Southwest's Fuel Bill Clouds Near-Term Profit Picture

Southwest Airlines signaled its second-quarter profit will likely fall short of Wall Street's projections, pointing to rising fuel costs as the primary culprit. The carrier, while maintaining its full-year outlook for now, offered a cautious near-term view.

The company anticipates earnings between 35 and 65 cents per share for the current quarter, a range that brackets but falls below the 55-cent average analyst estimate. This comes as Southwest, like its competitors, grapples with unpredictable jet fuel prices. In response, the airline is keeping a tight lid on growth, planning for second-quarter capacity to be flat or rise by no more than 1% compared to last year.

Despite the cost pressure, travel demand remains robust. Southwest reported a 13% year-over-year revenue jump to $7.25 billion for the first quarter, swinging from a loss to a $227 million profit. To further boost income, it's leaning into new revenue streams like checked bag and seat assignment fees.

"Demand continues to be strong," CEO Bob Jordan stated, "and we remain focused on controlling what we can control." The company expects its unit revenues to surge by as much as 18.5% this quarter, a sign that pricing power is helping offset some of the fuel expense. However, Southwest noted that hitting its full-year target would require either a drop in fuel prices or an even stronger revenue performance than currently forecast.