance,” said Jeff Smisek, the airline’s chairman, president and CEO.
United Continental Holdings Inc. earned $469 million, or $1.21 per share, for the quarter. It would have earned $1.35 per share if not for special items. That’s a penny better than expected by analysts surveyed by FactSet. A year ago it earned $339 million, or 89 cents per share.
Revenue rose almost 1 percent to $10 billion, about what analysts had expected.
Shares of Chicago-based United Continental rose 27 cents to $35.24 in morning trading.
United will trim available seats by as much as 1.4 percent this quarter, bucking increases by other U.S. airlines during the peak summer period.
United’s shares fell 67 cents, or 1.9 percent, to close at $34.30.
Information for this article was contributed by David Koenig and Joshua Freed of The Associated Press and Mary Jane Credeur and Jennifer Surane of Bloomberg News.
Business, Pages 27 on 07/26/2013