U.S. budget carrier Southwest Airlines' fourth-quarter profit surpassed Wall Street estimates on Thursday, helped by robust travel demand and improved airfares.

Southwest Airlines Co. warned that costs will climb faster than expected as it grapples with heavy labor expenses, undercutting gains from strong demand for leisure travel.

Southwest Airlines said Thursday it swung to a fourth-quarter profit of 42 cents a share from a year-ago loss of 42 cents a share, as overall expenses fell on lower fuel costs. Southwest’s stock fell 2.