Southwest Airlines Warns Fuel Costs May Weigh on Second-Quarter Earnings

Southwest Airlines has signaled that rising fuel expenses could push second-quarter earnings below analyst expectations, even as the carrier reports a strong recovery in its first-quarter financial performance. The airline is currently navigating a volatile energy market, which has forced many carriers to either trim full-year forecasts or limit capacity growth to protect margins. To offset these costs, Southwest is pivoting its business model to include new revenue streams, including the introduction of fees for checked bags and seat assignments. For the first quarter, Southwest swung to a net profit of $227 million, or $0.45 per share, compared to a $149 million loss in the same period last year. Revenue grew nearly 13% to $7.25 billion. However, the company expects Q2 earnings to range between $0.35 and $0.65 per share, while analysts polled by LSEG had estimated $0.55 per share. The company is maintaining its full-year 2026 earnings per share target of $4.00, though management noted that achieving this goal depends on fuel price stabilization or further revenue growth. Capacity for the second quarter is expected to remain relatively flat, increasing by no more than 1%, while unit revenues are projected to climb between 16.5% and 18.5% year-over-year.