A Southwest commercial airliner takes off from Las Vegas International Airport in Las Vegas, Nevada, U.S., February 8, 2024. REUTERS/Mike Blake

By Rajesh Kumar Singh

CHICAGO (Reuters) -Southwest Airlines reported an unexpected third-quarter profit on Wednesday, and forecast record sales in the current quarter on the back of improvements in travel demand.

The Texas-based carrier is the latest U.S. airline to report a pickup in travel bookings after corporate and leisure bookings took a hit in the first half of the year due to concerns about the economy and growing trade tensions. Last week, United Airlines said it expected to produce the highest quarterly revenue in the company's history in the quarter through December.

Southwest said travel bookings turned higher in early July, with a quarter-on-quarter improvement in business traffic. It expects travel demand to remain strong through December, leading to a "meaningful" expansion in its fourth-quarter margin.

The company's shares rose more than 3% in after-hours trading.

Southwest, the biggest U.S. domestic carrier, has struggled to find its footing after the COVID-19 pandemic and is undergoing a major strategic transformation.

The airline has begun charging for checked bags, rolled out a new basic-economy fare, and will switch to a new assigned seat policy in January, replacing its previous open seating model.

CEO Bob Jordan said the company plans to ramp up its revenue and cost initiatives in the fourth quarter. He did not offer more details.

Jordan has talked of the company's aspirations to launch flights to Europe and set up premium airport lounges as part of its turnaround strategy.

Southwest estimated revenue per available seat mile, or revenue per seat, in the fourth quarter to rise 1% to 3% from a year ago.

The company is benefiting from industry efforts to limit seat supply and fend off discounting pressure. Its pricing power also got a boost as financial troubles forced Spirit Airlines to shrink its operations.

Southwest is trying to keep a lid on operating expenses and plans to cut costs by $370 million this year. It expects non-fuel operating costs to increase by 1.5% to 2.5% in the fourth quarter from a year ago, after they rose 3.4% in the third quarter, less than its forecast increase of up to 5.5%. The airline attributed this to cost discipline across the organization.

Southwest reported an adjusted profit of 11 cents a share, compared with analysts' average expectations of a loss of 3 cents, according to data compiled by LSEG. Operating revenue totaled about $6.95 billion, compared with $6.29 billion expected by analysts.

The company will discuss its financial results on a call with analysts and investors on Thursday morning.

(Reporting by Rajesh Kumar Singh; Editing by Richard Chang)