DALLAS, July 23, 2025 /PRNewswire/ — Southwest Airlines Co. (NYSE: LUV) (the “Company”) today reported its second quarter 2025 financial results and Company highlights:
Net income of $213 million, or $0.39 income per diluted share
Net income, excluding special items1, of $230 million, or $0.43 income per diluted share
Returned $1.6 billion to Shareholders through a combination of share repurchases and dividends
Launched bag fees with financial benefit exceeding expectations and no negative operational impact
Rolled out new basic economy product structure, laying the foundation for future product differentiation
Maintaining targets of $1.8 billion full year 2025 and $4.3 billion full year 2026 incremental earnings before interest and taxes, excluding special items (“EBIT”2) contribution from slate of initiatives
While early, recent industry demand shows signs of improvement off of depressed second quarter 2025 levels, which combined with moderated capacity across the industry and Southwest-specific initiatives, creates a constructive backdrop for the second half of the year
Providing updated full year 2025 guidance for EBIT2 in the range of $600 million to $800 million
Board of Directors authorized a new $2.0 billion share repurchase program expected to be completed over a period of up to two years
Bob Jordan, President, Chief Executive Officer, & Vice Chairman of the Board of Directors, stated, “We continued to make meaningful progress against our transformational plan in second quarter, most notably implementing bag fees and a basic economy product. We had an exceptional operational rollout and continued to deliver outstanding service—a testament to our People. These initiatives are coming online quickly, and we are pleased with performance thus far, including bag fee revenue exceeding expectations. We are encouraged by the incremental fare product buy up that is already occurring at this early stage and in advance of assigned and premium seating that we will begin selling next week for flights beginning January 2026. We have already realized approximately one-third of our $1.8 billion 2025 initiative EBIT2 target in first half 2025 and remain highly confident in our ability to realize the remaining amount during the second half of the year, according to our plan. The value of these initiatives accelerates throughout second half 2025 and even more meaningfully into 2026. Underscoring belief in our transformational plan, strong management execution, and the ability to deliver significant value for Shareholders, our Board of Directors has authorized a new $2.0 billion share repurchase program, expected to be completed over a period of up to two years.”
Guidance and Outlook:
The following tables provide select financial guidance for third quarter 2025 and full year 2025, and select full year 2025 and 2026 targets.
3Q 2025 EstimationRASM (a), year-over-yearDown 2% to up 2%ASMs (b), year-over-year~FlatFuel cost per gallon3$2.40 to $2.50ASMs per gallon (fuel efficiency)82 to 84CASM-X (c), year-over-year1,4Up 3.5% to 5.5%Scheduled debt repayments (millions)~$6Interest expense (millions)~$352025 EstimationEBIT2 (millions)$600 to $8002025 Target2026 TargetEBIT2 contribution from initiatives (billions)~$1.8~$4.3
(a) Operating revenue per available seat mile (“RASM” or “unit revenues”).(b) Available seat miles (“ASMs” or “capacity”).(c) Operating expenses per available seat mile, excluding fuel and oil expense, special items, and profit sharing (“CASM-X” or “unit costs”).
Key Initiative Highlights:
Introduced bag fees with initial financial benefit exceeding expectations
Implemented basic economy product, laying the foundation for future product differentiation
Reintroduced flight credit expiration
Announced partnership with China Airlines and three new gateways for Icelandair partnership
Completed retrofits of more than 220 aircraft for extra legroom seating
Announced sell date of July 29, 2025, for assigned and premium seating, for travel beginning January 27, 2026
Announced intention to commence new service at Cyril E. King International Airport on St. Thomas beginning early next year
Completed the September 2024 $2.5 billion share repurchase authorization in second quarter 2025, repurchasing the remaining $1.5 billion through an accelerated share repurchase program. Final settlement of shares purchased through the second quarter 2025 accelerated share repurchase program is expected to occur by the end of July 2025
Revenue Results and Outlook:
Second quarter 2025 passenger revenues were $6.6 billion, a 1.3 percent decrease, year-over-year
Second quarter 2025 operating revenues were $7.2 billion, a 1.5 percent decrease, year-over-year
Second quarter 2025 RASM decreased 3.1 percent on capacity up 1.6 percent, both year-over-year—in line with the Company’s previous guidance range
Domestic leisure travel stabilized during second quarter 2025, with recent trends showing signs of improvement, and the Company once again outperformed its large industry peers on domestic unit revenue. The Company’s portfolio of recently implemented initiatives provided incremental revenue in second quarter 2025 that is expected to ramp up as the year progresses.
Following the May 28, 2025 launch of its basic economy product, the Company experienced a temporary reduction in the conversion rate of basic economy on its website. The Company took swift action and refined its booking flow and marketing approach in an effort to reduce friction, as well as offer additional promotional activity, and bookings and conversion rates quickly returned to expected levels. This resulted in an impact to second quarter 2025 year-over-year RASM of nearly one-half point, and an estimated impact to third quarter 2025 year-over-year RASM of approximately one point.
The Company expects third quarter 2025 unit revenues to be in the range of down 2 percent to up 2 percent on roughly flat capacity, both on a year-over-year basis. This guidance range assumes a modest sequential improvement in demand. Company-specific initiatives provide a unique offset to the broader industry revenue impact, and will continue to accelerate throughout third quarter 2025. Third quarter 2024 RASM included approximately one point of positive year-over-year impact from the CrowdStrike industry event.
The Company has provided full year 2025 EBIT2 guidance, as well as a reconciliation to its previous full year guide included in the materials accompanying this release. The Company’s EBIT2 guidance assumes further sequential improvement from third quarter 2025, driven by accelerating incremental revenue from Company-specific initiatives, the recovery of the temporary basic economy optimization impact, and anticipated improvement in domestic leisure travel trends.
Non-Fuel Costs and Outlook:
Second quarter 2025 operating expenses increased 0.9 percent, year-over-year, to $7.0 billion
Second quarter 2025 operating expenses, excluding fuel and oil expense, special items, and profit sharing1, increased 6.4 percent, year-over-year
Second quarter 2025 CASM-X increased 4.7 percent, year-over-year—in line with the Company’s previous guidance range
The Company’s second quarter 2025 CASM-X year-over-year increase included an approximate one-half point headwind from a non-cash mark-to-market adjustment for nonqualified deferred compensation plans which was driven by recent strong stock market performance.
The Company continues to expect to achieve its $370 million cost reduction target this year. The Company anticipates third quarter 2025 CASM-X to increase in the range of 3.5 percent to 5.5 percent, on roughly flat capacity, both on a year-over-year basis. This increase is driven primarily by the continuation of inflationary pressures, including those associated with labor contracts ratified in 2024, as well as approximately one point from the timing of engine overhaul expenses and one-half point from aircraft retrofit costs in advance of extra legroom seating launching in January 2026. Excluding the impact of book gains from fleet transactions in the fourth quarter of both years, the Company continues to expect fourth quarter 2025 CASM-X to be up low-single digits, year-over-year. The Company remains focused on driving efficiencies to offset overall inflationary cost pressures and achieve its multi-year cost reduction targets.
Fuel Costs and Outlook:
Second quarter 2025 fuel costs were $2.32 per gallon—slightly above the Company’s previous guidance range
Second quarter 2025 fuel efficiency improved 2.9 percent, year-over-year, primarily due to operating more Boeing 737-8 (“-8”) aircraft, the Company’s most fuel-efficient aircraft, as a percentage of its fleet
During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio. The cash proceeds from this transaction totaled approximately $40 million, which will reduce future premium costs. The remaining net premium costs of approximately $209 million will be recognized as an increase to Fuel and oil expense in the periods the originally forecasted transactions occur, specifically $72 million in the second half of 2025, $115 million in 2026, and $22 million in 2027. As of June 30, 2025, the Company had no fuel hedging contracts outstanding and its fuel hedging program has been discontinued.
Capacity, Fleet, and Capital Spending:
Second quarter 2025 capacity increased 1.6 percent, year-over-year—in line with the Company’s previous guidance range
The Company received 17 -8 aircraft and retired seven Boeing 737-700 aircraft in second quarter 2025, ending the quarter with 810 aircraft
Second quarter 2025 capital expenditures were $635 million, driven primarily by aircraft-related capital spending, as well as technology, facilities, and operational investments
The Company previously announced proactive capacity reductions in the second half of 2025 in an effort to better accommodate the current demand environment and capture associated cost savings, and continues to expect full year 2025 capacity to be up roughly 1 percent, year-over-year. This modest growth is driven entirely by an increase in aircraft utilization provided by redeye flying and turn time reduction initiatives.
The Company has updated its fleet planning assumptions to 47 Boeing -8 aircraft deliveries in 2025, from its prior estimate of 38, as The Boeing Company (“Boeing”) continues to ramp up production. With these incremental deliveries, the Company now expects to retire approximately 55 aircraft in 2025, compared with its previous estimate of approximately 50 retirements this year. This includes the sale of five Boeing 737-800 (“-800”) aircraft expected to occur in the second half of 2025. The Company continues to expect additional new aircraft deliveries to facilitate the retirement of aircraft from its existing fleet in support of its fleet monetization and capital allocation strategies.
The Company continues to expect its 2025 capital spending to be in the range of $2.5 billion to $3.0 billion, including the additional aircraft deliveries now expected, as well as the impact of the expected sale of five -800 aircraft this year.
Liquidity and Capital Deployment:
The Company paid off $1.6 billion of convertible notes in cash and prepaid $976 million for the first tranche of the Payroll Support Program notes in second quarter 2025
The Company ended second quarter 2025 with $3.8 billion in cash and cash equivalents and short-term investments, and a fully available revolving credit line of $1.0 billion
The Company returned $1.6 billion to its Shareholders during second quarter 2025, comprised of $103 million of dividends and $1.5 billion of share repurchases
The Company completed its September 2024 $2.5 billion share repurchase authorization in second quarter 2025, repurchasing the remaining $1.5 billion through an accelerated share repurchase program. Final settlement of shares purchased through the second quarter 2025 accelerated share repurchase program is expected to occur by the end of July 2025.
The Company’s capital allocation framework supports its continued commitment to a strong and efficient investment-grade balance sheet. Moving forward, the Company will target liquidity of approximately $4.5 billion, comprised of cash and cash equivalents, short-term investments, and a revolving credit line, which was recently increased to $1.5 billion. The Company will target leverage1,5 in the range of 1.0x to 2.5x adjusted debt to adjusted EBITDAR1,5. The Company continues to have a large base of unencumbered aircraft and primarily aircraft-related assets with a net book value of approximately $16.6 billion. The Company’s Board of Directors recently approved a $2.0 billion share repurchase authorization expected to be completed over a period of up to two years, which is supported by this framework and expected ramp up in initiative benefit.
Supplemental Information:
The Company has provided a summary on progress against initiative development and detail on its full year 2025 EBIT2 guidance on the Investor Relations website at https://www.southwestairlinesinvestorrelations.com.
Conference Call:
The Company will discuss its second quarter 2025 results on a conference call at 12:30 p.m. Eastern Time on July 24, 2025. To listen to a live broadcast of the conference call, please go to
https://www.southwestairlinesinvestorrelations.com.
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