Southwest Airlines Lowers 2026 Profit Forecast as Rising Fuel Costs Pressure Earnings

Post by : Saif

Southwest Airlines has lowered the minimum end of its 2026 profit forecast, warning that higher fuel costs continue to weigh on earnings despite stronger ticket prices and improving revenue from new services.

The revised outlook comes as the airline works to strengthen profitability by generating more revenue from each flight rather than expanding its flight schedule.

2026 Profit Forecast Revised Lower

Southwest now expects adjusted earnings of $3.25 to $4.25 per share for 2026, replacing its previous guidance of at least $4 per share.

The airline also forecast third-quarter adjusted earnings of 50 to 75 cents per share, below analysts' expectations of 82 cents per share, reflecting continued pressure from volatile fuel prices.

Fuel Costs Continue to Weigh on Earnings

Although jet fuel prices eased after the temporary US-Iran truce in June, renewed tensions in July pushed costs higher again.

Southwest reported that fuel expenses increased by nearly $900 million compared with the same period last year, reducing adjusted earnings by approximately $1.17 per share.

For the third quarter, the airline expects average fuel prices of $3.70 to $3.75 per gallon.

Read more: FAA Says It Is Not Blocking Boeing’s MAX 7 and MAX 10 Certification

Revenue Strategy Shows Positive Results

Despite cost pressures, Southwest reported strong revenue growth during the second quarter.

Adjusted unit revenue increased by about 20%, while flight capacity remained nearly unchanged. Average passenger fares rose almost 21%, supported by strong travel demand and limited seat growth across the domestic airline industry.

The company also reported solid growth in business travel revenue, loyalty program memberships and credit-card partnerships.

Focus Shifts to Higher Revenue Per Flight

Southwest continues expanding revenue through additional services, including checked baggage fees, assigned seating and extra-legroom options.

The airline has reduced its planned capacity growth for the full year to around 1.5%, down from an earlier forecast of 2%, reflecting its strategy of increasing profitability without adding significantly more flights.

As part of cabin upgrades, Southwest is removing six seats from each Boeing 737-700 aircraft to introduce more extra-legroom seating, although the changes are expected to increase operating costs in the near term.

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