Southwest raises Q3 forecast, proclaims $2.5 billion buyback

DALLAS — Southwest Airlines raised its third-quarter income forecast on Thursday, introduced its board licensed $2.5 billion in share buybacks and detailed a number of modifications to its enterprise mannequin because it seeks to fend off activist Elliott Funding Administration.

The airline mentioned it expects unit income to rise as a lot as 3% within the third quarter over the identical interval final 12 months, up from a earlier forecast of a decline of as a lot as 2%, helped partially by rebooking passengers who had been initially flying airlines affected by July’s CrowdStrike outage.

The service additionally mentioned it might add Bob Fornaro, a well-respected trade veteran who beforehand led Spirit Airlines, to its board of administrators. Southwest and Fornaro return greater than a decade. He had served as CEO of AirTran, the airline Southwest mixed with in 2011, and was a guide to Southwest after the merger.

Southwest executives are presenting their imaginative and prescient for the corporate’s future on the airline’s Dallas headquarters on Thursday in an investor day presentation. CEO Bob Jordan and Southwest’s different senior leaders are beneath growing stress from Elliott, which has known as for a leadership change on the service.

Southwest executives will attempt to persuade traders that it’s heading in the right direction to spice up income and improve income. Over the summer time, it unveiled dramatic changes to its greater than half-century-old enterprise mannequin, together with assigned and extra-legroom seats, which may generate extra income for the service.

In its presentation on Thursday, Southwest stood agency on its long-standing coverage of permitting clients to verify two items of baggage free of charge, saying it “generates market share good points in extra of potential misplaced income from bag charges.”

A day earlier, Southwest advised workers it’ll slash its service in Atlanta subsequent 12 months and will reduce greater than 300 flight attendants and pilots from the town in an effort to cut back prices.

Earlier this month, Southwest’s government chairman and former CEO Gary Kelly mentioned he would step down by the top of subsequent 12 months. Elliott later advised Southwest mechanics’ union that it nonetheless wished a management change on the prime of the service. The agency did not instantly touch upon Southwest’s technique presentation it launched Thursday.

— CNBC’s Rohan Goswami contributed to this report.