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Southwest Airlines Co. and American Airlines Group Inc. are finishing the year with more optimistic financial projections.
That's according to updates shared in recent days by North Texas' two major air carriers.
After a turbulent 2024, Dallas-based Southwest (NYSE: LUV) expects a smoother landing. It projected Dec. 5 that revenue per available seat mile would grow 5.5% to 7% in the fourth quarter compared with the same period in 2023, up from its previous estimation of 3.3% to 5.5% growth. The airline attributed the increase to higher travel demand in addition to improved internal operations.
The boost comes despite an expected 4% decrease in available seat miles this quarter, compared with a previous estimate of no change. Additionally, fuel costs are up slightly, from $2.25-$2.35 per gallon to $2.35-$2.45.
Additionally, Southwest (NYSE: LUV) expects to make about $5 million in debt repayments by the end of the year, and spend about $62 million in interest. And the airline said it will end the year with 797 aircraft, up slightly from the previous estimate of 796, after the end of Boeing's machinists strike.
Going forward, the airline said it will sell or lease some of its aircraft to generate cash in order to pay off debt, buy back stock and reduce future expenses. A $750 million stock repurchase program is in the works for early 2025, following its $250 million stock repurchase announced in October 2024.
Southwest shares were trading around $33.46 on the afternoon of Dec. 10, relatively flat compared with this time last week. The airline is preparing to embark on a transformative 2025, with the launch of assigned seats and other major changes to operations.
Meanwhile, American Airlines Group Inc. (Nasdaq: AAL) also shared a brief update on its forecasted financials state for the fourth quarter. The Fort Worth-based carrier said Dec. 5 it expects revenue per mile to be flat or up by 1% year over year, an improvement from an earlier estimate of a 1-3% decline.
At the other end of the financial equation, the airline said operating costs will likely be up 5% to 6% compared with last year. American attributed this to paying more for profit sharing due to better earnings.
Shares of American were trading around $17.41 on Dec. 10, up almost 20% from a week prior.
Chief executives across the aviator sector are feeling pressure. American Airlines CEO Robert Isom, speaking Dec. 5 in Charlotte, North Carolina, said there has never been a tougher time to run an airline. The disruption caused by the Covid-19 pandemic is still felt, and now supply chain and labor challenges have added to the turbulence.
He said American serves around 650,000 customers per day. To disappoint just 1% of customers daily is to disappoint 6,500 people, and to push back 10% of flights due to weather is to inconvenience 65,000 people. He stressed the airline has to run nearly perfectly to create a buffer for those inevitable disruptions, yet it is dependent on a supply chain that has more variability than ever before.
Whether it’s depending on the providers of aircraft materials or relying on people to apply and show up to work, the entire process has been thrown off track since 2020.
"Covid has taken a lot of human capital out of our businesses that we have to find a way to replace,” Isom said on the panel hosted by the Charlotte Regional Business Alliance along with Federal Reserve Bank of Richmond President Tom Barkin.
Isom said that American does everything it can with AI and other innovative technology, but there’s still an "aspect of the economy that needs people to do things in a tangible fashion."
He called on American's key partners — a group that includes Raytheon, GE, Airbus and Boeing — to "get our acts together" and move past the "Covid hangover."
Isom harped on the extreme shortage of pilots in the airline industry, as the pandemic aligned with a massive retirement wave. While entry level pilots used to earn $40,000 a year, Isom said they now make $100,000, and the top pilots are earning well over $600,000. One of American’s focuses this year and going into the next is bringing exposure of the aviation industry into communities with people who have never considered it as a career path.
Overall, the airline CEO said that there is a high demand for travel right now, and he remains optimistic.
