Southwest Airlines said that newly implemented checked bag fees are projected to generate more than $350 million in earnings before interest and tax (EBIT) during 2025.
The Texas-based airline said it remains on track to achieve its $370 million cost savings target for 2025, driven primarily by staff reductions implemented in the first half of the year and related savings in salaries, wages, and benefits. Additional cost-cutting measures have also been identified, and management reported broad engagement and improved cost discipline across the company.
Southwest said that industry demand stabilised during the second quarter, with recent early bookings showing clear signs of improvement.
Southwest noted that this strengthening demand environment, combined with more balanced industry capacity and the accelerating impact of our Southwest-specific initiatives, sets a positive tone for the second half of the year and into 2026.
As part of its ongoing fleet and service upgrades, Southwest began retrofitting aircraft with extra legroom seating, with about one quarter of its fleet now modified. The airline will also begin selling assigned and premium seating starting July 29, for flights departing on or after January 27, 2026.
Southwest also announced its first new destination since 2021, with flights to St. Thomas launching early next year, with at least two more new destinations are expected to be revealed later this summer.
Fuel costs are projected to remain between $2.40 and $2.50 per gallon in the third quarter, and Southwest said it currently holds no active fuel derivative contracts.
On fleet management, the airline revised its 2025 aircraft delivery forecast from 38 to 47 aircraft as Boeing ramps up aircraft production. The carrier received 17 aircraft in the second quarter and now expects to retire approximately 55 aircraft in 2025 - five more than previously estimated.
This total includes the planned sale of five 737-800 aircraft this year, with an additional eight 737-800s to be sold in the first half of 2026. Additional sale transactions are currently being negotiated.
Southwest said Boeing’s progress on stabilising 737 production is encouraging, with the manufacturer holding steady at a rate of 38 aircraft per month.
The airline stated that there was no new update on the certification timeline for the 737 MAX 7, with Southwest continuing to expect certification in the first half of 2026 and potential entry into service in late 2026.
The airline noted a brief dip in conversions on basic economy fares during the post-May booking period through mid-June but reported no significant change in overall website traffic.