Southwest Airlines could see record year

DALLAS — Last year Southwest Airlines shrank for the first time ever. Now the CEO says it could rebound with record revenue in 2010.

Southwest reported Thursday that January traffic rose 7.1 percent from a year ago, and CEO Gary Kelly said the nation’s biggest discount airline had strong bookings for February and March.

If that trends holds, Southwest should finish 2010 with revenue much higher than 2009 and “it can even surpass the revenues we had in 2008,” Kelly said at an investor conference in New York.

Southwest sales peaked in 2008 at $11.02 billion. A streak of six straight years of rising revenue ended in 2009, as the recession and a decline in business travel led to a 6 percent drop in sales.

Kelly said his airline is taking customers away from other carriers — traffic grew even as Southwest offered fewer flights — and he gave some of the credit to Southwest’s heavily advertised bags-fly-free policy.

Other airlines began charging for checking luggage in 2008 as jet fuel prices spiked. The charges remained — and rose — even after a decline in fuel prices.

Southwest considered adding bag fees, surveyed customers about it, but decided against it. Now it’s the only large U.S. carrier that lets customers check two bags for free; JetBlue lets them check the first bag free.

“It was something that just fell into our laps,” Kelly said. “That is why you see traffic growth at Southwest at the same time that we’re actually reducing capacity.”

Kelly said the company is working on overhauls of its web site and frequent-flier program to generate more revenue, but neither initiative is likely to help the airline financially this year.

Southwest isn’t the only airline seeing better traffic, as evidence grows of a slow recovery in travel demand.

JetBlue, another low-cost carrier modeled after Southwest, reported a 9.1 percent surge in January traffic. Continental Airlines saw an 8.5 percent gain, and American Airlines eked out a 0.4 percent improvement. Traffic fell 1.3 percent at US Airways.

Southwest shares fell 25 cents, or 2.2 percent, to $11.23 in afternoon trading.

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