Southwest Airlines‘ third-quarter profit fell from a yr ago but topped Wall Street estimates because the carrier worked to drum up revenue and fend off activist investor Elliott Investment Management.
Elliott and Southwest struck a deal, announced Thursday, that averts a proxy fight and adds six of the activist’s candidates to the board. CEO Bob Jordan will keep his job as a part of the deal.
The Dallas-based carrier forecast unit revenue for the fourth quarter would increase 3.5% to five.5% on a 4% drop in capability compared with a yr ago. It said costs, excluding fuel, would likely rise as much as 13%.
“So far within the quarter, travel demand stays healthy and bookings-to-date for the vacation season are strong, demonstrating the continued resilience of the leisure travel market,” Southwest said in an earnings release.
Other carriers have pointed to strong travel demand to shut out 2024 as airlines reduce unprofitable capability that pushed down airfare.
Individually, Southwest last month laid out a three-year plan that the corporate would add $4 billion to earnings before interest and taxes in 2027. The airline also said it authorized a $2.5 billion buyback and would slash underperforming flights from Atlanta to chop costs.
Southwest said Thursday that it would repurchase $250 million of Southwest stock through an “accelerated” program under the general buyback plan.
The carrier is planning to desert its longtime open seating to as an alternative charge for seats in addition to offer extra legroom options that come at a better price, the largest changes in its greater than 50 years of flying.
Here is how Southwest performed within the third quarter compared with Wall Street expectations, in keeping with consensus estimates from LSEG:
- Earnings per share: 15 cents adjusted vs. an expected zero cents
- Revenue: $6.87 billion vs. $6.74 billion expected
It reported third quarter revenue of $6.87 billion, a rise of greater than 5% on the yr. Net income fell 65% from the year-earlier quarter to $67 million, or 11 cents a share, though that was ahead of estimates. Adjusting for one-time items, it reported $89 million in net income or 15 cents a share, compared with analysts’ forecasts to interrupt even on an adjusted basis.
