US Airlines Flash Bullish Signal as Q3 Earnings Top Forecasts
American Airlines and Southwest lead the sector with better-than-expected results, signaling robust travel demand heading into the holiday season.
Major U.S. airlines are signaling a strong outlook for the remainder of the year after carriers including American Airlines and Southwest Airlines reported third-quarter results that flew past analyst expectations, buoyed by resilient consumer demand and moderating fuel costs.
The robust performance suggests travelers are continuing to prioritize flights for leisure and business, providing a crucial tailwind for an industry navigating persistent economic headwinds. The results sent shares of American Airlines up more than 3% in morning trading, while Southwest saw its stock decline, pointing to investor focus on future guidance over headline beats.
American Airlines (NASDAQ: AAL) reported record third-quarter revenue of $13.7 billion and a smaller-than-anticipated adjusted loss of $0.17 per share, comfortably beating consensus estimates of a $0.25 per share loss. The Fort Worth-based carrier provided an optimistic forecast, projecting an adjusted profit between $0.45 and $0.75 per share for the fourth quarter, a sign of confidence heading into the critical holiday travel period. In its official release, the company credited its performance to strong demand and effective cost control measures.
Similarly, Southwest Airlines (NYSE: LUV) posted a surprise profit, defying forecasts of a loss. The Dallas-based carrier reported adjusted earnings of $0.11 per share, while analysts had braced for a slight loss of $0.02 per share. The airline also achieved record third-quarter operating revenues of $6.9 billion. Despite the positive results, Southwest's stock fell more than 6%, suggesting investors were looking for a more aggressive upward revision to its outlook. The company reaffirmed its full-year guidance but noted ongoing efforts to refine its network and operations.
The better-than-expected earnings from these key carriers are not happening in a vacuum. They reflect a broader industry trend of sustained travel demand that has helped offset inflationary pressures. Air travel through U.S. security checkpoints saw a year-over-year increase in the third quarter, reversing a decline from the prior quarter and underscoring the consumer's willingness to spend on travel. Industry data shows this rebound provided a solid foundation for the sector's financial performance.
While demand remains a bright spot, airlines continue to grapple with significant operating costs. However, a recent moderation in jet fuel prices has offered some relief. The average cost per gallon, while still volatile, has decreased from its peak, allowing carriers to improve their margins. In its third-quarter report, American noted a 5.5% reduction in the average price per gallon compared to the prior year.
Looking ahead, the industry's focus shifts to the fourth quarter and early 2026. The strong Q3 results and positive forward guidance from carriers like American set an encouraging tone for the holiday season. Investors will be closely watching whether airlines can maintain pricing discipline and operational efficiency to fully capitalize on the enduring demand for air travel.