11:22 AM EDT, 09/26/2024 (MT Newswires) -- Southwest Airlines ( LUV ) increased its third-quarter guidance for a key revenue metric on Thursday while pledging to unlock $500 million in run-rate cost savings in 2027 through reduced hiring and other efficiency measures.

The carrier now sees revenue per available seat mile advancing by 2% to 3% in the September quarter, improved from an earlier outlook for the metric to be down 2% to flat on a year-over-year basis. Third-quarter economic fuel costs are now expected between $2.50 and $2.60 per gallon, down from an earlier projection in the $2.60 to 2.70 range.

The company reiterated its cost per available seat mile, excluding fuel and other items, estimate of 11% to 13% growth for the third quarter. It continues to see available seat miles rising by 2%. For the full year, it reiterated a capacity growth target of 4%.

Southwest ( LUV ) announced a multi-year plan to deliver more than $500 million in cost savings in 2027 through efforts including minimized hiring and aircraft scheduling improvements. The airline's stock soared 10% in Thursday trade.

The company expects to undertake significant fleet modernization, with a goal of achieving an average fleet age of five years by 2031. The will reduce average aircraft capital expenditures to about $500 million through 2027. In July, Southwest ( LUV ) estimated $1 billion in aircraft capital spending for 2024.

Its three-year financial plan also includes roughly $4 billion in cumulative incremental run-rate earnings before interest and taxes contribution in 2027 and a return on invested capital of 15% or greater.

The Southwest ( LUV ) board on Thursday approved a $2.5 billion share repurchase program.

Earlier this month, Southwest ( LUV ) announced a board shake-up that includes the 2025 retirement of Executive Chairman Gary Kelly and a plan to appoint four new independent directors. On Tuesday, activist investor Elliott Investment Management pledged to call a special meeting in the coming weeks, doubling down on efforts to oust Chief Executive Bob Jordan. Southwest ( LUV ) responded that Elliot has refused to constructively engage with the company while continuing to issue public threats.

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