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Southwest's 4Q profit slips on higher costs

Published on NewsOK Modified: January 24, 2013 at 3:31 pm •  Published: January 24, 2013

DALLAS (AP) — Southwest Airlines Co. said Thursday that fourth-quarter earnings fell by nearly half as costs rose for fuel, labor and maintenance.

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

Southwest 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 between 2 and 3 percent in January compared with the same month last year.

Although the rate of airfare increases has slowed since 2011, fares are still going up partly because airlines are limiting the number of flights, making seats more scarce. Southwest expects the industry as a whole to run about 1 to 2 percent fewer flights in early 2013 than in the same period last year.

Southwest, the nation's fourth-biggest airline, will consider cramming more flights into the busier middle of the day and reducing daily flights on some routes that aren't profitable enough.

"I hope what we have less of is eliminating nonstop service between city pairs but ... that is a possibility," said CEO Gary Kelly. He didn't name the routes that could be affected.

On a conference call, analysts pressed Kelly on whether he might reverse Southwest's "bags-fly-free" policy. Kelly said the policy helps his airline draw customers away from competitors — more than offsetting money lost by not charging fees — and that charging for bags now would damage the company's image.

"Customers hate bag fees, so I think by definition there would be an impact to the brand," he said.

Southwest reported fourth-quarter net income of $78 million, or 11 cents per share. That's down from $152 million, or 20 cents per share, a year earlier.

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