Southwest Airlines Mulls Slowing Expansion

June 6, 2007

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Southwest Airlines may slow expansion if profits continue to lag its growth targets, the discount carrier's chief executive said.

"If slower growth is what we need to get back on our profitability target, then we'll certainly do that," said Gary Kelly in an interview with UBS analyst Kevin Crissey.

A video of the interview, conducted May 29, was sent to clients on Tuesday.

Kelly said he wanted to see if profit growth continues to lag over "a couple more quarters" before making a decision on slowing the carrier's expansion.

Southwest expands its flying capacity by about 8 percent a year and targets 15 percent annual growth in earnings before special items.

The leading US discount carrier got off to a rough start this year. First-quarter earnings excluding gains from its fuel hedging program fell to USD$33 million from USD$64 million a year earlier.

With air travel showing signs of softening, slowing expansion may make it easier to keep costs under control.