01—Abstract
Summary
Summary of the 10-Q filed October 22, 2026. Cited figures are marked; the original filing is the authoritative source.
Southwest Airlines Co. reported a third quarter 2026 net income of $270 milliona, or $0.55 per diluted share, versus $54 million, or $0.10 per diluted share, in the third quarter of 2025.
Total operating revenues reached $8.42 billionb, up 21.2 percent year-over-year and described as a third quarter Company record, driven by passenger revenue growth of 22.8 percent. Operating income rose to $379 million from $35 million. Results were partially offset by higher aircraft fuel and related taxes, which increased 61.7 percent to $2.15 billion, and higher salaries, wages, and benefits, which rose 10.0 percent.
For the nine months, net income was $730 millionc, or $1.47 per diluted share, including a $285 million breakage revenue reversal recorded in the second quarter that the Company treated as a special item. Excluding special items, nine-month net income was $1.02 billion, or $2.05 per diluted share. The balance sheet shows total assets of $30.54 billion at September 30, 2026, cash and cash equivalents of $3.62 billion, and total stockholders' equity of $7.33 billion.
Current maturities of long-term debt rose to $2.15 billiond, and the Company reported a working capital deficit of approximately $7.2 billion, which it attributes to air traffic liability. Net cash provided by operating activities was $2.46 billion for the nine months, against capital expenditures of $2.45 billion. The Company expects 2026 net capital spending of $2.5 billion to $2.75 billion.
It entered a new $2.0 billion revolving credit facility in August 2026, and it repurchased $1.25 billion of common stock in the nine months, all in the first quarter, with approximately $450 million remaining under its authorization. The Company also disclosed ongoing aircraft delivery dependence on Boeing, with the FAA certifying the 737-7 on August 3, 2026, and first delivery expected in late 2026. Management highlighted fleet and product initiatives, including assigned and extra legroom seating, the Southwest Icon Lounge network, and a Chase co-brand agreement amendment, and noted that several litigation matters remain pending.
02—Key points
Key Highlights
- Third quarter 2026 net income of $270 million ($0.55 per diluted share), compared with $54 million ($0.10 per diluted share) in third quarter 2025.
- Third quarter total operating revenues of $8.42 billion, up 21.2 percent year-over-year, a third quarter Company record; RASM of 18.55 cents, an all-time Company record.
- Aircraft fuel and related taxes rose 61.7 percent to $2.15 billion in the third quarter; fuel costs per gallon were $3.92 versus $2.40, and the Company has no active fuel hedges.
- Nine-month GAAP net income of $730 million included a $285 million breakage revenue reversal; excluding special items, nine-month net income was $1.02 billion ($2.05 per diluted share).
- Net cash provided by operating activities was $2.46 billion for the nine months, against capital expenditures of $2.45 billion; 2026 net capital spending is expected to be $2.5 billion to $2.75 billion.
- Total debt-related activity included a new $1.5 billion term loan drawn and a new $2.0 billion revolving credit facility entered August 10, 2026, with no amounts outstanding; $1.25 billion of stock was repurchased in the first quarter.
- The FAA certified the 737-7 on August 3, 2026, with Southwest expecting to be the launch customer and to take first delivery in late 2026; a working capital deficit of approximately $7.2 billion is attributed to air traffic liability.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2026filed October 22, 2026Financial Statements
Q3 FY2026 against Q3 FY2025
| Line item | Q3 FY2026Q3 FY2025 | Change |
|---|---|---|
| Revenue | $8.42B$6.95B | +21.2% |
| Operating Income | $379.00M$35.00M | +982.9% |
| Net Income | $270.00M$54.00M | +400.0% |
| EPS (Basic) | $0.55$0.10 | +450.0% |
| EPS (Diluted) | $0.55$0.10 | +450.0% |
| Shares Outstanding (Basic) | 489.00M523.00M | −6.5% |
| Shares Outstanding (Diluted) | 494.00M526.00M | −6.1% |
05—Questions
Frequently Asked Questions
What drove the year-over-year improvement in third quarter 2026 profitability?
Operating income rose to $379 million from $35 million, driven primarily by strong revenue performance. Passenger revenues increased $1.4 billion, or 22.8 percent, reflecting a higher share of Customers choosing premium fare benefits and new ancillary products, including bag fees and assigned and extra legroom seating. Yield rose 23.3 percent. These gains were partially offset by a $821 million increase in aircraft fuel and related taxes and a $323 million increase in salaries, wages, and benefits.
How did the breakage revenue adjustment affect 2026 results?
In the second quarter of 2026, the Company reversed $285 million of previously recognized breakage revenue tied to non-expiring flight credits issued between July 2022 and December 2025, after finding that redemptions were higher than projected. Net income for the nine months was reduced by $187 million, or $0.38 per diluted share. The Company treated the adjustment as a special item and excluded it from non-GAAP results.
What is the status of the Company's fuel exposure and hedging?
The Company discontinued its fuel hedging program and terminated its remaining hedge contracts in 2025, so it is fully exposed to fuel price changes. The filing states that a one-cent-per-gallon change in jet fuel prices would affect fourth quarter 2026 aircraft fuel expense by $5.7 million, based on expected consumption of about 573 million gallons. Third quarter fuel costs per gallon were $3.92, including fuel tax, compared with $2.40 a year earlier.
What are the Company's liquidity and debt positions?
Cash and cash equivalents were $3.62 billion at September 30, 2026, and the Company reported a working capital deficit of approximately $7.2 billion, which it attributes primarily to air traffic liability. Current maturities of long-term debt increased to $2.15 billion from $324 million. The Company entered a $2.0 billion revolving credit facility in August 2026, with no amounts outstanding, and it maintains investment-grade credit ratings from all three major agencies. Approximately $450 million remained under its share repurchase authorization.
What is the outlook for aircraft deliveries and fleet modernization?
The Company expects to take delivery of its first 737-7 in late 2026, with entry into service expected in 2027, but notes that the timing and quantity of deliveries depend on Boeing's production and delivery schedule. As of October 22, 2026, it held firm orders for 487 MAX aircraft (240 -7s and 247 -8s), less 46 -8 aircraft received as of October 21, 2026, plus 130 options. The Company also expects to complete its fleet-wide Starlink rollout in fall 2027 and to open the first Southwest Icon Lounge network locations in late 2027.
06—Continue