Lower fares were no problem for Southwest, the nation’s largest discount airline.
Southwest Airlines posted a record profit in the past quarter. The airline’s net income reached $820 million, up 35% from a year earlier.
That’s despite falling fares — passengers paid 3.5% less to fly Southwest in April through June. And the airline warned that fares have been falling even more in recent weeks.
But that drop in fares was outweighed by a 6% increase passenger miles flown, lifting overall revenue.
The good news comes the day after Southwest was hit with technical issues, which grounded hundreds of its flights.
Rivals United Continental and Delta have reported even bigger drops in fares, with a 5% drop at Delta and nearly a 7% decline at United. Those airlines both reported lower overall revenue as a result. They’ve also warned that lower fares are likely to continue, at least through the end of the summer travel season.
Lower fuel costs were one of the drivers of the better profits. But Southwest’s savings were limited by long-term fuel contracts, known as hedges, which locked the airline into paying for some of its fuel at above market prices.
Overall, lower fares have prompted airlines to fly additional flights and try additional routes. Those extra choices for passengers means more competition and lower fares.
Industry leader American Airlines is due to report results later this week.
