Southwest Airlines (NYSE:LUV) on Thursday reported third-quarter profit that topped analysts' expectations, and it forecast that unit revenue would rise in the fourth quarter year-over-year.
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The U.S. budget carrier earned $584 million in the third quarter, a nearly 78 percent rise over the year prior. Excluding special items, profit was $623 million, or 94 cents per diluted share, compared with the average analyst estimate of 92 cents, according to Thomson Reuters I/B/E/S.
Southwest forecast that unit revenue, or sales relative to the total mileage of the seats it flies, would rise about 1 percent in the fourth quarter compared to the year prior.
It attributed the increase to "favorable booking" trends thus far in October and to revenue it has generated from an amended marketing agreement for credit cards with Chase Bank USA NA.
The forecast unit revenue increase breaks a two-quarter-long decline in that measure as Southwest added capacity and competed for share in hotly contested U.S. cities such as Dallas - its headquarters - pressuring ticket prices.
Sterne Agee CRT analyst Adam Hackel called the unit revenue rise a "very positive indication going into 2016," saying he had expected it to stay flat.
Investors closely follow the unit revenue gauge as an indicator of long-term health in the airline business.
Southwest reported that its capacity plans remain unchanged, expecting to increase available seat miles about 7 percent in 2015 and about 5 percent to 6 percent in 2016, each compared to a year earlier.
It said it expects unit costs in the fourth quarter, excluding fuel, profit-sharing and other expenses, will be "comparable" with the year prior, including the impact from a tentative contract it has reached with pilots at the airline.
The airline said it returned $549 million to shareholders through dividends and stock buybacks in the third quarter.
It said its operating margin in the quarter was 20.3 percent, helped by lower fuel prices.
(Reporting By Jeffrey Dastin in New York Editing by Jeremy Gaunt and W Simon)