Shares of Southwest Airlines (LUV) gained in trading on Thursday after the airline raised its forecast for fourth-quarter revenue per available seat mile (RASM). The updated outlook reflects a rebound in domestic travel demand during the holiday season and improved pricing trends, signaling optimism for the company’s near-term performance.
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Southwest Raises Q4 Outlook
Diving into the details, Southwest now anticipates its Q4 RASM will increase between 5.5% and 7%, up from its prior forecast of 3.5% to 5.5%. The airline defines RASM as its total operating revenues divided by the available seat miles—a key metric for evaluating performance. Additionally, Southwest projects its Q4 revenues will grow by 5.5% to 7% year-over-year.
In its revised outlook, Southwest adjusted its forecast for economic fuel costs, now expecting them to range between $2.35 and $2.45 per gallon, slightly higher than the earlier estimate of $2.25 to $2.35. On the operational side, the airline confirmed plans to receive delivery of approximately 20 Boeing 737-8 jets this year while retiring around 40 older 737 aircraft.
Beyond its updated forecasts, Southwest has implemented several strategies to drive demand and maintain competitiveness. These include forming new partnerships, introducing seats with more legroom, and leveraging aircraft sale leasebacks to optimize its operations and attract travelers.
Is LUV Stock a Buy or Sell?
Analysts remain sidelined about LUV stock, with a Hold consensus rating based on two Buys, nine Holds, and two Sells. Over the past year, LUV has increased by more than 25%, and the average LUV price target of $30.29 implies a downside potential of 11.3% from current levels.
