updated 7/14/2005 11:06:01 AM ET 2005-07-14T15:06:01

Low-cost carrier Southwest Airlines Co. said Thursday that second-quarter profit rose 41 percent from a year ago, as fare increases helped offset a 25 percent rise in fuel costs per gallon.

Net income grew to $159 million, or 20 cents per share, in the three months ended June 30 from $113 million, or 14 cents per share, a year ago. Revenue rose 13.3 percent to $1.94 billion from $1.72 billion last year, despite a glut of airline capacity on the East Coast.

Results beat analysts’ expectations for earnings of 18 cents per share on revenue of $1.92 billion, according to a Thomson Financial survey.

Looking ahead, CEO Gary C. Kelly noted, “Although we remain well-hedged, our employees understand that we must be prepared for higher fuel costs, and they are working harder than ever to reduce our cost structure through increased productivity. Based on current cost trends, we expect third-quarter 2005 unit costs, excluding fuel, to be in line with second-quarter 2005 unit cost of 6.27 cents. Current jet fuel costs are higher than second quarter.”

The company said it ended the second quarter with $2.3 billion cash on hand, plus a fully available unsecured revolving credit line of $575 million.

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