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'Buying and flying' hit by shutdown: Southwest CEO

The 16-day federal government shutdown in October will be a headwind at Southwest Airlines in the final three months of the year, Chairman and CEO Gary Kelly told CNBC on Thursday—right after the carrier reported third-quarter earnings in-line with Wall Street expectations.

Southwest is still looking for an "increase in unit revenues in October, although not as high as it would have been had the government not shut down," Kelly said in a "Squawk Box" interview.

In the third quarter, Southwest earned 34 cents a share excluding one-time items on revenues of $4.5 billion. Both numbers matched expectations.

"Consumers were out there buying and flying," Kelly said. "We were having a grand time until the government shut down in October, but we're still looking at a very good fourth quarter."

(Read more: Earnings Central)

Southwest Airlines
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Southwest Airlines

Booking demand for the holidays looks "really strong" in November and December, he said: "We had two quarters in a row of very stable fuel prices. … We're [also] looking for another stable quarter in the fourth quarter."

While fuel prices are expected to be stable, they are still high, and Southwest is still adjusting fares accordingly, Kelly said. "Fares are up year-over-year probably 5 to 6 percent," he added.

But Kelly advised passengers to book early for the lowest ticket prices. "You'll get a great fare. We are the low-fare policeman in the country," he said.

As for the merger integration with Airtran, Kelly said, "We are right on track. Our plan was always to have Airtran fully integrated by the end of next year."

He also said plans to add international service at Southwest are on track in 2014.

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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