Southwest posted a $54 million profit in the second quarter of 2009, following three consecutive quarterly losses. This number is down from last year’s $321 million Q2 profit, due largely to a steep decline in revenue.
Southwest used to be one of the most reliably profitable airlines in the business. Quarter after quarter, the airline would post profits even as other airlines struggled. This was especially apparent in 2008, when the airline’s clever/lucky (depending on how you look at it) fuel hedges propelled it to big profits while the competition suffered mightily due to monstrous fuel bills.
Recently, however, the airline succumbed to the same market forces assailing the rest of the industry. Plummeting demand dragged down revenues, and Southwest’s financials plunged into the red for three straight quarters. And despite posting a profit this quarter, the CEO Gary Kelly isn’t exactly bullish on the near future:
“Demand for business travel remains weak, and we continue to stimulate traffic with more discounted and promotional fares. Unless demand rebounds significantly, we expect third quarter 2009 unit revenues to decline year-over-year more than [they did in] the second quarter.”
Simply put: There’s a long road ahead.
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