Southwest Airlines managed to stave off rising unit costs and a 79.6% jump in fuel expenses to record a first-quarter profit of $61 million, up 3.4% over the $59 million earned in the three months ended March 31, 2005.The carrier also announced yesterday that it will exercise options for 79 737-700s for delivery from 2007 through 2012, bringing its firm orders to 140.

Southwest's quarterly revenues topped the $2 billion mark for the first time, increasing 21.4% to $2.02 billion. Expenses rose 21.4% over the year-ago quarter to $1.92 billion. Operating income climbed 21% to $98 million from $81 million.

"We are pleased with the continued and consistent improvement in our earnings performance," CEO Gary Kelly said. "Thus far, strong load factor and revenue trends have continued in April, and customer bookings for the remainder of second-quarter 2006 are strong."

Traffic increased 15.4% to 15.28 billion RPMs on a 9.9% gain in revenue passengers to 19.2 million. Capacity rose 9.1% to 22.08 billion ASMs, resulting in a record first-quarter load factor of 69.2%, up 3.8 points over the year-ago period. Average passenger fare grew 10.7% to $100.94, lifting yield 5.4% to 12.68 cents, while RASM jumped 11.3% to 9.15 cents. Fuel prices had an adverse effect on unit costs, boosting CASM 11.3% to 8.7 cents. Excluding fuel, CASM dipped 0.2% to 6.43 cents, which was in line with expectations, according to Kelly.

"We are optimistic we can achieve our full-year 2006 goal of flat year-over-year unit costs, excluding fuel, at 6.48 cents," Kelly said. The airline is more than 75% hedged for the current quarter with fuel costs capped at $36 per barrel and more than 70% hedged for the remainder of 2006 at the same rate.

Southwest will take 36 aircraft next year, 30 the following year, 18 in 2009 and 10 in each year from 2010 through 2012. It holds 116 options with delivery positions in 2008-12 and 54 purchase rights for delivery through 2014. CFMI valued the new firm engine orders at $1 billion at list prices.