Southwest Airlines (LUV) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 operating revenues of $7.4B, driven by all-time highs in passengers carried, passenger revenue, and ancillary revenue, despite industry-wide capacity growth outpacing demand.

• Net income for Q2 2024 was $367M ($0.58 per diluted share), down 46% year-over-year, with six-month net income at $137M, down 74%.

• Announced a major strategic transformation, including a shift to assigned seating, premium cabin options, redesigned boarding, and redeye flights, to align with evolving customer preferences and drive shareholder value.

• Board adopted a shareholder rights plan in response to activist investor Elliott Management's 11% stake and calls for management and board changes.

• Leadership is focused on restoring returns above cost of capital and implementing commercial, operational, and capital allocation initiatives.

Financial highlights

• Q2 2024 operating revenues rose 4.5% year-over-year to $7.4B; passenger revenues up 4.7%.

• Q2 2024 net income was $367M (EPS $0.58 diluted), down from $683M (EPS $1.08) in Q2 2023.

• Q2 2024 operating expenses increased 11.4% to $7.0B, with notable increases in salaries, fuel, and maintenance; CASM-X rose 6%.

• Q2 2024 RASM declined 3.8% year-over-year due to domestic capacity outpacing demand and revenue management challenges.

• Ended the quarter with $10B in cash and short-term investments versus $8B in outstanding debt.

Outlook and guidance

• Q3 2024 unit revenue (RASM) expected flat to down 2% year-over-year; capacity up ~2%.

• Full-year 2024 capacity expected to rise ~4% year-over-year; Q4 capacity to decline ~4%.

• Q3 2024 CASM-X expected to increase 11–13% year-over-year; full year CASM-X up 7–8%.

• Economic fuel costs per gallon estimated at $2.60–$2.70 for Q3 and $2.70–$2.80 for full year.

• Capital spending for 2024 projected at ~$2.5B, below initial expectations.