By Janet H. Cho
Southwest Airlines reported fourth-quarter adjusted earnings that beat Wall Street projections, but what caught investors' eyes was the news that the carrier projects a big bump in 2026 adjusted earnings.
The forecast sent its shares up 6% in late trading on Wednesday.
Southwest said its fourth-quarter performance benefited from revenue initiatives, like checked bag fees. It expects additional changes that kicked in this week, including charging for seat assignments and extra-legroom seats, to further boost results this year.
The Dallas-based carrier posted fourth-quarter adjusted earnings of 58 cents a share on record revenue of $7.4 billion, up 7.4% year over year.
Analysts surveyed by FactSet were expecting adjusted earnings of 57 cents a share on revenue of $7.5 billion.
Southwest expects earnings of at least $4 a share for 2026, which would be up more than 300% over 2025. It noted that its EPS guidance was "at the lower end of internal forecasts, and well above Wall Street consensus."
For the current first quarter of 2026, which includes the impact from Winter Storm Fern over the weekend, Southwest expects adjusted earnings of at least 45 cents a share. Southwest canceled more than 1,700 flights on Sunday and Monday because of heavy snowfall and freezing temperatures affecting travel across much of the U.S., according to FlightAware.
Analysts expect first-quarter adjusted earnings of 30 cents a share on revenue of $6.97 billion.
For full-year 2025, Southwest recorded earnings of 93 cents a share on a record $28.1 billion in revenue.
Southwest last year implemented "the most ambitious transformation in Company history, including bag fees, basic economy fares, assigned and extra legroom seating, Rapid Rewards program optimization, online distribution expansion, and free Wi-Fi for loyalty members," President and CEO Bob Jordan said.
Southwest also exceeded its cost-reduction goals, including its first-ever layoffs of non-contract and management employees; improved its operational reliability through new technology; and returned $2.9 billion to shareholders in share repurchases and dividends. "That foundation positions us well for long-term success and sets the stage for significant earnings growth this year," Jordan said.
Southwest said that although its fourth-quarter revenue per available seat mile dipped 0.2% from the year-ago quarter, partly because of Federal Aviation Administration-mandated service cuts, it expects first-quarter 2026 revenue per seat-mile to increase "at least 9.5%" from a year ago.
Southwest's stock is down 1.2% this year, but up 29.1% over the past 12 months.
Southwest reported earnings after Delta Air Lines beat fourth-quarter earnings expectations but issued disappointing 2026 guidance and after United Airlines reported fourth-quarter and full-year 2025 results that soared past Wall Street's expectations.
American Airlines on Tuesday released fourth-quarter earnings that fell short of expectations, partially because of the federal government shutdown, but offered upbeat guidance for 2026, despite a potential hit of up to $200 million to first-quarter revenue because of flight cancellations during the weekend's snowstorm.
JetBlue Airways on Tuesday reported a wider-than-expected loss in the fourth quarter.
Last month, the Transportation Department waived an $11 million penalty that Southwest was due to pay this week. The carrier had been fined $140 million by the Biden administration after stranding passengers by cancelling nearly 17,000 flights during the 2022 winter holiday travel period. Most of the fine was to upgrade technology and compensate passengers, but Southwest was also required to pay $35 million of it to the Treasury in three installments.
The Transportation Department said it waived the $11 million remaining because Southwest's investments of more than $1 billion to improve its performance and reliability had led to "meaningful improvements" in its on-time performance and other factors since 2023.
Jordan and other Southwest Airlines executives will discuss financial results at a conference call at 10 a.m. Eastern time on Thursday.
Write to Janet H. Cho at janet.cho@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 28, 2026 17:37 ET (22:37 GMT)
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