What's Going On With Southwest Airlines Stock After Guidance Update?

Southwest Airlines Company LUV shares are trading higher in the premarket session on Thursday.

In an exchange filing, the company said it has authorized a new $2.5 billion share repurchase program.

In connection with the new share repurchase program, the board terminated and replaced the company’s prior share repurchase program, which the board authorized in May 2019.

Southwest highlighted that it is reducing headcount by controlled hiring, and labor cost certainty has been achieved.

Also Read: Delta, Southwest And Other Airlines In Hot Waters With US Transportation Department For Unfair Rewards Programs

For the third quarter, the company sees operating revenue per available seat mile to grow 2% to 3% (prior view: flat to down 2%).

Economic fuel costs per gallon is expected to be $2.50 to $2.60 (prior view: $2.60 to $2.70).

The company expects to deliver approximately $4 billion in cumulative incremental earnings before interest and taxes (EBIT) by 2027, along with an after-tax return on invested capital (ROIC) of 15% or greater, significantly surpassing the weighted average cost of capital (WACC).

The company’s multi-year plan is expected to deliver an estimated $500 million run rate of cost savings in 2027 by minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and improving corporate efficiency.

Southwest Airlines expects to begin selling assigned seats in the second half of 2025, with its first flights operating with the new model in the first half of 2026.

Southwest Airlines also plans to enhance its boarding process by incorporating seat assignments, while prioritizing operational efficiency and improving the customer experience.

The revamped boarding method will retain Southwest’s distinctive and well-liked approach, utilizing position numbers and signage displayed on stanchions in the gate area.

Price Action: LUV shares are trading higher by 6.45% to $30.22 premarket at last check Thursday.

Image by Around the World Photos via Shutterstock

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