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 figures.

"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 year? Well... at least it's not United.

FMI: www.southwest.com