In this article, U.S. budget carrier Southwest Airlines’ fourth-quarter profit exceeded Wall Street estimates on Thursday, driven by strong travel demand and improved airfares. The airline also projected better-than-expected unit revenue (RASM) for the first quarter, indicating increased pricing power. Airlines nationwide have reduced seating capacity to raise fares following a surplus capacity introduced last summer, which led to discounts and margin sacrifices.
Airfares experienced their most rapid increase in 21 months in December, contributing to Southwest’s adjusted profit of 56 cents per share for the fourth quarter ending Dec. 31, surpassing analysts’ average estimate of 44 cents. Operating revenue climbed 1.6% to $6.93 billion compared to the previous year. During its investor day in September, the airline disclosed strategies such as vacation packages and aircraft sale-leasebacks to boost revenue and liquidity amidst challenges like high labor and aircraft maintenance costs in the industry.
CEO Bob Jordan expressed satisfaction with the progress of their tactical initiatives, noting that improvements are happening quicker than anticipated, supported by a favorable demand environment and industry conditions. Southwest anticipates first-quarter RASM growth of approximately 5% to 7%, surpassing analysts’ forecast of a 2.62% rise. The company expects a 7% to 9% increase in cost per available seat mile, excluding fuel, due to costly labor agreements.
Southwest, operating an all-Boeing fleet and impacted by the planemaker’s jet delivery delays, foresees receiving 38 737 MAX 8 aircraft from Boeing in 2025.
