Southwest Airlines Q4 Earnings Beat Estimates, Revenues Lag

Southwest Airlines Co. (LUV) reported mixed fourth-quarter 2025 results, wherein earnings surpassed the Zacks Consensus Estimate, but revenues lagged the same.

Quarterly earnings of 58 cents per share beat the Zacks Consensus Estimate of 56 cents and improved 3.6% year over year. Revenues of $7.44 billion missed the Zacks Consensus Estimate of $7.52 billion, but improved 7.4% year over year. Passenger revenues (which accounted for 91.1% of the top line) grew 7.6% year over year to $6.78 billion.

Quarterly results benefited from revenue initiatives and continued cost control, which contributed to solid results and strong momentum. 2026 looks encouraging on the back of LUV’s customer-focused product offering, operational excellence and dramatic progress from the transformational initiatives implemented last year.

Operating Statistics

Airline traffic, measured in revenue passenger miles, rose 3.2% year over year to 35.56 billion in the quarter under review. Capacity or available seat miles (ASMs) grew 5.8% year over year to 46.05 billion.As traffic failed to outpace capacity expansion, load factor (percentage of seat occupancy) fell 2 percentage points to 77.2%. Our estimate stands at 76.9%.

Passenger revenue per available seat mile (PRASM: a key measure of unit revenues) grew 1.7% year over year to 14.73 cents.

Revenue per available seat mile (RASM) grew 1.5% year over year to 16.16 cents.

Operating Expenses & Income

In the fourth quarter, Southwest Airlines incurred an operating income of $391 million compared with $278 million in the year-ago quarter. On an adjusted basis (excluding special items), the company reported operating income of $380 million compared with $397 million in the year-ago quarter. 

Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 6.6% in the fourth quarter of 2025. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, oil and profit-sharing expenses, and special items grew 0.8% year over year.

Fuel cost per gallon (inclusive of fuel tax: economic) rose 1.2% year over year to $2.45.

Liquidity

Southwest Airlines ended the fourth quarter with cash and cash equivalents of $3.23 billion compared with $2.90 billion at the end of the prior quarter. As of Dec. 31, 2025, the company had long-term debt (less current maturities) of $4.57 billion compared with $4.08 billion at the end of the prior quarter.

LUV generated $295 million of cash from operating activities in the reported quarter. Fourth-quarter 2025 net capital expenditures were $859 million.

During the full-year 2025, LUV repurchased shares worth $2.6 billion and paid $399 million in the form of dividends.

Outlook

LUV anticipates first-quarter 2026 unit revenues to be up at least 9.5%, on a year-over-year basis. LUV anticipates adjusted earnings per share to be at least 45 cents in the first quarter. The Zacks Consensus Estimate is pegged at 39 cents per share.

LUV anticipates first-quarter 2026 capacity to be up 1-2% year over year. First-quarter 2026 CASM-X is expected to be up almost 3.5% year over year, which includes a 1.1 point impact from the removal of six seats from the Boeing 737-700 fleet to enable extra legroom seating.First-quarter 2026 fuel cost per gallon is expected to be around $2.40.

LUV now anticipates 2026 capacity to be up 2-3% year over year. For 2026, LUV anticipates adjusted earnings per share to be at least $4.00 (which reflects the lower end of internal forecasts). The Zacks Consensus Estimate is pegged at $3.38 per share.

For 2026, net capital spending is expected to be in the range of $3.0 billion-$3.5 billion, with 66 Boeing 737-8 aircraft deliveries scheduled in 2026 and plans to retire nearly 60 aircraft.

Currently, LUV carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q4 Performances of Other Transportation Companies

Delta Air Lines DAL reported fourth-quarter 2025 earnings (excluding 31 cents from non-recurring items) of $1.55 per share, which beat the Zacks Consensus Estimate of $1.53. Earnings decreased 16.22% on a year-over-year basis due to high labor costs.

Revenues in the December-end quarter were $16 billion, beating the Zacks Consensus Estimate of $15.63 billion and increasing 2.9% on a year-over-year basis. Adjusted operating revenues (excluding third-party refinery sales) increased 1.2% year over year to $14.6 billion. Revenue growth was impacted by about 2 points due to the government shutdown, mainly in the domestic segment, consistent with the company's disclosure last month.

J.B. Hunt Transport Services, Inc. (JBHT) reported fourth-quarter 2025 earnings of $1.90 per share, which surpassed the Zacks Consensus Estimate of $1.81 and improved 24.2% year over year.

Total operating revenues of $3.09 billion lagged the Zacks Consensus Estimate of $3.12 billion and were down 1.6% year over year. JBHT’s fourth-quarter revenue performance was hurt by a 2% and 4% decline in revenue per load excluding fuel surcharge revenue in Intermodal (JBI) and Truckload (JBT), respectively, a 1% decrease in average trucks in Dedicated Contract Services (DCS), and a 7% and 2% decline in load volume in Integrated Capacity Solutions (ICS) and JBI, respectively. The decrease in revenue, excluding fuel surcharge revenue, was partially offset by a 15% increase in volume in JBT, a 1% uptick in productivity, excluding fuel surcharge revenue, in DCS, and an increase in revenue per load in ICS. Total operating revenue, excluding fuel surcharge revenue, decreased 2% year over year.

United Airlines Holdings, Inc. (UAL) reported solid fourth-quarter 2025 results wherein the company’s earnings and revenues beat the Zacks Consensus Estimate.

UAL's fourth-quarter 2025 adjusted earnings per share (excluding 9 cents from non-recurring items) of $3.10 surpassed the Zacks Consensus Estimate of $2.98 but declined 4.9% on a year-over-year basis. The reported figure lies within the guided range of $3.00-$3.50.

Operating revenues of $15.4 billion outpaced the Zacks Consensus Estimate marginally by 0.1% and increased 4.8% year over year. Passenger revenues (which accounted for 90.4% of the top line) increased 4.9% year over year to $13.9 billion. UAL flights transported 45,679 passengers in the fourth quarter, up 3% year over year.

Cargo revenues fell 6% year over year to $490 million. Revenues from other sources rose 9.1% year over year to $981 million.

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This article originally published on Zacks Investment Research (zacks.com).

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