DALLAS — Southwest Airlines’ third-quarter revenue rose to a record high but profit fell nearly two-thirds, to $67 million, on higher costs for labor and other expenses.
The airline, which is under pressure from hedge fund Elliott Investment Management to boost profit, said Thursday that adjusted earnings beat Wall Street expectations.
Southwest also said it would speed up repurchase of $250 million worth of its stock, under a $2.5 billion share-buyback plan it announced last month.
CEO Robert Jordan said the profit — although down from $193 million a year earlier — shows that the airline’s turnaround plan is starting to work. Southwest limited costs increases by offering voluntary time off and limiting hiring to deal with what it considers overstaffing.
Southwest plans to increase revenue by converting nearly one-third of its seats to premium ones with extra legroom and by assigning seats — ending the longtime practice of letting passengers pick their own seats after boarding the plane.
The Dallas airline is also revamping its board. Six directors will step down next month, and Chairman Gary Kelly will leave next spring. Elliott, the hedge fund led by billionaire financier Paul Singer, is pushing for more — it seeks to win control of the board during a special shareholder meeting in December and wants to oust Jordan.
Southwest said third-quarter profit, excluding special items, works out to 15 cents per share, which beat a forecast of six cents per share among analysts surveyed by FactSet.
Revenue rose 5%, to $6.87 billion, $100 million more than the analysts expected.
However, labor costs rose more than 12%, reflecting recent new contracts for pilots, flight attendants and other employees.
Southwest Airlines Co. shares rose 3% before the opening bell on Thursday.
