On an adjusted basis, the airline posted earnings of $0.43 per share for the three months ended June 30, while analysts expected it to post earnings of $0.51.

Southwest Airlines (LUV) stock edged 1.1% lower in early premarket trading on Thursday after the carrier’s quarterly earnings missed Wall Street’s expectations.

On an adjusted basis, the airline reported earnings of $0.43 per share for the three months ended June 30, compared to the expected earnings of $0.51, according to Fiscal.ai data. Its quarterly revenue of $7.24 billion also missed Wall Street’s estimates of $7.29 billion.

Retail sentiment on Stocktwits about Southwest was in the ‘neutral’ territory at the time of writing.

After a robust start to the year, consumer sentiment declined as President Donald Trump’s tariffs raised concerns about a recession, prompting customers to reduce their leisure travel. While relatively higher demand for premium seating has aided the likes of Delta Air Lines and United Airlines, low-cost airlines like Southwest have suffered.

The economic uncertainty had led airlines, including Southwest, to withdraw their annual forecasts. However, optimism around fresh trade deals has emboldened airlines to issue fresh outlooks for the year.

Southwest projected 2025 earnings before interest and taxes (EBIT) between $600 million and $800 million. That compares with its previous forecast of $1.7 billion.

The company has been reeling from a slump in earnings following the COVID-19 pandemic and subsequent operational failures, which have pushed it to take several actions to rein in costs. 

This year, it announced its first mass layoffs and scrapped famous policies, such as open seating and free checked bags. The company stated that baggage fee collection has exceeded expectations, and it hasn’t seen any operational impact due to the policy change.

“We have already realized approximately one-third of our $1.8 billion 2025 initiative EBIT target in the first half of 2025 and remain highly confident in our ability to realize the remaining amount during the second half of the year,” said CEO Bob Jordan.

The airline projected third quarter unit revenue to be in the range of down 2% to up 2% on roughly flat capacity. It also launched a new share buyback program worth $2 billion.

One bearish trader suggested that the company could take on more debt to pay for the share repurchases.

Southwest stock has gained 11.2% this year.

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