Southwest Airlines (LUV) CEO Gary Kelly said the airline would have seen a handsome profit in the third quarter but the late summer spike in COVID-19 cases led to a loss as passengers stopped booking flights.

"I am very hopeful we are on the right trajectory here but it may be 2022 before we see sustained profitability," Kelly told Yahoo Finance Live.

Here are the main results from the Q3 report, compared to consensus estimates compiled by Bloomberg:

• Adjusted pre tax income loss: $135 million vs $141 million estimate

• Adjusted earnings per share loss: $0.23 vs $0.26 estimate

• Net income per diluted share: $0.73 vs $0.05 estimate

• Revenue: $4.7 billion vs $4.64 billion estimate

Southwest posted an adjusted loss of $135 million or $0.23 per share in the third quarter, beating Wall Street estimates. Revenue also came in stronger than expected at $4.7 billion, down 17% compared to the same quarter in 2019.

"So just moving from second to third quarter and seeing that increase in demand was really, really encouraging. And it's continuing on here into the fourth quarter, even though we've moderated some of our capacity plans in fourth, I'm still expecting a good healthy revenue performance," Kelly said.

Jet fuel prices have risen 60% year-to-date and Kelly warned that they pose a $100 million cost headwind for Southwest in the fourth quarter. Other airlines have issued the same warning with Delta Air Lines (DAL) and United Airlines (UAL) considering increasing ticket prices.

Kelly said Southwest will continue to be "America's low fare policeman," but added, "I can't really tell you what our future pricing actions might be other than we want to keep our costs low and keep our fares low. We don't charge bag fees, don't charge change fees,"

'Struggling through this pandemic'

Southwest said leisure and business travel demand continue to improve with renewed momentum in bookings as people plan their holiday travel. The airline is halfway to its goal of hiring 5,000 new employees to meet that demand but Kelly says balancing capacity with staffing poses some challenges.

"We're seeing a little bit higher attrition, higher access to leaves a little bit higher absenteeism. And, you know, people are just, they're still struggling through this pandemic. So we just need to be mindful of that," Kelly pointed out.

Southwest said it was aggressive with its capacity plans in the third quarter pushing close to pre-pandemic levels. But staffing shortages magnified by bad weather and air traffic slowdowns led to Southwest canceling thousands of flights two weeks ago and upsetting thousands of passengers.