LUV Q2 2025 Earnings

Call Details

• Call Title: Southwest Airlines Company Q2 2025 Earnings Call
• Date: July 24, 2025 at 4:30 PM UTC
• Management Team:
  • Bob Jordan (President, CEO, and Vice Chairman of the Board)
  • Andrew Watterson (Chief Operating Officer)
  • Tom Doxey (Executive Vice President and Chief Financial Officer)
  • Lauren Yett (Investor Relations)
  • Whitney Eichinger (Chief Communications Officer)

Call Summary

Financial Performance

• Second quarter RASM was down 3.1% year-over-year, including a nearly one-half point impact from the basic economy booking disruption.
• Second quarter CASM-X (non-fuel CASM) came in up 4.7% year-over-year, which was near the midpoint of the company's guidance range.
• The company reported realizing roughly one-third of the 2025 initiative EVIT value in the first half, consistent with executing against the $1.8B 2025 initiative target.
• Checked bag fees are already tracking above initial expectations and are estimated to produce more than $350M of EBIT for full-year 2025 with an approximate $1.0B annualized run rate if annualized.
• The company emphasized outperformance on domestic unit revenue relative to its large peers during the quarter.
• Third-quarter RASM guidance is a range of down 2% to up 2% year-over-year, which assumes a modest sequential demand improvement and includes roughly a one-point headwind from lapping a prior-year incident and a one-point impact from the basic economy booking disruption.

Guidance

• The updated four-year EBIT guide was provided at $600M to $800M and reconciled to a prior four-year guide midpoint of $1.7B, reflecting nearly $1.0B of macro-driven downside and a $100M reduction from higher fuel costs.
• The company reiterated initiative EVIT targets of $1.8B in 2025 and $4.3B in 2026 with the expectation that the majority of 2025 incremental contribution will materialize in the back half of the year.
• Full-year 2025 capacity is maintained at approximately 1% year-over-year growth, with trips down roughly 2% for the year as described on the call.
• Third-quarter CASM-X is expected to be up 3.5% to 5.5% year-over-year and includes roughly a half-point headwind from aircraft retrofit costs and roughly a point from timing of engine overhaul expenses.
• Third-quarter fuel cost per gallon is estimated at $2.40 to $2.50, and the company has terminated its remaining fuel hedge portfolio and currently has no active fuel derivative contracts.
• Fourth-quarter CASM-X excluding book gains is expected to be in the low single digits year-over-year, and the company will provide more specific fourth-quarter RASM and cost detail on the next earnings call.