Southwest is facing a strong start to the year after a great 2010, but is uncertain about the impact of rising fuel costs. Image courtesy of Southwest.
Southwest Airlines, known as the world’s low fare carrier, continues to do well. Fourth quarter profits rose 13 % over the same time last year. That rise is due to travelers paying higher average fares. Southwest even said that the first quarter is already looking strong and is well booked.
In the second quarter, Southwest will finish buying AirTran Holdings, Inc. Southwest will acquire AirTan’s Boeing 717 fleet, which is smaller than the 737. Currently Southwest has almost 550 of the 737 aircraft. They are waiting to see if Boeing is going to keep making the 737 or if they are going to revamp them.
Either way, Southwest is fine operating all three different types of aircraft. Southwest would like Boeing to make a more efficient plane, but for now, they talk and wait for a decision on what Boeing is willing to do.
With the rising cost of fuel, it will cost Southwest $650 million more to operate this year over 2010. That is based on the expected average price of jet fuel being $2.80 to $2.85. This price represents a 20% increase over last year at this time.
Jet fuel is refined from crude oil. If crude oil hits $110 per barrel that will greatly effect the airlines, if it jumps to $120 per barrel it would become a real problem for all airlines.
Unfortunately these costs will be passed onto travelers in fare increases.
