Southwest Cites Price Softness – WSJ.com

Posted: September 7, 2012 in Uncategorized

September 6, 2012

http://online.wsj.com/article/SB10000872396390443686004577635263297268158.html?mg=com-wsj

Southwest Airlines Co. LUV -1.03% said it expects its third-quarter unit revenue to rise only 2% compared with the year-ago period, following 6% gain in the June quarter, Tammy Romo, the discount carrier’s senior vice president of planning, said Thursday at an investor conference.

Ms. Romo, who is in line to become chief financial officer this month, said Southwest’s August gain in unit revenue—the amount airlines receive for each passenger flown a mile—is expected to be 2% to 3%, on top of a 2% gain in July. But September will see tougher comparisons because last year Southwest’s gain was in the double digits.

She said Southwest had “very strong” load factor, or the percentage of seats filled in August, but the airline noted “some softness” on the price passengers paid for their tickets.

In light of rising fuel prices, the airline industry has raised fares four times so far this year, compared with eight increases in all of 2011, she said. “We look for opportunities where we can” to push up fares, declining to comment further on pricing activities.

Ms. Romo will succeed as finance chief Laura Wright, a longtime Southwest executive who is retiring.

Ms. Romo said the Dallas-based airline is “on track” with its integration of AirTran Airways, a fellow budget airline Southwest acquired in 2010. Southwest’s revamped Rapid Rewards frequent-flier plan delivered $50 million in incremental passenger revenues in the second quarter and is expected to throw off “hundreds of millions” of dollars in additional revenue by 2014.

Southwest also is making progress with its fleet upgrade program, she said. It is expected to have 34 new Boeing Co. BA -0.14% 737-800s in its fleet by year-end, and a total of 78 by the end of 2014. That aircraft has a lower cost per seat to operate than Southwest’s 737-700s and offers 22% more seats.

 

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