Southwest Airlines (LUV) shares lost ground after the carrier reported profit was dragged down by higher fuel and labor costs, and reduced its planned capacity growth. Southwest also struck a tentative labor agreement with the union representing its flight attendants, making Southwest the first major airline to do so.

The biggest domestic U.S. carrier reported third quarter fiscal 2023 earnings sank 30.3% from a year ago to $193 million, or $0.38 per share, in line with estimates. Revenue rose 4.9% to $6.53 billion, slightly less than forecasts.

Southwest noted that fuel costs reached $2.78 per gallon, at the high end of its expectations becaus♊e of increasing oil prices. Costs for salaries, wages, and benefits jumped 17.5% to $2.73 billion🌼. 

ꦡ The airline indicated that it anticipates boosting capacity by 10% to 12% in the first quarter of 2024, down from its earlier outlook of a gain of 14% to 15%. Southwest indicated that the reduction was “to better match current demand trends.”

The tentative contract with Southwest’s 19,000 flight attendants came three months after members of the Transport Workers Union Local 556 rejected the previous offer. That proposal called for an immediate 8% ratification bonus and a 3% raise, as well as multiple other raises and bonuses over the life of the agreement. The old deal wi🐓th the union expired in October 2018.

Shares of Southwest Airlines were down 1.5% as of 12:15 p.m. ET on Thursday. They closed at a nine-and-a-half-year low on Wednesday.