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May 18, 2011

Despite tough economic conditions, Southwest tells shareholders future bookings look good

Rising fuel costs and a lackluster economy has made it difficult to operate an airline, but not for Southwest's chief executive Gary Kelly.

"It's not just been tough," Kelly told shareholders at the company's annual meeting at its Dallas Love Field headquarters. "It's been a lost decade."

But Kelly proudly pointed out that while other airlines filed for bankruptcy or disappeared altogether, the Dallas-based carrier has grown its network and capacity without furloughs.

"Our 2010 earnings performance was a superb rebound," Kelly said of the airline's $459 million profit last year. And he added that first quarter demand was solid with June bookings looking "very strong."

Fuel is continuing to rise and Kelly said he expects the carrier to spend $1.3 billion more on fuel than it did in 2010. As a result, the carrier has little or no fleet growth plans for 2011 or 2012, he said.

On May 2, the company acquired AirTran Airways and has begun evaluating its newly-acquired carrier's network and scheduling. Kelly said his team sees several business opportunities to expand upon what AirTran has accomplished and expects to have a single operating certificate issued by the government in the first quarter of 2012.

Southwest executives are also planning to meet with Dallas/Fort Worth Airport staff to discuss the withdrawal of AirTran from the airport per the Wright Amendment Compromise Agreement. Both Fort Worth and Dallas mayors had expressed dismay that Southwest could potentially be operating AirTran's D/FW service through the end of the year.

Kelly said that his primary concern is for the passengers who have already booked flights on AirTran through the busy summer months. AirTran, prior to the acquisition, had published its flight schedule through November 21.

"We are not going to extend the AirTran D/FW schedule beyond that [Nov. 21 date]," Kelly said.

He also discussed the termination of AirTran's code-share agreement with SkyWest to serve six cities out of Milwaukee. Kelly said that the agreement will end since Southwest's pilot contract does not allow for domestic codesharing. However, the airline hopes to maintain service to those cities even after the agreement has ended, he said.

-Andrea Ahles

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I thought that was a very interesting comment: "It's been a lost decade." It does seem like we've been through a lot as a nation since 2000.

In relation to Southwest, I'm glad they are doing well. They are the first airline I check out when making travel arrangements.

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