Increased Competition Slashes Southwest’s Profits

Earnings reports

Low-fare carrier Southwest Airlines Co. reported Friday that first-quarter profits plunged more than 70 percent, attributing the decline to increased competition and reservation-system capacity constraints.

Southwest earned $11.8 million, or 8 cents per share, in the three months ended March 31, compared with earnings of $41.8 million, or 28 cents per share, in the same period a year earlier.

Revenues were $621 million vs. $619.4 million.

Chairman Herbert D. Kelleher said the results were well below last year’s record first-quarter performance but in line with expectations.

“The anticipated softness in revenues and decline in earnings, similar to our fourth-quarter 1994 performance, was principally caused by aggressive industry fare sales; increased short-haul, low-fare competition; reservation system capacity constraints; and our own aggressive expansion,” he said.

In other earnings reports:

Northwest Airlines Corp. said that first-quarter profits plunged 86 percent, blaming the drop on one-time factors that included an employee stock program and the strength of the Japanese yen.

The airline earned $2.6 million, or 52 cents a share, in the three months ended March 31, compared with profits of $18.3 million, or 5 cents a share, in the same period last year. Revenues rose to $2.04 billion from $1.92 billion.

Northwest took a $63.6 million charge against firstquarter earnings to cover the transfer of 29 million shares of stock to employees, received stock in exchange for $886 million in wage reductions over three years.

The dollar’s nearly 18 percent decline against the yen since the start of the year cost the carrier $59.1 million in foreign-exchange losses.

West One Bancorp credits loan growth and lower credit costs for the highest quarterly profit in its 128-year history.

The Boise-based bank holding company with West One Bank operations in Idaho, Oregon, Washington and Utah said Thursday that it earned $28.3 million during its first quarter, up 23 percent from the first three months last year.

In fact, cash flow was so strong that West One Chairman Daniel Nelson characterized the company’s balance sheet as a “fortress.”

Lending increased 12.5 percent compared with the first quarter of 1994 as the economies of states in the company’s operating area remained strong.

Colgate-Palmolive Co.’s profits rose 4.6 percent in the first quarter on a 10 percent revenue increase powered by strong sales gains overseas, the consumer products company said Friday.

Sales in North America rose by a more modest 6 percent but still marked Colgate’s best performance in its home market in two years.

Colgate earned $156.5 million, or $1.05 a share, in the three months ended March 31. That was up from a profit of $149.6 million, or 98 cents a share, in the same period a year earlier.

Revenues for the quarter rose to $1.98 billion from $1.77 billion.