Southwest Airlines Co. reported it nearly tripled its profit in the final quarter of the year as the company continues to soar on cheap fuel and the modernization of its fleet.

The No. 4 U.S. airline by traffic said its fuel and oil expense dropped 37% in the latest quarter. The average cost of fuel was $2.03 a gallon, compared with $2.62 in the period last year.

Southwest and its U.S. airline peers have reported strong financial results in recent quarters, the result of slower growth, less competition and cheaper fuel.

The airline estimates fuel costs in the current quarter will be about $1.70 a gallon, compared with $2 a gallon in first quarter last year.

Chief Executive Gary Kelly pointed to strong free cash flow of $1.1 billion in 2015, and said Southwest intends to repurchase an additional $500 million of stock under an accelerated share repurchase program, to be launched soon.

In the quarter ended December, Southwest's unit revenue—the amount it takes in per seat flown a mile—edged down 0.7% compared with the quarter a year ago. The metric is closely watched as a sign of demand and how well an airline is generating sales. Unit revenues have been declining across the industry because of relatively rapid expansions. Last month, the airline warned the key revenue metric could fall in the quarter, lowering its guidance to be flat to down 1% compared with the same period last year.

Capacity increased 8.3%, while load factor rose to 84.1% from 82% a year earlier. Traffic shot up 11.1%.

Overall, the company posted a profit of $536 million, or 82 cents a share, up from $190 million or 28 cents a share a year earlier. Excluding certain items, earnings on a per-share basis rose to 90 cents a share from 59 cents a year earlier.

Revenue climbed 7.5% to $4.98 billion.

Analysts surveyed by Thomson Reuters were looking for earnings of 90 cents a share on revenue of $5 billion.

Southwest's results followed Delta Air Lines Inc. reporting Tuesday it swung to a profit in the final quarter of the year, aided by a strong tailwind of sharply lower fuel costs.

Shares of Southwest, which have fallen 4.2% over the last three months, were inactive premarket.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

January 21, 2016 07:35 ET (12:35 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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