High US jet fuel prices to continue in Q2 – Southwest CEO

19 April 2012 19:10  [Source: ICIS news]

HOUSTON (ICIS)--High jet fuel prices in the first quarter may continue into the second quarter of 2012, leading to higher ticket prices, a US airline company executive said on Thursday.

First quarter 2012 economic fuel costs for Southwest Airlines were at $3.44/gal, up about 50 cents/gal from the prior year, according to the company. Southwest reported on Thursday a net loss of $18m (€13.7) for the first quarter of 2012 compared with a net income of $20m in first quarter 2011.

“The decline in operating income was driven by a $478m increase in our first quarter economic fuel costs, compared to first quarter last year,” said Southwest president and CEO Gary Kelly during the company’s first quarter results conference call.

The company expects second quarter 2012 fuel costs, including fuel taxes, to stay near the levels in the first quarter in the $3.40-$3.45/gal range, with minimal impact from cash settlements for fuel derivative contracts, according to Kelly.

Kelly did not go into details about the increasing fuel costs leading to higher airline ticket prices from Southwest, but said, “After multiple fare increases last year, and being the expert airline at reducing fares and stimulating markets, we know there’s price elasticity and resistance to fare increases.”

Kelly said while he thinks there is nothing wrong with the company’s revenue production, the challenge is that fuel prices demand more, and that may cause higher ticket prices for travellers in 2012.

($1 = €0.76)

By: Anna Matherne

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