Southwest’s second quarter financial results are being spun as a success of the airline’s transformation – that customers love paying for seats and checked bags, a devalued Rapid Rewards program, and travel credits that now expire.
In management’s telling, basic economy restrictions are getting customers to spend more, rather than stay away. According to CEO Bob Jordan,
Our business model now benefits from a broader and more diversified set of revenue and commercial levers than at any point in our history.
But when you did into the actual accounting, that story falls apart.
Southwest’s Revenue Growth Is Just Industry Revenue Growth
Southwest’s second quarter GAAP revenue was $8.432 billion, versus $7.244B in the second quarter of 2025. In their telling you can’t really say how much of that is the result of fuel price increases because so much has changed in their business. There’s too many moving pieces, but $1.2 billion additional revenue shows that what they’re doing is working.
But all the big airlines are seeing huge increases in revenue, and they haven’t made the same kind of business model changes that Southwest has. The major airlines have all now reported financial results for the second quarter. Revenue is up significantly across the board as follows:
- United: 16%
- Delta: 14%
- American: approximately 16%
- Peer average: 15.3%
So if we assume 15.3% increase in revenue for Southwest just from average industry uplift, we’d expect $8.355 billion in revenue and the excess revenue above that is $77 million which is just noise.
It’s Still Messy, With Expiring Travel Credits And More Credit Card Money From Chase
Southwest’s adjusted revenue looks better than GAAP revenue. The difference is a $285 million flight credit breakage adjustment.
The airline’s travel credits didn’t used to expire. They assumed that 85% of credits would get used, and 15% would expire. They now have data that suggests 12% are expiring. That means expiration wasn’t as beneficial to them, and they had to make an adjustment for it.
Basically, they recognized $285 million in the past that had to be backed out and moved forward – they shouldn’t have recognized as much breakage when they changed their rules, recognizing the revenue instead when travel gets redeemed.
So if you grant them the adjustment their quarterly revenue was $360 million higher than one would expect just from the overall industry environment. However, that’s mostly accounted for by credit card revenue improvements coming from Chase.
They have a full year-over-year effect from their revised credit card deal, reported co-brand acquisitions reported up 28% year-over-year, and increased card spend that’s reported by issuers and airlines across the board. Southwest didn’t disclose the specific amounts. Overall though there’s probably an increase coming from Chase of $250 million ($200 – $300 million).
What that means is that any above-baseline increase in revenue is coming from Chase rather than from their flying. Those aren’t entirely separable. People haven’t abandoned the credit card.
There’s No Revenue Left To Say Checked Bag Fees, Seat Fees And Basic Economy Are Helping Southwest
I considered the possibility that Southwest, doing just as well as other airlines, was really outperforming because the story so far has been about the strength of premium and Southwest isn’t premium. However that really isn’t what we’ve seen at other airlines during the second quarter.
At United, premium revenue per seat mile, main cabin revenue per seat mile and basic economy revenue were all up around the same percentage. At Delta, premium ticket revenue was up more than main cabin revenue because of an increase in premium seats and reduction in non-premium ones. So main cabin unit revenue was up double digits – and mor ethan premium unit revenue was.
The best thing Southwest can say is that they’ve reverted to industry mean. They were once the darling of investors, earning a profit 47 consecutive years (1973 – 2019) through recessions, oil shocks, and 9/11. They were a growth stock. Now, they’re an airline just like any other and we see industry-average performance.
Simply as a consumer, I really cannot see a reason for flying Southwest any longer. Even my 92-year old mother-in-law is flying on UA now! I have no doubt that some people are flying Southwest out of “force of habit,” but paying for checked baggage and paying for seats makes Southwest as expensive — and often more so — than other carriers.
Southwest is no longer extraordinary, they’re just another ordinary airline now.
What was once the most pleasant, carefree, reliable airline for short jumps and flexible scheduling has become the same (or worse) than the (we’re now charging for the air you breath while onboard) airlines. I quit using them when it all changed and spent most of my remaining credits and points getting kids home for the holidays. Not worth it anymore, not even for short jumps. Quite sad actually and their claiming it is somehow better for the consumer? LOL
I recall a time, not really that long ago, when Southwest had achieved record earnings. At the time there were no assigned seats and two bags were free. At that time Southwest was my only choice as my preferred carrier. Now, they are just like all the others and flying now on any carrier makes me feel like I need a shower. The fact that now there is not one carrier out there who values ALL Customers is a sad state of affairs. Southwest used to when Herb Kelleher was running it. Now Southwest only values ALP passengers and the rest they just want to see how much money they can squeeze out of the them.
I believe that non-expiring funds would increase revenue in the long run and that Southwest’s past data should show that.
Charging elites $35 or more for Same Day Change which was previously free was a stab in the back. The $229 credit card now gives almost the equivalent of A-list status. I’ve been A-list Preferred since it began but I won’t be next year. Almost no paid flights.
@Jason — The only reason is to burn that expiring $500 Chase CSR credit. Or, if they have a nonstop when no one else does on a particular route (rare, but it’s still a thing, say, for ELP-BNA, LAS-CUN, BNA-AUA, AUS-SJO, or BWI-PHL, but, for real, if you take that last one, instead of Amtrak or rideshare, what are you even doing?).
They lost us as customers after 22 years.
Not an ULCC, which is a good thing, but not really a global airline with a true premium product. There doesn’t seem to be clear strategy of where the airline wants to go.
I have the SW credit card simply to dodge the bag fees and get to pick seats 48 hours in advance instead of 24 hours. However I absolutely despise the seat picking. I will NOT pay to switch seats after already paying to be on the plane. If I cant get seats all together for my family, we just barter and trade with people on the plane. Works every time.
Unless you’re in BWI, BNA, STL, or just on that side of town in Texas or Chicago; there is no reason to fly WN anymore.
I was absolutely loyal to Southwest for over 30 years. Now I’m completely indifferent to the airline even though I have over a half million points saved up. They’ve made it too complicated. My last two trips have been on Alaska and I must say I like it and now consider it might go to Airline.
@john gets it; though, I’d probably add DEN, LAS and PHX to that list, because they’ve still got major bases out there, too.
I’ll say, I’ve noticed how much WN scaled back in the NYC-area this decade. (Of course, they never flew to JFK to begin with.) But, since 2019, they exited EWR (if you recall, they were at the old Terminal A before it closed). And, of their remaining LGA flights, it’s only basically just MDW, DEN, DAL, HOU, and BNA, nonstop, daily, year-round. Sometimes you’ll find an occasional ATL, STL, or random OMA flight. Maybe 2010s was the peak for the airline (at least in my area). If you venture out a little farther, WN is still at ISP (Long Island), nonstops to BWI, MCO, TPA, FLL, and PBI (yeah, you read that correctly. Deal with it.)
SWA lost its heart with all the changes that have morphed their airline into being similar to one of the three legacy carriers. As other readers assert, unless SWA offers the only non stop to / from my desired destination, they are usually not the carrier I choose. For my most recent flight on SWA I noticed that the back of the plane was packed while the space from exit rows forward was noticeably light. Anecdotally it indicates many people are not paying for the premium seats but rather taking their chances with a random seat assignment. I don’t wish any ill will on the SWA team, but the changes are not what people requested as SWA states, but rather what Elliot management required when they dominated the SWA board.
Ken,
I have noticed the same thing w/ a lightly booked extra legroom section and a full flight for normal economy.
WN is still trying to figure out how to deliver a service that customers will pay for.
Keep in mind that AA and WN are both still significantly underperforming and I would strongly bet that WN can make the change before AA can.
Clearly, I’m the exception in this comments section.
For last-minute domestic travel, Southwest offers me a stronger overall value proposition than legacy carriers, despite my lifetime status with United and American (6M total miles). The combination of usable points, Companion Pass benefits, double points as ALP, preferred boarding, included business-fare perks, and reliable access to roomier (than DL or AA first) exit-row seating makes SWA more rewarding for me.
Sure, the legacy airlines offer lounges, international networks, and the ‘promise’ of first-class upgrades, but I prioritize minimizing airport time, avoiding restrictive award availability, and maximizing flexibility / value. For every full fare economy trip that I book on SWA, I have a solid inflight experience, and I bank $200-$300 towards my travel fund. (of course, that’s only relevant until the next devaluation, but I ride these programs like a borrowed mule….earn and burn baby)
700K for biz class to Europe. Really?
I jumped off of that hamster wheel a decade ago.
Did I mention that I when I call SWA customer service, they know me by my caller ID, and I get a person within 90 secs. To a business traveller, that matters. Thank you, SWA.
Oh yeah, because SWA is all economy, I get no expense scrutiny. Zero.
Only to/from DEN for family visits and am old enough to remember when it was PSA. I paid for extra leg room on the last flight and used my SWA card. Hut since abandoning the brilliant strategy of open seating to purchasing assigned seating, I am no longer a devoted fan. I used all my extra points for flights last year and will be comparison shopping from now on. This is not success; it’s greed. Goodbye, Southwest.
I wasn’t thrilled when Southwest made all the changes, but they turned out really well for me and have made it my preferred airline. The credit card lets me grab an extra legroom exit row seat 48 hours out for free, which is not an option on United or the other airlines without status. At 6’4″, that’s an instant winner for me!
@of1944atx — So, you flyin’ just super-short-haul between like DEN-COS? I think flight time on that is like 19 minutes for the 70-miles. Because you’re certainly not flying to Europe or Asia, much less Canada on Southwest. Also, have you seen WN’s fares? Not cheap. At all. Even in economy. Oof. Feels like Bob’s PR team literally wrote what you said above.
Axing free oversized baggage killed a small but dedicated segment.
Elliott Air sux balls.
@1990 – lol, I appreciate your point, and agree that SWA is NOT an ULCC.
My objective is to maximize the ‘rebate’ programs because loyalty has been deader than fried chicken for some time now. Let’s call it what it is. Spelunking my way to find a 700K RT ‘deal’ to Europe is over for me. Mile for mile, full fare on SWA, paid for by my employer (emphasis that the fare doesn’t matter, as long as it’s economy, according to my expense policy) is the most rewarding way to go. It’s been a growing blind spot for travel loyalty programs…..where the road warrior influences NOT-cost sensitive travel spend for work. Our ilk was once the target demographic in the travel world, and the credit card military-industrial-complex changed the economics. So I adapt …
I’m based in TX and matched SWA ALP in 3 months. In the last 90 days, I’ve paid for choice extra on all of my weekly flights, including nonstops to SJC, SEA, BOS, PIT, MDW, BNA, JAX, BUR, DEN. I book exit row aisle, which allows me to open a laptop without the person in front of me reclining into the screen. Track record has been no delays greater than 45 minutes. I could give a sh** about lounges, food, etc (and it appears that the legacies are recognizing this with their fare ‘unbundling’). I actively minimize airport time, typically arriving 20 minutes before boarding. SWA FA’s have been universally friendly and positive to be around, consistent with the legacy brand standard. On the return flights home, I’ve never paid for an adult beverage.
I’ve flown to Canada a few times in the last year, and I just buy the Air Canada nonstop into Montreal, Vancouver, or Toronto, depending on what’s required. One size does not fit all. When I fly to Europe or Asia, I book the most efficient ticket (typically biz on a non-legacy US airline). I recently drove to Houston to catch the Zipair flight to Tokyo and the value was superb. When I’m flying paid business, why would ‘loyalty’ ever matter. Europe in Biz is $7K-$10K RT … I’m going for the best product and it’s definitely not AA/DL/UA.
3 months ago, I’d pay for discounted First on any of UA, AA, or DL, and there’s not enough room in this textbox to layout the deficiencies to both the brand standards, as well as what one would expect from paid First. I literally have more room to work in the SWA exit row than when the dude in AA/DL First reclines into my space.
Every situation is different, and I respect that. I just wanted to highlight that for the full fare business traveler, the new SWA has been a refreshing change, and I moved all of my domestic travel there 3 months ago because of it.
The result is that after 3 months:
-I’m sitting on 400K SWA points with ALPd
-I got the credit card and my wife is on Companion Pass
-SWA’s algorithm is such that they hold seats for extra legroom, and I can book 2 days before travel and still get extra legroom seats. Last minute bookings don’t put me into middle-seat purgatory, which is almost guaranteed with AA/UA/DL. (Nothing upsets me more than paying $1K for a middle seat)
The new SWA is a solid value prop, and you heard it here first. I didn’t expect the response to be so long, but it’s refreshing when loyalty is rewarded and for this (primarily) domestic traveller, I’m surprised myself, but I’ve found loyalty to SWA. When I buying my own tickets in retirement, different story, but that’s down the road.
of…
WN did indeed fire a lot of their loyal customers but created a better product for some.
They made tons of changes in a fairly short period; it takes time for customers to adapt to the changes and for WN to figure out how to better market what they have done.
WN needs to better compete w/ the big 3 for connecting passengers but remember that just 2 years ago, WN expected connecting passengers to settle for a middle seat on the second leg because that was about all you could get once you arrived to the gate after your connecting flight was already boarding.
WN will figure it out but the real issue is that competitively WN Is going to regain a lot that it has lost and, given that the domestic market is very slow growing, WN will take from other airlines as its new products and strategies become more accepted in the marketplace and as the “fired customers” accept that no one else is willing to give them what WN gave them for far too long.
@TimDunn:
>as the “fired customers” accept that no one else is willing to give them what WN gave them for far too long.
Southwest is like a woman who divorced her loyal spouse because he was not making enough money? Southwest’s entire reputation was that it wasn’t a mercenary or transactional company.
Frontier gives me better deals than the classic Southwest. I hope Frontier invades OAK, because SFO is a disaster with runway closure this year. I admit a fair amount of resentment to Southwest’s change from coddling us to exploiting us. Especially its revocation of elite free same day changes on the lowest fares. That was a betrayal, using the transparent artifice of simply changing the name of that fare bucket. Clever but dishonest.
Southwest has failed to “dance with the one that brung ya”. I suspect the snapshot of their recent financial performance will not eclipse the previous 50 years of success . Past pilot compensation often included stock options. I’d be negotiating for cash.
@of1994atx — If you’re a Texas-based corporate road warrior flying OPM with zero budget scrutiny as long as the receipt says “Economy,” you’re the exception to the rule. Congrats.
However, the moment your company enforces a “lowest logical fare” policy or caps last-minute ticket prices, paying $800+ for a WN economy seat just to secure an exit row stops making sense against discounted corporate fares on AA/UA/DL. So, enjoy your gravy train as long as it lasts. (And, don’t hoard points, because even Rapid Rewards tend to get devalued over time.)
Being based in Texas (DAL/HOU/AUS) gives you nonstops to almost everywhere you need. Try pulling off that strategy out of LGA, EWR, or secondary markets where WN gutted their point-to-point schedule down to a handful of routes.
Pivoting the airline to capture unconstrained business travelers while alienating the massive leisure/family base that built the brand is a gamble. Legacy carriers subsidize low-margin domestic economy with high-yield international business class. Southwest doesn’t have that international cushion if corporate travel tightens up.
Respect on Zipair. I’ve been meaning to try them out. Worth it to drive to Houston for ‘affordable’ long-haul lie-flat to Tokyo, any day.
Ask cracker barrel about how it worked out. Don’t listen to your customers, but make up stories to make it fit some clueless executives perception. I am a former SWA customer and now I find better fares and schedules elsewhere.
I have flown Southwest as the only airline of choice. Southwest no longer wants my business and that is fine. But don’t say charging your customers for bags and seats was successful when you are laying off staff.
Southwest is no longer an enjoyable airline to do business with. My condolences to the excellent staff that may lose their jobs due to corporate greed
I’m betting on the “Fail” line. We’ll see, but I think SW made a huge mistake chasing the rest of the industry to the bottom of the barrel. I used to think of SW as friendly, convenient, customer forward, timely, nice FA’s and always smiling. I have not flown them since the changes (by choice) and have no intention of doing so. Used to pay for the business class special A1-15 priority boarding gladly which made for a good flight… Now you pay for bags, flight changes, seats etc.. Way to go! Let’s see how this works out long term… I’m betting not well. I could be wrong, but as a past happy passenger/customer, I doubt it. RIP SW