Cancun Airport

Southwest beats unit costs estimates despite posting a first quarter loss

A first quarter loss at Southwest Airlines was accompanied by a better-than-expected result in the carrier’s unit cost performance driven in part by labour productivity improvements. The carrier is striking a cautiously optimistic tone regarding the rest of the year, indicating it should record a favourable financial performance if fuel prices remain at current levels. But until Southwest completes the integration of AirTran Airways into its operations by 2014, the carrier will be constrained in reaching its full revenue potential.

Favourable gains on the settling of certain fuel hedge contracts helped Southwest to record a first quarter profit of USD98 million. But excluding special items the carrier’s loss was USD18 million compared with a USD20 million profit the year prior. The airline’s operating income tumbled USD100 million to USD10 million as the carrier recorded fuel and oil expense of USD1.5 billion, a 45.5% rise from 1Q2011. On a combined basis with AirTran, Southwest’s operating revenue was USD86 million.

Houston airport operator envisions Hobby offering international flights in 12 markets

Studies carried out on behalf of the Houston Airport System (HAS) to examine the viability of international flights from Houston Hobby airport contemplate a two-phased introduction of 12 markets to Mexico and Central America. Southwest Airlines is pushing for facilities at Hobby to support international flights, but research conducted shows that Mexican low cost carriers VivaAerobus and Volaris would also have an interest to operate international service from Hobby. It is not surprising United has mounted vehement opposition to Southwest’s campaign, as it enjoys majority carrier status in most of those markets with its service offerings from Houston Intercontinental Airport.

Earlier this year Southwest asked Houston Airport System (HAS) to conduct a feasibility study for the addition of a five-gate terminal at Houston Hobby Airport to support international flights. Houston is Southwest’s sixth largest city based on daily departures, and the city’s geographical location makes it an ideal destination for short-haul international flights to Mexico and Central and South America. Data in the study conducted on behalf of HAS show that Houston was the point of entry for 64% of Mexican visitors travelling by air to the US in 2010. Through its acquisition of AirTran, previously domestic-only Southwest is gaining knowledge of international operations now that it is managing AirTran’s network, which includes flights to the Caribbean and Central America.

Traffic continues to drop at Mexico's airports

Mexico’s three main airport groups continue to report monthly traffic declines and have not yet fully recovered from one of the country’s main carriers suspending operations six months ago. ASUR, GAP and OMA have all reported year-on-year declines in traffic for Mar-2011 and 1Q2011. Several Mexican airports have still not fully recovered from the suspension of operations at Grupo Mexicana in Aug-2010, although overall traffic levels in the domestic market have already fully recovered.