Southwest Air does not see first quarter profit due to fuel

DALLAS, Tue Mar 13, 2012 − Southwest Airlines Co. does not expect to report a profit for the current first quarter because of high fuel prices, the company’s finance chief said on Tuesday.

The carrier, which acquired AirTran last year, said it expects fuel costs of about $3.50 a gallon for the first period, about 15 cents higher than its prior forecast.

“If you look at the last few fare increases, they’ve become less effective,” CFO Laura Wright told a JPMorgan Aviation, Transportation and Defense conference that was broadcast over the Internet.

“No surprise; any business that raises fares that many times in a short period of time would expect to see that,” Wright added. She cited 10 rounds of fare rises in the last year.

The company said passenger revenue per available seat mile, an important measure, rose 4 percent in February, weaker than expected and compared with a 7 percent rise for January. Wright said close-end bookings toward the end of February were weaker.

“For March, bookings remain good but we are cautious,” Wright said. She added it was too early to discern if the February weakness was a “sign of something going on in the economy” or an anomaly.

Oil prices traded up on Tuesday, with Brent crude near $126, as investors awaited comments from the U.S. Federal Reserve that may confirm an improving outlook.

How Colleen Barrett builds a culture of high-flying spirit to fuel growth at Southwest Airlines

In the airline industry, just running a company in the black is an accomplishment. But somehow, Colleen Barrett, president of Southwest Airlines Co., has found a way not only to operate in the black but to expand the airline’s reach and grow, as other airlines are filing bankruptcy, cutting service and even folding. Barrett and the company’s two other top managers, Herbert D. Kelleher, chairman of the board, and Gary C. Kelly, CEO, have done this by building a culture of employee warriors who help them look out for the company’s best interests. “We tell our employees over and over and over that if they want to continue to enjoy job security, which is very rare in our business, and if they want to increase their personal welfare from a financial standpoint, the only way we can continue to do those things is if we make more money,” Barrett says.

Southwest’s legendary warrior spirit started in the early days of the airline’s epic fight for the right to fly planes. The company spent three-and-a-half years in court fighting just for the right to put a plane in the air.

From those early days, everyone has been ready for a fight, always understanding that the airline’s very survival was at stake, every single day, with every single customer. With that attitude, employees have helped build the airline into a company that brings customers back, time and again, because it has taken flights beyond functional to fun.

Since its founding in 1971, Southwest has grown to 32,000 employees and reported $7.6 billion in revenue in 2005. Drawn to the airline by low fares and high customer satisfaction ratings, some 88.4 million people flew Southwest in 2005.

Since 1987, the airline has maintained the fewest overall customer complaints as published in the Department of Transportation’s Air Travel Consumer Report, according to Southwest.com, the company’s Web site. In 2005, Southwest ranked first in customer satisfaction. In 1973, the airline adopted the first profit-sharing plan in the U.S. airline industry. Through this plan and others, employees own at least 10 percent of the company stock, increasing the employees’ ownership mindset.

Barrett says that early fight was the basis for how the company thinks and operates today.

“The competition and the arrogance of people who didn’t think we should be there caused us to want to be there even more,” Barrett says. “I’ve often thought that if they had just left us alone, we probably would have been out of business in a year or two. Every step we took, they tried to block, and that built up a fire in the belly, and a ‘By God, nobody is going to do this to us’ sort of mentality that I think created what we now call our warrior spirit.”