Southwest Airlines Co. is making money even with higher fuel prices, thanks to full planes and rising fares.

The airline’s fourth-quarter net income rose 16 percent to $152 million and revenue jumped to $4.11 billion. Southwest expects strong revenue in the first quarter too, based on passenger-booking trends, says CEO Gary C. Kelly.

Southwest carries more passengers in the U.S. than any airline, and it’s the first to report fourth-quarter results. Its profit and other numbers indicate that travel demand is holding up despite the weak economy — Southwest filled more than 80 percent of its seats, an unusually high percentage.

The average passenger on Southwest paid a fare of $140.18 in the fourth quarter, a 7 percent increase from a year earlier.

That helped the Dallas-based airline offset rising fuel costs. Southwest paid 34 percent more at the pump to fill its fleet of Boeing 737s. Fuel averaged $3.29 per gallon, up from $2.46 a year earlier, and Southwest’s fuel tab for the final three months of the year came to $1.49 billion.

And there’s no relief in sight. Southwest expects to spend $3.35 per gallon in the first quarter, up from $2.95 per gallon in same period last year.

The increase in Southwest’s fourth-quarter profit came entirely from gains on fuel-hedging contracts. Without those one-time gains, Southwest would have earned $66 million, or 9 cents per share, down from adjusted income of $115 million, or 15 cents per share, a year earlier.

Still, the results beat analysts’ prediction of 8 cents per share, according to FactSet.

With the addition of AirTran Airways, which Southwest bought last year, revenue jumped to $4.11 billion, just below analysts’ forecast of $4.12 billion.

Southwest paid $1.4 billion for AirTran, which allowed it to expand into Atlanta, Mexico and the Caribbean, but it said Thursday that the cost of combining the two airlines will end up at $500 million. The company said it saved $80 million in overlapping expenses in 2011 and expects the annual savings to go much higher.

Shares of Southwest rose 13 cents to $9.15 in early trade.

United Continental Holdings Inc., Delta Air Lines Inc. and US Airways Group Inc. report results next week, and analysts expect all three will show operating profits for the usually weak fourth quarter. They have helped themselves by limiting the number of flights, which has given them power to raise prices.

SOURCE: AP