"Profitable" is one adjective seldom used to describe an airline operator these days. In the first quarter of 2011, the four biggest airlines in the United States posted a combined loss of more than $1 billion.
By purchasing AirTran for $1 billion, Southwest is gearing up for a race against high-fare giants like Delta Air Lines
The news isn't all great, however. Southwest's net income dropped to $5 million in the first quarter this year, from $11 million in the first quarter of 2010. However, that plunge owed to the costs related to acquiring AirTran.
The airline's revenue rose to $3.1 billion, up from $2.6 billion in the first quarter of 2010. Operating expenses increased, as expected, owing to rising oil prices. As my Fool colleague Shubh Datta pointed out earlier, airlines are going through a rough patch, thanks to inflated oil prices, driving them to raise fares and cut capacity. AMR
The bottom line
Southwest, which is primarily famous for its low-cost fares and excellent customer service, is no longer the cheapest carrier in the industry. JetBlue
The fact that Southwest is making money at a time when the goliaths are reporting losses speaks volumes. Thanks to its synergy with AirTran, the airline will only get bigger from here. I think it's about time we make room for Southwest in our portfolios.
What do you think about the newly expanded Southwest's prospects? Share your thoughts in the comments box below.
Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article. Southwest Airlines is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.