Southwest sees relief in recent drop in oil prices

By DAVID KOENIG | May 18, 2011 | 2:14 PM EDT

DALLAS (AP) — The CEO of Southwest Airlines said Wednesday bookings for early summer travel look strong.

Gary Kelly also expects the recent drop in oil prices to give his airline a bit of a break from soaring fuel prices.

Demand for travel has been strong enough for airlines to raise prices — seven times at Southwest since the start of the year.

Kelly cautioned that fares hikes could go too far and cause people to cut back on travel. He doesn't think that has happened yet, however.

"You never know when you hit that tipping point until you hit it," he said.

If fare increases have been driven by rising fuel costs, as the airlines insist, the pressure may be easing, at least temporarily. Oil prices have fallen more than 11 percent so far in May. Southwest said Wednesday that it expects its 2011 fuel bill to rise $1.3 billion over last year's $3.62 billion tab. It previously forecast a $1.5 billion jump.

Kelly also said at the company's annual shareholder meeting that Southwest isn't planning to increase its dividend until it can hit ambitious profit targets.

Dallas-based Southwest carries more U.S. passengers than any airline. In the first three months of this year, passenger traffic soared 11.9 percent over year-ago levels, and at higher average fares. That helped Southwest scratch out a $5 million profit last quarter while its four biggest rivals lost a combined $1.08 billion.

This month, Southwest completed the purchase of AirTran Airways but will operate it as a separate airline until next year. It plans to eventually drop AirTran's baggage fees and first-class cabins.