Southwest Airlines (NYSE:LUV) shares traded lower after the airline forecast higher fourth quarter fuel costs and moderated its long-term capacity growth expectations.
In an investor update released Wednesday, Southwest projected 4Q fuel costs of $3 to $3.10 per gallon up from its prior forecast of $2.90 to $3.
However, the company now expects its revenues to come in at the top end of its previous target range on strong travel demand over the Thanksgiving holiday period and better-than-expected business bookings.
It continues to expect record operating revenue and passengers for 4Q, with average seat miles, an industry method of measuring capacity, expected to rise 21% year-over-year compared to the airline’s previous estimate of no change.
For full-year 2023, Southwest said it still expects average seat miles to grow 14% to 15% year-over-year. Capacity in the first quarter of 2024 is expected to grow 12%, and 6% to 8% for the full year 2024.
In terms of its long-term growth plans, the airline said it was moderating its capacity expansion plans.
Beyond 2024, it expects average seat miles to increase by a low- to mid-single-digit year-over-year, compared to its prior goal of mid-single-digit year-over-year average seat miles growth.
Shares of Southwest traded down 2.5% at US$29.55 before Wednesday’s opening bell.