Southwest Airlines third-quarter net income rises to $270 million on record revenue
The company said unit revenues rose 21.6% to an all-time record, and it forecast fourth-quarter adjusted EPS of $0.55 to $0.80.
Key takeaways
- Southwest Airlines Co. (LUV) reported third-quarter 2026 net income of $270 million, or $0.55 per diluted share, on Oct. 21. Operating revenues rose 21.2% to $8.4 billion. The company expects fourth-quarter adjusted EPS of $0.55 to $0.80 and full-year 2026 adjusted EPS of $2.60 to $2.85.
Southwest Airlines Co. (LUV) reported third-quarter 2026 net income of $270 million, or $0.55 per diluted share, compared with $54 million, or $0.10 per share, a year earlier, the company said Wednesday in a regulatory filing.
Operating revenues rose 21.2% to $8.4 billion from $6.9 billion a year earlier. The total was a third-quarter record for the company.
Adjusted net income, which excludes special items, was $328 million, or $0.66 per diluted share, against $58 million, or $0.11, a year earlier.
Here's how the company did:
- Net income: $270 million, or $0.55 per diluted share, vs. $54 million, or $0.10, a year earlier
- Adjusted net income: $328 million, or $0.66 per diluted share, vs. $58 million, or $0.11 a year earlier
- Revenue: $8.4 billion vs. $6.9 billion a year earlier
- Operating margin: 4.5%, up 4.0 points from a year earlier
- Adjusted operating margin: 5.4%, up 4.8 points from a year earlier
- Operating expenses: $8.0 billion vs. $6.9 billion a year earlier
Unit revenues, or operating revenue per available seat mile, rose 21.6% to 18.55 cents, an all-time record for the company. The company said the figure exceeded its prior guidance.
Fuel costs weighed on results. Aircraft fuel and related taxes rose $821 million from a year earlier, to $2.2 billion.
The company paid $3.92 per gallon in the quarter, above its prior assumption of $3.70 to $3.75 per gallon, and $2.40 a year earlier. It said the higher fuel cost was a $1.08 headwind to adjusted EPS.
"Customers are responding to the enhanced Southwest offering, and it shows in our results," Southwest Airlines President & Chief Executive Officer Bob Jordan said.
"With the transformation complete, our efforts have shifted to optimizing the business and delivering the next set of Customer Experience enhancements," Jordan said.
Passenger revenue was $7.8 billion, up 22.8% from a year earlier. The average passenger fare rose 26.9% to $231.69, and the company said its passenger yield was the highest in its history.
Operating expenses rose 16.3% to $8.0 billion. Excluding special items, expenses rose 15.4% to $8.0 billion.
CASM-X, the company's unit cost measure that excludes fuel, special items and profit sharing, rose 3.8% from a year earlier.
The company booked $30 million in severance and related costs from corporate workforce reductions, and a $30 million impairment of long-lived assets. Active full-time equivalent employees totaled 73,092, up 1.2% from 72,223.
Capacity, measured in available seat miles, fell 0.4% from a year earlier. The company received 20 Boeing 737-8 aircraft and retired 20, ending the quarter with 803 aircraft.
The company booked a $214 million gain on aircraft sales, including $96 million from retiring aircraft and engine sales and $118 million from sale-leaseback transactions.
The company's guidance is based on the forward fuel curve as of Oct. 15, 2026, and assumes the current fare environment and demand trends remain broadly intact. The outlook is as follows.
| Item | Forecast |
|---|---|
| Fourth-quarter adjusted EPS | $0.55 to $0.80 |
| Fourth-quarter capacity, year over year | 3% to 4% |
| Fourth-quarter RASM, year over year | 19% to 21% |
| Fourth-quarter CASM-X, year over year | 4.0% to 4.5% |
| Full-year 2026 adjusted EPS | $2.60 to $2.85 |
The company expects fourth-quarter fuel of about $4.55 per gallon. Full-year capacity growth is now expected at about 1.2%, versus last updated guidance of about 1.5%.
The company expects 2026 net capital spending of $2.5 billion to $2.75 billion. It also expects 67 Boeing 737-8 and 737-7 deliveries this year and plans to retire about 60 aircraft.
The company ended the quarter with $5.6 billion in liquidity, made up of $3.6 billion in cash and a $2.0 billion revolving credit line. Gross leverage, a non-GAAP ratio that counts operating lease liabilities as debt, was 1.9x.
The company paid $176 million in dividends during the quarter. It has $450 million remaining under its $2.0 billion share repurchase authorization.
Southwest will hold a Capital Markets Day in New York City on March 2, 2027, where it plans to share a multi-year financial framework and the targets it is managing toward.
The company said it plans to launch the Southwest Icon Lounge network, its first airport lounges, with first guests expected in 2027. It also added TAP Air Portugal and LOT Polish Airlines as its tenth and eleventh airline partners.
For the first nine months, operating revenues were $24.1 billion, up 16.9%, and net income was $730 million, or $1.47 per diluted share, compared with $118 million, or $0.21, a year earlier. The nine-month figures include a $285 million breakage revenue adjustment tied to non-expiring flight credits, which the company excludes from adjusted results.
Southwest will discuss the results on a conference call at 10:00 a.m. Eastern Time on Oct. 22.