third quarter 2026
Filed Oct 21, 2026SOUTHWEST AIRLINES REPORTS THIRD QUARTER 2026 RESULTS; RECORD REVENUE PERFORMANCE DRIVES YEAR-OVER-YEAR MARGIN EXPANSION
Record operating revenue, a 21.6% increase in RASM, and year-over-year operating-margin expansion outweighed a $821 million increase in fuel expense.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total operating revenues, three months ended September 30, 2026GAAP | $8.42B | – | 21.2% |
| Operating revenues, excluding special items, three months ended September 30, 2026non-GAAP | $8.42B | – | 21.2% |
| Operating income, three months ended September 30, 2026GAAP | $379M | – | n.m. |
| Operating income, excluding special items, three months ended September 30, 2026non-GAAP | $452M | – | 976.2% |
| Operating margin, three months ended September 30, 2026GAAP | 4.5% | – | 4.0 pts. |
| Operating margin, excluding special items, three months ended September 30, 2026non-GAAP | 5.4% | – | 4.8 pts. |
| Net income, three months ended September 30, 2026GAAP | $270M | – | n.m. |
| Net income, excluding special items, three months ended September 30, 2026non-GAAP | $328M | – | 465.5% |
| Diluted net income per share, three months ended September 30, 2026GAAP | $0.55 | – | n.m. |
| Diluted net income per share, excluding special items, three months ended September 30, 2026non-GAAP | $0.66 | – | 500.0% |
| Total operating expenses, three months ended September 30, 2026GAAP | $8.04B | – | 16.3% |
| Total operating expenses, excluding special items, three months ended September 30, 2026non-GAAP | $7.97B | – | 15.4% |
| Operating expenses excluding Aircraft fuel and related taxes expense, special items, and profit sharing, three months ended September 30, 2026non-GAAP | $5.76B | – | 3.4% |
| Aircraft fuel and related taxes, three months ended September 30, 2026GAAP | $2.15B | – | 61.7% |
| Net cash provided by operating activities, three months ended September 30, 2026GAAP | $513M | – | – |
| Capital expenditures, three months ended September 30, 2026GAAP | −$1.01B | – | – |
| Cash and cash equivalents, September 30, 2026GAAP | $3.62B | – | – |
| Total debt, including finance leases, September 30, 2026GAAP | $5.89B | – | – |
| Gross leverage, September 30, 2026non-GAAP | 1.9x | – | – |
| Total operating revenues, nine months ended September 30, 2026GAAP | $24.10B | – | 16.9% |
| Operating income, nine months ended September 30, 2026GAAP | $994M | – | n.m. |
| Net income, nine months ended September 30, 2026GAAP | $730M | – | n.m. |
| Diluted net income per share, nine months ended September 30, 2026GAAP | $1.47 | – | n.m. |
| Net cash provided by operating activities, nine months ended September 30, 2026GAAP | $2.46B | – | – |
| Capital expenditures, nine months ended September 30, 2026GAAP | −$2.45B | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Passenger revenue, three months ended September 30, 2026Record third quarter passenger revenue and the highest passenger yield in the Company's history. | $7.75B | – | 22.8% |
| Freight revenue, three months ended September 30, 2026No driver disclosed. | $48M | – | 14.3% |
| Other revenue, three months ended September 30, 2026No driver disclosed. | $621M | – | 4.5% |
| Passenger revenue, nine months ended September 30, 2026No driver disclosed. | $22.09B | – | 17.8% |
| Freight revenue, nine months ended September 30, 2026No driver disclosed. | $141M | – | 11.0% |
| Other revenue, nine months ended September 30, 2026No driver disclosed. | $1.87B | – | 7.4% |
4Q 2026 and 2026 Forecast outlook
- Note4Q 2026 Adjusted EPS: $0.55 to $0.80
- Note4Q 2026 ASMs, year-over-year: 3% to 4%
- Note4Q 2026 RASM, year-over-year: 19% to 21%
- Note4Q 2026 CASM-X, year-over-year: 4.0% to 4.5%
- Note2026 Adjusted EPS: $2.60 to $2.85
- NoteFourth quarter 2026 fuel cost per gallon is assumed to be approximately $4.55
- NoteFull-year growth of approximately 1.2%
- Note2026 net capital spending between $2.5 billion and $2.75 billion
- NoteA total of 67 Boeing 737-8 and 737-7 aircraft deliveries and approximately 60 aircraft retirements in 2026
Capital returns
- Distributed $176 million in dividends during third quarter 2026.
- $450 million remains outstanding under the Company's $2.0 billion share repurchase authorization.
- Repurchase of common stock for the nine months ended September 30, 2026: $(1,250) million.
- Payments of cash dividends for the nine months ended September 30, 2026: $(357) million.
What drove it
- Third quarter RASM increased 21.6% year-over-year to 18.55 ¢, an all-time record.
- Average passenger fare increased 26.9% to $231.69 and passenger revenue yield per RPM increased 23.3% to 21.41 ¢.
- Managed business revenue reached a third quarter record, with 20 of the 50 all-time top managed business booking days occurring during the quarter.
- Capacity decreased 0.4% year-over-year, while revenue passenger miles decreased 0.4% and load factor was 79.8%.
- CASM excluding fuel, special items, and profit sharing increased 3.8% year-over-year to 12.68 ¢.
- The Company received 20 Boeing 737-8 aircraft and retired 20 aircraft, ending the quarter with 803 aircraft.
- Third quarter gain on sale was $214 million, including $96 million primarily from retiring aircraft and engine sales and $118 million from sale-leaseback transactions.
Concerns
- Aircraft fuel and related taxes expense increased 61.7% year-over-year to $2,152 million.
- Fuel cost was $3.92 per gallon, above prior assumptions of $3.70 to $3.75 per gallon.
- Fuel expense increased by $821 million compared with the third quarter of 2025 and represented a $1.08 headwind to adjusted EPS.
- Fourth quarter CASM-X guidance includes an expected 1.0 point headwind from the removal of six seats from the Boeing 737-700 fleet to enable extra legroom seating.
- Revenue passengers carried decreased 3.2% year-over-year to 33,467 thousand.
- Interest expense increased 100.0% year-over-year to $70 million.
What to watch
- Fourth quarter RASM guidance of 19% to 21% year-over-year.
- Fourth quarter CASM-X guidance of 4.0% to 4.5% year-over-year.
- Fourth quarter assumed fuel cost of approximately $4.55 per gallon.
- Execution against full-year capacity growth of approximately 1.2%.
- 2026 net capital spending of between $2.5 billion and $2.75 billion.
- Fleet-wide Starlink installation expected to be complete in fall 2027.
- Southwest Icon Lounge network launch, with the first guests expected in 2027.
- Capital Markets Day in New York City on March 2, 2027.
Balance sheet and cash flow
- Ended third quarter 2026 with $5.6 billion in liquidity, comprised of $3.6 billion in cash and cash equivalents and a revolving credit line of $2.0 billion.
- Cash and cash equivalents at September 30, 2026: $3,624 million.
- Total debt, including finance leases, at September 30, 2026: $5,887 million.
- Adjusted debt at September 30, 2026: $6,871 million.
- Net cash provided by operating activities was $513 million for the third quarter and $2,460 million for the nine months ended September 30, 2026.
- Net cash used in investing activities was $(509) million for the third quarter and $(1,513) million for the nine months ended September 30, 2026.
- Net cash used in financing activities was $(171) million for the third quarter and $(554) million for the nine months ended September 30, 2026.
- Gross capital expenditures were $1.0 billion in third quarter 2026.
Analysis
Southwest reported record third-quarter operating revenue of $8,422 million, up 21.2% year-over-year, led by passenger revenue of $7,754 million, up 22.8%. Unit revenue was a central driver: RASM increased 21.6% to 18.55 ¢, while average passenger fare rose 26.9% to $231.69 and passenger yield increased 23.3% to 21.41 ¢. These gains occurred with capacity down 0.4%, revenue passenger miles down 0.4%, and load factor unchanged at 79.8%.
The stronger revenue base produced substantial profit expansion. GAAP operating income was $379 million, compared with $35 million, and GAAP operating margin expanded to 4.5% from 0.5%. Operating income excluding special items was $452 million and adjusted operating margin was 5.4%, compared with $42 million and 0.6%, respectively. GAAP net income was $270 million, or $0.55 diluted EPS, while net income excluding special items was $328 million, or $0.66 per diluted share.
Fuel remained the principal cost pressure. Aircraft fuel and related taxes increased 61.7% to $2,152 million, with fuel cost per gallon at $3.92 versus prior assumptions of $3.70 to $3.75. The company said fuel expense increased by $821 million and represented a $1.08 headwind to adjusted EPS. Nonetheless, operating expenses excluding aircraft fuel, special items, and profit sharing increased 3.4%, while the associated unit cost measure increased 3.8% to 12.68 ¢.
Cash generation was positive, with $513 million of third-quarter operating cash flow, while capital expenditures were $(1,006) million. Southwest ended the quarter with $5.6 billion of liquidity, including $3.6 billion of cash and cash equivalents, and gross leverage of 1.9x. The company distributed $176 million in dividends during the quarter and reported $450 million remaining under its $2.0 billion share repurchase authorization.
For the fourth quarter, Southwest guided to adjusted EPS of $0.55 to $0.80, ASM growth of 3% to 4%, RASM growth of 19% to 21%, and CASM-X growth of 4.0% to 4.5%. The company assumes fuel cost per gallon of approximately $4.55. Full-year 2026 adjusted EPS guidance is $2.60 to $2.85, capacity growth is expected to be approximately 1.2%, and net capital spending is expected to be between $2.5 billion and $2.75 billion.
Management, verbatim
Customers are responding to the enhanced Southwest offering, and it shows in our results. Demand remained strong as we lapped last year's bag fee and other commercial initiatives, reinforcing our belief that the earnings power we've built is durable, even with significantly higher fuel costs.
Bob Jordan, Southwest Airlines President & Chief Executive Officer
With the transformation complete, our efforts have shifted to optimizing the business and delivering the next set of Customer Experience enhancements, both focused on unlocking the next phase of value creation.
Bob Jordan, Southwest Airlines President & Chief Executive Officer
We look forward to sharing our multi-year financial framework, the targets we are managing toward, and our path to achieving them at our Capital Markets Day in New York City on March 2, 2027.
Bob Jordan, Southwest Airlines President & Chief Executive Officer
Not in the filing
stated, not guessed- Gross margin was not reported.
- Free cash flow was not reported.
- Prior-quarter comparisons were not reported for the financial metrics.
- Previous-release outlook was not provided, so no comparison with prior guidance is available.
- No fourth-quarter or full-year revenue, gross margin, operating-expense, or tax-rate guidance was reported.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.