Q4 2008 Results Are In
While it's still 11 months too early to say for certain,
indications are that 2009 will be known as the year Southwest
Airlines' streak of rapid growth will come to an end.
TheStreet.com reports Southwest -- which reported its
fourth-quarter earnings Thursday -- will shrink capacity by 4
percent this year, in keeping with the Dallas-based low-cost
carrier's recent efforts to curb its expansion, and take delivery
of fewer planes.
On that note, Southwest CEO Gary Kelly told investors Thursday
the airline plans to continue shrinking its fleet. "Our fleet
growth plans are suspended indefinitely," said CEO Gary Kelly on an
earnings conference call. "...We've been saying for the last
several quarters that we don't want to grow the fleet for '09. The
report today is we're extending that for 2010."
Kelly's pronouncement came as Southwest announced fourth quarter
earnings of $61 million, or 8 cents per share. That figure beat
analysts' estimates, but was $26 million less than for the same
period in 2007.
The airlines took pains to note Thursday's report marked
Southwest's 71st consecutive quarter of profitability... but,
as was the case last quarter, that statement
comes with a significant caveat attached. When noncash charges
related to the airline's fuel hedging program -- which had assumed
oil would be trading at closer to the $147 per barrel seen last
summer, versus $40 as it is now -- are taken into account,
Southwest actually lost $56 million.
Even as Southwest fudges the results slightly in order to brag
of a profit, there's still real reason for the airline to be
optimistic for the year. For starters, the airline's revenue per
available seat mile (RASM) in Q4 2008 rose 8.8 percent over 2007
"Because the industry has reduced capacity aggressively, we're
absorbing the reduction in demand without destroying unit revenues
completely," Kelly said. "These are decent unit revenue gains in
any environment, much less a recessionary environment. The question
is, 'Will demand hold up or will it worsen from here?' I don't
think any of us know."
And another reason for Southwest to feel some cheer in this new
at least it's not United.