October 21, 2009 / 7:56 PM / 10 years ago

UPDATE 1-Southwest to start flying to Panama City, Florida

DALLAS, Oct 21 (Reuters) - Southwest Airlines (LUV.N) said it would add a new city to its schedule in May of next year, as well as add nine new flights from St. Louis to six new markets.

Southwest will commence flights from the Panama City-Bay County International Airport new Panama City, Florida, in mid-2010, the carrier said on Wednesday. The airport is scheduled to open in mid-2010.

“It’s a spectacular area and ... there are 15 million visitors per year,” Chief Executive Gary Kelly told reporters, employees and other airline experts in Dallas. “There’s plenty of traffic and right now it’s automobile traffic.”

Kelly said converting just 1 percent of automobile traffic would make eight flights work. Southwest plans eight daily departures for Panama City and will unveil its schedule in December.

The flights will be easy for Southwest to accommodate, Kelly said. The airline plans to end the year with 541 aircraft and plans to keep capacity flat.

Southwest also will add nine flights from its St. Louis hub following a “massive reduction in flights” by one of its competitors, Kelly said separately. The flights will go to six new destinations.

AMR Corp’s AMR.N American Airlines cut flights in St. Louis earlier this year.

DEAL WITH ST. JOE COMPANY

In Panama City, Southwest forged a deal with St. Joe Co (JOE.N), which owns about 71,000 acres of land surrounding the new airport and has been involved with discussions to open an airport in Panama City for 10 years.

St. Joe will make quarterly cash payments to Southwest to cover shortfalls in the carrier’s operations at the airport during the first three years of service, St. Joe said in a securities filing.

St. Joe will also share Southwest’s profits from the air service up to the maximum amount of St. Joe’s prior break-even payments.

In the filing, St. Joe said there would be four separate flight destinations from the Panama City airport. (Reporting by Deepa Seetharaman; Editing by Steve Orlofsky)

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