DALLAS (AP) – Cheaper fuel and higher revenue boosted Southwest Airlines to a record third quarter profit of $584 million.
Passengers paid lower average fares in the third quarter than a year ago, but that could be about to change. Southwest said that a key revenue per mile figure will rise in the fourth quarter, likely indicating that it expects higher fares.
Southwest said Thursday that net income rose 78 percent from a year ago, helped by fuel-pump savings of $450 million, or 32 percent.
Excluding non-repeating items, Southwest said it earned 94 cents per share. That topped Wall Street expectations, as nine analysts surveyed by Zacks Investment Research predicted 92 cents per share.
Revenue rose 11 percent, to $5.32 billion, which also topped the analysts’ forecast. Three analysts surveyed by Zacks expected $5.1 billion.
Southwest has been growing rapidly in its hometown of Dallas since federal restrictions on flights at Love Field expired a year ago. That helped Southwest increase traffic by 9 percent and fill 85.4 percent of its seats, an increase of 1 percentage point from a year ago.
The average fare on Southwest fell 4 percent, to $154.33 for a one-way ticket despite longer flights.
Southwest said, however, that revenue for every seat flown one mile will rise 1 percent in the fourth quarter. That’s a closely watched number in the airline business, and it rises when airlines fill more seats or charge higher average prices. Southwest also said the benefits from a new credit card contract with Chase.
Airlines have been posting record profits this year thanks to jet fuel prices, which began to plummet in summer 2014. Southwest’s fuel bill dropped to $936 million, making labor costs by far the airline’s biggest expense. Salaries, wages and benefits rose 25 percent to $1.7 billion.
This month, Southwest opened a new international terminal in Houston and began flights to several destinations in Mexico and the Caribbean.
Shares of Southwest Airlines Co (LUV) shares have dropped 3 percent since the beginning of the year, while the Standard & Poor’s 500 index has declined almost 2 percent. The stock has risen 19 percent in the last 12 months.
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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on LUV at http://www.zacks.com/ap/LUV
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