It’s been a wild ride for Southwest Airlines lately. If you just looked at the headlines from their July 2024 release, you might think everything was coming up roses. Record revenue? Check. Beating the Street's expectations? You bet. But honestly, if you peel back just one layer of that corporate onion, the picture gets a lot more complicated.
The Southwest Airlines 2024 Q2 results were a classic "good news, bad news" sandwich. On one hand, the airline pulled in an all-time quarterly record of $7.4 billion in operating revenue. That’s a 4.5% jump from the previous year. On the other hand, their profits are getting squeezed by a pincer movement of rising costs and a domestic market that is, frankly, overstuffed with seats.
The Numbers Game: Revenue, EPS, and LSEG Consensus
Let's talk about the "beat." Wall Street analysts—the folks behind the LSEG consensus—were expecting something a bit more modest. The consensus for adjusted earnings per share (EPS) was sitting around $0.51. Southwest came in hot with an adjusted EPS of $0.58.
That looks like a win, right? Well, it depends on who you ask. While they beat the immediate estimates, that $0.58 is a massive drop-off from the $1.09 they reported in the same quarter of 2023. Profits basically got cut in half.
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Breaking Down the Top Line
- Total Operating Revenue: $7.4 billion (Record high).
- Net Income: $367 million (Down about 46% year-over-year).
- Liquidity: A very healthy $11 billion.
The revenue "surprise" was about 0.4% higher than what Zacks and LSEG data suggested. It’s a beat, but it’s a "thin" beat. Most of that money came from a record-breaking number of passengers—people are definitely flying—but Southwest just isn't making as much money per person as they used to.
Why the Revenue Per Seat is Falling
This is where the jargon starts: RASM. It stands for Revenue per Available Seat Mile. Think of it as the "efficiency" of how much money they make for every seat they fly one mile. In Q2 2024, RASM dropped 3.8%.
Why? It's pretty simple: everyone is flying too many planes. The industry-wide domestic capacity grew way faster than the actual demand. When there are too many seats and not enough butts to fill them, prices drop. Southwest also admitted they messed up their "revenue management." Basically, they sold too many cheap seats too early in the booking curve for the summer peak. By the time the high-paying last-minute travelers showed up, the cheap seats were gone, and the plane was full of people who paid 2023 prices for 2024 flights.
It wasn't all bad, though. They actually got a weird little boost at the end of June. Severe weather caused a lot of other airlines to cancel flights, and stranded passengers flocked to Southwest. That "incremental booking" benefit actually kept the RASM from falling even further.
The Elliott Management Shadow
You can’t talk about these results without mentioning the elephant in the room: Elliott Investment Management. This activist investor group took a $2 billion stake in Southwest (about 11%) and started screaming for change.
Elliott’s argument is basically that Southwest is a "dinosaur." They’ve pointed out that while other airlines are thriving, Southwest’s stock has been stuck in the mud. They want CEO Bob Jordan and Chairman Gary Kelly out. They want a total overhaul of the board.
The Q2 results were a bit of a defensive shield for Bob Jordan. Beating the LSEG consensus gave management some breathing room to say, "Look, we’re fixing it!" But Elliott wasn't impressed. They called the recent changes—like the plan to end open seating—"too little, too late."
Costs Are Climbing Faster Than Planes
The "CASM-X" (Cost per Available Seat Mile, excluding fuel) is the number that keeps CFOs up at night. For Southwest in Q2 2024, this number rose 6%.
Most of that is labor. Pilots and flight attendants aren't cheap, and new contracts have sent wages skyrocketing. Add in the fact that maintenance costs are up because Boeing can't deliver new planes fast enough, and you have a recipe for a margin squeeze. Southwest is forced to keep older, less efficient planes in the air longer because their new 737 MAX orders are perpetually delayed.
What This Means for You (The Actionable Part)
If you’re an investor or just someone who flies Southwest a lot, here is the "so what" of the Southwest Airlines 2024 Q2 results revenue EPS LSEG consensus saga:
1. Watch the Seating Chart
Southwest is moving to assigned seating and "premium" extra-legroom seats. This is a direct response to the Q2 revenue struggle. They need to find ways to charge more for the same flight. If you like the "free-for-all" of open seating, enjoy it while it lasts—it's officially on the way out.
2. Expect Capacity Cuts
The airline realized they flew too many planes in the first half of the year. They’ve already announced they are cutting capacity for the end of 2024. Fewer seats usually means higher ticket prices, so if you’re planning a holiday trip, book it sooner rather than later.
3. The Proxy War Isn't Over
The battle with Elliott is going to get messier before it gets better. Keep an eye on the "Investor Day" updates and any special shareholder meetings. If Elliott succeeds in flipping the board, we could see an even more radical transformation of the airline's "low-cost" identity.
The Q2 results showed that Southwest is a stable, cash-rich company that is currently struggling to find its footing in a post-pandemic world where "budget" flying isn't as profitable as it used to be. They’ve got the money to pivot, but whether they have the leadership to do it fast enough is the $7.4 billion question.
To stay ahead of the curve, monitor the 12-month CASM-X projections. If costs don't stabilize by early 2025, the pressure for a complete leadership overhaul will become impossible to ignore. For travelers, keep a close watch on the "Rapid Rewards" program changes—management will likely look to loyalty revenue to offset the unit revenue declines seen this quarter.