Southwest profit beats estimates on higher fares, demand

DALLAS, Thu Jul 19, 2012 – Southwest Airlines Co. beat analysts’ estimates with a 42-percent rise in quarterly profit on Thursday, helped by higher fares and robust demand despite a fragile U.S. economy.
U.S. airlines have merged, raised ticket prices and shown discipline in cutting back flights to match demand in a bid to return to stability over the past two years.
“Southwest and the rest of the airlines are really focusing in on the routes that are higher-yielding and more profitable, and as a whole that has helped the industry,” said Matthew Jacob, an airline analyst with ITG Investment Research.
Analysts said Southwest, which is looking to maintain its dwindling low-cost advantage against rivals that have restructured, made progress in controlling costs in the quarter.
Southwest, which acquired discount rival AirTran Holdings last year, said second quarter net income was $228 million, or 30 cents a share, compared with $161 million, or 21 cents a share, a year earlier. Excluding items, profit was 36 cents a share, higher than analysts’ expectations of 32 cents, according to Thomson Reuters I/B/E/S.

Boeing logs big order from Southwest for fuel-efficient planes

(Reuters) – Boeing Co. bagged its first firm order for the new 737 MAX fuel-efficient, narrowbody plane, as part of a $19 billion deal with Southwest Airlines that the jet maker calls its largest order ever.

The order for 208 narrowbody planes includes 150 MAX aircraft and puts Southwest, a loyal Boeing customer, first in line to take delivery of the upcoming revamp of the best-selling 737, which will feature a new energy-efficient engine.

The order reflects robust demand for fuel-efficient planes as the airline industry struggles to rebound from a painful downturn and cope with volatile oil prices. The Southwest deal is also one of the last major aircraft orders up for grabs from U.S. carriers looking to replace aging models.

“It’s been a very good year for orders, really driven by the re-engined platforms for Airbus and Boeing,” said Peter Arment, an aerospace and defense analyst with Sterne, Agee & Leach. “We do expect that to continue in 2012.”

He said Boeing would likely garner more orders for its 737 MAX from existing customers, and noted the company was currently competing with chief rival Airbus for an order from United Continental Holdings, the world’s largest carrier.

Delta Air Lines ordered 737-900ER 100 Next-Generation extended-range 737 planes in August, following a giant order in July from now-bankrupt American Airlines for 460 single-aisle jets worth up to $40 billion, an order Boeing split with Airbus.

The MAX orders, combined with a strong existing backlog for other 737 models, will allow Boeing to raise production rates to record levels on one of its most profitable plane programs, Arment said.

“Longer term, it’s going to help generate some additional earnings power for the company,” Arment added.

Boeing reported commitments for 948 MAX airplanes and said the figure could climb to 1,500 by the end of next year. It said the Southwest deal was its largest firm order ever in dollar value and the number of airplanes.

Private Indonesian carrier Lion Air last month placed an order for 230 planes, including 201 of the MAX that Boeing said at that time was its largest order, but those orders were not firm.

“It truly is Christmas come early for the Boeing Co,” Jim Albaugh, Boeing’s chief executive for commercial planes, told a press briefing held in Dallas to announce the Southwest order.