Southwest Airlines Q3 Earnings Beat, Revenues Lag Estimates

Southwest Airlines Co. (LUV) reported mixed third-quarter 2025 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Quarterly earnings of 11 cents per share beat the Zacks Consensus Estimate of 1 cent but declined 26.7% year over year. Revenues of $6.94 billion missed the Zacks Consensus Estimate of $6.96 billion, but improved 1.1% year over year. Passenger revenues (which accounted for 90.8% of the top line) grew 1% year over year to $6.31 billion.

Quarterly results benefited from better-than-anticipated unit revenues and unit costs.

Bob Jordan, president, chief executive officer, & vice chairman of the board of directors, stated, "We continue to make substantial progress as we execute the most significant transformation in Southwest Airlines' history. We quickly implemented many new product attributes and enhancements, and the results are showing—we delivered a profitable quarter, with both unit revenues and unit costs performing better-than-anticipated, are reaffirming our full year 2025 EBIT² guidance, and expect meaningful margin expansion in the fourth quarter. We continue to deliver a strong operational performance and are currently in first place year-to-date based on our calculations of the Wall Street Journal's airline rankings, an important indicator of success from the continued investment in our operation. These significant accomplishments reflect the strength of our plan, the quality of our execution, and the dedication of our Team.”

Operating Statistics

Airline traffic, measured in revenue passenger miles, fell 1% year over year to 36.36 billion in the quarter under review. Capacity or available seat miles (ASMs) grew 0.8% year over year to 45.56 billion.As traffic failed to outpace capacity expansion, load factor (percentage of seat occupancy) fell 1.4 percentage points to 79.8%. Our estimate stands at 78.2%.

Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) grew 0.2% year over year to 13.85 cents.

Revenue per available seat mile (RASM) grew 0.4% year over year to 15.25 cents.

Operating Expenses & Income

In the third quarter, Southwest Airlines incurred an operating income of $35 million compared with $38 million in the year-ago quarter. On an adjusted basis (excluding special items), the company reported operating income of $42 million compared with $32 million in the year-ago quarter.  

Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 3.4% in the third quarter of 2025.

Fuel cost per gallon (inclusive of fuel tax: economic) fell 5.9% year over year to $2.40.

Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items grew 2.5% year over year.

Liquidity

Southwest Airlines ended the third quarter with cash and cash equivalents of $2.90 billion compared with $3.47 billion at the end of the prior quarter. As of Sept. 30, 2025, the company had long-term debt (less current maturities) of $4.08 billion, which was flat sequentially.

LUV generated $287 million of cash from operating activities in the reported quarter. Third-quarter 2025 capital expenditures were $678 million, owing to aircraft-related capital spending, as well as technology, facilities and operational investments.

During third-quarter 2025, LUV returned $439 million to its shareholders, which includes $189 million in the form of dividend payments and $250 million through share repurchases under its current $2.0 billion share repurchase authorization.

Outlook

LUV anticipates fourth-quarter 2025 unit revenues to be up 1-3%, on a year-over-year basis, excluding special items, on capacity up almost 6% year over year. This guidance range assumes demand strength remains at current levels through the end of the quarter. LUV anticipates delivering an all-time quarterly record revenue performance in the fourth quarter.

Economic fuel costs per gallon are expected to be between $2.20 and $2.30 for fourth-quarter 2025.

LUV continues to expect to achieve its $370 million cost reduction target this year. LUV anticipates fourth-quarter 2025 CASM-X to be in the range of up 1.5-2.5%, or flat to up 1% when excluding the impact of expected book gains from fleet transactions in the fourth quarter of both years, on capacity up almost 6%, all on a year-over-year basis. Unit costs continue to be backed by the continuation of inflationary pressures, including those associated with labor contracts ratified in 2024. LUV remains focused on driving efficiencies to offset overall inflationary cost pressures and achieve its multi-year cost reduction targets.

LUV now anticipates 2025 capacity to be up roughly 1.5%, year over year, including the capacity increase associated with shifting extra legroom seating retrofits of -700 aircraft to January 2026, which delays the removal of six seats from each of those aircraft. This shift is anticipated to maximize revenue potential during the holiday travel period and still meet the company's operational date milestone of Jan. 27, 2026, for assigned and extra legroom seating, as the company's Technical Operations Team has streamlined the timeline to complete this work.

LUV continues to anticipate 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 -800 aircraft this year).

LUV is reaffirming 2025 earnings before interest and taxes, excluding special items, guidance range of $600 million to $800 million. LUV is also 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.

Q3 Performances of Other Transportation Companies

Delta Air Lines DAL reported third-quarter 2025 earnings (excluding 46 cents from non-recurring items) of $1.71 per share, which beat the Zacks Consensus Estimate of $1.52. Earnings increased 14% on a year-over-year basis due to low fuel costs.

Revenues in the September-end quarter were $16.67 billion, beating the Zacks Consensus Estimate of $15.79 billion and increasing 6.4% on a year-over-year basis. Due to improving air-travel demand, adjusted operating revenues (excluding third-party refinery sales) increased 4.1% year over year to $15.2 billion. 

J.B. Hunt Transport Services, Inc. (JBHT) reported third-quarter 2025 earnings of $1.76 per share, which surpassed the Zacks Consensus Estimate of $1.47 and improved 18.1% year over year.

Total operating revenues of $3.05 billion surpassed the Zacks Consensus Estimate of $3.02 billion and were down 0.5% year over year. JBHT’s third-quarter revenue performance was hurt by a 1% and 4% decline in gross revenue per load in Intermodal (JBI) and Truckload (JBT), respectively, a decrease in load volume of 8% and 1% in Integrated Capacity Solutions (ICS) and Dedicated Contract Services (DCS), and 8% fewer stops in Final Mile Services (FMS). These items were partially offset by a 3 % improvement in DCS productivity, a 9% increase in revenue per load in ICS and 14% load growth in JBT. Total operating revenue, excluding fuel surcharge revenue, fell less than 1% year over year.

United Airlines Holdings, Inc. (UAL) reported mixed third-quarter 2025 results wherein the company’s earnings beat the Zacks Consensus Estimate, but revenues missed the same.

UAL's third-quarter 2025 adjusted earnings per share (EPS) (excluding 12 cents from non-recurring items) of $2.78 surpassed the Zacks Consensus Estimate of $2.64 but declined 16.5% on a year-over-year basis. The reported figure lies above the guided range of $2.25 and $2.75.

Operating revenues of $15.2 billion fell short of the Zacks Consensus Estimate of $15.3 billion but increased 2.6% year over year. Passenger revenues (which accounted for 90.7% of the top line) increased 1.9% year over year to $13.8 billion. UAL flights transported 48,382 passengers in the third quarter, up 6.2% year over year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research