Southwest Airlines Sees Profit Soar on Fuel Prices

Southwest Airlines reported profit that close to tripled during the fourth quarter of 2015, as the company continued to soar thanks to inexpensive fuel and its fleet’s modernization.

Southwest is the fourth largest U.S. airline by traffic and said its oil and fuel expense had dropped by 37%, as the average cost for fuel ended at $2.03 per gallon, in comparison to last year’s $2.62 price.

Southwest and its airline peers in the U.S. have been reporting strong results the past few quarters, which is the result of less competition and less expensive fuel.

Fuel costs were estimated by the airline for the current quarter at $1.70 per gallon, in comparison to $2.00 per gallon for the first three months of last year.

Gary Kelly the CEO at Southwest pointed to $1.1 billion of free cash flow in 2015 and announced that Southwest is intending to accelerate buybacks of share of $500 million that will start soon.

In the quarter that ended in December, the unit revenue for Southwest – the amount it needs to earn per seat flown a mile – moved down 0.7% in comparison with the same quarter one year ago.

This metric is one that is watched closely as a sign of an airline’s demand and how well it is generating sales.

Unit revenue has been on the decline throughout the industry because of the rapid expansions. In December, the airline warned investors that the key metric of revenue would be flat to down by 1% in comparison with the same three-month period in 2014.

Capacity increased by 8.3% while the load factor was up from 82% to 84.1% and traffic spiked by 11.1%.

In all, the company enjoyed a $536 million profit equal to 82 cents per share, which was up from its $190 million equal to 28 cents per share for the final three months of 2014.

Excluding special items, earnings on a basis of per share were up 90 cents per share from 59 cents during 2014.

Revenue was up 7.5% ending the quarter at $4.98 billion.

Analysts were expecting revenue of $5 billion and 90 cents per share of profit.

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