Southwest sold more tickets’ worth of travel than ever and still had to tell investors to lower their expectations. The new Southwest profit forecast is lower, and record sales didn’t stop it. The airline reported third-quarter results on Oct. 21 and lowered its 2026 earnings guidance because jet fuel keeps getting more expensive.
The new full-year adjusted earnings range is $2.60 to $2.85 per share, according to the company’s earnings call. Back in July, the airline had guided to $3.25 to $4.25. That is a big haircut for a company that just posted its best third-quarter revenue ever.
Record sales, shrinking Southwest profit forecast
Here is the strange part. Southwest’s third-quarter operating revenue hit about $8.4 billion, up 21.2% from a year ago. Adjusted earnings of 66 cents a share also beat Wall Street’s estimate of about 58 cents, CNBC reported. Strong sales still couldn’t save the earnings outlook.
So why did Southwest lower its forecast?
Fuel. Southwest paid $3.92 a gallon in the quarter, up from roughly $2.40 a year earlier. Fuel expense jumped $821 million, which alone cost the company $1.08 per share, per the SEC filing.
It also isn’t getting easier. Southwest is planning for fuel at about $4.55 a gallon in the fourth quarter. That figure is a forward-curve estimate, not a price anyone has actually paid yet (think weather forecast, not receipt). On that math, it expects fourth-quarter adjusted earnings of 55 to 80 cents a share.
What the Southwest guidance cut means for your ticket
Here’s the thing: you are already paying for this. Southwest’s average passenger fare came in at $231.69, up almost 27% from last year, and that figure leaves out add-on fees, a company spokesman told CNBC.
Meanwhile, fewer people are flying. Revenue passengers fell 3.2% to 33.47 million. Southwest is also trimming growth, with full-year capacity now rising only about 1.2%, down from the roughly 1.5% it planned earlier. The guidance cut tells the same story from the supply side.
Fewer seats and pricier tickets rarely add up to a cheap holiday trip. The airline says its fourth-quarter revenue per seat mile should climb another 19% to 21%. Translation: expect fares to stay high.
Southwest isn’t alone
This is an industry problem, and the lowered Southwest profit forecast is just the latest example. Southwest is the third major U.S. airline this month to cut its 2026 outlook, following Delta and United, CNBC noted. United is assuming roughly $4.80 a gallon for the fourth quarter, while Alaska is planning on $4.65 to $4.85, according to Skift.
CEO Bob Jordan stuck to the optimistic script. “With the transformation complete, our efforts have shifted to optimizing the business,” he said. His longer release statement argued that the airline’s earnings power is “durable, even with significantly higher fuel costs.”
Investors seemed to buy that. The stock rose about 4.6% to $41.73 on the day of the call, a sign that markets expected a cut and liked the strong sales behind it.
Southwest earnings outlook: what to watch next
Southwest has overhauled its whole model. It ended open seating and free checked bags and added seat and bag fees to bring in more money, a shift we covered in our look at how Southwest is changing its brand. The company says it expects to be the only major U.S. carrier with a better third-quarter margin than last year.
Fuel isn’t only an airline headache. Higher costs are squeezing other industries too, as Bank of America’s 17% profit drop showed in a very different way. Meanwhile, consumer-facing companies like American Express are raising their forecasts instead.
The next big checkpoint for the Southwest earnings outlook is a Capital Markets Day in New York on March 2, 2027. By then, travelers will know whether fuel finally cooled off. If it didn’t, the bigger question is how many more fare hikes passengers will swallow before they stay home.
