Analysis for The Americas

A first quarter loss at Southwest Airlines was accompanied by a better-than-expected result in the carrier’s unit cost performance driven in part by labour productivity improvements. The carrier is striking a cautiously optimistic tone regarding the rest of the year, indicating it should record a favourable financial performance if fuel prices remain at current levels. But until Southwest completes the integration of AirTran Airways into its operations by 2014, the carrier will be constrained in reaching its full revenue potential.

Favourable gains on the settling of certain fuel hedge contracts helped Southwest to record a first quarter profit of USD98 million. But excluding special items the carrier’s loss was USD18 million compared with a USD20 million profit the year prior. The airline’s operating income tumbled USD100 million to USD10 million as the carrier recorded fuel and oil expense of USD1.5 billion, a 45.5% rise from 1Q2011. On a combined basis with AirTran, Southwest’s operating revenue was USD86 million.