Southwest Airlines said Wednesday that fuel ran above its projections, leading it to cut its full-year adjusted earnings forecast to a range of $2.60 to $2.85 a share.
The new range compares with a forecast of $3.25 to $4.25 a share issued in July. For the fourth quarter, Southwest expects adjusted earnings of 55 cents to 80 cents a share.
Fuel cost $3.92 a gallon in the third quarter, above the company's assumption of $3.70 to $3.75 and up from $2.40 a year earlier. Fuel expense rose by $821 million from the third quarter of 2025, a $1.08 headwind to adjusted earnings per share. Southwest assumes fuel will cost about $4.55 a gallon in the fourth quarter, based on the forward fuel curve as of Oct. 15.
Third-quarter net income reached $270 million, or 55 cents a share, up from $54 million, or 10 cents a share, in the year-earlier period. Adjusted earnings were 66 cents a share. Revenue rose 21.2% to $8.4 billion, a third-quarter record for the company. Operating expenses increased 16.3% to $8.0 billion.
The average passenger fare came to $231.69, a 26.9% increase over the third quarter of 2025. Revenue passengers numbered 33.5 million, a 3.2% decline. Southwest expects fourth-quarter unit revenue to rise 19% to 21% from a year earlier.
"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, even with significantly higher fuel costs," Southwest CEO Bob Jordan said in a statement, according to CNBC.
Southwest expects full-year capacity growth of about 1.2%, versus about 1.5% in its last guidance. The company said its guidance is based on the forward fuel curve and assumes the current fare environment and demand trends remain broadly intact.
Southwest is the third major U.S. carrier this month to lower its 2026 earnings outlook, according to CNBC. Delta Air Lines and United Airlines likewise reduced their guidance, doing so alongside their reports on the July-September period. United CEO Scott Kirby said carriers should prepare for fuel prices to remain elevated through 2027, according to The Wall Street Journal.
Southwest will discuss its results on a conference call at 10 a.m. ET on Thursday. The company said it will hold a Capital Markets Day in New York City on March 2, 2027, to share its multi-year financial framework.
Daily Brief
The essential business news, delivered fresh every morning.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.