Standard & Poor's Ratings Services has lowered its ratings on Southwest Airlines Co. (LUV), lowering the debt ratings to 'BBB' from 'BBB+’ and placing it with negative implications. However, Southwest has retained its investment grade rating. The downgrade reflects lower operating cash flow caused by record high fuel prices, low global demand for air travel and weak prices. The travel downturn has eroded the airline's flow of cash at a time when the airline faces substantial fixed obligations and declining cash balances. Southwest's cash balance fell to $902 million in the third quarter from $1.4 billion at the end of 2008. Recently, Southwest borrowed $124 million under a new term loan agreement secured by five Boeing 737-700 aircrafts. It also replaced its previous $600 million unsecured revolving credit facility with a new $600 million unsecured revolving credit facility that will expire in Oct. 2012. The rating ...

Southwest Airlines (LUV) reported an operating income of 3 cents per share, ahead of the Zacks Consensus Estimate of 2 cents per share. This was lower than the profit of 9 cents per share in the prior-year quarter. Passenger revenues decreased 7.8% to $2.6 billion from $2.8 billion in the prior-year period. Cargo & Freight revenue decreased 24.3% y-o-y to $28.0 million, primarily due to fewer shipments as a result of the ongoing worldwide recession. Other revenue increased 1.1% y-o-y to $88.0 million. Fall-off in business travel because of the recession negatively affected the revenues. Total operating expenses decreased 5.7% year-over-year, mainly due to lower energy prices. The quarter’s operating expenses included $27 million of early out program launched during the previous quarter. Southwest’s revenue passenger miles (RPMs) increased 4.7% y-o-y to 19.7 billion miles from 18.8 billion miles in the prior-year quarter. Capacity (available ...