Southwest Airlines delivered a record quarter with revenue up 20.3% and EPS up 120% YoY, driven by full implementation of new commercial initiatives (bag fees, basic economy, managed business, co-brand cards). Management expressed strong confidence in demand and pricing, though the full-year EPS guide was adjusted lower to $3.25-$4.25 (from at least $4) due to fuel costs. The call highlighted cost discipline, network optimization in its strongest markets, and further upside from refining products and expanding the co-brand partnership with Chase. Record Q2 revenue of $8.7B and adjusted EPS of $0.94, well above guidance and consensus.
Southwest Airlines delivered a record quarter with revenue up 20.3% and EPS up 120% YoY, driven by full implementation of new commercial initiatives (bag fees, basic economy, managed business, co-brand cards). Management expressed strong confidence in demand and pricing, though the full-year EPS guide was adjusted lower to $3.25-$4.25 (from at least $4) due to fuel costs. The call highlighted cost discipline, network optimization in its strongest markets, and further upside from refining products and expanding the co-brand partnership with Chase. Record Q2 revenue of $8.7B and adjusted EPS of $0.94, well above guidance and consensus.
Management expressed strong confidence in the transformation's success, record revenue performance, and durable demand, with no notable shift in confidence from prior calls.
Unit revenue up 20.1% to all-time record. Management expressed strong confidence in the transformation's success, record revenue performance, and durable demand, with no notable shift in confidence from prior calls.
Guidance tone
Full-year EPS guide revised to $3.25-$4.25, replacing the 'at least $4' floor, reflecting fuel headwinds but still implying significant YoY growth.
Unit revenue up 20.1% to all-time record. Management expressed strong confidence in the transformation's success, record revenue performance, and durable demand, with no notable shift in confidence from prior calls.
Management noted that capex guidance is at or below the low end, driven by fleet transactions and aircraft sales, with third-quarter gains elevated due to timing of asset disposals.
Management expressed strong confidence in the transformation's success, record revenue performance, and durable demand, with no notable shift in confidence from prior calls.
“Bag fees alone is about a billion dollars a year. So we're just starting off at a much higher base.”
“That comment of hundreds of millions of dollars of savings is incremental savings that we've found since the beginning of the year as we've been working together. And yes, it is incorporated into the full year guide.”
“You're going to see us building on these points of strength. And the reason we're focused on those is because we're focused on customer loyalty and building diverse revenue streams.”
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| EPS | FY2026 | $3.25–$4.25 | $3.75 | LOWERED |
| Issued | Metric | Target | Guide | Actual | Outcome |
|---|---|---|---|---|---|
| FY2026 Q1 | EPS | FY2026 Q2 | $0.35–$0.65 | $0.94 | Met / beat |
| FY2025 Q4 | EPS | FY2026 Q1 | $0.45 | $0.45 | Met / beat |
| FY2025 Q4 | Op margin | FY2026 Q1 | 3.5% | 4.55% | Met / beat |
Strong co-brand card acquisition growth signals deepening partnership and potential for higher future co-brand revenue for Southwest, which benefits Chase via card spend and fees.
“Chase co-branded credit card account growth was also exceptionally strong with card acquisitions in the quarter up 28% year over year.”
… Managed business revenues grew 30% year-over-year to a new all-time quarterly record, surpassing the record established just one quarter ago. Customer response to our enhanced product offering is showing up in strong engagement results. Rapid Rewards new member enrollments increased 35% year-over-year, and overall program size is a record with nearly 100 million members. Tier qualification activity also reached a record high in the quarter. Chase co-branded credit card account growth was also exceptionally strong with card acquisitions in the quarter up 28% year over year. Cost discipline continued as well with Casamax increasing just 3.4% year over year on near flat capacity below the low end of our prior guidance and Cost Discipline remains broad-based across the company. With transformational initiatives now fully in place, our focus has shifted to optimization and unlocking the full potential of the business. Specifically, we are focused on optimizing the network, refining new products and pricing, growing managed business revenues and expanding co-brand opportunities. We have emerged as a stronger, more resilient and better positioned Southwest while sustaining a unique set …
Southwest is shifting capacity growth into its 'points of strength'—markets where it already has leading positions—and away from new markets, focusing on profitable optimization rather than share gain. — This capacity strategy could intensify competition in Southwest's stronghold airports while reducing capacity pressure in other markets, potentially benefiting competitors in those secondary markets.
Everyone, thank you. I was hoping to start with the comp issue that you raised on unit revenue a little bit, and just maybe you could potentially size that impact in 3Q, just so we can understand a little bit more. I think what people are trying to get at is just the framing of how it progresses through the first half of 2027. I would have thought that there would have been more maturation period and more uplift from the initiatives to kind of offset just the timing of it. And then specifically to Justin, again, congrats on the new role. Just trying to understand your long-term growth, how you view long-term growth at Southwest and just network development in general. Should we be reading…
Thanks for the question. On the first, yeah, I think I just start, just maybe zoom out, back up with the fact, you know, that our Q2 unit revenue, I mean, was up 20%. I mean, an extraordinary number. I mean, just far ahead of the rest of the industry, you know, as the transformation really kicked in and performed and showed up in the results. You know, the Q3 RASM guide is pretty simple to me. It includes the headwinds. from the initiatives that we put into place about a year ago in 2025, one of which was bag fees. Bag fees alone is about a billion dollars a year. So we're just starting off at a much higher base. So if you adjust the guide for lapping those initiatives in Q3, our unit revenue guide would be well ahead of the unit revenues that we posted in the second quarter. and then either way, you know, we saw strong demand, really strong demand in revenues across the second quarter and all of that robust strength is fully in place and continuing here in the third quarter.
Southwest's bag fees alone are a ~$1B annual revenue headwind, making the underlying demand and unit revenue growth much stronger than the headline RASM numbers suggest.
Everyone, thank you. I was hoping to start with the comp issue that you raised on unit revenue a little bit, and just maybe you could potentially size that impact in 3Q, just so we can understand a little bit more. I think what people are trying to get at is just the framing of how it progresses through the first half of 2027. I would have thought that there would have been more maturation period and more uplift from the initiatives to kind of offset just the timing of it. And then specifically to Justin, again, congrats on the new role. Just trying to understand your long-term growth, how you view long-term growth at Southwest and just network development in general. Should we be reading…
Thanks for the question. On the first, yeah, I think I just start, just maybe zoom out, back up with the fact, you know, that our Q2 unit revenue, I mean, was up 20%. I mean, an extraordinary number. I mean, just far ahead of the rest of the industry, you know, as the transformation really kicked in and performed and showed up in the results. You know, the Q3 RASM guide is pretty simple to me. It includes the headwinds. from the initiatives that we put into place about a year ago in 2025, one of which was bag fees. Bag fees alone is about a billion dollars a year. So we're just starting off at a much higher base. So if you adjust the guide for lapping those initiatives in Q3, our unit revenue guide would be well ahead of the unit revenues that we posted in the second quarter. and then either way, you know, we saw strong demand, really strong demand in revenues across the second quarter and all of that robust strength is fully in place and continuing here in the third quarter.