Southwest Airlines reported a net income of $227 million, or $0.45 diluted earnings per share, for the first quarter of 2026. This was achieved despite fuel costs being significantly higher than anticipated, coming in at $2.73 per gallon, which was above the prior guidance of approximately $2.40. This increased fuel expense by $164 million, representing an approximate $0.22 headwind to EPS.
The airline recorded operating revenues of $7.2 billion, marking a first-quarter record and a 12.8% year-over-year increase. Strong demand and double-digit unit revenue growth contributed to significant improvements in earnings and margins. The operating margin reached 4.6%, an 8.1-point improvement year-over-year, and the company generated $1.4 billion in operating cash flow, a 65% increase from the first quarter of 2025.
Despite the higher-than-expected fuel costs and the associated impact on earnings per share, Southwest Airlines chose not to update its full-year adjusted EPS guidance of $4.00. The company stated that updating this guidance would not be productive due to ongoing macroeconomic uncertainty. Achieving the full-year target would necessitate lower fuel prices or stronger revenue performance to offset increased fuel expenses.
For the second quarter of 2026, Southwest is guiding adjusted EPS to be in the range of $0.35 to $0.65. This guidance is based on a projected fuel cost per gallon between $4.10 and $4.15, as of the forward fuel curve from April 16. The airline plans to provide updates to its full-year guidance as circumstances warrant.
