Southwest Airlines Co. reassured investors that fares are holding up as the economy slows, helping boost the shares after the carrier posted its first quarterly loss in 17 years on costs tied to fuel hedges.
Unit revenue, a measure of fares, fees and traffic, rose 11 percent in September and was up 14 percent so far in October, Chief Executive Officer Gary Kelly said on a call with reporters. The increase shows U.S. carriers are succeeding in raising revenue by trimming capacity and eliminating the cheapest fares.
“It says this industry is not dead; people are still booking seats,” Robert McAdoo, an Avondale Partners LLC analyst in Kansas City, Mo., said.
Southwest rose 93 cents, or 8 percent, to $12.49. The shares had fallen 5.3 percent this year before Thursday. Other airline shares also climbed as crude oil, which is refined into jet fuel, fell below $70 a barrel as stockpiles increased.
Southwest's deficit of $120 million, or 16 cents a share, compares with year-earlier net income of $162 million, or 22 cents. Third-quarter revenue rose 12 percent to $2.89 billion.
The loss comes after the airline's practice of locking in fuel prices in advance helped keep it profitable for years. The average price of jet fuel dropped 29 percent after reaching a record on July 3, forcing the carrier to reverse gains taken in earlier periods when prices rose.
Excluding the effects of the fuel hedges and other one-time items, profit was $69 million, or 9 cents. On that basis, Southwest was expected to earn 8 cents a share, the average of 13 analyst estimates compiled by Bloomberg.
The airline is selling some of its hedges to better position itself for lower prices, Kelly said.