S&P Downgrades Southwest Airlines

Standard & Poor’s downgraded Southwest Airlines Co. one notch on Wednesday, citing lower demand for travel and weak pricing that have cut into the company’s earnings and cash flow.

The ratings agency lowered Southwest debt to BBB from BBB+, and also assigned it a negative outlook.

S&P left Southwest debt at investment grade, however, two rungs above junk status.

U.S. airlines have been struggling with weak demand, especially among high-fare business travelers. They’ve had to slash prices to fill seats.

But Southwest, which was scheduled to report third-quarter financial results Thursday, said its September traffic increased 8.8 percent compared with a year earlier. And it said passenger revenue per available seat mile rose 3 percent.

S&P said it gave a negative outlook to Dallas-based Southwest because of concern over how quickly and how strongly earnings can improve.

Southwest shares rose 46 cents, or 4.8 percent in regular trading Wednesday, then lost 10 cents in extended trading.

10/14/2009 6:57 PM DALLAS (AP)