Southwest Airlines (LUV) Q3 2024 Earnings

Southwest AirlinesThird-quarter earnings fell from a year earlier but beat Wall Street estimates as the airline worked to boost revenue and fend off activist investor Elliott Investment Management.

Elliott and Southwest reached a deal, announced Thursday, that avoids a proxy fight and adds six of the activist’s nominees to the board. CEO Bob Jordan will retain his position as part of the deal.

The Dallas-based airline’s forecast unit revenue for the fourth quarter would increase between 3.5% and 5.5% with a 4% drop in capacity compared to a year ago. He said costs, excluding fuel, would likely rise by up to 13%.

“So far this quarter, travel demand remains healthy and year-to-date bookings for the holiday season are strong, demonstrating the continued resilience of the leisure travel market,” Southwest said in an earnings release.

Other airlines have signaled strong travel demand to close out 2024, as airlines reduce unprofitable capacity that drove down airfares.

Separately, Southwest last month unveiled a three-year plan under which the company would add $4 billion to earnings before interest and taxes in 2027. The airline also said it authorized a $2.5 billion buyback and would cut flights low-performing companies from Atlanta to reduce costs.

Southwest said Thursday it will buy back $250 million in Southwest stock through an “accelerated” program within the overall buyback plan.

The airline plans to abandon its long-standing open seating offering to charge for seats and offer extra legroom options at a higher price, the biggest changes in its more than 50 years of flying.

Here’s how Southwest performed in the third quarter compared to Wall Street expectations, according to LSEG consensus estimates:

• Earnings per share: 15 cents adjusted vs. zero cents expected
• Revenue: $6.87 billion vs. $6.74 billion expected

It reported third-quarter revenue of $6.87 billion, up more than 5% year over year. Net income fell 65% from the year-ago 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’ forecasts of breaking even on an adjusted basis.