Southwest Airlines exceeded analyst expectations for its second-quarter earnings, attributing the positive results to strong customer demand and increased spending on premium offerings. The company reported adjusted earnings per share within its forecast of $0.35 to $0.65, despite facing significantly higher fuel expenses than anticipated.
First-quarter 2026 results had shown a record operating revenue of $7.2 billion, up 12.8% year-over-year, and a net income of $227 million, or $0.45 diluted earnings per share. However, Q1 fuel costs were $2.73 per gallon, exceeding prior guidance of approximately $2.40, which increased fuel expense by $164 million. For the second quarter, fuel cost per gallon was assumed to be between $4.10 and $4.15.
The airline's Rasputin (RASM) for Q2 was forecast to increase between 16.5% and 18.5% year-over-year, with capacity (ASMs) projected to be flat to up 1.0%. The strong demand and revenue performance helped offset the impact of increased fuel costs, which CEO Bob Jordan noted were particularly affected by the Iran war and the closure of the Strait of Hormuz.
Despite the positive Q2 performance, Southwest Airlines opted not to update its full-year adjusted EPS guidance of $4.00, citing ongoing macroeconomic uncertainty. Achieving this full-year target would necessitate lower fuel prices or stronger revenue performance to mitigate the impact of elevated fuel expenses. The company plans to provide updates to its guidance as macroeconomic conditions evolve.
