Carrier Says Fuel Costs Have Cut Into Its Profitability

Southwest Airlines Co. released its second quarter financial report Wednesday noting a drop in net income compared to the same period last year.

The Dallas-based carrier blames ever-rising fuel costs, according to Newsday. It reports its quarterly earnings fell 16.5 percent, to $278 million, or 36 cents a share, compared with net income of the second quarter of 2006 of $333 million, or 40 cents a share.

"The anticipated decline in our year-over-year second quarter earnings performance reflects a continued rise in fuel costs and difficult unit revenue comparisons. As we recently outlined, specific initiatives are well underway to adapt to higher jet fuel cost levels. Through these initiatives, we believe that we can maintain our low fare, low cost leadership while achieving substantially enhanced incremental revenues over the next several years," said Southwest Chief Executive Officer Gary C. Kelly.

The carrier said it was paying $1.62 a gallon for fuel, a 14.1 percent increase over last year and saw gains of $173 million from its fuel-hedging program.

SWA said second quarter revenues were $2.6 billion, a 5.5 percent increase over the prior year's quarter.

Shares of Southwest closed Tuesday at $15.59, a decrease of four cents.

"Although we face earnings challenges, primarily due to escalating fuel costs, we are confident in our future and the Employees of Southwest Airlines," said Kelly.

FMI: www.southwest.com