Southwest Falls Short as Costs Rise

By Imani Moise Features Dow Jones Newswires

Southwest Airlines Co. earnings fell in the most recent quarter as rising costs continued to outpace revenue growth.

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Shares fell 4.3% to $54.50 premarket as the nation's largest discount air carrier missed analysts' expectations for profit and sales.

Operating expenses increased 8.8% during the first quarter while revenue edged up 1.2%.

The Dallas-based company expects costs to rise about 6% in the current quarter. Chief Executive Gary Kelly said cost inflation should ease significantly in the back half of the year.

Labor costs at the airline are rising after Southwest signed new contracts with its pilots and flight attendants last year. Additionally, the company is contending with accelerated depreciation on a flock of older Boeing Co. 737s it intends to retire this fall.

Higher fuel prices and strong demand for lower fares have pressured airlines industrywide. Southwest also recorded a quarterly fuel-hedge loss of $106 million.

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In all for the first quarter, Southwest reported a profit of $351 million, or 57 cents per share, down from $513 million, or 80 cents per share, a year earlier. Excluding certain items, the airline earned 61 cents per share, down from 88 cents per share last year. Revenue rose 1.2% to $4.88 billion.

Analysts were looking for earnings of 63 cents per share on $4.92 billion in revenue.

Write to Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

April 27, 2017 08:18 ET (12:18 GMT)