clarinews@clarinet.com (HARIHAR KRISHNAN, UPI Business Writer) (02/01/90)
DALLAS (UPI) -- Southwest Airlines, which began as a small regional carrier in 1971, gained the status of ``major airline'' on the strength of revenues in excess of $1 billion in 1989, the airline announced Wednesday. The good news was tempered by a 49.5 percent decline in fourth-quarter profits blamed largely on rising jet fuel costs which have also adversely affected the earnings of other carriers. Chairman Herbert Kelleher said the pressure of higher fuel costs would continue in the first quarter of this year, further eroding earnings. Kelleher also announced the carrier planned fare increases in February of between $3 and $6 on both the short-haul and long-haul fligths. Customers would also be required to share some of the higher jet fuel costs. Kelleher said the airline will inaugurate service between Burbank and Oakland in California beginning April 16 with 10 daily roundtrip flights. The Department of Transportation grants ``major airline'' status to a carrier which reports operating revenues of $1 billion or more in a 12-month period. Southwest achieved that goal with revenues of $1.015 billion in 1989. Last year, its revenues totaled $860.4 million. In the fourth quarter, Southwest earned $8.1 million, or 27 cents a share, compared to $16.1 million, or 51 cents a share, in the same period of last year. The company said fuel costs rose 37 percent during the quarter. Last year's quarter included $4.2 million of nonoperating gains. Revenues for the quarter were up 13.2 percent to $255.6 million from $225.8 million. They resulted from a 5.5 percent improvement in revenue passenger miles and a 6.7 percent increase in passenger revenue yield per RPM. But the load factor declined to 58.7 percent from 61.5 percent. For the whole year, earnings jumped 23.5 percent to $71.5 million from $58 million in 1988. Earnings per share were $2.37 a share, compared to $1.84 a share last year. Both years were favorably affected by nonoperating gains from sales of certain financial assets and planes. For 1989 those gains totaled $16.7 million and $9.2 million in 1988. ``It is a tribute to the people of Southwest Airlines that our gross operating revenues attained the $1 billion level in 1989, despite the fact that we charge fares much lower than those of other airlines. Our people are exceptional,'' Kelleher said in a prepared statement. At a news conference, Kelleher said fuel costs increased from 47.8 cents a gallon to 65.5 cents a gallon in the fourth quarter. In the first quarter of this year, the chairman said, ``We believe it will be a disappointment from an earnings standpoint.'' Kelleher would not say if the first quarter might result in a loss. ``There will be a substantial reduction in profitablity,'' he said. But he also noted bookings in the first quarter were beginning to rise and that fuel costs may begin to ease. He said he expected considerable improvement in subsequent quarters of 1990.