Oct 21 (Reuters) – Southwest Airlines posted better-than-expected third-quarter adjusted earnings on Wednesday, driven by higher fares and additional fees, but forecast fourth-quarter profit below expectations.
Airlines in the US have so far relied on a swathe of fare hikes, checked baggage fees and capacity controls to boost revenues, as they contend with volatile fuel prices that have made it harder for airlines to forecast costs and earnings.
The Dallas-based carrier reported an adjusted profit of 66 cents per share in the September quarter, up from 11 cents a year earlier and above Wall Street expectations of 58 cents, according to data compiled by LSEG.
Shares of the airline were up 1% in extended trading.
However, it slashed its full-year adjusted profit forecast to $2.60 to $2.85 per share, from its earlier range of $3.25 to $4.25 per share. Analysts on average estimate an adjusted profit of $2.85 per share.
For the fourth quarter, Southwest expects profit of 55 cents to 80 cents per share, also below estimates of an 82 cents profit.
Jet fuel prices have scaled their spring highs in recent months as the Middle East conflict shows no sign of abating. Meanwhile, oil is at a five-month high amid supply fears due to Houthi attacks on Saudi infrastructure.
The spike in crude prices has prompted airlines to scale back year-end and 2027 capacity growth, as they brace for higher-for-longer fuel expenses.
Rival Delta warned that airlines may need to curb flight growth next year to sustain higher fees, while United Airlines has said it expects fuel prices to remain elevated throughout 2027.
Southwest expects fuel prices to average at $4.55 per gallon during the fourth quarter, based on the forward curve as of October 15.
(Reporting by Nandan Mandayam in Bengaluru; Editing by Diti Pujara)
Comments