Southwest Profit Drops 1.5% as Labor Boosts Expenses

Southwest Airlines Co. (LUV), the biggest low-fare carrier, said fourth-quarter profit fell 1.5 percent amid higher labor costs.

Profit excluding some items was $65 million, or 9 cents a share, from $66 million, also 9 cents, on that basis a year earlier, the Dallas-based carrier said today in a statement. That exceeded the 8-cent average of 16 analysts’ estimates compiled by Bloomberg.

Southwest is contending with rising labor and jet fuel costs amid growing competition from larger carriers. The airline is adding or increasing fees to help boost annual revenue by about $100 million, in a departure from its stance of forgoing some charges that are standard for the industry.

“These solid earnings were achieved despite significant efforts and costs related to critical strategic initiatives,” Chief Executive Officer Gary Kelly said in the statement.

Labor costs rose 4.5 percent to $1.2 billion in the quarter, while fuel and oil advanced 0.7 percent to $1.51 billion.

Sales rose 1.6 percent in the quarter to $4.17 billion, less than the $4.2 billion average of 12 estimates. Traffic, measured in miles flown by paying passengers, fell 1.4 percent as overall expenses rose 3.1 percent.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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Jan. 24 (Bloomberg) -- Gary Kelly, chief executive officer of Southwest Airlines Co., talks about the company's outlook and marketing strategy. Southwest, the biggest low-fare carrier, said fourth-quarter profit fell 1.5 percent amid higher labor costs. Kelly speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)