Southwest Airlines posts 37th year of profits

Southwest said Thursday it earned $116 million in the quarter, which was enough to lift the company to a full-year profit of $99 million after it lost money during the first nine months of 2009.

Traffic on the nation’s largest discount carrier has been rising in recent months while it’s been falling on many competitors.

But many of Southwest’s customers are leisure passengers responding to the airline’s constant fare sales, not the high-priced business travelers coveted by airlines.

“We’re certainly not seeing a large return of business traffic, nor were we predicting that for 2010,” said Chairman and CEO Gary C. Kelly. But he added that business travel has stabilized and perhaps improved since last summer.

Kelly added that fares must rise to cover higher expenses. He said Southwest was hiking prices “as aggressively as we dare.”

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Kelly said 2010 will be a challenging year, with a tepid economy so far and higher fuel costs.

Traffic rose at Southwest each month of the fourth quarter, with paying passengers flying 5.3 percent more miles than in the same period of 2008. There were fewer flights and fewer empty seats.

Southwest believes it is taking customers from other airlines by letting passengers check two bags for free, but it has boosted ticket revenue by charging fees for services such as flying unaccompanied minors and pets.

The fourth-quarter profit of 56 cents per share included gains from fuel-hedging contracts. Without those items, Southwest, based in Dallas, said it would have earned $74 million, or 10 cents per share.

Analysts, who don’t count extra items in their forecasts, expected profit of 7 cents per share.

Revenue fell less than 1 percent, to $2.71 billion. That compared to declines of 7 percent and 8 percent at American Airlines and Continental. Continental reported earnings earlier Thursday. American posted its results Wednesday.

Spending dropped 4.5 percent, helped by a 13.5 percent reduction in fuel costs.

Throughout its history, Southwest has grown rapidly and pushed into new markets. Last year, however, it reduced flights and capacity, and Kelly said the company has no plans for growth in 2010.

But Southwest continues to tinker with its schedule, pruning unprofitable flights. It announced Thursday that it would add four more flights in Denver in June.

For all of 2009, Southwest’s $99 million profit equaled 13 cents per share, down from 2008 earnings of $178 million, or 24 cents per share. Full-year revenue fell 6.1 percent, to $10.35 billion.

In afternoon trading, Southwest shares rose 4 cents to $11.37.

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