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Southwest Airlines Q2 Earnings & Revenues Lag, Decrease Year Over Year
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Key Takeaways
Southwest reported Q2 EPS of 43 cents, missing estimates and dipping 25.9% year over year.
Revenue fell 1.5% to $7.24B as traffic lagged capacity growth, lowering the load factor to 78.5%.
CASM-X rose 4.7% due to inflation and labor costs; LUV reaffirmed 2025 EBIT contribution targets.
Southwest Airlines Co. (LUV - Free Report) ) reported disappointing second-quarter 2025 results, wherein both earnings and revenues lagged the Zacks Consensus Estimate.
Quarterly earnings of 43 cents per share missed the Zacks Consensus Estimate of 51 cents and declined 25.9% year over year. Revenues of $7.24 billion missed the Zacks Consensus Estimate of $7.29 billion and declined 1.5% year over year. Passenger revenues (which accounted for 91.5% of the top line) decreased 1.3% year over year to $6.62 billion.
Domestic leisure travel stabilized during second-quarter 2025, with recent trends showing signs of improvement.
Southwest Airlines Co. Price, Consensus and EPS Surprise
Airline traffic, measured in revenue passenger miles, fell 3.5% year over year to 36.88 billion in the quarter under review. Capacity or available seat miles (ASMs) grew 1.6% year over year to 46.99 billion.As traffic failed to outpace capacity expansion, load factor (percentage of seat occupancy) fell 4.1 percentage points to 78.5%. Our estimate stands at 79.2%.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) fell 2.8% year over year to 14.10 cents.
Revenue per available seat mile (RASM) fell 3.1% year over year to 15.41 cents.
Operating Expenses & Income
In the second quarter, Southwest Airlines incurred an operating income of $225 million compared with $398 million in the year-ago reported quarter. On an adjusted basis (excluding special items), the company reported operating income of $245 million compared with $405 million in the year-ago quarter.
Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 6.4% year over year.
Fuel cost per gallon (inclusive of fuel tax: economic) fell 15.9% year over year to $2.32.
Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items grew 4.7% year over year.
Liquidity
Southwest Airlines ended the second quarter with cash and cash equivalents of $3.47 billion compared with $8.13 billion at the end of the prior quarter. As of June 30, 2025, the company had long-term debt (less current maturities) of $4.08 billion, which was flat sequentially.
LUV generated $401 million of cash from operating activities in the reported quarter. Second-quarter 2025 capital expenditures were $635 million, owing to aircraft-related capital spending, coupled with technology, facilities, and operational investments.
During the second quarter of 2025, LUV returned $1.6 billion to shareholders, which includes $103 million of dividend payments and $1.5 billion of share repurchases.
By repurchasing the remaining $1.5 billion through an accelerated share repurchase (ASR) program, LUV has completed the September 2024 $2.5 billion share repurchase authorization in the second quarter of 2025. Final settlement of shares purchased through the second quarter of 2025 ASR program is anticipated to occur by the end of July 2025.
LUV’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.
Outlook
LUV anticipates its third-quarter 2025 unit revenues to be in the range of down 2% to up 2% 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 the third quarter of 2025.
Economic fuel costs per gallonare expected to be in the range of $2.40 to $2.50. Interest expenses are expected to be $35 million in the third quarter.
LUV continues to expect to achieve its $370 million cost reduction target this year. LUV anticipates third-quarter 2025 CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase in the range of 3.5-5.5%, on a year-over-year basis. This increase is due to 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, LUV continues to expect fourth-quarter 2025 CASM-X to be up low single digits year over year. LUV remains focused on driving efficiencies to offset overall inflationary cost pressures and achieve its multi-year cost reduction targets.
LUV continues to anticipate its 2025 capital spending to be in the range of $2.5 billion-$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).
LUV’s 2025 EBIT 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.
LUV is reaffirming its full-year incremental EBIT contribution targets of $1.8 billion for 2025 and $4.3 billion for 2026 from those initiatives.
Delta Air Lines (DAL - Free Report) reported second-quarter 2025 earnings (excluding $1.17 per share from non-recurring items) of $2.10 per share, which beat the Zacks Consensus Estimate of $2.04. Earnings decreased 11% on a year-over-year basis due to high labor costs.
Revenues in the June-end quarter were $16.65 billion, beating the Zacks Consensus Estimate of $16.2 billion and decreasing marginally on a year-over-year basis. Adjusted operating revenues (excluding third-party refinery sales) increased 1% year over year to $15.5 billion.
J.B. Hunt Transport Services, Inc. (JBHT - Free Report) reported second-quarter 2025 earnings of $1.31 per share, which missed the Zacks Consensus Estimate of $1.34 and declined 0.8% year over year.
Total operating revenues of $2.93 billion missed the Zacks Consensus Estimate of $2.94 billion and were flat year over year. JBHT’s second-quarter revenue performance witnessed a 6% increase in Intermodal (JBI) loads, a 13% increase in Truckload (JBT) loads, a 3% increase in Dedicated Contract Services (DCS) productivity and a 6% increase in Integrated Capacity Solutions (ICS) revenue per load. These items were offset by Final Mile Services revenue declining 10%, lower revenue per load in both JBI and JBT, a 9% decrease in ICS load volume and a 3% decline in average trucks in DCS. Total operating revenues, excluding fuel surcharge revenue, increased 1% on a year-over-year basis.
United Airlines Holdings, Inc. (UAL - Free Report) reported mixed second-quarter 2025 results wherein the company’s earnings beat the Zacks Consensus Estimate, but revenues missed the same.
UAL's second-quarter 2025 adjusted earnings per share (excluding 90 cents from non-recurring items) of $3.87 surpassed the Zacks Consensus Estimate by a penny but declined 6.5% on a year-over-year basis. The reported figure lies within the guided range of $3.25-$4.25.
Operating revenues of $15.2 billion fell short of the Zacks Consensus Estimate of $15.4 billion but increased 1.7% year over year. Passenger revenues (which accounted for 90.8% of the top line) increased 1.1% year over year to $13.8 billion. UAL flights transported 46,186 passengers in the second quarter, up 4.1% year over year.
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Southwest Airlines Q2 Earnings & Revenues Lag, Decrease Year Over Year
Key Takeaways
Southwest Airlines Co. (LUV - Free Report) ) reported disappointing second-quarter 2025 results, wherein both earnings and revenues lagged the Zacks Consensus Estimate.
Quarterly earnings of 43 cents per share missed the Zacks Consensus Estimate of 51 cents and declined 25.9% year over year. Revenues of $7.24 billion missed the Zacks Consensus Estimate of $7.29 billion and declined 1.5% year over year. Passenger revenues (which accounted for 91.5% of the top line) decreased 1.3% year over year to $6.62 billion.
Domestic leisure travel stabilized during second-quarter 2025, with recent trends showing signs of improvement.
Southwest Airlines Co. Price, Consensus and EPS Surprise
Southwest Airlines Co. price-consensus-eps-surprise-chart | Southwest Airlines Co. Quote
Operating Statistics
Airline traffic, measured in revenue passenger miles, fell 3.5% year over year to 36.88 billion in the quarter under review. Capacity or available seat miles (ASMs) grew 1.6% year over year to 46.99 billion.As traffic failed to outpace capacity expansion, load factor (percentage of seat occupancy) fell 4.1 percentage points to 78.5%. Our estimate stands at 79.2%.
Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) fell 2.8% year over year to 14.10 cents.
Revenue per available seat mile (RASM) fell 3.1% year over year to 15.41 cents.
Operating Expenses & Income
In the second quarter, Southwest Airlines incurred an operating income of $225 million compared with $398 million in the year-ago reported quarter. On an adjusted basis (excluding special items), the company reported operating income of $245 million compared with $405 million in the year-ago quarter.
Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 6.4% year over year.
Fuel cost per gallon (inclusive of fuel tax: economic) fell 15.9% year over year to $2.32.
Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items grew 4.7% year over year.
Liquidity
Southwest Airlines ended the second quarter with cash and cash equivalents of $3.47 billion compared with $8.13 billion at the end of the prior quarter. As of June 30, 2025, the company had long-term debt (less current maturities) of $4.08 billion, which was flat sequentially.
LUV generated $401 million of cash from operating activities in the reported quarter. Second-quarter 2025 capital expenditures were $635 million, owing to aircraft-related capital spending, coupled with technology, facilities, and operational investments.
During the second quarter of 2025, LUV returned $1.6 billion to shareholders, which includes $103 million of dividend payments and $1.5 billion of share repurchases.
By repurchasing the remaining $1.5 billion through an accelerated share repurchase (ASR) program, LUV has completed the September 2024 $2.5 billion share repurchase authorization in the second quarter of 2025. Final settlement of shares purchased through the second quarter of 2025 ASR program is anticipated to occur by the end of July 2025.
LUV’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.
Outlook
LUV anticipates its third-quarter 2025 unit revenues to be in the range of down 2% to up 2% 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 the third quarter of 2025.
Economic fuel costs per gallonare expected to be in the range of $2.40 to $2.50. Interest expenses are expected to be $35 million in the third quarter.
LUV continues to expect to achieve its $370 million cost reduction target this year. LUV anticipates third-quarter 2025 CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase in the range of 3.5-5.5%, on a year-over-year basis. This increase is due to 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, LUV continues to expect fourth-quarter 2025 CASM-X to be up low single digits year over year. LUV remains focused on driving efficiencies to offset overall inflationary cost pressures and achieve its multi-year cost reduction targets.
LUV continues to anticipate its 2025 capital spending to be in the range of $2.5 billion-$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).
LUV’s 2025 EBIT 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.
LUV is reaffirming its full-year incremental EBIT contribution targets of $1.8 billion for 2025 and $4.3 billion for 2026 from those initiatives.
Currently, LUV carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Q2 Performances of Other Transportation Companies
Delta Air Lines (DAL - Free Report) reported second-quarter 2025 earnings (excluding $1.17 per share from non-recurring items) of $2.10 per share, which beat the Zacks Consensus Estimate of $2.04. Earnings decreased 11% on a year-over-year basis due to high labor costs.
Revenues in the June-end quarter were $16.65 billion, beating the Zacks Consensus Estimate of $16.2 billion and decreasing marginally on a year-over-year basis. Adjusted operating revenues (excluding third-party refinery sales) increased 1% year over year to $15.5 billion.
J.B. Hunt Transport Services, Inc. (JBHT - Free Report) reported second-quarter 2025 earnings of $1.31 per share, which missed the Zacks Consensus Estimate of $1.34 and declined 0.8% year over year.
Total operating revenues of $2.93 billion missed the Zacks Consensus Estimate of $2.94 billion and were flat year over year. JBHT’s second-quarter revenue performance witnessed a 6% increase in Intermodal (JBI) loads, a 13% increase in Truckload (JBT) loads, a 3% increase in Dedicated Contract Services (DCS) productivity and a 6% increase in Integrated Capacity Solutions (ICS) revenue per load. These items were offset by Final Mile Services revenue declining 10%, lower revenue per load in both JBI and JBT, a 9% decrease in ICS load volume and a 3% decline in average trucks in DCS. Total operating revenues, excluding fuel surcharge revenue, increased 1% on a year-over-year basis.
United Airlines Holdings, Inc. (UAL - Free Report) reported mixed second-quarter 2025 results wherein the company’s earnings beat the Zacks Consensus Estimate, but revenues missed the same.
UAL's second-quarter 2025 adjusted earnings per share (excluding 90 cents from non-recurring items) of $3.87 surpassed the Zacks Consensus Estimate by a penny but declined 6.5% on a year-over-year basis. The reported figure lies within the guided range of $3.25-$4.25.
Operating revenues of $15.2 billion fell short of the Zacks Consensus Estimate of $15.4 billion but increased 1.7% year over year. Passenger revenues (which accounted for 90.8% of the top line) increased 1.1% year over year to $13.8 billion. UAL flights transported 46,186 passengers in the second quarter, up 4.1% year over year.