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Southwest Airlines Cuts 2026 Profit Forecast as Jet Fuel Costs Surge

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2025 Southwest Airlines Boeing 737-8 MAX N8971L on final approach at Baltimore-Washington International Thurgood Marshall Airport, Maryland, USA
Image credit: Acroterion · CC BY-SA 4.0 · Wikimedia Commons

In brief

Southwest Airlines lowered its full-year 2026 adjusted profit forecast to $2.60–$2.85 per share, down from the $3.25–$4.25 range it had given in July, citing jet fuel costs that came in above its prior assumptions. The cut came alongside record third-quarter revenue of $8.4 billion and net income of $270 million.

Record revenue, lower profit guidance

Southwest Airlines reported third-quarter 2026 operating revenue of $8.4 billion, up 21.2% from a year earlier and a record for the quarter, according to the company's earnings release. Net income was $270 million, with adjusted net income of $328 million and adjusted diluted earnings per share of 66 cents, beating the 58-cent average analyst estimate reported by Reuters.

Despite the quarterly beat, Southwest cut its full-year 2026 adjusted earnings-per-share guidance to a range of $2.60 to $2.85, down from the $3.25 to $4.25 range it had set in July. The new midpoint falls below Wall Street's prior consensus estimate, Reuters reported. For the fourth quarter, Southwest guided to adjusted EPS of 55 to 80 cents, according to the company's earnings release.

Fuel costs drive the downgrade

Southwest said fuel cost per gallon, including taxes, averaged $3.92 in the third quarter — above the $3.70 to $3.75 range it had previously assumed, according to the company's earnings release. The airline's total fuel expense rose $821 million compared with the third quarter of 2025, a swing the company said amounted to a $1.08 headwind to adjusted earnings per share.

Looking ahead, Southwest said it now expects to pay up to $4.55 per gallon for jet fuel in the fourth quarter, based on the forward curve as of October 15, Reuters reported. The company also trimmed its planned 2026 capacity growth to about 1.2%, down from an earlier 1.5% target, according to its earnings release.

Southwest Chief Financial Officer Tom Doxey said the airline has room to raise fares to help offset the higher fuel bill, Skift reported. Average passenger fares were up nearly 27% year over year in the third quarter, Reuters reported.

Customers are responding to the enhanced Southwest offering, and it shows in our results.

— Bob Jordan, Southwest Airlines President and CEO, in the company's Q3 2026 earnings release

An industry-wide fuel squeeze

Southwest is not alone in facing elevated fuel costs. Skift reported that United Airlines expects to pay up to $4.80 per gallon in the fourth quarter, while Alaska Airlines has projected $4.65 to $4.85 per gallon for the same period.

Fourth-quarter 2026 jet fuel cost guidance by airline (per gallon)
AirlineQ4 2026 fuel cost guidance
Southwest AirlinesUp to $4.55
United AirlinesUp to $4.80
Alaska Airlines$4.65–$4.85

Operating margin still expanded

Even with the fuel headwind, Southwest's adjusted operating margin rose to 5.4% in the third quarter, up 4.8 percentage points from a year earlier, according to the company's earnings release. The company said it would lay out longer-term financial targets at a Capital Markets Day in New York on March 2, 2027, according to the earnings release and Skift. Separately, Skift reported that Jordan has floated adding 8 to 12 long-haul international routes using Boeing 787 aircraft, pending sufficient customer demand, as part of a broader push into lounges and loyalty-program changes.

Questions

Why did Southwest Airlines cut its 2026 profit forecast?
Southwest said jet fuel costs came in higher than it had assumed — $3.92 per gallon in the third quarter versus an expected $3.70–$3.75 — and it now expects up to $4.55 per gallon in the fourth quarter, adding roughly $821 million in fuel expense year over year, according to the company's earnings release.
What is Southwest's new 2026 earnings guidance?
Southwest now expects full-year 2026 adjusted earnings per share of $2.60 to $2.85, down from the $3.25 to $4.25 range it had given in July, Reuters reported.
Did Southwest still report strong results in the third quarter?
Yes. Southwest reported record third-quarter operating revenue of $8.4 billion, net income of $270 million, and adjusted EPS of 66 cents, beating the 58-cent analyst estimate, according to the company's earnings release and Reuters.
Are other airlines facing the same fuel cost pressure?
Yes. Skift reported that United Airlines expects to pay up to $4.80 per gallon and Alaska Airlines $4.65 to $4.85 per gallon in the fourth quarter of 2026.
How is Southwest responding to higher fuel costs?
Southwest's CFO said the airline has room to raise fares further, and average fares were already up nearly 27% year over year in the third quarter, Skift and Reuters reported. The company also trimmed planned 2026 capacity growth to about 1.2% from 1.5%, according to its earnings release.

Sources

  1. Southwest Airlines Investor Relations — Southwest Airlines Reports Third Quarter 2026 Results; Record Revenue Performance Drives Year-Over-Year Margin Expansion
  2. Skift — Southwest Slashes 2026 Profit Guidance on Higher Fuel Bills
  3. Reuters via Investing.com — Southwest Airlines Cuts 2026 Profit Forecast as Fuel Costs Spike

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