Southwest Airlines Q4 Earnings Beat Estimates, Revenues Lag

Core Insights - Southwest Airlines Co. reported mixed fourth-quarter 2025 results, with earnings exceeding estimates while revenues fell short [1] Financial Performance - Quarterly earnings were 58 cents per share, beating the Zacks Consensus Estimate of 56 cents and reflecting a 3.6% year-over-year improvement [2] - Revenues totaled $7.44 billion, missing the Zacks Consensus Estimate of $7.52 billion but showing a 7.4% year-over-year increase [2] - Passenger revenues, which made up 91.1% of total revenues, grew 7.6% year over year to $6.78 billion [2] Operational Metrics - Airline traffic, measured in revenue passenger miles, increased by 3.2% year over year to 35.56 billion [4] - Capacity, or available seat miles (ASMs), rose 5.8% year over year to 46.05 billion, leading to a load factor decrease of 2 percentage points to 77.2% [4] - Passenger revenue per available seat mile (PRASM) grew 1.7% year over year to 14.73 cents [4] - Revenue per available seat mile (RASM) increased by 1.5% year over year to 16.16 cents [5] Operating Income and Expenses - Operating income for the fourth quarter was $391 million, up from $278 million in the previous year [6] - Adjusted operating income was $380 million, slightly down from $397 million year over year [6] - Total adjusted operating expenses increased by 6.6% in the fourth quarter [7] - Consolidated unit cost (CASM) excluding fuel, oil, and profit-sharing expenses grew by 0.8% year over year [7] - Fuel cost per gallon rose by 1.2% year over year to $2.45 [7] Liquidity and Capital Expenditures - Cash and cash equivalents at the end of the fourth quarter were $3.23 billion, up from $2.90 billion in the prior quarter [8] - Long-term debt increased to $4.57 billion from $4.08 billion [8] - The company generated $295 million in cash from operating activities during the quarter [8] - Net capital expenditures for the fourth quarter were $859 million [8] Shareholder Returns - In 2025, the company repurchased shares worth $2.6 billion and paid $399 million in dividends [9] Future Outlook - For the first quarter of 2026, the company expects unit revenues to grow at least 9.5% year over year and adjusted earnings per share to be at least 45 cents [10][11] - Capacity for the first quarter of 2026 is anticipated to increase by 1-2% year over year [12] - For the full year 2026, the company expects capacity to rise by 2-3% and adjusted earnings per share to be at least $4.00 [13] - Net capital spending for 2026 is projected to be between $3.0 billion and $3.5 billion, with 66 Boeing 737-8 aircraft deliveries scheduled [13]