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March 12 (Bloomberg) -- Southwest Airlines Co., the discount carrier that made free peanuts a symbol of no-frills flying, may start selling food to boost revenue as travel demand dwindles.

Food sales are “intriguing to us,” spokeswoman Beth Harbin said in an interview. Southwest, the largest low-fare carrier, doesn’t have a timetable for a decision, she said.

Charging for food would break with tradition at Dallas- based Southwest, underscoring its push to find $1.5 billion in new annual revenue from sources other than ticket sales by 2010. Southwest stuck with its free-snack policy as other large carriers offered free meals, then switched to selling food.

“It’s a good decision,” Hunter Keay, a Stifel Nicolaus & Co. analyst in Baltimore, said in an interview today. “Airlines are chasing every incremental dollar they can these days given the declining demand.” He rates Southwest as “hold.”

JetBlue Airways Corp., a low-cost carrier based in New York, already is testing the sale of light meals and snacks on some of its longer flights, spokeswoman Jenny Dervin said in an interview.

The airline, which now offers free snacks and no meals, expects to decide as soon as May whether to permanently adopt food sales, Dervin said. JetBlue hadn’t announced the program because it’s a trial, she said.

Southwest’s Shrinkage

Declining passenger traffic because of the recession is forcing Southwest to shrink seating capacity by 4 percent in 2009, snapping a 20-year expansion streak. Traffic measured in miles flown by paying passengers fell 6.2 percent in February for the sixth decline in the past eight months.

Questions such as whether an in-flight menu would be sandwiches and salads or an expanded snack lineup haven’t been resolved, Harbin said. In any scenario for onboard sales, Southwest would retain some free snacks, she said.

“They are in markets where they are competitively going to have to offer” food for purchase, said Michael Boyd, president of consulting firm Boyd Group in Evergreen, Colorado. “This is one reason they’re having trouble breaking into markets. You get on the competition and you can at least buy a stale sandwich.”

Southwest gained 14 cents, or 2.6 percent, to $5.59 at 4:02 p.m. in New York Stock Exchange composite trading. The shares have tumbled 52 percent in the past year.

Cocktails, Energy Drinks

The airline’s ads promote its lack of fees for services such as checking a bag or speaking to a reservations agent, which have become an industry standard. Its only charges for cabin service are for alcoholic beverages and an energy drink, Monster Lo-Carb.

Passengers now typically have a choice of peanuts or pretzels on trips shorter than 450 miles (724 kilometers). On flights of as much as 1,120 miles, the options are a cookie pack or crackers. A snack pack that includes cookies and crackers is provided on the longest flights.

Southwest served almost 90.8 million packages of peanuts and 9.9 million bags of pretzels in 2008.

Peanuts have long been part of Southwest’s promotion of its low-fare, bare-bones approach to travel. They were served in packets labeled “Love Bites” after Southwest started flights in 1971, in a nod to its home base at Dallas Love Field airport. Today, the employee blog is titled “Nuts About Southwest.”

Free meals, once a staple of U.S. air travel, have largely disappeared from coach cabins on domestic routes. Continental Airlines Inc., No. 4 in the U.S. by traffic, is the only one of the six biggest carriers that doesn’t charge for food.

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