Southwest returns to profit in 3rd quarter

Southwest Airlines has reported third quarter 2010 net income of $205 million, taking the airline back into a third quarter profit after a net loss of $16 million in the third quarter of 2009.

Both years’ results included special items related to non-cash, mark-to-market, and other items associated with a portion of the company’s fuel hedge portfolio. Excluding special items for both periods, third quarter 2010 net income was a third quarter company record of $195 million, compared to $31 million for third quarter 2009.

"The significant year-over-year improvement in our third quarter results was driven by another outstanding revenue performance, up nearly 20%,” reported Gary Kelly, the airline’s chairman of the board, president, and chief executive officer. “Our 3Q10 unit revenues increased 16.1% over 3Q09 and marked the fourth consecutive quarter we’ve reported record unit revenues, surpassing each preceding quarter. Our industry-leading domestic revenue performance this year demonstrates continued strong customer response to our revenue management and schedule optimisation efforts.

"Our outlook for October is excellent, based on traffic and revenue trends, thus far. We are encouraged by the sustained momentum, especially in what is typically a seasonally weaker travel period. Assuming traffic and revenue trends continue, we expect a solid unit revenue improvement in fourth quarter 2010, even with more difficult year-over-year comparisons," added Kelly.

Excluding fuel and special items in both periods, third quarter 2010 unit costs increased 5.1% from third quarter 2009, which was better than anticipated primarily due to lower than expected advertising and employee benefit costs. Excluding profit-sharing and special items in both periods, third quarter 2010 nonfuel unit costs increased 2.5% compared to third quarter last year. Based on current cost trends, the company expects its fourth quarter 2010 nonfuel unit costs to increase from fourth quarter last year.

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