Southwest Airlines has cut its 2026 profit forecast as higher fuel prices weigh on the carrier, despite stronger-than-expected third-quarter results and continued demand for travel.
The US airline now expects adjusted earnings of between $2.60 and $2.85 a share this year, down from its July forecast of $3.25 to $4.25 a share. It is the third major US airline this month to reduce its profit outlook.
Southwest reported adjusted third-quarter earnings of 66 cents a share, ahead of the 58 cents expected by analysts. Revenue rose by more than 21% to $8.42 billion, beating the $8.25 billion consensus estimate.
Chief executive Bob Jordan said bookings remained resilient, even as fares increased. “Demand remained strong as we lapped last year’s bag fee and other commercial initiatives, reinforcing our belief that the earnings power we’ve built is durable, even with significantly higher fuel costs,” he said.
The airline forecast adjusted fourth-quarter earnings of between 55 cents and 80 cents a share. It expects revenue per available seat mile, a measure of airfare performance, to rise by as much as 21% year on year, while capacity is expected to increase by up to 4%.
Southwest’s average passenger fare reached $231.69 in the third quarter, almost 27% higher than a year earlier. The figure does not include additional fees, according to a spokesman, while the number of revenue passengers fell by 3.2% to 33.47 million.
Jordan told CNBC that demand was strong across all regions and products, including during the holiday period. “The consumer is incredibly strong and we do not see that abating,” he said. “We’re seeing strength in both the holiday period and the non-holiday period.”
Southwest has been changing its long-standing business model in an effort to increase revenue. It has ended policies including two free checked bags for each passenger and open seating, and has begun charging for many seat assignments and adding baggage fees.
Net income for the third quarter was $270 million, or 55 cents a share, compared with $54 million, or 10 cents a share, in the same period last year. The adjusted result excluded one-off items.
Delta Air Lines and United Airlines have also lowered their profit forecasts for the rest of the year after reporting third-quarter results. Both airlines missed expectations for revenue and earnings.
