Record revenues, solid earnings take the sting out of Southwest’s failing battle against expenses

Southwest Airlines got a solid boost from holiday travel, which sent quarterly profit up to $261 million, significantly better than the $252 million loss from the same period last year. Adjusted earnings per share of $0.56 were also better than the $0.47 figure analysts were looking for. Its revenues rose to a record $6.93 billion, though these were a little shy of expectations.

But the airline also warned that its costs have been spiking, and they’re about to climb even more.

Southwest, which reported earnings Thursday morning, said that nonfuel costs could see a hike of up to 9% in Q1, following an 11% jump late last year. Wall Street was expecting costs to grow closer to 6%. In its most recent quarter, Southwest’s fuel expenses plunged about 26% in the latest quarter.

Costs going up isn’t ideal for an airline that, to all appearances, looked to be in the middle of a substantial cost-cutting spree. Earlier this month, Southwest said it’s freezing corporate hiring and promotions. Last year, the airline stopped service to four airports and cut more than 300 pilot positions. In the second half of this year, Southwest plans to ditch its open-seating policy and introduce premium options.

Insufficient progress on cost controls have bedeviled airlines this earnings season. Look no further than JetBlue, which lost nearly a quarter of its value after its outlook for expenses was ahead of analysts’ estimates.