Southwest Airlines reported in its first-quarter 2025 earnings report released late Wednesday lower fuel cost and lower overall use and announced the company is discontinuing its fuel hedging program after 2027.
The airline's total fuel cost over the first three months of the year was $1.249 billion, which includes $37 million in related hedging expenses. That's an 18.4% decline from the same three months a year ago.
Overall fuel use was down as well, contrary to the increased fuel use seen in the earnings of Delta Air Lines and United Airlines. Southwest used 500 million gallons of fuel in the first quarter of 2025, down 4.6% from year-ago levels.
On average, the airline paid $2.49/gal for fuel in January-March 2025, including a 7ct/gal cost due to hedging. Even so, average fuel cost was down 14.7% year-to-year. However, the cost per gallon was still above previous estimates despite the airline reporting a 2.6% increase in fuel efficiency thanks to more efficient aircraft.
Looking at the cost of fuel per available seat mile, the airline showed a first-quarter fuel CASM of 3.01cts/ASM, 17% lower than the 3.63cts/ASM seen in the first quarter of 2024.
The filing also revealed that Southwest has discontinued its fuel hedging program and will not add any additional fuel futures contracts to its portfolio beyond 2027. As of mid-April, Southwest has 47% of its 2025 fuel cost hedged, with 45% hedged in the second quarter of 2025 and 46% hedged in the second half of the year. Beyond 2025, the air carrier has 43% of its estimated fuel cost hedged in 2026, and 13% of fuel costs hedged in 2027.
Looking ahead, the airline estimates a second-quarter fuel cost average of $2.20-2.30/gal based on current market conditions.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
--Reporting by Cory Wilchek, cwilchek@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com
(END) Dow Jones Newswires
April 24, 2025 09:46 ET (13:46 GMT)
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