Southwest Airlines posted a more than 9 percent increase in second-quarter profit compared with a year ago, but its summer forecast fell short of Wall Street expectations, according to a report by CNBC.
The airline projected third-quarter adjusted earnings of between 50 cents and 75 cents per share. Analysts had expected 82 cents. Southwest said it plans to contract capacity by 1 percent at most, or keep it flat, compared with the third quarter of 2025.
For the full year, Southwest expects adjusted earnings per share of $3.25 to $4.25. In January, the company had forecast adjusted full-year 2026 earnings of at least $4 a share.
Fuel costs were a major factor in the quarter. Southwest's fuel bill jumped 67 percent to $2.22 billion in the second quarter from a year before. While fuel prices have eased from a record spike tied to the Iran war, costs have remained volatile. Airlines have largely held onto fare gains this year to help cover those costs.
Southwest's average one-way fares rose almost 21 percent, climbing to $225.61 from $186.65 a year earlier. Total revenue for the quarter increased 16.4 percent to $8.4 billion.
"The demand environment just remains really strong, and that includes domestic," Chief Financial Officer Tom Doxey told CNBC on Wednesday.
Net income rose 9.4 percent to $233 million, or 47 cents a share, compared with $213 million or 39 cents a share a year earlier. On an adjusted basis, Southwest reported 94 cents per share, well above the 51 cents analysts had expected. Adjusted revenue came in at $8.72 billion, compared with the $8.58 billion analysts forecast.
Part of the adjustment reflected customers redeeming flight credits in higher numbers than the company projected. Southwest changed its old policy and put expiration dates on flight credits, starting with many ticket classes sold beginning in mid-2025.
The airline has made significant changes to its business model over the past two years. It ended open seating in January, launched basic economy fares, and stopped its long-standing policy of allowing customers to check two bags for free. Doxey said recent improvements to aircraft and amenities are helping attract more business travelers.
