Southwest Airlines Co.: Q1 FY2026 earnings call

What management said about Q1 FY2026, from the documents filed with the SEC on 22 April 2026: press release. Guidance figures: 1 lowered, 6 new, 1 kept. The quarter’s numbers.

Read the filing

Key takeaways

• Net income and EPS reported: Net income was $227 million, or $0.45 diluted EPS, against a net loss of $149 million in the first quarter of 2025. Operating income was $330 million, compared with a loss of $223 million. Source
• Operating margin improved 8.1 points: Operating margin was 4.6%, an 8.1-point improvement year-over-year. Excluding special items, the improvement was 6.6 points, with the prior-year margin shown as negative 2.0%. Source
• RASM rose 11.2%, above guidance: RASM increased 11.2%, above prior guidance, which management attributed to initiative contributions and broad-based demand across the network. Passenger yield rose 11.5% to 21.16 cents per RPM. Source
• Buy-up rate rose to 60%: About 60% of Customers upgraded from the base product in the first quarter of 2026, up from about 20% in 2025, according to the release. Source
• Fuel price above prior guidance: Fuel cost was $2.73 per gallon, above prior guidance of about $2.40. The company said this added $164 million to fuel expense and about $0.22 of headwind to EPS. Source
• Chicago and Dulles exits in June: Southwest announced suspension of operations at Chicago O'Hare and Washington Dulles in June, with capacity reallocated to higher-performing markets as part of network optimization. Source
• Repurchases and dividends over $1.3B: The company repurchased $1.25 billion of shares and paid $93 million of dividends in the quarter. $450 million remains under the $2.0 billion repurchase authorization. Source

“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.”

Bob Jordan, President & Chief Executive Officer

Guidance

What changed from last quarter

• New guidance: Second quarter 2026 ranges given for ASMs, RASM, CASM-X and fuel cost per gallon. Source
• Guidance lowered: Full-year 2026 capacity growth narrowed to about 2%, from the prior 2% to 3% range. Source
• New: Planned Starlink Wi-Fi deployment across the fleet, which was not in the prior release. Source
• New: New strategic partnership with All Nippon Airways, bringing the network to seven partners. Source
• New: Announced suspension of operations at Chicago O'Hare and Washington Dulles in June, with capacity moved to higher-performing markets. Source
• New: Entered a $500 million aircraft-secured term loan used to pay down the final portion of the Payroll Support Program loan. Source

Results and profit drivers

• Net income and EPS reported: Net income was $227 million, or $0.45 diluted EPS, against a net loss of $149 million in the first quarter of 2025. Operating income was $330 million, compared with a loss of $223 million. Source
• Operating margin improved 8.1 points: Operating margin was 4.6%, an 8.1-point improvement year-over-year. Excluding special items, the improvement was 6.6 points, with the prior-year margin shown as negative 2.0%. Source
• Operating cash flow up 65%: Operating cash flow was $1.4 billion, an increase of 65% from the first quarter of 2025. Operating revenues were $7.2 billion, up 12.8% year-over-year. Source

Revenue and demand

• Passenger revenue rose 13.4%: Passenger revenue was $6.6 billion, up 13.4%, on capacity up 1.5%. Average passenger fare rose 16.6% to $225.93, while revenue passengers carried fell 2.7%. Source
• RASM rose 11.2%, above guidance: RASM increased 11.2%, above prior guidance, which management attributed to initiative contributions and broad-based demand across the network. Passenger yield rose 11.5% to 21.16 cents per RPM. Source
• Air traffic liability climbed: Current air traffic liability was $7,049 million at quarter-end, compared with $5,945 million at December 31, 2025. The cash flow statement shows a $1,086 million inflow from air traffic liability. Source

“Our Customers have embraced and value our new products, and that is reflected in our financial performance.”

Bob Jordan, President & Chief Executive Officer

Products and customers

• Buy-up rate rose to 60%: About 60% of Customers upgraded from the base product in the first quarter of 2026, up from about 20% in 2025, according to the release. Source
• Rapid Rewards enrollments up 37%: Rapid Rewards enrollments rose 37% and tier-status earners rose 62%, both year-over-year, which the company cited as higher engagement. Source
• Managed business revenue up 25% in March: Managed business revenue increased 25% in March and 16% for the quarter, which the company described as its March and quarterly record. Source

Costs and fuel

• Fuel price above prior guidance: Fuel cost was $2.73 per gallon, above prior guidance of about $2.40. The company said this added $164 million to fuel expense and about $0.22 of headwind to EPS. Source
• Unit costs excluding fuel rose 2.3%: CASM-X rose 2.3% on capacity growth of 1.5%, below prior guidance. Total operating expenses rose 4.0% to $6.9 billion, and CASM-X excluding special items rose 4.0%. Source
• Salaries and fuel lines rose: Salaries, wages, and benefits rose 6.3% to $3,297 million, and aircraft fuel and related taxes rose 8.6%. Other operating expenses fell 4.9%, and landing fees rose 9.6%. Source
• Profit-sharing expense added: Profit-sharing expense of $50 million was recorded in the quarter and is excluded from the CASM-X measure. The prior-year quarter had no profit-sharing expense. Source

“While the external environment remains uncertain, we are confident in our positioning”

Bob Jordan, President & Chief Executive Officer

Capacity, fleet and network

• Capacity up 1.5% in quarter: Capacity rose 1.5% to 42,049 million ASMs. The company received 10 Boeing 737-8 aircraft and retired 13 aircraft, ending the quarter with 800 aircraft. Source
• Full-year capacity growth trimmed: Full-year 2026 capacity growth is now expected at about 2%, the low end of the earlier 2% to 3% range, under a disciplined capacity plan. Source
• Chicago and Dulles exits in June: Southwest announced suspension of operations at Chicago O'Hare and Washington Dulles in June, with capacity reallocated to higher-performing markets as part of network optimization. Source
• Five new market entries in 2026: Service began at St. Thomas, U.S. Virgin Islands and Knoxville, Tennessee, which the company described as two of five new market entries planned for 2026. Source

Liquidity, debt and capital returns

• Repurchases and dividends over $1.3B: The company repurchased $1.25 billion of shares and paid $93 million of dividends in the quarter. $450 million remains under the $2.0 billion repurchase authorization. Source
• Cash and leverage at quarter-end: Cash and cash equivalents were $3.3 billion, with a $1.5 billion revolving credit line. Adjusted debt to adjusted EBITDAR, the company's leverage measure, was 2.2x. Source
• Unencumbered assets near $16.5B: Unencumbered aircraft and related assets had a net book value of about $16.5 billion. The prior release gave $17.0 billion at December 31, 2025. Source
• Capital expenditures of $630M: Gross capital expenditures were $630 million, mainly for aircraft, with technology, facilities and operational investments also included. Source

Strategy and partnerships

• Starlink Wi-Fi across the fleet: Starlink ultra-fast Wi-Fi is planned across the fleet, with initial aircraft in service in summer 2026 and at least 300 aircraft by year-end 2026. Source
• New partnership with ANA: A new strategic partnership with All Nippon Airways expands the global network to seven partners. The company listed this among its first-quarter highlights. Source
• Cabin upgrades: power and bins: Fleet upgrades with in-seat power and larger overhead bins continue, with about two thirds of aircraft expected to have both features by late 2026. Source

Operations, workforce and management tone

• Seating launch and on-time results: Assigned and extra legroom seating launched January 27, 2026, with best-in-class on-time performance and the highest completion factor among large domestic peers on launch day. Source
• Active employees up 2.7%: Active full-time equivalent employees were 73,401 at quarter-end, up 2.7% from a year earlier. Aircraft at end of period were 800, unchanged year-over-year. Source
• External uncertainty and cost focus: Management said the external environment remains uncertain and that it is focused on managing costs, optimizing revenue initiatives, and directing capacity. Source

Coming up, as management said on 22 April 2026

• Second quarter guidance to be updated: The company expects to provide updates to the second quarter guidance as appropriate. Full-year adjusted EPS guidance was not updated in this release. Source

Figures management reported

Risks management discussed

• External: Management said achieving full-year adjusted EPS of $4.00 would require lower fuel prices, stronger revenue performance, or both, to offset higher fuel expense. Source
• External: Management cited ongoing macroeconomic uncertainty as the reason it did not update full-year adjusted EPS guidance at this time. Source

Earlier plans management reported on

• Met: First quarter net income of $227 million and $0.45 EPS were described as in line with guidance. Source
• Not stated: RASM of 11.2% growth was described as above prior guidance. Source
• Not stated: CASM-X growth of 2.3% was described as below prior guidance. Source
• Not stated: Fuel cost of $2.73 per gallon was described as above prior guidance. Source
• Not stated: Management reiterated expected 2026 Boeing 737-8 deliveries and planned retirements. Source

Other quarters

• Q2 FY2026 earnings call
• Q4 FY2025 earnings call
• Q3 FY2025 earnings call
• Q2 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.