Southwest earnings fall on higher fuel costs

NEW YORK (Reuters) - Southwest Airlines Co (LUV.N), the leading U.S. discount carrier, said on Wednesday that quarterly earnings fell 16.5 percent on higher fuel costs and sluggish demand.

Southwest, which recently trimmed its expansion plans to adjust to the tougher market, said second-quarter net profit fell to $278 million, or 36 cents per share, from $333 million, or 40 cents per share, a year earlier.

Excluding costs and proceeds related to the company's fuel hedging program, earnings fell to 25 cents per share, beating Wall Street expectations of 22 cents, according to Reuters Estimates.

In the second quarter, Southwest booked gains of $173 million from its fuel hedging program, which is gradually unwinding, reducing its fuel cost advantage over other carriers.

Operating revenue rose 5.5 percent to $2.58 billion, boosted by more flights and higher fares.

Southwest shares, which have traded between $14.03 and $18.20 over the last 12 months, are essentially flat from where they were a year ago.

(Reporting by Chris Reiter)