The U.S. discount carrier said its net loss had narrowed to $16 million, or 2 cents per share, from $120 million, or 16 cents per share, a year earlier.
During the quarter, Southwest recorded charges of $27 million for the buyout program and $12 million for a portion of its fuel hedge portfolio.
Excluding these one-time items, the airline reported a profit of 3 cents per share.
Revenue for the third quarter fell 7.8 percent to $2.7 billion.
(Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn)