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Investing.com -- Southwest Airlines Co. (NYSE:LUV) reported second quarter earnings that fell short of analyst expectations, with net income of $213 million, or $0.39 per diluted share, missing the analyst estimate of $0.51. Revenue for the quarter came in at $7.24 billion, slightly below the consensus estimate of $7.29 billion and down 1.5% compared to the same quarter last year.
The airline’s shares edged down 0.6% following the results as investors digested both the earnings miss and the company’s updated guidance. Southwest’s adjusted earnings per share of $0.43, which excludes special items, still fell below analyst expectations.
Southwest pointed to stabilizing domestic leisure travel during the quarter, with recent trends showing signs of improvement. The company highlighted progress on its transformation initiatives, including the implementation of bag fees and a basic economy product structure, which it said are already delivering financial benefits exceeding expectations.
"We continued to make meaningful progress against our transformational plan in second quarter, most notably implementing bag fees and a basic economy product," said Bob Jordan, President, Chief Executive Officer, & Vice Chairman. "These initiatives are coming online quickly, and we are pleased with performance thus far, including bag fee revenue exceeding expectations."
For the third quarter, Southwest expects revenue per available seat mile (RASM) to range between a 2% decline and a 2% increase year-over-year, with capacity expected to remain flat. The company maintained its targets of $1.8 billion in incremental earnings before interest and taxes (EBIT) contribution from initiatives for full year 2025 and $4.3 billion for 2026.
Southwest updated its full year 2025 EBIT guidance to a range of $600 million to $800 million. The company’s Board of Directors also authorized a new $2.0 billion share repurchase program expected to be completed over a period of up to two years, reflecting confidence in its transformation plan.
Operating expenses increased 0.9% year-over-year to $7.0 billion, while operating expenses excluding fuel, special items, and profit sharing increased 4.7% compared to the same period last year.
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