Southwest Airlines Q2 Earnings Beat Estimates on Record Revenue Growth

LUV's Passenger Revenues Power Top-Line Growth

Passenger revenues, which accounted for 91.9% of the top line, increased 16.9% year over year to $7.75 billion. The improvement reflected higher fares and strong customer response to Southwest Airlines’ expanded commercial offerings.

Freight revenues rose 13.6% to $50 million. Other operating revenues increased 11.2% to $637 million, providing another source of growth beyond ticket sales.

Southwest Airlines Posts Stronger Revenue Productivity

Revenue passenger miles, a measure of traffic, increased 1.2% year over year to 37.35 billion. Capacity, measured in available seat miles, edged up only 0.2% to 47.09 billion, allowing demand growth to outpace supply.

The load factor improved 0.8 percentage points to 79.3%. Average passenger fare climbed 20.9% to $225.61, while passenger revenue per available seat mile advanced 16.7% to 16.45 cents. Revenue passengers carried declined 3.3% to 34.3 million.

LUV Controls Non-Fuel Costs as Fuel Expense Surges

Total operating expenses increased 16.1% year over year to $8.15 billion. Aircraft fuel and related taxes surged 67% to $2.22 billion, representing the largest cost headwind during the quarter.

Fuel cost per gallon increased 69% to $3.92. Still, cost per available seat mile, excluding fuel, special items and profit sharing, rose a more moderate 3.4% to 12.45 cents, coming in below the company’s prior guidance.

Adjusted operating income climbed 138.8% to $585 million. Reported operating income increased 26.7% to $285 million despite the sharp rise in fuel costs.

Southwest Airlines' Commercial Initiatives Gain Traction

Managed business revenues reached a quarterly record and increased 30% year over year. The performance highlighted stronger demand from corporate customers and broadened the company’s revenue mix.

Rapid Rewards enrollment rose 35%, while the loyalty program reached nearly 100 million members and posted record tier qualifiers. Acquisitions for the Chase co-branded credit card accelerated 28%, with double-digit growth in every month of the quarter.

Southwest Airlines also completed service rollouts to five new destinations and added Air Premia as its ninth airline partner. The carrier operated its first aircraft equipped with Starlink connectivity during the quarter.

LUV Generates Higher Operating Cash Flow

Southwest Airlines ended June with cash and cash equivalents of $3.79 billion, up from $3.23 billion at the end of 2025. Total liquidity was $5.3 billion, including a $1.5 billion revolving credit facility.

Net cash provided by operating activities rose to $530 million from $401 million a year earlier. Capital expenditures totaled $818 million, while proceeds from property and equipment sales reached $258 million.

The company paid $88 million in dividends during the quarter. It ended the period with $3.79 billion of long-term debt, excluding current maturities, and reported gross leverage of 2.1 times.

Southwest Airlines Issues Q3 and 2026 Guidance

For third-quarter 2026, Southwest Airlines expects adjusted earnings of 50-75 cents per share. The Zacks Consensus Estimate is pegged at 77 cents per share. Capacity is projected to decline 1% to remain flat, while unit revenues are forecasted to increase 17.5-19.5% year over year.

Third-quarter cost per available seat mile, excluding fuel, special items and profit sharing, is expected to rise 3.5-4%. Fuel cost per gallon is projected to be between $3.70 and $3.75.

For 2026, management expects adjusted earnings of $3.25-$4.25 per share, replacing its prior expectation of at least $4. The Zacks Consensus Estimate is currently pegged at $3.23. Capacity growth is now forecasted to be roughly 1.5%, down from 2%. Net capital spending is expected near the low end of, or below, the previously announced $3-$3.5 billion range.

Currently, LUV carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q2 Performances of Other Transportation Companies

Delta Air Lines (DAL) reported second-quarter 2026 earnings (excluding 88 cents from non-recurring items) of $1.56 per share, beating the Zacks Consensus Estimate of $1.51. Earnings declined in double digits (% wise) from a year ago as sharply higher fuel costs pressured profitability.

Revenues rose on a year-over-year basis to $17.67 billion but missed the consensus estimate of $17.76 billion. Broad demand strength lifted adjusted total revenue per available seat mile, or TRASM, 12.4%, while premium and diversified revenue streams continued to expand.

United Airlines Holdings, Inc. (UAL) reported second-quarter 2026 adjusted earnings of $1.99 per share, down 48.6% year over year but above the Zacks Consensus Estimate of $1.92 by 3.7%.

Operating revenues rose 16% to $17.67 billion and were essentially in line with the $17.68-billion consensus mark. A 12.1% increase in total revenue per available seat mile, or TRASM, and broad-based gains across premium, loyalty and cargo revenues supported the top line despite sharply higher fuel costs.

J.B. Hunt Transport Services, Inc. (JBHT) reported second-quarter 2026 earnings of $1.91 per share, up 45.8% from $1.31 a year ago. The figure beat the Zacks Consensus Estimate of $1.71 by 11.7%.

Operating revenues climbed 19.4% year over year to $3.50 billion and surpassed the consensus mark of $3.19 billion by 9.5%. Higher volumes and pricing across several businesses supported growth, led by a 10% increase in Intermodal loads.

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