Things in the Sky

A profit! Southwest made $278 million during the second quarter, and excluding special items made $112 million, or $0.16 a share, better than estimated!

Of course the hedging program really helped here. According the the media call, the airline would have lost about $134 million during the second quarter. Gary Kelly was on CNBC and Bloomberg Thursday morning, and I believe he said the hedging program saved $511 million during the second quarter, and the airline expects to see $2 billion in savings for the year.

Like the other airlines, revenue was up a good amount. Southwest set a record with $2.9 billion, 11% higher than last year. Southwest is different, though, because that extra revenue isn’t coming from extra fees. It was very refreshing to hear Gary Kelly say that Southwest would rather be transparent and raise fares rather than adding extra fees that the customer may not expect. He especially stressed the lack of a change fee during one of the television interviews. This feature is very popular with business travelers.

Anyways, I’d to like to go back quickly to some of the speculation I made a couple of days ago on codesharing. First Gary Kelly said this on the conference call, laying out the future codeshare plans:

We are working very hard on a Hawaiian solution as well as a Mexican and the Caribbean solution which with a little luck we’ll get all of those executed by the end of next year.

Then Dan McKenzie of Credit Suisse asked:

I wonder if you can talk about the pros and cons of say a code-share with another domestic low-cost carrier to gain access to markets that Southwest hasn’t yet cracked in particular maybe Atlanta or Reagan National or LaGuardia?

Which I saw as a question about a potential AirTran partnership, an idea I had not considered before. Kelly replied:

Well, we had a great amount of business to LaGuardia [with ATA] in particular, but also to Reagan so those are on our wish list…What we told you all is that we’ll be working on Mexico and the Caribbean but it could somehow it could emerge that we have somebody who could codeshare for us to New York or Washington. But right now, Dan, those are lower priorities for us.

That answer instantly made me think of AirTran as less likely, as they don’t have much to offer in terms of Mexico and the Caribbean. But it is still interesting to consider a codeshare with a carrier in the domestic market.

Anyways, based on what was said about future codeshares, we can all look forward to some exciting announcements from Southwest in the coming months.