* Q1 unit rev declines 2.8 pct
* Q1 profit tumbles 31.6 pct
* Shares fall as much as 4.3 pct
(Adds details, analyst comments, updates shares)
By Arunima Banerjee
April 27 Southwest Airlines Co reported
a smaller-than-expected quarterly profit, hit by higher
operating expenses and a decline in average fares.
The airline's shares fell as much as 4.3 percent to $54.52
in morning trading on Thursday.
The No.4 U.S. airline by passenger traffic said its unit
revenue, a key metric that compares ticket sales with flight
capacity, fell 2.8 percent in the quarter ended March 31, hurt
by competitive fare pricing and a shift in Easter travel demand
However, the Dallas, Texas-based carrier expects unit
revenue in the current quarter to rise 1-2 percent.
The metric turned positive in April even after excluding an
about $10 million benefit from the shift in Easter date, the
"Unit revenue trend for Q2 is improving but it is slightly
worse than elevated investor expectations, which have increased
in recent weeks," Cowen & Co analyst Helane Becker wrote in a
Bigger rival American Airlines Group Inc forecast on
Thursday total unit revenue growth in its second quarter.
Earlier this month, Delta Air Lines Inc,the second
largest U.S. airline by passenger traffic, also forecast its
passenger unit revenue to rise 1-3 percent in the second
quarter, citing improving demand and average fares.
U.S. carriers have struggled to mark positive increases in
unit revenue as cheaper fares and tougher competition have
pummeled the industry.
The budget airline's operating expenses increased 8.8
percent to $4.23 billion, partly due to higher fuel costs and
pay increases from amended union contracts.
Southwest's unit costs, excluding fuel, oil expense and some
items, increased 6.9 percent in the quarter and the company
expects the metric to increase by about six percent in the
"Near-term cost pressures are very much an industry
concern," Cowen & Co's Becker said.
While more people booked travel on Southwest in the first
quarter, fares on average declined 2.6 percent.
The company said its net income fell to $351 million, or 57
cents per share, in the quarter, from $513 million, or 79 cents
per share, a year earlier.
Excluding items, the company earned 61 cents per share,
compared with estimates of 63 cents, according to Thomson
Operating revenue rose 1.2 percent to $4.88 billion.
Up to Wednesday's close, shares of the company had risen
14.3 percent this year.
(Reporting by Arunima Banerjee in Bengaluru; Editing by Sriraj
Kalluvila and Arun Koyyur)