Investing.com — Southwest Airlines (NYSE:) said travel demand has been “healthy” during its current quarter and holiday season bookings have been “strong,” signaling some momentum in the embattled budget US carrier.
Dallas-based Southwest, which once posted 47 consecutive years of profit, has struggled to recover from the COVID-19 pandemic despite the broader airline industry seeing recently solid travel activity.
Passenger volumes have hovered below pre-pandemic levels, while aircraft delivery delays from Boeing (NYSE:) have also weighed on performance. It has also downgraded its outlook at least eight times over the past 20 months.
But in an earnings release on Thursday, the group said the leisure travel market has shown “resilience,” adding it now expects unit revenues to increase by 3.5% to 5.5% in the fourth quarter. The guidance range includes a slight headwind from flight cancellations stemming from the devastating Hurricane Milton that hit the US Southeast earlier this month, Southwest noted.
The firm also flagged “manufacturing challenges” at Boeing, saying it “offers no assurances” around its current estimates for approximately 20 of the aerospace giant’s best-selling 737-8 jet deliveries in 2024. Boeing has delayed plane deliveries due to an ongoing strike by workers in the US West Coast.
Southwest also slashed its capital expenditures forecast to $2.1 billion from its previous outlook of $2.5 billion, citing changes in expectations of future aircraft delivery timing “as Boeing […] delays persist into 2025.” Discussions with Boeing are “ongoing”, Southwest added.
For the third quarter, Southwest’s revenue per available seat miles, a key measure of pricing power, increased by 2.8%, at the top end of prior estimates laid out by Southwest in September.
Total operating revenue rose by 5.3% versus the year-ago period to $6.87 billion, topping estimates of $6.81 billion, while adjusted net income of $89 million also beat Wall Street forecasts despite slipping by 63%.
“We are laser-focused on delivering the robust set of tactical and strategic initiatives included in our plan and returning to the strong financial performance we expect. We are fully committed to executing our plan and to reporting regularly on our progress,” CEO Bob Jordan said in a statement.
Jordan is now under pressure to restore the firm’s long-term profitability, particularly as a possible proxy battle with activist investor Elliott Investment Management looms. Elliott has previously nominated eight directors to Southwest’s board and has called a special shareholders meeting in December in response to what it has described as “disappointing” financial returns.
However, Southwest and Elliott are closing in on a settlement that would avoid the board fight, according to Bloomberg News.
Shares in Southwest advanced by more than 3% in premarket trading on Thursday.
