Southwest Airlines reported a first-quarter profit of $227 million, or $0.45 per diluted share. A $149 million loss in the year-ago period gave way to a $227 million first-quarter profit, with earnings coming in at $0.45 per diluted share compared with a loss of $0.26 per share twelve months prior. Operating revenue rose 12.8% to $7.25 billion, a first-quarter record for the Dallas-based carrier.
Passenger revenue climbed 13.4% year-over-year to $6.6 billion. The operating margin improved 8.1 percentage points to 4.6%, the company said. About 60% of customers upgraded from the base product during the quarter, up from about 20% in 2025.
The Q2 adjusted earnings outlook Southwest put forward — a range of $0.35 to $0.65 per share — fell short of the $0.55 consensus estimate among analysts surveyed by LSEG, according to CNBC. Issued in January, the full-year adjusted earnings target of $4.00 per share was left unchanged, though Southwest cautioned that hitting that figure hinges on a combination of easing fuel costs and continued outperformance on the revenue side.
Fuel costs are the central pressure point. Southwest paid $2.73 per gallon in the first quarter, above its prior guidance of about $2.40 — a $164 million increase that represented roughly a $0.22 headwind to earnings per share. For the second quarter, the company projected fuel costs of $4.10 to $4.15 per gallon based on the forward curve as of April 16.
CEO Bob Jordan, speaking with reporters after the earnings release, struck an upbeat tone on bookings. "Demand is really strong ... strong in every sector," he said.
Second-quarter capacity is expected to be flat to up 1%, with unit revenues forecast to rise between 16.5% and 18.5% year-over-year.
Southwest ended the quarter with $3.3 billion in cash and generated $1.4 billion in operating cash flow, a 65% increase from the first quarter of 2025. The company repurchased $1.25 billion in shares and paid $93 million in dividends during the quarter.
The results reflect a broader set of commercial changes Southwest has made over the past two years. The airline ended its open seating policy — a feature it had offered for more than 50 years — on Jan. 27, 2026, introducing assigned seating and extra legroom options across four fare bundles. The change came after Southwest also ended its universal two free checked bags policy, restricting it to higher-paying customers.
Southwest overhauled its boarding process alongside the seating shift, moving from open boarding groups to eight structured groups that prioritize premium and frequent flyers. The carrier also launched service in St. Thomas, U.S. Virgin Islands, and Knoxville, Tennessee in the quarter, and entered a partnership with All Nippon Airways, expanding its global network to seven partners.
Looking ahead, Southwest said it plans to deploy Starlink Wi-Fi across its fleet, with at least 300 aircraft expected to be equipped by the end of 2026. The company also announced it will suspend operations at Chicago O'Hare and Washington Dulles in June, reallocating capacity to higher-performing markets.