Southwest Airlines (LUV) Q1 2026 earnings summary

Executive summary

• Achieved record first quarter operating revenues of $7.2 billion, up 12.8% year-over-year, driven by new ancillary revenue streams, transformational initiatives, and strong customer demand.

• Net income was $227 million, reversing a $149 million loss in the prior year, with EPS of $0.45.

• Transformation initiatives, including assigned and extra legroom seating, new partnerships, and enhanced onboard offerings, contributed to improved financial performance.

• Returned over $1.3 billion to shareholders through share repurchases and dividends in the quarter.

• Operational excellence and cost discipline recognized, with industry-leading reliability and best net margin among large U.S. carriers.

Financial highlights

• Operating income was $330 million, compared to a loss of $223 million in the prior year.

• Operating margin improved to 4.6%, up 8.1 points year-over-year; CASM-X rose 2.3%.

• Operating cash flow of $1.4 billion, up 65% year-over-year.

• Passenger revenues were $6.6 billion, up 13.4% year-over-year; unit revenue (RASM) up 11.2%.

• Operating expenses increased 4.0% year-over-year, mainly due to higher salaries and fuel costs.

Outlook and guidance

• Q2 unit revenue growth expected between 16.5% and 18.5%, with EPS guidance of $0.35-$0.65, assuming fuel prices of $4.10-$4.15 per gallon.

• Full-year capacity growth expected at approximately 2%, at the low end of prior guidance.

• Net capital spending for 2026 projected at $3.0–$3.5 billion, with 66 MAX 8 deliveries and ~60 retirements.

• Second quarter CASM ex expected to increase 3.5%-4% year-over-year on 0.5% capacity growth.

• Full-year adjusted EPS guide of $4 maintained, but achieving it depends on lower fuel prices and/or stronger revenue.