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Southwest Airlines shares fell by as much as 9% in premarket trading on Wednesday after the company announced weak guidance for a key industry metric.
In its third-quarter earnings statement, Southwest said it expected the revenue generated from each seat flown a mile – Revenue per Available Seat Mile (RASM) – to fall by between 4% and 5% in the fourth quarter.
The high end of that forecast would be worse than the 4.1% drop in RASM that Southwest reported for the third quarter. According to Bloomberg, the company said Hurricane Matthew cut October RASM by about one-half point, but that would only reflect in the fourth-quarter earnings.
Southwest, like other airlines, has experienced pressure from lower ticket prices amid greater competition in their industry.
Third-quarter revenue and profit fell. Adjusted earnings per share (EPS) was $0.93, beating the forecast for $0.88. Revenue was short of expectations, at $5.14 billion versus $5.16 billion estimated according to Bloomberg.
“We will continue to manage our growth prudently in light of the revenue environment and increasing fuel prices,” said CEO Gary Kelly in the earnings statement.
“We plan to slow our 2017 available seat mile growth rate to less than 4.0 percent, year-over-year, with approximately 2.0 points of the increase relating to domestic growth.”