Southwest Manages to Post a Profit

Travelers are boarding planes in increasing numbers and are paying more for tickets, boosting revenue at U.S. airlines, but the carriers continue to struggle with jet fuel prices that could be headed even higher.

Southwest Airlines Co., Continental Airlines Inc. and Alaska Air Group Inc. all said Thursday that their first-quarter revenue jumped by double-digit amounts, but only Southwest earned a profit.

Airline executives worry whether people paying $3 a gallon for gasoline for their cars and dealing with surging utility bills will have enough left over to travel by air, especially with fares rising.

This week, American Airlines added $10 to its leisure fares, a move that was quickly matched by most other major carriers.

There have been more than a dozen fare increases since the beginning of last year, driving up the fares on some routes more than 50%.

“I think you can push fares only so far and there will be a negative effect and a backlash by customers,” Southwest Chief Executive Gary Kelly said.

But so far, demand for air travel is holding up well, said Continental Chairman and CEO Larry Kellner.

“I would have predicted you would have seen more impact by now, so I’m just not sure where the line is,” Kellner said.

“There is no question that as prices continue to increase, that should have an impact on demand.”

In its report Thursday, Dallas-based Southwest, a leader among low-cost airlines, said it earned $61 million, or 7 cents a share, in the January-to-March quarter. That compared with a profit of $59 million, or 7 cents, a year earlier, and matched the expectation of analysts, according to a survey by Thomson Financial.

Revenue soared 21% to $2 billion, boosted by higher fares and more miles flown by paying passengers. On the average Southwest flight, 69.2% of the seats were full, up 3.8 percentage points from a year earlier.

Houston-based Continental reported a first-quarter loss of $66 million, or 76 cents a share, compared with a loss of $186 million, or $2.79, a year earlier.

Excluding a loss of $20 million from special items, Continental’s loss totaled $46 million, or 53 cents a share. Analysts polled by Thomson Financial had expected a loss of 62 cents a share.

Continental’s revenue rose 17.6% to $2.95 billion.

Alaska Air Group, which operates Alaska Airlines and Horizon Air, lost $79.1 million, or $2.36 a share, in the first quarter, compared with a loss of $80.5 million, or $2.39, a year earlier.

But the Seattle-based company would have posted a profit of $2.8 million except for a charge to reflect the lower value of its aging fleet of MD-80s, which Alaska is phasing out as it switches to an all-Boeing 737 fleet.

On that basis, Alaska easily beat analysts’ forecast of a loss of 56 cents a share. Ray Neidl, an analyst with Calyon Securities, said the operating profit plus a bullish outlook for the summer helped lift Alaska shares.

Revenue rose 14% to $735.4 million, helped by passenger traffic increases of 14.8% at Horizon and 4.7% at Alaska Airlines.

Shares of Southwest fell 88 cents to $16.48 and Continental dropped $1.18 to $24.81. Alaska rose $1.65 to $37.05.