Image: Southwest Airlines
Charles Rex Arbogast  /  AP
Long considered an airline catering to leisure travelers, Southwest has been making a push for business travelers. Customers who buy more expensive "business select" tickets will qualify for the faster "fly by" security screening.
updated 10/1/2008 4:55:32 PM ET 2008-10-01T20:55:32

Southwest Airlines Co. plans to begin service next year to Minneapolis, its first new city in more than a year, Chief Executive Gary Kelly said Wednesday.

Other U.S. carriers have sharply cut flights this fall, creating "tremendous opportunities for Southwest Airlines to expand," Kelly said.

The airline's chief financial officer said Southwest has "very limited financing needs" and little immediate exposure to the turmoil in the financial markets.

Laura Wright said Southwest, which enters fuel-hedging transactions with financial-services firms as counterparties, has no exposure to bankrupt Lehman Brothers and only a small amount to brokerages that don't have a commercial banking side.

Wright said Southwest, which reported about $5.8 billion in cash and short-term investments on June 30, has enough cash set aside to cover about 85 percent of its fuel-hedging positions.

Wright said Southwest is worried, however, that further weakening of the economy could hurt demand for air travel.

Separately, Southwest said Wednesday it would set aside priority security lanes for business-fare customers and frequent fliers at seven airports beginning next month. It's similar to an announcement two weeks ago by American Airlines, which will add priority security screening and boarding for top customers.

Long considered an airline catering to leisure travelers, Southwest has been making a push for business travelers. Customers who buy more expensive "business select" tickets will qualify for the faster "fly by" security screening.

Southwest, the only major U.S. airline to remain profitable this year because of those hedges, which reduce the price it pays for fuel, has slowed growth and deferred aircraft it planned to add in 2009, from 14 down to 10 Boeing 737s.

The Dallas-based carrier has bought 26 new jets this year and has three more deliveries scheduled before year-end, but Wright said the strike at supplier Boeing Co. has put those deliveries in doubt.

Wright, speaking during a company meeting with reporters, said Southwest also has an unused $600 million line of credit and believes it could tap European bank credit markets, as it did this spring.

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Southwest debt is rated "A-minus," still investment-grade, by Standard & Poor's and Fitch Ratings, and "Baa1" by Moody's.

The company has hedged against 80 percent of its fuel needs for the fourth quarter at an average price equivalent to $58 per barrel fuel, and is more than 70 percent hedged next year at $66 per barrel, Wright said.

Southwest boasts in advertising that it foregoes the fees that other airlines charge, but it too is looking for new sources of revenue. The airline will soon begin testing Internet access in flight, and plans to charge for it. It is boosting sales of alcohol by accepting credit cards instead of cash.

The company reports third-quarter results on Oct. 16.

Shares of Southwest Airlines Co. fell 31 cents, or 2.1 percent, to $14.20 Wednesday. Other airline stocks rose. Those carriers are not as well insulated from fuel prices, so Wednesday's decline in oil prices offered them more support.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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