Southwest Air sees lower flight capacity growth as retires old planes

Thu Apr 21, 2016 11:54am EDT
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(Reuters) - Southwest Airlines Co (LUV.N: Quote) on Thursday reported first-quarter profit above estimates and said it will retire old planes earlier than planned, rolling back its growth plans and taking some competitive heat off rivals.

The No.4 U.S. airline by traffic said it grew profit 13 percent in the first quarter from a year ago to $511 million. Excluding special items, it earned 88 cents per share, compared with 84 cents per share that analysts on average were expecting, according to Thomson Reuters I/B/E/S.

The Dallas-based carrier said it moved up plans to retire classic Boeing Co (BA.N: Quote) 737 jets in its fleet to no later than the third quarter of 2017 from 2018, in order to resolve uncertainty about U.S.-mandated pilot training for flying those aircraft and their next-generation model, the Boeing 737 MAX.

This will result in fewer aircraft and lower growth in flight capacity than previously forecast, Southwest said.

"These are the most expensive planes in terms of fuel (inefficiency) and in terms of maintenance," Sterne Agee CRT analyst Adam Hackel said.

At the end of 2015, Southwest had 129 classic aircraft that it has planned to retire out of a fleet of 704. As of March 31, it said it expected to take delivery of 155 new planes through 2018 and has options for 18 more, and will have about 720 aircraft by the end of 2016.

The early retirements will have the unintended effect of boosting rivals, Hackel added.

American Airlines Group Inc (AAL.O: Quote) and others have reeled from Southwest's massive expansion from Dallas Love Field, an airport where its flying was limited by statute until October 2014.

Southwest also began flying abroad from Houston last year, where United Continental Holdings Inc (UAL.N: Quote) had a grip on the international travel market.   Continued...

Southwest Airlines planes are seen in front of the Las Vegas strip, Nevada, United States in this April 23, 2015, file photo. REUTERS/Lucy Nicholson/Files