Southwest Airlines closed 2024 on a high note, recording its highest-ever annual revenue, strong operational performance, and steady progress toward future growth. Under CEO Bob Jordan’s leadership, the airline is entering 2025 with optimism, although challenges remain. Let’s explore the key highlights from its recent performance and future plans.
A Look at Southwest’s 2024 Financial Performance
Southwest Airlines achieved record-breaking revenue in 2024, thanks to successful revenue initiatives and favorable market conditions. Here’s a summary of its financial highlights:
- Q4 2024 Net Income: $261 million
- Full-Year 2024 Net Income: $465 million
- Q4 2024 Revenue: $6.9 billion
- Full-Year 2024 Revenue: $27.5 billion
- Liquidity: $9.7 billion (well above its $6.7 billion debt)
Despite its impressive financial results, CEO Bob Jordan acknowledged that there’s still work to be done. However, he expressed confidence in the company’s progress, driven by a strong demand environment and effective strategic initiatives.
Strategic Share Buybacks and Optimistic Outlook
Southwest has taken bold steps to reward investors, including launching a $750 million accelerated share repurchase program. As part of this initiative:
- The airline has already completed the initial $250 million share buyback.
- Strong operational performance and financial results have enabled this repurchase.
Fleet Expansion: Better-than-Expected Boeing Deliveries
Southwest Airlines experienced a boost in 2024 with better-than-expected aircraft deliveries from Boeing. The airline received 22 Boeing 737 MAX 8 planes—two more than expected—and saw a 4.1% year-on-year (YoY) increase in capacity.
Key Fleet Developments
- 2024 Fleet Size: 803 aircraft after retiring 36 older planes (34 737-700s and 2 737-800s).
- 2025 Plans: The airline expects 38 new 737 MAX 8 deliveries, though this is lower than the contractual order of 136 aircraft.
- Planned Retirements in 2025: 51 older planes, including 49 737-700s and 2 737-800s.
The airline hopes that ongoing discussions with Boeing could result in more than 38 deliveries in 2025, supporting its fleet modernization efforts. Additionally, Southwest exercised options for 11 more 737 MAX 7 planes for delivery in 2025-2026. Its current firm order includes 496 aircraft (300 MAX 7s and 196 MAX 8s).
Boeing’s 737 MAX Certification Updates
Boeing aims to certify the 737 MAX 7 and 737 MAX 10 in 2025. Although Southwest hasn’t ordered the 737 MAX 10, the certification of the MAX 7 is critical for its future fleet strategy.
2025: A Pivotal Year for Southwest Airlines
Southwest Airlines has identified 2025 as a crucial year under its “Southwest. Even Better.” transformation plan. This strategy was introduced during a proxy battle with Elliott Investment Management in September 2024.
Key Initiatives for 2025
- Partnership with Chase: Southwest reached a new co-brand agreement with Chase, enhancing benefits for cardholders. This partnership is tied to the airline’s assigned and premium seating initiatives, supporting its long-term financial targets.
- Operational Improvements: The airline is committed to maintaining a safe, reliable, and efficient operation while delivering outstanding hospitality to its customers.
- Shareholder Returns: It aims to enhance returns for investors through growth, modernization, and financial performance improvements.
2025 Revenue and Capacity Projections
Southwest Airlines provided limited guidance for 2025, emphasizing moderate growth and improved operating margins.
- Revenue per Available Seat Mile (RASM): Expected to grow by 5% to 7% in Q1 2025.
- Capacity (Available Seat Miles): Expected to decrease by 2% to 3% YoY in Q1 2025. Full-year capacity is expected to grow slightly by 1% to 2%, consistent with the airline’s 2027 target.
- Operating Margins (Excluding Special Items): Between 3% and 5% in 2025, with a long-term target of 10% or more by 2027.
- Return on Invested Capital (ROIC): Expected between 5% and 8% in 2025, aiming for 15% or more by 2027.
Building on Momentum for Long-Term Success
Southwest Airlines’ record-breaking revenues in 2024 and its strategic initiatives set the stage for continued growth in 2025. With a focus on fleet modernization, customer experience, and financial discipline, the airline is on track to achieve its long-term targets. However, challenges remain, including managing fleet expansion amid potential delivery delays. By maintaining operational efficiency and focusing on strategic partnerships, Southwest aims to solidify its position as a market leader while driving enhanced returns for investors.
