Southwest Airlines Co. may not meet its earnings targets this year due to a combination of fuel costs and weakening revenue growth. (6/14/2007)
Southwest CEO Gary Kelly reportedly said the airline needs its unit revenue – revenue per seat per mile flown – to increase five percent this year to increase earnings and to hit Southwest’s stated target of a 15 percent return on invested capital.
“Based on our first-quarter results, our second-quarter trends and the best guess we have about the second half of the year, that won’t happen,” Kelly said.
Southwest doesn’t plan to slow its eight percent growth but will consider cutting back its expansion if revenue doesn’t improve.
Southwest had predicted 2007 would continue the trend of 2006, in which unit revenue climbed 17.5 percent over the previous year. That hasn’t happened, he said.
“Basically what we’re trying to assess at this point is how long the revenue environment will continue. ... If trends don’t change, I think it would be appropriate to change the growth rate,” he said.