Southwest Airlines’ Profit Soars

Southwest Airlines Inc. on Monday reported a jump in its quarterly profit and said it would speed up the delivery of more planes next year as it looks for opportunities to expand.

Southwest, the only major U.S. carrier to report consistent profit since the Sept. 11 attacks, said it would boost capacity by 6% to 7% next year and forecast a higher third-quarter profit than a year ago. Its larger rivals, meanwhile, are deferring aircraft deliveries and relying on federal aid to offset huge losses.

The No. 6 U.S. airline also said it may add a city to its network in 2004, which would be its first move into a new market since it started service to Norfolk, Va., a month after the 2001 attacks.

Southwest also is looking to scoop up business where its bigger competitors -- strapped with excessive costs -- are cutting back. Chief Financial Officer Gary Kelly said the decision by American Airlines parent AMR Corp. to cut its St. Louis service in half provides a big opportunity for Southwest to expand.

Southwest’s second-quarter net income was $246 million, or 30 cents a share, including $143 million after tax in government aid to offset security costs. That was more than double the $102 million, or 13 cents a share, for the year-earlier quarter. Sales rose 2.9% to $1.52 billion.

Even without the government aid, Southwest’s profit rose 22.6% to $103 million, or 13 cents a share.

Kelly said the Dallas-based carrier expected more cost pressure in the second half of the year from labor rates. Southwest is in talks with its flight attendants, its last major labor group without a new contract.

Kelly also said the carrier was concerned about post-summer travel demand and could not yet tell whether business travel has picked up. But Southwest still expects third-quarter earnings to exceed its third-quarter 2002 profit of $75 million.

The carrier said it recently exercised options for the delivery of nine Boeing 737-700s next year. It also exercised six 2005 options for accelerated delivery in 2004, and accelerated the firm delivery of two 2005 aircraft to 2004.

The changes to its 2004 delivery schedule -- 42 deliveries and 17 retirements of Boeing 737-200s -- will yield 25 more jets. Southwest also plans to net 29 more planes in 2005 and 38 in 2006, Kelly said.

Shares of Southwest fell 1 cent to $16.98 on the New York Stock Exchange.