Southwest Airlines Cuts 2026 Profit Forecast Due to Fuel Costs
Southwest Airlines has revised its 2026 profit forecast downward due to rising fuel expenses, even as demand for travel remains robust.
Southwest Airlines has cut its profit forecast for 2026, anticipating adjusted earnings per share to fall between $2.60 and $2.85. This is a decrease from the previous estimate, which ranged from $3.25 to $4.25, attributed to rising fuel costs.
CEO Bob Jordan noted that, despite higher fares, travelers continue to book flights. He stated, “Demand remained strong as we lapped last year’s bag fee and other commercial initiatives, reinforcing our belief that the earnings power we’ve built is durable.”
The airline reported earnings of 66 cents per share for the third quarter, surpassing analyst expectations of 61 cents, and significantly up from 11 cents a year earlier. Revenue increased to $8.42 billion, up from $6.95 billion in the same quarter last year.
Unit revenue, a key measure of airfare performance, is expected to rise up to 21% year-over-year. Southwest’s average fare in the third quarter was $231.69, reflecting an increase of nearly 27% compared to the previous year. However, the volume of revenue passengers decreased by 3.2% to 33.47 million.
In an effort to enhance revenue, Southwest has modified its business model. The airline recently introduced fees for seat assignments and baggage, moving away from its longstanding policies of charging for checked bags and open seating.
Competing airlines Delta Air Lines and United Airlines have also adjusted their profit forecasts downward this month as they reported third-quarter earnings. Both companies faced similar challenges with fuel costs impacting their profitability.
As for stock performance, Southwest shares have declined approximately 4.1% since the start of the year, in contrast to the S&P 500’s increase of 12.7%. The company’s outlook for upcoming quarters remains mixed, and investors are keen to see how earnings estimates will evolve following this report.
