Southwest will reduce the number of planes once slated for fleet

DALLAS — Southwest Airlines Co. will add fewer planes to its fleet than it had planned and is tweaking its flight schedule in several cities as the carrier grapples with a slowing U.S. economy and high fuel costs, Chief Executive Gary Kelly said Wednesday.

Instead of the previous goal of adding 34 aircraft by 2008, Southwest will add just 19 for a total of 539 aircraft by the end of next year, Kelly said in a meeting with analysts and investors in New York.

By early next month, Southwest will eliminate 39 roundtrip flights, including its two daily nonstop routes between Philadelphia and Los Angeles, while adding 45 flights between cities including New Orleans and Birmingham, Ala.

"We make what I would almost describe as temporary changes to the flight schedule all the time," Kelly said.

The changes are intended to restore profit growth, which Kelly said is expected to slow to 6 percent, down from a previous forecast of 8 percent. He still maintained a revenue target of $1 billion by 2010.

"If we find that conditions change, we will re-evaluate our growth plans for future periods," he said. "In this economic environment, we simply need to take less risk and grow more slowly."

Kelly said the slower growth would give the Dallas-based airline time to evaluate several new business initiatives scheduled to begin in the fourth quarter of 2007.

Without getting into specifics, he said the changes would affect Southwest's fare structure and frequent flyer program, as well as a new advertising campaign and a new method of boarding and seating passengers.

"We just wanted to provide some insight as to when we might unveil some of these initiatives," Kelly said. "But we're still being a little coy as to exactly what those details are."

He hinted, however, that Southwest has historically appealed to the leisure traveler and needed to do a better job of attracting business customers.

Kelly also maintained a positive growth outlook and said with the planned changes, the company's financials would stay on target with more than $1 billion in incremental revenue over the next few years overcoming higher fuel costs.

"We remain excited about our future long-term growth opportunities," he said.

Earlier this month Southwest said it is planning to sell seats on ATA Airlines flights from the East Coast to the Caribbean by 2009 and later to Europe.

Southwest and ATA already operate a partnership in which each can sell seats for connecting flights on the other carrier, a common airline industry practice called code-sharing. The agreement has already allowed Southwest to offer service to new U.S. destinations, including Hawaii, on ATA jets.

Kelley rang the opening bell at the New York Stock Exchange on Wednesday to commemorate Southwest's 30th anniversary on the financial exchange.

Shares of Southwest Airlines Co. rose 16 cents, or 1.1 percent, to $14.80 in afternoon trading.

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