The airline is seeking to generate more revenue from each flight through checked-bag fees, assigned seating and extra-legroom options, while increasing income from corporate travel, its loyalty program and credit-card partnerships.
That strategy appears to be gaining traction: revenue rose sharply in the second quarter on essentially flat capacity, allowing the carrier to grow sales without expanding its schedule.
Southwest's adjusted unit revenue, a broad measure of pricing and demand, rose about 20% in the second quarter, while capacity was virtually unchanged. Average passenger fares increased nearly 21%.
The carrier said demand for its enhanced products remained robust. Managed-business revenue rose 30% in the second quarter from a year ago. Loyalty enrollment and credit-card acquisitions also grew strongly.
Southwest expects third-quarter unit revenue to rise 17.5% to 19.5% from a year earlier, with capacity ranging from down 1% to flat.
It also lowered planned full-year capacity growth to about 1.5% from 2%, reinforcing its focus on generating more revenue from its existing schedule rather than adding flights.
That strategy carries a near-term cost. Southwest is removing six seats from each Boeing 737-700 to create extra-legroom rows, adding 1.1 percentage points to third-quarter non-fuel unit-cost growth.
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