Las Vegas Sun

March 28, 2024

THE ECONOMY:

Southwest reports second straight quarterly loss

Airline reports $91 million loss for fourth quarter of 2008

Southwest Airlines 4Q 2009 report

  4Q 2009 4Q 2008 % change 3Q 2008
Revenue $2.71 billion $2.73 billion -0.8% $2.66 billion
Earnings $116 million $56 million - (-$16 million)
Earnings per share 16 cents 8 cents - (-2 cents)

At a glance:

+ By passenger volume, Southwest is the No. 1 carrier at McCarran International Airport.

- “We face the toughest revenue environment in our history. A rapid weakening in passenger demand during first quarter, particularly among business travelers, led to our first quarter net loss. Although competitively strong and financially resilient, we are not immune to the challenges the worldwide recession is having on air travel.” – CEO Gary Kelly

- Southwest expects another year-over-year decline in the second quarter despite the timing of the Easter holiday.

- Southwest has deferred aircraft deliveries in 2009 and 2010 as a cost-cutting measure.

- Southwest stock had 52-week lows March 2 ($5.41), March 3 ($5.08) and March 5 ($4.95).

- April 15 stock price: $7.64 (52-week high: $16.77)

+++

Dallas-based Southwest Airlines, the busiest commercial air carrier serving McCarran International Airport in Las Vegas, reported its second straight quarterly loss today, surprising analysts who expected a smaller loss than reported.

The airline, which saw its historic string of profitability end in the fourth quarter of 2008, reported a loss of $91 million, 12 cents a share, on revenue of $2.36 billion. The company had earnings of $34 million, 5 cents a share, on revenue of $2.53 billion in the same quarter a year earlier.

Airline officials said today it would freeze hiring and offer more buyouts to employees to reduce its work force. Early today, there was no indication how that would affect operations at McCarran where the company has a pilot and flight attendant crew base and 2,300 employees. Company officials said employees were given a June 19 deadline to consider buyout options.

Pay was frozen for senior management and top officers.

“We face the toughest revenue environment in our history,” CEO Gary Kelly said in a statement accompanying the earnings announcement. “A rapid weakening in passenger demand during first quarter, particularly among business travelers, led to our first quarter net loss. Although competitively strong and financially resilient, we are not immune to the challenges the worldwide recession is having on air travel.”

The loss occurred despite a record first-quarter load factor of 69.9 percent. The higher percentage of paying customers on flights was a result of the airline’s capacity cuts systemwide, which included a 4 percent reduction of flights in Las Vegas.

The company’s fuel-hedging program, which has benefited the airline for years, worked against it in the first quarter, just as it did in the fourth quarter of 2008. The company reported $57 million in unrealized losses associated with the hedging program because oil prices are well below costs projected when the hedges were made.

Without the fuel hedges, Southwest still would have lost $20 million, or 3 cents a share. Analysts expected a 1 cent loss.

Southwest has curtailed its growth plans for 2009, but promised expansion next year in its recent contract negotiations with its pilots. This year, the airline has trimmed flights in several cities, but expanded its Denver market and began service to Minneapolis-St. Paul in March. The airline will begin offering flights to New York’s LaGuardia International Airport on June 28 and to Boston’s Logan International Airport on Aug. 16.

Las Vegas continues to be Southwest’s largest station with an average of 230 flights a day by McCarran’s count.

In another cost-cutting measure, the airline deferred deliveries of jets from Boeing in 2009 and 2010, but still plans to accept 13 new Boeing 737-700 jets, while retiring 15 older aircraft by the end of 2009.

In early trading on Wall Street today, Southwest stock was down 92 cents, 12 percent, to $6.72 a share.

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