Southwest reported a first-quarter loss of 26 cents per share. Analysts warn that new initiatives such as baggage fees could sacrifice market share.
Southwest Airlines’ continued turnaround efforts fell deadlock in the first quarter as the Dallas-based airline announced plans to cut flight schedules amidst travel disruptions across the industry.
Like airlines in the US, Delta and other domestic airlines, the Southwest has suspended its outlook for 2025 and 2026, warning that the current economic situation in the industry could have a significant impact on travel demand.
“In the current macroeconomic uncertainty, it is extremely difficult to confidently predict the recent short-lived trends,” Southwest president and CEO Bob Jordan told analysts during the company’s first quarter conference call.
Jordan, who continued his job in late 2024 in a long proxy battle with activist hedge fund Elliott Investment Management to rebuild his Dallas-based career, said the company’s management is focusing on implementing its strategic plans. The plan will continue to focus on improving operational metrics, including company-wide cost reductions, rolling out new rate-based initiatives, and on-time performance.
Following the settlement agreement with Elliott in late October, Southwest appointed six new independent board directors and overhauled the leadership team with several new recruits. In February, longtime Lovefield tenants cut 1,750 jobs from more than 72,000 workforce. This included 15% of companies and managers.
Despite these efforts, Southwest reported a loss of $149 million, or 26 cents per share, in the same period in 2024, compared to a loss of $231 million (39 cents). Southwest has increased record revenues by 3.5%, with an adjusted 13 cents per share of $643 million.
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Wall Street was hoping Southwest would report a 17-cent loss of 17 cents on revenues, according to Factset of Financial Services Company. During the April 24 trading session, revised results that exceeded expectations made Southwest shares higher. The shares closed the day at a 3.6% increase, or 92 cents.
In key quarter highlights, Jordan said the company accelerated its cost-cutting plans, increasing its 2025 target to around $370 million, and its 2027 execution rate exceeds $1 billion.
The former budget airline will also launch several new programs in the second quarter. Jordan said the company is on track to close its long-standing popular open seat arrangements, and will begin assigning seats allocated in additional legrooms in the third quarter in early 2026.
Still, Bank of America analyst Andrew Didola said the current “micro uncertainty” has many questions about the company’s new initiative, including new add-on baggage fees, economy fares and allotted seats.
“Low-performance” ratings for Southwest stocks,” said Didra, who maintains a “low-performance” rating.
Regarding the company’s operational performance, Jordan said Southwest’s first quarter capacity fell 1.9% from a year ago. In response to the decline in flight bookings, he said he is reducing capacity in the second half to accommodate lower demand and gain related cost reductions.
The schedule is not final, but Southwest is also looking to cut its capacity in the third and fourth quarters by about 1.5 percentage points. It is also expected that annual capacity will rise by about 1%, which is the lowest level of previous forecasts of 1-2%.
As part of the company’s fleet upgrade, Southwest received 11 aircraft, retired from 14 old planes, and finished the quarter with 800 aircraft. Capital expenditures for the first quarter of 2025 rose to $501 million, driven primarily by aircraft-related purchases, technology, facilities and operational investments.
Southwest expects capital expenditures to range from $2.5 billion to $3 billion in 2025, but this does not include the impact of potential future fleet transactions. It also said that the company has halted its fuel hedging program to lock down future prices as jet fuel prices continue to fall to an average of $2.49 per gallon in the first quarter.
In response to several questions from industry analysts, Jordan said he is confident in his company’s transformation plans in the current environment. Entering the second quarter, he said Southwest will continue to run with capacity plans, launching new operational initiatives and reducing costs, including repayment of $2.6 billion in debt.
“I’m confident in our plans, I’m confident in our executions, I’m confident in our people,” he said.
