Southwest Airlines Company
Q1 2026 Earnings
Market Reaction
S&P 500 over the same 30 days: +5.95%.
Did LUV Beat Earnings? Q1 2026 Results
Southwest Airlines delivered a mixed first quarter for fiscal 2026, posting earnings of $0.45 per share and revenue of $7.25 billion, missing Wall Street's consensus estimates of $0.47 and $7.28 billion by 5.04% and 0.37% respectively, even as the carrier swung to $227 million in net income from a loss of $149 million a year ago. Revenue grew 12.8% year-over-year, buoyed by 13.4% passenger revenue growth and strong adoption of the new assigned and extra legroom seating, with roughly 60% of customers upgrading from the base product. The primary drag on earnings was fuel, where costs of $2.73 per gallon ran well above prior guidance of approximately $2.40, creating an estimated $164 million headwind and weighing roughly $0.22 on EPS. With industry-wide fuel cost pressure intensifying, Southwest's Q2 outlook reflects that concern directly, with fuel now projected at $4.10 to $4.15 per gallon; the company guided Q2 adjusted EPS of $0.35 to $0.65, and declined to reaffirm its full-year $4.00 EPS target given macroeconomic uncertainty.
- Successful launch of assigned and extra legroom seating driving approximately 60% customer buy-up rate, up from approximately 20% in 2025
- Record first quarter RASM growth of 11.2% year-over-year on capacity growth of 1.5%
- Managed business revenue at strongest March and quarterly performance, increasing 25% and 16% year-over-year
- Rapid Rewards enrollments up 37% and tier-status earners up 62% year-over-year
- Strong cost discipline with CASM-X increasing only 2.3% year-over-year, below prior guidance
“First quarter 2026 marked a turning point for Southwest, as our broad set of commercial, operational, and cost initiatives is now translating into terrific results. Demand for our new product offerings drove record first quarter revenues, double-digit unit revenue growth, and significant improvement in earnings and margins. These results were achieved despite significantly higher fuel costs, underscoring the momentum across the business and the strength of our transformed business model.”
Southwest Airlines CEO, on the earnings call
Forward Guidance & Outlook
For Q2 2026, Southwest guides adjusted EPS of $0.35 to $0.65 with RASM growth of 16.5% to 18.5% year-over-year, ASMs flat to up 1.0%, and CASM-X growth of 3.5% to 4.0%. Fuel cost per gallon is assumed at $4.10 to $4.15 based on forward curves as of April 16, a significant increase from Q1 levels. Full-year 2026 capacity growth is now expected at approximately 2%, at the low end of prior 2%–3% guidance. Net capital spending for 2026 is expected at $3.0 billion to $3.5 billion. The company expects 66 Boeing 737-8 deliveries and plans to retire approximately 60 aircraft. The previously issued full-year adjusted EPS guidance of $4.00 was not updated due to macroeconomic uncertainty; achieving it would require lower fuel prices and/or stronger revenue performance.
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Figures from SEC filings and company reports. Not investment advice.