DALLAS (AP) — By the slimmest of margins, Southwest Airlines Co. made a profit in the first quarter while other big carriers were losing money.
Southwest said Thursday it earned $11 million, or a penny per share. Revenue rose 11.6 percent.
The airline says it's seeing an uptick in business travel but is struggling with jet fuel costs, which jumped by about one-third.
Oil prices hovered around $83 a barrel on Thursday after a long climb that began in December 2008.
"What we're worried about ... is $120 crude oil," CEO Gary Kelly said in an interview. "That's where the company is in peril."
Southwest said it was coping with higher fuel costs by improving productivity, and had cut the number of employees per plane by 3 percent compared with a year ago.
Last week, Kelly said Southwest was trying to shrink its work force through attrition and didn't plan any hiring this year. Last year, the airline convinced 1,400 employees, or about 4 percent of its workers, to take buyouts and leave the company.
Southwest said its first-quarter profit included write-downs of its fuel-hedging contracts that were designed to save money. Without those write-downs, it would have earned $24 million, or 3 cents per share, which matched the forecast of analysts surveyed by Thomson Reuters. A year ago, the Dallas company lost $91 million.
Revenue rose to $2.63 billion in the first quarter, a tick better than analysts' forecast of $2.62 billion.
Kelly said Thursday that as the January-to-March quarter went along, Southwest saw a modest pickup in full-fare traffic — presumably business travelers. Southwest doesn't have separate business-class seating.
Kelly predicted that revenue per passenger would again top last year's levels during the April-to-June quarter.
Southwest's profit stood in contrast to large first-quarter losses reported so far by Delta Air Lines Inc., American Airlines parent AMR Corp., and Continental Airlines Inc.
Southwest has tried to separate itself from the pack by letting passengers check two bags free, avoiding bag fees levied by most other large U.S. carriers. Southwest boosted traffic in the first quarter compared with last year, but so did some of the airlines that charge bag fees.
While airlines disagree on baggage charges, they are united in complaining about rising energy prices. Oil prices are far below their mid-2008 record around $145 a barrel, but they've been creeping back up. Spot prices for jet fuel have eased this week but are still about one-sixth higher than they were in early February, about 30 cents more per gallon.
Southwest's fuel spending was made worse by the need to pay $44 million in cash to settle some of its fuel-hedging contracts. Those contracts, dating back several years, were to cover Southwest fuel costs in 2010 but turned unfavorable when oil prices plunged in 2008. Southwest has booked similar setbacks in recent quarters.
Southwest is more aggressive than other airlines in buying the contracts, a strategy that saved billions when energy prices were rising earlier this decade. Kelly said Southwest was "willing to lose a little bit of money" on hedging to protect against catastrophically high fuel prices.
The airline expects its total fuel costs including taxes and hedging contracts to rise another 3 percent to 5 percent in the second quarter, compared with the first quarter.
Since fuel is second only to labor among Southwest's costs, that will put even more pressure on the discount carrier to boost traffic and fares.
Southwest shares fell 20 cents to $13.38 in morning trading.
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