Southwest Airlines said Thursday that it faces higher costs in 2025 as inflation persists, but it managed to swing to a fourth-quarter profit due to a boost from lower fuel prices.

The airline also forecast better-than-expected unit revenue (RASM), a proxy for pricing power, for the first quarter. Airlines across the U.S. have cut seating to boost fares after a surplus capacity, introduced last summer in anticipation of a demand surge, forced airlines to offer discounts and sacrifice margins.

Southwest Airlines Co. reported a quarterly profit higher than analysts expected as leisure travel over the winter holidays and ticket prices both rose in the final three months of 2024.

Southwest Airlines (LVU) put in a solid performance in the fourth quarter and forecast above-consensus revenue per available seat mile for the current quarter as the carrier absorbed surplus capacity across the industry with greater aircraft efficiency and higher airfares.