Episode summary
Southwest CEO Bob Jordan on higher jet fuel costs: We're planning as if those persist into 2027
Summary
Southwest’s quarterly results beat expectations on revenue and earnings, but the airline cut its full-year profit outlook because higher jet fuel costs remain a major headwind. The Southwest CEO said the company is still operating well, with margins up nearly five points year over year and earnings of $0.66 per share, and argued that the airline can keep improving even if fuel stays elevated. He said Southwest is planning as if high fuel prices persist into 2027, while continuing to focus on what it can control.
The CEO also pushed back on any sign of demand weakness. He said demand remains strong across leisure and business travel, with about 65% of fourth-quarter bookings already in place and no evidence that consumers are pulling back on fares. He pointed to a 27% increase in airfares last quarter, stronger yields, and strong bookings around the holidays as signs that customers are accepting the new product mix.
Looking ahead, he emphasized Southwest’s product upgrades as a key growth driver, including full-fleet Starlink, Southwest Icon lounges, a premium co-brand card, and fleet retrofits. He also said the first MAX 7 deliveries should arrive in the fourth quarter and enter the schedule in March, after the FAA said the software issue was not a safety issue.
Key takeaways
- The Southwest CEO said the airline is planning for jet fuel prices to stay high through 2027, not just the next few quarters.
- Southwest still expects to expand margins in 2027 despite fuel costs, helped by product changes and business optimization.
- The CEO said demand remains strong across every geography and product, with about 65% of fourth-quarter bookings already locked in.
- He said higher fares have not yet triggered a meaningful consumer crack, even after airfares rose 27% last quarter.
- Southwest expects first MAX 7 deliveries in the fourth quarter and plans to add them to the schedule in March.
Notable quotes
“WE ARE PLANNING AS IF THOSE PERSIST INTO 2027. AND THE MAIN THING WITH ALL THE THINGS THAT ARE CONTINUING TO COME ONLINE IS SOUTHWEST AIRLINES”
“WE SAW STRONG DEMAND ACROSS EVERY GEOGRAPHY, LEISURE AND BUSINESS AND EVERY PRODUCT. AND THAT DEMAND CONTINUES IN THE FOURTH QUARTER”
“WE'LL HAVE OUR FIRST SOUTHWEST ICON LOUNGES IN PLACE. WE'LL HAVE A PREMIUM CO-BRAND CARD IN THE MARKET”
“WE'LL TAKE OUR FIRST DELIVERIES OF MAX SEVENS HERE IN THE FOURTH QUARTER. WE'LL HAVE THEM INTO THE SCHEDULE IN MARCH”
How the episode opens
Southwest, bea — Southwest beating expectations on both the top and bottom line. But the airline cut its profit forecast. Phil LeBeau joins us now with the company's ceo. Good morning. — Good morning andrew. Bob Gordon, ceo of Southwest Airlines. Andrew, set it up perfectly. You dramatically cut your full year profit guide despite beating in the third quarter. How long are you now factoring in higher jet fuel prices at well over $4 a gallon?
Well, phil, let's start with I'm really pleased with the quarter. Our people did an awesome job with the transformation. You can see it in the results.
I mean, despite jet fuel, our our margins are going to be up five nearly five points year over year. The only major airline to expand margins. We had earnings of $0.66 per share.
That's 500% increase over last year. So despite fuel, we are operating really, really well. And there's huge demand for the southwest product.
We are not planning on fuel to go down. We're planning basically in the current environment and even in that environment, we see opportunities to expand margins in 2027. If fuel comes down, that's a great thing.
But we're not planning against that.
Two part question here. When you say you're planning on these fuel prices to stay where they are, are you talking into the first quarter? Are you talking the first half of this year? Or have you told your team, look, it may be like this for an extended period of time.
Well, we have no idea. So we're focusing on what we can control like we have been. And all you can do is plan in the environment that you know. And today fuel prices are high. We are we are planning as if those persist into 2027.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- jet fuel costs
- earnings
- profit guidance
- airline margins
- travel demand outlook
Companies and tickers mentioned
- LUV
- Southwest Airlines
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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