Southwest Airlines posts 2nd quarter profit

DALLAS -- Southwest Airlines Co. broke a string of three straight losing quarters by scratching out a small profit in the April-June period despite a downturn in travel.

Demand for business travel remains weak, and "we cannot predict a profitable third quarter," said Chairman and CEO Gary C. Kelly.

Southwest is also cutting its work force, and it announced that 1,400 employees -- about 4 percent of its employees -- had accepted early-out offers of cash and travel benefits.

Dallas-based Southwest said Tuesday it earned $54 million, or 7 cents per share in the quarter ended June 30, down sharply from $321 million, or 44 cents per share, a year earlier.

Excluding one-time items, Southwest said it would have earned $59 million, or 8 cents per share.

Analysts expected profit of 7 cents per share excluding items.

Revenue dipped 8.8 percent to $2.62 billion, less than the 22.7 percent plunge Continental reported Tuesday.

Southwest's traffic has held up better than at other airlines as it has lured passengers with fare sales.

Kelly called the second-quarter profit an enormous achievement in "without a doubt, one of the worst revenue environments for the airlines, ever."

Since the recession deepened last fall, traffic on U.S. airlines has fallen every month compared with the year before. Companies have cut back sharply on business travel, which is a lucrative part of the airlines' operations.

Unit revenue -- sales per available seat miles, or capacity -- fell 6 percent in the second quarter compared with a year ago, and Kelly warned that unless travel demand rebounds significantly, the third-quarter decline will be even sharper.

But costs per available seat mile, excluding fuel, will rise from the second quarter into the third, the company said.

Southwest expects to incur costs of about $70 million for the voluntary departure of 1,400 employees starting at the end of this month and running through next April.

The costs will include $40 million this year and $30 million in 2010. Kelly said savings in later years should "eventually" offset the costs.

Like other airlines, Southwest gained from fuel prices that were much lower than a year ago.

Southwest said it still plans to cut capacity this year by 5 or 6 percent compared with 2008, but at the same time it is pushing into new markets, including New York's LaGuardia Airport and Boston Logan.