DALLAS (AP) — Southwest Airlines said second-quarter earnings dropped 10% to $683 million as labor costs soared, offsetting record revenue at the start of the peak summer travel season.
The airline's shares slumped 6% before the opening bell Thursday.
Southwest's results, which were aided by lower fuel prices, beat Wall Street expectations. The company predicted record revenue and another profit in the third quarter, but warned of even stronger cost pressure.
Southwest is locked in drawn-out negotiations with pilots and flight attendants, who have not received pay raises in several years. Unions are aiming to match higher wages won by counterparts at other major U.S. airlines.
Southwest's profit fell from $760 million a year earlier. Excluding special items, per-share earnings were $1.09, beating the analyst consensus forecast of 99 cents per share, according to a FactSet survey.
Revenue rose 5% to a quarterly record of $7.04 billion, topping the $6.31 billion prediction of analysts.
Southwest's labor costs rose 25.5% from a year earlier, an increase of more than $500 million, and the airline said third-quarter non-fuel costs would rise by 3.5% to 6.5% for each seat flown one mile, mostly in anticipation of higher wages.
The Dallas-based airline spent 14% less on fuel than a year earlier, a savings of more than $200 million, because of lower prices.
