Flying High: Southwest Airlines Posts Big February Gains

(MoneyWatch)  Southwest Airlines (LUV) has been the revenue rock star as of late, and its February numbers are no exception. It's like the sleeping bear has been awakened from a revenue-anemic sleep. Southwest has shown how the revenue game is played, with gains of 16 to 17 percent.

In previous months, we've seen Southwest make revenue gains primarily thanks to having more butts in seats. In the fourth quarter of 2009, Southwest filled 77.3 percent of its seats compared to 67.8 percent the year before. That led to a 7.4 percent increase in unit revenue (more revenue to spread across the total number of seats) even though yield (revenue spread across only the seats that are filled) dropped 6.4 percent. In other words, people were paying less but there were a lot more of them to help improve the revenue picture.

In January, Southwest filled 72.1 percent of its seats compared to 62.8 percent the year before. That led to a 14 to 15 percent unit revenue gain. But February is a little different. Yes, the airline saw load factor gains, but it was only a gain of 4.8 points from 69.1 percent to 73.9 percent. So improving yields finally made a difference.

Southwest isn't the only one seeing this, but they clearly are seeing the biggest gain. The airlines have continued to be very disciplined when it comes to holding down capacity. Now that air travel has started to recover from the nadir of demand, things should start improving dramatically if capacity (and demand) holds.

[Photo via Flickr user gTarded]