Southwest Airlines cut its 2026 profit forecast as rising fuel costs hit the carrier. The airline now expects earnings of $2.60 to $2.85 per share. While third-quarter revenue hit a record $8.4 billion, high fuel prices remain a challenge. CEO Bob Jordan said, "With the transformation complete, our efforts shifted."
The Dallas-based carrier expects adjusted earnings of $2.60 to $2.85 per share in 2026, down from its earlier forecast of $3.25 to $4.25. The midpoint of the new range is below analysts' average estimate of $2.85 per share, according to data compiled by LSEG.
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Southwest also forecast fourth-quarter earnings below Wall Street expectations, underscoring the challenge facing US airlines as rising fuel costs eat into revenue from sharply higher airfares.
The carrier, once known for its free checked bags and open seating, has been overhauling its business to attract higher-spending travelers and generate more revenue through new products and fees.
Southwest's results offer an early test of those efforts. The airline is collecting substantially more revenue even as it carries fewer travelers.
The fuel shock, however, is making it harder to gauge how much of those gains will translate into profit.
Southwest's average passenger fare jumped nearly 27% in the third quarter, helping lift revenue to a third-quarter record of $8.4 billion. Southwest also reported higher adjusted operating margin despite sharply higher fuel costs.
"With the transformation complete, our efforts have shifted to optimizing the business," CEO Bob Jordan said in a statement, adding that demand remained strong in the fourth quarter.
Southwest's fuel bill rose $821 million from a year earlier, and the carrier expects jet fuel prices to increase further in the final three months of the year.
The company reported third-quarter adjusted earnings of 66 cents per share, above analysts' expectations of 58 cents and up from 11 cents a year earlier.
HIGHER FARES, FUEL PRESSURE
Southwest's outlook provides further evidence that higher airfares have not fully insulated US airlines from the fuel shock stemming from the Iran war.
Southwest plans to increase capacity by 3% to 4% in the fourth quarter, after slightly reducing flying in the September quarter.
It will outline its longer-term financial targets at an investor event in March.
The carrier will discuss its financial results with analysts and investors on Thursday morning.
Recasts first paragraph, adds details from earnings release throughout
Reporting by Rajesh Kumar Singh in Chicago and Nandan Mandayam in Bengaluru; Editing by Diti Pujara and Rod Nickel
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Rajesh Kumar Singh is the U.S. Aviation Correspondent at Reuters, based in Chicago, where he reports on airlines, aircraft manufacturers, and regulatory developments that shape the global aviation industry. Prior to this role, he covered U.S. manufacturing and trade policy, including the U.S.–China trade wars, where his work delved into the disruption facing American businesses and the strategic responses of major corporations. He began his career with Reuters in India, where he reported on a wide range of issues covering the country's economic complexities—from its recovery after the global financial crisis to the challenges of inflation and governance.