In the third quarter, Southwest Airlines Co. (LUV) is expected to post narrow losses. The Zacks Consensus Estimate for Southwest is a loss of 4 cents per share.
Southwest may see a drain in its profits from non-cash charges in its fuel hedging program. As of June 30, 2009, the company had fuel derivative instruments in place for approximately 30% of its expected third quarter 2009 jet fuel consumption. Though revenue remains a problem for the airline, it is trying to entice the passengers with cheaper prices.
More traffic and less capacity or available seats led to a rise in average occupancy for Southwest in September. Load factor jumped to 74.7%, a gain of more than 11% from Sept. 2008. These full loads were built with cheap fares and other promotions which the airline has been offering of late.
There have been signs that demand may be picking up with September traffic rising 8.8% for the airline. It had cut its capacity by 8%. In July and August, Southwest’s traffic rose, but more slowly.
Southwest is known as a low-cost airline. The company continues its diligent cost control efforts and remains committed to maintain its competitive cost advantage to sustain its strong low fare brand. In addition to other cost containment measures, the company has a hiring freeze in place, as well as a pay freeze for all company officers and senior management. In the last quarter, the company announced an early out option available for the vast majority of its employees.
Bigger losses are expected at American Airlines parent AMR Corp. (AMR), United parent UAL Corp. (UAUA) and US Airways Group Inc (PLCC). a slump in international travel and higher fares have negatively affected these carriers.
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