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Higher fares can’t save Southwest’s Q4 profit

The airline's revenue rose slightly, however, as the average fare climbed almost $8 higher than a year ago.

Southwest also said that bookings for the first three months of 2013 look strong. It said that based on bookings and ticket prices so far, a key revenue measure should rise by 2 per cent to 3 per cent in January compared with the same month last year.

Southwest, the nation's fourth-biggest airline, said Thursday that net income was $78 million, or 11 cents per share. That's down from $152 million, or 20 cents per share, a year earlier.

Excluding items such as fuel contracts, the net income would have been 9 cents per share, beating the 7-cents-per-share forecast among analysts surveyed by FactSet.

Revenue ticked up 1.6 per cent to $4.17 billion but fell short of the $4.20 billion that analysts expected.

Expenses rose faster, however, by 3.1 per cent. That includes a 4.5 per cent increase in labour costs and a 13 per cent jump in maintenance as the airline continued to overhaul the cabins inside many of its planes.

Spending on fuel, the airline's biggest expense, rose a modest 0.7 per cent. Southwest estimated that its fuel bill in the first quarter, which ends March 31, will drop to $3.30 per gallon from $3.44 in the first quarter of 2012, which CEO Gary Kelly called "an encouraging trend.''

The average fourth-quarter fare on Southwest and its AirTran Airways subsidiary was $148.02, up 5.4 per cent from $140.38 a year earlier.

Passengers flew 1.4 per cent fewer miles on Southwest than a year earlier, and planes were less full — 79.6 per cent occupancy, down from 80.5 per cent.

For all of 2012, Southwest earned $421 million, up from $178 million the year before and its 40th straight profitable year, which Kelly said was "a remarkable feat and a record unmatched in the airline industry.''