10:32 AM EDT, 10/24/2024 (MT Newswires) -- Southwest Airlines ( LUV ) and American Airlines ( AAL ) reported better-than-expected third-quarter results, while Southwest ( LUV ) said it reached a cooperation agreement with activist investor Elliott Investment Management.

Southwest's ( LUV ) adjusted earnings declined to $0.15 a share for the September quarter from $0.38 the year before, but exceeded the Capital IQ-polled consensus of $0.04. Total operating revenue improved 5.3% to $6.87 billion, topping the Street's view for $6.79 billion. Passenger revenue rose 5.7% to $6.25 billion, while freight declined 2.3% to $43 million.

Yield improvements from capacity moderation across the industry helped drive the company's operating and passenger sales. The carrier's revenue per available seat mile increased 2.8% on a yearly basis, while operating expenses per available seat mile, excluding fuel and oil expense, jumped about 12%.

For the ongoing three-month period, Southwest ( LUV ) expects unit revenue to be up 3.5% to 5.5% versus the prior-year quarter, with capacity to be down about 4%. The outlook reflects a headwind of "just under one-half point" from Hurricane Milton and resulting cancellations, according to the company. Demand for travel "remains healthy" while bookings-to-date for the holiday season are robust, Southwest ( LUV ) added.

Separately, the airline said Executive Chairman Gary Kelly will now retire on Nov. 1 under a deal with Elliot, while a reconstituted board will name a new independent chairman. The carrier appointed David Cush, Sarah Feinberg, Dave Grissen, Gregg Saretsky, Patricia Watson and Pierre Breber to its board, effective Nov. 1.

Southwest ( LUV ) will share confidential information with the activist investor regarding "upcoming company announcements and other matters," according to the joint announcement. Elliot withdrew its request for a special shareholder meeting and dropped its plan to nominate directors on the airline's board.

At American Airlines ( AAL ), adjusted EPS decreased to $0.30 in the third quarter from $0.38 last year, but beat the Street's view of $0.17. Revenue rose to $13.65 billion for the three months ended Sept. 30 from $13.48 billion a year ago, ahead of the average analyst estimate of $13.57 billion on Capital IQ. Passenger revenue edged up 0.8% to $12.52 billion, while cargo gained 5% to $202 million.

"The American Airlines ( AAL ) team continues to focus on running a reliable operation and managing costs across the airline," CEO Robert Isom said. "We have taken aggressive action to reset our sales and distribution strategy and reengage the business travel community, which we're confident will improve our revenue performance over time."

For the full year, the company now projects adjusted EPS of between $1.35 and $1.60, up from its previous guidance of $0.70 to $1.30. The market view is for normalized EPS of $1.31 for 2024. The airline is guiding for fourth-quarter adjusted EPS of $0.25 to $0.50, versus analysts' forecast of $0.36.

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