Key facts
- Southwest Airlines lowered its 2026 profit forecast to $2.60-$2.85 per share from $3.25-$4.25 per share.
- The airline cited a spike in fuel prices as the reason for the reduced forecast.
- Southwest also projected third-quarter earnings of 50-75 cents per share, below estimates of 82 cents.
Southwest Airlines lowered its annual profit forecast on Wednesday, citing a significant increase in fuel prices that is impacting its margins. The Dallas-based carrier now anticipates an adjusted profit of $2.60 to $2.85 per share for the full year, a reduction from its previous projection of $3.25 to $4.25 per share. Analysts, on average, had estimated an adjusted profit of $2.85 per share. The airline also projected third-quarter earnings between 50 cents and 75 cents per share, falling short of the 82 cents estimated by Wall Street. Fuel costs more than doubled after the Iran war began, leading to an 85% increase in U.S. airline fuel bills by May. Despite a temporary retreat, prices climbed again as hostilities resumed in July. Southwest reported a second-quarter adjusted profit of 94 cents per share, exceeding estimates, but a nearly $900 million rise in fuel expenses reduced earnings by $1.17 per share. The airline expects to pay an average of $3.70 to $3.75 per gallon for fuel in the third quarter. Southwest's revenue strategy, including higher fares and new revenue initiatives, is showing traction, with adjusted unit revenue up about 20% in the second quarter and managed-business revenue up 30%. However, the persistent fuel shock limits the earnings payoff from these gains.