Southwest Airlines planes take off from the airline's hub at Dallas Love Field Airport March 12, 2008, in Dallas, Texas.
Southwest Airlines Co. earned $98 million in the first quarter, helped by deals designed to blunt the pain of higher jet fuel prices.
That amounted to net income of 13 cents per share, compared with $5 million, or a penny per share, a year earlier, for the nation's fourth-biggest airline company.
Excluding the fuel-hedging gains, which are like insurance against spikes in fuel prices, Southwest said Thursday that it would have lost $18 million -- less than analysts had expected.
Quarterly revenue rose 29 percent to $3.99 billion, reflecting the company's bigger size since it bought AirTran Airways last year.
Fuel was Southwest's biggest expense, at $1.5 billion -- an increase of $472 million, or 45.5 percent from a year ago. That was partly due to the bigger fleet now that it owns AirTran, but also to higher jet fuel prices.
With fuel costs rising, airlines have been boosting fares for more than a year. At the same time, however, Southwest and others run frequent sales to fill seats.
The result: The average one-way fare on Southwest and AirTran rose to $146.44 during the first quarter, up 5 percent in a year. That helped Southwest increase revenue for every mile flown by passengers, a closely watched statistic in the airline business.
Southwest said that April passenger traffic and ticket bookings were solid. Investors had worried after Southwest reported a slump in bookings in late February, and its planes were slightly less full during the quarter than they were at the same time last year.
In an interview Thursday with The Associated Press, CEO Gary Kelly said that the 1-percentage-point decline in average occupancy was not alarming but, "It does suggest that there is some resistance by some consumers to higher fares." He said fuel prices were "putting pressure on us to raise fares more than we think is wise."
This week, Southwest has so far declined to match fare increases imposed by Delta, United and American. Analysts think that's a sign of Southwest's concern that more increases could kill demand.
Kelly declined to discuss specific pricing decisions, but he noted that fuel prices -- the reasons airlines give for recent fare hikes -- have fallen from their highs earlier this year. If that continues, he said, "We have a much better outlook profitability-wise for the second quarter, and if fuel prices continue to stay at current levels, then I think the outlook for the rest of the year is improved as well."
Southwest reported that without the fuel-hedging gains and other one-time items, it would have lost 2 cents per share in the first quarter. On that basis, analysts surveyed by research firm FactSet predicted a loss of 5 cents per share.
Southwest warned last month that excluding items it wouldn't make a profit in the first quarter, typically a slow period for travel.
The Dallas-based airline hasn't reported a full-year loss in about 40 years. Analysts expect it will earn 42 cents per share this year.