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Special Charge Gives Southwest Airlines Its First Quarterly Loss

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By TED JACKOVICS | The Tampa Tribune

Published: October 16, 2008

TAMPA - Southwest Airlines, the busiest carrier at Tampa International Airport, reported its first quarterly loss in more than 17 years after taking a $247 million special accounting charge on its fuel hedging program for the period ending Sept. 30.

The Dallas-based airline said it achieved an operating profit for the 70th consecutive quarter, but the special charge resulted in a $120 million loss, or 22 cents a share, for the third quarter.

Southwest's fuel hedging program to arrange contracts years in advance for large percentages of its fuel supply has helped the airline surpass all other domestic carriers remaining profitable in recent years.

However, with fuel prices declining to the $70 a barrel range, Southwest had to adjust its accounting to write down fuel hedging contracts that have become less valuable as crude prices decline.

Chief executive Gary Kelly told financial analysts in a conference call this morning that post-Labor Day revenue trends are strong. He outlined several steps in moving forward:

• Trimming capacity growth (numbers of seats available) to less than 2 percent the remainder of 2008.

• Trimming unproductive and less popular flights and reallocating capacity to attractive markets, including Southwest's newest city, Minneapolis-St. Paul.

• Gradually increasing fares.

• Aggressively promoting Southwest's "No Hidden Fee, Low Fare" brand.

Reporter Ted Jackovics can be reached at (813) 259-7817.

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