Southwest Airlines announced on Wednesday plans to scale back its flight capacity during the latter half of the year, signaling a potential decline in domestic travel bookings.
The airline projected that its unit revenue for the second quarter could remain unchanged or decrease by as much as 4% compared to last year. Additionally, Southwest refrained from reaffirming its earnings guidance for 2025 and 2026 due to “current macroeconomic uncertainty.”
Meanwhile, major competitors United and Delta have also announced intentions to reduce their domestic capacity in the second half of the year. Delta has withdrawn its full-year forecast, and United has provided two contrasting forecasts, describing the U.S. economic outlook as “impossible” to predict. Following these adjustments, Southwest anticipates only a 1% increase in capacity for the full year compared to 2024.
Despite the forecasted challenges, Southwest’s first-quarter financial results exceeded analysts’ expectations.
According to consensus estimates from LSEG, here is a summary of Southwest’s performance in the first quarter:
- Adjusted loss per share: 13 cents vs. expected loss of 18 cents
- Revenue: $6.43 billion vs. projected $6.40 billion
The airline has implemented significant changes to its longstanding business model over the past year, including expanding fare sales through online platforms like Expedia, transitioning from an open-seating policy to assigned seating, and introducing more restrictive basic economy fares.
Next month, Southwest is set to introduce fees for checked luggage, marking the end of its long-standing policy of allowing passengers to check two bags free of charge.
“We are seeing positive results on recently rolled out initiatives,” commented CEO Bob Jordan in an earnings release.
In the first quarter, Southwest reported a net loss of $149 million, improving from a loss of $231 million in the previous year. The revenue of over $6.4 billion also showed a year-over-year increase of 1.6%. When adjusted for special items, the airline’s loss was 13 cents per share for the quarter ending March 31.
Executives from Southwest are scheduled to be available for questions from analysts during a quarterly call at 12:30 p.m. ET on Thursday.
