Southwest Trims 2026 Profit Forecast as Fuel Costs Offset Record Revenue

Southwest Airlines lowered its full-year 2026 adjusted earnings forecast to a range of $2.60 to $2.85 per share, citing a significant spike in global fuel prices that has overshadowed record-breaking revenue performance. Despite the reduced profit outlook, the carrier’s third-quarter earnings report exceeded analyst expectations on both the top and bottom lines.

The industry-wide pressure stems largely from Brent crude futures, which reached $110 a barrel in October 2026 for the first time since May. Southwest now projects its fourth-quarter fuel costs will reach approximately $4.55 per gallon.

Southwest projects its fourth-quarter fuel costs will reach approximately $4.55 per gallon.

For the third quarter of 2026, Southwest reported adjusted earnings of $0.66 per share, outperforming the consensus analyst estimate of $0.58. The company achieved record quarterly operating revenue of $8.42 billion, representing a 21.2% increase compared to the same period last year. This growth was driven by significant pricing power, as revenue per available seat mile (RASM) rose 21.6% year-over-year to an all-time record.

Management’s ability to drive record unit revenue even as capacity growth slows has provided a buffer against rising operating expenses. According to third-quarter financial results, the airline has also begun trimming its 2026 capacity growth outlook to approximately 1.2%, down from a previous estimate of 1.5%, as it prioritizes margin protection over volume.

The carrier reported a 21.2% year-over-year increase in operating revenue for the third quarter.

The fuel-driven forecast cut reflects a broader trend among high-capacity carriers. United Airlines previously adjusted its outlook on October 20, noting that it expects its own fourth-quarter fuel costs to reach $4.80 a gallon. Southwest’s management noted that while the external energy environment remains volatile, the demand for travel continues to support record passenger revenue levels.

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