Southwest Airlines reported a $59 million profit in the first quarter, down 40 percent from the same period last year.
Higher fares helped boost the Dallas-based carrier's revenues up 2.3 percent to $4.08 billion in the first quarter even as the airline kept its capacity relatively flat, up only 0.6 percent.
"While we are cautious about April trends and the potential effects from government sequestration, recent bookings for May and June have been solid, and lower fuel prices have roughly offset the revenues weakness thus far in April," said Southwest chief executive Gary Kelly.
Fuel costs dropped 4.4 percent to $3.29 per gallon, compared to $3.44 per gallon in the first quarter of 2012. It expects fuel costs to continue to decline and be in the range of $3.00 to $3.05 per gallon in the second quarter.
Excluding one-time accounting charges, which included gains from its fuel hedging portfolio, Southwest's net income was $53 million, or 7 cents per share, beating Wall Street analysts' estimates of 2 cents per share, according to First Call.
The carrier also announced it will implement its new "no show" policy starting on fares purchased after May 10, for travel on or after September 13. If a passenger, who purchased a cheaper, nonrefundable ticket that Southwest calls Wanna Get Away and Ding fares, does not show up for their flight, they will lose the value of the unused part of their ticket itinerary and the rest of the reservation will be cancelled.
Southwest does not charge for the first two checked bags but has implemented several other fees recently including charging for early boarding at the gate.