Airline shares are rallying Thursday after Southwest Airlines Co. (NYSE:LUV) beat Wall Street’s third-quarter estimates.
- Airline stocks are rising. Why are airline stocks up today?
Airline Stocks Rise After Southwest Q3 Beat
Southwest beat on both lines. It earned 66 cents per share, above the 58 cents analysts predicted, and sales of $8.42 billion cleared the $8.25 billion forecast, according to Benzinga Pro. Revenue grew 21.2% from a year earlier.
Demand drove the records. Southwest set company records for unit revenue, up 21.6%, along with passenger revenue and yields. The quarter also produced 20 of the 50 best managed business booking days Southwest has ever recorded.
Airline stocks are rising together. Frontier Group Holdings Inc (NASDAQ:ULCC), Delta Air Lines Inc (NYSE:DAL), American Airlines Group Inc (NASDAQ:AAL) and United Airlines Holdings Inc (NASDAQ:UAL) are all trading higher with Southwest’s results.
Southwest Airlines Lowers Full-Year Earnings Forecast
Southwest cut its 2026 earnings outlook to $2.60 to $2.85 per share, down from a range of $3.25 to $4.25. For the fourth quarter, Southwest guided to 55 to 80 cents per share and to a 19% to 21% jump in revenue per available seat mile.
Fuel remains a major cost. Fourth-quarter fuel is forecast at $4.55 a gallon, up 63 cents from the third quarter’s $3.92. Higher fuel added $821 million to third-quarter costs versus a year earlier, about $1.08 per share, yet the operating margin still reached 4.5%.
Southwest says it expanded margins despite that pressure, and that demand held up after last year’s bag fee and other commercial changes. Management argues the results show durable earnings power even with much higher fuel costs.
Southwest is a major carrier, so its results work as a read on the whole sector. Investors use that read to judge two things: whether travelers still pay up for flights and whether airlines can cover higher costs. Southwest’s record passenger yields suggest travelers are paying more. Its 4.5% operating margin, despite $821 million in extra fuel costs, suggests carriers can absorb part of the fuel hit.
Airline Rally Extends After United Airlines Guidance
Southwest is the second large carrier to move the group this week. United Airlines lifted airline shares Wednesday by forecasting fourth-quarter revenue above $18.48 billion, against about $18.29 billion expected, along with faster unit revenue growth.
Oil helped too. Crude futures had dropped 1% to below $97 a barrel Tuesday. Lower fuel prices lift margins quickly, since fuel ranks among carriers’ biggest expenses.
Airline Shares Are Moving Higher
Price Action: Frontier shares were up 1.59% at $5.11, United Airlines shares were up 0.08% at $101.75, Southwest shares were up 3.46% at $41.26, American Airlines shares were up 2.70% at $12.57 and Delta shares were up 1.09% at $78.52 at the time of publication on Thursday, according to Benzinga Pro.
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