Southwest Airlines Co ( LUV ) shares are trading lower after the airlines reported second-quarter 2024 results.

LUV reported operating revenue increase of 4.5% year-over-year to $7.354 billion, beating the consensus of $7.32 billion.

Bob Jordan, President, Chief Executive Officer, & Vice Chairman of the Board of Directors, stated, “Our second quarter performance was impacted by both external and internal factors and fell short of what we believe we are capable of delivering.”

Adjusted EPS was $0.58, down from $1.19 last year, above the consensus $0.51.

The airline’s adjusted operating income fell 54.5% to $405 million, operating expenses increased by 13% YoY to $6.95 billion.

LUV’s unit revenue declined 3.8% YoY, driven primarily by industry-wide domestic capacity growth outpacing demand.

Revenue passenger miles increased 7.6% Y/Y, Available seat miles were up 8.6% Y/Y, and load factor was 82.6% compared to 83.4% last year.

CASM-X increases by 6% Y/Y, attributable to anticipated cost increases, most notably market-driven rate inflation in salaries, wages, and benefits, and higher maintenance expenses.

Fuel costs were $2.76 per gallon (+6.2% Y/Y), which aligned with the company’s expectation and included $0.087 per gallon in premium expenses and $0.04 per gallon in favorable cash settlements. Fuel efficiency improved by 1.1% Y/Y.

The Dallas-based company had a net cash position of $2 billion and an adjusted debt-to-invested capital ratio of 46% as of June-end. LUV’s liquidity stood at $11 billion, more than the debt outstanding of $8 billion.

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Southwest Airlines’ cash used in operating activities for the quarter stood at $(23) million, compared to cash provided of $1.416 billion a year ago.

“We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth,” Bob Jordan, President, Chief Executive Officer, & Vice Chairman of the Board of Directors, stated.

“As we announced this morning, our implementation of assigned and premium seating is part of an ongoing and comprehensive upgrade to the Customer Experience, one that research shows Customers overwhelmingly prefer,” added Jordan.

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Third-quarter 2024 Guidance: Southwest ( LUV ) sees RASM flat to down 2% YoY; ASMs up ~2%; CASM-X up 11% to 13% and Economic fuel costs per gallon of $2.60 to $2.70.

The company continues to refine its new revenue management system and optimize network capacity for better long-term performance.

Reaffirmed 2024 Guidance: Southwest ( LUV ) sees ASMs up ~4%; CASM-X up 7% to 8%; economic fuel costs per gallon of $2.70-$2.80; and capital spending of ~$2.5 billion.

Price Action: LUV shares are trading lower by 4.59% at $25.39 premarket at the last check Thursday.