Southwest Airlines raised its fourth quarter guidance on December 5, 2024, driven by stronger than expected travel demand.
Revenue per available seat mile (RASM) for the fourth quarter is now expected to be up 5.5% to 7% in the quarter compared to the same period last year. The company had previously estimated RASM to be up 3.5% to 5.5% year over year.
“The strong year over year unit revenue growth is driven by resilient travel demand along with the realisation of benefits from the company's execution of tactical actions,” the carrier read in its update.
The company's tactical actions include improving network optimisation and capacity rationalisation.
Southwest's capacity is expected to be down 4% in the quarter, compared to last year. Fuel costs are set to be between $2.35 and $2.45 per gallon. Cost per available seat mile (CASM) is set to be up 11-13% in the period.
Furthermore, the company expects around $5 million in scheduled debt repayments in the period, along with $62 million in interest expense.
Southwest said it is “encouraged” by recent revenue trends as well as forward bookings, including fourth quarter holiday travel. The company expects these trends to carry into the new year.
As part of its fleet strategy which aims to realise value from its current fleet and orderbook through aircraft sales and sale-leaseback transactions, Southwest said it expects to complete an initial transaction by early 2025.
“The company continues to plan for a balanced capital allocation approach utilising funds generated from its fleet strategy, as well as excess cash from the balance sheet, to offset future capital expenditures, reduce outstanding debt obligations, and provide shareholder returns,” Southwest read in a statement.
The company plans to launch an additional $750 million accelerated share repurchase (ASR) programme in the first quarter of next year. It follows the completion of the $250 million ASR announced in October 2024. Following the $750 million ASR programme, the company will have $1.5bn remaining under its $2.5bn share repurchase programme authorised by its board of directors in September 2024.