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Fuel prices push Southwest to reduce capacity

By control on August 5, 2011

For the first six months of the year, Southwest's freight operating revenues were up $4 million year-over-year, finishing June at $67 million.

Passenger revenues so far in 2011 represent a 23.6 percent year-over-year increase, and the carrier's total net income in 2011 is 35 percent greater than its 2010 totals. But even with these encouraging numbers, Southwest will scale back its capacity in the coming months.

“We trimmed our 2012 winter schedule, published last week, which began to coordinate the Southwest and AirTran networks," the carrier's CEO, Gary Kelly, said in a statement. "We have reduced our planned 2012 capacity to be equal to or less than our 2011 combined available seat miles.  We will be aggressive in our efforts to optimize our combined networks and redeploy capacity more profitably.”

Southwest will add a total of six more Boeing 737-700s in 2011, and it has placed firm orders for six 737-700s and 20 737-800s next year.

The most obvious culprit is fuel. During the first six months of the year, fuel prices for Southwest sat 46.2-percent higher than they were a year ago; in just the second quarter, the carrier spent 63.7-percent more on gas — $1.52 billion — than it did a year ago. Southwest also consumed more gas that it did last year, ending the first six months of 2011 on a 27.6-percent, year-over-year increase.

The continued integration of AirTran's business may provide a bit of a boost to these numbers. Southwest acquired the smaller carrier in May.

“Our integration efforts are well underway,” Kelly said, noting that the carriers have streamlined many of their corporate processes and have settled on a new leadership structure. “I am pleased with our progress thus far.”

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