Southwest Airlines responds to the "flight recovery wave": Q3 performance exceeds expectations, and holiday season revenue is expected to hit a record high
Southwest Airlines announced its third-quarter results, with revenue of $6.95 billion, a year-on-year increase of 1.1%, exceeding market expectations. Passenger revenue was $6.3 billion, and adjusted EPS was $0.11, while analysts had expected a loss of $0.032. Although profits decreased by 19% year-on-year, the company expects record revenue during the holiday season, echoing other airlines' optimistic forecasts for passenger volume growth
According to Zhitong Finance APP, Southwest Airlines (LUV.US) announced its third-quarter performance. According to LSEG data, the third-quarter revenue was $6.95 billion, a year-on-year increase of 1.1%, exceeding market expectations, with passenger revenue at $6.3 billion, a year-on-year increase of 1.0%; adjusted EPS was $0.11, while analysts expected a loss of $0.032 per share, thanks to the revenue generated from its new policy (charging passengers for baggage fees), and the company also stated that it expects operating income in the last few months of this year to reach a record high.
Southwest Airlines' profit in the third quarter decreased by more than 19% compared to the same period last year, falling from $67 million to $54 million. On a per-share basis, Southwest Airlines' earnings dropped from 11 cents in the same period last year to 10 cents. Excluding one-time items, Southwest Airlines reported a third-quarter profit of $58 million, or 11 cents per share.
From an operational perspective, in the third quarter, the cost per available seat mile (CASM-x) increased by 2.5% year-on-year to $0.122. This increase is attributed to enhanced cost control. Additionally, revenue per available seat mile (RASM) and passenger revenue per available seat mile (PRASM) remained basically flat compared to last year, at $0.153 and $0.139, respectively, while the airline's load factor decreased by 140 basis points to 79.8%.
Southwest Airlines' forecast for a significant increase in passenger volume during the holiday period echoes the optimistic outlook of other major U.S. airlines, such as Delta Air Lines (DAL.US) and United Airlines (UAL.US). These airlines noted that domestic passenger demand in the U.S. has begun to recover after a poor performance earlier in the year. In July, Southwest Airlines, along with other airlines, lowered its earnings expectations for 2025.
Previously, when Delta Air Lines announced its third-quarter results, it expected that market demand would remain strong over the next year. The CEO of United Airlines stated, "As the economy and demand continue to improve in the fourth quarter, the company has significant upside potential."
Meanwhile, American Airlines (AAL.US) also raised its earnings expectations for 2025 on Thursday, indicating that the capacity reductions across the industry following a demand decline earlier this year have begun to result in price increases.
Southwest Airlines is currently undergoing a large-scale transformation, which is distinctly different from the "one-size-fits-all" operating model that has been used for decades and has previously given it a competitive edge.
The airline has been working to enhance its competitiveness to better compete with rivals and increase sales. To this end, they have abandoned long-standing policies such as open seating arrangements and allowing each passenger to check in two pieces of luggage for free. The airline eliminated its free checked baggage policy in May and will begin charging for seats next year, a move that is expected to help achieve an additional $1.8 billion in EBITDA through this reform.
Looking ahead, Southwest Airlines reiterated its expectation for full-year EBIT to be between $600 million and $800 million. CEO Bob Jordan reaffirmed the company's full-year pre-tax profit expectations during the earnings report and predicted that the profit margin in the fourth quarter would see a "significant" increase Operating revenue in the third quarter did not reach $7 billion, but showed a slight increase compared to the same period last year. The company added that the corporate travel business improved compared to the second quarter, and loyalty-related revenue grew by 7%.
Other airlines indicated that leisure travel (which accounts for a significant portion of Southwest Airlines' revenue) is gradually recovering after hitting bottom earlier this year due to President Trump's push to restart global trade
