It must be a bit frustrating to sit in the big chair at Southwest Airlines (NYSE:LUV). This airline continues to perform better than practically any other domestic passenger carrier, yet the stock has been stuck at the gate.

Second-quarter were quite solid. Operating revenue grew more than 13% for the period and operating income climbed 41% as margins expanded despite high fuel costs. That strong performance continued through to the bottom line as net income grew 41% and earnings per share climbed 43%.

Looking at the little bits and pieces, revenue passenger miles, which represent paying passengers multiplied by distance flown, grew 8.1%; available seat miles, a measure of the number of seats available times distance flown, grew 13.7%; and the load factor, which is the number of seat miles occupied by paying customers, declined by 3.8% to 72.5%. The average fare increased by 6% and fuel costs per gallon climbed by 24.5%. All in all, though, operating expenses per available seat mile declined by 3.5% to just 7.8 cents.

Unlike many of its competitors, Southwest wisely chose to hedge its fuel exposure. This has saved the company a lot of grief and allowed it to continue to post growth despite high energy prices. Nevertheless, the benefits could diminish over time. Southwest has 85% of its 2005 fuel needs hedged at $26 per barrel, but the percentage of coverage and the price per barrel both decline over time, ending with 25% of 2009 need's hedged at $35 per barrel. If high oil prices are in fact here to stay, Southwest will see higher costs over time.

While a few airlines have gone bankrupt and many are just scraping by, Southwest generated over $800 million of free cash flow in the first half of 2005. Accordingly, I don't think the company will be at all strained by its plans to add more planes, more routes, and more destinations in the coming years.

Though the stocks of airlines like AMR (NYSE:AMR) (parent of American Airlines) and Continental (NYSE:CAL) have outperformed Southwest over the past year, that might be because they fared so much worse in 2002, a particularly bad year for the airlines. Similarly, another discount airline, Motley Fool Stock Advisor selection JetBlue (NASDAQ:JBLU), also avoided a big meltdown that year.

Southwest doesn't seem cheap by P/E standards, but looking at metrics like EV-to-EBITDA or historical price-to-book ratios offers a more positive result. What's more, while the stock has gone basically nowhere over the past five years, and earnings have declined over that time, I'd argue that the company is stronger today than it was in 2000.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).