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S&P puts Southwest Airlines on credit watch

Standard & Poor’s has put Southwest Airlines Co. on credit watch with negative implications, after the carrier reported a first-quarter loss that was larger than expected.

Standard & Poor’s has put Southwest Airlines Co. on credit watch with negative implications, after the carrier reported a first-quarter loss that was larger than expected.

S&P said it placed Southwest’s “BBB+” long-term corporate credit rating on watch because the airline reported a first-quarter loss of $91 million, largely due to fuel hedge charges.

Southwest, which is Philadelphia’s second-busiest airline, also gave a weak revenue outlook for the second quarter.

The rating agency said Southwest has added a “significant amount of debt,” more than $700 million, since late 2008, adding to its interest expense. The result is that earnings and cash flow in 2009 will likely be below S&P’s expectations, and that the debt will be higher, credit analyst Betsy Snyder said.

Although the Dallas-based airline ended the latest quarter, March 31, with cash and short-term investments of $2.1 billion, the current market value, on April 14, of its fuel-hedging contracts “was a net liability of $950 million.”

Southwest shares were down 13 cents, or 1.83 percent, to $6.97 in midday trading on the New York Stock Exchange.