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Is Southwest Soaring?

Every major airline is reducing capacity, right? Wrong. Southwest (NYSE: LUV  ) is adding flights, even as UAL's (Nasdaq: UAUA  ) United, AMR's (NYSE: AMR  ) American, and Denver's Frontier -- among others -- are cutting flights.

Southwest's plan, revealed last week, isn't linear. The low-fare pioneer says it will eliminate 31 low-profit routes and add 40 in markets where it attracts higher-margin business, such as Denver.

"We have a much different story to tell today than our competitors," CEO Gary Kelly said in a company statement. He also said that Southwest is still growing and chastised peers for adding fees.

He has a point. Over the past week:

  • Delta (NYSE: DAL  ) said it would add a fuel surcharge of up to $50 to tickets bought with frequent-flier miles. Expect every one of the majors to follow suit, including United and Continental (NYSE: CAL  ) , which recently agreed to a partnership that, when effective, will allow frequent fliers to redeem miles with either airline.
  • U.S. Airways (NYSE: LCC  ) fired its skycaps. Over time, the carrier expects curbside check-in to be an automated affair. (Oh, goody.)
  • Finally, let's not forget American, which began charging a $15 first-bag fee earlier this month.

Contrast all of this with what Southwest has planned: more flights and a $5 to $10 per-segment fare increase, its third this year.

By itself, that's a pretty unremarkable statistic. (Of course Southwest is raising fares; oil is more than $140 a barrel!) What's interesting is that customers are willingly paying more. Southwest's load factor -- a measure that determines how full, on average, its aircraft are upon departure -- rose to 71.4% though May, up from 70.1% a year ago. 

Higher prices; more fliers. Talk about impressive.

Southwest isn't soaring. But, unlike far too many of its peers, it isn't dying, either.

Taxi toward related Foolishness:

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. He's also a member of the Rule Breakers team. You can find the rest of Tim's portfolio here and his latest blog entry here. The Motley Fool has a market-beating disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 01, 2008, at 6:17 PM, ratherblucky wrote:

    What is the point of the article? The only reason Southwest is making money was a that they had the cash that allowed them to hedge fuel. The 71% filled seats is far below other carriers.

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Tim Beyers
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Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.

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