Key Takeaways
- Southwest Airlines shares surged Thursday as the airline adjusted its third-quarter and full-year projections, and announced a $2.5 billion stock buyback program.
- The announcements preceded the start of Southwest’s Investor Day on Thursday.
- The airline has faced pressure in recent months from activist investor Elliott Investment Management to make revenue-generating adjustments and to change its executive leadership.
Shares of Southwest Airlines (LUV) jumped Thursday as it announced a $2.5 billion stock buyback program and provided a positive update to its third-quarter and full fiscal year outlook.
The airline released the information ahead of Thursday’s Southwest Investor Day event. This included previously announced changes like assigned seating and overnight flights coming in 2025, and some new rollouts, like a partnership with Icelandair and a packaged vacation service called “Getaways by Southwest.”
Southwest also said it expects to yield some $500 million in savings by 2027 by reducing hiring, “optimizing scheduling efficiency,” and improving its supply chain.
Southwest Lifts Q3, Full-Year Revenue Outlook
Southwest also updated its projections for a number of metrics like revenue per available seat mile (RASM) and fuel costs. For the third quarter, Southwest now expects revenue to be up 2% to 3% year-over-year, after previous projections expected revenue flat to down 2%. Fuel costs are projected between $2.50 and $2.60 per gallon, down from $2.60 to $2.70 previously.
Southwest has faced increasing pressure in recent months to make changes at the executive level and improve profitability, with activist investor Elliott Investment Management leading the push for changes. Wednesday, the airline informed employees that among the changes to its operations over the next several months will be a reduction in service at Atlanta’s airport.
Southwest shares were up 6.4% at $30.20 at around 1:15 p.m. ET Thursday, after gaining as much as 11% earlier in the session.