Southwest shares tumble more than 7 percent after warning that higher costs are coming

Key Points
  • Southwest shares were down more than 7 percent in early afternoon trading.
  • The Dallas-based carrier reported higher-than-expected profits, but warned about higher costs.
  • Southwest carries more passengers within the U.S. than any other airline.
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Shares of Southwest Airlines were off more than 7 percent in afternoon trading Thursday after the Dallas-based airline warned investors that its costs will rise into 2019.

Southwest's third-quarter profit that topped Wall Street's expectations wasn't enough to dissuade investors from selling the company's stock after Southwest said it expected costs could rise "at least" 3 percent next year, even when stripping out fuel and profit-sharing. 

Southwest said it expects fuel costs to range between $2.35 and $2.40 a gallon year next year, above its third-quarter fuel bill. It's also higher than what it originally thought it would be paying for fuel in the fourth quarter.

Even when stripping out fuel and some other expected costs, its operating expenses rose 7 percent in the third quarter from a year earlier and that this could rise as much as 1 percent in the last three months of 2018, the company said.

Southwest CEO on quarterly earnings and forecast for Q4