Southwest Cuts Forecast, Reinstates 2025 Profit Target

Southwest Airlines reported a second-quarter net income of $213 million, a 42% decline from the previous year, as both profit and revenue missed Wall Street forecasts amid weak domestic travel demand and economic uncertainty from tariffs and rising living costs. The airline introduced basic economy fares and began charging for checked bags, but initial rollout issues negatively affected online bookings and unit revenue, though these have since stabilized. In April, Southwest withdrew its 2025 financial guidance but has now reinstated a profit target of $600-$800 million in EBIT, less than half its earlier projections. The airline also announced a $2 billion stock buyback and plans to introduce premium seating in 2026. Despite ongoing challenges, Southwest shares have outperformed the broader market in 2025, and management is cautiously optimistic for the year's second half as leisure demand shows signs of recovery. Industry-wide, airlines are discounting fares amid soft economy demand, with Delta and United seeing gains in premium cabins.