Southwest Airlines has adjusted its profit outlook for 2026, becoming the third major U.S. airline to do so this month owing to rising fuel prices. CEO Bob Jordan highlighted that despite the increase in fares, traveler demand remains strong. The airline now anticipates earning between $2.60 and $2.85 per share for the year, a decrease from the previous forecast of $3.25 to $4.25.
In the third quarter, Southwest reported earnings of 66 cents per share, surpassing Wall Street expectations of 58 cents. Adjusted revenue reached $8.42 billion, exceeding the anticipated $8.25 billion. For the fourth quarter, the airline forecasts adjusted earnings per share between 55 cents and 80 cents, predicting a rise in unit revenue, a key indicator of airfare pricing, of up to 21% compared to the previous year. Capacity growth is expected to be around 4%.
Jordan noted the robustness of demand, attributing it to the airline’s strategies from previous years, including the introduction of fees for bags and seat assignments. These measures have been part of a significant shift in the airline’s long-standing business model, which traditionally offered two free checked bags and open seating.
Southwest’s net income for the third quarter was reported at $270 million, or 55 cents per share, compared to $54 million, or 10 cents per share, in the same period last year. Revenue increased by over 21% year-over-year. Other major airlines, including Delta Air Lines and United Airlines, have also revised their profit forecasts downward following similar earnings reports.
Why this story matters:
- Reflects the broader impact of rising fuel costs on airline profitability.
Key takeaway:
- Despite fare increases, consumer demand for travel remains robust.
Opposing viewpoint:
- Concerns arise regarding the sustainability of Southwest’s revised business model amid increasing charges for basic services.
