Southwest Airlines second-quarter forecasts fell below analysts expectations as the war in Iran increases fuel prices.
For the second quarter, the airline expects adjusted earnings per share between US$0.35 and $0.65, with fuel costs expected to reach $4.10 and $4.15 per gallon. This is higher than the $2.73 gallon it cost in the first quarter.
Analysts polled by LSEG expected Q2 guidance to reach $0.55 per share.
The company also said its previous guidance of $4 per share, which it expected in January, would “not be productive at this time”.
“Achieving this outcome would require lower fuel prices and/or stronger revenue performance to offset higher fuel expense,” the airline said in an earnings release.
“The Company expects to provide updates to this guidance as appropriate.”
Other airlines, like United, have also decreased or cut their guidance amid the higher fuel costs.
They are also pulling back on their capacity growth plans to cut costs, which can drive up airfare when fewer seats are for sale.
Southwest said it expects its capacity to be flat to up no more than 1% in the second quarter, and unit revenues to rise by 16.5% to as much as 18.5% over last year.
Despite headwinds created by the conflict in the Middle East, Southwest’s profit rose to $227 million, or $0.45 per share. This is up from last year’s $149 million or $0.26 per share, but falls short of analysts' expectations of $0.47 per share.
"First quarter 2026 marked a turning point for Southwest, as our broad set of commercial, operational, and cost initiatives is now translating into terrific results,” Southwest president and CEO Bob Jordan said.
“These results were achieved despite significantly higher fuel costs, underscoring the momentum across the business and the strength of our transformed business model.”
Revenue rose nearly 13% to $7.25 billion but fell below expectations of $7.27 billion.
Southwest Airlines (NYSE: LUV) shares fell 3.84% to $39.35 on Wednesday (Thursday AEST), and declined a further 2.8% in after-hours trade. Its market cap is $19.32 billion.
