Southwest Airlines

Southwest Airlines’ ambitious guidance: three takeaways from the airline’s Q4 2025 results

Southwest Airlines has a bullish outlook for 2026.

Photo: Southwest Airlines

Southwest Airlines has published its Q4 2025 results, with the airline, which had a transformational year as it continues to make changes to its business model, ending the quarter with a significant improvement in net profitability.

At the end of Q4 2025, the carrier’s net income was $323 million, up 23.8% year-on-year (YoY), with total revenues improving to $7.4 billion, while quarterly expenses increased by 6% YoY to $7 billion.

Growing aircraft utilization and gauge

In Q4 2025, Southwest Airlines grew its capacity, measured in available seat miles (ASMs), by 5.8% YoY, despite the fact that it had 803 aircraft at the end of both Q4 2025 and Q4 2024. During the quarter, the airline took delivery of 19 Boeing 737 MAX 8 aircraft and retired 14 737-700 and four 737-800s.

With larger MAX 8 aircraft joining the fleet, Southwest Airlines saw its average seats per trip increase by 1.0% to 161.7.

Those extra seats were not, however, filled as load factors dropped by 2%.

The airline highlighted two initiatives that have driven aircraft utilization up: red-eye flying and reduced turn times. While it did not publish its aircraft utilisation, a 5.8% increase in ASMs on unchanged fleet size and 1% higher gauge suggests that utilisation increased by around 4.8% YoY.

In 2026, Southwest Airlines plans to take delivery of 66 737 MAX 8s and retire 60 aircraft, with the initial full-year capacity guidance estimating ASMs growing by 2% to 3% YoY.

RASM growth ahead of CASM inflation

During the quarter, Southwest Airlines’ revenue per ASM (RASM) improved by 1.5% YoY, while cost per ASM (CASM) was relatively flat, up only 0.2%. CASM, excluding fuel, special items, and profit-sharing, rose only 0.8%, enabling the airline to end the three-month period with operating income of $391 million in 4Q25, up from $278 million in 4Q24.

Other United States-based carriers’ RASM growth was mixed. Delta Air Lines’, for example, quarterly passenger RASM (PRASM) was slightly down (-0.08¢), while American Airlines and United Airlines’ PRASM were down 2% and 1.4% YoY, respectively.

Ambitious guidance

While Southwest Airlines warned that it will have “better visibility to the upside potential” from upsell revenue from close-in bookings and growth in business and leisure customer segments stemming from “more attractive new product offering” for 2026 “in the next month or so,” it already outlined ambitious earnings per share (EPS) guidance for the year.

The airline estimated that its year-end adjusted EPS will be “at least” $4.00, compared to year-end net EPS of $0.82 in 2025. The year’s diluted EPS was $0.76.

In Q1 2026, its adjusted EPS is expected to be at least $0.45, with ASMs rising between 1% and 2%, while RASM is expected to be up an impressive 9.5%. At least.

“The 2026 adjusted EPS guidance is at the lower end of internal forecasts, and well above Wall Street consensus.”

Bob Jordan, the President and Chief Executive Officer (CEO) of Southwest Airlines, highlighted that in 2025, the airline implemented “the most ambitious transformation in the company's history, including bag fees, basic economy fares, assigned and extra legroom seating, Rapid Rewards program optimization, online distribution expansion, and free WiFi for loyalty members.”