Southwest cuts its 2026 profit forecast by about a quarter, and fuel at $4.55 is the reason

Southwest Airlines reported the best third quarter in its history on Wednesday and, in the same release, lowered its profit outlook. The airline now expects adjusted earnings of $2.60 to $2.85 a share for 2026, according to its earnings release. In July the range was $3.25 to $4.25, CNBC reported.

The cut in numbers

The midpoint of the range moves from $3.75 to $2.725, a drop of about 27%. The top end falls 33% and the bottom end 20%. Because the release also gives fourth-quarter guidance of $0.55 to $0.80, we can back out what the company has already earned: both ends of the range imply $2.05 a share through the first nine months.

Where the money went

The story is in the gap between two lines. Revenue grew 21.2% to $8.4 billion, which works out to roughly $1.5 billion more than a year earlier. Fuel alone took $821 million of that, a little over half. The $1.08 a share fuel headwind is larger than the $0.66 the company actually earned. Costs other than fuel rose only 3.8% per seat mile, so the squeeze is not coming from wages or maintenance.

The fourth quarter assumes $4.55 a gallon, based on the forward curve as of October 15. That is 16% above the third quarter's $3.92. Southwest expects unit revenue to rise 19% to 21%, a slightly slower pace than the third quarter, against costs that keep climbing.

This is the same pattern we reported at United, which built a $4.80 fuel assumption into its guidance, and at Delta, which assumed $4.25. The three numbers are not directly comparable, since each airline buys different fuel at different dates, but all three point the same way. CNBC counted Southwest as the third major U.S. airline this month to cut its forecast on fuel.

Who feels it

Travelers and the companies that send them. Airlines are not absorbing fuel; the 21.6% jump in revenue per seat mile is mostly higher fares and fees. That measure blends fares, bag and seat fees and how full the planes are, so it is not the same as a ticket price, but as a rough guide a business spending $1,000 a month on Southwest-type domestic trips should plan for something closer to $1,200 on the same itineraries. Capacity is also tightening: Southwest now expects 2026 seat growth of about 1.2%, down from 1.5%, and is removing six seats from each Boeing 737-700 to add extra legroom rows, which trims supply further.

Holiday and winter bookers. Fourth-quarter capacity is guided up only 3% to 4% while the airline says demand remains robust into the quarter. Fewer new seats chasing steady demand rarely lowers fares. Anyone with a late-December trip still unbooked is looking at prices set by a $4.55 fuel assumption, so waiting for a sale has less going for it than usual.

Owners deciding between flying and driving or meeting remotely. For a team of four flying round trip, a fifth more on each fare adds up quickly over a quarter of customer visits.

What to watch

Southwest discusses the quarter on a call at 10:00 a.m. ET on Thursday, October 22. The company also scheduled a Capital Markets Day in New York on March 2, 2027, where it says it will lay out multi-year targets. Until then, the guidance leans on the October 15 fuel curve, so a sharp move in crude in either direction changes the math. Track it on our crude oil chart.

Sources: Southwest Airlines third quarter 2026 results release; CNBC. The $1,000 to $1,200 example is our illustration using the company's unit revenue guidance, not a fare forecast. This is market information, not investment advice.