FORT WORTH, Texas _ Lower fares and higher fuel costs caused Southwest Airlines fourth-quarter profits to slide.
The Dallas-based carrier reported net income of $522 million, down 2.6 percent from the same period in 2015. Revenues, however, increased 2 percent to $5.07 billion as the airline carried more passengers even though they paid lower average fares.
Passengers paid an average fare of $144.43, down 3.7 percent from the fourth quarter of 2016.
"We carried a record number of customers while improving our on-time performance, baggage delivery rate, and net promoter score," said Southwest's chief executive Gary Kelly in a statement. "As expected, our fourth-quarter unit costs increased, year over year, due to higher fuel costs, pay increases from amended union contracts, and additional depreciation expense associated with the accelerated retirement of our Boeing 737-300 aircraft."
The airline paid 19 percent more for fuel during the quarter, about $2.07 per gallon. Salaries and benefits also rose three percent to $1.7 billion for the fourth quarter.
Excluding one-time accounting items, Southwest said its net income was 75 cents per share, beating Wall Street estimates of 70 cents, according to First Call. Investors were also encouraged by the airline's announcement that it will add only 3.5 percent more capacity in 2017, down from its previous forecast of 4 percent.
Shares of Southwest jumped almost 7 percent Thursday morning, trading around $52.82 a share.
"The U.S. domestic market has seen improved demand and yields post the U.S. election, which is likely the reason the company is resuming growth in these markets," Cowen and Co. analyst Helane Becker wrote in a research note. "It is unclear which international markets are the cause for the decision to slow growth this year (our guess is Cuba)."
For the full year, Southwest's net income rose 2.9 percent to $2.24 billion while revenues increased 3.1 percent to $20.4 billion.
