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Chief Executive Gary C. Kelly said Southwest was helped by competitors who reduced capacity in their flight networks, increasing demand for travel on his airline.
Kelly said planes were still flying nearly full in July, and bookings for the rest of the July-September quarter were strong. He predicted third-quarter profit, excluding hedging that saves money on fuel, would increase from earnings in the same period last year.
Southwest benefited again from a decision several years ago — when oil was relatively cheap — to buy most of its fuel at set prices, which have turned out to be a bargain. Southwest estimated that this hedging saved it $225 million cash in the second quarter.
The airline has options to buy 73 percent of its fuel for the rest of 2006 at the equivalent of $36 per barrel oil — about half the going rate.
Southwest, however, has only enough long-term options to cover about one-third of its fuel for 2008 and 2009. That’s because the recent run-up in oil prices has made fuel hedging more expensive too.
Kelly said Southwest expects its fuel cost per gallon to rise from the second quarter into the third.
The carrier has also raised revenue by boosting fares four times this year.
Kelly warned this spring of a backlash by customers if airlines raise fares too high. Still, Southwest raised prices again this month by up to $10 each way on long flights.
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