Southwest Airlines Tosses Out Profit Guidance Amid 'Macroeconomic Uncertainty,' Shares Slide Despite Better-Than-Expected Q1 Results

Southwest Airlines Co (NYSE:LUV) reported first-quarter financial results after the market close on Wednesday. Here’s a rundown of the report.

• Q1 Revenue: $6.43 billion, versus estimates of $6.40 billion

• Q1 EPS: Loss of 13 cents, versus estimates for a loss of 18 cents

First-quarter operating revenue increased 1.6% year-over-year. The company said passenger revenue increased 1.7% year-over-year. Revenue per available seat mile (RASM) increased 3.5% year-over-year. Growth was primarily driven by yield improvements from revenue management actions and capacity moderation.

The company ended the quarter $8.3 billion in cash, cash equivalents and short-term investments, resulting in a net cash position of $1.6 billion, which includes debt. Southwest returned $857 million to shareholders in the first quarter in dividends and share repurchases and said it expects to repurchase the remaining $1.5 billion under its buyback by the end of July.

“While the broader economic environment has been dynamic, we remain focused on executing our transformational plan. On costs, we beat our previously adjusted guidance and are on track to achieve the increased cost reduction plan targets announced last month. We ran a stellar operation in first quarter, leading the industry in ontime performance and improving on almost every operating metric, year-over-year,” said Bob Jordan, president and CEO of Southwest Airlines.

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Outlook: Southwest Airlines pulled its full-year 2025 and 2026 EBIT guidance, citing “current macroeconomic uncertainty.”

The company said it expects second-quarter unit revenues to be flat to down 4%. Capacity is expected to grow between 1% and 2% year-over-year in the second quarter. Southwest expects cost per available seat mile excluding fuel (CASM-X) to increase 3.5% to 5.5% year-over-year in the second quarter, driven primarily by inflationary pressures.

The company expects full-year 2025 capacity to be up roughly 1%, versus prior expectations of 1% to 2%. Southwest continues to expect 2025 capital spending to be in the range of $2.5 billion to $3 billion.

“We expect to introduce basic economy and bag fees for most fare products next month and remain on track to begin selling assigned and extra legroom seats in third quarter 2025 for operation beginning in first quarter of next year,” Jordan said.

Southwest Airlines executives will further discuss the quarter on a call with investors and analysts at 12:30 p.m. ET Thursday afternoon.

LUV Price Action: Southwest Airlines shares were down after-hours 3.61% at $24.60 at the time of publication Wednesday, according to Benzinga Pro.

Photo: Courtesy of Southwest Airlines.