Southwest Airlines (LUV -0.54%) reported its third-quarter results this morning, with the airline giant giving shareholders largely good news. The company reported adjusted earnings per share of $0.34, setting a new all-time record for net income and up almost 150% from the year-ago quarter. Operating income excluding special items more than doubled as overall operating revenue climbed 5.5%. As of 7:45 a.m. EDT, shares of Southwest were up more than 3% in pre-market trading.
Citing the "imperative that we preserve our financial health and return value to our stakeholders," Southwest CEO Gary Kelly listed several successful initiatives that contributed to its overall results. The company made further progress in converting AirTran service to use the Southwest name. Lower fuel prices and more fuel-efficient operations combined to cut fuel-related costs by 5.7%. Ongoing efforts to modernize Southwest's fleet led to the replacement of four retired airplanes with three new aircraft, and the company began the more extensive job of dealing with the 88-plane Boeing 717 fleet that Southwest acquired in the AirTran acquisition, moving one plane out of the fleet and taking 11 out of active service.
Moreover, Southwest expects favorable conditions to continue. Based on early estimates, Kelly projected that fourth-quarter fuel prices would be similar to the third quarter's lower levels. Changes to Southwest's schedule next month will further integrate AirTran's operations, especially with its Atlanta service.
Last month's groundbreaking on Southwest's Houston-based international terminal also points toward a new direction for the airline's growth. Kelly mentioned potential service to Mexico, the Caribbean, and even Central and South America as possibilities in the coming year or so.
Southwest will have a conference call at 12:30 p.m. EDT to discuss the results in further detail. For more information, visit the Southwest Airlines investor relations webcast site.
