Welcome to Extreme Investor Network, where we bring you the latest business news with a unique twist! Today, we’re diving into Southwest Airlines’ recent performance in the third quarter, which saw their profit fall from a year ago but still topped Wall Street estimates.
One of the key factors contributing to Southwest’s success was their ability to drum up revenue and fend off activist investor Elliott Investment Management. In a deal announced recently, Southwest and Elliott reached an agreement that adds six of the activist’s candidates to the board, averting a potential proxy fight.
Looking ahead to the fourth quarter, Southwest forecasts a 3.5% to 5.5% increase in unit revenue despite a 4% drop in capacity compared to last year. The carrier also expects costs, excluding fuel, to rise by as much as 13%. Despite these challenges, Southwest remains optimistic about travel demand, particularly during the upcoming holiday season.
In addition to their financial performance, Southwest also announced a three-year plan to add $4 billion to earnings before interest and taxes by 2027. The airline authorized a $2.5 billion buyback program and plans to eliminate underperforming flights, such as those from Atlanta, to improve cost efficiency.
Furthermore, Southwest is making significant changes to its seating arrangements by moving away from open seating and instead offering seat selection options at varying prices. These changes mark a significant shift for the airline, which has maintained the same seating system for over 50 years.
In terms of their third quarter performance, Southwest reported adjusted earnings per share of 15 cents, surpassing expectations of zero cents. Revenue for the quarter came in at $6.87 billion, beating analysts’ estimates of $6.74 billion. Despite a 65% decrease in net income from the previous year, Southwest’s performance was still ahead of projections, with adjusted net income of $89 million or 15 cents per share.
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