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What you need to know
- Southwest’s shares rose Thursday, after it raised its revenue forecast for the current quarterly.
- The airline said it expected its total seating capacity to be lower than the same time last year as it undergoes "network optimization."
- After months of being under pressure by an activist investor, the company has made changes such as moving away from their well-known model with open seating.
Southwest Airlines shares (LUV), rose on Thursday after it became the latest airline to increase its outlook for revenue, citing a strong travel demand heading into holiday season.
The airline now expects its total capacity of available seating to decline 4% year-over-year in the fourth quarter as it undertakes "tactical actions" like "improving network optimization and capacity rationalization."
Southwest 'Encouraged' Ahead of Holiday Travel Season
Southwest now expects its revenue per seat mile to grow between 5.5% and 7%, compared with the 3.5%-to-5.5% growth it had previously projected. It said that it expected higher revenue growth due to “better than expected leisure travel demand and faster than expected benefits from actions taken to mature the Company’s revenue management techniques.”
Southwest said it is "encouraged by recent revenue trends" and booking data around the upcoming holiday season, and expects the trends to continue into next year.
In the first quarter, 2025, after the airline has completed the stock-buyback program of $250 million announced in October it will start an accelerated program of $750 million, leaving $1.5 billion from the original $2.5 billion program.
Outlook Bump Follows JetBlue's Similar Shift, Pressure From Activist Investor
This updated forecast comes just a day before rival JetBlue’s (JBLU), which also raised its outlook after claiming to have seen a rise in travel demand following the presidential elections last month.
The move comes as Southwest announced several new revenue-generating measures, including abandoning their famous open seating policy. This was after months of activist investor Elliott Investment Management’s pressure. In October, the firm won several seats in Southwest’s Board of Directors after a settlement was announced.
Southwest’s shares rose 4% at noon on Thursday. This is more than 20% higher than where they began the year.
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