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Jul 11, 2008 7:49 pm US/Central
CBS 11 News Talks To Southwest Airlines CEO
Reporting
Jack Fink
DALLAS (CBS 11 / TXA 21) ―
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 11 News spoke exclusively with Gary Kelly, the CEO of Southwest Airlines and maybe the most-feared person in the airline industry.
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. He may be the only airline executive who can brag.
Southwest can add planes and flights because it hedges most of its fuel, spending cash to obtain guaranteed low prices.
So, 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 still had to raise fares becaues of rising fuel prices, though. 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.
So, 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."
Not only that, but 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.
CBS 11 News asked Kelly if fares would increase to help pay for airport improvements. "I don't know," he said. "I think that's one of the things we're going to want to be carefully managing here."
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