**Southwest Airlines Exceeds Q4 Profit Expectations Amid Strong Travel Demand**
On January 30, Southwest Airlines, a U.S. budget carrier, reported a fourth-quarter profit that exceeded Wall Street forecasts, driven by strong travel demand and improved airfares. The airline also projected better-than-anticipated unit revenue (RASM) for the first quarter, indicating enhanced pricing power.
In response to a surplus of seating capacity that led to discounts and reduced margins last summer, airlines across the U.S. have been cutting back on available seats to increase fares. December saw airfares rise at their fastest rate in 21 months, contributing to Southwest’s adjusted profit of 56 cents per share for the quarter ending December 31, surpassing analysts’ average estimate of 44 cents, according to data from LSEG. Operating revenue increased by 1.6% to $6.93 billion compared to the previous year.
During its investor day in September, Southwest outlined strategies to boost revenue and liquidity, including vacation packages and aircraft sale-leasebacks, as the industry grapples with rising labor and aircraft maintenance costs. CEO Bob Jordan expressed optimism, stating, “While we still have much work to do, we are pleased that the improvements from our tactical initiatives are materializing faster than expected, and our progress continues to be further supported by a constructive demand environment and industry backdrop.”
The airline anticipates a RASM growth of approximately 5% to 7% in the first quarter, outpacing analysts’ expectations of a 2.62% increase. However, it expects costs per available seat mile, excluding fuel, to rise by 7% to 9% due to high labor contract expenses. Additionally, Southwest, which operates an all-Boeing fleet, has faced challenges from delivery delays of jets from the manufacturer but expects to receive 38 737 MAX 8 aircraft in 2025.
