"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.