Jul 12, 2008 8:25 am US/Pacific
Southwest Airlines To Expand Internationally
DALLAS, Texas (CBS) ―
The nation's airlines expect to lose a combined $10 billion this year due to record-high oil prices. The only exception is Southwest Airlines.
How has the Dallas-based carrier been able to buck the skyrocketing fuel costs, industry layoffs and drastic service cuts? CBS station KTVT-TV spoke exclusively with Gary Kelly, the CEO of Southwest Airlines to find out.
Unlike competitors, which are parking planes, cutting flights and bleeding money, Southwest Airlines has a much different story to tell.
"It's a very exciting time for Southwest Airlines," Kelly said.
Southwest can add planes and flights because it hedges most of its fuel, spending cash to obtain guaranteed low prices. While oil set a new record on Friday at $147 a barrel, Southwest Airlines still pays just $51 a barrel for 70 percent of its fuel. That adds up to nearly $2 billion in savings.
"If we weren't prepared for the current environment, we'd be in a world of hurt," Kelly told CBS 11 News. "Clearly, we wouldn't have had as many airplanes. Clearly, we wouldn't be nearly as profitable."
Southwest Airlines has had to raise fares because of rising fuel prices, however. Walk-up, one-way fares have jumped from $299 three years ago to $399 now. And, according to Kelly, the fares still need to go up about $20 or $30 more.
Kelly said Southwest Airlines is looking to expand. They are going international next year by code-sharing flights with Canada's West Jet. And beyond that, Kelly explained, "We'll probably have a partner announced for Hawaii before we have a Mexico or Caribbean solution."
Starting in the fall on a test run of four jets, Southwest Airlines will offer customers an on-board, satellite-based wi-fi service for laptop computers. If the program is successful, the service will be expanded to all 530 of their jets.
In addition, Kelly embraces a $700 million makeover for Dallas Love Field by 2014, most of it paid for by Southwest Airlines.
Kelly said fare increases would be one thing the carrier would be "carefully managing."
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