(Reuters) – Southwest Airlines reported a surprise third-quarter profit on Thursday, benefiting from improved pricing and demand, as well as rebookings from passengers stranded due to the global cyber outage in July.
During the U.S. summer travel season, an oversupply of airline seats in the domestic sector compelled airlines to sell seats at lower prices to fill their planes, denting their earnings.
Since then U.S. airlines have moderated capacity. Annual domestic seat growth has slowed to 1.5% in October and November from 5.5% in July, according to BofA analysts.
Southwest reported an adjusted profit of $89 million, or 15 cents per share, compared with analysts’ average estimate of a loss of $12.65 million, or a break-even on a per share basis, according to data compiled by LSEG.
Southwest is also nearing a settlement with activist investor Elliott, a report said, after the hedge fund pushed for a revamp of the airline’s board and a replacement of top executives.
That, along with inflated costs, has pushed it to take steps to restore steady profitability and find high-margin revenue streams, including vacation packages, overnight flights and assigned and premium seating.
It expects fourth-quarter revenue per available seat mile, a proxy for pricing power, to be up 3.5% to 5.5%, on a projected capacity reduction of about 4%.
“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,” CEO Bob Jordan said.
The airline has been hit hard by Boeing’s jet delivery delays and is reeling from elevated operating expenses, including high labor and aircraft maintenance costs.
It continues to expect about 20 new jets from Boeing this year.
Southwest Airlines’ operating revenue rose 5.3%, to $6.87 billion in the third quarter.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Arun Koyyur)
