Last year Southwest Airlines' revenue shrank for the first time ever. Now the CEO says it could rebound with record revenue in 2010.
Southwest reported Thursday that January traffic rose 7.1 percent from a year ago, and CEO Gary Kelly said the nation's biggest discount airline had strong bookings for February and March.
If that trend holds, Southwest should finish 2010 with revenue much higher than last year. Kelly told an investors conference in New York "it can even surpass the revenues we had in 2008."
Southwest sales peaked in 2008 at $11.02 billion. Six straight years of rising revenue ended in 2009 with a 6 percent drop in sales.
Kelly said his airline is taking customers away from other carriers. Traffic grew even as Southwest offered fewer flights. He gave some of the credit to Southwest's heavily advertised bags-fly-free policy.
Other airlines began charging for checked luggage in 2008 as jet fuel prices spiked. Fuel prices dropped but the fees stuck.
Southwest thought about adding bag fees but decided against it. Now it's the only large U.S. carrier that lets customers check two bags for free. JetBlue lets passengers check the first bag free.
"It was something that just fell into our laps," Kelly said. "That is why you see traffic growth at Southwest at the same time that we're actually reducing capacity."
Kelly said the company is overhauling its web site and frequent-flier program to generate more revenue, but the changes aren't likely to help the airline financially this year.
Southwest isn't the only airline seeing better traffic, as evidence grows of a slow recovery in travel demand. JetBlue reported a 9.1 percent surge in January traffic. Continental Airlines saw an 8.5 percent gain, and American Airlines eked out a 0.4 percent improvement.