Southwest Airlines’ third-quarter forecast falls short as fuel bill climbs

Southwest Airlines reported a more than 9% increase in second-quarter profit from last year as higher fares are increasingly helping the airline cover its fuel tab, but its outlook for the summer fell below Wall Street forecasts.

The airline forecast third-quarter adjusted earnings of between 50 cents and 75 cents, below the 82 cents analysts expected, even though it projected an increase in sales between 17.5% to 19.5% from a year earlier. The Dallas airline said it plans to contract capacity 1% at most or keep it flat compared with the third quarter of 2025.

Southwest in the past two years has torn up its decades-old business model to increase revenue. It ended open-seating in January, it launched basic economy fares and even stopped its longstanding policy of allowing customers to check two bags for free.

In the second quarter, Southwest’s revenue increased 16.4% to $8.4 billion. Average passenger fares were up almost 21% to $225.61 from $186.65 a year earlier. But Southwest’s costs spiked, with a 67% increase in its fuel bill to $2.22 billion in the second quarter from a year before.

Net income rose 9.4% to $233 million, or 47 cents a share, compared with $213 million or 39 cents a share a year earlier.

Here’s what Southwest reported for second quarter compared with Wall Street expectations, according to consensus estimates from LSEG:

• Earnings per share: 94 cents adjusted. It was not immediately clear if that was comparable to expectations for 51 cents
• Revenue: $8.43 billion vs. $8.58 billion expected

Excluding one-time items, Southwest reported an adjusted 94 cents per share, including an adjustment for customers that redeemed flight credits in higher numbers than projected. Southwest changed its old policy and put expiration dates on flight credits, starting with many ticket classes sold starting in mid-2025.