Southwest Airlines, the leader in most passengers carried domestically (U.S.), reported their first loss in 17 years. The conference call, hosted by CEO Gary Kelly and CFO Laura Wright, informed listeners of Southwest’s $120 million loss. The loss is primarily due to $247 million in charges. A majority of those charges focused on writing down fuel hedge contracts, which now hold less value since the sharp decline of oil prices. Although oil has plunged, the new economic tolls on the population are decreasing the number of travelers. ”The main thing now is the recession and the impact on travel demand,” said Mr. Kelly. He also said that the company fears results for January, however they have not seen anything major yet to pull down results. The carrier said that they will be looking to raise a few hundred million dollars for the collateral of fuel hedges.
Good news: Revenue rose 11.7 percent to $2.89 billion dollars. Mr. Kelly also said that the carrier is expected to pay $2 a gallon for fuel, rather than $2.44 during last quarter. Operations wise, the carrier had net profits, yet it was those charges that brought them down. Luckily for Southwest and other carriers, flight cuts have been made in anticipation of low-travel demand (initially those cuts were made for high price in oil). Hopefully airlines, such as Southwest, will not face any decline in the coming months.
Image: flickr.com
