The airline likes to advertise that it offers low fares, but lately it's been raising prices right along with all the other airlines to boost revenue.
The airline industry is on a rebound after getting hammered by falling demand during the recession. But airline executives are spooked by rising fuel prices that could undercut profit.
Southwest's fuel bill jumped 18 percent in the fourth quarter. Dallas-based Southwest joins Delta in reporting a fourth-quarter profit while American Airlines' parent AMR Corp. lost money. Fourth-quarter net income equaled 18 cents per share, compared to a gain of $116 million, or 16 cents per share, in the same period last year.
Excluding charges such as costs related to its pending purchase of AirTran Airways, Southwest said adjusted net income was 15 cents per share. On that basis, analysts expected 16 cents per share, according to FactSet.
Revenue rose to $3.11 billion from $2.71 billion a year ago. Analysts were looking for $3.07 billion.
Southwest, based in Dallas, topped Wall Street's revenue expectations thanks to a 4.4 percent increase in traffic -- miles flown by paying passengers -- and a 3.5 percent bump in the amount travelers paid per mile, which closely tracks fares.
In the past, Southwest often stood pat while other airlines raised fares -- it saw a competitive edge to underpricing rivals. But twice this month, the airline went along with fare increases at the other airlines.
With oil trading above $90 a barrel, the airlines say they need to raise fares to cover rising fuel costs. Southwest spent $3.6 billion on fuel last year, an increase of nearly $600 million over 2009.
For 2010, the airline made $459 million on $12.10 billion in revenue, compared with net income of $99 million and $10.35 billion in revenue during 2009.
In premarket trading, Southwest shares rose 25 cents, or almost 2 percent, to $13.08.