Southwest Airlines Beats Q3 Street Expectations, Secures Agreement With Elliott Management-Driven Board Overhaul

Southwest Airlines Co LUV reported a third-quarter 2024 operating revenue increase of 5.3% year-over-year to $6.870 billion, beating the consensus of $6.735 billion.

Adjusted EPS was $0.11, down from $0.31 last year, beating the consensus $0.00.

The airline's adjusted operating income fell to $32 million from $224 million a year ago; operating expenses increased by 14.3% YoY to $5.384 billion.

Also Read: Southwest Airlines Q3 Earnings Preview: Can Strategic Changes Propel Growth?

LUV's unit revenue increased 2.8% YoY, Revenue passenger miles increased 3.1% Y/Y, Available seat miles were up 2.4% Y/Y, and load factor was 81.2% compared to 80.7% last year.

CASM-X increased by 11.6% YoY, meeting the company's guidance. Cost control efforts included voluntary time off and limited hiring.

Fuel costs were $2.55 per gallon (-8.2% Y/Y), including $0.07 in premium expense and $0.02 from favorable fuel derivative settlements. Fuel efficiency improved by 1.5% Y/Y, driven by an increased percentage of -8 aircraft in the fleet.

As of September end, the Dallas-based company had a net cash position of $1.4 billion and an adjusted debt-to-invested capital ratio of 46%. LUV's liquidity stood at $10.4 billion, more than the debt outstanding of $8 billion.

Southwest Airlines generated an operating cash flow of $113 million for the third quarter, compared to $616 million a year ago.

Board Reconstitution

Additionally, Southwest Airlines announced the appointment of six new independent directors, including David Cush, Sarah Feinberg, and former Chevron CFO Pierre Breber, effective November 1, 2024. The appointments are part of cooperation agreements with Elliott Investment Management.

LUV's Executive Chairman Gary Kelly will retire on November 1, 2024, becoming Chairman Emeritus. Along with six other retiring directors, the Board will reduce to 13 members by the 2025 Annual Shareholder Meeting. A new independent Chairman will be appointed, and the reconstituted Finance Committee, chaired by Gregg Saretsky, will oversee operational and strategic plans.

Fourth-quarter 2024 Guidance: Southwest sees RASM up 3.5%-5.5% YoY; ASMs down ~4%; CASM-X up 11% to 13% and Economic fuel costs per gallon of $2.25 to $2.35.

Price Action: LUV shares are trading lower by 1.33% at $30.32 premarket at the last check Thursday.

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