Ryan Green
Executive Vice President and Chief Commercial Officer at Southwest Airlines
Thank you, Tammy. I'm going to walk through a review of our third quarter revenue results, provide context for our fourth quarter outlook and share some exciting commercial updates with you today. For additional detail on our revenue performance, please see this morning's earnings release. Starting with third quarter. Demand continues to be healthy. Operating revenue was a third quarter record of just over $6.5 billion. And on a year-over-year basis, operating revenue was up nearly 5%, and that's on a tough compare period given pent-up domestic travel was still underway last year. When you compare revenue performance versus third quarter of 2019, operating revenue is up nearly 16% on 12% capacity growth.
Also, average fares were up 2.6% year-over-year and are up over 7% over third quarter 2019. So while we have work to do to cover our unit cost challenges, I am pleased we are moving in the right direction. The nearly 5% operating revenue growth year-over-year on a capacity increase of 12.5% had unit revenue or RASM declining 6.8% for the third quarter of 2023. The July four and Labor Day travel came right in line with our expectations. However, bookings for nonpeak August and September, while stable came in at the lower end of our expectations.
This performance aligns with fall start dates for primary and secondary schools continuing to shift earlier in much of the country. For example, in our markets, 1/3 of schools were back in session by the second week of August, which is nearly double what it was pre-pandemic, and nearly 95% of schools were back before the Labor Day weekend. We are planning for these back-to-school trends to continue as we work on our August 2024 capacity plans. In addition, we had multiple records set from our ancillary products and our loyalty program.
We had an all-time best quarter for ancillary revenue with 24% year-over-year growth and Rapid Rewards set a third quarter record for revenue generated from the program. New Rapid Rewards member acquisitions were a quarterly record, and the number of engaged members grew 10% on a year-over-year basis. Rapid Rewards point redemptions were up 16% compared to the same period last year, and retail spend on our co-brand Chase credit card was also a third quarter record. Our customers love the benefits they get from the card as evidenced by our low cardholder attrition, which continues to be below pre-pandemic levels.
Overall, we see a resilient consumer and high engagement with the Southwest Airlines brand. Consumer spending trends still favor services, particularly travel experiences, and we expect that will continue. Moving to the fourth quarter. We're seeing a continuation of healthy leisure booking demand and stable business travel patterns. As a result, we expect a nominal sequential increase in operating revenue resulting in record fourth quarter revenue and passengers, which would bring us to three consecutive quarters of record operating revenue. October performance has been strong to date, and bookings for the holidays as a whole are also strong.
RASM, however, continues to be impacted by higher than seasonally normal capacity, driven by our network restoration plan, a larger-than-normal investment in development markets, and business travel that while improving is still below historical levels. We also expect the close-in leisure trends we saw in non-peak August and September will persist into the non-holiday periods of the fourth quarter and our guidance range does contemplate potential challenges from this year's holiday placement, including the expectation that a portion of return travel will spill into January.
I am encouraged, however, that we have higher booked load factors for the December holiday period this year than we had at the same point last year, which indicates to me we're not experiencing significant book away as a result of last year's operational disruption. All in, we expect RASM in the fourth quarter to finish down 9% to 11% on a year-over-year basis on capacity up approximately 21%. Again, we are steadfastly committed to addressing RASM performance to ensure a revenue plan that is appropriate for the current demand and cost environment. In the near term, we are continuing to execute a strategy of fair sale campaigns to address low-demand flights with meaningful advanced purchase requirements.
This helps build load factor and suboptimal capacity without impacting higher demand flights or diluting close and yield strength. Looking to 2024, as Bob mentioned, we will address RASM by moderating capacity to better match demand and optimizing our schedules to accommodate current travel behaviors. Our current set of strategic initiatives, including GDS participation and the new revenue management system, will also contribute incremental pretax profits to 2024 as they mature and hit their full run rates. Finally, we're tireless in working to make customer experience on Southwest Airlines even better and drive even more loyalty from our customers.
Earlier this month, we announced several exciting updates and the first involves several enhancements to our award-winning Rapid Rewards program. We will add the ability for customers to combine Rapid Reward points with cash next spring, which increases the ubiquity of our loyalty currency and makes it easier to book additional flights on Southwest Airlines. We also made it easier to reach our A-List and A-List preferred levels in 2024, and are looking to reward our customers for their loyalty and entice them to fly with us whenever they travel. We have an imperative to win more customers and drive more travel from our most frequent travelers and these enhancements are designed to give them even more reasons to choose Southwest Airlines.
We also launched a new product for our corporate customers last week that will help us continue to grow our market share in the managed travel space. Our new product streamlines the process to book group travel for meetings, incentives and conventions, which is one of the fastest-growing segments in the managed travel space. I'm very pleased with the response to the product so far, as we already have millions of dollars in travel booked on the new tool in just the first few days. Finally, we recently introduced customer bag tracking, which gives our customers the ability to track their checked bags throughout their day of travel both at the airport and in flight.
This improvement was one of the investments we accelerated following last December's disruption. By providing additional transparency and information to customers about where their bags are during their travel journey, we're elevating the travel experience and removing friction for our customers. This enhancement is an early release of our larger digital hospitality modernization plan. So congratulations to the teams that worked so hard to bring these great enhancements and solutions to market for our customers. Ultimately, we have to continue to win customers while taking into account the challenges of higher cost inputs as we build both our long-term commercial strategies and our near-term revenue plans, and we're committed to doing just that.
With that, I'll turn it day over to Andrew.
