Southwest Airlines Incurs Loss in Q1, Beats Revenue Estimates

Southwest Airlines Co. (LUV) reported first-quarter 2025 loss of 13 cents per share, which was wider than the Zacks Consensus Estimate of 18 cents. In the year-ago quarter, the company had incurred a loss of 36 cents per share.

Revenues of $6.42 billion beat the Zacks Consensus Estimate of $6.40 billion. The top line, however, improved 1.6% year over year on the back of the yield improvements from revenue management actions and capacity moderation. However, LUV witnesses weaker demand throughout the quarter, driving softness in bookings, particularly in domestic leisure travel.

Operating Statistics

Airline traffic, measured in revenue passenger miles, fell 7.4% year over year to 30.63 billion in the quarter under review. Capacity or available seat miles (ASMs) fell 1.9% year over year to 41.43 billion.As traffic decline is more than capacity,the load factor (percentage of seat occupancy) fell 4.4 percentage points to 73.9%. Our estimate stands at 80.6%.

Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) grew 3.7% year over year to 14.02 cents.

Revenue per available seat mile (RASM) grew 3.5% year over year to 15.51 cents.

Operating Expenses & Income

In the first quarter, Southwest Airlines incurred an operating loss (as reported) of $223 million, compared with $393 million in the year-ago reported quarter. On an adjusted basis (excluding special items), the company reported an operating loss of $128 million compared with $377 million of operating loss in the year-ago quarter.

Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 2.6% year over year.

Fuel cost per gallon (inclusive of fuel tax: economic) fell 14.7% year over year to $2.49.

Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items grew 4.6% year over year.

Liquidity

Southwest Airlines ended the first quarter with cash and cash equivalents of $8.13 billion compared with $7.50 billion at the end of the prior quarter. As of March 31, 2025, the company had long-term debt (less current maturities) of $4.08 billion compared with $5.06 billion at the end of the prior quarter.

LUV generated $860 million of cash from operating activities in the reported quarter, while CapEx was $501 million.

LUV returned $857 million to shareholders, including $107 million in dividends and $750 million through share repurchases, during the first quarter of 2025.

LUV has repurchased $1 billion under its previously announced $2.5 billion share repurchase authorization. The company anticipates completing the repurchase of the remaining $1.5 billion by the end of July 2025.

Outlook

For second-quarter 2025, ASMs are estimated to improve 1-2% from the year-ago reported figure. Economic fuel costs per gallonare expected to be in the range of $2.20 to $2.30. RASM is anticipated to be flat to down 4% on a year-over-year basis. LUV expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase 3.5-5.5% in the second quarter from the comparable period in 2024. Interest expenses are expected to be $39 million in the second quarter.

LUV continues to anticipate its 2025 capital expenditure in the range of $2.5 billion to $3.0 billion.

Since it is difficult to estimate recent and short-lived booking trends amid the current macroeconomic uncertainty, LUV is not reaffirming its full-year 2025 or 2026 EBIT guidance. However, LUV remains confident in the persistent solid execution of its initiatives and is reaffirming its full-year incremental EBIT contribution targets of $1.8 billion for 2025 and $4.3 billion for 2026 from those initiatives.

We note that another player from the Zacks Airline industry, JetBlue Airways Corporation JBLU, will report its first-quarter earnings numbers later this month. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

JetBlue is a low-cost airline, headquartered in Long Island City, NY. JBLU currently has an Earnings ESP of +2.33% and a Zacks Rank #3 (Hold). The company is slated to report first-quarter 2025 results on April 29.

Low fuel costs are likely to have aided JBLU’s bottom line in the to-be-reported quarter. JBLU beat the Zacks Consensus Estimate in each of the last four quarters. The average beat is 62.22%.

LUV’s Zacks Rank

Currently, LUV carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q1 Performances of Some Other Airline Companies

United Airlines

United Airlines’ UAL first-quarter 2025 earnings per share (excluding 25 cents from non-recurring items) of 91 cents surpassed the Zacks Consensus Estimate of 75 cents. In the year-ago quarter, the Chicago-based airline reported a loss of 15 cents per share. 

Operating revenues of $13.21 billion fell marginally short of the Zacks Consensus Estimate of $13.22 billion. The top line increased 5.4% year over year despite the tariff-induced slowdown in domestic air travel demand. Passenger revenues (which accounted for 89.7% of the top line) rose 4.8% to $11.9 billion. UAL flights transported 40,806 passengers in the first quarter, up 3.8% year over year.

Delta Air Lines

Delta Air LinesDAL reported first-quarter 2025 earnings (excluding 9 cents from non-recurring items) of 46 cents per share, which surpassed the Zacks Consensus Estimate of 40 cents. Earnings increased 2.2% on a year-over-year basis due to low fuel costs.

Revenues in the March-end quarter were $14.04 billion, surpassing the Zacks Consensus Estimate of $13.81 billion and increasing 2.1% on a year-over-year basis. Adjusted operating revenues (excluding third-party refinery sales) rose 3.3% year over year to $13 billion.

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

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