Southwest Airlines Co. (LUV): Business Model Canvas [Dec-2025 Updated]

You're looking at Southwest Airlines Co. now, and honestly, the old, simple low-cost carrier playbook is definitely getting an upgrade as they fight to hit their full-year EBIT guidance of about $500 million. They just posted a record Q1 passenger revenue of $5.8 billion, but the real strategy is balancing that heritage-like keeping two free checked bags for many-with aggressive new ancillary revenue, like bag fees and a new Basic fare option, all while sitting on a strong liquidity position of nearly $9.3 billion as of Q1 2025. To make the math work amid labor cost pressures, they are simultaneously driving an accelerated plan to find about $370 million in savings this year. It's a fascinating, high-stakes balancing act.

Southwest Airlines Co. (LUV) - Canvas Business Model: Key Partnerships

Southwest Airlines Co. (LUV) has deepened its reliance on strategic alliances to expand reach beyond its traditional domestic footprint, while solidifying core financial partnerships and its exclusive fleet supply chain.

The expansion into international connectivity is being executed via interline agreements, allowing for single-ticket bookings onto partner carriers.

Partner Carrier	Agreement Launch/Announcement Timing	Geographic Reach/Benefit
Icelandair	February 2025	Connectivity to destinations via Iceland
China Airlines	June 2025	Connectivity to destinations via Taiwan/China
EVA Air	August 2025	Connectivity to destinations via Taiwan/China
Philippine Airlines	November 2025	Connectivity to destinations via the Philippines
Condor Airlines	December 2025 (Flights start Jan 19, 2026)	Access to nearly 70 destinations across Europe, Africa, and Asia via Frankfurt hub

Southwest Airlines Co. (LUV) has established five international interline agreements since the start of 2025. The partnership with Condor Airlines, announced in December 2025, connects Southwest's U.S. network through six key gateways: Boston (BOS), Las Vegas (LAS), Los Angeles (LAX), Portland (PDX), San Francisco (SFO), and Seattle (SEA).

The co-brand credit card partnership with Chase Bank remains a critical component for customer engagement and revenue generation. Southwest Airlines Co. (LUV) reported a record first quarter operating revenue of $6.4 billion in Q1 2025, with record first quarter co-brand card spend contributing to this result.

• Southwest Rapid Rewards Priority Credit Card annual fee increased to $229 (from $149) as of July 2025.
• New limited-time welcome offer (July 24 to Sept 17, 2025) for consumer cards: earn 100,000 bonus points after spending $4,000 in the first 5 months.
• Priority Card earns 4X points per $1 on Southwest Airlines purchases.
• Priority Card earns 2X points per $1 at gas stations and restaurants.
• Cardholders can earn 2,500 tier qualifying points (TQPs) toward A-List status for every $5,000 spent annually.
• Benefits for cardholders include the first checked bag free for the cardmember and up to 8 additional passengers, a value of up to $280 roundtrip for a family of 4 (based on a $35 per bag per trip fee structure).
• Existing earn categories, such as 2X points on Southwest Cruises purchases, are available only until December 31, 2025.

Southwest Airlines Co. (LUV) maintains its commitment to an exclusive fleet supply partnership with Boeing, relying solely on the 737 family of aircraft. The airline received 11 Boeing 737 MAX 8 aircraft in Q1 2025. The revised 2025 delivery forecast from Boeing was for 73 total B737 MAX aircraft, a reduction from the original 86 anticipated. The capital commitments for the 136 aircraft expected to be delivered in 2025 were estimated at $3.2 billion for the year.

Aircraft Type	Revised 2025 Delivery Expectation	Status/Notes
B737 MAX 7	44 (plus 27 deferred from 2024)	MAX-7 certification projected for first half of 2026.
B737 MAX 8	21 (plus 36 deferred from 2024)	11 delivered in Q1 2025.
Total Expected 2025 Deliveries	73 (revised)	Original 2025 estimate was 86 aircraft.

The total Boeing aircraft backlog, including options, stands at 672 aircraft scheduled for delivery up to 2031.

Distribution strategy evolution includes formal agreements with Online Travel Agencies (OTAs). Southwest Airlines Co. (LUV) began sales through Expedia Group sites in February 2025. Expedia Group reported that this collaboration contributed approximately 5 percent of the airline's passenger volume in Q2 2025. In August 2025, the airline signed a direct distribution agreement with Booking Holdings, making inventory available on Priceline, Booking.com, and Agoda.

Southwest Airlines Co. (LUV) - Canvas Business Model: Key Activities

Implementing a multi-year transformation plan for new revenue streams.

• Assigned seating booking availability expected in 2025 for flights beginning in the first half of 2026.
• Premium seating options, including Extra Legroom seats with up to five additional inches of pitch, rolling out starting January 2026.
• Targeted cumulative incremental EBIT contribution from strategic initiatives of $1.8 billion for full year 2025.
• Projected cumulative incremental EBIT contribution from strategic initiatives of $4.3 billion by 2026.
• Launch of a new product, Getaways by Southwest, offering vacation packages in 2025.
• New Basic fare product structure rolled out in Q2 2025.
• New agreement with Expedia for booking flights, beginning last month (prior to July 2025 report).

Operating a high-frequency, point-to-point domestic route network.

Southwest Airlines Co. carries more air travelers flying nonstop within the United States than any other airline.

Metric	Value as of June 30, 2025 (unless noted)
Total Aircraft in Fleet	810
Total Destinations Served	117 airports across 11 countries
Average Aircraft Trip Length (2024)	763 miles
Average Aircraft Trip Duration (2024)	Approximately two hours
TTM Revenue (Ending September 30, 2025)	$27.551B
Q2 2025 Operating Revenue	$7.2 billion

Fleet modernization and maintenance of the all-Boeing 737 fleet.

Southwest Airlines Co. operates an all-Boeing 737 fleet.

Aircraft Type	Number in Service (as of June 30, 2025)	Seats
Boeing 737-700	334 (or almost 350 as of March 2025)	143
Boeing 737-800	203 (or just over 200 as of March 2025)	175
Boeing 737-8 (MAX)	273 (or more than 250 as of March 2025)	175

The fleet has an average age of approximately 11 years as of June 30, 2025.

• Expected 737 MAX 7 entry into service: 2026.
• Total Boeing 737 MAX aircraft on order as of November 2025: over 500.
• Boeing 737-700 sub-fleet is targeted to be retired by 2031.
• Fleet goal to be all MAX-operators of the 737 by 2031.
• In 2025, the airline updated assumptions to 47 Boeing -8 aircraft deliveries, up from 38.
• Expected 55 aircraft retirements in 2025, including the sale of five Boeing 737-800 aircraft in the second half of 2025.
• Fleet modernization in Q1 2025 involved retiring 14 older aircraft (12 737-700s and 2 737-800s) and taking 11 fuel-efficient 737-8 models.

Optimizing operational efficiency, including reducing aircraft turn times.

The airline aims to increase capacity by 1% to 2% in 2025 through turnaround time reduction and redeye flights.

• Average turnaround time as of September Investor Day presentation: 49 minutes.
• Goal to reduce average turnaround time by five minutes to roughly 44 minutes.
• This five-minute reduction is hoped to free up the equivalent of approximately 16 aircraft by November 2025.
• The airline cut five minutes from turnaround times at 19 airports as of April 2025.
• Introduction of overnight 'red-eye' flights began in February 2025 with initially five per day, growing to 50 per day by 2027.
• Redeye flights are expected to increase capacity by the equivalent of 34 additional aircraft.
• Q2 2025 Available Seat Miles (ASMs) were up 1.6% year-over-year.

Managing and enhancing the Rapid Rewards loyalty program.

The loyalty program saw earning rate adjustments effective March 4, 2025, and bag fee changes effective May 28, 2025.

Fare Class	Points Earned Per Dollar (New Rate)	Change from Previous Rate
Business Select	14 points	Up from 12 (+16%)
Anytime	10 points	No change
Wanna Get Away Plus	6 points	Down from 10 (-40%) (Down from 8)
Wanna Get Away	2 points	Down from 6 (-67%)

The carrier introduced variable redemption rates across higher-demand and lower-demand flights.

Checked Bag Policy Changes (Effective May 28, 2025):

• First checked bag fee: $35.
• Second checked bag fee: $45.
• Two free checked bags: Business Select fares or A-List Preferred Members.
• One free checked bag: A-List Members and Rapid Rewards Credit Cardmembers.

Elite Status Qualification (Tier Qualifying Points):

• A-List: 35,000 tier qualifying points OR 25 one-way qualifying flights.
• A-List Preferred: 70,000 tier qualifying points OR 50 one-way qualifying flights.

Southwest Airlines Co. (LUV) - Canvas Business Model: Key Resources

You're looking at the core assets Southwest Airlines Co. (LUV) relies on to run its unique, low-cost operation. These aren't just line items on a balance sheet; they are the engines of their entire model.

The fleet is the most visible physical resource. Southwest Airlines Co. (LUV) maintains a highly standardized fleet, which is a massive operational advantage. As per the Q1 2025 results, the fleet stood at approximately 800 Boeing 737 aircraft. By mid-year, specifically as of June 30, 2025, the total number of Boeing 737 aircraft in service was 810. This standardization cuts down on training costs for pilots and maintenance crews, a key part of their cost structure.

Here's a quick breakdown of the fleet composition as of June 30, 2025:

Aircraft Type	In Service Number	Seats
Boeing 737-700	334	143
Boeing 737-800	203	175
Boeing 737-8	273	175

The average age of this fleet is approximately 11 years. Furthermore, Southwest Airlines Co. (LUV) has over 500 Boeing 737 MAX aircraft on order as of November 2025, signaling a continued commitment to fleet modernization.

Financial strength, particularly liquidity, is a critical buffer. At the end of the first quarter of 2025, the reported liquidity position was approximately $9.3 billion. That figure was well in excess of the debt outstanding at that time, which was $6.7 billion. To be fair, by the end of the second quarter of 2025, cash and short-term investments stood at $3.8 billion, backed by a fully available revolving credit line of $1.0 billion. Looking ahead, the Company is targeting a liquidity level of approximately $4.5 billion.

The human capital and culture are often cited as irreplaceable assets. As of January 30, 2025, Southwest Airlines Co. (LUV) employed 72,450 active full-time equivalent employees. A significant portion of this workforce is unionized; about 83% of employees are members of a union. This structure is balanced by a customer-centric culture, though the company did undertake a restructuring in early 2025, reducing its workforce by approximately 1,750 roles, which represented about 15% of corporate positions. This move was expected to generate savings of approximately $210 million in 2025.

The Rapid Rewards loyalty program represents a deep pool of customer data and a powerful commercial tool. The structure for earning status is concrete:

• A-List status requires 20 qualifying one-way flights or 35,000 tier qualifying points annually.
• A-List Preferred status requires 40 flights or 70,000 points.
• Co-branded Credit Card holders receive an annual boost of 10,000 Companion Pass qualifying points.

The program saw a key change effective January 1, 2025, allowing members to earn points and elite-qualifying credit on the cash portion of their Cash+Points bookings. This is important data for understanding customer commitment. Also, note the shift in ancillary revenue drivers: as of May 28, 2025, the first checked bag costs $35 and the second costs $45 on most fares, though A-List members still receive their first bag free.

Finance: draft 13-week cash view by Friday.

Southwest Airlines Co. (LUV) - Canvas Business Model: Value Propositions

You're looking at the core promises Southwest Airlines Co. (LUV) is making to its customers as of late 2025, especially as they navigate major product shifts. Honestly, the value proposition is now a blend of their historic strengths and new, revenue-focused offerings.

Low-fare, High-Satisfaction Flying Experience

The commitment to a high-satisfaction experience remains a key differentiator, particularly in the economy cabin. You see this reflected in the external validation. Southwest Airlines ranked highest in customer satisfaction in the economy/basic economy segment for a fourth consecutive year in the J.D. Power 2025 North America Airline Satisfaction Study, scoring a 694 on the 1,000-point scale. That score is partly driven by frontline personnel; positive experiences with airline staff were responsible for a 9-point increase in satisfaction for economy/basic economy passengers.

Operationally, the airline has demonstrably improved reliability, which underpins customer trust. For instance, in February 2025, Southwest led North American carriers with an on-time performance of 82.3 percent. Furthermore, they achieved a completion factor of 99.6 percent across 102,457 observed flights that month. The airline also recorded the industry's lowest complaint rate at 1.71 per 100,000 passengers. This operational turnaround followed significant investment, including $1.3 billion in modernized IT systems.

The value proposition here is that you get top-tier economy satisfaction coupled with industry-leading operational metrics, even as the fare structure evolves. It's a strong selling point.

Transparency: Policy Changes and Fare Structure

The traditional transparency of 'bags fly free' has been significantly altered, aligning Southwest Airlines Co. (LUV) more closely with its competitors, though some elements of flexibility remain. The new baggage policy, effective for flights booked on or after May 28, 2025, means the two free checked bags perk is now tiered. The airline expects to generate $350 million in 2025 from these new baggage fees, which began on May 28.

Here is the breakdown of the baggage value proposition as of late 2025:

Customer/Fare Type	Free Checked Bags	First Checked Bag Fee (If Not Free)	Second Checked Bag Fee (If Not Free)
A-List Preferred Members & Business Select Customers	Two	$0	$0
A-List Members & Select Customers	One	Charged	Charged
Rapid Rewards Credit Cardmembers	One (Credited)	Charged	Charged
All Other Customers	Zero	Charged	Charged

Regarding flight flexibility, which was another hallmark of transparency, flight credits issued for tickets purchased on or after May 28, 2025, will now expire one year from the ticketing date, but the new Basic fare credits expire sooner, at six months from ticketing date.

Frequent, Direct, Point-to-Point Flights

Southwest Airlines Co. (LUV) continues to lean on its extensive domestic network. The airline remains committed to a strong network featuring the most nonstop flights within the U.S.. This point-to-point structure, often utilizing secondary airports to keep costs down, is a foundational element that supports the low-fare promise. While specific numbers on the use of secondary airports aren't immediately available, the sheer scale of their nonstop operation is the core value here.

• Maintains the most nonstop flights within the U.S..
• Achieved a 98.3 percent completion rate of its published flight schedule year-over-year improvement as of February 2025.
• Expanded distribution to reach new customers via Expedia starting last month.

New Basic Fare Option

To capture the most price-sensitive segment, Southwest Airlines Co. (LUV) introduced a new fare category. The Basic fare was launched for the lowest-priced tickets purchased on or after May 28, 2025. This tier is designed for fliers prioritizing price above all else, and it notably ditches perks like advanced seat assignments and extra legroom options. Flight credits associated with this lowest-tier fare have a shorter expiration window of six months from the ticketing date.

Premium Seating Options

The airline is actively transforming its product by introducing paid premium seating, a major shift from its historic open-seating model. The sale of these new products, including the Extra Legroom seats, is scheduled to begin in the back half of 2025. The physical rollout is aggressive: the airline plans to retrofit its entire fleet between April 30 and the end of 2025. These extra legroom rows will offer three to five inches more space than standard seats. This transformation is expected to be a significant financial driver; management projects more than $1 billion of incremental EBIT from assigned and extra legroom seating in 2026, with a target full run rate of approximately $1.5 billion in 2027.

The value for certain loyal customers is maintained, though: A-List members may receive complimentary access to these seats based on tier and booking timing.

Finance: finalize the 13-week cash flow projection for Q1 2026 by Monday.

Southwest Airlines Co. (LUV) - Canvas Business Model: Customer Relationships

Southwest Airlines Co. maintains a relationship strategy balancing its historic high-touch service with new transactional elements.

Dedicated, high-touch customer service ('Fun, Friendly Flying Experience')

The dedication to service is reflected in the Net Promoter Score (NPS) of 48 in Q1 2025, which is above the airline industry average of 33. This score shows that 59% of passengers are Promoters. Southwest Airlines Co. was named #1 in Customer Satisfaction among Economy Class Passengers by J.D. Power for four consecutive years as of 2025. Operational reliability supports this relationship, with the airline operating 98.3% of its published flight schedule without cancellations in 2025. The airline employs over 72,000 full-time workers who shape brand marketing through daily interactions.

Automated self-service via website and mobile app

Digital self-service travel tools are available online and in the app to help manage trips. Customers use these tools to perform specific actions.

• Track their baggage.
• Buy upgraded boarding.
• Buy lap child seat.

Inflight, Rapid Rewards® Members receive Free WiFi on unlimited devices thanks to T-mobile.

Highly personalized engagement through the Rapid Rewards program

The Rapid Rewards program saw significant earning structure adjustments effective March 4, 2025, to better align rewards with higher-value fares. Loyalty revenue increased 7% year over year in Q3 2025. The Companion Pass qualification threshold remains 135,000 Companion Pass qualifying points or 100 qualifying one-way flights per calendar year. The program now features variable redemption rates starting in 2025.

Fare Type	2025 Points Earned Per Dollar	Change from Previous Rate
Wanna Get Away	2 points per dollar	Down from 6 points per dollar (-67%)
Wanna Get Away Plus	6 points per dollar	Down from 10 points per dollar (-40%)
Anytime fares	10 points per dollar	No change
Business Select	14 points per dollar	Up from 12 points per dollar (+16%)

Transactional relationship for the new Basic fare segment

The introduction of the new Basic fare on May 28, 2025, established a more transactional relationship for the lowest-priced tickets. This fare does not include free checked bags for most passengers, which is a shift from the previous policy. Flight credits associated with the Basic fare expire six months from the purchase date. The initial launch of this product caused a temporary reduction in the website conversion rate for three weeks, from May 28 through June 15. This dip resulted in a half percentage point hit to the Q2 2025 Revenue per Available Seat Mile (RASM), with an expected further one percentage point impact in the third quarter. Separately, the new checked bag fees are estimated to result in more than $350 million of earnings before interest and taxes for the full year 2025. In Q2 2025, passenger revenue was $6.6 billion, a decrease of 1.3% year over year.

Southwest Airlines Co. (LUV) - Canvas Business Model: Channels

You're looking at how Southwest Airlines Co. (LUV) gets its product-seats on planes-into the hands of customers as of late 2025. The strategy has seen a significant, albeit cautious, pivot away from its long-held direct-only stance.

Direct Sales: Southwest.com and mobile application (primary channel)

The airline continues to prioritize its own digital properties, Southwest.com and the mobile application, as the core booking mechanism. This approach historically allowed Southwest Airlines Co. (LUV) to avoid third-party commissions, keeping distribution costs low. Even with recent changes, the airline stated that for its new in-house vacation product, Getaways by Southwest, it will tilt the lion's share of distribution toward these direct channels. This focus is logical, as the airline reported operating 98.3 percent of its published flight schedule without cancellations as of February 28, 2025, indicating a stable platform for direct transactions.

Online Travel Agencies (OTAs): Expanded distribution via Expedia in 2025

A major shift occurred in 2025, breaking nearly two decades of direct-only sales. Southwest Airlines Co. (LUV) began relaxing distribution restrictions in February 2025 by launching sales through Expedia Group sites, including Expedia, Travelocity, Hotwire, Orbitz, and CheapTickets, covering its entire network of 117 destinations in 11 countries. This partnership delivered immediate results; during its August 2025 earnings call, Expedia Group reported the collaboration contributed about 5 percent of Southwest Airlines Co. (LUV)'s passenger volume in Q2 2025 alone. Following this success, Southwest signed a direct distribution agreement with Booking Holdings in August 2025, adding Priceline, Booking.com, and Agoda to its distribution footprint.

Airport ticket counters and customer service centers

The traditional channels remain active, serving customers who prefer or require in-person assistance. These counters handle ticketing, changes, and customer service interactions across the network. While the focus is digital, these physical touchpoints are essential for the overall customer experience, especially for complex itinerary changes or for travelers less comfortable with self-service digital booking.

New in-house vacation package brand, Getaways by Southwest

In August 2025, Southwest Airlines Co. (LUV) launched its new in-house vacation package product, Getaways by Southwest, replacing the previous offering managed by ALG Vacations Corp.. This product bundles airfare with hotel, car, and ground transportation options for over 30 leisure destinations, including Las Vegas and Orlando. The packages come with specific incentives, such as offering two checked bags for free (a perk eliminated for general passengers in May 2025) and awarding five Rapid Rewards points per dollar spent on bookings.

Here's a quick look at the channel evolution and key metrics as of late 2025:

Channel Type	Status/Key 2025 Event	Associated Metric/Data Point
Direct (Website/App)	Primary distribution focus maintained	Targeted for lion's share of Getaways by Southwest sales
Expedia Group (OTA)	Launched February 2025	Contributed 5 percent of passenger volume in Q2 2025
Booking Holdings (OTA)	Agreement signed August 2025	Expanded reach to Priceline, Booking.com, Agoda
Getaways by Southwest	Launched in-house August 2025	Offers five Rapid Rewards points per dollar spent
Airport Counters	Traditional sales/support	Supports network of 802 aircraft as of Q3 2025

The shift to OTAs is clearly aimed at capturing new customer segments who use comparison sites, which is important because most Millennials and Gen X travelers prefer booking via OTAs.

You should note the following key channel-related features:

• Getaways by Southwest offers vacation travel credits valid for 18 months upon cancellation.
• The airline is actively managing its fare structure, introducing a new, Basic fare on lowest-priced tickets purchased on or after May 28, 2025.
• The new Basic fare flight credits expire six months from the date of ticketing.
• Choice fare credits created on or after May 28, 2025, expire twelve months from the ticketing date.

Finance: draft 13-week cash view by Friday.

Southwest Airlines Co. (LUV) - Canvas Business Model: Customer Segments

Southwest Airlines Co. (LUV) continues to serve a diverse set of travelers, though its transformation efforts in 2025 signal a deliberate segmentation toward higher-yield customers while still catering to its core base.

Domestic Leisure Travelers seeking affordable, convenient travel.

This segment remains central, evidenced by the sheer volume of passengers carried. In the third quarter of 2025, Southwest Airlines carried 34.5 million revenue passengers, with 43.8 million enplaned passengers overall. The average passenger fare in that quarter was $182.56. However, the market dynamics for this group shifted; CEO Bob Jordan described a 'recession' in domestic leisure travel in the first half of 2025. This price sensitivity is a known factor, as a 2025 survey by J.D. Power indicated that 68% of leisure travelers prioritize affordability over ancillary perks. To address this, Southwest introduced a new Basic fare on tickets purchased on or after May 28, 2025. The airline is evolving away from its historic 'bags fly free' model, having implemented bag fees starting May 28, 2025. Before this change, the airline earned only $73.4 million from baggage fees compared to peers.

Families attracted by low fares and bag policies.

The shift in baggage policy directly impacts families. While the airline is implementing new fees, it is important to note that Southwest Airlines continues to retain its two free checked bags policy, which serves as a key differentiator against other major U.S. carriers. The introduction of the new fare structure, including the Basic fare, is designed to appeal to the most price-sensitive customers, which often includes families planning vacations.

Price-sensitive Business Travelers valuing frequency and reliability.

Business travel demand showed signs of sequential improvement through the third quarter of 2025. Corporate sales for future travel, excluding government bookings, increased by 5% year-over-year in Q3 2025. Southwest Airlines' domestic managed business share is currently estimated to be in the mid-teens. Operational reliability remains a key value proposition for this segment; in 2025, Southwest operated 98.3% of its published flights without cancellations.

New segment of customers seeking premium seating and assigned seats.

Southwest Airlines Co. is actively courting customers who prefer structure, aiming to unlock new revenue streams. Research indicated that 80% of current Southwest customers and 86% of potential customers preferred an assigned seat. The airline expects to generate $1.5 billion in annual revenue from seat selection alone. Sales for assigned seating began in late 2025, with the full operational rollout scheduled for flights starting January 27, 2026. This new offering is structured around tiered seating options:

Seat Type	Description/Location
Extra Legroom	Seats in the front of the cabin and exit rows
Preferred	Standard legroom seats near the front of the cabin
Standard	Seats in the back of the cabin

The transformation plan, which includes these seating changes, is targeted to generate $1.8 billion in incremental earnings in 2025. As of the third quarter of 2025, the airline had completed retrofits on more than 400 aircraft to include extra legroom seating.

• The new fare bundles allow customers to select seats during booking.
• A-List and A-List Preferred Customers receive complimentary seat selection at booking regardless of fare type.
• Priority Boarding can be purchased 24 hours prior to departure.

Southwest Airlines Co. (LUV) - Canvas Business Model: Cost Structure

Southwest Airlines Co. operates with a cost-driven structure, constantly focusing on operational efficiency to maintain its low-fare proposition. The airline is taking a hard look at its cost structure because its performance is not where management wants it to be.

Major costs center on fuel, labor, and maintenance. Labor costs are a significant driver, with unit costs continuing to be pushed up primarily by inflationary pressures, including those tied to labor contracts ratified in 2024. For instance, the Cost per Available Seat Mile excluding fuel (CASM-X) increased 4.7 percent year-over-year in the second quarter of 2025. Fuel prices remain volatile, contributing to revised outlooks; the estimated fuel cost per gallon for the third quarter of 2025 was projected to be between $2.20 to $2.30. The airline has also incurred costs related to maintenance, such as the timing of engine overhaul expenses and aircraft retrofit costs ahead of new seating launches.

Here's a quick look at some key cost metrics as of mid-2025:

Metric	Period	Value
Economic Fuel Cost per Gallon	Q1 2025	$2.49
CASM-X Year-over-Year Increase	Q1 2025	4.6 percent
CASM-X Year-over-Year Increase	Q2 2025	4.7 percent
CASM-X Year-over-Year Increase	Q3 2025	2.5 percent
Operating Expenses Year-over-Year Increase (Excl. Fuel, Special Items, Profit Sharing)	Q3 2025	3.4 percent

To combat these pressures, Southwest Airlines Co. accelerated its cost reduction plan, targeting approximately $370 million in savings for the 2025 fiscal year. This acceleration followed an earlier plan to realize some $500 million in annual cost-savings. The efficiency drive included a 15 percent reduction in corporate jobs, approximately 1,750 roles, implemented in February 2025, which was estimated to save $210 million in 2025.

The airline maintains high fixed costs associated with its infrastructure and fleet. The total fleet size at the end of the third quarter of 2025 stood at 802 aircraft. Capital expenditures for the third quarter of 2025 totaled $678 million, covering major investments. You can expect the full year 2025 capital spending to fall within the range of $2.5 billion to $3.0 billion. Key areas contributing to these fixed/capital outlays include:

• Fleet ownership and new aircraft deliveries (e.g., 53 -8 aircraft deliveries expected for full year 2025)
• Airport infrastructure costs
• Technology investments

Finance: draft 13-week cash view by Friday.

Southwest Airlines Co. (LUV) - Canvas Business Model: Revenue Streams

You're looking at the core ways Southwest Airlines Co. (LUV) brings in cash as of late 2025. The biggest piece, as always, is flying people from point A to point B.

Passenger Revenue hit a first quarter record in Q1 2025, coming in at $5.8 billion. This was supported by an all-time record yield performance for that quarter. The airline reported Q1 2025 operating revenues were a first quarter record of $6.4 billion overall.

The loyalty ecosystem, heavily reliant on the co-brand credit card partnership with Chase, continues to be a major driver. Loyalty and marketing revenues now represent more than 20% of total revenue at Southwest Airlines. For the third quarter of 2025, loyalty revenue specifically was up 7 percent year-over-year, and new co-brand credit card acquisitions grew by double digits over the same period.

New ancillary revenue streams started rolling out in the second quarter of 2025, designed to diversify income beyond the base fare. The launch of bag fees saw a financial benefit that exceeded expectations, with no negative operational impact reported. Simultaneously, the rollout of the new basic economy product structure began laying the groundwork for future product differentiation and fare up-sells. The company noted in Q2 that it was already seeing incremental fare product buy up occurring at that early stage.

Here's a quick look at some key figures impacting the revenue picture for 2025:

Metric	Value/Guidance	Period/Context
Passenger Revenue	$5.8 billion	Q1 2025 Record
Total Operating Revenue	$6.4 billion	Q1 2025 Record
Loyalty Revenue Share	More than 20%	Of Total Revenue
Co-brand Card Acquisitions Growth	Double digits	Q3 2025 Year-over-Year
Full-Year 2025 EBIT Guidance (Excl. Special Items)	Approximately $500 million	Revised Full-Year Outlook

The overall profitability expectation for the full year 2025, specifically earnings before interest and taxes excluding special items, has been revised to approximately $500 million. This figure is down from a prior expectation of $600 million to $800 million, reflecting lower revenue due to a government shutdown and the impact of higher fuel prices. Still, the company reaffirmed its targets for incremental EBIT contribution from its slate of initiatives, aiming for $1.8 billion for full year 2025.

• Q1 2025 RASM (Unit Revenues) increased 3.5 percent year-over-year.
• Q1 2025 Co-brand card spend was a first quarter record.
• Q3 2025 Loyalty Revenue up 7 percent year-over-year.