Written by StockNews.com

Southwest Airlines Co. (NYSE: LUV) early Thursday posted worse than expected first quarter earnings results and warned that its costs would increase substantially in Q2.

The Dallas-based airline operator reported Q1:

• earnings per share (EPS) of $0.61, which was $0.02 worse than the Wall Street consensus estimate of $0.63,
• revenues rose 1.2% from last year to $4.88 billion, also missing analysts’ view for $4.91 billion.

Looking ahead, LUV said it:

• expects positive year-over-year RASM in the second quarter based on current bookings and improved yield trends
• but that unit costs are expected to rise 6% from year-ago levels and
• expected that cost inflation to subside by the end of the fourth quarter.

The company commented via press release:

“We are on track to launch our new reservation system next month.

Our current revenue trends reinforce our goal to deliver year-over-year RASM growth this year, and we remain intensely focused on controlling costs.

With our encouraging outlook and continued expectation for healthy margins and cash flows, we remain steadfast in our commitment to return significant value to our Employees, Customers, and Shareholders.”

Southwest Airlines Co shares fell $2.54 (-4.46%) in premarket trading Thursday. Year-to-date, LUV had gained 14.44% prior to today’s report, versus a 7.12% rise in the benchmark S&P 500 index during the same period.

LUV currently has a StockNews.com POWR Rating of A (Strong Buy) and is ranked #1 of 19 stocks in the Airlines category.