Will this be the peak of the airlines' latest run of good fortunes or are we somewhere else along in the cycle? How well the U.S. insulates itself from growing global challenges may answer this, but U.S.-centric carriers like Southwest will have an extra edge.
Southwest Airlines reported record profit for the fourth quarter and the whole year today, helped by a drop in fuel prices that saw the airline’s fuel costs go down by 37% in the final quarter alone.
Southwest’s earnings come two days after Delta Air Lines posted its own record earnings.
Appearing on CNBC, President and CEO Gary Kelly dismissed concerns that the growing global economic challenges would have a big impact on carriers operating in the United States.
“You see all the headlines and it makes everybody worried, me included,” Kelly said. “But if you look at our business it’s quite strong. We are growing. We grew 7.2% for the year and we’re growing passengers faster than that.”
“Travel demand is very strong. The industry is growing and oil prices are lower. overall I’d give a big thumbs up to the health of the air travel industry in the U.S.”
Southwest’s fourth quarter was its strongest this year. It is traditionally strong because of holiday travel, but was even better this year because of favorable weather and record low fuel prices.
“We didn’t think [oil] would go this direction. It feels like we’re going to be really low for quite some time. Demand is just not picking up and supply just keeps coming. What price that means I don’t really know.”
Kelly hinted that Southwest is ready to respond to price cuts from other airlines. “We have strong profit margins and that puts us in a position to absorbing increasing prices,” Kelly said. “We’ll be competing very vigorously.”
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Photo credit: Southwest Airlines CEO Gary Kelly and Annise Parker talk backstage at a press conference about the upcoming international terminal at Houston's Hobby airport. Southwest