Southwest Airlines will release its quarterly report tomorrow, and investors expect the quirky airline to continue its tradition of strong financials. The question, though, is whether Southwest earnings will grow as quickly as some of its peers, which have been faster to climb onto money-making strategies like baggage fees and other ancillary charges to enhance their revenue.

Unlike other airlines, though, Southwest hasn't needed those fees to be profitable. With the exception of a few quarters of high fuel costs and depressed economic conditions, Southwest has consistently made money, and it has gradually grown to become one of the largest airlines in the U.S. business. What's next for the great growth story? Let's take an early look at what's been happening with Southwest Airlines over the past quarter and what we're likely to see in its quarterly report.

Stats on Southwest Airlines

Analyst EPS Estimate

$0.38

Change From Year-Ago EPS

5.6%

Revenue Estimate

$4.66 billion

Change From Year-Ago Revenue

0.9%

Earnings Beats in Past Four Quarters

4


Source: Yahoo! Finance.

How much higher can Southwest earnings fly?
Analysts have had mixed views over the past few months about the earnings prospects for Southwest Airlines. They reined in their June-quarter estimates by $0.04 per share, but they've boosted their full-year 2013 consensus figures by $0.02, suggesting deferred earnings rather than completely disappearing profits. The stock has held its own, rising another 4% since mid-April.

We've already gotten some information about how the quarter went for Southwest from its monthly results. In April, the company saw a 4%-5% decline in unit revenue, offset by a rise of 4.1% in capacity. Those figures were largely consistent with the rest of the industry, as both US Airways and Delta Air Lines posted similar combinations of revenue and capacity changes. The same trend continued in May, as a drop of 2% in unit revenue came with a 3.4% rise in capacity.

But those somewhat troubling figures haven't stopped Southwest from moving forward with growth initiatives. The company expects to start flying to Memphis this November, filling the void from Delta's removal of its hub from the Tennessee city and expecting to become the city's biggest carrier in the long run. Moreover, the impending merger of US Airways and AMR could result in slots coming open at Washington's Reagan Airport, giving Southwest a chance to establish a foothold closer to the nation's capital than Baltimore-Washington International.

Southwest has also stood up to low-cost competitor JetBlue by coming to an agreement with DISH Network to offer free live television access as well as on-demand shows at no charge. Rather than installing monitors, Southwest will make the entertainment freely available on its Wi-Fi planes, not even charging for Wi-Fi access for passengers who want only to watch the DISH offerings.

In the Southwest earnings report, watch to see whether the company responds to the changing dynamics of the airline industry. With Southwest having followed in Delta's footsteps by purchasing some used aircraft during the quarter, some believe the leadership mantle has moved off Southwest's shoulders. Yet with its loyal workforce and strong reputation for customer service, Southwest should continue its winning ways well into the future.

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The article Will Southwest Earnings Keep Flying High? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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