Lower oil prices help top carriers in Houston

United and Southwest airlines, the dominant carriers in Houston, reported record firstquarter profits Thursday due largely to a significant drop in their biggest expense — fuel — resulting from the sustained slump in crude prices.

“Lower fuel prices is a big part of the first-quarter story,” Southwest CEO Gary Kelly said during a quarterly conference call. “I hope these lower energy prices are here to stay,” he added later, a sentiment not shared in much of Houston’s business community.

Chicago-based United, however, did acknowledge the downside of oil’s plunge. Revenue from corporate accounts declined 20 percent, executives reported in a conference call, as oil and gas customers scale back as business slows. Corporate travel from the energy industry, especially for business-class tickets on international routes, has slowed significantly at its Bush Intercontinental Airport hub, the executives said.

The fall-off in energy-related travel was partially offset by continued strong business from the medical field, they said.

Kelly said Dallas-based Southwest, which dominates Hobby Airport, has not seen business travel slow, partly because it’s been rolling out international flights, with a mix of leisure and business travelers. But he said he has not seen a dropoff even in domestic markets where business travel is heavily oil-related.

Overall, it was a record quarter for both airlines.

United reported a first-quarter profit of $508 million this year,

more than a $1 billion swing from the same period last year, when the airline reported a $609 million loss. Revenue fell 1 percent year over year.

CEO Jeff Smisek and other executives said during the conference call that the airline would continue to improve on-time arrivals, pay down debt, and invest in upgrades to its onboard food and beverage services and inflight entertainment.

“We will continue to work aggressively to boost revenue and increase efficiency,” he said. “Over the last several quarters, we have demonstrated our plan is working.”

United also said remaking schedules at hubs in Houston and Denver helped increase volume. Profit also was boosted because Easter fell during the first quarter.

Southwest reported profit of $453 million, a 266.7 percent increase from 2014’s first quarter.

Kelly said that in addition to the lower fuel costs, the airline’s earnings have been up. He said the opening later this year of Hobby’s international terminal will further increase the number of flights. He also cited continued growth of international flights after its merger with AirTran.

“We have a lot of developing markets that we are staying on top of and carefully managing,” Kelly said. “We are hoping those will continue to improve over time.”

Business travelers make up about a third of the passengers at Southwest, which reported an eighth consecutive quarter of record profits.

“There is a natural mix of those flying for business or leisure,” Kelly said. “Short-haul flights are more dominated by people flying for business. These longer flights are a mix of leisure.”