Southwest profit tops estimates despite lingering cost pressures

Southwest Airlines Co. reported a third-quarter profit greater than Wall Street expected as business sales strengthened, even as the carrier warned that cost pressures will extend into next year.

Adjusted earnings were 50 cents a share in the period, the company said in a statement, compared with the 44-cent average from analyst estimates compiled by Bloomberg. Revenue of $6.22 billion was essentially in line with analysts’ projections.

Pilot staffing limits will keep the carrier from fully utilising its fleet for “the majority” of next year, and it faces higher spending on wages and benefits and for airport costs. Southwest also expects delays in aircraft deliveries from Boeing Co. to extend into 2024.

Southwest historically has counted on having lower operating costs so it can attract passengers through cheaper fares. It’s had help offsetting rising expenses from strong travel demand that’s allowed carriers to boost ticket prices. Southwest’s average fare climbed 13% in the quarter from a year ago.

The Dallas-based company reiterated that it will report a fourth-quarter profit, without providing specifics. Its outlook was more muted than those from larger United Airlines Holdings Inc. and Delta Air Lines Inc., which forecast fourth-quarter profits well above Wall Street expectations.

Non-fuel costs to fly each seat a mile, an industry gauge of efficiency, will be as much as 18% above 2019 levels in the fourth quarter, Southwest said. Unit expenses will be 14% to 15% higher for the full year, narrowing an earlier range of up 12% to 16%, Southwest said.

Southwest said Boeing likely won’t make all of its scheduled aircraft deliveries this year.

—Bloomberg