01—Abstract
Summary
Summary of the 10-Q filed July 24, 2025. Cited figures are marked; the original filing is the authoritative source.
Southwest Airlines Co. reported a sharp decline in second-quarter 2025 earnings.
Net income for the three months ended June 30, 2025 was $213 milliona, down from $367 million a year earlier, and diluted EPS was $0.39 versus $0.58. Total operating revenues were $7.24 billion, down $110 million, or 1.5 percent, driven by lower load factor (down 4.1 points to 78.5 percent) and passenger traffic (revenue passengers carried down 5.3 percent). Operating income fell to $225 million from $398 million.
Six-month GAAP net income was $64 millionb versus $137 million, with operating income of only $2 million. The company's non-GAAP results, which exclude special items such as severance and transformation costs, show second-quarter net income of $230 million and six-month net income of $153 million, roughly flat year over year. Balance sheet and cash flow changed materially during the period.
Cash and cash equivalents fell to $3.48 billionc from $7.51 billion at year-end 2024, and total stockholders' equity declined to $8.00 billion from $10.35 billion, largely reflecting share repurchases totaling $2.25 billion in the first half. The company repaid its $1.6 billion Convertible Notes at maturity and redeemed the $976 million PSP1 Payroll Support Program loan early. Operating cash flow improved to $1.26 billion for the six months, compared with a $128 million outflow a year earlier, while capital expenditures were $1.14 billion.
The company also terminated its remaining fuel hedge portfolio in the second quarter and now has no fuel derivatives, leaving it fully exposed to jet fuel price changes. Management's outlook calls for third-quarter 2025 RASM of down 2 percent to up 2 percent on roughly flat capacity, CASM-X up 3.5 to 5.5 percent, and full-year 2025 EBIT of $600 million to $800 milliond, excluding special items. The company cites approximately $1.8 billion of 2025 initiative EBIT contribution and about $4.3 billion targeted for 2026.
Its transformational initiatives include bag fees, a new basic fare product, revised flight credit expiration rules, and assigned seating. Q2 2025 also included a $62 million one-time severance charge tied to a workforce reduction of about 1,750 roles, and the board approved a new $2.0 billion share repurchase authorization on July 23, 2025.
02—Key points
Key Highlights
- Q2 2025 GAAP net income was $213 million, versus $367 million in Q2 2024; diluted EPS was $0.39 versus $0.58.
- Total operating revenues declined 1.5 percent to $7.24 billion, with load factor down 4.1 points to 78.5 percent and RASM down 3.1 percent.
- Fuel and oil expense fell 17.1 percent to $1.33 billion, while salaries, wages, and benefits rose 8.8 percent to $3.26 billion.
- Cash and cash equivalents dropped to $3.48 billion from $7.51 billion at December 31, 2024, after $2.25 billion in share repurchases and $1.6 billion Convertible Notes repayment.
- The company terminated its remaining fuel hedge contracts in Q2 2025 and will be fully exposed to jet fuel price volatility going forward.
- Q3 2025 guidance: RASM down 2 to up 2 percent, CASM-X up 3.5 to 5.5 percent; full-year 2025 EBIT guidance of $600 million to $800 million, excluding special items.
- A new $2.0 billion share repurchase authorization was approved on July 23, 2025, following the completion of the $2.5 billion September 2024 program.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed July 24, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $7.24B$7.35B | −1.5% |
| Operating Income | $225.00M$398.00M | −43.5% |
| Net Income | $213.00M$367.00M | −42.0% |
| EPS (Basic) | $0.40$0.61 | −34.4% |
| EPS (Diluted) | $0.39$0.58 | −32.8% |
| Shares Outstanding (Basic) | 538.00M599.00M | −10.2% |
| Shares Outstanding (Diluted) | 541.00M643.00M | −15.9% |
05—Questions
Frequently Asked Questions
Why did Southwest's net income decline so sharply in the second quarter of 2025?
Operating revenues fell 1.5 percent to $7.24 billion, driven by a 4.1-point drop in load factor and lower passenger traffic, particularly in domestic leisure travel. Salaries, wages, and benefits rose 8.8 percent, which more than offset a 17.1 percent decline in fuel and oil expense. Interest income also fell by $76 million, or 58.5 percent, due to lower cash and investment balances.
How much cash did Southwest return to shareholders in 2025?
In the first half of 2025, the company repurchased $2.25 billion of common stock and paid $210 million in cash dividends. The second quarter included a $1.5 billion accelerated share repurchase program, which the filing says will be completed by the end of July 2025.
What is the company's outlook for the rest of 2025?
Management expects third-quarter 2025 unit revenues (RASM) to range from down 2 percent to up 2 percent and CASM-X to rise 3.5 to 5.5 percent, on roughly flat capacity. Full-year 2025 EBIT, excluding special items, is guided to $600 million to $800 million, and the company targets about $1.8 billion of EBIT contribution from initiatives in 2025 and about $4.3 billion in 2026.
What changed with Southwest's fuel hedging strategy?
In the second quarter of 2025, Southwest terminated its remaining fuel hedging contracts, which were scheduled to settle through 2027, and does not intend to add new fuel derivatives. The company received approximately $40 million in cash proceeds, but it will now be fully exposed to fluctuations in jet fuel prices. A one-cent-per-gallon change in fuel price would change second-half 2025 fuel expense by approximately $11 million.
What were the main costs and one-time items affecting results?
The company recorded a $62 million one-time severance and related expense in the first quarter of 2025 from a workforce reduction of about 1,750 corporate roles. Q2 2025 also included $20 million in pre-tax special charges, including $12 million of transformation costs and $8 million of asset impairments. Excluding special items, first-half 2025 operating income was $117 million, compared with $28 million a year earlier.
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