Southwest $149m Q1 loss precedes capacity cuts later in year
April 25, 2025
Southwest Airlines has reported a net loss of $149 million for Q1 2025 despite record first quarter operating revenues of $6.4 billion on all-time record yields, proof that its transformational plan appears to be providing positive momentum. However, prudent cost-controlling measures being unrolled onboard also extend to services themselves, as the airline confirms it is to cut capacity in the second half of 2025.
Set aside a “broader economic environment” president and CEO Bob Jordan described as “dynamic,” Southwest is nevertheless committed to “evolving… more than ever before”. Building on its ‘Southwest Even Better’ plan, revealed in September 2024, the low-cost carrier is “confident in the initiatives [it has] outlined and the value [it expects] them to produce,” he continued.
Crucially, Southwest is confident that it remains on track to achieve its increased cost reduction plan targets announced last month, citing a “stellar operation in the first quarter” that improved on “almost every operating metric”. However, this has arguably come at a cost to long-standing customer expectations, such as March 2025’s controversial U-turn on its long-standing ‘Bags Fly Free’ scheme. Southwest is currently expecting to introduce basic economy and bag fees for most fares next month, with the sale of extra legroom seats to also start later this year. The airline states it has seen “no evidence of book-away following its recent announcement of policy changes”.
However, in an effort to continue “executing on these plans while controlling what [it] can control,” Southwest is to reduce capacity for the latter half the year through “incremental schedule adjustments”. Current estimates suggest its full-year capacity will be up just 1% year-over-year. This comes following weakened domestic demand throughout Q1, “driving softness in bookings, particularly in domestic leisure travel, where the Company is currently more heavily weighted compared with larger industry peers,” Southwest explained.
The second quarter of 2025 revenues are also set to be down from the promising early start from the year (flat to down 4%), with Southwest assuming that these trends will “persist through the remainder of the quarter”. Additionally, the airline is not reaffirming its guidance for earnings before interest and taxes for 2025 and 2026.
