Southwest Airlines borrows $600M

DALLAS - Southwest Airlines Co. said Monday that it borrowed $600 million from Citibank and seven European banks to bolster its cash position because of uncertainty about the economy.

The airline disclosed in a regulatory filing that it had tapped the full amount of the loans on Friday.

The loans were secured by the first-lien mortgages on 21 of Southwest's Boeing 737-700 aircraft.

The filing didn't give a purpose for the debt, but spokeswoman Beth Harbin said, "It's due to uncertainty about the economy and the credit market and the high price of fuel."

"We thought it would be wise to bolster our cash position," she said.

The company had $2.98 billion in cash and another $140 million in short-term investments as of March 31, up slightly from the combination of $2.21 billion cash and $566 million in short-term investments a year earlier.

Harbin said the company owns 83 percent of its planes. She said the company had 535 planes at the end of April.

The new loans mature in 2020 and are repayable in quarterly installments beginning Aug. 9. They bear an interest of the London Interbank Offered Rate plus 0.95 percent.

Southwest said in the filing that there are no financial covenants to the loans.

Lenders holding more than 50 percent of the outstanding principal could accelerate the unpaid principal under certain circumstances, the company said in the filing.

Southwest hasn't reported a quarterly loss in 17 years, but its earnings in the first three months of this year plummeted by about two-thirds as the airline felt the pinch of higher fuel costs. But last week, the Dallas-based carrier said April traffic rose 5.7 percent, as it flew more passengers on slightly fuller planes.

Three times within the past year, Southwest has scaled back once-ambitious expansion plans - although it still increased capacity 5.3 percent in April, compared to April 2007 - and it has raised fares several times.

Shares of Southwest rose 31 cents, or 2.4 percent, to $13.30 on Monday.