DALLAS » Fresh from announcing a deal with Mexican airline carrier Volaris this week to sell flights to Mexico in 2010, Southwest Airlines is also exploring opportunities for routes to Hawaii and the Caribbean.

Southwest in July announced plans to team with WestJet to offer U.S.-Canada travel by late 2009.

Southwest officials say they have been in discussions with nearly a dozen airlines about code-sharing to Hawaii and the Caribbean by late 2009.

Competitors are paying close attention. Some may fear that Southwest Airlines Co. could emerge as a low-cost rival on their lucrative international routes, just as it pushed beyond Texas and grew into the nation's largest carrier by number of domestic passengers.

Others are courting Southwest. Last month, the chief executive of AirTran Airways said he would like to talk to Southwest about selling seats on each other's planes and sharing the revenue.

Such arrangements are called code-sharing, because one airline puts its name or code on a flight operated by the other.

Code-sharing is considered a low-risk way for airlines to expand their networks without the added cost of more planes and employees. It figures to be a particularly important strategy for Southwest, which is alone among the nation's major carriers in not belonging to one of three big global alliances or teams of airlines.

  Since 2001, Southwest has enjoyed fortress-like strength in the troubled U.S. airline industry, earning consistent profits because it bet right on the direction of oil prices several years ago.

But the castle walls are showing cracks.

Last month, Southwest reported its first quarterly loss since early 1991. Its wildly successful fuel-hedging bets are winding down and losing value. Its once-enormous financial advantage over other airlines is shrinking.

To avoid big losses or draconian spending cuts, Southwest must raise more money - and fast.

The airline aims to increase revenue by $1.5 billion, and international code-sharing could contribute “;several hundred million dollars”; a year toward that goal, said CEO Gary Kelly.

In July, Southwest announced that by the end of 2009 it would launch service between the U.S. and Canada with WestJet Airlines Ltd. Details such as destinations, fares and revenue forecasts have not been disclosed.

Southwest officials say they have been talking to nearly a dozen airlines about code-sharing to Hawaii, Mexico and the Caribbean by late 2009 - Europe and Asia would be farther down the road.

“;We want to start off regionally. It's simpler,”; said Richard Sweet, who leads a group at Southwest that is studying code-sharing possibilities.

“;WestJet comes pretty close to the profile of an ideal code-sharing partner,”; Sweet said. He said both WestJet and Southwest are low-cost, efficient and emphasize customer service.

Volaris differs from WestJet - and Southwest - in some ways, including its fleet, which consists entirely of Airbus jets. But it is also a low-cost carrier that hopes to capitalize on consolidation taking place in the Mexican airline industry.

  With deals done for Canada and Mexico, Southwest will turn now to finding partners to serve Hawaii and the Caribbean.

Sweet and Kelly declined to discuss potential partners, but industry experts all have their own favorites.

At the top of the list for several was Hawaiian Airlines Inc., to replace service lost when ATA went under.

“;Hawaiian would be the obvious choice for Southwest,”; said Robert Mann, an independent airline consultant in Port Washington, N.Y. “;In the absence of Aloha”; - which failed this year - “;it's the dominant carrier in the islands.”;

Hawaiian spokesman Keoni Wagner declined to comment.

Mann said Southwest could team with AirTran or Spirit Airlines to sell seats to the Caribbean, although Spirit “;is even more bare-bones of an operation than Southwest by a long stretch.”;

Whoever it picks, Mann said, partners will insist that Southwest begin assigning passengers to seats to match the practice of other airlines. Southwest considered such a move last year but stuck with its open-seating plan in which those who check in first get the best seats.