Earnings
Southwest posts record third-quarter revenue but cuts its 2026 profit forecast as fuel climbs to $3.92 a gallon
Fares and fees drove a 21% revenue jump, yet an $821 million rise in fuel costs pushed the airline to lower its full-year earnings range to $2.60–$2.85 a share.
HedgeWeekly News Desk ·
Southwest Airlines reported operating revenue of $8.42 billion for the third quarter, up 21.2% from a year earlier and a record for the period, according to results filed with the SEC on Wednesday. Adjusted earnings came to 66 cents a share, against 11 cents a year ago and the 58 cents analysts had expected, Reuters reported. Net income rose to $270 million from $54 million.
Revenue per available seat mile, the industry's main pricing gauge, climbed 21.6% to an all-time high of 18.55 cents even as capacity edged down 0.4%. Reuters said average fares rose almost 27%. Costs moved the other way: Southwest paid $3.92 a gallon for fuel including taxes, up from $2.40 and above the $3.70–$3.75 it had assumed, adding $821 million of expense that the company put at a $1.08 hit to earnings per share.
The carrier now expects 2026 adjusted earnings of $2.60 to $2.85 a share, down from $3.25 to $4.25, with the midpoint below the $2.85 analysts' average compiled by LSEG, Reuters reported. Fourth-quarter guidance calls for adjusted EPS of 55 to 80 cents, capacity growth of 3% to 4% and unit revenue up 19% to 21%, on an assumed fuel price of about $4.55 a gallon. Southwest made no buybacks in the quarter, leaving $450 million under its $2 billion authorization after $1.25 billion of repurchases earlier in the year.
Why it matters: Southwest is the latest US carrier to cut its full-year outlook on fuel, after Delta and United, according to FlightGlobal, and United has said it expects fuel to stay elevated through 2027. The guidance shows the sector's pricing power is real, but that fares are only partly offsetting a jet fuel bill that the company expects to rise again in the fourth quarter. Investors will get longer-term targets at a capital markets day in New York on March 2, 2027.