Why Southwest predicts a dip in revenue

DALLAS - Southwest (LUV) is adding a lot of seats but managing to fill almost all of them.

The airline also says that a key revenue figure will drop 1 percent in the third quarter compared with a year earlier. That's much smaller than the 6.5 percent decline that Delta Air Lines (DAL) reported for August.

Both airlines' decline in revenue for every seat flown one mile indicates that fare wars are taking a financial toll on the airlines. Carriers have been adding flights and seats due to cheaper fuel, leading to lower fares on some routes, particularly during non-peak hours.

Southwest Airlines Co. said Tuesday that it increased passenger-carrying capacity by 7.6 percent last month compared with August 2014. Passengers filled most of the new seats, as traffic rose 7.5 percent. The average flight was 85.4 percent full, down from 85.5 percent a year earlier.

The shares were up 73 cents, or 2 percent, to $37.96 in midday trading. They started the day down 12 percent this year.