Southwest Airlines Co. (NYSE: LUV) released its first quarter 2025 financial results, revealing a net loss of $149 million.
Despite the loss, the airline achieved record-breaking operating revenues of $6.4 billion, driven by all-time high yields.
This performance sees Southwest navigating a complex economic landscape, amid a reported softening in air travel demand. The airline continues with the implementation of transformation initiatives.
Q1 Revenue Performance
Southwest delivered exceptional revenue results in Q1 2025. The airline reported record operating and passenger revenues, alongside peak yields.
Strategic revenue management and moderated capacity fueled these achievements. However, softening demand, particularly in domestic leisure travel, impacted bookings.
As Southwest relies more heavily on this segment compared to larger competitors, the weaker demand posed challenges.
The airline reduced its capacity by 1.9% year-over-year, aligning with prior guidance. Southwest also adjusted its fleet, adding 11 Boeing 737-8 aircraft while retiring 14 older planes. This left the airline with a fleet of 800 aircraft by the quarter’s end.
Operational Performance and Strategic Initiatives
Bob Jordan, Southwest’s President, CEO, and Vice Chairman, emphasized the airline’s focus on its transformation plan. “We’re operating in a dynamic economic environment, but our team remains committed to executing our strategy,” Jordan said.
Southwest outperformed its cost reduction goals and led the industry in on-time performance. Nearly all operational metrics improved compared to last year.
The airline rolled out several initiatives to boost its commercial offerings. It launched Expedia as a new distribution channel and optimized its loyalty program.
Starting next month, Southwest plans to introduce basic economy fares and bag fees for most products. By Q3 2025, the airline will begin selling assigned seats and extra legroom options, with operations starting in Q1 2026.
“These changes mark a significant evolution for Southwest,” Jordan noted. “Our initiatives aim to enhance customer experience and drive financial performance, delivering value to both customers and shareholders.”
Financial Position and Capacity Adjustments
Southwest maintains a strong investment-grade balance sheet and a flexible aircraft order book with Boeing. To address market uncertainty, the airline is reducing capacity in the second half of 2025.
As a result, full-year capacity is now expected to grow by approximately 1% year-over-year, down from earlier projections.
Jordan expressed confidence in the airline’s direction. “Our people continue to demonstrate resilience and deliver exceptional hospitality,” he said. “We’re focused on controlling what we can and executing our plans effectively.”
Outlook for 2025
Given recent booking trends and macroeconomic uncertainty, Southwest opted not to reiterate its full-year 2025 or 2026 EBIT guidance.
However, the airline remains confident in its initiatives, targeting $1.8 billion in incremental EBIT contribution for 2025 and $4.3 billion for 2026.
For Q2 2025, Southwest expects unit revenues to range from flat to down 4% year-over-year, with capacity increasing by 1% to 2%. These projections reflect cautious optimism as the airline navigates a shifting demand landscape.
Southwest’s leadership is dedicated to balancing customer satisfaction with financial discipline. The airline’s ongoing transformation aims to modernize its offerings while preserving its signature hospitality.
The airline continues to weather external challenges with a clear strategy and strong operational foundation.
