Southwest AirlinesThird-quarter profits fell from a year ago but beat Wall Street estimates as the company worked to boost revenue and fend off activist investor Elliott Investment Management.
Elliott and Southwest reached an agreement, announced Thursday, to avoid a proxy fight and add six activist nominees to the board. CEO Bob Jordan will keep his job as part of the deal.
The Dallas-based carrier expected fourth-quarter unit revenue to increase 3.5% to 5.5% due to a 4% decrease in capacity compared to last year. Costs, excluding fuel, are likely to rise by as much as 13%, she said.
“So far this quarter, travel demand remains good and bookings so far for the holiday season are strong, demonstrating the continued resilience of the leisure travel market,” Southwest said in an earnings release.
Other airlines cited strong travel demand for the 2024 shutdown as airlines trim unprofitable capacity that has pushed down airfare prices.
Separately, Southwest last month laid out a three-year plan in which the company will add $4 billion to earnings before interest and taxes in 2027. The airline also said it has authorized a $2.5 billion buyback and will cut underperforming flights from Atlanta to cut costs.
Southwest said Thursday it will buy back $250 million of Southwest stock through an “accelerated” program under a comprehensive buyback plan.
The carrier plans to ditch its long-standing open seats to charge for seats instead as well as offer extra legroom options at a higher price, the biggest changes in more than 50 years of flying.
Here's how Southwest performed in the third quarter compared to Wall Street expectations, according to consensus estimates from LSEG:
Earnings per share: 15 cents adjusted vs. 0 cents expected Revenue: $6.87 billion vs. $6.74 billion expected
It reported third-quarter revenue of $6.87 billion, an increase of more than 5% year over year. Net income fell 65% from the prior quarter to $67 million, or 11 cents per share, although that was above estimates. Adjusting for one-time items, it reported $89 million in net income, or 15 cents per share, compared with analysts' expectations for breakeven on an adjusted basis.
