Southwest Airlines reports second quarter 2026 results; earnings power on full display

Strong year-over-year margin expansion despite fuel expense up nearly $900 million

All-time record operating and managed business revenues

Record Rapid Rewards membership and tier qualifiers

Expect full-year adjusted earnings per share1,2of $3.25 to $4.25

DALLAS, TEXAS, July 22, 2026 /PRNewswire/ -- Southwest Airlines Co. (NYSE: LUV) today reported second quarter 2026 financial results, marking the first full quarter with all transformational initiatives in place. Results reflected record revenue performance, significant earnings growth and margin expansion, broad demand strength, continued cost discipline, and strong Customer engagement with the Company's enhanced product offering.

"Second quarter results demonstrate the earnings power of our business. We delivered results well ahead of consensus expectations despite nearly $900 million of additional fuel expense year-over-year.

"Our business model now benefits from a broader and more diversified set of revenue and commercial levers than at any point in our history. Momentum across managed business, Rapid Rewards, and our Chase co-branded credit card, together with continued robust demand for our enhanced product offering, reinforce the strong progress we are seeing across Southwest.

"Our focus now turns to unlocking the Company's full earnings potential by continuing to optimize our network, product offering, and pricing, while continuing to strengthen financial performance. Even in a volatile fuel environment, we delivered significant earnings growth and margin expansion in the second quarter, and are positioned to do so for the remainder of 2026," said Bob Jordan, Southwest Airlines President & Chief Executive Officer.

Highlights:

• Net income of $233 million, or $0.47 diluted EPS, adjusted net income¹ of $465 million, or $0.94 adjusted EPS¹

• Record operating revenues of $8.4 billion, up 16.4%, the highest in Company history; adjusted operating revenues¹ of $8.7 billion, up 20.3%

• Unit revenues increased 16.2%; adjusted unit revenues¹ increased 20.1%, exceeding prior guidance

• Operating margin of 3.4%, up 0.3 points year-over-year; adjusted operating margin¹ of 6.7%, up 3.3 points year-over-year despite an $889 million increase in nominal fuel costs

• Returned $88 million to Shareholders through dividends

• Managed business revenues reached an all-time quarterly record, increasing 30% year-over-year

• Strong Rapid Rewards program engagement, with new enrollments increasing 35% year-over-year and record tier qualifiers, driving the program to its largest size ever at nearly 100 million Members

• Chase co-branded credit card acquisitions accelerated 28% year-over-year, with double-digit growth in each month of the quarter

• Named #1 in Customer Satisfaction among Economy Passengers in the JD Power 2026 North America Airline Satisfaction Study for the fifth consecutive year

• Completed the rollout of service to all five previously announced new destinations with the addition of St. Maarten, Santa Rosa, California, and Anchorage, Alaska

• Welcomed Air Premia as Southwest's ninth airline partner

• Operated the Company's first Starlink-equipped aircraft, marking the beginning of a new era of inflight connectivity at Southwest

Guidance and Outlook:
The following tables provide guidance for third quarter and full-year 2026. The Company's guidance is based on the forward fuel curve as of July 17, 2026 and assumes the current fare environment and demand trends remain broadly intact.

The Company is guiding adjusted EPS1,2 for the third quarter to be in the range of $0.50 to $0.75.
For full-year 2026, the Company is guiding adjusted EPS1,2 to be in the range of $3.25 to $4.25. This updated range replaces its prior expectation of at least $4.00.

Revenue Results and Outlook:

• Record second quarter 2026 operating revenues of $8.4 billion, up 16.4 percent year-over-year; adjusted operating revenues¹ of $8.7 billion, a 20.3 percent increase year-over-year

• Second quarter 2026 RASM increased 16.2 percent year-over-year, and adjusted RASM¹ increased 20.1 percent year-over-year, above prior guidance, on capacity up 0.2 percent

• Third quarter 2026 RASM is expected to increase between 17.5% and 19.5% year-over-year, which includes the headwind from lapping the 2025 implementation of bag fees and other initiatives

Second quarter 2026 results included a $285 million adjustment for the reversal of a portion of breakage revenue recognized between 2022 and 2025 related to non-expiring flight credits issued during that same period. The accounting adjustment, which is further described in the Non-GAAP reconciliation and corresponding Non-GAAP Note, reflects a 3 percentage point increase in the Company's redemption assumption for this population of flight credits based on current redemption trends. The adjustment was treated as a special item and excluded from adjusted results. No breakage revenue related to these non-expiring flight credits was recorded during 2026.

Non-Fuel Costs and Outlook:

• Second quarter 2026 operating expenses increased 16.1 percent year-over-year to $8.1 billion; operating expenses excluding special items¹ increased 16.2 percent year-over-year to $8.1 billion

• Second quarter 2026 operating expenses, excluding aircraft fuel and related taxes expense, special items, and profit sharing1, increased 3.6 percent year-over-year

• Second quarter 2026 CASM-X1 increased 3.4 percent year-over-year, below prior guidance

• Third quarter 2026 CASM-X1,2 is expected to increase between 3.5% and 4.0% year-over-year, which includes an expected 1.1 point headwind from the removal of six seats from the Boeing 737-700 fleet to enable extra legroom seating

Fuel Costs:

• Second quarter 2026 fuel cost was $3.92 per gallon, below prior assumptions of $4.10 to $4.15 per gallon. Fuel expense increased by $889 million compared to the second quarter of 2025 and represented a $1.17 headwind to adjusted EPS

• Third quarter 2026 fuel cost per gallon is assumed to be between $3.70 and $3.753 based on the forward curve as of July 17, 2026

Capacity, Fleet, and Capital Spending:

• Second quarter 2026 capacity increased 0.2 percent year-over-year

• Received 13 Boeing 737-8 aircraft and retired 10 aircraft in second quarter 2026, ending the quarter with 803 aircraft (retirements included the sale of four Boeing 737-800 aircraft and one Boeing 737-700 aircraft, and the retirement of five Boeing 737-700 aircraft)

• Second quarter 2026 gross capital expenditures were $818 million, driven primarily by aircraft-related capital spending, as well as technology, facilities, and operational investments

• Expect 64 Boeing 737-8 aircraft deliveries and plan to retire approximately 60 aircraft in 2026

• Entered 2026 with a disciplined capacity plan and now expect full-year growth of approximately 1.5%, versus last updated guidance of 2%

• Expect 2026 net capital spending4 toward the low end of, or below, the $3.0 billion to $3.5 billion range
   

Liquidity and Capital Deployment:

• Ended second quarter 2026 with $5.3 billion in liquidity, comprised of $3.8 billion in cash and cash equivalents and a revolving credit line of $1.5 billion

• Ended the quarter with gross leverage1 of 2.1x

• Have unencumbered aircraft and other related assets with a net book value of approximately $15.7 billion

• Distributed $88 million in dividends during second quarter 2026

• $450 million remains outstanding under the Company's $2.0 billion share repurchase authorization

Conference Call:
Southwest will discuss its second quarter 2026 results on a conference call at 10:00 a.m. Eastern Time on July 23, 2026. To listen to a live broadcast of the conference call, please go to
https://www.southwestairlinesinvestorrelations.com. 

Footnotes
1See Note Regarding Use of Non-GAAP Financial Measures for additional information on special items. In addition, information regarding special items is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Items (also referred to as "excluding special items").
2Projections do not reflect the potential impact of special items and/or Aircraft fuel and related taxes expense, special items, and profit sharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, particularly given the unusual or infrequent nature of special items and especially considering the significant volatility of the Aircraft fuel and related taxes expense line item. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.
3Based on market prices as of July 17, 2026. Fuel cost per gallon includes fuel taxes and fuel hedging net premium expense of $0.05 per gallon related to terminated fuel derivative contracts.
4Net capital expenditures include the impact of aircraft sales and sale-leaseback transactions.

Cautionary Statement Regarding Forward-Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include, without limitation, statements related to (i) the Company's financial and operational outlook, expectations, goals, plans, targets, and projected results of operations, including with respect to its earnings power, growth, and margin expansion, and including factors and assumptions underlying the Company's expectations and projections; (ii) the Company's initiatives, strategic priorities and focus areas, goals, and opportunities, including with respect to the Company's positioning and momentum; (iii) the Company's capacity plans and expectations; (iv) the Company's expectations with respect to fuel costs and fuel efficiency, including factors underlying the Company's expectations; (v) the Company's expectations with respect to unlocking its full earnings potential by optimizing the Company's network, product offerings, and pricing; (vi) the Company's network plans and expectations; (vii) the Company's expectations with respect to the continued demand, including with respect to engagement across managed business and loyalty programs; (viii) the Company's plans and expectations with respect to Starlink Wi-Fi; (ix) the Company's fleet plans and expectations, including with respect to its fleet order book, fleet utilization, fleet modernization, and expected fleet deliveries and retirements, and including factors and assumptions underlying the Company's plans and expectations; and (x) the Company's plans, estimates, and assumptions related to capital spending, including factors and assumptions underlying the Company's expectations and projections. These forward-looking statements are based on the Company's current estimates, intentions, beliefs, expectations, goals, strategies, and projections for the future and are not guarantees of future performance. Forward-looking statements involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors include, among others, (i) the impact of geopolitical conflicts, fears or actual outbreaks of diseases, extreme or severe weather and natural disasters, actions of competitors (including, without limitation, pricing, scheduling, capacity, and network decisions, and consolidation and alliance activities), governmental actions, consumer perception, consumer uncertainties with respect to trade policies or government shutdowns (including the imposition of tariffs), economic conditions, banking conditions, fears or actual acts of terrorism or war, sociodemographic trends, and other factors beyond the Company's control, on consumer behavior and the Company's results of operations and business decisions, plans, strategies, and results; (ii) the Company's ability to timely and effectively implement, transition, operate, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives; (iii) consumer behavior and response with respect to the Company's commercial products and policies; (iv) the impact of fuel price changes, fuel price volatility, and fuel availability on the Company's business plans and results of operations; (v) the impact of governmental regulations and other governmental actions, including with respect to government shutdowns, as well as the Company's ability to obtain any required governmental approvals, on the Company's business plans, results, and operations; (vi) the Company's dependence on The Boeing Company ("Boeing") and Boeing suppliers with respect to the Company's aircraft deliveries, Boeing MAX 7 aircraft certifications, fleet and capacity plans, operations, maintenance, strategies, and goals; (vii) the Company's dependence on the Federal Aviation Administration with respect to, among other things, the certification of the Boeing MAX 7 aircraft; (viii) the Company's dependence on other third parties, in particular with respect to its technology plans, its plans and expectations related to revenue management, online travel agencies, operational reliability, fuel supply, maintenance, Global Distribution Systems, environmental sustainability, and the impact on the Company's operations and results of operations of any third-party delays or nonperformance; (ix) the Company's ability to timely and effectively prioritize its initiatives and focus areas and related expenditures; (x) the impact of labor matters on the Company's business decisions, plans, strategies, and results; (xi) the Company's ability to obtain and maintain adequate infrastructure and equipment to support its operations and initiatives; (xii) the Company's dependence on its workforce, including its ability to employ and retain sufficient numbers of qualified Employees with appropriate skills and expertise to effectively and efficiently maintain its operations and execute the Company's plans, strategies, and initiatives; (xiii) the cost and effects of the actions of activist shareholders; and (xiv) other factors, as described in the Company's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025.