Earnings Preview: Southwest 3Q profit gain seen

Southwest expected to report higher adjusted 3Q profit; eye on fall, winter bookings

Associated Press

DALLAS (AP) -- Southwest Airlines Co. is expected to report higher third-quarter earnings on Thursday, as it boosted a key revenue figure even while traffic slipped slightly from summer 2012.

WHAT TO WATCH FOR: Southwest and other airlines kept flights mostly full during the busy summer season. Investors will want to hear about Southwest's bookings for the fall and winter, which are slower months for airlines. Strong demand will help keep average fares steady or rising.

Southwest increased revenue for every seat flown one mile by about 4 percent in July and August and between 7 percent and 8 percent in September. That likely means Southwest sold more tickets at higher fares or sold fewer at sale prices — or did both.

Investors will also be interested in any updates on Southwest's integration of AirTran. It's been more than two years since Southwest bought the rival low-cost carrier, but combining them into a single airline has gone slowly.

Barclays analyst David Fintzen said in a note Monday that Southwest likely improved its profitability during the quarter and should continue to improve its margins faster than its competitors are doing.

WHY IT MATTERS: Although United, Delta and American are bigger when international traffic is included, nobody carries as many passengers within the U.S. as Southwest. It's a good gauge of whether Americans feel confident enough about the economy to make a discretionary purchase such as buying an airline ticket.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect that profit, excluding special items, will be 33 cents per share, and they're looking for revenue of $4.54 billion.

LAST YEAR'S QUARTER: Net income of $16 million, or 2 cents per share. Excluding one-time items, profit came to 13 cents per share. Revenue was $4.31 billion.

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