Southwest Airlines Cuts Profit Forecast After Q3 Results

Southwest Airlines cut its profit forecast on Oct. 21, 2026, citing rising fuel costs despite posting record third-quarter operating revenue, beating adjusted earnings expectations, and expanding margins year over year.

Record Quarter and Rising Fuel Costs

For the quarter ended Sept. 30, 2026, Southwest reported adjusted diluted earnings per share of $0.66, up from $0.11 a year earlier and above analyst estimates of about $0.58. Operating revenue reached a record $8.42 billion, a 21.2% increase year over year. Unit revenue, or revenue per available seat mile, rose 21.6%, while passenger revenue and yield also set company records. Adjusted operating margin stood at 5.4%.

Fuel expenses climbed by $821 million year over year to roughly $2.15 billion, with an average price of $3.92 per gallon. Southwest characterized this as an approximately $1.08-per-share headwind to adjusted earnings. Management attributed the revenue strength to strong demand, higher fares, and additional fees, including comparisons with the prior year’s bag fee and other commercial initiatives, according to the company’s Oct. 21 press release.

GAAP net income was $270 million, or $0.55 per diluted share, while adjusted net income totaled $328 million.

Guidance Reduction and Outlook

Southwest lowered its full-year 2026 adjusted earnings-per-share guidance to a range of $2.60 to $2.85 from a prior range of $3.25 to $4.25, according to its Oct. 21 Form 8-K filing. Fourth-quarter adjusted EPS is forecast between $0.55 and $0.80, below the reported consensus estimate of $0.82.

The company expects fourth-quarter unit revenue to rise about 19% to 21% year over year. The guidance assumes fourth-quarter fuel costs of roughly $4.55 per gallon, up from the third-quarter average of $3.92. Southwest also announced a Capital Markets Day scheduled for March 2, 2027, in New York.

Liquidity, Fleet, and New Amenities

Southwest ended the quarter with $5.6 billion in liquidity and returned $176 million to shareholders through dividends. The airline expects 67 deliveries of Boeing 737-8 and 737-7 aircraft and approximately 60 retirements in 2026. Full-year capacity growth is projected at about 1.2%.

The company also announced the Southwest Icon Lounge network, with the first guests expected in 2027.