Southwest Says Capacity Growth Unlikely into 2013
AP | Sep. 14, 2011
Southwest Airlines Co. said Tuesday that it is focused on boosting earnings after buying rival discount airline AirTran, and that it is holding off on expanding its fleet because of the weak economy.
Southwest's purchase of AirTran earlier this year boosted the Dallas company's passenger-carrying capacity by about 25 percent. But now consumers, hurt by high unemployment and the recent turmoil in financial markets, may cut back on leisure trips.
September bookings "look good at this point," said Southwest's Chief Financial Officer Laura Wright on Tuesday at an investor conference in New York. But she cautioned that the airline often is late to feel the effects of an economic downturn.
Southwest has "a pretty cautious outlook," Wright said. She suggested that a freeze on growth in passenger capacity would last even longer than the company had previously predicted.
"We aren't growing on a (capacity) basis as we look into 2012 and likely 2013," Wright said. "But we have a huge opportunity to grow our earnings associated with that 25 percent increase in size that we've just digested."
Southwest had said in August that it expected passenger capacity to be flat or slightly down in 2012 from 2011 levels.
If other airlines hold the line on capacity that could limit seats and push up fares.
Southwest collected US$56 million in extra revenue in July and August, Wright said. Many airlines lifted fares after federal excise taxes on tickets expired. By raising prices to match the amount of the expired taxes, the airlines got more money but consumers paid the same total price for tickets. The taxes were restored last month.
Southwest stock rose 35 cents, or 4.4 percent, to close Tuesday at US$8.31. Other airline stocks also surged as carriers, including Delta Air Lines Inc., also said they would keep a lid on expansion plans next year. The NYSE Arca Airline index was up about 5.1 percent.