All streaks must eventually come to an end. That day finally arrived for Southwest Airlines Co., which posted its first quarterly loss in 17 years. Still it was an amazing streak considering the turmoil the industry faced during that period, such as soaring fuel and labor costs as well as security issues following the 9/11 attacks. The end of the record didn't faze shareholders all that much though, as the stock had climbed over 5%
to $12.20 in Thursday afternoon trading. Lately, the airline sector continues to be in a state of flux as airlines have folded or gone bankrupt at a rate of about one a week for the first six months of 2008, according to Wired. The number is likely higher now considering that the global economy is in shambles.
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Southwest was stung by the summer's record-level fuel costs, which outpaced higher fares in the third quarter. The largest low-fare carrier posted a loss of $120 million on
costs to adjust the value of its fuel hedges, the first time since 1991
it hasn't been profitable. Southwest's unprofitability broke down to a loss of 16 cents a share, compared with net income of
$162 million, or 22 cents, a year earlier.
Southwest CEO Gary C. Kelly said in a statement that jet fuel costs per
gallon were 44.4% higher in the third quarter compared to the same
period a year ago. Southwest says it paid $2.44 per gallon for fuel in the third quarter -- far below what its peers are paying due to its fuel hedges. The airline expects to pay around $2 a gallon in the fourth quarter.
While the company has a plan to turn things around, Southwest's new strategies -- like new routes to places like Minneapolis/St. Paul -- will need time to take effect. The company has also been linked to possible deals as weaker airlines look for a stronger partner and bankrupt airlines sell their assets. The Deal's Lou Whiteman cited whispers of a potential deal between Southwest-AirTran Airways Inc. in March, but no deal materialized. - Gerald Magpily
See the Windsor Star article
See Wired
See Dealscape: Who might Southwest merge with?
