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Southwest Airlines said on Wednesday that quarterly profit nearly doubled on big gains from its industry-leading fuel hedges.

While the leading US low-cost carrier uniquely benefited from a surge in oil prices, the carrier expressed a «cautious view» on the US economy that could sap travel demand. Its fuel hedges are also gradually unwinding, which will erode the company's advantage over rivals.

Southwest's fourth-quarter net profit rose to USD$111 million, compared with USD$57 million a year earlier, as its fuel hedging gain more than doubled.

Southwest's gain from its fuel hedging position was USD$300 million in the quarter, compared to USD$118 million in the year-ago period.

Excluding special items, including gains and losses related to its fuel hedges, Southwest's earnings fell 13 percent to USD$87 million.

Southwest was 90 percent hedged in the fourth quarter at about USD$51 a barrel. For the first quarter, the company is 75 percent covered also at about USD$51 a barrel -- still a sizable advantage compared to the current price of about USD$88 a barrel.

Fourth-quarter operating revenue rose 9.5 percent to USD$2.49 billion, helped by a 5.5 percent increase in fares and a 5.6 percent rise in capacity.

Operating expenses rose 12.6 percent, boosted by a 27 percent jump in fuel expenses.

In response to its eroding hedge position, Southwest is looking for new ways to boost revenue. The carrier, which last year launched Business Select fares, said it will begin testing in-flight Internet service this summer.

(Reuters)