Southwest Airlines chief Gary Kelly said that the carrier intends to drive growth via bigger aircraft and the purchase of AirTran Holdings in the face of rising fuel prices. “The No. 1 challenge that the industry faces is energy costs,” said Kelly during an investor webcast. Southwest estimates fuel prices at about $2.50 a gallon for the current fourth quarter, rising to the $2.70-to-$2.75 range in 2011. Kelly said with fuel prices continuing to rise airlines must scale back growth plans, keep more cash and less debt. As a result Southwest is cautious about buying back its own shares. Southwest

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