Southwest Airlines (LUV) investor relations material

Executive summary

• Q2 2026 marked the first full quarter with all major transformation initiatives in place, resulting in record financial and operational performance, including record operating and managed business revenues and strong customer engagement.

• Adjusted EPS rose 120% year-over-year to $0.94, surpassing guidance and consensus; net income was $233 million ($0.47 diluted EPS), and adjusted net income was $465 million.

• Revenue and customer engagement reached all-time highs, driven by diversified revenue streams, enhanced product offerings, and transformational initiatives.

• Operational excellence and customer satisfaction remained industry-leading, with top rankings in J.D. Power and The Wall Street Journal studies.

Financial highlights

• Adjusted operating margin improved by 3.3 points year-over-year to 6.7%; operating margin (GAAP) was 3.4%.

• Adjusted operating revenue grew 20.3% year-over-year to a record $8.7 billion on 0.2% capacity growth; operating revenues reached $8.4 billion, up 16.4%.

• Managed business revenue increased 30% year-over-year, setting a new quarterly record.

• Operating cash flow for the first half of 2026 reached nearly $2 billion; Q2 operating cash flow was up 32% year-over-year to $0.5 billion.

• Liquidity ended at $5.3 billion, above the $4.5 billion target; gross leverage ratio improved to 2.1x from 2.4x at 2025 year-end.

Outlook and guidance

• Full-year 2026 adjusted EPS expected in the range of $3.25–$4.25, reflecting updated fuel assumptions and robust demand.

• Third quarter 2026 unit revenue growth projected at 17.5%–19.5% year-over-year, with strong demand and pricing; CASM-X expected to rise 3.5%–4% year-over-year.

• Full-year capacity growth expected at approximately 1.5%, with disciplined growth focused on network strength.

• Expects 2026 net capital spending to be at or below $3.0–$3.5 billion, with 60 aircraft retirements and 64 new deliveries planned.

• Continues to monitor Boeing delivery delays and will adjust fleet and capacity plans as needed.