Southwest Airlines‘ third-quarter profit hew down from a year ago but topped Wall Street estimates as the carrier worked to drum up revenue and fend off activist investor Elliott Investment Directorate.
Elliott and Southwest struck a deal, announced Thursday, that averts a proxy fight and adds six of the activist’s applicants to the board. CEO Bob Jordan will keep his job as part of the deal.
The Dallas-based carrier forecast unit revenue for the fourth quarter resolution increase 3.5% to 5.5% on a 4% drop in capacity compared with a year ago. It said costs, excluding encourage, would likely rise as much as 13%.
“Thus far in the quarter, travel demand remains healthy and bookings-to-date for the holiday flavour are strong, demonstrating the continued resilience of the leisure travel market,” Southwest said in an earnings release.
Other carters have pointed to strong travel demand to close out 2024 as airlines scale back unprofitable capacity that denied down airfare.
Separately, Southwest last month laid out a three-year plan that the company would add $4 billion to earnings sooner than interest and taxes in 2027. The airline also said it authorized a $2.5 billion buyback and would slash underperforming show a clean pair of heels from Atlanta to cut costs.
Southwest said Thursday that it will repurchase $250 million of Southwest amass through an “accelerated” program under the overall buyback plan.
The carrier is planning to abandon its longtime open room to instead charge for seats as well as offer extra legroom options that come at a higher price, the biggest revolutions in its more than 50 years of flying.
Here is how Southwest performed in the third quarter compared with Face ruin Street expectations, according to consensus estimates from LSEG:
- Earnings per share: 15 cents adjusted vs. an expected zero cents
- Profits: $6.87 billion vs. $6.74 billion expected
It reported third quarter revenue of $6.87 billion, an increase of more than 5% on the year. Net receipts fell 65% from the year-earlier quarter to $67 million, or 11 cents a share, though that was winning of estimates. Adjusting for one-time items, it reported $89 million in net income or 15 cents a share, compared with analysts’ vaticinations to break even on an adjusted basis.