southwest airlines reported a more than 9% year-over-year increase in second-quarter profit as higher fares helped airlines cover fuel costs, but its outlook for the summer fell short of Wall Street expectations.
The company forecast third-quarter adjusted earnings of 50 cents to 75 cents, below analysts’ expectations of 82 cents, even though it expected sales to rise 17.5% to 19.5% from a year earlier. The Dallas airline said it plans to reduce capacity by up to 1% or keep it flat compared to the third quarter of 2025.
Southwest expects full-year adjusted earnings per share to be between $3.25 and $4.25. In January, the company expected adjusted full-year 2026 earnings to be at least $4 per share.
Although fuel prices have eased from record highs sparked by the Iran war, costs remain volatile, and airlines announced this month that they would maintain most of their fare increases this year. Southwest’s average one-way fare was $225.61, up nearly 21% from $186.65 a year ago.
CEO Bob Jordan told CNBC’s Phil LeBeau on Thursday: “There’s still room for the industry to change rates to catch up with the costs we’ve seen over the last five or six years.”
Over the past two years, Southwest Airlines has dismantled its decades-old business model to increase profits. In January, the airline eliminated unreserved seating, introduced basic economy fares and also ended its long-standing policy of allowing customers to check in up to two bags for free.
“The demand environment continues to be very strong, and that includes domestically,” Chief Financial Officer Tom Doxey told CNBC on Wednesday.
Doxey said recent improvements to aircraft and amenities are helping to attract more business travelers.
Southwest Airlines’ revenue rose 16.4% to $8.4 billion in the second quarter. But Southwest Airlines’ costs also skyrocketed, with fuel costs rising 67% from a year earlier to $2.22 billion in the second quarter.
Net income increased 9.4% to $233 million, or 47 cents per share, compared to $213 million, or 39 cents per share, in the year-ago period.
Here’s how Southwest reported in the second quarter compared to Wall Street expectations, according to LSEG consensus estimates.
Earnings per share: 94 cents adjusted, 51 cents expected Earnings: $8.72 billion adjusted, $8.58 billion expected
Southwest reported adjusted earnings of 94 cents per share, excluding one-time items and including an adjustment for customers who redeemed more flight credits than expected. Southwest Airlines has changed its previous policy and now has an expiration date for flight credits from many ticket classes sold starting in mid-2025. The company’s sales figures were also adjusted for that reason.
Description: This article has been updated to reflect that adjusted earnings are in line with analyst expectations.
