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The Honolulu Advertiser
Posted on: Friday, April 18, 2008

Southwest profits plummet; Continental in red

By David Koenig
Associated Press

DALLAS — High fuel costs that helped drive some marginal airlines into bankruptcy this spring are also taking a toll on two of the nation's healthiest carriers.

Continental Airlines Inc. slid to a first-quarter loss as fuel spending soared 53 percent, and Southwest Airlines Co. — which hasn't lost money since 1991 — saw its profit fall by two-thirds.

Both airlines say they will respond by slowing their once-ambitious growth plans, and they are raising fares.

"We've put in two fare increases in the past week, and we'll have to be looking for opportunities to do more," said Gary Kelly, chief executive of Southwest, which built its business on offering lower fares than competitors but faces the same cost squeeze.

Stubbornly high fuel prices are likely to mean billions in losses this year at the nation's airlines. Already this year, five smaller carriers have shut down or announced plans to do so, and analysts are tossing around the B-word — bankruptcy — even in talking about the major airlines.

Southwest reported yesterday that its earnings tumbled to $34 million, or 5 cents per share, in the January-March period, from $93 million, or 12 cents per share, a year earlier.

Excluding some one-time items, the profit would have been 6 cents per share, which beat the penny-per-share profit forecast by analysts, according to Thomson Financial.

Revenue rose 15 percent, to $2.53 billion, and Southwest planes were more full than a year ago.

Still, Southwest spent $753 million on fuel, an increase of $189 million or 33.5 percent in just a year.