Southwest Earnings Exceed Estimates as Fuel Costs Decline

Southwest Airlines Co.’s fourth-quarter profit topped analysts’ estimates as the carrier paid less for jet fuel and flew more passengers longer distances. 

Earnings excluding some items were 90 cents a share, compared with the 89-cent average of 15 analyst estimates compiled by Bloomberg. Sales rose to $4.98 billion, just missing the $5 billion average estimate.

Southwest’s passenger traffic and trip length rose as it expanded in international markets and at its Dallas home base. With just 1.5 percent of its capacity flown abroad, the airline wasn’t hurt as badly as bigger rivals were by the strong U.S. dollar and weak demand in some global markets. Pricing competition in the domestic market pushed its yield, or average fare per mile, down 7 percent. Revenue from each seat flown a mile slipped 0.7 percent. The airline had forecast it would be flat to down 1 percent.

Southwest paid $2.03 a gallon for fuel in the quarter, down 23 percent from a year earlier. That reduced such costs by $189 million.

The carrier plans to slow growth this year, increasing capacity by 5 percent to 6 percent. That would be down from 7.2 percent last year, and most of this year’s expansion will reflect 2015 growth carried forward, Southwest has said.

The airline converted its remaining 25 orders for Boeing Co. 737-700 aircraft to the -800 model, and added 33 more -800s to its firm delivery schedule, according to a statement Thursday. The changes will increase Southwest’s spending for planes by $400 million beyond 2015. The carrier also is speeding up retirement of all its older 737-300 and -500 aircraft to no later than 2018.

The company’s fourth-quarter profit, excluding special items, rose 46 percent to $591 million from $404 million, or 59 cents as share, a year earlier.

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