Southwest Airlines (LUV): Q3 sales rise 21% to a record $8.42bn, but a 62% jump in fuel costs leads it to cut its 2026 profit forecast

Southwest Airlines reported record third-quarter sales of $8.42bn, up 21%, and adjusted profit per share of $0.66, above the roughly $0.57 to $0.58 analysts expected. But its fuel bill rose by $821m, and it cut its 2026 profit forecast to $2.60 to $2.85 a share from $3.25 to $4.25.

What happened

On 21 October 2026, after US markets closed, Southwest Airlines published its results for the three months to 30 September 2026 and filed them with the US Securities and Exchange Commission (SEC) on Form 8-K, the form used to report major events. Unless we say otherwise, figures are in US dollars. Operating revenue, the airline's sales, was $8,422m, a record for a third quarter. Net income, the profit after all costs, was $270m, or $0.55 a share, under US accounting rules (GAAP). Excluding what the company calls special items, one-off costs such as a $30m asset write-down, $13m of legal accruals and $30m of severance payments, profit was $328m, or $0.66 a share. That adjusted figure is the company's own measure, not a GAAP number.

The same release changed the outlook. The company now expects adjusted profit per share of $2.60 to $2.85 for the full year 2026, and $0.55 to $0.80 for the fourth quarter. Three months earlier, in its July results, it had forecast $3.25 to $4.25 for the full year. Chief executive Bob Jordan said demand "remained strong as we lapped last year's bag fee and other commercial initiatives", and that the earnings power the airline has built is durable "even with significantly higher fuel costs". It also announced plans for its first airport lounges, with the first guests expected in 2027, and said it will hold a Capital Markets Day in New York on 2 March 2027.

The numbers, explained

Start with sales. Revenue of $8,422m compares with $6,949m a year earlier, a rise of $1,473m, or 21.2% (1,473 / 6,949). The airline flew slightly fewer seats: available seat miles, one seat flown one mile, fell 0.4% to 45,393m from 45,567m, and the share of seats filled, the load factor, stayed at 79.8%. So the rise came from price, not volume. Unit revenue, sales for each available seat mile, was 18.55 cents against 15.25 cents, up 21.6% (3.30 / 15.25). The company says last year's introduction of bag fees and other changes helped, and that this beat its own forecast. Unit revenue is the airline's key measure of how much it earns for each seat it puts in the air.

Now costs. Aircraft fuel and related taxes cost $2,152m against $1,331m, up $821m or 61.7% (821 / 1,331). Fuel cost per gallon, including tax, was $3.92 against $2.40, up 63.3% (1.52 / 2.40), and above the $3.70 to $3.75 the company assumed in July. Total operating expenses excluding special items rose 15.4%, from $6,907m to $7,970m. Strip out fuel as well and the remainder rose 4.3%, from $5,576m to $5,818m. Operating income, profit from running the airline before interest and tax, excluding special items, was $452m against $42m. As a check, sales rose $1,473m and those expenses rose $1,063m (7,970 - 6,907), leaving $410m more, which matches 452 - 42. The adjusted operating margin was 5.4% (452 / 8,422), against 0.6%.

Profit per share improved by more than profit itself, because there are fewer shares. Average diluted shares, which count shares plus those that could be created from options, were 494m against 526m, down 6.1% (32 / 526), after buybacks. Adjusted profit rose from $58m to $328m, up 465.5% (270 / 58), and adjusted profit per share from $0.11 to $0.66. Analysts' expectations, as reported by 247WallSt and by LSEG via briefs.co, were about $0.57 to $0.58 a share and $8.24bn to $8.25bn of sales, so the quarter came in about 14% to 16% above on profit per share (0.66 / 0.58 and 0.66 / 0.57) and 2% above on sales. Those are analyst estimates, not company figures. Over nine months, adjusted profit per share is $2.05, and adding the new fourth-quarter range gives $2.60 to $2.85, which matches the full-year forecast.

Why it matters

An airline sells seats and earns its money from the gap between what passengers pay and what it costs to fly them. Fuel is one of its biggest costs and is largely outside its control. This quarter shows both sides: prices for flights rose enough to lift sales by 21%, yet fuel made up $821m of the $1,063m rise in costs excluding special items, about 77% (821 / 1,063). The company says fuel was a $1.08 drag on adjusted profit per share. For customers, the signal is that fares and fees are carrying more of the cost, with the company reporting that demand held up. For rivals, higher fuel prices apply to every airline, though each has its own hedging, fleet and cost position.

The balance sheet shows how it is coping. Cash was $3.6bn and total liquidity, cash plus an undrawn $2.0bn credit line, was $5.6bn. Total debt including finance leases was $5,887m, up 20.1% from $4,901m at the end of 2025 (986 / 4,901). It made no share buybacks in the quarter, against $250m a year ago. These are company-reported figures; we are not judging them.

What to watch next

The company guides to fourth-quarter capacity up 3% to 4%, unit revenue up 19% to 21%, and a fuel price of about $4.55 a gallon, based on futures prices on 15 October 2026. That compares with $3.92 in the third quarter, a rise of 16.1% (0.63 / 3.92). These are the company's own forecasts, not facts, and they depend on fuel prices and demand. It has also trimmed 2026 capacity growth to about 1.2% from about 1.5%. Dated events: the company's Capital Markets Day is on 2 March 2027 in New York, where it says it will share multi-year financial targets. We have not seen a confirmed date for the fourth-quarter results, so we do not state one.

• Unit revenue (RASM): sales for each available seat mile flown
• Adjusted profit: profit excluding one-off items the company chooses to list
• Load factor: the share of seats filled with paying passengers
• Special items: one-off costs such as write-downs, legal accruals and severance

Sources

• Southwest Airlines third quarter 2026 results, Form 8-K (SEC, primary)
• Southwest Airlines second quarter 2026 results (company filing, primary)
• Southwest Airlines Q3 earnings: $8.4B revenue record (StockTitan)
• Southwest trims 2026 EPS outlook as fuel costs rise (briefs.co)
• Southwest Airlines Beat Q3 Estimates, but Fuel Costs Cloud Q4 (247WallSt)