Southwest Airlines, American lift forecasts as holiday travel takes off

U.S. carriers Southwest Airlines and American Airlines lifted their fourth-quarter forecasts on Thursday, betting on buoyant domestic travel demand during the holiday season and improved pricing.

Shares of the airlines rose in morning trading and lifted their peers, with the S&P 1500 airlines sub-index hitting its highest level since June 2021.

Signaling a strong start to the travel season, the U.S. Transportation Security Administration said it had screened 3.08 million airline passengers on Sunday, the highest number ever on a single day.

U.S. airlines are set to fly more than 31 million passengers over the holiday period, up from nearly 29 million during the same period in 2023, according to trade association Airlines for America.

The raised forecasts follow warnings on the impact of the U.S. presidential election on travel demand.

Southwest's CEO Bob Jordan, speaking at a Goldman Sachs conference, said the carrier drew network capacity down during the election week to align with demand.

The budget carrier expects fourth-quarter revenue per available seat mile to be up between 5.5% and 7%, compared with its prior expectation of between 3.5% and 5.5%. It also said it was encouraged by revenue trends and forward bookings.

Meanwhile, American also lifted its fourth-quarter adjusted earnings and total revenue per available seat mile forecast, sending its shares up nearly 10%.

Jordan said Southwest was working with Boeing to fix a jet delivery target on a number that was more "conservative" than its 90 jet estimate.

The company continued to expect about 20 Boeing 737-8 jet deliveries this year and to retire roughly 40 older 737 models from its fleet.

The airline has struggled to find its footing after the pandemic, in part due to Boeing's delivery delays and industry-wide overcapacity in the domestic market.

Shares of Delta Air Lines and United Airlines were up 2.5% each.

Southwest said it expects economic fuel costs per gallon to fall in a range of $2.35 to $2.45 in the current quarter, compared with its previous forecast of $2.25 to $2.35.