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What changed in Southwest Airlines's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Southwest Airlines's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+798 added−700 removedSource: 10-K (2025-02-07) vs 10-K (2024-02-06)

Top changes in Southwest Airlines's 2024 10-K

798 paragraphs added · 700 removed · 484 edited across 10 sections

Item 1. Business

Business — how the company describes what it does

158 edited+102 added−91 removed119 unchanged
Biggest changeIn negotiations Southwest Flight Crew Training Instructors 252 Transportation Workers of America, AFL-CIO, Local 557 (“TWU 557”) Amendable January 2027 Southwest Dispatchers 496 Transportation Workers of America, AFL-CIO, Local 550 (“TWU 550”) Amendable June 2027 Southwest Aircraft Appearance Technicians 214 AMFA Amendable July 2027 Southwest Mechanics 2,979 Aircraft Mechanics Fraternal Association (“AMFA”) Amendable August 2027 Southwest Facilities Maintenance Technicians 52 AMFA Amendable November 2027 Southwest Customer Service Agents, Customer Representatives, and Source of Support Representatives 8,173 International Association of Machinists and Aerospace Workers, AFL-CIO (“IAM 142”) Amendable December 2027 Southwest Meteorologists 15 TWU 550 Amendable May 2028 Human Capital Objectives and Programs The Company’s hiring, development, and retention of a diverse and talented workforce is a priority that includes: (i) providing opportunities for learning, development, career growth, and movement within the Company; (ii) evaluating compensation and benefits, and rewarding performance; (iii) investing in physical, emotional, and 27 Table of Contents financial health of Employees; (iv) obtaining Employee feedback; (v) maintaining and enhancing Company culture; and (vi) communicating with the Board on a routine basis on key topics, including executive succession planning.
Biggest changeThe following table sets forth the Company's Employee groups subject to collective bargaining and the status of their respective collective-bargaining agreements as of December 31, 2024: 29 Table of Contents Employee Group Approximate Number of Full-time Equivalent Employees Representatives Status of Agreement Southwest Pilots 10,548 Southwest Airlines Pilots' Association (“SWAPA”) Amendable January 2029 Southwest Flight Attendants 19,518 Transportation Workers of America, AFL-CIO, Local 556 (“TWU 556”) Amendable May 2028 Southwest Material Specialists (formerly known as Stock Clerks) 484 International Brotherhood of Teamsters, Local 19 (“IBT 19”) Amendable October 2026 Southwest Ramp, Operations, Provisioning, Freight Agents 16,940 Transport Workers Union Local 555 (“TWU 555”) Amendable March 2029 Southwest Flight Simulator Technicians 53 IBT 19 Amendable September 2028 Southwest Flight Crew Training Instructors 227 Transportation Workers of America, AFL-CIO, Local 557 (“TWU 557”) Amendable January 2027 Southwest Dispatchers 519 Transportation Workers of America, AFL-CIO, Local 550 (“TWU 550”) Amendable June 2027 Southwest Aircraft Appearance Technicians 212 AMFA Amendable July 2027 Southwest Mechanics & Related Employees 3,011 Aircraft Mechanics Fraternal Association (“AMFA”) Amendable August 2027 Southwest Facilities Maintenance Technicians 49 AMFA Amendable November 2027 Southwest Customer Service Agents, Customer Representatives, and Source of Support Representatives 7,265 International Association of Machinists and Aerospace Workers, AFL-CIO (“IAM 142”) Amendable December 2027 Southwest Meteorologists 15 TWU 550 Amendable May 2028 Human Capital Objectives and Programs The Company’s hiring, development, and retention of a talented workforce is a priority that includes: (i) providing opportunities for learning, development, career growth, and movement within the Company; (ii) evaluating compensation and benefits, and rewarding performance; (iii) investing in physical, emotional, and financial health of Employees; (iv) obtaining Employee feedback; (v) maintaining and enhancing Company culture; (vi) communicating with the Board on a routine basis on key topics, including executive succession planning; and (vii) ongoing commitments to equal employment opportunity within the workplace.
For example, under the DOT's tarmac delay rule and subject to limited exceptions, air carriers must not allow an aircraft to remain on the tarmac for more than 3 hours (for domestic delays) or more than 4 hours (for international delays), without allowing passengers to deplane.
For example, under the DOT's tarmac delay rule and subject to limited exceptions, air carriers must not allow an aircraft to remain on the tarmac for more than 3 hours (for domestic delays) or more than 4 hours (for international delays), without allowing passengers to deplane, subject to limited exceptions.
Under ATSA, substantially all security officers at airports are federal employees, and significant other elements of airline and airport security are overseen and performed by federal employees, including federal security managers, federal law enforcement officers, and federal air marshals. TSA personnel and TSA-mandated security procedures can affect the Company's operations, costs, and Customer experience.
Under the ATSA, substantially all security officers at airports are federal employees, and significant other elements of airline and airport security are overseen and performed by federal employees, including federal security managers, federal law enforcement officers, and federal air marshals. TSA personnel and TSA-mandated security procedures can affect the Company's operations, costs, and Customer Experience.
In addition, the 2018 Reauthorization Act requires the FAA to consider community noise concerns when proposing a new navigation departure procedure or amending an existing navigation procedure that would direct aircraft over noise sensitive areas. This requirement could delay or otherwise impede the implementation or use of more efficient flight paths.
In addition, the FAA Reauthorization Act of 2018 requires the FAA to consider community noise concerns when proposing a new navigation departure procedure or amending an existing navigation procedure that would direct aircraft over noise sensitive areas. This requirement could delay or otherwise impede the implementation or use of more efficient flight paths.
To date, the Company has not incurred any material costs related to its compliance with CORSIA; however, the Company could experience material costs as a result of any future expansion of its international operations, which would increase its compliance obligations under CORSIA, the need to purchase additional carbon offsets or volumes of SAF than what the Company has currently projected based on any changes to the CORSIA program, or other unforeseeable reasons given the evolving nature of climate-change-related laws, regulations, and programs.
To date, the Company has not incurred any material costs related to its compliance with CORSIA; however, the Company could experience material costs as a result of any future expansion of its international operations, which would increase its compliance obligations under CORSIA, the need to purchase additional carbon offsets or volumes of SAF than what the Company has currently projected based on any changes to the CORSIA program, any similar program, or other unforeseeable reasons given the evolving nature of climate-change-related laws, regulations, and programs.
Generally, in most markets the Company serves, demand for air travel is greater during the summer months, and, therefore, revenues in the airline industry tend to be stronger in the second (April 1 - June 30) and third (July 1 - September 30) quarters of the year than in the first (January 1 - March 31) and fourth (October 1 - December 31) quarters of the year.
In most markets the Company serves, demand for air travel is greater during the summer months, and, therefore, revenues in the airline industry tend to be stronger in the second (April 1 - June 30) and third (July 1 - September 30) quarters of the year than in the first (January 1 - March 31) and fourth (October 1 - December 31) quarters of the year.
If there is no open seat on this different flight, a traveler may request to be added to the standby list for that flight. • “Anytime” fares may be subject to advance purchase requirements. They are refundable if canceled, subject to Southwest’s No-Show Policy, or flight credit may be applied towards future travel on Southwest.
If there is no open seat on this different flight, a traveler may request to be added to the standby list for that flight. • “Anytime” fares are often subject to advance purchase requirements. They are refundable if canceled, subject to Southwest’s No-Show Policy, or flight credit may be applied towards future travel on Southwest.
As a result, the Company must comply with a developing set of cybersecurity requirements, including but not limited to incident and other reporting, internal and external coordination, affirmative risk‑management obligations, and technical requirements related to information technology systems and operational technology systems.
As a result, the Company must comply with a developing set of cybersecurity requirements, including but not limited to incident and other reporting, internal and external coordination, affirmative risk‑management obligations, compliance, and technical requirements related to information technology systems and operational technology systems.
During 2023, the Company completed the enhanced WiFi connectivity onboard its aircraft in order to improve WiFi speed, reliability, and bandwidth. Its new -8 aircraft deliveries are equipped with latest-generation, upgraded WiFi hardware, and the Company completed its upgrade of the WiFi hardware on its existing fleet.
During 2023, the Company completed the enhanced WiFi connectivity onboard its aircraft in order to improve WiFi speed, reliability, and bandwidth. Its new -8 aircraft deliveries are equipped with latest-generation WiFi hardware, and the Company completed its upgrade of the WiFi hardware on its existing fleet.
The Company’s accounting policies with respect to its loyalty programs are discussed in more detail in Note 1 to the Consolidated Financial Statements. Investments in Customer Experience In 2022, the Company announced its multi-year plan to modernize and transform the Customer Experience.
The Company’s accounting policies with respect to its loyalty programs are discussed in more detail in Note 1 to the Consolidated Financial Statements. Investments in Customer Experience In 2022, the Company announced a multi-year plan to modernize and transform the Customer Experience.
Passenger and Occupational Health Regulation The Company is subject to various other federal, state, and local laws and regulations relating to health and occupational safety, including Department of Health and Human Services, Centers for Disease Control and Prevention (“CDC”), Occupational Safety and Health Administration, and Food and Drug Administration regulations.
Passenger and Occupational Health Regulation The Company is subject to various other federal, state, and local laws and regulations relating to health and occupational safety, including Department of Health and Human Services, Centers for Disease Control and Prevention, Occupational Safety and Health Administration, and Food and Drug Administration regulations.
The purpose of this new rule is to help establish clear and consistent criteria for unfair or deceptive practices while aligning DOT’s oversight of aviation entities with other government agencies’ oversight of other sectors of the economy regarding unfair or deceptive practices.
The purpose of this rule is to help establish clear and consistent criteria for unfair or deceptive practices while aligning the DOT’s oversight of aviation entities with other government agencies’ oversight of other sectors of the economy regarding unfair or deceptive practices.
The Passenger Protection Rules also require that (i) advertised fares include all government-mandated taxes and fees; (ii) passengers be allowed to either hold a reservation for up to 24 hours without making a payment or cancel a paid reservation without penalty for 24 hours after the reservation is made, as long as the reservation is made at least seven days in advance of travel; (iii) fares may not increase after purchase; (iv) baggage fees must be disclosed to the passenger at the time of booking; (v) the same baggage allowances and fees must apply throughout a passenger’s trip; (vi) baggage fees must be disclosed on e-ticket confirmations; and (vii) passengers must be promptly notified in the event of delays of more than 30 minutes or if there is a cancellation or diversion of their flight.
The Passenger Protection Rules also require that (i) advertised fares include all government-mandated taxes and fees; (ii) passengers be allowed to either hold a reservation for up to 24 hours without making a payment or cancel a 16 Table of Contents paid reservation without penalty for 24 hours after the reservation is made, as long as the reservation is made at least seven days in advance of travel; (iii) fares may not increase after purchase; (iv) baggage fees must be disclosed to the passenger at the time of booking; (v) the same baggage allowances and fees must apply throughout a passenger’s trip; (vi) baggage fees must be disclosed on e-ticket confirmations; and (vii) passengers must be promptly notified in the event of delays of more than 30 minutes or if there is a cancellation or diversion of their flight.
References to the Company's website in this Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Form 10-K. 29 Table of Contents DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION This Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
References to the Company's website in this Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Form 10-K. 31 Table of Contents DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION This Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Subject to Southwest’s No-Show Policy, Wanna Get Away Plus fares also enable a same-day confirmed change, free of airline charges, if there is an open seat on another flight that departs on the same day as the original flight and is between the same origin and destination airports, but the Customer is required to pay any additional government taxes and fees associated with voluntary changes in their itinerary.
Subject to Southwest’s No-Show Policy, Wanna Get Away Plus fares also enable a same-day confirmed change, free of airline charges, 7 Table of Contents if there is an open seat on another flight that departs on the same day as the original flight and is between the same origin and destination airports, but the Customer is required to pay any additional government taxes and fees associated with voluntary changes in their itinerary.
Moreover, regulatory authorities at the federal, state, and local levels are moving forward with prohibitions on the manufacturing, use, or sale of PFAS-based AFFF, as well as costly remediation efforts at airports to address groundwater contamination. In addition, the U.S.
Moreover, regulatory authorities at the federal, state, and local levels are moving forward with prohibitions on the manufacturing, use, or sale of PFAS-based AFFF, as well as costly remediation efforts at airports to address groundwater contamination. In addition, in April 2024, the U.S.
The Company's fuel hedging activities, as well as the risks associated with high and/or volatile fuel prices, are discussed in more detail below under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 11 to the Consolidated Financial Statements.
The Company's fuel hedging activities, as well as the risks associated with high and/or volatile fuel prices, are discussed in more detail below under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 10 to the Consolidated Financial Statements.
The Company does not expect to incur any material costs related to the EPA’s GHG aircraft rules at this time, and the rules are not expected to adversely impact the Company's current aircraft fleet; however, the Company cannot guarantee that more stringent standards will not be adopted by the EPA in the future that could require material capital expenditures to modernize or replace its aircraft fleet or incur other costs related to GHG emissions from its aircraft.
The Company has not and does not expect to incur any material costs related to the EPA’s aircraft GHG emissions rules at this time, and the rules are not expected to adversely impact the Company's current aircraft fleet; however, the Company cannot guarantee that more stringent standards will not be adopted by Congress, the FAA, or the EPA in the future that could require material capital expenditures to modernize or replace its aircraft fleet or incur other costs related to GHG emissions from its aircraft.
Over the years, the Company has undertaken a number of initiatives that have a direct impact on its fuel conservation and emissions-related reduction efforts, such as the following: • introduction of the MAX aircraft into the Company's fleet, which is more fuel-efficient and releases fewer CO₂ emissions per available seat mile than the Company's previous generation of 737 aircraft; • installation of winglets, which reduce drag and increase fuel efficiency, on all aircraft in the Company's fleet; • application of periodic engine washes, which helps improve fuel efficiency; • implementation of procedures for the use of electric ground power and pre-conditioned air for aircraft at the gate, when available; • replacement of eligible internal combustion ground support equipment with electric equipment at select locations; • deployment of auto-throttle and vertical navigation to maintain optimum cruising speeds; • implementation of engine start procedures to support the Company's single engine taxi procedures; • implementation of procedures on the timing of auxiliary power unit starts on originating flights to reduce auxiliary power unit usage; • implementation of fuel planning initiatives to safely reduce loading of excess fuel; • retrofitting of aircraft cabin interiors to reduce weight; • implementation of procedures to reduce aircraft engine idle speed while on the ground, which also increases engine life; • utilization of Company-optimized routes (including flying the best wind routes to take advantage of tailwinds or to minimize headwinds); • improvements in flight planning algorithms to better match the Company's aircraft flight management system and thereby enabling the Company to fly at the most efficient altitudes; • substitution of Pilot and Flight Attendant flight bags and paper manuals with lighter Electronic Flight Bag tablets; and • implementation of Real Time Descent Winds (automatic uplinking of up-to-date wind data to the aircraft, allowing crews to time the descent to minimize thrust inputs and, as a result, improve fuel efficiency per flight).
Over the years, the Company has undertaken a number of initiatives that have a direct impact on its fuel conservation and emissions-related reduction efforts, such as the following: • introduction of the MAX aircraft into the Company's fleet, which is more fuel-efficient and releases fewer CO₂ emissions per ASM than the Company's previous generation of 737 aircraft; • installation of winglets, which reduce drag and increase fuel efficiency, on all aircraft in the Company's fleet; • application of periodic engine washes, which helps improve fuel efficiency; • implementation of procedures for the use of electric ground power and pre-conditioned air for aircraft at the gate, when available; • replacement of eligible internal combustion ground support equipment with electric equipment at select locations; • deployment of auto-throttle and vertical navigation to maintain optimum cruising speeds; • implementation of engine start procedures to support the Company's single engine taxi procedures; • implementation of procedures on the timing of auxiliary power unit starts on originating flights to reduce auxiliary power unit usage; • implementation of fuel planning initiatives to safely reduce loading of excess fuel; • implementation of procedures to reduce aircraft engine idle speed while on the ground, which also increases engine life; • utilization of Company-optimized routes (including flying the best wind routes to take advantage of tailwinds or to minimize headwinds); 14 Table of Contents • improvements in flight planning algorithms to better match the Company's aircraft flight management system and thereby enabling the Company to fly at the most efficient altitudes; • substitution of Pilot and Flight Attendant flight bags and paper manuals with lighter Electronic Flight Bag tablets; and • implementation of Real Time Descent Winds (automatic uplinking of up-to-date wind data to the aircraft, allowing crews to time the descent to minimize thrust inputs and, as a result, improve fuel efficiency per flight).
In general, government efforts at the international, federal, state, or local levels to address worldwide climate change, manage greenhouse gas emissions, and reduce aircraft noise, to the extent pursued or implemented, could affect the Company, aircraft operators, original equipment manufacturers, producers and sellers of aviation fuel, and other third parties on which the Company is dependent.
In general, government efforts at the international, federal, state, or local levels to address worldwide climate change, manage GHG emissions, and reduce aircraft noise, to the extent pursued or implemented, could affect the Company, aircraft operators, original equipment manufacturers, producers and sellers of aviation fuel, and other third parties on which the Company is dependent.
The DOT defines major U.S. airlines as those airlines with annual revenues of at least $1 billion; there are currently 14 passenger airlines offering scheduled service, including Southwest, that meet this standard.
The DOT defines major U.S. airlines as those airlines with annual revenues of at least $1 billion; there are currently 15 passenger airlines offering scheduled service, including Southwest, that meet this standard.
As a result, in many cases, the Company's results of operations reflect this seasonality. Factors that could alter this seasonality include, among others, global pandemics such as COVID-19, the price of fuel, general economic conditions, changes in consumer behavior, governmental action, extreme or severe weather and natural disasters, fears of terrorism or war, or changes in the competitive environment.
As a result, in many cases, the Company's results of operations reflect this seasonality. Factors that could alter this seasonality include, among others, the price of fuel, general economic conditions, changes in consumer behavior, governmental action, global pandemics, extreme or severe weather and natural disasters, fears of terrorism or war, or changes in the competitive environment.
The Company participates in Required Navigation Performance (“RNP”) operations as part of the FAA's Performance Based Navigation program, a key component of the Next Generation Transportation System (“NextGen”), which is intended to modernize the U.S. air traffic system by addressing limitations on air 13 Table of Contents transportation capacity and making more efficient use of airspace.
The Company participates in Required Navigation Performance (“RNP”) operations as part of the FAA's Performance Based Navigation program, a key component of the Next Generation Transportation System (“NextGen”), which is intended to modernize the U.S. air traffic system by addressing limitations on air transportation capacity and making more efficient use of airspace.
Air carriers must comply with these measures with respect to new aircraft that the air carrier operates that were (i) originally ordered after October 3, 2033, (ii) delivered after October 2, 2035, or (iii) are part of a new type-certificated design filed with the FAA or a foreign carrier’s safety authority after October 2, 2024.
Specifically, air carriers must comply with these measures with respect to new aircraft that an air carrier operates that are (i) originally ordered after October 3, 2033, (ii) delivered after October 2, 2035, or (iii) part of a new type-certificated design filed with the FAA or a foreign carrier’s safety authority after October 2, 2024.
The Air Traffic Organization (“ATO”) is the operational arm of the FAA. The ATO is responsible for providing safe and efficient air navigation services to all of the United States and large portions of the Atlantic and Pacific Oceans and the Gulf of Mexico.
The Air Traffic Organization (“ATO”) is the operational arm of the FAA. The ATO is responsible for providing safe and efficient air navigation services to all of the United States and large portions of the Atlantic and Pacific Oceans.
ATSA and subsequent TSA regulations and procedures implementing ATSA and related statutes address, among other things, (i) flight deck security; (ii) the use of federal air marshals onboard flights; (iii) airport and aircraft access security; (iv) airline crew security training; (v) security screening of passengers, baggage, cargo, mail, employees, and vendors; (vi) training and qualifications of security screening personnel; (vii) provision of passenger data to CBP; and (viii) background checks.
The ATSA and subsequent TSA regulations and procedures implementing the ATSA and related statutes address, among other things, (i) flight deck security; (ii) the use of federal air marshals onboard flights; (iii) airport and aircraft access security; (iv) airline crew security training; (v) security screening of passengers, baggage, cargo, mail, employees, and vendors; (vi) training and qualifications of security screening personnel; (vii) provision of passenger data to CBP; (viii) background checks; and (ix) certain cybersecurity requirements.
For further information regarding the Company’s aircraft contractual order 5 Table of Contents book see “Properties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The delivery schedule for the -7 is dependent on the Federal Aviation Administration (“FAA”) issuing required certifications and approvals to Boeing and the Company.
For further information regarding the Company’s aircraft contractual order book see “Properties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The delivery schedule for the -7 is dependent on the Federal Aviation Administration (“FAA”) issuing required certifications and approvals to Boeing and the Company.
At the federal level, in July 2016, the EPA issued a final endangerment finding for greenhouse gas emissions from certain types of aircraft engines, which the agency determined contribute to pollution that causes climate change and endangers public health and the environment.
At the federal level, in July 2016, the EPA issued a final endangerment finding for GHG emissions from certain types of aircraft engines, which the agency determined contribute to pollution that causes climate change and endangers public health and the environment.
Key competitive factors within the airline industry have historically included (i) pricing and cost structure; (ii) routes, loyalty programs, and schedules; (iii) customer service, operational reliability, product offerings, and amenities; and (iv) balance sheet health. Airlines, including Southwest, also compete for customers with alternatives to air travel, such as driving, videoconferencing, and business communication platforms.
Key competitive factors within the airline industry include (i) pricing and cost structure; (ii) routes, loyalty programs, and schedules; (iii) Customer Service, operational reliability, product offerings, and amenities; and (iv) balance sheet health. Airlines, including Southwest, also compete for customers with alternatives to air travel, such as driving, videoconferencing, and business communication platforms.
For 21 Table of Contents further discussion of the risks relating to these reporting obligations, see “Risk Factors—Legal, Regulatory, Compliance, and Reputational Risks.” Separately, on November 10, 2022, the Biden-Harris Administration proposed the Federal Supplier Climate Risks and Resilience Rule, which would require major federal contractors to publicly disclose their greenhouse gas emissions and climate-related financial risks and set science-based emissions reduction targets verified by the Science-Based Target initiative and in accordance with third-party standards that preclude the use of carbon offsets to achieve emission reduction goals.
For further discussion of the risks relating to these reporting obligations, see “Risk Factors—Legal, Regulatory, Compliance, and Reputational Risks.” On November 12, 2022, the Biden-Harris Administration proposed the Federal Supplier Climate Risks and Resilience Rule, which would require major federal contractors to publicly disclose their greenhouse gas emissions and climate-related financial risks and set science-based emissions reduction targets verified by the Science-Based Target initiative and in accordance with third-party standards that preclude the use of carbon offsets to achieve emission reduction goals.
Technology Initiatives The Company is focused on the prioritization and execution of its technology investments through an evolving multi-year plan, with the goal of developing stronger, more adaptable, more efficient, and more reliable technology systems to support the Company's strategic priorities.
Technology Initiatives 13 Table of Contents The Company is focused on the prioritization and execution of its technology investments through an evolving multi-year plan, with the goal of developing stronger, more adaptable, more efficient, and more reliable technology systems to support the Company's strategic priorities.
Congress has set the Transportation Security Fee paid by passengers at $5.60 per one-way passenger trip originating in the United States. In addition, international 16 Table of Contents passengers arriving in the United States are subject to U.S. immigration and customs fees that are indexed to inflation. These fees are used to support the operations of U.S.
Congress has set the Transportation Security Fee paid by passengers at $5.60 per one-way passenger trip originating in the United States. Additionally, international passengers arriving in the United States are subject to U.S. immigration and customs fees that are indexed to 17 Table of Contents inflation. These fees are used to support the operations of U.S.
The airline industry is also subject to varying degrees of competition from other forms of transportation, including surface transportation by automobiles, buses, and trains. Inconveniences and delays associated with air travel security measures can increase surface competition.
The airline industry is also subject to varying degrees of competition from other forms of transportation, including public charter operators and surface transportation by automobiles, buses, and trains. Inconveniences and delays associated with air travel security measures can increase surface competition.
For the years ended December 31, 2023, and December 31, 2022, approximately 82 percent and 83 percent, respectively, of the Company’s Passenger revenues originated from Southwest.com or the Southwest App (including revenues from SWABIZ®, the Company's online booking tool designed for business Customers who prefer a self-service and low-cost solution for booking their air travel on Southwest).
For the years ended December 31, 2024, and December 31, 2023, approximately 81 percent and 82 percent, respectively, of the Company’s Passenger revenues originated from Southwest.com or the Southwest App (including revenues from SWABIZ®, the Company's online booking tool designed for business Customers who prefer a self-service and low-cost solution for booking their air travel on Southwest).
During 2023, among other things, the Company invested in technology and tools that are expected to enhance resiliency and improve its recovery during irregular operations, implemented a new revenue management system, 12 Table of Contents introduced Customer bag tracking, enhanced Customer digital self-service capabilities, and launched Southwest Business Meetings.
During 2023, among other things, the Company invested in technology and tools that are expected to enhance resiliency and improve its recovery during irregular operations, implemented a new revenue management system, introduced Customer bag tracking, enhanced Customer digital self-service capabilities, and launched Southwest Business Meetings.
Southwest's route structure includes service to and from many secondary or downtown airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, Burbank, Manchester, Oakland, San Jose, Providence, and Ft. Lauderdale-Hollywood.
Southwest's route structure includes service to and from many secondary or downtown airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, Burbank, Manchester, Oakland, San Jose, and Providence.
The FAA could also require mitigations from aircraft operators (e.g., aircraft retrofits) as a means to avoid any potential interference. With respect to airline operations, the FAA has rules in effect with respect to crew flight, duty, and rest times.
The FAA could also require mitigations from aircraft operators (e.g., aircraft retrofits) to avoid any potential interference. With respect to airline operations, the FAA has rules in effect with respect to crew flight, duty, and rest times.
Additionally, Anytime fares receive Priority Lane and Express Lane access through check-in and security lines where available. Further, Anytime fares receive all of the benefits of Wanna Get Away Plus fares, including Transferable Flight Credit and same-day confirmed changes and standby. • “Business Select” fares may be subject to advance purchase requirements.
Additionally, Anytime fares receive Priority Lane and Express Lane access through check-in and security lines where available. Further, Anytime fares receive all of the benefits of Wanna Get Away Plus fares, including Transferable Flight Credit and same-day confirmed changes and standby. • “Business Select” fares are often subject to advance purchase requirements.
Insurance 23 Table of Contents The Company carries insurance of types customary in the airline industry and in amounts the Company deems adequate to protect the Company and its property and to comply both with applicable regulations and certain of the Company's credit and lease agreements.
Insurance The Company carries insurance of types customary in the airline industry and in amounts the Company deems adequate to protect the Company and its property and to comply both with applicable regulations and certain of the Company's credit and lease agreements.
As part of its commitment to corporate sustainability, the Company has published the Southwest One Report describing the Company's environmental sustainability goals, actions, initiatives, and strategies, which include the foregoing and other efforts to address greenhouse gas emissions and other environmental matters such as energy and water conservation, waste minimization, and recycling.
As part of its corporate sustainability efforts, the Company has published the Southwest One Report describing the Company's environmental sustainability goals, actions, initiatives, and strategies, which include the foregoing and other efforts to address GHG emissions and other environmental matters such as energy and water conservation, waste minimization, and recycling.
Flight credits or refunds for refundable fares are issued regardless of cancellation time. 8 Table of Contents Ancillary Services The Company offers ancillary services such as Southwest’s EarlyBird Check-In ® , Upgraded Boarding, and transportation of pets and unaccompanied minors, in accordance with Southwest’s respective policies.
Transferable Flight Credits or refunds for refundable fares are issued regardless of cancellation time. Ancillary Services The Company offers ancillary services such as Southwest’s EarlyBird Check-In®, Upgraded Boarding, and transportation of pets and unaccompanied minors, in accordance with Southwest’s respective policies.
Under the Railway Labor Act, collective-bargaining agreements between an airline and a labor union generally do not expire, 26 Table of Contents but instead become amendable as of an agreed date.
Under the Railway Labor Act, collective-bargaining agreements between an airline and a labor union generally do not expire, but instead become amendable as of an agreed date.
Southwest Business ® Initiatives In addition to improvements in the Company's consumer-direct Southwest.com channel of distribution, in recent years the Company has taken significant action, including investments in Employees, processes, and technology, in order to grow its corporate travel business with the goal of making it easier for corporate travel Customers and travel management companies to do business with Southwest.
Southwest Business ® Initiatives In addition to improvements in the Company's consumer-direct Southwest.com channel of distribution and new flight search engine partnerships, in recent years the Company has taken significant action, including investments in Employees, processes, and technology, in order to grow its corporate travel business with the goal of making it easier for corporate travel Customers and travel management companies to do business with Southwest.
Business Select fares also include additional perks such as priority boarding with a boarding position in the first 15 boarding positions within boarding group “A,” 12 Rapid Rewards points per dollar spent on the base fare—the highest loyalty point multiplier of all Southwest fare products, one complimentary premium beverage coupon for the day of travel (Customers must be of legal drinking age to drink alcoholic beverages), and free Inflight Internet service on Wi-Fi enabled aircraft, where available.
Business Select fares also include additional perks such as priority boarding with a boarding position in the first 15 boarding positions within boarding group “A,” 12 Rapid Rewards points per dollar spent on the base fare—the highest loyalty point multiplier of all Southwest fare products, one complimentary premium beverage coupon for the day of travel on flights over 250 miles (Customers must be of legal drinking age to drink alcoholic beverages), and free inflight internet service, where available.
They are non-refundable, but, subject to Southwest’s No-Show Policy, flight credit for the fare paid for unused travel by the Customer (“flight credit”) may be applied towards future travel on 7 Table of Contents Southwest.
They are non-refundable, but, subject to Southwest’s No-Show Policy, flight credit for the fare paid for unused travel by the Customer (“flight credit”) may be applied towards future travel on Southwest.
As of December 31, 2023, Southwest had a total of 817 Boeing 737 aircraft in its fleet and served 121 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.
As of December 31, 2024, Southwest had a total of 803 Boeing 737 aircraft in its fleet and served 117 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.
In late 2023, the 10 Table of Contents Company also began taking delivery of MAX aircraft with the latest-generation of onboard USB-A and USB-C power ports on every seat, with a space-saving system that maintains legroom. The Company is also installing the in-seat power ports onboard its existing MAX fleet.
In late 2023, the Company also began taking delivery of MAX aircraft with the latest-generation of onboard USB-A and USB-C power ports on every seat, with a space-saving system that preserves legroom. The Company is also installing the in-seat power ports onboard its existing MAX fleet.
The CCDAA requires both public and private U.S. companies that are “doing business in California” and that have a total annual revenue of $1 billion to publicly disclose and verify, on an annual basis, Scope 1, 2 and 3 greenhouse gas emissions.
The CCDAA requires both public and private U.S. companies that are “doing business in California” and that have a total annual revenue of $1 billion to publicly disclose and verify, on an annual basis, Scopes 1, 2 and 3 GHG emissions.
In addition, A-List Preferred Members enjoy free inflight satellite internet service on WiFi-enabled aircraft, where available, and up to two complimentary premium drinks per flight on flights traveling 176 miles or more, added directly to their mobile boarding passes. Members who attain A-List or A-List Preferred status receive priority boarding privileges.
In addition, A-List Preferred Members enjoy free inflight internet service, where available, and up to two complimentary premium drinks per flight on flights traveling 250 miles or more, added directly to their mobile boarding passes. Members who attain A-List or A-List Preferred status receive priority boarding privileges.
The VCMDA requires business entities that (1) market or sell voluntary carbon offsets in California, (2) purchase or use voluntary carbon offsets sold in California that make emissions-related claims, or (3) make claims that an entity or product has eliminated or made significant reductions to its carbon dioxide or GHG emissions to make certain public disclosure on the business entity’s website.
The VCMDA requires business entities that (i) market or sell voluntary carbon offsets in California, (ii) purchase or use voluntary carbon offsets sold in California that make emissions-related claims, or (iii) make claims that an entity or product has eliminated or made significant reductions to its carbon dioxide or GHG emissions to make certain public disclosure on the business entity’s website.
Labor Union Activity Approximately 83 percent of Company Employees as of December 31, 2023, were represented by labor unions. The Railway Labor Act establishes the right of airline employees to organize and bargain collectively.
Labor Union Activity Approximately 82 percent of Company Employees as of December 31, 2024, were represented by labor unions. The Railway Labor Act establishes the right of airline employees to organize and bargain collectively.
When 9 Table of Contents these Customers purchase travel at least 36 hours prior to flight time, they receive the best boarding position available (generally, an “A” boarding pass).
When these Customers purchase travel at least 36 hours prior to flight time, they receive the best boarding position available (generally, an “A” boarding pass).
The Company augments its direct to Customer distribution approach by offering a broad suite of digital platforms to support Customers' travel needs, including full featured websites and apps.
The Company supports its distribution approach by offering a broad suite of digital platforms to support Customers' travel needs, including full featured websites and apps.
In addition, the active full-time equivalent Employees figure includes an adjustment to count all part-time Employees as a 0.5 full-time equivalent Employee. When considering total demographics of Employees, however, the Company looks at total headcount, active and inactive Employees, irrespective of part-time or full-time status.
In addition, the active full-time equivalent Employees figure includes an adjustment to count all part-time Employees as a 0.5 full-time equivalent Employee. When considering total 28 Table of Contents demographics of Employees, however, the Company looks at total headcount, active and on-leave Employees, irrespective of part-time or full-time status.
The Companion Pass is valid for the remainder of the calendar year in which status is earned and for the following full calendar year to any destination available on Southwest for a designated Companion of the qualifying Member. The Member and designated Companion must travel together on the same flight.
The Companion Pass is valid for the remainder of the calendar year in which status is earned and for the following full calendar year to any destination available on Southwest for a designated Companion of the qualifying Member.
The Company continues to undertake a number of other fuel conservation initiatives, which are discussed in detail under “Environmental Sustainability.” The table below sets forth the Company's available seat miles produced per fuel gallon consumed (fuel-efficiency) over the last five years: Year ended December 31, 2023 2022 2021 2020 2019 Available seat miles per fuel gallon consumed 79.5 77.3 79.2 81.3 75.7 The Company also enters into fuel derivative contracts to manage its risk associated with significant increases in fuel prices.
The Company continues to undertake a number of other fuel conservation initiatives, which are discussed in detail under “Environmental Sustainability.” 6 Table of Contents The table below sets forth the Company's ASMs produced per fuel gallon consumed (fuel-efficiency) over the last five years: Year ended December 31, 2024 2023 2022 2021 2020 Available seat miles per fuel gallon consumed 80.8 79.5 77.3 79.2 81.3 The Company has also entered into fuel derivative contracts to manage its risk associated with significant increases in fuel prices.
The proposed rule amendments would require a domestic or foreign registrant to include certain climate-related information in its registration statements and periodic reports, such as on Form 10-K, including: climate-related risks and their actual or likely material impacts on the registrant’s business, strategy, and outlook; the registrant’s governance of climate-related risks and relevant risk management processes; the registrant’s greenhouse gas emissions, which for accelerated and large accelerated filers and with respect to certain emissions, would be subject to assurance; certain climate-related financial statement metrics and related disclosures in a note to its audited financial statements; and information about climate-related targets and goals, and transition plan, if any.
For instance, the rule requires a domestic or foreign registrant to include certain climate-related information in its registration statements and periodic reports, such as on Form 10-K, including: (i) climate-related risks and their actual or likely material impacts on the registrant’s business, strategy, and outlook; (ii) the registrant’s governance of climate-related risks and relevant risk management processes; (iii) the registrant’s GHG emissions, which for accelerated and large accelerated filers and with respect to certain emissions would be subject to assurance; (iv) certain climate-related financial statement metrics and related disclosures in a note to its audited financial statements; and (v) information about climate-related targets and goals, and transition plan, if any.
Year ended December 31, 2023 2022 2021 Flight awards redeemed (millions) 10.9 9.2 8.1 For 2023, 2022, and 2021, Customer redemption of flight awards accounted for approximately 16.3 percent, 15.0 percent, and 17.3 percent of revenue passenger miles flown, respectively.
Year ended December 31, 2024 2023 2022 Flight awards redeemed (millions) 10.1 10.9 9.2 For 2024, 2023, and 2022, Customer redemption of flight awards accounted for approximately 14.7 percent, 16.3 percent, and 15.0 percent of revenue passenger miles flown, respectively.
On November 9, 2021, the U.S. government announced an Aviation Climate Action Plan to reduce emissions by, among other initiatives and efforts, operationalizing NextGen to realize the full potential of modernized infrastructure and systems, and enhancing data quality and information distribution to enable operators to fly more fuel-efficient trajectories.
On November 9, 2021, the U.S. government announced an Aviation Climate Action Plan to reduce emissions by, among other initiatives and efforts, operationalizing NextGen to realize the full potential of modernized infrastructure and systems, and enhancing data quality and information distribution to enable operators to fly more fuel-efficient trajectories. However, with the new presidential administration, this initiative may be postponed.
A point-to-point system enables airlines to connect directly to destinations without providing a connecting service. By contrast, the hub-and-spoke system concentrates most of an airline's operations at a limited number of central hub cities and serves most other destinations in the system by providing one-stop or connecting service through a hub.
By contrast, the hub-and-spoke system concentrates most of an airline's operations at a limited number of central hub cities and serves most other destinations in the system by providing one-stop or connecting service through a hub.
Regulations affecting the Company and/or the airline industry that have been or may be imposed by several of these governmental agencies and legislative bodies include, but are not limited to, those discussed below. In 2024, Congress is expected to enact an FAA Reauthorization bill.
Regulations affecting the Company and/or the airline industry that have been or may be imposed by several of these governmental agencies and legislative bodies include, but are not limited to, those discussed below. In May 2024, Congress enacted the FAA Reauthorization Act of 2024 (the “2024 Reauthorization Act”).
If the FAA issues a rule with minimum dimensions that exceed the Company’s current seat dimensions, the Company could incur substantial compliance costs.
The FAA has not yet issued a proposed rule. If the FAA issues a rule with minimum dimensions that exceed the Company’s current seat dimensions, the Company could incur substantial compliance costs.
Aviation Taxes and Fees The statutory authority for the federal government to collect most types of aviation taxes, which are used, in part, to finance programs administered by the FAA, must be periodically reauthorized by the U.S. Congress. The FAA Reauthorization Act of 2018 (the “2018 Reauthorization Act”) extended most commercial aviation taxes through September 30, 2023.
Aviation Taxes and Fees The statutory authority for the federal government to collect most types of aviation taxes, which are used, in part, to finance programs administered by the FAA, must be periodically reauthorized by the U.S. Congress. The 2024 Reauthorization Act extended, but did not modify, most commercial aviation taxes through September 30, 2028.
The Company has consistently utilized active full-time equivalent Employees to determine various metrics that measure productivity and efficiency, so it has chosen to not include inactive Employees in the figure, which totaled an additional 3,954 Employees as of December 31, 2023.
The Company has consistently utilized active full-time equivalent Employees to determine various metrics that measure productivity and efficiency, so it has chosen to not include on-leave Employees in the figure, which totaled an additional 4,546 Employees as of December 31, 2024.
In 2023, the Company launched Southwest Business Meetings, a new product for its corporate Customers that is designed to make it easier for meeting planners to manage travel on Southwest by streamlining the process to book group travel for meetings and conventions. In 2022, the Company launched its new travel portal, Southwest Business Assist™.
The Company offers Southwest Business Meetings, a product for its corporate Customers that is designed to make it easier for meeting planners to manage travel on Southwest by streamlining the process to book group travel for meetings and conventions.
Salaries, wages, and benefits expense constituted approximately 43 percent of the Company's operating expenses in 2023 and was the Company's largest operating cost category.
Salaries, wages, and benefits expense constituted approximately 45.1 percent of the Company's operating expenses in 2024 and was the Company's largest operating cost category.
In addition, the Passenger Protection Rules require airlines to (i) display ontime performance on their websites; (ii) adopt customer service plans, publish those plans on their website, and audit their own compliance with their plans; (iii) designate an employee to monitor the performance of airlines' flights; (iv) provide information to passengers on how to file complaints; (v) respond in a timely and substantive fashion to consumer complaints; (vi) pay compensation to each passenger denied boarding involuntarily from an oversold flight; (vii) refund any checked bag fee for permanently lost luggage; (viii) prominently disclose all potential fees for optional ancillary services on their websites; and (ix) refund passenger fees paid for ancillary services if a flight cancels or oversells and a passenger is unable to take advantage of such services.
In addition, the Passenger Protection Rules require airlines to (i) display ontime performance on their websites; (ii) adopt Customer Service plans, publish those plans on their website, and audit their own compliance with their plans; (iii) designate an employee to monitor the performance of airlines' flights; (iv) provide information to passengers on how to file complaints; (v) respond in a timely and substantive fashion to consumer complaints; (vi) pay compensation to each passenger denied boarding involuntarily from an oversold flight; and (vii) prominently disclose all potential fees for optional ancillary services on their websites.
A final rule is expected in 2024. Additionally, the state of California recently enacted a number of climate-disclosure related laws, including the Climate Corporate Data Accountability Act (“CCDAA”) and Climate-Related Financial Risk Act (“CRFRA”) in October 2023.
Additionally, in 2023, the State of California enacted a number of climate-disclosure related laws, including the Climate Corporate Data Accountability Act (“CCDAA”) and Climate-Related Financial Risk Act (“CRFRA”).
ICAO's Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”) program is a global market-based measure intended to cap carbon emissions from international civil aviation at their 2019 levels from 2021 to 2023 and 85 percent of their 2019 levels from 2024 to 2035, addressing carbon emissions from the growth of international air traffic by requiring that international aviation emissions above these levels be offset or reduced through the use of CORSIA Eligible Fuel, such as a CORSIA sustainable aviation fuel, or CORSIA Eligible Emissions Units.
ICAO's Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”) program is a global market-based measure intended to cap carbon emissions from international civil aviation at their 2019 levels from 2021 to 2023 and 85 percent of their 2019 levels from 2024 to 2035, addressing carbon emissions from the growth of international air traffic by requiring that international aviation emissions above these levels be offset or reduced through the use of CORSIA Eligible Fuel, such as a CORSIA SAF, or CORSIA Eligible Emissions Units. 21 Table of Contents The U.S. federal government has opted to participate in the voluntary phases of the CORSIA program from 2021-2026 (additional phases extend through 2035).
For additional information, see Item 1C – “Cybersecurity.” The Company expects federal, state, and other governments to assess and implement increasingly challenging data privacy and cybersecurity legal obligations, which could result in expanded compliance burdens, costs, and enforcement risks for the Company.
The Company expects federal, state, and other governments to assess and implement increasingly complex data privacy and cybersecurity legal obligations, which could result in expanded compliance burdens, costs, and enforcement risks for the Company.
The Company is committed to its goal of widening its Customer Service advantage by enhancing digital Hospitality. The Company is amid a multi-year digital service modernization program designed to, among other things, provide better Customer Service at a lower cost. Key focus areas of the digital service modernization program include contact center service modernization, airport service modernization, and disruptions management.
Digital Hospitality The Company is committed to its goal of widening its Customer Service advantage by enhancing digital Hospitality. The Company is amid a multi-year digital service modernization program designed to, among other things, provide better Customer Service at a lower cost.
Fuel and oil expense can be extremely volatile and unpredictable, and even a small change in market fuel prices can significantly affect profitability. Although the Company’s jet fuel prices per gallon were slightly lower in 2023, as compared with 2022, they remain at high historical levels.
Fuel and oil expense can be extremely volatile and unpredictable, and even a small change in market fuel prices can significantly affect profitability. Although the Company’s jet fuel prices per gallon were generally lower in 2024, as compared with 2023, they remain at high levels. Fuel and oil expense remained the Company's second largest operating cost category for 2024.
These types of restrictions can cause curtailments in service or increases in operating costs and can limit the ability of air carriers to expand operations at the affected airports.
These types of restrictions can cause curtailments in service or increases in operating costs, limit the ability of air carriers to expand operations at the affected airports, and result in civil fines when operators violate curfews or noise limitations.
Year Cost (Millions) Average Cost Per Gallon Percentage of Operating Expenses 2011 $ 5,751 $ 3.25 38.2 % 2012 $ 6,156 $ 3.32 37.3 % 2013 $ 5,823 $ 3.19 35.3 % 2014 $ 5,355 $ 2.97 32.6 % 2015 $ 3,740 $ 1.96 23.6 % 2016 $ 3,801 $ 1.90 22.7 % 2017 $ 4,076 $ 1.99 23.0 % 2018 $ 4,616 $ 2.20 24.6 % 2019 $ 4,347 $ 2.09 22.3 % 2020 $ 1,849 $ 1.45 14.4 % 2021 $ 3,310 $ 1.98 23.5 % 2022 $ 5,975 $ 3.10 26.2 % 2023 $ 6,217 $ 2.89 24.0 % First Quarter 2023 $ 1,547 $ 3.19 25.8 % Second Quarter 2023 $ 1,403 $ 2.60 22.5 % Third Quarter 2023 $ 1,564 $ 2.80 24.4 % Fourth Quarter 2023 $ 1,703 $ 3.01 23.6 % The Company’s fuel efficiency was aided in 2023, as compared with 2022, through the addition of 86 -8 aircraft to its fleet and by the retirement of 39 of its oldest, least fuel-efficient Boeing 737-700 (“-700”) aircraft.
The table below shows the Company's average cost of jet fuel inclusive of fuel taxes and fuel hedging impacts, for each year beginning in 2011 and during each quarter of 2024. 5 Table of Contents Year Cost (Millions) Average Cost Per Gallon Percentage of Operating Expenses 2011 $ 5,751 $ 3.25 38.2 % 2012 $ 6,156 $ 3.32 37.3 % 2013 $ 5,823 $ 3.19 35.3 % 2014 $ 5,355 $ 2.97 32.6 % 2015 $ 3,740 $ 1.96 23.6 % 2016 $ 3,801 $ 1.90 22.7 % 2017 $ 4,076 $ 1.99 23.0 % 2018 $ 4,616 $ 2.20 24.6 % 2019 $ 4,347 $ 2.09 22.3 % 2020 $ 1,849 $ 1.45 14.4 % 2021 $ 3,310 $ 1.98 23.5 % 2022 $ 5,975 $ 3.10 26.2 % 2023 $ 6,217 $ 2.89 24.0 % 2024 $ 5,812 $ 2.64 21.4 % First Quarter 2024 $ 1,531 $ 2.92 22.8 % Second Quarter 2024 $ 1,599 $ 2.76 23.0 % Third Quarter 2024 $ 1,417 $ 2.52 20.7 % Fourth Quarter 2024 $ 1,264 $ 2.38 19.0 % The Company’s fuel efficiency was aided in 2024, as compared with 2023, through the addition of 22 -8 aircraft to its fleet and by the retirement of 34 of its oldest, least fuel-efficient Boeing 737-700 (“-700”) aircraft and the retirement of two Boeing 737-800 ("-800") aircraft.
For example, in 2023, the Company added 86 Boeing 737 MAX 8 (“-8”) aircraft to its fleet, with the goal of lowering operating costs, improving potential growth opportunities, restoring the Company's network to pre-pandemic levels, reducing carbon emissions per available seat mile, and further modernizing the Company's fleet with more fuel-efficient aircraft.
For example, in 2024, the Company added 22 Boeing 737 MAX 8 (“-8”) aircraft to its fleet, with the goal of lowering operating costs, improving potential growth opportunities, better optimizing the Company's network, reducing carbon emissions per ASM, and further modernizing the Company's fleet with more fuel-efficient aircraft.
Economic and Consumer Protection Regulation 14 Table of Contents Regulation by the U.S. Department of Transportation The U.S. Department of Transportation (“DOT”) regulates economic operating authority for air carriers and consumer protection for airline passengers. The DOT may take legal enforcement action against air carriers for violating their statutes or regulations by imposing civil penalties up to $40,272 per occurrence.
Department of Transportation The DOT regulates economic operating authority for air carriers and consumer protection for airline passengers. The DOT may take legal enforcement action against air carriers for violating the DOT’s statutes or regulations by imposing civil penalties up to $75,000 per occurrence.
Human Capital Resources Employees As of December 31, 2023, the Company had 74,806 active full-time equivalent Employees, consisting of 31,339 air operations (including Pilots, Flight Attendants, Dispatchers, Flight Simulator Technicians, Flight Crew Training Instructors, and Meteorologists), 22,882 ground operations (including Ramp, Operations, Provisioning, and Freight Agents, and Customer Service Agents), 3,183 Customer Representatives and Source of Support Representatives, 3,736 maintenance and engineering (including Material Specialists, Mechanics, Aircraft Appearance Technicians, and Facilities Maintenance Technicians), and 13,666 additional “noncontract” Employees.
Human Capital Resources Employees As of December 31, 2024, the Company had 72,450 active full-time equivalent Employees, consisting of 30,771 air operations (including Pilots, Flight Attendants, Dispatchers, Flight Simulator Technicians, Flight Crew Training Instructors, and Meteorologists), 21,435 ground operations (including Ramp, Operations, Provisioning, Freight Agents, and Customer Service Agents), 2,770 Customer Representatives and Source of Support Representatives, 3,756 maintenance and engineering (including Material Specialists, Mechanics, Aircraft Appearance Technicians, and Facilities Maintenance Technicians), and 13,718 additional “noncontract” Employees.
All fare products include the privilege of two free checked bags (weight and size limits apply). Southwest does not charge fees for cancellations or changes to flight reservations, although fare differences may apply. • “Wanna Get Away” fares are generally the lowest fares and are often subject to advance purchase requirements.
Southwest does not charge fees for cancellations or changes to flight reservations, although fare differences may apply. • “Wanna Get Away” fares are generally the lowest fares and are often subject to advance purchase requirements.
The self-service tool enables corporate travel buyers, travel decision makers, and travel management companies to better manage their business travel on Southwest using dashboards, reports, automated processing of travel benefits, and Customer Service. The on-demand self-service tool provides access to real-time information and reporting. Southwest Business has also continued to invest in and enhance SWABIZ with mobile capabilities.
The Company also offers Southwest Business Assist™, a travel portal that enables corporate travel buyers, travel decision makers, and travel management companies to better manage their business travel on Southwest using dashboards, reports, automated processing of travel benefits, and Customer Service. The on-demand self-service tool provides access to real-time information and reporting.
These communication alternatives have become particularly prevalent as a result of the COVID-19 pandemic. Pricing and Cost Structure Pricing is a significant competitive factor in the airline industry, and the availability of fare information on the Internet allows travelers to easily compare fares and identify competitor promotions and discounts.
These communication alternatives have bec ome particularly prevalent post-pandemic. Pricing and Cost Structure Pricing is a significant competitive factor in the airline industry, and the availability of fare information on the Internet allows travelers to easily compare fares and identify competitor promotions and discounts. During 2024, the Company continued to experience a highly competitive fare environment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeLegal, Regulatory, Compliance, and Reputational Risks • The Company is subject to extensive FAA regulation that may disrupt or necessitate modifications to the Company’s operations, business plans, and strategies. • Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth; changes in or additional governmental regulation could increase the Company's operating costs or otherwise limit the Company's ability to conduct business. • The Company is subject to various environmental requirements and risks, including increased regulation, changing consumer preferences, physical, environmental, and climate risks, and risks associated with climate change; the cost of compliance with more stringent environmental regulations, failure to comply with environmental regulations, or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on the Company’s results of operations. • The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand. • The Company's future results will suffer if it is unable to effectively manage its international operations and/or Extended Operations. • The Company is currently subject to regulatory actions and pending litigation, and if judgment, penalties, or fines were to be rendered against the Company, such judgment, penalties, or fines could adversely affect the Company's operating results. 31 Table of Contents • Conflicting federal, state, and local laws and regulations may impose additional requirements and restrictions on the Company’s operations, which could increase the Company’s operating costs, result in service disruptions, and increase litigation risk. • The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise, including with respect to the Company's voluntary ESG-related goals and disclosures. • The Company’s Bylaws designate specific courts as the exclusive forum for certain legal actions between the Company and its Shareholders, which could increase costs to bring a claim, discourage claims, or limit the ability of the Company’s Shareholders to bring a claim in a judicial forum viewed by the Shareholders as more favorable for disputes with the Company or the Company’s directors, officers, or other Employees.
Biggest changeLegal, Regulatory, Compliance, and Reputational Risks • The Company is subject to extensive government regulation that may disrupt or necessitate modifications to the Company’s operations, business plans, and strategies, increase the Company's operating costs, or otherwise limit the Company's ability to conduct business. • Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth. • The Company is subject to various environmental requirements and risks, including increased regulation, changing consumer preferences, physical, environmental, and climate risks, and risks associated with climate change; the cost of compliance with more stringent environmental regulations, failure to comply with environmental regulations, or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on the Company’s results of operations. • The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand. • The Company's future results will suffer if it is unable to effectively manage its international operations and/or Extended Operations. • The Company’s plans to develop commercial relationships with airlines in other parts of the world may not produce the results or returns it expects. • The Company is currently subject to regulatory actions and pending litigation, and if judgment, penalties, or fines were to be rendered against the Company, such judgment, penalties, or fines could adversely affect the Company's operating results. 33 Table of Contents • Conflicting federal, state, and local laws and regulations may impose additional requirements and restrictions on the Company’s operations, which could increase the Company’s operating costs, result in service disruptions, and increase litigation risk. • The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise, including with respect to the Company's voluntary or mandatory ESG-related goals and disclosures. • The Company’s business has been, and could in the future be, negatively affected as a result of actions of activist shareholders, and such activism could adversely affect the strategic direction and business results of the Company. • The Company’s Bylaws designate specific courts as the exclusive forum for certain legal actions between the Company and its Shareholders, which could increase costs to bring a claim, discourage claims, or limit the ability of the Company’s Shareholders to bring a claim in a judicial forum viewed by the Shareholders as more favorable for disputes with the Company or the Company’s directors, officers, or other Employees.
Extreme weather conditions, including increases in the frequency, severity, or duration of severe weather events (whether or not caused by anthropogenic climate change), can disrupt air travel from time to time, ground planes, damage equipment and increase maintenance costs, cause delays and cancellations or other network disruptions, require implementation of weight limitations due to increased temperatures, increase turbulence-related injuries, cause increases in fuel consumption to avoid such weather, disrupt the Company’s supply chains (including fuel, parts, and service provider disruptions), and otherwise adversely affect the Company’s assets, operations, and infrastructure.
Extreme weather conditions, including increases in the frequency, severity, or duration of severe weather events (whether or not caused by anthropogenic climate change), can disrupt air travel from time to time, ground planes, damage equipment and increase maintenance costs, cause delays and cancellations or other network disruptions, require implementation of weight limitations due to increased temperatures, increase turbulence-related injuries, cause disruptions in staffing, cause increases in fuel consumption to avoid such weather, disrupt the Company’s supply chains (including fuel, parts, and service provider disruptions), and otherwise adversely affect the Company’s assets, operations, and infrastructure.
For additional discussion of the availability of jet fuel and SAF, please see “The Company is subject to risks related to its voluntary sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.” The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have affected and could continue to affect the Company's ability to control its costs.
For additional discussion of the availability of jet fuel and SAF, please see “The Company is subject to risks related to its voluntary sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.” The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have adversely affected and could continue to adversely affect the Company's ability to control its costs.
Any future system interruptions or delays could reduce the Company's operating revenues and the attractiveness of its services, as well as increase the Company's costs. Similarly, the Company has experienced operational challenges in connection with severe weather events and associated crew scheduling, such as during and subsequent to Winter Storm Elliott.
Similarly, the Company has experienced operational challenges in connection with severe weather events and associated crew scheduling, such as during and subsequent to Winter Storm Elliott. Any future system interruptions or delays or operational disruptions or delays could reduce the Company’s operating revenues and the attractiveness of its services, as well as increase the Company’s costs.
The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise, including with respect to the Company's voluntary ESG-related goals and disclosures. The Company operates in a public-facing industry with significant exposure to social media. Negative publicity, whether or not justified, can spread rapidly through social media.
The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise, including with respect to the Company's voluntary or mandatory ESG-related goals and disclosures. The Company operates in a public-facing industry with significant exposure to social media. Negative publicity, whether or not justified, can spread rapidly through social media.
While the Company seeks to obtain assurances that these third parties will protect this information and systems in accordance with legal requirements and industry standards, there is a risk the security of systems and data held by third parties could be compromised.
While the Company seeks to obtain assurances that these third parties will protect this information and their systems in accordance with legal requirements and industry standards, there is a risk that the security of systems and data held by third parties could be compromised.
For example, fuel prices can be impacted by political, 32 Table of Contents environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and the potential for hostilities or other conflicts in oil producing areas; (ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; and (v) changes in currency exchange rates.
For example, fuel prices can be impacted by political, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and the potential for hostilities or other conflicts in oil producing areas; (ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; and (v) changes in currency exchange rates.
If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to 30 Table of Contents experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected. • The Company's business is labor intensive, with most Employees represented by labor unions; therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives or if the Company were unable to employ and retain sufficient numbers of qualified Employees to maintain its operations. • The Company is currently dependent on a single engine supplier, as well as single suppliers of certain other aircraft parts and equipment; therefore, the Company could be materially adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or equipment from Boeing or other suppliers or adequate maintenance or other support from any of these suppliers at commercially reasonable terms, (ii) if Boeing or other suppliers were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or (iii) in the event of a mechanical or regulatory issue associated with the Company's aircraft parts or equipment. • The airline industry has faced on-going security concerns and related cost burdens; further threatened or actual terrorist attacks, war, or other hostilities, even if not made directly on the airline industry, could significantly harm the airline industry and the Company's operations. • Interruptions or disruptions in service at one of the Company’s core stations have had, and could in the future have, a material adverse impact on its operations. • The Company’s operations have been, and in the future may again be, materially and adversely disrupted by extreme weather events.
If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to continue to experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected. • The Company's business is labor intensive, with most Employees represented by labor unions; therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives or if the Company were unable to employ and retain appropriate numbers of qualified Employees to maintain its operations. • The Company is currently dependent on a single engine supplier, as well as single suppliers of certain other aircraft parts and equipment; therefore, the Company could be materially adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or equipment or adequate maintenance or other support from any of these suppliers at commercially reasonable terms, (ii) if suppliers were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or (iii) in the event of a mechanical or regulatory issue associated with the Company's aircraft parts or equipment. • The airline industry has faced on-going security concerns and related cost burdens; further threatened or actual terrorist attacks, war, or other hostilities, even if not made directly on the airline industry, could significantly harm the airline industry and the Company's operations. • Interruptions or disruptions in service at one of the Company’s core stations have had, and could in the future have, a material adverse impact on its operations. • The Company’s operations have been, and in the future may again be, materially and adversely disrupted by extreme weather events.
The Company's fuel hedging arrangements and the various potential impacts of hedge accounting on the Company's financial position, cash flows, and results of operations are discussed in more detail under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk," and in Note 1 and Note 11 to the Consolidated Financial Statements.
The Company's fuel hedging arrangements and the various potential impacts of hedge accounting on the Company's financial position, cash flows, and results of operations are discussed in more detail under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk," and in Note 1 and Note 10 to the Consolidated Financial Statements.
As discussed further under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the Company's unionized workforce makes up approximately 83 percent of its Employees and many have had pay scale increases as a result of contractual rate increases, which has put pressure on the Company's labor costs.
As discussed further under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the Company's unionized workforce makes up approximately 82 percent of its Employees and many have had pay scale increases as a result of contractual rate increases, which has put pressure on the Company's labor costs.
Adjustments in the Company's overall fuel hedging strategy, as well as the ability of the commodities used in fuel hedging to qualify for special hedge accounting, could continue to affect the Company's results of operations. In addition, there can be no assurance that the Company will be able to cost-effectively hedge against increases in fuel prices.
Adjustments in the Company's overall fuel hedging strategy, as well as the ability of the commodities used in fuel hedging to qualify for special hedge accounting, could continue to affect the Company's results of operations. In addition, there can be no assurance that the Company would be able to cost-effectively hedge against increases in fuel prices.
If any of the Company's significant technologies or third-party systems were to cease functioning, or if its third-party service providers or data providers were to fail to adequately and timely provide required information or reports, technical support, system maintenance, security, or software upgrades for any of the Company’s existing systems, the Company could experience service interruptions, delays, and loss of critical data, which could harm its operations and result in financial losses and reputational damage.
If any of the Company's IT Systems or third-party systems were to cease functioning, or if its third-party service providers or data providers were to fail to adequately and timely provide required information or reports, technical support, system maintenance, security, or software upgrades for any of the Company’s existing IT Systems, the Company could experience service interruptions, delays, and loss of critical data, which could harm its operations and result in financial losses and reputational damage.
The Company's strategic plans and results of operations could be negatively affected by changes in law and future actions taken by domestic and foreign governmental agencies having jurisdiction over its operations, including, but not limited to: • increases in airport rates and charges; • limitations on airport gate capacity or use of other airport facilities; • limitations on route authorities; • actions and decisions that create difficulties in obtaining access at slot-controlled airports (a "slot" is the right of an air carrier, pursuant to regulations of the FAA or local authorities, to operate a takeoff or landing at certain airports); • actions and decisions that create difficulties in obtaining operating permits and approvals; • changes to environmental regulations; 42 Table of Contents • mandates that affect the usage of SAF; • enhanced emissions and climate reporting obligations; • mandates on and regulation of existing products and services; • new or increased taxes or fees, such as with respect to potential increases to the federal corporate income tax rate, and such as those contained in the Inflation Reduction Act, including a potential corporate alternative minimum tax or potential taxes imposed on share repurchases, which may affect the Company’s decisions with respect to capital markets; • changes to laws that affect the services that can be offered by airlines in particular markets and at particular airports; • restrictions on competitive practices; • changes in laws that increase costs for safety, security, compliance, or other Customer Service standards; • changes in laws that may limit the Company's ability to enter into fuel derivative contracts to hedge against increases in fuel prices; • changes in laws that may limit or regulate the Company's ability to promote the Company’s business or fares; • changes in laws that could affect the value of the Company’s existing contracts or agreements, such as its co-branded credit card agreement; • airspace closures or restrictions, such as restrictions on operations in markets where certain wireless telecommunications systems may cause interference with certain aircraft avionics; • grounding of commercial air traffic by the FAA; and • the adoption of more restrictive locally imposed noise regulations.
The Company's strategic plans and results of operations could be negatively affected by changes in law and future actions taken by domestic and foreign governmental agencies having jurisdiction over the Company’s operations, including, but not limited to: • increases in airport rates and charges; • limitations on airport gate capacity or use of other airport facilities; • limitations on route authorities; • actions and decisions that create difficulties in obtaining access at slot-controlled airports (a "slot" is the right of an air carrier, pursuant to regulations of the FAA or local authorities, to operate a takeoff or landing at certain airports); • actions and decisions that create difficulties in obtaining operating permits and approvals; • changes to environmental regulations; • mandates that affect the usage of SAF; • enhanced emissions and climate reporting obligations; 44 Table of Contents • mandates on and regulation of existing products and services; • new or increased taxes or fees, such as with respect to potential increases to the federal corporate income tax rate, and such as those contained in the Inflation Reduction Act, including a potential corporate alternative minimum tax or taxes imposed on share repurchases, which may affect the Company’s decisions with respect to capital markets; • changes to laws that affect the services that can be offered by airlines in particular markets and at particular airports; • restrictions on competitive practices; • changes in laws that increase costs for safety, security, compliance, or other Customer Service standards; • changes in laws that may limit the Company's ability to enter into fuel derivative contracts to hedge against increases in fuel prices; • changes in laws that may limit or regulate the Company's ability to promote the Company’s business or fares; • changes in laws that could affect the value of the Company’s existing contracts or agreements, such as its co-branded credit card agreement; • airspace closures or restrictions, such as restrictions on operations in markets where certain wireless telecommunications systems may cause interference with certain aircraft avionics; • grounding of commercial air traffic by the FAA; • the adoption of more restrictive locally imposed noise regulations; and • expanded compliance burdens, costs, and enforcement risks related to evolving data privacy and cybersecurity laws and regulations.
As discussed under “Business—Regulation—Environmental Regulation,” the state of California recently enacted a number of new climate-disclosure related laws, including the CCDAA and CRFRA, that require GHG emissions or climate-related risk disclosures, and the VCMDA that requires disclosure regarding the use of voluntary carbon offsets in certain circumstances.
As discussed under “Business—Regulation—Environmental Regulation,” the State of California enacted a number of new climate-disclosure related laws in October 2023, including the CCDAA and CRFRA, that require GHG emissions or climate-related risk disclosures, and the VCMDA that requires disclosure regarding the use of voluntary carbon offsets in certain circumstances.
The Company’s reputation or brand, as well as its Customer and other stakeholder relationships, could be adversely impacted as a result of, among other things, (i) any failure to meet its ESG plans or goals; (ii) Customer perceptions of the Company’s advertising campaigns, sponsorship arrangements or marketing programs; (iii) Customer perceptions of the Company’s use of social media; (iv) Customer and other stakeholder perceptions of statements made by the Company, its Employees and executives, agents, any industry trade associations, or other third parties; or (v) public pressure from investors or policy groups to change the Company's policies.
The Company’s reputation or brand, as well as its Customer and other stakeholder relationships, could be adversely impacted as a result of, among other things, (i) any failure to meet its ESG plans or goals or any modifications to such goals; (ii) Customer perceptions of the 50 Table of Contents Company’s advertising campaigns, sponsorship arrangements or marketing programs; (iii) Customer perceptions of the Company’s use of social media; (iv) Customer and other stakeholder perceptions of statements made by the Company, its Employees and executives, agents, any industry trade associations, or other third parties; or (v) public pressure from investors or policy groups to change the Company's policies.
Any of these events could cause system interruptions, delays, and loss of critical data, and could prevent the Company from processing Customer transactions or providing services, which could make the Company's business and services less attractive and subject the Company to liability. Any of these events could damage the Company's reputation and be expensive to remedy.
Any of these events 42 Table of Contents could cause system interruptions, delays, and loss of critical data, and could prevent the Company from processing Customer transactions or providing services, which could make the Company's business and services less attractive and subject the Company to liability. Any of these events could damage the Company's reputation and be expensive to remedy.
A significant interruption or disruption in service at one of the Company’s core stations (such as Denver or Chicago-Midway), resulting from air traffic control systems, weather incidents, performance by third-party service providers, interruption of the Company’s technology, the availability and location of the Company’s crew resources, fuel supplies, or otherwise, has resulted, and could again in the future result, in the cancellation or delay of a significant portion of the Company’s flights and, as a result, has had, and could again in the future have, a severe impact on its business, results of operations and financial condition.
Significant interruptions or disruptions in service at one or more of the Company’s core stations (such as Denver or Chicago-Midway), resulting from air traffic control systems, weather incidents, performance by third-party service providers, interruption of the Company’s technology, the availability and location of the Company’s crew resources, fuel supplies, or otherwise, have resulted, and could again in the future result, in the cancellation or delay of a significant portion of the Company’s flights and, as a result, have had, and could again in the future have, a severe impact on its business, results of operations and financial condition.
Although the Company has policies and procedures in 46 Table of Contents place that are designed to promote compliance with the laws of the jurisdictions in which it operates, a violation by the Company's Employees, contractors, or agents or other intermediaries could nonetheless occur.
Although the Company has policies and procedures in place that are designed to promote compliance with the laws of the jurisdictions in which it operates, a violation by the Company's Employees, contractors, or agents or other intermediaries could nonetheless occur.
The Company’s reputation or brand, as well as its Customer and other stakeholder relationships, could be adversely impacted as a result of, among other things, (i) any failure to meet its sustainability plans or goals, including those that relate to climate change; (ii) the Company’s impact on the environment; or (iii) public pressure from investors or policy groups to change the Company's policies.
The Company’s reputation or brand, as well as its Customer and other stakeholder relationships, could be adversely impacted as a result of, among other things, (i) any failure to meet or maintain its sustainability plans or goals, including those related to climate change; (ii) the Company’s impact on the environment; or (iii) public pressure from investors or policy groups to change the Company's policies.
An inability to quickly and effectively restore operations following adverse weather, a 37 Table of Contents localized disaster, or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company’s business, results of operations, and financial condition.
An inability to quickly and effectively restore operations following adverse weather, a localized disaster, or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company’s business, results of operations, and financial condition.
Finally, the potential acute and chronic physical effects of climate change, such as increased frequency, duration, and severity of extreme weather events, longer-term changes in weather patterns, and other climate-related events, could affect the Company’s operations, infrastructure, and financial results.
Finally, the potential acute and chronic physical effects of climate change, such as increased frequency, duration, and severity of extreme weather events, longer-term changes in weather patterns, and other climate-related events, 46 Table of Contents could affect the Company’s operations, infrastructure, and financial results.
As discussed below under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the Company experienced significant inflationary cost pressure in 2023, particularly with respect to Salaries, wages, and benefits expense. 33 Table of Contents The Company's low-cost structure can also be negatively impacted by costs over which the Company has limited control.
As discussed below under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the Company 35 Table of Contents has experienced significant inflationary cost pressure, particularly with respect to Salaries, wages, and benefits expense. The Company's low-cost structure can also be negatively impacted by costs over which the Company has limited control.
Even a small change in market fuel prices can significantly affect profitability. Furthermore, the cost of fuel can be extremely volatile and unpredictable and subject to many external factors that are beyond the Company's control.
Even a small change in market fuel prices can significantly affect 34 Table of Contents profitability. Furthermore, the cost of fuel can be extremely volatile and unpredictable and subject to many external factors that are beyond the Company's control.
Additionally, SAF purchase agreements may pertain to production from facilities that are planned but not yet 44 Table of Contents operational, and which may utilize technology that has not been proven at commercial scale. There is no assurance that these facilities will produce SAF at commercial scale or that they will meet contracted production timelines and volumes.
Additionally, SAF purchase agreements may pertain to production from facilities that are planned but not yet operational, and which may utilize technology that has not been proven at commercial scale. There is no assurance that these facilities will produce SAF at commercial scale or that they will meet contracted production timelines and volumes.
In addition, the Company is subject to the risk that its fuel derivatives will no longer qualify for hedge accounting under applicable accounting standards, or that the derivative instruments utilized will not effectively offset changes in the price of the jet fuel consumed, which can create additional earnings volatility.
The Company continues to be subject to the risk that its fuel derivatives will no longer qualify for hedge accounting under applicable accounting standards, or that the derivative instruments utilized will not effectively offset changes in the price of the jet fuel consumed, which can create additional earnings volatility.
Depending on location, the Company’s assets and route network are or could be exposed to ongoing risks arising from a variety of adverse weather conditions or localized natural or manmade disasters such as earthquakes, volcanoes, wildfires (such as the 2023 Maui wildfires), hurricanes, tropical storms, tornadoes, floods, sea-level rise, severe winter weather, sustained or extreme cold or heat, drought, or other disturbances, actual or threatened.
Depending on location, the Company’s assets and route network have been or could be exposed to ongoing risks arising from a variety of adverse weather conditions or localized natural or manmade disasters such as earthquakes, volcanoes, wildfires (such as the 2023 Maui wildfires and the 2025 Los Angeles wildfires), hurricanes, tropical storms, tornadoes, floods, sea-level rise, severe winter weather, sustained or extreme cold or heat, drought, or other disturbances, actual or threatened.
In the future, the Company's efforts to meet its sustainability plans or goals may divert Company resources or management's attention from other matters. The Company's future results will suffer if it is unable to effectively manage its international operations and/or Extended Operations ("ETOPS").
In the future, the Company's efforts to meet its sustainability plans or goals or to comply with sustainability-related regulations may divert Company resources or management's attention from other matters. The Company's future results will suffer if it is unable to effectively manage its international operations and/or Extended Operations ("ETOPS").
The Company attempts to manage its risk associated with volatile jet fuel prices by utilizing over-the-counter fuel derivative instruments to hedge a portion of its future jet fuel purchases. However, energy prices can fluctuate significantly in a relatively short amount of time.
The Company has historically attempted to manage its risk associated with volatile jet fuel prices by utilizing over-the-counter fuel derivative instruments to hedge a portion of its future jet fuel purchases. However, energy prices can fluctuate significantly in a relatively short amount of time.
While the Company operates across a diverse geographic footprint, its operations at times have been adversely and materially impacted by severe weather, such as Hurricanes Harvey and Irma in 2017 and Winter Storm Elliott in December 2022.
While the Company operates across a diverse geographic footprint, its operations at times have been adversely and materially impacted by severe weather, such as Hurricanes Harvey and Irma in 2017, Winter Storm Elliott in December 2022, and Hurricane Milton in October 2024.
The reporting obligations of the CCDAA, CRFRA, VCMDA, and other state or federal laws or rules requiring the disclosure of climate-related risks or emissions may cause the Company to incur additional increased costs for compliance as well as increased costs regarding access to capital.
The reporting obligations of the CCDAA, CRFRA, VCMDA, and any similar future state or federal laws or rules requiring the disclosure of climate-related risks or emissions may cause the Company to incur additional increased costs for compliance as well as increased costs regarding access to capital.
The issuance of new FAA regulations, regulatory amendments, or orders or directives, such as FAA restrictions associated with certain wireless telecommunications systems, could result in flight schedule adjustments and groundings or delays in aircraft deliveries, as well as lower operating revenues, operating income, and net income due to a variety of factors, including, among others, (i) lost revenue due to flight cancellations and operational disruptions as a result of a smaller operating aircraft fleet, (ii) the lack of ability to make corresponding reductions in expenses because of the fixed nature of many expenses, and (iii) possible negative effects on Customer confidence and airline choice.
The issuance of new FAA regulations, regulatory amendments, or orders or directives could result in flight schedule adjustments and groundings or delays in aircraft deliveries, as well as lower operating revenues, operating income, and net income due to a variety of factors, including, among others, (i) lost revenue due to flight cancellations and operational disruptions as a result of a smaller operating aircraft fleet, (ii) the lack of ability to make corresponding reductions in expenses because of the fixed nature of many expenses, and (iii) possible negative effects on Customer confidence and airline choice.
These technologies and systems include, among others, the Company's website and reservation system; flight dispatch and tracking systems; flight simulators; check-in kiosks; aircraft maintenance, planning, and record keeping systems; telecommunications systems; flight planning and scheduling systems; crew scheduling systems; human resources systems; and financial planning, management, and accounting systems.
These IT Systems include, among others, the Company's website and reservation system; mobile application; flight dispatch and tracking systems; flight simulators; check-in kiosks; aircraft maintenance, planning, and record keeping systems; telecommunications systems; flight planning and scheduling systems; crew scheduling systems; human resources systems; and financial planning, management, and accounting systems.
In addition to the unpredictable economic conditions and fuel costs previously discussed, the Company, like the airline industry in general, is affected by conditions that are largely unforeseeable and outside of its control, including, among others: • adverse weather and natural disasters and the associated effects on the Company's operations, which have, in certain circumstances, such as Winter Storm Elliott, impacted the Company's operational recovery to a greater degree than other airlines; • changes in consumer preferences, perceptions, spending patterns, or demographic trends (including, for example, changes in travel patterns due to economic conditions, weather, or government restrictions, sequestration, or shutdowns); • actual or potential disruptions in the air traffic control system (including, for example, as a result of FAA system outages or inadequate FAA staffing levels, as the United States has recently seen a shortage of air traffic controllers); • actual or perceived delays at various airports resulting from government restrictions (including, for example, longer wait-times at TSA checkpoints due to inadequate TSA staffing levels); • changes in the competitive environment due to industry consolidation, industry bankruptcies, and other factors; • delays in deliveries of new aircraft (including, for example, due to delays in the manufacturing process, in FAA certification, or due to the closure of the FAA's aircraft registry during government restrictions or shutdowns); • collective bargaining requirements and demands; • reliance on third-party facilities, goods, and/or services essential to its operations and/or business such as airports, de-icing services, fuel supply and delivery, and weather data and other critical information; • outbreaks of disease such as the COVID-19 pandemic; and • actual or threatened war, terrorist attacks, government travel warnings to certain destinations, travel restrictions, and political instability. 38 Table of Contents Because airline systems are inherently and unavoidably complex, large or small events, especially when in combination, can create opportunity for a systemic incident.
In addition to the unpredictable economic conditions and fuel costs previously discussed, the Company, like the airline industry in general, is affected by conditions that are largely unforeseeable and outside of its control, including, among others: • adverse weather and natural disasters and the associated effects on the Company's operations, which have, in certain circumstances, such as Winter Storm Elliott, impacted the Company's operational recovery to a greater degree than other airlines; • changes in consumer preferences, perceptions, spending patterns, or demographic trends (including, for example, changes in travel patterns due to economic conditions, weather, government restrictions, sequestration, or shutdowns); • actual or potential disruptions in the air traffic control system (including, for example, as a result of FAA system outages or inadequate FAA staffing levels, as the United States has recently seen a shortage of air traffic controllers); • actual or perceived delays at various airports resulting from government restrictions (including, for example, longer wait-times at TSA checkpoints due to inadequate TSA staffing levels); • changes in the competitive environment due to industry consolidation, industry bankruptcies, and other factors; • delays in deliveries of new aircraft (including, for example, due to delays in the manufacturing process, in FAA certification, or due to the closure of the FAA's aircraft registry during government restrictions or shutdowns); • collective bargaining requirements and demands; • reliance on third-party facilities, goods, and/or services essential to its operations and/or business such as airports, de-icing services, fuel supply and delivery, software, and weather data and other critical information; • outbreaks of disease such as the COVID-19 pandemic; and • actual or threatened war, terrorist attacks, government travel warnings to certain destinations, travel restrictions, and political instability.
For instance, the cost of insurance premiums related to hail and wind damage has increased for certain facilities, and certain flood insurance is no longer available.
For instance, the cost of insurance premiums related to hail and wind damage has increased for certain facilities, and 36 Table of Contents certain flood insurance is no longer available.
Jet fuel and oil constituted approximately 24 percent of the Company's operating expenses during 2023, and the Company's ability to control the cost of fuel is subject to the external factors discussed in “The Company's business can be significantly impacted by the availability of jet fuel and high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be impacted by the Company's ability to effectively address fuel price increases and fuel price volatility and availability.” Salaries, wages, and benefits constituted approximately 43 percent of the Company's operating expenses during 2023.
Jet fuel and oil constituted approximately 21.4 percent of the Company's operating expenses during 2024, and the Company's ability to control the cost of fuel is subject to the external factors discussed in “The Company's business can be significantly impacted by the availability of jet fuel and high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be impacted by the Company's ability to effectively address fuel price increases and fuel price volatility and availability.” Salaries, wages, and benefits constituted approximately 45.1 percent of the Company's operating expenses during 2024.
Financial Risks • The airline industry is particularly sensitive to changes in economic conditions, and continued or future unfavorable economic conditions could negatively affect the Company’s results of operations and require the Company to adjust its business strategies. • The Company's business can be significantly impacted by the availability of jet fuel and high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be impacted by the Company's ability to effectively address fuel price increases and fuel price volatility and availability. • The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have affected and could continue to affect the Company's ability to control its costs. • The Company's results of operations could be adversely impacted if it is unable to effectively execute its strategic plans. • The airline industry is intensely competitive.
Financial Risks • The airline industry is particularly sensitive to changes in economic conditions, and continued or future unfavorable economic conditions could negatively affect the Company’s results of operations and require the Company to adjust its business strategies. • The Company's business can be significantly impacted by the availability of jet fuel and high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel. • The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have adversely affected and could continue to adversely affect the Company's ability to control its costs. • Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results. • The Company's results of operations could be adversely impacted if it is unable to effectively execute its strategic plans. • The airline industry is intensely competitive.
Further failures of suppliers, third-party vendors, or service providers to timely provide adequate products or support for their products, or otherwise fulfill their commitments to the Company, could materially adversely affect the Company’s operations.
Failures of suppliers, third-party vendors, or service providers to timely provide adequate products or support for their 39 Table of Contents products, or otherwise fulfill their commitments to the Company, could materially adversely affect the Company’s operations.
Information Technology Risks The Company is increasingly dependent on technology to operate its business and continues to implement substantial changes to its information systems; any failure, disruption, breach, or delay in implementation of necessary changes of the Company's information systems could materially adversely affect its operations.
Information Technology, Cybersecurity, and Data Privacy Risks The Company is heavily dependent on technology to operate its business and continues to implement substantial changes to its information systems; any failure, disruption, breach, or delay in the Company’s information systems or in implementation of necessary changes could materially adversely affect its operations.
As of December 31, 2023, approximately 83 percent of the Company's Employees were represented for collective bargaining purposes by labor unions, making the Company particularly exposed in the event of labor-related job actions.
As of December 31, 2024, approximately 82 percent of the Company's Employees were represented for collective bargaining purposes by labor unions, making the Company particularly exposed in the event of labor-related job actions.
The Company is subject to evolving federal, state, local, and international laws and regulations relating to the protection of the environment, including those relating to aircraft and ground-based emissions, discharges to water systems, safe drinking water, and the management of hazardous substances and waste materials.
The Company is subject to changing federal, state, local, and international laws and regulations relating to the protection of the environment, including those relating to aircraft and ground-based emissions, discharges to water 45 Table of Contents systems, safe drinking water, and the management of hazardous substances and waste materials.
The Company's results of operations could be adversely impacted if it is unable to effectively execute its strategic plans. The Company is reliant on the success of its revenue strategies and other strategic plans and initiatives to grow and to help offset increasing costs. The execution of the Company's strategic plans was significantly negatively affected by the COVID-19 pandemic.
The Company's results of operations could be adversely impacted if it is unable to effectively execute its strategic plans. The Company is reliant on the success of its strategic plans and initiatives to increase revenues and help offset increasing costs. The execution of the Company's strategic plans was significantly negatively affected by the COVID-19 pandemic.
For example, lower-carbon technologies, such as SAF, are currently not available at scale and may take a significant amount of time to develop and mature, and the cost to transition to them could be prohibitively expensive without appropriate government support, policies, and incentives in place (including tax credits).
For example, lower-carbon technologies, such as SAF, are currently not available at scale or priced cost-competitively as compared to conventional jet fuel and may take a significant amount of time to develop and mature, and the cost to transition to them could be prohibitively expensive without appropriate government support, policies, and incentives in place (including tax credits).
As more businesses have publicly announced environmental sustainability goals, the cost of carbon offsets has also increased significantly and will likely continue to do so. The Company’s ability to achieve its environmental sustainability goals is subject to risks and uncertainties, many of which are outside of its control.
As more businesses have publicly announced environmental sustainability goals, the cost of carbon offsets has also increased and may continue to increase significantly. The Company’s ability to achieve its environmental sustainability goals is subject to risks and uncertainties, many of which are outside of its control.
In addition, to the extent the Company does utilize offsets, it will need to obtain these offsets from third parties, and while the Company generally seeks to purchase only quality offsets verified by reputable third parties, it can make no guarantees that the underlying offset project will provide the full or any claimed GHG emission reduction benefits , nor can it guarantee that any such offsets will not be subject to criticism from Customers, regulators, or other stakeholders .
While the Company generally seeks to purchase only quality offsets verified by reputable third parties, it can make no guarantees that the underlying offset project will provide the full or any claimed GHG emission reduction benefits, nor can it guarantee that any such offsets will not be subject to criticism from Customers, regulators, or other stakeholders.
Operational Risks • The Company is currently dependent on Boeing as the sole manufacturer of the Company's aircraft.
Operational Risks 32 Table of Contents • The Company is currently dependent on Boeing as the sole manufacturer of the Company's aircraft.
The airline business is labor intensive, and for the year ended December 31, 2023, Salaries, wages, and benefits expense represented approximately 43 percent of the Company's operating expenses.
The airline business is labor intensive, and for the year ended December 31, 2024, Salaries, wages, and benefits expense represented approximately 45.1 percent of the Company's operating expenses.
The Company's technologies and related systems and functions could be damaged or interrupted by catastrophic events beyond its control such as fires, floods, earthquakes, tornadoes and hurricanes, power loss, computer and telecommunications failures, acts of war or terrorism, computer viruses, malware, ransomware, security breaches, and similar events or disruptions generally beyond the Company’s control.
The Company's IT Systems or those of third-party service providers could be damaged or interrupted by catastrophic events beyond its control such as fires, floods, earthquakes, tornadoes and hurricanes, power loss, computer and telecommunications failures, acts of war or terrorism, computer viruses, malware, ransomware, security breaches, and similar events or disruptions generally beyond the Company’s control.
The timely and effective execution of the Company's strategies is dependent upon, among other factors, (i) the Company's ability to balance its network schedule and capacity with the availability and location of its crew resources; (ii) the Company's ability to effectively balance its investment of incremental operating expenses and capital expenditures related to its strategies against the need to effectively control costs; (iii) the Company's ability to timely and effectively implement, transition, and maintain related information technology systems and infrastructure; (iv) as discussed below, the Company’s ability to maintain satisfactory relations with its Employees or its Employees’ representatives; and (v) the Company's dependence on third parties with respect to the execution of its strategic plans .
The Company’s transformational initiatives are discussed in more detail under “Business.” The timely and effective execution of the Company's strategies is dependent upon, among other factors, (i) the Company's ability to balance its network schedule and capacity with the availability and location of its crew resources; (ii) the Company's ability to effectively balance its investment of incremental operating expenses and capital expenditures related to its strategies against the need to effectively control costs; (iii) the Company's ability to timely and effectively implement, transition, and maintain related information technology systems and infrastructure; (iv) the Company’s ability to maintain satisfactory relations with its Employees or its Employees’ representatives; (v) the Company’s ability to broaden its Customer base; and (vi) the Company's dependence on third parties with respect to the execution of its strategic plans.
The Company cannot guarantee that it will be able to purchase SAF on a cost-effective basis , and in addition to the factors already discussed, the ability to leverage SAF as part of its sustainability efforts could also be adversely affected by any of the following: technology challenges in the production, development, transportation, storage, and distribution of SAF; compliance with and/or changes to government regulations; modifications to or failure of industry standards, accounting protocols, approaches to modeling life cycle GHG emissions, or other applicable requirements to allow the Company to realize benefits from SAF (including blend limitations); or changes in carbon costs or climate-related goals.
The Company cannot guarantee that it will be able to purchase SAF on a cost-effective basis, and in addition to the factors already discussed, the ability to leverage SAF as part of its sustainability efforts could also be adversely affected by any of the following: technology challenges in the production, development, transportation, storage, and distribution of SAF; compliance with and/or changes to government regulations; modifications to or failure of industry standards, accounting protocols, approaches to modeling life cycle GHG emissions, or other applicable requirements to allow the Company to realize benefits from SAF (including blend limitations); or changes in carbon costs or climate-related goals. 47 Table of Contents Furthermore, to the extent that the Company may seek to achieve its voluntary climate goals and/or mandatory climate obligations through the use of carbon offsets, it may be exposed to additional costs associated with the procurement of offsets or limited supply in the carbon offsets market.
Given the estimates, assumptions, and timelines used to create these disclosures, the materiality of these disclosures is inherently difficult to assess in advance, and given the uncertainty of the estimates and assumptions used to create these disclosures, the Company may not be able to anticipate in advance whether or the degree to which it will or will not be able to meet its sustainability plans or goals, or how expensive it will be to do so. 45 Table of Contents Additionally, the Company is subject to increasing regulation imposing mandatory disclosure of sustainability and climate-related goals.
Given the estimates, assumptions, and timelines used to create these disclosures, the materiality of these disclosures is inherently difficult to assess in advance, and given the uncertainty of the estimates and assumptions used to create these disclosures, the Company may not be able to anticipate in advance whether or the degree to which it will or will not be able to meet its sustainability plans or goals, or how expensive it will be to do so.
The Company may not be able to anticipate, detect, or prevent cyberattacks or security breaches, particularly because the methodologies used by attackers change frequently or may not be recognized until such attack is launched, and because attackers are increasingly using technologies specifically designed to circumvent cybersecurity measures and avoid detection.
The Company may not be able to anticipate, detect, or prevent cyber-attacks, security breaches, or data incidents, particularly because the methodologies used by threat actors change frequently or may not be recognized until such attack is launched or for a substantial period thereafter, and because threat actors are increasingly using technologies specifically designed to circumvent cybersecurity measures and avoid detection.
Although the Company has not experienced cyber incidents that are individually, or in the aggregate, material, the Company has experienced cyber-attacks in 40 Table of Contents the past, which have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company.
Although the Company has not experienced cyber incidents that are individually, or in the aggregate, material, the Company and certain of its vendors and service providers have experienced cyber-attacks and cybersecurity incidents in the past, which have thus far been mitigated by preventative, detective, and responsive measures.
Regardless of merit, these litigation matters and any potential future claims against the Company may be both time consuming and disruptive to the Company's operations and cause significant expense and diversion of management attention.
As discussed below under "Legal Proceedings," the Company is subject to regulatory actions and pending litigation. Regardless of merit, these litigation matters and any potential future claims against the Company may be both time consuming and disruptive to the Company's operations and cause significant expense and diversion of management attention.
Almost all commercial service airports are owned and/or operated by units of local or state governments. Airlines are largely dependent on these governmental entities to provide adequate airport facilities and capacity at an affordable cost.
Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth. Almost all commercial service airports are owned and/or operated by units of local or state governments. Airlines are largely dependent on these governmental entities to provide adequate airport facilities and capacity at an affordable cost.
Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented approximately 24.0 percent of the Company's operating expenses for 2023. As discussed under "Business - Cost Structure," although market jet fuel prices remained volatile throughout the year, Fuel and oil expense for 2023 remained high, primarily due to higher capacity in response to consumer demand.
Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented approximately 21.4 percent of the Company's operating expenses for 2024. As discussed under "Business - Cost Structure," although market jet fuel prices were volatile throughout the year, Fuel and oil expense for 2024 remained high, primarily due to an increase in fuel gallons consumed.
Nevertheless, the Company has taken actions to add staffing and increase the starting wage rate for certain workgroups, manage its fleet and fleet order book, and better optimize its network in an effort to position itself to opportunistically recover and grow.
Nevertheless, the Company has taken actions to address staffing and increase the starting wage rate for certain workgroups, manage its fleet and fleet order book, and better optimize its network.
The FAA will ultimately determine the timing of the -7 certification and entry into service, and the Company therefore offers no assurances that current estimations and timelines are correct. Boeing no longer manufactures versions of the 737 other than the MAX family of aircraft.
The FAA will ultimately determine the timing of the -7 certification and entry into service, and the Company therefore offers no assurances that current estimations and timelines are correct.
Consumer behavior related to traveling may be negatively impacted by adverse changes in the perceived or actual economic climate, including declines in income levels or disposable income, and/or loss of wealth resulting from the impact of economic conditions.
However, offering low fares typically hampers the ability of airlines to counteract any increases in fuel, labor, and other costs. Consumer behavior related to traveling may be negatively impacted by adverse changes in the perceived or actual economic climate, including declines in income levels or disposable income, and/or loss of wealth resulting from the impact of economic conditions.
To the extent that the Company is unable to respond timely and appropriately to negative publicity, the Company’s reputation and brand can be harmed. Damage to the Company’s overall reputation and brand could have a negative impact on its financial results and require additional resources for the Company to rebuild its reputation.
Damage to the Company’s overall reputation and brand could have a negative impact on its financial results and require additional resources for the Company to rebuild its reputation.
The impact of the COVID-19 pandemic has heightened the Company’s exposure to its labor risks. In connection with the drastic reduction in travel demand due to the pandemic, in 2020 the Company offered voluntary separation and extended time-off programs to Employees. This negatively impacted the Company's ability to staff appropriately when demand for leisure travel returned.
The Company’s success depends on its ability to attract and retain appropriate levels of skilled personnel. In connection with the drastic reduction in travel demand due to the pandemic, in 2020 the Company offered voluntary separation and extended time-off programs to Employees. This negatively impacted the Company's ability to staff appropriately when demand for leisure travel returned.
Implementation and integration require a balancing between the introduction of new capabilities and the managing of existing systems, and present the risk of operational or security inadequacy or interruption, which could materially affect the Company's ability to effectively operate its business and/or could negatively impact the Company's results of operations.
Implementation and integration require balancing the introduction of new capabilities with the management of existing systems and present the risk of operational or security inadequacy or interruption. The Company’s inability to timely or effectively implement, update, or integrate its IT Systems, could materially affect its business and/or could negatively impact the Company's results of operations and financial performance.
The Company's business is labor intensive, with most Employees represented by labor unions; therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives.
The Company could also be materially adversely affected if the pricing or operational attributes of its aircraft were to become less competitive. 38 Table of Contents The Company's business is labor intensive, with most Employees represented by labor unions; therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives.
A compromise of the Company's systems could adversely affect the Company's reputation and disrupt its operations and could also result in litigation against the Company or the imposition of penalties. In addition, it could be costly to remediate.
A compromise of data stored by third-party systems could adversely affect the Company's reputation, disrupt its operations, and result in litigation against the Company or the imposition of penalties from regulators. In addition, these third-party incidents or failures could be costly and take time to remediate.
Although the Company has surpassed pre-pandemic staffing levels as of December 31, 2023, staffing-related challenges could continue to occur in certain areas and 36 Table of Contents limit the Company's ability to optimally adjust capacity. The inability to recruit and retain skilled personnel or the unexpected loss of key skilled personnel could continue to adversely affect the Company’s operations.
Staffing-related challenges, particularly any unpredictability in required staffing levels, could continue to occur in certain areas and limit the Company's ability to optimally adjust capacity. The inability to recruit and retain skilled personnel or the unexpected loss of key skilled personnel could continue to adversely affect the Company’s operations.
The Company’s business is labor intensive; therefore, the Company has been, and could in the future be, adversely affected if it were unable to employ and retain sufficient numbers of qualified Employees to maintain its operations. The Company’s success depends on its ability to attract and retain skilled personnel.
The Company’s results could be materially adversely affected in the event of conflicts with its Employees or its Employees’ representatives. The Company’s business is labor intensive; therefore, the Company has been, and could in the future be, adversely affected if it were unable to employ and retain appropriate numbers of qualified Employees to maintain its operations.
The airline industry is intensely competitive. As discussed in more detail under "Business - Competition," the airline industry is intensely competitive. The Company's primary competitors include other major domestic airlines, as well as regional and new entrant airlines, surface transportation, and alternatives to transportation such as videoconferencing, business communication platforms, and the Internet.
The Company's primary competitors include other major domestic airlines, as well as regional and new entrant airlines, public charter operators, surface transportation, and alternatives to transportation such as videoconferencing, business communication platforms, and the Internet.
Fuel consortiums and fuel committees have, directly or indirectly, incurred debt obligations for improvements and capital projects for fuel facilities.
The Company participates in fuel consortium arrangements and fuel committees at certain airports. Fuel consortiums and fuel committees have, directly or indirectly, incurred debt obligations for improvements and capital projects for fuel facilities.
The continuation of these air traffic control constraints or the FAA's inability to meet staffing needs on a long-term basis may have a material adverse effect on the Company's operations. As discussed under "Business - Regulation," airlines are also subject to other extensive regulatory requirements. These requirements often impose substantial costs on airlines.
The continuation of these air traffic control constraints or the FAA's inability to meet staffing needs on a long-term basis may have a material adverse effect on the Company's operations.
Moreover, any resulting economic dislocations could adversely affect demand for the Company’s services, resulting in an adverse effect on its business, results of operations, and financial condition. The airline industry is made up of inherently complex systems and is affected by many conditions that are beyond its control, which can impact the Company's business strategies and results of operations.
The airline industry is made up of inherently complex systems and is affected by many conditions that are beyond its control, which can impact the Company's business strategies and results of operations.
Until the timing, scope, and extent of such future policy, legal, regulatory, or other market developments become known, the Company cannot predict their effect on the Company’s cost structure or its operating results. Violations of environmental and climate change-related laws and regulations could lead to significant fines and penalties and reputational harm.
Other states could propose or adopt similar obligations in the future. Until the timing, scope, and extent of such future policy, legal, regulatory, or other market developments become known, the Company cannot predict their effect on the Company’s cost structure or its operating results.
Boeing has in the past, and may continue to, experience delays in fulfilling its commitments with regards to delivery of the -8 to the Company as a result of supply chain constraints.
Deliveries of MAX aircraft from Boeing to the Company are subject to Boeing's production schedules and volumes. Boeing has in the past, and may continue to, experience delays in fulfilling its commitments with regards to delivery of the -8 to the Company as a result of manufacturing challenges.
Any aircraft accident or other incident involving Southwest, even if fully insured, could also have a material adverse effect on the public's perception of the Company, which could harm its reputation and business. 34 Table of Contents The Company participates in fuel consortium arrangements and fuel committees at certain airports.
In addition, an aircraft accident or other incident involving Southwest could result in costs in excess of its related insurance coverage, which costs could be substantial. Any aircraft accident or other incident involving Southwest, even if fully insured, could also have a material adverse effect on the public's perception of the Company, which could harm its reputation and business.
An inability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company's business, results of operations, and financial condition” in the “Operational Risks” section.
An inability to quickly and effectively restore operations following adverse weather, a localized disaster, or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company's business, results of operations, and financial condition.” The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.
In addition, while the Company cannot predict what requirements may be imposed in the future, federal, state, local, and international legislative and regulatory bodies are generally increasingly focused on climate change and reducing greenhouse gas emissions (“GHG”), including CO 2 emissions.
In addition, while the Company cannot predict what requirements may be imposed in the future, federal, state, local, and international legislative and regulatory bodies in recent years have generally increased focus on climate change and reducing GHG, including CO2 emissions, and have generally continued to do so.
The potential triggers for incidents and failures change constantly because of changing technology, work organization, efforts to eradicate those potential triggers, and other factors. Events or combinations of events such as those described above have had, and could have, a material adverse effect on the Company’s business, results of operations, and financial condition.
Events or combinations of events such as those described above have had, and could have, a material adverse effect on the Company’s business, results of operations, and financial condition.
The achievement of these plans and goals is materially dependent on the performance of third parties and government action, and these goals could be adversely affected by changes in third party expectations, methodologies, and priorities.
In addition to responding to legislative and regulatory requirements, the Company has voluntarily set near- and long-term environmental sustainability plans and goals. The achievement of these plans and goals is materially dependent on the performance of third parties and government action, and these goals could be adversely affected by changes in third-party expectations, methodologies, and priorities, which are rapidly changing.
The Company’s collateral to secure loans, including in the form of aircraft, could lose value as customer demand shifts and economies move to low-carbon alternatives, which may increase the Company’s financing costs. In addition, major financial institutions have begun to announce greenhouse gas emissions reductions targets for their financed activities in the aviation sector.
The Company’s collateral to secure loans, including in the form of aircraft, could lose value as customer demand shifts and economies move to lower-carbon alternatives, which may increase the Company’s financing costs.
The Company could also face increased risks of litigation resulting from any enhanced disclosure requirements related to climate change. 43 Table of Contents In addition to risks from potential changes to environmental regulation and policy, the transition to lower-carbon technologies could materially adversely affect the Company’s financial results.
In addition to risks from potential changes to environmental regulation and policy, the transition to lower-carbon technologies could materially adversely affect the Company’s financial results.
The FAA from time to time also issues orders or directives relating to the maintenance and operation of aircraft.
The FAA promulgates and enforces regulations affecting the airline industry and exercises extensive regulatory oversight of the Company’s operations. The FAA from time to time also issues orders or directives relating to the maintenance and operation of aircraft.
If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected. 35 Table of Contents The Boeing MAX aircraft are crucial to the Company’s ability to operate and grow its business and fleet modernization initiatives.
Operational Risks The Company is currently dependent on Boeing as the sole manufacturer of the Company's aircraft. If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to continue to experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeLeaders from each team regularly meet with the Cybersecurity Leaders to provide visibility of major issues and seek alignment with strategy. As noted above under “Incident Response,” the Company’s cybersecurity incident response plan includes standard processes for reporting and escalating cybersecurity incidents to senior management.
Biggest changeAs noted above under “Incident Response,” the Company’s cybersecurity incident response plan includes standard processes for reporting and escalating cybersecurity incidents, as appropriate, to senior management, the Audit Committee, and the Board. Cybersecurity incidents that meet certain thresholds are escalated to the Cybersecurity Leaders and cross-functional teams on an as-needed basis for support and guidance.
The National Institute of Standards and Technology Cybersecurity Framework helps the Company inform its cybersecurity agenda and prioritize its cybersecurity activities. The Company takes a risk-based approach to cybersecurity, which begins with the identification and evaluation of cybersecurity risks or threats that could affect the Company’s operations, finances, legal or regulatory compliance, or reputation.
The National Institute of Standards and Technology Cybersecurity Framework helps the Company inform its cybersecurity agenda and prioritize its cybersecurity activities. The Company takes a risk-based, threat-informed approach to cybersecurity, which begins with the identification and evaluation of cybersecurity risks or threats that could affect the Company’s operations, finances, legal or regulatory compliance, or reputation.
These strategies include, among others, the application of cybersecurity policies and procedures, implementation of administrative, technical, and physical controls, and Employee training, education, and awareness initiatives. The Company’s cybersecurity risk management also includes a Security Operations Center (“SOC”) that conducts ongoing monitoring of networks and systems for potential signs of suspicious activity.
These strategies include, among others, the application of cybersecurity policies and procedures, implementation of administrative, technical, and physical controls, and Employee training, education, and awareness initiatives. The Company’s cybersecurity program also includes a Security Operations Center (“SOC”) that conducts ongoing monitoring of networks and systems for potential signs of suspicious activity.
The Company also uses third-party service providers to support its operations and many of its technology initiatives. The Company evaluates third-party service providers from a cybersecurity risk perspective, which may include an assessment of that service provider’s cybersecurity posture or a recommendation of specific mitigation controls.
Oversight of Third-Party Service Providers . The Company also uses third-party service providers to support its operations and many of its technology initiatives. The Company evaluates third-party service providers from a cybersecurity risk perspective, which may include an assessment of that service provider’s cybersecurity posture and/or a recommendation of specific mitigation activities.
Once identified, cybersecurity risks and related mitigation efforts are prioritized based on their potential impact, likelihood, velocity, and vulnerability, considering both quantitative and qualitative factors. Risk mitigation strategies are developed and implemented based on the specific nature of each cybersecurity risk.
Once identified, cybersecurity risks and related mitigation efforts are evaluated and prioritized based on their potential impact, likelihood, velocity, and vulnerability, considering both quantitative and qualitative factors. Risk mitigation strategies are developed and implemented based on the specific nature of each cybersecurity risk or threat.
Based on these reports, the Board requests follow-up data and presentations to address any specific concerns and recommendations. Additionally, the Audit Committee has opportunities to report regularly to the entire Board and review with the Board any major issues that arise at the committee level, which may include cybersecurity risks. The Audit Committee .
Based on these reports, the Board may request follow-up information and presentations to address any specific concerns and recommendations. Additionally, the Audit Committee has opportunities to report regularly to the entire Board and review with the Board any major issues that arise at the committee level, which may include cybersecurity risks. The Audit Committee.
For a detailed discussion of the Company’s cybersecurity related risks, see “Item 1.A Risk Factors—Information Technology Risks.” Cybersecurity Governance Board Oversight The Board is responsible for overseeing management’s assessments of major risks facing the Company and for reviewing options to mitigate such risks.
For a detailed discussion of the Company’s cybersecurity related risks, see “Item 1A Risk Factors—Information Technology, Cybersecurity, and Data Privacy Risks.” Cybersecurity Governance Board Oversight The Board is responsible for overseeing management’s assessments of major risks facing the Company and for reviewing options to mitigate such risks.
The incident response plan includes standard processes for reporting and escalating cybersecurity incidents to senior management. Additionally, the Company conducts at least one cybersecurity tabletop exercise on an annual basis, where members of a cross-functional team engage in a simulated cybersecurity incident scenario.
The incident response plan includes standard processes for reporting and escalating cybersecurity incidents, as appropriate, to senior management, the Audit Committee, and the Board. Additionally, the Company conducts at least one cybersecurity tabletop exercise on an annual basis, where members of a cross-functional team engage in a simulated cybersecurity incident scenario.
Management believes that this regular cadence of reporting helps to provide the Audit Committee with an informed understanding of the Company’s dynamic cybersecurity program and threat landscape. The Audit Committee further reviews with management the Company’s business continuity and disaster recovery plans and capabilities and the effectiveness of the Company’s escalation procedures.
Management believes that this regular cadence of reporting helps to provide the Audit Committee with an informed understanding of the Company’s dynamic cybersecurity program and threat landscape. As needed, the Audit Committee reviews with 54 Table of Contents management the Company’s business continuity and disaster recovery plans and capabilities and the effectiveness of the Company’s escalation procedures.
These technologies and systems include, among others, the Company's website and reservation system; flight dispatch and tracking systems; flight simulators; check-in kiosks; aircraft maintenance, planning, and record keeping systems; telecommunications systems; flight planning and scheduling systems; crew scheduling systems; human resources systems; and financial planning, management, and accounting systems.
These technologies and systems include, among others, the Company's website and 52 Table of Contents reservation system; mobile application; flight dispatch and tracking systems; flight simulators; check-in kiosks; aircraft maintenance, planning, and record keeping systems; telecommunications systems; flight planning and scheduling systems; crew scheduling systems; human resources systems; and financial planning, management, and accounting systems.
Although the Company has not experienced cybersecurity incidents that are individually, or in the aggregate, material, the Company has experienced cyberattacks in the past, which the Company believes have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company.
Although the Company has not experienced cybersecurity incidents that are individually, or in the aggregate, material, the Company and its service providers have experienced cyber-attacks in the past, which the Company believes have thus far been mitigated by preventative, detective, and responsive measures put in place.
This preparedness exercise is intended to provide hands-on training for the participants and helps the Company assess its processes and capabilities in addressing cybersecurity threats. Use of Third Parties Cybersecurity Service Providers and Third-Party Consultants . The Company engages cybersecurity consultants, auditors, and other third parties to assess and enhance its cybersecurity practices.
This preparedness exercise is intended to provide hands-on training for the participants and helps the Company assess its cybersecurity response plan and its processes and capabilities in addressing cybersecurity threats. 53 Table of Contents Use of Third Parties Cybersecurity Service Providers and Third-Party Consultants .
Risks from Material Cybersecurity Threats As of the date of this report, the Company has not identified any cybersecurity threats that have materially affected or are reasonably anticipated to have a material effect on the organization.
Risks from Material Cybersecurity Threats As of the date of this report, the Company has not identified any cybersecurity threats that have materially affected or are reasonably likely to have a material effect on the Company's business strategy, results of operations, or financial condition.
Cybersecurity risks are evaluated alongside other critical business risks under the ERM program to align cybersecurity efforts with the Company's broader business goals and objectives. The Company believes that integrating cybersecurity risks into its ERM program fosters a proactive and holistic approach to cybersecurity, which helps safeguard the Company’s operations, financial condition, and reputation in an ever-evolving threat landscape.
The Company believes that integrating cybersecurity risks into its ERM program fosters a proactive and holistic approach to cybersecurity, which helps safeguard the Company’s operations, financial condition, and reputation in an ever-evolving threat landscape.
This includes a managed security service provider to augment the Company’s dedicated SOC team, an endpoint detection and response system for continuous monitoring, detection, and response capabilities, and a security information and event management solution to automate real-time threat detection, investigation, and prioritization of high-fidelity alerts. Oversight of Third-Party Service Providers .
Additionally, the Company leverages a number of third-party tools and technologies as part of its efforts to enhance cybersecurity functions, such as a managed security service provider to augment the Company’s dedicated SOC team, an endpoint detection and response system for continuous monitoring, detection, and response capabilities, and a security information and event management solution to automate real-time threat detection, investigation, and prioritization of high-fidelity alerts.
Additionally, the Company must receive certain confidential or personal information related to its Customers and 48 Table of Contents Employees to run its business, and the Company's operations depend upon secure collection, processing, retention, and transmission of such information.
Additionally, the Company must receive and process certain confidential or personal information related to its Customers and Employees to run its business, and the Company's operations depend upon secure collection, processing, retention, and transmission of such information. Therefore, the performance, reliability, and security of the Company's technology infrastructure and information systems are critical to the Company's operations and initiatives.
This team also collaborates closely with other teams in identifying, protecting from, detecting, responding to, and recovering from cybersecurity incidents. Cybersecurity incidents that meet certain thresholds are escalated to the Cybersecurity Leaders and cross-functional teams on an as-needed basis for support and guidance. Additionally, this team tracks cybersecurity incidents to help identify and analyze them.
Cybersecurity incidents that meet certain thresholds are escalated to the Cybersecurity Leaders and cross-functional teams on an as-needed basis for support and guidance. Additionally, this team tracks cybersecurity incidents to help identify and analyze them. The Company maintains a cybersecurity incident response plan to prepare for and respond to cybersecurity incidents.
The CIO holds an undergraduate degree from Cornell and has served in various roles in information technology for over 20 years, including Vice President, Senior Director, Manager and Consultant. • The CISO is responsible for all aspects of cybersecurity across the Company’s facilities, airports, and aircraft fleet, which includes security engineering, security operations, incident response, threat intelligence, risk and compliance, and vulnerability management.
The CIO holds an undergraduate degree from Cornell and has served in various roles in information technology for over 20 years, including Vice President, Senior Director, Manager and Consultant. • The CISO is responsible for leading the Company’s cybersecurity strategy and department while ensuring the protection of data and assets across the Company’s facilities, airports, and aircraft.
The Company’s cybersecurity function is led by the Company’s CISO, who reports to the Company’s CIO. The CISO and CIO (collectively, the Company’s “Cybersecurity Leaders”) are actively involved in assessing and managing cybersecurity risks. They are responsible for implementing cybersecurity policies, programs, procedures, and strategies.
Management’s Role The Company has a dedicated cybersecurity organization within its technology department that focuses on current and emerging cybersecurity matters. The Company’s cybersecurity function is led by the Company’s CISO, who reports to the Company’s CIO. The Cybersecurity Leaders are actively involved in assessing and managing cybersecurity risks. They are responsible for implementing cybersecurity policies, programs, procedures, and strategies.
The Company’s cybersecurity incident response team partners with the Company’s internal cybersecurity teams as well as with external legal advisors, communication specialists, and other key stakeholders as appropriate to respond to cybersecurity incidents. The Company maintains a cybersecurity incident response plan to prepare for and respond to cybersecurity incidents.
Incident Response The Company has a dedicated cybersecurity incident response team responsible for managing and coordinating the Company’s cybersecurity incident response efforts. This team collaborates closely with other internal teams as well as with external legal advisors, communication specialists, and other key stakeholders, as appropriate, in identifying, protecting from, detecting, responding to, and recovering from cybersecurity incidents.
Further, the Company’s cybersecurity program is periodically reviewed by its Cybersecurity Leaders (as defined below) and adjusted in an effort to maintain the program’s agility and responsiveness as circumstances evolve, new cybersecurity threats emerge, and regulations change. Incident Response The Company has a dedicated cybersecurity incident response team responsible for managing and coordinating the Company’s cybersecurity incident response efforts.
Further, the Company’s cybersecurity program is periodically reviewed by its Chief Information Officer ("CIO") and Chief Information Security Officer ("CISO" and, together with the CIO, the Company’s “Cybersecurity Leaders”) and adjusted in an effort to maintain the program’s agility and responsiveness as circumstances evolve, new cybersecurity threats emerge, and regulations change.
Based on these management reports, the Audit Committee may request follow-up data and presentations to address any specific concerns and recommendations.
Based on these management reports, the Audit Committee may request follow-up information and presentations to address any specific concerns and recommendations. In addition to this regular reporting, cybersecurity risks or threats may also be escalated on an as-needed basis to the Audit Committee.
The Audit Committee reviews with management the Company’s technology and cybersecurity frameworks, policies, programs, opportunities, and risk profile at its regularly scheduled meetings.
The Audit Committee reviews with management the Company’s technology and cybersecurity frameworks, policies, programs, opportunities, and risk profile as needed at its regularly scheduled meetings. The Company’s CIO, CISO, members of the cybersecurity team, or other advisors, as requested by the Audit Committee, report quarterly on the Company’s technology, data protection, and cybersecurity strategies and risks.
Cybersecurity incidents that meet certain thresholds are escalated to the Cybersecurity Leaders and cross-functional teams on an as-needed basis for support and guidance. The Company’s incident response team also coordinates with external legal advisors, communication specialists, and other key stakeholders. 51 Table of Contents
The Company’s incident response team also coordinates, as needed, with external legal advisors, communication specialists, and other key stakeholders. 55 Table of Contents
These third parties conduct assessments, penetration testing, and vulnerability assessments to identify weaknesses and recommend 49 Table of Contents improvements. Additionally, the Company leverages a number of third-party tools and technologies as part of its efforts to enhance cybersecurity functions.
The Company engages cybersecurity consultants, assessors, and other third parties to assess and enhance its cybersecurity practices. These third parties conduct assessments, penetration testing, and vulnerability evaluations to help identify potential weaknesses and recommend improvements.
The CISO has served in various roles in information technology for nearly 40 years at numerous technology companies and consulting firms. The CISO earned a Bachelor of Science in Industrial Engineering from Louisiana State University, a Master of Science in Management Information Systems from The University of Texas at Dallas, and a Master of Business Administration from Southern Methodist University.
The CISO has served in various roles in cybersecurity for over 15 years. The CISO earned a Bachelor of Business Administration in Management Information Systems from The University of Oklahoma and holds a Certified Information Systems Security Professional certification.
Therefore, the performance, reliability, and security of the Company's technology infrastructure and information systems are critical to the Company's operations and initiatives. The Company has an enterprise risk management (“ERM”) program to identify, evaluate, and manage risks.
The Company has an enterprise risk management (“ERM”) program to identify, evaluate, and manage risks. Cybersecurity risks are evaluated alongside other critical business risks under the ERM program to align cybersecurity efforts with the Company's broader business goals and objectives.
The Company’s cybersecurity department is comprised of teams that engage in a range of cybersecurity activities such as threat intelligence, security architecture, and incident response. These teams conduct vulnerability management and penetration testing to identify, classify, prioritize, remediate, and mitigate vulnerabilities.
The CISO also participates in the Aviation Information Sharing and Analysis Center Board and is the Vice Chair of the Cybersecurity Council at Airlines for America. The Company’s cybersecurity department is comprised of teams that engage in a range of cybersecurity activities such as threat intelligence, incident response, security operations, vulnerability management, risk and compliance and security engineering.
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The Company’s Chief Information Officer (“CIO”), Chief Information Security Officer (“CISO”), members of the cybersecurity team, or other advisors, as requested by the Audit Committee, report quarterly on the Company’s technology, data privacy, and cybersecurity strategies and risks.
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These teams conduct vulnerability management and penetration testing to identify, classify, prioritize, remediate, and mitigate vulnerabilities. Leaders from each team regularly meet with the Cybersecurity Leaders to provide visibility of relevant issues and seek alignment with strategy.
Removed
In addition to this regular reporting, significant cybersecurity risks or threats may also be escalated on as needed basis to the Audit Committee. 50 Table of Contents Management’s Role The Company has a dedicated cybersecurity organization within its technology department that focuses on current and emerging cybersecurity matters.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(c) The Company currently plans for approximately 79 MAX aircraft deliveries in 2024. Ground Facilities and Services Southwest either leases or pays a usage fee for terminal passenger service facilities at each of the airports it serves to which various leasehold improvements have been made.
Biggest changeThe 2025 contractual detail is as follows: 56 Table of Contents The Boeing Company -7 Firm Orders -8 Firm Orders Total 2024 Contractual Deliveries 27 36 63 2025 Contractual Deliveries 43 30 73 2025 Combined Contractual Total 70 66 136 Ground Facilities and Services Southwest either leases or pays a usage fee for terminal passenger service facilities at each of the airports it serves, to which various leasehold improvements have been made.
The Company owns two additional headquarters buildings, located across the street from the Company's main headquarters building, on land owned by the Company, including (a) an energy efficient, modern building, called TOPS, which houses certain operational and training functions, including the Company's 24-hour operations and (b) the Wings Complex, consisting of a Leadership Education and Aircrew Development (“LEAD”) Center (housing the Company's 26 Boeing 737 flight simulators and classroom space for Pilot training), an additional office building, and a parking garage.
The Company owns two additional headquarters buildings, located across the street from the Company's main headquarters building, on land owned by the Company, including (i) an energy efficient, modern building, called TOPS, which houses certain operational and training functions, including the Company's 24-hour operations and (ii) the Wings Complex, consisting of a Leadership Education and Aircrew Development (“LEAD”) Center (housing the Company's 26 Boeing 737 flight simulators and classroom space for Pilot training), an additional office building, and a parking garage.
Additional information regarding these projects is provided in Note 5 to the Consolidated Financial Statements. The Company performs substantially all line maintenance on its aircraft and provides ground support services at most of the airports it serves.
Additional information regarding these projects is provided in Note 4 to the Consolidated Financial Statements. The Company performs substantially all line maintenance on its aircraft and provides ground support services at most of the airports it serves.
In fourth quarter 2023, the Company entered into supplemental agreements with Boeing relating to its contractual order book for -7 and -8 aircraft. These agreements, which include an extended order book to 2031, provide flexibility in support of the Company's growth plans and fleet modernization.
In second quarter and fourth quarter 2024, the Company entered into supplemental agreements with Boeing relating to its contractual order book for -7 and -8 aircraft. These agreements provide flexibility in support of the Company's growth plans and fleet modernization.
The Company expects to manage the design, development, financing, construction, and commissioning of the project, and expects to commence construction in early 2025 with construction to be complete in late 2028 or early 2029. Prior to commencement of construction, LAWA and the Company will need to agree on scope and budget and have financing in place.
The Company expects to manage the design, development, financing, construction, and commissioning of the project, and expects to commence construction in 2028 with construction to be completed in 2032. Prior to commencement of construction, LAWA and the Company will need to agree on scope and budget and have financing in place.
The Company has commitments associated with various airport improvement projects, including construction at Houston Hobby International Airport. This project includes the construction of new facilities and the rebuilding or modernization of existing facilities.
The Company has commitments associated with various airport improvement projects, including construction at Houston Hobby International Airport. This project includes the construction of new facilities and the rebuilding or modernization of existing facilities. Construction on the project has begun, and the Company expects construction to be completed in 2027.
Item 2. Properties Aircraft Southwest operated a total of 817 Boeing 737 aircraft as of December 31, 2023, of which 57 and 24 were under operating and finance leases, respectively.
Item 2. Properties Aircraft Southwest operated a total of 803 Boeing 737 aircraft as of December 31, 2024, of which 88 and 18 were under operating and finance leases, respectively.
As of December 31, 2023, the Company had firm deliveries and options for -7 and -8 aircraft as follows: The Boeing Company -7 Firm Orders -8 Firm Orders -7 or -8 Options Total 2024 27 58 — 85 (c) 2025 59 — 15 74 2026 59 — 26 85 2027 19 46 25 90 2028 15 50 25 90 2029 38 34 18 90 2030 45 — 45 90 2031 45 — 45 90 307 (a) 188 (b) 199 694 (a) The delivery timing for the -7 is dependent on the FAA issuing required certifications and approvals to Boeing and the Company.
As of December 31, 2024, the Company had firm deliveries and options for -7 and -8 aircraft as follows: The Boeing Company -7 Firm Orders -8 Firm Orders -7 or -8 Options Total 2025 70 66 — 136 (c) 2026 64 — 22 86 2027 19 46 25 90 2028 15 50 25 90 2029 38 34 18 90 2030 45 — 45 90 2031 45 — 45 90 296 (a) 196 (b) 180 672 (a) The delivery timing for the -7 is dependent on the Federal Aviation Administration ("FAA") issuing required certifications and approvals to Boeing and the Company.
The following table details information on the 817 aircraft as of December 31, 2023: Type Seats Average Age (Yrs) Number of Aircraft Number Owned Number Leased (a) 737-700 143 18 387 352 35 737-800 175 8 207 190 17 737 -8 175 2 223 194 29 Totals 11 817 736 81 (a) See Note 8 to the Consolidated Financial Statements for more information on the Company's lease transactions.
The following table details information on the 803 aircraft as of December 31, 2024: Type Seats Average Age (Yrs) Number of Aircraft Number Owned Number Leased (a) 737-700 143 19 353 326 27 737-800 175 9 205 155 50 737 -8 175 3 245 216 29 Totals 12 803 697 106 (a) See Note 7 to the Consolidated Financial Statements for more information on the Company's lease transactions.
The 52 Table of Contents Company also leases a warehouse and engine repair facility in Atlanta. The Company has announced its intent to build a new aircraft maintenance facility, expected to be completed in 2025, at Baltimore-Washington International Airport.
The Company also leases a warehouse and engine repair facility in Atlanta. The Company has begun construction on a new aircraft maintenance facility, expected to be completed in 2025, at Baltimore-Washington International Airport. In 2024, the Company completed a multi-year, $100 million project, which nearly doubled the size of the Company’s maintenance hangar at Phoenix Sky Harbor.
Added
(c) The Company has included the remaining 63 of its 2024 contractual but undelivered aircraft (27 -7s and 36 -8s) within its 2025 contractual commitments. As Boeing continues to ramp up production and works to certify the -7, the Company is currently using a planning assumption of 38 -8 aircraft deliveries in 2025.
Added
The 90,000 square foot expansion added three new aircraft bays to the facility.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

19 edited+18 added−9 removed33 unchanged
Biggest changeOn October 5, 2023, the District Court entered a final judgment dismissing the 2020 Securities Litigation in its entirety with prejudice, and the lead plaintiff has filed no timely notice of appeal from that dismissal. The plaintiff in the Derivative Action has taken no steps to lift the stay in the case, which remains stayed.
Biggest changeWhile the parallel securities class action was dismissed with prejudice on October 5, 2023, the plaintiff in the Derivative Action has taken no steps to lift the stay in the case, which remains stayed. The Board and Company deny all allegations of wrongdoing made in the Derivative Action.
Since about January 24, 2023, the Company’s senior officers and Board of Directors have received multiple derivative demand letters from legal counsel for purported Southwest shareholders demanding that the Board investigate claims, initiate legal action, and take remedial measures in connection with the service disruptions occurring in December 2022.
Since about January 24, 2023, the Company’s senior officers and the Board have received multiple derivative demand letters from legal counsel for purported Southwest Shareholders demanding that the Board investigate claims, initiate legal action, and take remedial measures in connection with the service disruptions occurring in December 2022.
The Company’s management does not expect that the outcome in any of its currently ongoing legal proceedings or the outcome of any proposed adjustments presented to date by the Internal Revenue Service and state and local income tax authorities, individually or collectively, will have a material adverse effect on the Company’s financial condition, results of operations, or cash flow.
The Company’s management does not expect that the outcome in any of its currently ongoing legal proceedings or the outcome of any proposed adjustments presented to date by the Internal Revenue Service and state and local income tax authorities, individually or collectively, will have a material adverse effect on the Company’s financial 61 Table of Contents condition, results of operations, or cash flow.
The Company agreed to pay 53 Table of Contents $15 million and to provide certain cooperation with the plaintiffs as set forth in the settlement agreement. After notice was provided to the proposed settlement class and the Court held a fairness hearing the Court issued an order granting final approval of the settlement on May 9, 2019.
The Company agreed to pay $15 million and to provide certain cooperation with the plaintiffs as set forth in the settlement agreement. After notice was provided to the proposed settlement class and the Court held a fairness hearing the Court issued an order granting final approval of the settlement on May 9, 2019.
Item 3. Legal Proceedings On June 30, 2015, the U.S. Department of Justice ("DOJ") issued a Civil Investigative Demand ("CID") to the Company. The CID sought information and documents about the Company’s capacity from January 2010 to the date of the CID, including public statements and communications with third parties about capacity.
Item 3. Legal Proceedings On June 30, 2015, the U.S. Department of Justice (“DOJ”) issued a Civil Investigative Demand (“CID”) to the Company. The CID sought information and documents about the Company’s capacity from January 2010 to the date of the CID, including public statements and communications with third parties about capacity.
Generally, the demand letters broadly assert that the Company’s directors and senior officers did not make sufficient investments in internal technology systems to prevent large-scale flight disruptions, 55 Table of Contents did not exercise sufficient oversight over the Company’s operations, approved or received unwarranted compensation, caused the Company to make materially misleading public statements, and breached their fiduciary duties to the Company.
Generally, the demand letters broadly assert that the Company’s directors and senior officers did not make sufficient investments in internal technology systems to prevent large-scale flight disruptions, did not exercise sufficient oversight over the Company’s operations, approved or received unwarranted compensation, caused the Company to make materially misleading public statements, and breached their fiduciary duties to the Company.
On November 28, 2022, the parties jointly notified the Court of the Fifth Circuit's decision regarding the Sherman Complaint. On March 23, 2023, the parties jointly notified the Court of the dismissal of the Sherman Complaint for lack of jurisdiction. The case remains stayed.
On November 28, 2022, the parties jointly notified the Court of the Fifth Circuit's decision regarding the Sherman Complaint. On March 23, 2023, the parties jointly notified the Court of the dismissal of the Sherman Complaint for lack of jurisdiction.
Based on the Company's wide-scale operational disruption, which led to the cancelation of a significant number of flights between December 21 and December 29, 2022, the Company has been subject to inquiries and investigations by governmental agencies and could be subject to fines and/or penalties resulting from those inquiries and investigations, as well as litigation from Customers and Shareholders.
Based on the Company's wide-scale operational disruption, which led to the cancelation of a significant number of flights between December 21 and December 29, 2022, the Company has been subject to inquiries and investigations by governmental agencies (including with respect to a December 2023 settlement with the DOT) and could be subject to fines and/or penalties resulting from those inquiries and investigations, as well as litigation from Customers and Shareholders.
In June 2015, the Company also received a letter from the Connecticut Attorney General requesting information about capacity. The Company is cooperating fully with the DOJ CID and the state inquiry.
In June 2015, 57 Table of Contents the Company also received a letter from the Connecticut Attorney General requesting information about capacity. The Company is cooperating fully with the DOJ CID and the state inquiry.
The plaintiff alleges the Board, in the absence of good faith, exhibited reckless 54 Table of Contents disregard for its duties of oversight.
The plaintiff alleges the Board, in the absence of good faith, exhibited reckless disregard for its duties of oversight.
The Ninth Circuit issued its order in Clarkson on February 1, 2023, reversing the district court’s grant of summary judgment and remanding the Clarkson case to the District Court with instructions to consider the “pay during leave” issue in the first instance.
The Ninth Circuit issued its order in Clarkson on February 1, 2023, reversing the district court’s grant of summary judgment and remanding the Clarkson case to the District Court with instructions to consider the “pay during leave” issue in the first instance. The Company has received the military pay and service records.
The Board and Company deny all allegations of wrongdoing made in the Derivative Action. On August 26, 2021, a complaint alleging breach of contract and seeking certification as a class action was filed against the Company in the United States District Court for the Western District of Texas in Waco.
On August 26, 2021, a complaint alleging breach of contract and seeking certification as a class action was filed against the Company in the United States District Court for the Western District of Texas in Waco.
On October 7, 2020, the Court entered an order staying and administratively closing the Derivative Action, pending the District Court’s final resolution of the Company’s motion to dismiss in the ongoing 2020 Securities Litigation brought under the federal securities laws or upon the occurrence of certain other conditions.
On October 7, 2020, the Court entered an order staying and administratively closing the Derivative Action, pending the District Court's final resolution of the Company's motion to dismiss in a parallel securities class action under Section 10(b) of the Exchange Act that was filed on February 19, 2020, or upon the occurrence of certain other conditions.
The Company denies all allegations of wrongdoing in the complaint, believes the plaintiffs' positions are without merit, and intends to vigorously defend itself in all respects.
The plaintiffs oppose that relief but have not yet filed their opposition brief. The Company denies all allegations of wrongdoing in the complaint, believes the plaintiffs' positions are without merit, and intends to vigorously defend itself in all respects.
The Company denies all allegations of wrongdoing, including those in the amended complaint. On June 22, 2020, a derivative action for breach of fiduciary duty was filed in the United States District Court for the Northern District of Texas naming the members of the Company's Board of Directors as defendants and the Company as a nominal defendant (the "Derivative Action").
The Company denies all allegations of wrongdoing, believes the plaintiff’s positions are without merit, and intends to vigorously defend itself in all respects. 58 Table of Contents On June 22, 2020, a derivative action for breach of fiduciary duty was filed in the United States District Court for the Northern District of Texas naming the members of the Company's Board of Directors (the “Board”) as defendants and the Company as a nominal defendant (the “Derivative Action”).
The Company denies all allegations of wrongdoing, believes the plaintiffs' positions are without merit, and intends to vigorously defend itself in all respects.
The case remains stayed, and there has been no effort either to lift the stay or to further pursue the asserted claims following the dismissal of the Sherman Complaint. The Company denies all allegations of wrongdoing, believes the plaintiffs' positions are without merit, and intends to vigorously defend itself in all respects.
Pursuant to those statutes, a committee of independent and disinterested directors (“Special Litigation Committee”) has been appointed to conduct an inquiry regarding the allegations in the derivative suits and derivative demand letters.
The Company and the Board have addressed the Derivative Actions and Demands in accordance with the applicable Texas statutes governing such demands and litigation. Pursuant to those statutes, a committee of independent and disinterested directors (the "Special Litigation Committee") was appointed to conduct an inquiry regarding the allegations in the Derivative Actions and Demands.
On November 20, 2023, the Company and the individual defendants filed a motion to dismiss the amended complaint for failure to state a claim. The parties’ respective briefing on the Company’s motion to dismiss is expected to be completed on or around February 21, 2024.
On November 20, 2023, the Company and the individual defendants filed a motion to dismiss the amended complaint for failure to state a claim. Plaintiffs filed an opposition brief on January 26, 2024. The 59 Table of Contents Company and the individual defendants filed a reply brief on February 23, 2024.
The Company and its Board of Directors intend to address the derivative and books and records demands and the shareholder derivative suits in accordance with the applicable Texas statutes governing such demands and litigation.
The Company and its counsel intend to take steps on behalf of the Company to implement the resolution of the Special Litigation Committee, including making appropriate motions in accordance with applicable Texas law governing derivative demands and litigation procedure.
Removed
The Company denies all allegations of wrongdoing, believes the plaintiff’s positions are without merit, and intends to vigorously defend itself in all respects.
Added
On October 29, 2024, the Company filed a motion to decertify the class. The motion is fully briefed and a hearing on the motion is set for February 27, 2025. The Court has set a trial date of September 11, 2025.
Removed
On February 19, 2020, a complaint alleging violations of federal securities laws and seeking certification as a class action was filed against the Company and certain of its officers in the United States District Court for the Northern District of Texas in Dallas (the “2020 Securities Litigation”).
Added
On December 5, 2024, the United States District Court for the Southern District of Texas denied the motion to dismiss on the basis that "the issues are better suited for a summary judgment motion after the parties have had the opportunity to engage in discovery." On December 21, 2024, the Company moved for reconsideration of the December 5, 2024, order and, in the alternative, for permission to pursue an interlocutory appeal.
Removed
A lead plaintiff has been appointed in the case, and an amended complaint was filed on July 2, 2020. The amended complaint seeks damages on behalf of a putative class of persons who purchased the Company’s common stock between February 7, 2017, and January 29, 2020.
Added
On June 18, 2024, a fourth shareholder derivative suit was filed in the 101st Judicial District Court of Dallas County, Texas, asserting substantially similar claims as in the first two state court derivative suits.
Removed
The amended complaint asserts claims under Sections 10(b) and 20 of the Securities Exchange Act and alleges that the Company made material misstatements to investors regarding the Company’s safety and maintenance practices and its compliance with federal regulations and requirements. The amended complaint generally seeks money damages, pre-judgment and post-judgment interest, and attorneys’ fees and other costs.
Added
On June 26, 2024, a fifth shareholder derivative suit was filed in the United States District Court for the Northern District of Texas, asserting substantially similar claims as in the first federal derivative suit.
Removed
On August 17, 2020, the Company and the individual defendants filed a motion to dismiss. On October 1, 2020, the lead plaintiff filed a response in opposition to the motion to dismiss. The Company filed a reply on or about October 21, 2020.
Added
On July 18, 2024, a sixth shareholder derivative suit was filed in the United States District Court for the Northern District of Texas, asserting substantially similar claims as in the first federal derivative suit (together with the previous demand letters and shareholder derivative suits, the “Derivative Actions and Demands”).
Removed
On September 20, 2023, the District Court issued an opinion granting the Company’s motion to dismiss as to all claims. On October 5, 2023, the District Court entered a final judgment dismissing the suit in its entirety with prejudice. The lead plaintiff has filed no timely notice of appeal.
Added
On February 26, 2024, the Company filed a second unopposed motion to extend the stay of the federal derivative case until at least April 26, 2024. On April 26, 2024, the Company filed a third motion to extend the stay of the federal derivative case until at least June 25, 2024.
Removed
On October 27, 2023, the DOT notified the Company that it had determined the Company failed to provide adequate customer service assistance, prompt flight status notifications, and proper and prompt refunds and that the assessment of a civil penalty was warranted.
Added
On July 2, 2024, the Company filed a fourth motion to extend the stay of the federal derivative case until at least July 25, 2024. On July 27, 2024, the Company filed an additional motion to further extend the stay until September 23, 2024.
Removed
During fourth quarter 2023, the Company accrued an expense of $107 million associated with a settlement reached with the DOT based on their investigation into the disruption, which includes a cash penalty and incorporates a future commitment for Southwest Customer care with a new Customer compensation policy.
Added
The state court cases have been consolidated into one case, and a motion is pending to consolidate the federal cases into one federal case. 60 Table of Contents As described above, pursuant to the applicable Texas statutes governing derivative demands and litigation, the Special Litigation Committee was duly appointed to conduct an inquiry regarding the claims and allegations asserted in the Derivative Actions and Demands.
Removed
An additional $33 million penalty was also assessed by the DOT, but was able to be credited against the substantial value the Company had already provided to its Customers impacted by the disruption, and therefore did not result in further impact to the Company's financial results for 2023.
Added
The Derivative Actions and Demands have all been stayed, formally or by agreement, pending the outcome of the investigation by the Special Litigation Committee.
Added
On September 19, 2024, the Special Litigation Committee formally reported its findings and resolution concerning its investigation of the Derivative Actions and Demands, which began in July 2023 and concluded with the September 19, 2024 report and resolution, which in turn were delivered to the Company and its Board on September 23, 2024.
Added
The Special Litigation Committee retained two law firms to represent the Special Litigation Committee in connection with the Special Litigation Committee’s investigation of the Derivative Actions and Demands and the Special Litigation Committee’s review and assessment of evidence gathered in its investigation.
Added
The Special Litigation Committee further reported, among other details, upon its appointment, the independence and disinterestedness of its members, the Special Litigation Committee’s investigative processes, including meetings, scope of investigation, volume of documents reviewed, numbers of witnesses interviewed, other presentations received, review and analysis of evidence and applicable legal standards, work with its counsel, and findings and preparation of the final report and resolution of the Special Litigation Committee.
Added
Based upon the Special Litigation Committee report and the conclusions reached therein, the Special Litigation Committee, consistent with its appointment and delegated authority, unanimously adopted a resolution (i) determining that it is not in the best interests of the Company or its Shareholders to pursue the relief requested in the Derivative Actions and Demands; (ii) determining that it is in the best interests of the Company and its Shareholders to reject the Derivative Actions and Demands; (iii) determining that it is in the best interests of the Company and its Shareholders for the Company to move to dismiss the Derivative Actions and Demands; and (iv) instructing that the Company and counsel take all further actions necessary to implement the resolution.
Added
On December 26, 2024, the Board received a seventh demand letter, and on January 31, 2025, received an eighth demand letter, each containing allegations substantially similar to those presented in certain of the prior Derivative Actions and Demands, which will be addressed consistent with applicable Texas law governing such demands.
Added
On January 28, 2025, two participants in the Company’s retirement plans commenced a putative class action in the United States District Court for the Northern District of Texas against the Company, the Board, and certain of the Company’s officers. Plaintiffs purport to represent a class consisting of participants and beneficiaries in the Southwest Airlines Co.
Added
Retirement Savings Plan, the Southwest Airlines Co. 401(k) Plan, and the Southwest Airlines Co.
Added
ProfitSharing Plan (collectively, the “Plan”) who invested in the Harbor Capital Appreciation Fund from January 28, 2019 “through the date of judgment.” The complaint asserts that defendants mismanaged Plan assets and failed to monitor the Plan in violation of the Employee Retirement Income Security Act by, among other things, failing to remove the Harbor Fund as an investment option.
Added
The complaint seeks various forms of declaratory and monetary relief as well as attorneys’ fees, interest and other costs. The defendants deny all allegations of wrongdoing, believe the plaintiffs’ claims are without merit, and intend to vigorously defend against these claims.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

7 edited+2 added−6 removed6 unchanged
Biggest changeItem 4. Mine Safety Disclosures 56 Table of Contents Not applicable. 57 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following information regarding the Company’s executive officers is as of February 1, 2024. Name Position Age Gary C. Kelly Executive Chairman of the Board 68 Robert E. Jordan President & Chief Executive Officer 63 Andrew M.
Biggest changeItem 4. Mine Safety Disclosures Not applicable. 62 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following information regarding the Company’s executive officers is as of February 5, 2025. Name Position Age Robert E. Jordan President & Chief Executive Officer 64 Andrew M. Watterson Chief Operating Officer 58 Ryan C.
Jordan has served as the Company's Chief Executive Officer since February 2022 and as its President since January 2023. Mr. Jordan has been a member of the Company's Board of Directors since February 2022. Mr.
Jordan has served as the Company's Chief Executive Officer since February 2022 and as its President since January 2023. Mr. Jordan has been a member of the Board since February 2022. Mr.
Romo also served as Senior Vice President Finance & Chief Financial Officer from September 2012 to July 2015, Senior Vice President of Planning from February 2010 to September 2012, Vice President of Financial Planning from September 2008 to February 2010, Vice President Controller from February 2006 to August 2008, Vice President Treasurer from September 2004 to February 2006, Senior Director of Investor Relations from March 2002 to September 2004, Director of Investor Relations from December 1994 to March 2002, Manager of Investor Relations from September 1994 to December 1994, and Manager of Financial Reporting from September 1991 to September 1994.
Romo also served as Senior Vice President Finance & Chief Financial Officer from September 2012 to July 2015, Senior Vice President of Planning from February 2010 to September 2012, Vice President of Financial Planning from September 2008 to February 2010, Vice President Controller from February 2006 to August 2008, Vice President Treasurer from September 2004 to February 2006, Senior Director of Investor Relations from March 63 Table of Contents 2002 to September 2004, Director of Investor Relations from December 1994 to March 2002, Manager of Investor Relations from September 1994 to December 1994, and Manager of Financial Reporting from September 1991 to September 1994.
Green also served as Senior Vice President & Chief Marketing Officer from February 2019 to October 2022, Vice President & Chief Marketing Officer from April 2017 to February 2019, Vice President Marketing from February 2016 to April 2017, Managing Director Customer Strategy and Development from October 2013 to February 2016, Senior Director Loyalty & Partnerships from July 2010 to October 2013, Director Customer Loyalty from November 2007 to July 2010, Senior Manager Loyalty Marketing from January 2007 to November 2007, and Manager Business Development from July 2004 to January 2007.
Green also served as Executive Vice President Commercial Transformation from July to November 2024, Executive Vice President & Chief Commercial Officer from October 2022 to July 2024, Senior Vice President & Chief Marketing Officer from February 2019 to October 2022, Vice President & Chief Marketing Officer from April 2017 to February 2019, Vice President Marketing from February 2016 to April 2017, Managing Director Customer Strategy and Development from October 2013 to February 2016, Senior Director Loyalty & Partnerships from July 2010 to October 2013, Director Customer Loyalty from November 2007 to July 2010, Senior Manager Loyalty Marketing from January 2007 to November 2007, and Manager Business Development from July 2004 to January 2007.
Mr. Jones joined the Company in 2001 in the Revenue Management Department. 58 Table of Contents Tammy Romo has served as the Company's Executive Vice President & Chief Financial Officer since July 2015. Ms.
Mr. Jones joined the Company in 2001 in the Revenue Management Department. Tammy Romo has served as the Company's Executive Vice President & Chief Financial Officer since July 2015. Ms.
Ryan C. Green has served as the Company’s Executive Vice President & Chief Commercial Officer since October 2022. Mr.
Ryan C. Green has served as the Company’s Executive Vice President & Chief Transformation Officer since November 2024. Mr.
Linda B. Rutherford has served as the Company’s Chief Administration Officer since October 2022. Ms.
The Company has announced Ms. Romo’s resignation from her position of Executive Vice President & Chief Financial Officer effective April 1, 2025. Linda B. Rutherford has served as the Company’s Chief Administration Officer since October 2022. Ms.
Removed
Watterson Chief Operating Officer 57 Ryan C. Green Executive Vice President & Chief Commercial Officer 47 Justin Jones Executive Vice President Operations 45 Tammy Romo Executive Vice President & Chief Financial Officer 61 Linda B. Rutherford Chief Administration Officer 57 Mark R.
Added
Green Executive Vice President & Chief Transformation Officer 48 Justin Jones Executive Vice President Operations 46 Tammy Romo Executive Vice President & Chief Financial Officer 62 Linda B. Rutherford Chief Administration Officer 58 Set forth below is a description of the background of each of the Company’s executive officers. Robert E.
Removed
Shaw Executive Vice President & Chief Legal & Regulatory Officer & Corporate Secretary 61 Set forth below is a description of the background of each of the Company’s executive officers. Gary C. Kelly has served as the Company's Executive Chairman of the Board since February 2022 and has served as the Company's Chairman of the Board since May 2008. Mr.
Added
Ms. Rutherford joined the Company in 1992 as a Public Relations Coordinator. The Company has announced Ms. Rutherford’s resignation from her position of Chief Administration Officer effective April 1, 2025. 64 Table of Contents PART II
Removed
Kelly also served as Chief Executive Officer from July 2004 to February 2022, President from July 2008 to January 2017, Executive Vice President & Chief Financial Officer from June 2001 to July 2004, and Vice President Finance & Chief Financial Officer from 1989 to 2001. Mr. Kelly joined the Company in 1986 as its Controller. Robert E.
Removed
Ms. Rutherford joined the Company in 1992 as a Public Relations Coordinator. Mark R. Shaw has served as the Company's Executive Vice President & Chief Legal & Regulatory Officer since November 2018. Mr. Shaw has also served as the Company’s Corporate Secretary since August 2022. Mr.
Removed
Shaw also served as Executive Vice President, Chief Legal & Regulatory Officer, & Corporate Secretary from August 2018 to November 2018, Senior Vice President, General Counsel, & Corporate Secretary from July 2015 to August 2018, Vice President, General Counsel, & Corporate Secretary from February 2013 to July 2015, and as Associate General Counsel - Corporate & Transactions from February 2008 to February 2013.
Removed
Mr. Shaw joined the Company in 2000 as an Attorney in the General Counsel Department. 59 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+4 added−2 removed0 unchanged
Biggest changeCOMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG SOUTHWEST AIRLINES CO., S&P 500 INDEX, AND NYSE ARCA AIRLINE INDEX 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Southwest Airlines Co. $ 100 $ 118 $ 102 $ 94 $ 74 $ 65 S&P 500 $ 100 $ 131 $ 156 $ 200 $ 164 $ 207 NYSE ARCA Airline $ 100 $ 123 $ 93 $ 91 $ 59 $ 77 61 Table of Contents Issuer Repurchases On May 15, 2019, the Board authorized the repurchase of up to $2.0 billion of the Company’s common stock.
Biggest changeCOMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG SOUTHWEST AIRLINES CO., S&P 500 INDEX, AND NYSE ARCA AIRLINE INDEX 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Southwest Airlines Co. $ 100 $ 87 $ 80 $ 63 $ 55 $ 66 S&P 500 $ 100 $ 118 $ 152 $ 125 $ 157 $ 197 NYSE ARCA Airline $ 100 $ 76 $ 74 $ 48 $ 63 $ 63 66 Table of Contents Issuer Repurchases Issuer Purchases of Equity Securities (1) (a) (b) (c) (d) Period Total number of shares purchased Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Maximum dollar value of shares that may yet be purchased under the plans or programs October 1, 2024 through October 31, 2024 6,795,787 $ — (3) 6,795,787 $ 2,250,000,000 November 1, 2024 through November 30, 2024 — $ — — $ 2,250,000,000 December 1, 2024 through December 31, 2024 — $ — — $ 2,250,000,000 Total 6,795,787 6,795,787 (1) On May 15, 2019, the Board authorized the repurchase of up to $2.0 billion of the Company’s common stock, of which approximately $899 million remained as of September 2024.
The comparison assumes $100 was invested on December 31, 2018, in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance.
The comparison assumes $100 was invested on December 31, 2019, in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance.
The following graph compares the cumulative total shareholder return on the Company’s common stock over the five-year period ended December 31, 2023, with the cumulative total return during such period of the Standard and Poor’s 500 Stock Index and the NYSE ARCA Airline Index.
The following graph compares the cumulative total Shareholder return on the Company’s common stock over the five-year period ended December 31, 2024, with the cumulative total return during such period of the Standard and Poor’s 500 Stock Index and the NYSE ARCA Airline Index.
As of February 2, 2024, there were approximately 11,028 holders of record of the Company’s common stock. 60 Table of Contents Stock Performance Graph The following Performance Graph and related information shall not be deemed "soliciting material" or "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
As of February 5, 2025, there were approximately 10,623 holders of record of the Company’s common stock. 65 Table of Contents Stock Performance Graph The following Performance Graph and related information shall not be deemed "soliciting material" or "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
The Company currently intends to continue declaring dividends on a quarterly basis for the foreseeable future; however, the Board may elect to alter the timing, amount, and payment of dividends on the basis of operational results, financial condition, cash requirements, future prospects, and other factors deemed relevant by the Board.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The Company’s common stock is listed on the New York Stock Exchange ("NYSE") and is traded under the symbol "LUV." The Company currently intends to continue declaring dividends on a quarterly basis for the foreseeable future; however, the Board may elect to alter the timing, amount, and payment of dividends on the basis of operational results, financial condition, cash requirements, future prospects, and other factors deemed relevant by the Board.
Subject to certain conditions, repurchases may be made in accordance with applicable securities laws in open market or private, including accelerated, repurchase transactions from time to time, depending on market conditions. The Company has suspended share repurchase activity until further notice. The Company has approximately $899 million remaining under its current share repurchase authorization.
On September 25, 2024, the Board terminated and replaced this previous share repurchase authorization with a new $2.5 billion share repurchase authorization of the Company’s common stock. Subject to certain conditions, repurchases may be made in accordance with applicable securities laws in open market or private, including accelerated, repurchase transactions from time to time, depending on market conditions.
Removed
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The Company’s common stock is listed on the New York Stock Exchange ("NYSE") and is traded under the symbol "LUV." Although the Company previously suspended the payment of dividends in second quarter 2020 through September 30, 2022, pursuant to payroll funding support agreements with the U.S.
Added
(2) Excludes immaterial amount of excise tax on share repurchases, net of issuances, payable in April 2025.
Removed
Department of the Treasury, the Company reinstated and declared a quarterly cash dividend of $.18 per share on December 6, 2022, and has continued to pay quarterly dividends since the reinstatement.
Added
(3) Under an accelerated share repurchase program entered into by the Company with a third party financial institution in fourth quarter 2024 (the "Fourth Quarter 2024 ASR Program"), the Company paid $250 million and received an initial delivery of 6,795,787 shares during October 2024, representing an estimated 80 percent of the shares to be purchased by the Company under the Fourth Quarter 2024 ASR Program.
Added
This share amount was based on the $29.43 closing price of the Company's common stock on October 25, 2024. Final settlement of the Fourth Quarter 2024 ASR Program occurred in January 2025 and was based on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed in January 2025.
Added
Upon settlement, the third party financial institution delivered 1,010,663 additional shares of the Company’s common stock to the Company. Upon completion of the Fourth Quarter 2024 ASR Program in January 2025, the average purchase price per share for the 7,806,450 shares repurchased was $32.02.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

118 edited+116 added−66 removed77 unchanged
Biggest changeReconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding special items) (unaudited) (in millions, except per share amounts and per ASM amounts) Year ended December 31, Percent 2023 2022 Change Fuel and oil expense, unhedged $ 6,346 $ 6,780 Add: Premium cost of fuel contracts designated as hedges 121 105 Deduct: Fuel hedge gains included in Fuel and oil expense, net (250) (910) Fuel and oil expense, as reported $ 6,217 $ 5,975 Deduct: Fuel hedge contracts settling in the current period, but for which gains were reclassified from AOCI (c) (16) (40) Deduct: Premium benefit of fuel contracts not designated as hedges — (28) Fuel and oil expense, excluding special items (economic) $ 6,201 $ 5,907 5.0 % Total operating expenses, as reported $ 25,867 $ 22,797 Deduct: TWU 556 Labor contract adjustment (a) (180) — Deduct: SWAPA Labor contract adjustment (b) (354) — Deduct: Fuel hedge contracts settling in the current period, but for which gains were reclassified from AOCI (c) (16) (40) Deduct: Premium benefit of fuel contracts not designated as hedges — (28) Deduct: Impairment of long-lived assets — (35) Deduct: DOT settlement (107) — Deduct: Litigation settlement (12) — Total operating expenses, excluding special items $ 25,198 $ 22,694 11.0 % Deduct: Fuel and oil expense, excluding special items (economic) (6,201) (5,907) Operating expenses, excluding Fuel and oil expense and special items $ 18,997 $ 16,787 13.2 % Deduct: Profitsharing expense (110) (127) Operating expenses, excluding Fuel and oil expense, special items, and profitsharing $ 18,887 $ 16,660 13.4 % Operating income, as reported $ 224 $ 1,017 Add: TWU 556 contract adjustment (a) 180 — Add: SWAPA contract adjustment (b) 354 — Add: Fuel hedge contracts settling in the current period, but for which gains were reclassified from AOCI (c) 16 40 Add: Premium benefit of fuel contracts not designated as hedges — 28 Add: Impairment of long-lived assets — 35 Add: DOT settlement 107 — Add: Litigation settlement 12 — Operating income, excluding special items $ 893 $ 1,120 (20.3) % Other (gains) losses, net, as reported $ (62) $ 12 Add: Mark-to-market impact from fuel contracts settling in current periods (c) 17 41 Add: Premium benefit of fuel contracts not designated as hedges — 28 Add (Deduct): Unrealized mark-to-market adjustment on available for sale securities 4 (4) Other (gains) losses, net, excluding special items $ (41) $ 77 n.m.
Biggest changeThe year-over-year decrease in the tax rate is primarily due to the DOT settlement, which was treated as a disallowed tax deduction in 2023. 2023 Compared with 2022 The Company's comparison of 2023 results to 2022 results is included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under Part II Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. 80 Table of Contents Reconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding special items) (unaudited) (in millions, except per share amounts and per ASM amounts) Year ended December 31, Percent 2024 2023 Change Fuel and oil expense, unhedged $ 5,750 $ 6,346 Add: Premium cost of fuel contracts designated as hedges 148 121 Deduct: Fuel hedge gains included in Fuel and oil expense, net (86) (250) Fuel and oil expense, as reported $ 5,812 $ 6,217 Add (Deduct): Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) 34 (16) Add: Premium cost of fuel contracts not designated as hedges 9 — Fuel and oil expense, excluding special items (economic) $ 5,855 $ 6,201 (5.6) % Total operating expenses, as reported $ 27,162 $ 25,867 Deduct: Voluntary Employee programs (5) — Deduct: Labor contract adjustment (b) (9) (180) Deduct: SWAPA Labor contract adjustment (c) — (354) Add (Deduct): Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) 34 (16) Add: Premium cost of fuel contracts not designated as hedges 9 — Deduct: DOT settlement — (107) Deduct: Litigation settlements (7) (12) Deduct: Professional advisory fees (37) — Deduct: Transformation costs (5) — Total operating expenses, excluding special items $ 27,142 $ 25,198 7.7 % Deduct: Fuel and oil expense, excluding special items (economic) (5,855) (6,201) Operating expenses, excluding Fuel and oil expense and special items $ 21,287 $ 18,997 12.1 % Deduct: Profitsharing expense (103) (110) Operating expenses, excluding Fuel and oil expense, special items, and profitsharing $ 21,184 $ 18,887 12.2 % Operating income, as reported $ 321 $ 224 Add: Breakage revenue adjustment (d) 116 — Add: Voluntary Employee programs 5 — Add: Labor contract adjustment (b) 9 180 Add: SWAPA contract adjustment (c) — 354 Add (Deduct): Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) (34) 16 Deduct: Premium cost of fuel contracts not designated as hedges (9) — Add: DOT settlement — 107 Add: Litigation settlements 7 12 Add: Professional advisory fees 37 — Add: Transformation costs 5 — Operating income, excluding special items $ 457 $ 893 (48.8) % Other (gains) losses, net, as reported $ 4 $ (62) Add (Deduct): Mark-to-market impact from fuel contracts settling in current periods (a) (34) 17 Deduct: Premium cost of fuel contracts not designated as hedges (9) — Add: Unrealized mark-to-market adjustment on available for sale securities — 4 Other gains, net, excluding special items $ (39) $ (41) (4.9) % Income before income taxes, as reported $ 598 $ 633 Add: Breakage revenue adjustment (d) 116 — Add: Voluntary Employee programs 5 — Add: Labor contract adjustment (b) 9 180 Add: SWAPA contract adjustment (c) — 354 Add (Deduct): Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) (34) 16 Add (Deduct): Mark-to-market impact from fuel contracts settling in current periods (a) 34 (17) Deduct: Unrealized mark-to-market adjustment on available for sale securities — (4) Add: DOT settlement — 107 Add: Litigation settlements 7 12 Add: Professional advisory fees 37 — Add: Transformation costs 5 — Income before income taxes, excluding special items $ 777 $ 1,281 (39.3) % Provision for income taxes, as reported $ 133 $ 168 Add: Net income tax impact of fuel and special items (e) 47 133 Provision for income taxes, net, excluding special items $ 180 $ 301 (40.2) % Net income, as reported $ 465 $ 465 Add: Breakage revenue adjustment (d) 116 — Add: Voluntary Employee programs 5 — Add: Labor contract adjustment (b) 9 180 Add: SWAPA contract adjustment (c) — 354 Add (Deduct): Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) (34) 16 Add (Deduct): Mark-to-market impact from fuel contracts settling in current periods (a) 34 (17) Deduct: Unrealized mark-to-market adjustment on available for sale securities — (4) Add: DOT settlement — 107 Add: Litigation settlements 7 12 Add: Professional advisory fees 37 — Add: Transformation costs 5 — Deduct: Net income tax impact of special items (e) (47) (133) Net income, excluding special items $ 597 $ 980 (39.1) % Net income per share, diluted, as reported $ 0.76 $ 0.76 Add: Impact of special items 0.27 1.01 Deduct: Net income tax impact of special items (e) (0.07) (0.21) Net income per share, diluted, excluding special items $ 0.96 $ 1.56 (38.5) % Operating expenses per ASM (cents), as reported 15.32 ¢ 15.19 ¢ Deduct: Impact of special items (0.04) (0.38) Deduct: Fuel and oil expense divided by ASMs (3.27) (3.65) Deduct: Profitsharing expense divided by ASMs (0.06) (0.07) Operating expenses per ASM, excluding Fuel and oil expense, profitsharing, and special items (cents) 11.95 ¢ 11.09 ¢ 7.8 % (a) See Note 10 to Consolidated Financial Statements for further information.
Economic fuel cost projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate the hedge accounting impact associated with the volatility of the energy markets, or the impact to its financial statements in future periods.
Economic fuel cost projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate the hedge accounting impact associated with the volatility of the energy markets, or the impact to its financial statements in future periods.
The Company paid $428 million in cash dividends to Shareholders and repaid $85 million in finance lease obligations during the year ended December 31, 2023. The Company may engage in early debt repurchases from time to time at its discretion; however, any early future repurchases are not included in the Company's current maturities of long-term debt.
The Company may engage in early debt repurchases from time to time at its discretion; however, any early future repurchases are not included in the Company's current maturities of long-term debt. The Company paid $428 million in cash dividends to Shareholders and repaid $85 million in finance lease obligations during the year ended December 31, 2023.
(c) The Equity adjustment in the denominator adjusts for the cumulative impacts, in Accumulated other comprehensive income and Retained earnings, of gains and/or losses that will settle in future periods, including those associated with the Company's fuel hedges. The current period impact of these gains and/or losses is reflected in the Net impact from fuel contracts in the numerator.
(c) The Equity adjustment in the denominator adjusts for the cumulative impacts, in Accumulated other comprehensive income (loss) and Retained earnings, of gains and/or losses that will settle in future periods, including those associated with the Company's fuel hedges. The current period impact of these gains and/or losses is reflected in the Net impact from fuel contracts in the numerator.
While the Company believes that the disclosures contained in the Southwest One Report, the DEI Report, and other voluntary disclosures regarding environmental, social, and governance (“ESG”) matters are responsive to various areas of investor interest, the Company believes that certain of these disclosures do not currently address matters that are material in the near term to the Company’s operations, strategy, financial condition, or financial results, although this view may change in the future based on new information that could materially alter the estimates, assumptions, or timelines used to create these disclosures.
While the Company believes that the disclosures contained in the Southwest One Report and other voluntary disclosures regarding environmental, social, and governance (“ESG”) matters are responsive to various areas of investor interest, the Company believes that certain of these disclosures address matters that are currently not material to the Company’s near-term operations, strategy, financial condition, or financial results, although this view may change in the future based on new information that could materially alter the estimates, assumptions, or timelines used to create these disclosures.
Such impact ended in third quarter 2021, and the Company's 2022 and 2023 results do not reflect the benefit of this payroll support, and its future periods are not expected to benefit from such payroll support.
Such impact ended in third quarter 2021, and the Company's 2022, 2023, and 2024 results do not reflect the benefit of this payroll support, and its future periods are not expected to benefit from such payroll support.
The Company began accruing for all of its open labor contracts on April 1, 2022, and this incremental $354 million expense represents an increase in retroactive pay associated with wage rates for purposes of calculating the ratification bonus agreed to for Pilots for periods prior to 2023. See the Note Regarding Use of Non-GAAP Financial Measures for further information.
The Company began accruing for all of its open labor contracts on April 1, 2022, and this incremental $354 million expense represented an increase in retroactive pay associated with wage rates for purposes of calculating the ratification bonus agreed to for Pilots for periods prior to 2023. See the Note Regarding Use of Non-GAAP Financial Measures for further information.
As a result of changes in observed Customer travel habits and behaviors during 2021 and 2022, the Company increased its estimates of “normal” Customer flight credits that are expected to go unused, as Customer redemptions of these "normal" credits had been at a slower rate than the Company’s historical data for similar credits in periods prior to the COVID-19 pandemic.
As a result of changes in observed Customer travel habits and behaviors during 2021 and 2022, the Company increased its estimates of “normal” Customer flight credits that were expected to go unused, as Customer redemptions of these "normal" credits had been at a slower rate than the Company’s historical data for similar credits in periods prior to the COVID-19 pandemic.
The Company expects to be able to continue to meet such obligations utilizing cash and investments on hand, as well as cash generated from its ongoing operations. 79 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company’s Consolidated Financial Statements have been prepared in accordance with GAAP.
The Company expects to be able to continue to meet such obligations utilizing cash and investments on hand, as well as cash generated from its ongoing operations. 88 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company’s Consolidated Financial Statements have been prepared in accordance with GAAP.
Operating Statistics The Company provides the operating data below for the years ended December 31, 2023 and 2022 because these statistics are commonly used in the airline industry and, therefore, allow readers to compare the Company’s performance against its results for the prior year period, as well as against the performance of the Company’s peers.
Operating Statistics The Company provides the operating data below for the years ended December 31, 2024 and 2023 because these statistics are commonly used in the airline industry and, therefore, allow readers to compare the Company’s performance against its results for the prior year period, as well as against the performance of the Company’s peers.
A one percent increase or decrease in the Company's estimate of the standalone selling prices, implemented as of January 1, 2023, causing a change to the allocation of proceeds to air transportation would not have had a material impact on the Company's Operating revenues for the year ended December 31, 2023.
A one percent increase or decrease in the Company's estimate of the standalone selling prices, implemented as of January 1, 2024, causing a change to the allocation of proceeds to air transportation would not have had a material impact on the Company's Operating revenues for the year ended December 31, 2024.
Since the Company purchases the majority of the aircraft it acquires, it has been able to utilize accelerated depreciation methods (including bonus depreciation) available under the Internal Revenue Code of 1986, as amended, in 2023 and in previous years, which has enabled the Company to accelerate cash tax benefits of depreciation.
Since the Company purchases the majority of the aircraft it acquires, it has been able to utilize accelerated depreciation methods (including bonus depreciation) available under the Internal Revenue Code of 1986, as amended, in 2024 and in previous years, which has enabled the Company to accelerate cash tax benefits of depreciation.
A discussion of the Company's most significant drivers impacting cash flow for 2021 are included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, under Part II Item 7, Liquidity and Capital Resources.
A discussion of the Company's most significant drivers impacting cash flow for 2022 are included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under Part II Item 7, Liquidity and Capital Resources.
Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in Note 11 to the Consolidated Financial Statements.
Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in Note 10 to the Consolidated Financial Statements.
The following measures are often provided, excluding special items, and utilized by the Company’s management, analysts, and investors to enhance comparability of year-over-year results, as well as to industry trends: Fuel and oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing; Operating income, non-GAAP; Other (gains) losses, net, non-GAAP; Income before income taxes, non-GAAP; Provision for income taxes, net, non-GAAP; Net income, non-GAAP; Net income per share, diluted, non-GAAP; and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents).
The following measures are often provided, excluding special items, and utilized by the Company’s management, analysts, and investors to enhance comparability of year-over-year results, as well as to industry trends: Fuel and oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing; Operating income, non-GAAP; Other gains, net, non-GAAP; Income before income taxes, non-GAAP; Income tax rate, non-GAAP; Provision for income taxes, net, non-GAAP; Net income, non-GAAP; Net income per share, diluted, non-GAAP; and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents).
See "Quantitative and Qualitative Disclosures about Market Risk" for more information on these risk management activities, Note 11 to the Consolidated Financial Statements for more information on the Company’s fuel hedging program and financial derivative instruments, and Note 12 to the Consolidated Financial Statements for more information about fair value measurements.
See "Quantitative and Qualitative Disclosures about Market Risk" for more information on these risk management activities, Note 10 to the Consolidated Financial Statements for more information on the Company’s fuel hedging program and financial derivative instruments, and Note 11 to the Consolidated Financial Statements for more information about fair value measurements.
As discussed in Note 11 to the Consolidated Financial Statements, any changes in fair value of cash flow derivatives designated as hedges are offset within AOCI until the period in which the expected future cash flow impacts earnings.
As discussed in Note 10 to the Consolidated Financial Statements, any changes in fair value of cash flow derivatives designated as hedges are offset within AOCI until the period in which the expected future cash flow impacts earnings.
See Part I, Item 2 for a complete table of the Company's contractual firm deliveries and options for -7 and -8 aircraft, and Note 5 to the Consolidated Financial Statements for the financial commitments related to these firm deliveries.
See Part I, Item 2 for a complete table of the Company's contractual firm deliveries and options for -7 and -8 aircraft, and Note 4 to the Consolidated Financial Statements for the financial commitments related to these firm deliveries.
Given that Member behavior may fluctuate over time, the Company expects the current estimates may change in future periods. However, the Company believes its current estimates are reasonable given current facts and circumstances. 83 Table of Contents
Given that Member behavior may fluctuate over time, the Company expects the current estimates may change in future periods. However, the Company believes its current estimates are reasonable given current facts and circumstances. 93 Table of Contents
The non-GAAP measures provided that relate to the Company’s performance on an economic fuel cost basis include Fuel and oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing; Operating income, non-GAAP; Other (gains) losses, net, non-GAAP; Income before income taxes, non-GAAP; Provision for income taxes, net, non-GAAP; Net income, non-GAAP; Net income per share, diluted, non-GAAP; and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents).
The non-GAAP measures provided that relate to the Company’s performance on an economic fuel cost basis include Fuel and oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing; Operating income, non-GAAP; Other gains, net, non-GAAP; Income before income taxes, non-GAAP; Income tax rate, non-GAAP; Provision for income taxes, net, non-GAAP; Net income, non-GAAP; Net income per share, diluted, non-GAAP; and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents).
(b) Represents changes in estimate related to the contract ratification bonus for the Company’s Pilots as part of the tentative agreement reached in December 2023 with SWAPA.
(c) Represents changes in estimate related to the contract ratification bonus for the Company’s Pilots as part of the tentative agreement reached in December 2023 with SWAPA.
See Note 8 to the Consolidated Financial Statements for further detail. Aircraft purchase commitments The Company is required to make cash deposits toward the purchase of aircraft in advance.
See Note 7 to the Consolidated Financial Statements for further detail. Aircraft purchase commitments The Company is required to make cash deposits toward the purchase of aircraft in advance.
Also referred to as "operating unit revenues" or "RASM," this is a measure of operating revenue production based on the total available seat miles flown during a particular period. (h) Calculated as passenger revenue divided by available seat miles.
Also referred to as "operating unit revenues" or "RASM," this is a measure of operating revenue production based on the total available seat miles flown during a particular period. 69 Table of Contents (h) Calculated as passenger revenue divided by available seat miles.
Additionally, due to the December 2022 operational disruption, as described above, the financial results on a GAAP and non-GAAP basis for the year ended December 31, 2023 included a negative financial impact of approximately $380 million on a pre-tax basis in first quarter 2023 and, on a GAAP basis, a $107 million charge on a pre-tax basis for the DOT settlement in fourth quarter 2023.
Additionally, due to the December 2022 operational disruption, as described below, the financial results on a GAAP and non-GAAP basis for the year ended December 31, 2023 included a negative financial impact of approximately $380 million on a pre-tax basis in first quarter 2023 and, on a GAAP basis, a $107 million charge on a pre-tax basis for the Department of Transportation ("DOT") settlement in fourth quarter 2023.
For the year ended December 31, 2023, based on actual redemptions of points sold to business partners and earned through flights, a hypothetical one percentage point change in the estimated breakage rate would have resulted in a change to Passenger revenue of approximately $235 million (an increase in breakage would have resulted in an increase in revenue and a decrease in breakage would have resulted in a decrease in revenue).
For the year ended December 31, 2024, based on actual redemptions of points sold to business partners and earned through flights, a hypothetical one percentage point change in the estimated breakage rate would have resulted in a change to Passenger revenue of approximately $252 million (an increase in breakage would have resulted in an increase in revenue and a decrease in breakage would have resulted in a decrease in revenue).
All derivatives are required to be reflected at fair value and recorded on the Consolidated Balance Sheet. As of December 31, 2023, the Company was a party to over 200 separate financial derivative instruments related to its fuel hedging program for future periods.
All derivatives are required to be reflected at fair value and recorded on the Consolidated Balance Sheet. As of December 31, 2024, the Company was a party to over 175 separate financial derivative instruments related to its fuel hedging program for future periods.
Under the Southwest Rapid Rewards loyalty program, Members earn points for every dollar spent on Southwest base fares. The amount of points earned under the program is based on the fare amount and fare type, with higher fare types (e.g., Business Select) earning more points than lower fare types (e.g., Wanna Get Away).
Under the Southwest Rapid Rewards loyalty program, Members earn points for every dollar spent on eligible Southwest fare purchases. The amount of points earned under the program is based on the fare amount and fare type, with higher fare types (e.g., Business Select) earning more points than lower fare types (e.g., Wanna Get Away).
However, future cash flows will be impacted through the portion of payroll support that was in the form of loans that remain outstanding and will have to be repaid to Treasury. 77 Table of Contents See Note 7 to the Consolidated Financial Statements for further detail on the Company's debt and the timing of expected and future principal payments.
However, future cash flows will be impacted through the portion of payroll support that was in the form of loans that remain outstanding and will have to be repaid to Treasury. See Note 6 to the Consolidated Financial Statements for further detail on the Company's debt and the timing of expected and future principal payments.
The Company’s consolidated financial statements for the year ended December 31, 2023 include market rate wage accrual for all workgroups with open collective bargaining agreements. See the Note Regarding Use of Non-GAAP Financial Measures for further information.
The Company’s consolidated financial statements for the year ended December 31, 2023 included market rate wage accruals for all workgroups with open collective bargaining agreements. See the Note Regarding Use of Non-GAAP Financial Measures for further information.
See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures. Salaries, wages, and benefits expense for 2023 increased by $1.8 billion, or 18.9 percent, compared with 2022. On a per ASM basis, Salaries, wages, and benefits expense for 2023 increased 3.8 percent, compared with 2022.
See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures. Salaries, wages, and benefits expense for 2024 increased by $1.1 billion, or 9.8 percent, compared with 2023. On a per ASM basis, Salaries, wages, and benefits expense for 2024 increased 5.5 percent, compared with 2023.
As of December 31, 2023, these consisted of its fuel derivative option contracts, which were an asset of $223 million. The Company utilizes financial derivative instruments primarily to manage its risk associated with changing jet fuel prices.
As of December 31, 2024, these consisted of its fuel derivative option contracts, which were an asset of $130 million. The Company utilizes financial derivative instruments primarily to manage its risk associated with changing jet fuel prices.
See Note 6 to the Consolidated Financial Statements for further information on determining the estimated fair value of each loyalty point. The majority of the points sold to business partners are through the Southwest co-branded credit card agreement ("Agreement") with Chase Bank USA, N.A. Consideration received as part of this Agreement is subject to ASC 606.
See Note 5 to the Consolidated Financial Statements for further information on determining the estimated fair value of each loyalty point. The majority of the points sold to business partners are through the Southwest co-branded credit card agreement ("Agreement") with Chase. Consideration received as part of this Agreement is subject to ASC 606.
See Note 6 to the Consolidated Financial Statements for further information. The Company believes it has various options available to meet its capital and operating commitments, including unrestricted cash and short-term investments of $11.5 billion as of December 31, 2023, and anticipated future internally generated funds from operations.
See Note 5 to the Consolidated Financial Statements for further information. The Company believes it has various options available to meet its capital and operating commitments, including unrestricted cash and short-term investments of $8.7 billion as of December 31, 2024, and anticipated future internally generated funds from operations.
Market price changes can be driven by factors such as supply and demand, inventory levels, weather events, refinery capacity, political agendas, the value of the U.S. dollar, geopolitical events, the extent of the COVID-19 pandemic, and general economic conditions, among other items.
Market price changes can be driven by factors such as supply and demand, inventory levels, weather events, refinery capacity, political agendas, the value of the U.S. dollar, geopolitical events, pandemics, and general economic conditions, among other items.
Under the program, (i) Members are able to redeem their points for every available seat, every day, on every flight, with no blackout dates; and (ii) points do not expire.
Under the program, (i) Members are able to 91 Table of Contents redeem their points for every available seat, every day, on every flight, with no blackout dates; and (ii) points do not expire.
Based on the Company’s scheduled future aircraft deliveries from Boeing and existing tax laws in effect, the Company will continue to accelerate the cash income tax benefits related to aircraft purchases.
Based on the Company’s scheduled future 87 Table of Contents aircraft deliveries from Boeing and existing tax laws in effect, the Company will continue to accelerate the cash income tax benefits related to aircraft purchases.
Changes in the fair values of these instruments can vary dramatically based on changes in the underlying commodity prices. For example, during 2023, market "spot" prices for Brent crude oil peaked at a high average daily price of approximately $97 per barrel and hit a low average daily price of approximately $72 per barrel.
Changes in the fair values of these instruments can vary dramatically based on changes in the underlying commodity prices. For example, during 2024, market "spot" prices for Brent crude oil peaked at a high average daily price of approximately $91 per barrel and hit a low average daily price of approximately $69 per barrel.
Also, the Company has engaged in transactions with certain convertible debt holders to purchase their instruments in private transactions from time to time in cash, and may continue to do so in future periods.
Upon conversion, the Company will settle conversions in cash. Also, the Company has engaged in transactions with certain convertible debt holders to purchase their instruments in private transactions from time to time in cash, and may continue to do so in future periods.
Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for projected results is not meaningful or available without unreasonable effort. See Note Regarding Use of Non-GAAP Financial Measures. Maintenance materials and repairs expense for 2023 increased by $336 million, or 39.4 percent, compared with 2022.
Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for projected results is not meaningful or available without unreasonable effort. See Note Regarding Use of Non-GAAP Financial Measures. Maintenance materials and repairs expense for 2024 increased by $165 million, or 13.9 percent, compared with 2023.
Capital expenditures during 2023 also included approximately $79 million associated with the Company's purchase of finance leased aircraft, compared to approximately $174 million associated with finance leased aircraft purchased during 2022. See Note 8 to the Consolidated Financial Statements for further information.
Capital expenditures during 2024 also included approximately $22 million associated with the Company's purchase of finance leased aircraft, compared to approximately $174 million associated with finance leased aircraft purchased during 2023. See Note 7 to the Consolidated Financial Statements for further information.
Changes in the breakage rates applied annually in recent years have not had a material impact on Passenger revenues.
Changes in the breakage rates applied annually in recent years have not had a material impact on Passenger 92 Table of Contents revenues.
The Company continues to have a large base of unencumbered assets with a net book value of approximately $17.3 billion , including $14.5 billion in aircraft value and $2.8 billion in non-aircraft assets such as spare engines, ground equipment, and real estate.
The Company continues to have a large base of unencumbered assets with a net book value of approximately $16 billion , including approximately $13 billion in aircraft value and approximately $3 billion in non-aircraft assets such as spare engines, ground equipment, and real estate.
The following table displays the components of Other (gains) losses, net, for 2023 and 2022: Year ended December 31, (in millions) 2023 2022 Mark-to-market impact from fuel contracts settling in current and future periods $ (17) $ (41) Premium cost of fuel contracts not designated as hedges — (28) Unrealized mark-to-market adjustment on available for sale securities (4) 4 Mark-to-market impact on deferred compensation plan investment (39) 74 Other (2) 3 $ (62) $ 12 Income Taxes The Company's annual 2023 effective tax rate was 26.5 percent, compared with 25.9 percent in 2022.
The following table displays the components of Other (gains) losses, net, for 2024 and 2023: Year ended December 31, (in millions) 2024 2023 Mark-to-market impact from fuel contracts settling in current period $ 34 $ (17) Premium cost of fuel contracts not designated as hedges 9 — Unrealized mark-to-market adjustment on available for sale securities — (4) Mark-to-market impact on deferred compensation plan investments (36) (39) Other (3) (2) $ 4 $ (62) Income Taxes The Company's annual 2024 effective tax rate was 22.2 percent, compared with 26.5 percent in 2023.
The following table provides more information on the Company's economic fuel cost per gallon, including the impact of fuel hedging premium expense and fuel derivative contracts: 69 Table of Contents Year ended December 31, 2023 2022 Economic fuel costs per gallon $ 2.89 $ 3.07 Fuel hedging premium expense (in millions) $ 121 $ 78 Fuel hedging premium expense per gallon $ 0.06 $ 0.04 Fuel hedging cash settlement gains per gallon $ 0.12 $ 0.49 See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.
The following table provides more information on the Company's economic fuel cost per gallon, including the impact of fuel hedging premium expense and fuel derivative contracts: Year ended December 31, 2024 2023 Economic fuel costs per gallon $ 2.66 $ 2.89 Fuel hedging premium expense (in millions) $ 157 $ 121 Fuel hedging cash settlement gain (in millions) $ 53 $ 267 Fuel hedging premium expense per gallon $ 0.07 $ 0.06 Fuel hedging cash settlement gains per gallon $ 0.03 $ 0.12 See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.
Subsequently, on July 28, 2022, the Company modified its policy and announced that all unexpired flight credits as of that date, including these extended flight credits, will no longer have an expiration date and thus will be able to be redeemed by Customers indefinitely.
See Note 5 to the Consolidated Financial Statements for further information regarding these extended flight credits. Subsequently, on July 28, 2022, the Company modified its policy and announced that all unexpired flight credits as of that date, including these extended flight credits, will no longer have an expiration date and thus will be able to be redeemed by Customers indefinitely.
In addition, the Company is providing its maximum percentage of estimated fuel consumption covered by fuel derivative contracts in the following table: Period Maximum fuel hedged percentage (a)(b) 2024 57% 2025 46% 2026 18% (a) Based on the Company's current available seat mile plans.
The Company is providing its maximum percentage of estimated fuel consumption covered by fuel derivative contracts in the following table: Period Maximum fuel hedged percentage (a)(b) 2025 47% 2026 43% 2027 13% (a) Based on the Company's current available seat mile plans.
The operating cash flows for 2023 were largely impacted by the Company's net income (as adjusted for noncash items), a $29 million increase in Air traffic liability driven by higher ticket sales related to an increase in travel demand, partially offset by a $273 million decrease related to the purchase of fuel derivative instruments, which is included within Other, net operating cash flows in the accompanying Consolidated Statement of Cash Flows (see Note 11 to the Consolidated Financial Statements for further information), and a $215 million decrease due to the payment of Customer reimbursement expenses in first quarter 2023 related to the December 2022 operational disruption.
Operating cash flows for 2023 included a $29 million increase in Air traffic liability driven by higher ticket sales related to an increase in travel demand, partially offset by a $273 million decrease related to the purchase of fuel derivative instruments, which is included within Other, net operating cash flows in the accompanying Consolidated Statement of Cash Flows, and a $215 million decrease due to the payment of Customer reimbursement expenses in first quarter 2023 related to the December 2022 operational disruption.
Information contained in the Southwest One Report and/or the DEI Report is not incorporated by reference into, and does not constitute a part of, this Form 10-K.
Information contained in the Southwest One Report as published from time to time is not incorporated by reference into, and does not constitute a part of, this Form 10-K.
(b) Based on the Company's existing fuel derivative contracts and market prices as of January 17, 2024, first quarter and full year 2024 economic fuel costs per gallon are estimated to be in the range of $2.70 to $2.80 and $2.55 to $2.65, respectively.
(b) Based on the Company's existing fuel derivative contracts and market prices as of January 21, 2025, first quarter and full year 2025 economic fuel costs per gallon are estimated to be in the range of $2.50 to $2.60 and $2.45 to $2.55, respectively.
(d) Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item. 72 Table of Contents Non-GAAP Return on Invested Capital (ROIC) (in millions) (unaudited) Year Ended December 31, 2023 Operating income, as reported $ 224 TWU 556 contract adjustment 180 SWAPA contract adjustment 354 Net impact from fuel contracts 16 DOT settlement 107 Litigation settlement 12 Operating income, non-GAAP 893 Net adjustment for aircraft leases (a) 128 Adjusted operating income, non-GAAP (A) $ 1,021 Non-GAAP tax rate (B) 23.5 % (d) Net operating profit after-tax (A* (1-B) = C) $ 781 Debt, including finance leases (b) $ 8,033 Equity (b) 10,669 Net present value of aircraft operating leases (b) 1,029 Average invested capital $ 19,731 Equity adjustment (c) (168) Adjusted average invested capital (D) $ 19,563 Non-GAAP ROIC, pre-tax (A/D) 5.2 % Non-GAAP ROIC, after-tax (C/D) 4.0 % (a) Net adjustment related to presumption that all aircraft in fleet are owned (i.e., the impact of eliminating aircraft rent expense and replacing with estimated depreciation expense for those same aircraft).
(e) Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item. 81 Table of Contents Non-GAAP Return on Invested Capital (ROIC) (in millions) (unaudited) Year Ended Year Ended December 31, 2024 December 31, 2023 Operating income, as reported $ 321 $ 224 Breakage revenue adjustment 116 — Voluntary Employee programs 5 — TWU 555 contract adjustment 9 — TWU 556 contract adjustment — 180 SWAPA contract adjustment — 354 Net impact from fuel contracts (34) 16 Premium benefit of fuel contracts not designated as hedges (9) Professional advisory fees 37 — Transformation costs 5 — DOT settlement — 107 Litigation settlements 7 12 Operating income, non-GAAP 457 893 Net adjustment for aircraft leases (a) 134 128 Adjusted operating income, non-GAAP (A) $ 591 $ 1,021 Non-GAAP tax rate (B) 23.1 % (d) 23.5 % (e) Net operating profit after-tax (A* (1-B) = C) $ 454 $ 781 Debt, including finance leases (b) $ 7,742 $ 8,033 Equity (b) 10,388 10,669 Net present value of aircraft operating leases (b) 933 1,029 Average invested capital $ 19,063 $ 19,731 Equity adjustment (c) 13 (168) Adjusted average invested capital (D) $ 19,076 $ 19,563 Non-GAAP ROIC, pre-tax (A/D) 3.1 % 5.2 % Non-GAAP ROIC, after-tax (C/D) 2.4 % 4.0 % (a) Net adjustment related to presumption that all aircraft in fleet are owned (i.e., the impact of eliminating aircraft rent expense and replacing with estimated depreciation expense for those same aircraft).
However, once settlement of the financial derivative instruments occurs and the hedged jet fuel is purchased and consumed, all values and prices are known and are recognized in the financial statements.
Fair values for financial derivative instruments are estimated prior to the time that the financial derivative instruments settle. However, once settlement of the financial derivative instruments occurs and the hedged jet fuel is purchased and consumed, all values and prices are known and are recognized in the financial statements.
During 2022, market spot prices ranged from a high average daily price of approximately $128 per barrel to a low average daily price of approximately $76 per barrel.
During 2023, market spot prices ranged from a high average daily price of approximately $97 per barrel to a low average daily price of approximately $72 per barrel.
(c) See Note Regarding Use of Non-GAAP Financial Measures for additional information on special items. In addition, information regarding special items and economic results is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Items (also referred to as "excluding special items").
In addition, information regarding special items and economic results is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Items (also referred to as "excluding special items").
While many of these expenses are variable in nature, some of the expenditures can be somewhat fixed in the short-term due to the lead-time involved in publishing the Company's flight schedule in advance and providing for resources to be available to operate those schedules.
While many of these expenses are variable in nature, some of the expenditures can be somewhat fixed in the short-term due to the lead-time involved in publishing the Company's flight schedule in advance and providing for resources to be available to operate those schedules. The Company has a large net deferred tax liability on its Consolidated Balance Sheet.
The Company's 2023 available seat miles per gallon ("fuel efficiency") improved 2.8 percent, year-over-year, due to lower load factors and more -8 aircraft, the Company's most fuel-efficient aircraft, as a percentage of its fleet.
The Company's 2024 available seat miles per gallon ("fuel efficiency") improved 1.6 percent, year-over-year, due to operating more -8 aircraft, the Company's most fuel-efficient aircraft, as a percentage of its fleet.
Landing fees and airport rentals expense for 2023 increased by $281 million, or 18.6 percent, compared with 2022. On a per ASM basis, Landing fees and airport rentals expense increased 2.9 percent, compared with 2022.
Landing fees and airport rentals expense for 2024 increased by $173 million, or 9.7 percent, compared with 2023. On a per ASM basis, Landing fees and airport rentals expense increased 5.7 percent, compared with 2023.
Average length of passenger haul (miles) 993 978 1.5 % Average aircraft stage length (miles) 730 728 0.3 % Trips flown 1,459,427 1,298,219 12.4 % Seats flown (000s) (d) 231,409 201,913 14.6 % Seats per trip (e) 158.6 155.5 2.0 % Average passenger fare $ 172.18 $ 169.12 1.8 % Passenger revenue yield per RPM (cents) (f) 17.35 17.29 0.3 % Operating revenues per ASM (cents) (g) 15.32 16.04 (4.5) % Passenger revenue per ASM (cents) (h) 13.88 14.42 (3.7) % Operating expenses per ASM (cents) (i) 15.19 15.36 (1.1) % Operating expenses per ASM, excluding fuel (cents) 11.54 11.33 1.9 % Operating expenses per ASM, excluding fuel and profitsharing (cents) 11.47 11.25 2.0 % Fuel costs per gallon, including fuel tax $ 2.89 $ 3.10 (6.8) % Fuel costs per gallon, including fuel tax, economic $ 2.89 $ 3.07 (5.9) % Fuel consumed, in gallons (millions) 2,143 1,922 11.5 % Active full-time equivalent Employees 74,806 66,656 12.2 % Aircraft at end of period (j) 817 770 6.1 % (a) A revenue passenger mile is one paying passenger flown one mile.
Average length of passenger haul (miles) 1,018 993 2.5 % Average aircraft stage length (miles) 763 730 4.5 % Trips flown 1,443,866 1,459,427 (1.1) % Seats flown (000s) (d) 230,187 231,409 (0.5) % Seats per trip (e) 159.4 158.6 0.5 % Average passenger fare (k) $ 178.40 $ 172.18 3.6 % Passenger revenue yield per RPM (cents) (f)(k) 17.53 17.35 1.0 % Operating revenues per ASM (cents) (g)(k) 15.51 15.32 1.2 % Passenger revenue per ASM (cents) (h)(k) 14.09 13.88 1.5 % Operating expenses per ASM (cents) (i) 15.32 15.19 0.9 % Operating expenses per ASM, excluding fuel (cents) 12.05 11.54 4.4 % Operating expenses per ASM, excluding fuel and profitsharing (cents) 11.99 11.47 4.5 % Fuel costs per gallon, including fuel tax $ 2.64 $ 2.89 (8.7) % Fuel costs per gallon, including fuel tax, economic $ 2.66 $ 2.89 (8.0) % Fuel consumed, in gallons (millions) 2,194 2,143 2.4 % Active full-time equivalent Employees 72,450 74,806 (3.1) % Aircraft at end of period (j) 803 817 (1.7) % (a) A revenue passenger mile is one paying passenger flown one mile.
Debt As detailed in Notes 2 and 7 to the Consolidated Financial Statements, in connection with the major negative impact of COVID-19 on air carriers, the Company received significant financial assistance from Treasury in the form of payroll support, and this assistance had a significant impact on the Company's reported GAAP financial results in 2021.
Accordingly, the actual results may vary materially from the amounts discussed herein. 86 Table of Contents Debt As detailed in Note 6 to the Consolidated Financial Statements, in connection with the major negative impact of COVID-19 on air carriers, the Company received significant financial assistance from Treasury in the form of payroll support, and this assistance had a significant impact on the Company's reported GAAP financial results.
(d) Based on the Company's existing fuel derivative contracts and market prices as of January 17, 2024, first quarter and full year 2024 economic fuel costs per gallon are estimated to be in the range of $2.70 to $2.80 and $2.55 to $2.65, respectively.
(d) Based on the Company's existing fuel derivative contracts and market prices as of January 21, 2025, first quarter 2025 economic fuel costs per gallon are estimated to be in the range of $2.50 to $2.60.
On a per ASM basis, Fuel and oil expense for 2023 decreased 9.4 percent. On a dollar basis, the increase was primarily attributable to an increase in fuel gallons consumed, partially offset by a decrease in jet fuel prices per gallon. On a per ASM basis, the decrease was primarily due to lower jet fuel prices.
Fuel and oil expense for 2024 decreased by $405 million, or 6.5 percent, compared with 2023. On a per ASM basis, Fuel and oil expense for 2024 decreased 10.4 percent. On a dollar basis, the decrease was primarily attributable to a decrease in fuel prices, partially offset by an increase in fuel gallons consumed.
The continued deliveries of MAX aircraft are expected to remain critical to the Company's efforts to modernize its fleet, reduce carbon emissions intensity, and achieve its near-term environmental sustainability goals.
The continued deliveries of MAX aircraft are expected to remain critical to the Company's efforts to modernize its fleet, reduce carbon emissions intensity, and achieve its near-term environmental sustainability goals. As of December 31, 2024, the Company has fuel derivative contracts in place through 2027.
As of December 31, 2023, future interest payments associated with its fixed rate debt (excluding interest associated with finance leases) were $239 million in 2024, $198 million in 2025, $166 million in 2026, $114 million in 2027, $56 million in 2028, and $105 million thereafter.
As of December 31, 2024, future interest payments associated with its fixed rate debt (excluding interest associated with finance leases) were $138 million in 2025, $128 million in 2026, $71 million in 2027, $13 million in 2028, $13 million in 2029, and $7 million thereafter.
Other than the fourth quarter 2023 charge associated with the DOT settlement, there were no material impacts to operating revenues or expenses as a result of this disruption beyond first quarter 2023.
Other than a fourth quarter 2023 charge associated with a DOT settlement of $107 million, there were no material impacts to operating 68 Table of Contents revenues or expenses as a result of this disruption beyond first quarter 2023. See Note 1 to the Condensed Consolidated Financial Statements for further information.
As part of its commitment to corporate sustainability, the Company published its 2022 One Report describing the Company's sustainability strategies on May 3, 2023, which include the Company’s fuel conservation and emissions mitigation initiatives and other efforts to minimize greenhouse gas emissions and address other environmental matters such as energy and water conservation, waste minimization, and recycling.
The report describes the Company's sustainability strategies, which include the Company’s fuel conservation and emissions mitigation initiatives and other efforts to minimize greenhouse gas emissions and address other environmental matters such as energy and water conservation, waste minimization, and recycling.
Also referred to as "unit costs" or "cost per available seat mile," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies.
Also referred to as "unit costs" or "cost per available seat mile" or "CASM," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies. (j) Included three Boeing 737 Next Generation aircraft in temporary storage as of December 31, 2024.
The Company has a large net deferred tax liability on its Consolidated Balance Sheet. The deferral of income taxes has resulted in a significant benefit to the Company and its liquidity position.
The deferral of income taxes has resulted in a significant benefit to the Company and its liquidity position.
Based on the Company’s portfolio of option contracts as of December 31, 2023, a 10 percent change in implied volatility, holding all other factors constant, would have resulted in a change in the fair value of this portfolio of less than $34 million. 81 Table of Contents Fair values for financial derivative instruments are estimated prior to the time that the financial derivative instruments settle.
Based on the Company’s portfolio of option contracts as of 90 Table of Contents December 31, 2024, a 10 percent change in implied volatility, holding all other factors constant, would have resulted in a change in the fair value of this portfolio of less than $100 million.
The Company's Convertible Notes did not meet the criteria to be converted by holders as of the date of the financial statements, and thus are classified as Long-term debt in the accompanying Consolidated Balance Sheet as of December 31, 2023.
The Company's Convertible Notes of $1.6 billion did not meet the criteria to be converted by holders as of the date of the financial statements, but are classified within Current maturities of long-term debt in the accompanying Consolidated Balance Sheet as of December 31, 2024, due to their maturation date of May 1, 2025.
The economic fuel price per gallon sensitivities provided in the table below assume the relationship between Brent crude oil and refined products based on market prices as of January 17, 2024. 70 Table of Contents Estimated economic fuel price per gallon, including taxes and fuel hedging premiums (b) Average Brent Crude Oil price per barrel First Quarter 2024 Full Year 2024 $60 $2.15 to $2.25 $2.10 to $2.20 $70 $2.50 to $2.60 $2.40 to $2.50 Current market (a) $2.70 to $2.80 $2.55 to $2.65 $80 $2.80 to $2.90 $2.70 to $2.80 $90 $3.10 to $3.20 $3.00 to $3.10 $100 $3.35 to $3.45 $3.25 to $3.35 Fair market value of fuel derivative contracts settling in period $12 million $86 million Estimated premium costs $39 million $158 million (a) Brent crude oil average market prices as of January 17, 2024, were approximately $77 and $76 per barrel for first quarter 2024 and full year 2024, respectively.
Estimated economic fuel price per gallon, including taxes and fuel hedging premiums (b) Average Brent Crude Oil price per barrel First Quarter 2025 Full Year 2025 $60 $2.05 to $2.15 $2.00 to $2.10 $70 $2.35 to $2.45 $2.30 to $2.40 Current market (a) $2.50 to $2.60 $2.45 to $2.55 $80 $2.65 to $2.75 $2.65 to $2.75 $90 $3.00 to $3.10 $2.95 to $3.05 $100 $3.20 to $3.30 $3.20 to $3.30 Fair market value of fuel derivative contracts settling in period $1 million $23 million Estimated premium costs $37 million $148 million (a) Brent crude oil average market prices as of January 21, 2025, were $78 and $76 per barrel for first quarter and full year 2025, respectively.
On a dollar basis, the increase was primarily due to additional marketing revenue from Chase Bank USA, N.A., driven by improved retail spend on the Company's co-brand credit cards. Operating Expenses Operating expenses for 2023 increased by $3.1 billion, or 13.5 percent, compared with 2022, and capacity increased 14.7 percent over the same prior year period.
Other revenues for 2024 increased by $49 million, or 2.2 percent, compared with 2023. On a dollar basis, the increase was primarily driven by improved retail spend on the Company's co-brand credit cards. Operating Expenses Operating expenses for 2024 increased by $1.3 billion, or 5.0 percent, compared with 2023, and capacity increased 4.1 percent over the same prior year period.
As of December 31, 2023, the loyalty liabilities were approximately $4.9 billion, including $3.2 billion classified within Air traffic liability and $1.7 billion classified as Air traffic liability – noncurrent. 82 Table of Contents In order to determine the value of each loyalty point, certain assumptions must be made at the time of measurement, which include an allocation of passenger revenue between the flight and loyalty points earned by passengers, and the fair value of Rapid Rewards points, which are generally based on their redemption value to the Customer.
In order to determine the value of each loyalty point, certain assumptions must be made at the time of measurement, which include an allocation of passenger revenue between the flight and loyalty points earned by passengers, and the fair value of Rapid Rewards points, which are generally based on their redemption value to the Customer.
On January 22, 2024, the Company's nearly 11,000 Pilots, represented by SWAPA, voted to ratify a five-year contract extension with the Company. The newly ratified agreement becomes amendable in January 2029. Fuel and oil expense for 2023 increased by $242 million, or 4.1 percent, compared with 2022.
On January 22, 2024, the Company's nearly 11,000 Pilots, represented by Southwest Airlines Pilots Association ("SWAPA"), voted to ratify a five-year contract extension with the Company. The newly ratified agreement becomes amendable in January 2029.
Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort. (g) Aircraft on property, end of period.
Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort. (g) Operating margin, excluding special items, is calculated as operating income, excluding special items, divided by operating revenues, excluding special items.
The following table displays the Company's estimated fair value of remaining fuel derivative contracts (not considering the impact of the cash collateral provided to or received from counterparties - see Note 11 to the Consolidated Financial Statements for further information), as well as the deferred amounts in AOCI as of December 31, 2023, and the expected future periods in which these items are expected to settle and/or be recognized in earnings (in millions): Year Fair value of fuel derivative contracts at December 31, 2023 Amount of gains deferred in AOCI at December 31, 2023 (net of tax) 2024 $ 86 $ 55 2025 91 43 2026 46 4 Total $ 223 $ 102 The Company's multi-year fuel hedging program continues to provide protection against spikes in energy prices.
The following table displays the Company's estimated fair value of remaining fuel derivative contracts (not considering the impact of the cash collateral provided to or received from counterparties - see Note 10 to the Consolidated Financial Statements for further information), as well as the deferred amounts in AOCI as of December 31, 2024, and the expected future periods in which these items are expected to settle and/or be recognized in earnings (in millions): 78 Table of Contents Year Fair value of fuel derivative contracts at December 31, 2024 Amount of gains (losses) deferred in AOCI at December 31, 2024 (net of tax) 2025 $ 22 $ (96) 2026 72 (49) 2027 36 (3) Total $ 130 $ (148) The Company's current fuel derivative contracts contain instruments based in Brent crude oil.
Although return on invested capital is commonly used as a measure of capital efficiency, definitions of return on invested capital differ; therefore, the Company is providing an explanation of its calculation for non-GAAP return on invested capital in the accompanying reconciliation in order to allow investors to compare and contrast its calculation to the calculations provided by other companies. 75 Table of Contents Liquidity and Capital Resources The enormous impact of the COVID-19 pandemic on the U.S. travel industry created an urgent liquidity crisis for the entire airline industry, including the Company.
Although return on invested capital is commonly used as a measure of capital efficiency, definitions of return on invested capital differ; therefore, the Company is providing an explanation of its calculation for non-GAAP return on invested capital in the accompanying reconciliation in order to allow investors to compare and contrast its calculation to the calculations provided by other companies. 84 Table of Contents Liquidity and Capital Resources Net cash provided by operating activities for 2024 was $462 million, and net cash provided by operating activities for 2023 was $3.2 billion.
In addition, the Company continues to maintain investment-grade credit ratings by all three major credit agencies (Moody's, S&P Global, and Fitch). The following discussion includes various short-term and long-term material cash requirements from known contractual and other obligations, but does not include amounts that are contingent on events or other factors that are uncertain or unknown at this time.
Baa1 BBB BBB+ The following discussion includes various short-term and long-term material cash requirements from known contractual and other obligations, but does not include amounts that are contingent on events or other factors that are uncertain or unknown at this time.
This disruption and subsequent recovery efforts resulted in the cancellation of more than 16,700 flights during the period from December 21 through December 31, 2022. For fourth quarter 2022, the Company estimated the financial impact of this disruption was approximately $800 million on a pre-tax basis.
This disruption and subsequent recovery efforts resulted in the cancellation of more than 16,700 flights during the period from December 21 through December 31, 2022.
The majority of the year-over-year unit cost decrease was driven by a decrease in the Company's fuel cost per gallon, partially offset by higher salaries, wages, and benefits expense. Operating expenses per ASM for 2023, excluding Fuel and oil expense, profitsharing, and special items (a non-GAAP financial measure), decreased 1.2 percent, year-over-year.
This increase was mostly offset by the decrease in the Company's fuel cost per gallon. Operating expenses per ASM for 2024, excluding Fuel and oil expense, profitsharing, and special items (a non-GAAP financial measure), increased 7.8 percent, year-over-year.
The Company is currently 60 percent hedged in first quarter 2024, 55 percent hedged in second quarter 2024, and 56 percent hedged in second half 2024.
The Company is currently 51 percent hedged in first quarter 2025, 45 percent hedged in second quarter 2025, and 46 percent hedged in second half 2025.
The most recent instance in which the Agreement was amended was in fourth quarter 2021. The Agreement has the following multiple elements: travel points to be awarded, use of the Southwest Airlines’ brand and access to Rapid Rewards Member lists, advertising elements, and the Company’s resource team.
Agreements with Chase have the following multiple elements: travel points to be awarded, use of the Southwest Airlines’ brand and access to Rapid Rewards Member lists, advertising elements, and the Company’s resource team.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 62 Liquidity and Capital Resources 76 Critical Accounting Policies and Estimates 80 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84 Item 8. Financial Statements and Supplementary Data 88 Southwest Airlines Co. Consolidated Balance Sheet 88 Southwest Airlines Co.
Biggest changeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 67 Liquidity and Capital Resources 85 Critical Accounting Policies and Estimates 89 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 94 Item 8. Financial Statements and Supplementary Data 98 Southwest Airlines Co. Consolidated Balance Sheet 98 Southwest Airlines Co.
Consolidated Statement of Income 89 Southwest Airlines Co. Consolidated Statement of Comprehensive Income 90 Southwest Airlines Co. Consolidated Statement of Stockholders’ Equity 91 Southwest Airlines Co. Consolidated Statement of Cash Flows 92 Notes to Consolidated Financial Statements 93
Consolidated Statement of Income 99 Southwest Airlines Co. Consolidated Statement of Comprehensive Income 100 Southwest Airlines Co. Consolidated Statement of Stockholders’ Equity 101 Southwest Airlines Co. Consolidated Statement of Cash Flows 102 Notes to Consolidated Financial Statements 103

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

33 edited+3 added−2 removed21 unchanged
Biggest changeWhile the Company uses financial leverage, it strives to maintain a strong balance sheet and has a "BBB+" rating with Fitch, a "BBB" rating with Standard & Poor’s, and a "Baa1" credit rating with Moody’s as of December 31, 2023, all of which are considered "investment grade." See Note 7 to the Consolidated Financial Statements for more information on the material terms of the Company’s short-term and long-term debt.
Biggest changeSee Note 6 to the Consolidated Financial Statements for more information on the material terms of the Company’s short-term and long-term debt. The Company's senior unsecured notes outstanding as of December 31, 2024 are all fixed-rate obligations. See Note 6 to the Consolidated Financial Statements for further information.
Utilizing these assumptions and considering the Company’s cash balance (excluding the impact of cash collateral deposits held from or provided to counterparties, if applicable) and short-term investments outstanding as of December 31, 2023, an increase in rates would have a net positive effect on the Company’s earnings and cash flows, while a decrease in rates would have a net negative effect on the Company’s earnings and cash flows.
Utilizing these assumptions and considering the Company’s cash balance (excluding the impact of cash collateral deposits held from or provided to counterparties, if applicable) and short-term investments outstanding as of December 31, 2024, an increase in rates would have a net negative effect on the Company’s earnings and cash flows, while a decrease in rates would have a net positive effect on the Company’s earnings and cash flows.
This sensitivity analysis uses industry standard valuation models and holds all inputs constant as of December 31, 2023, levels, except underlying futures prices. The Company’s credit exposure related to fuel derivative instruments is represented by the fair value of contracts that are in an asset position to the Company.
This sensitivity analysis uses industry standard valuation models and holds all inputs constant as of December 31, 2024, levels, except underlying futures prices. The Company’s credit exposure related to fuel derivative instruments is represented by the fair value of contracts that are in an asset position to the Company.
Under these processing agreements, and based on specified conditions, increasing amounts of cash reserves could be required to be posted with the counterparty. There was no cash reserved for this purpose as of December 31, 2023. A majority of the Company’s sales transactions are processed by Chase Paymentech.
Under these processing agreements, and based on specified conditions, increasing amounts of cash reserves could be required to be posted with the counterparty. There was no cash reserved for this purpose as of December 31, 2024. A majority of the Company’s sales transactions are processed by Chase Paymentech.
Cash reserve requirements are based on the Company’s public debt rating and a corresponding percentage of the Company’s Air traffic liability. As of December 31, 2023, no holdbacks were in place. As of December 31, 2023, the Company was in compliance with all credit card processing agreements.
Cash reserve requirements are based on the Company’s public debt rating and a corresponding percentage of the Company’s Air traffic liability. As of December 31, 2024, no holdbacks were in place. As of December 31, 2024, the Company was in compliance with all credit card processing agreements.
The Company does not purchase or hold any derivative financial instruments for trading purposes. See Note 11 to the Consolidated Financial Statements for information on the Company’s accounting for its hedging program and for further details on the Company’s financial derivative instruments.
The Company does not purchase or hold any derivative financial instruments for trading purposes. See Note 10 to the Consolidated Financial Statements for information on the Company’s accounting for its hedging program and for further details on the Company’s financial derivative instruments.
The Company believes that it will be able to continue to renew its existing credit card processing agreements or will be able to enter into new credit card processing agreements with other processors in the future. 87 Table of Contents
The Company believes that it will be able to continue to renew its existing credit card processing agreements or will be able to enter into new credit card processing agreements with other processors in the future. 97 Table of Contents
Due to the significance of the Company’s fuel hedging program and the emphasis that the Company places on utilizing fuel derivatives to reduce its fuel price risk, the Company has created a system of governance and management oversight and has put in place a number of internal controls designed so that procedures are properly followed and accountability is present at the appropriate levels.
Due to the significance of the Company’s current fuel hedging program and the historical emphasis that the Company has placed on utilizing fuel derivatives to reduce its fuel price risk, the Company has created a system of governance and management oversight and has put in place a number of internal controls designed so that procedures are properly followed and accountability is present at the appropriate levels.
The Company has found that financial derivative instruments in commodities, such as West Texas Intermediate ("WTI") crude oil, Brent crude oil, and refined products, such as heating oil and unleaded gasoline, can be useful in decreasing its exposure to jet fuel price volatility.
The Company has found that financial derivative instruments in commodities, such as WTI crude oil, Brent crude oil, and refined products, such as heating oil and unleaded gasoline, can be useful in decreasing its exposure to jet fuel price volatility.
As of December 31, 2023, the Company was in compliance with this covenant and there were no amounts outstanding under the Amended Credit Agreement.
As of December 31, 2024, the Company was in compliance with this covenant and there were no amounts outstanding under the Amended Credit Agreement.
The C ompany also had agreements with counterparties in which cash deposits and/or letters of credit are required to be posted as collateral whenever the net fair value of derivatives associated with those counterparties exceeds specific thresholds.
The C ompany also had agreements with counterparties in which cash deposits and letters of credit may be required to be posted as collateral whenever the net fair value of derivatives associated with those counterparties exceeds specific thresholds.
As of December 31, 2023, the Company had agreements with all of its active counterparties containing early termination rights and/or bilateral collateral provisions whereby security is required if market risk exposure exceeds a specified 84 Table of Contents threshold amount based on the counterparty’s credit rating.
As of December 31, 2024, the Company had agreements with all of its active counterparties containing early termination 94 Table of Contents rights and/or bilateral collateral provisions whereby security is required if market risk exposure exceeds a specified threshold amount based on the counterparty’s credit rating.
As of December 31, 2023, the Company had no outstanding interest rate swap agreements and therefore no cash collateral deposits provided or held.
As of December 31, 2024, the Company had no outstanding interest rate swap agreements and therefore no cash collateral deposits provided or held.
Credit card processors have financial risk associated with tickets purchased for travel because the processor generally forwards the cash related to the purchase to the Company soon after the purchase is completed, but the air travel generally occurs after that time; therefore, the processor will have liability if the Company does not ultimately 86 Table of Contents provide the air travel.
Credit card processors have financial risk associated with tickets purchased for travel because the processor generally forwards the cash related to the purchase to the Company soon after the purchase is completed, but the air travel generally occurs after that time; therefore, the processor will have liability if the Company does not ultimately provide the air travel.
Assuming floating market rates in effect as of December 31, 2023 were held constant throughout a 12-month period, a hypothetical 10 percent change in those rates would have resulted in an approximate $59 million impact on the Company’s net earnings and cash flows.
Assuming floating market rates in effect as of December 31, 2024 were held constant throughout a 12-month period, a hypothetical 10 percent change in those rates would have resulted in an approximate $36 million impact on the Company’s net earnings and cash flows.
Refer to the counterparty credit risk and collateral table provided in Note 11 to the Consolidated Financial Statements for the fair values of fuel derivatives, amounts held as collateral, and applicable collateral posting threshold amounts as of December 31, 2023, at which such postings are triggered.
Refer to the counterparty credit risk and collateral table provided in Note 10 to the Consolidated Financial Statements for the fair values of fuel derivatives, amounts held as collateral, and applicable collateral posting threshold amounts as of December 31, 2024, at which such postings are triggered.
At such times, these outstanding instruments expose the Company to credit loss in the event of nonperformance by the counterparties to the agreements. As of December 31, 2023, the Company had eight counterparties for which the derivatives held were an asset and none in a loss position.
At such times, these outstanding instruments expose the Company to credit loss in the event of nonperformance by the counterparties to the agreements. As of December 31, 2024, the Company had nine counterparties for which the derivatives held were an asset and none in a loss position.
In addition, to add further protection, the Company may periodically enter into jet fuel derivatives for short-term timeframes. Jet fuel is not widely traded on an organized futures exchange and, therefore, there are limited opportunities to hedge directly in jet fuel for time horizons longer than approximately 24 months into the future.
In addition, to add further protection, the Company has in the past periodically entered into jet fuel derivatives for short-term timeframes. Jet fuel is not widely traded on an organized futures exchange and, therefore, there are limited opportunities to hedge directly in jet fuel for time horizons longer than approximately 24 months into the future.
See Note 11 to the Consolidated Financial Statements for further information. The Company currently has agreements with organizations that process credit card transactions arising from purchases of air travel tickets by its Customers utilizing American Express, Discover, and MasterCard/VISA.
See Note 10 to the Consolidated Financial Statements for further information. 96 Table of Contents The Company currently has agreements with organizations that process credit card transactions arising from purchases of air travel tickets by its Customers utilizing American Express, Discover, and MasterCard/VISA.
An immediate 10 percent increase or decrease in underlying fuel-related commodity prices from prices as of December 31, 2023 would correspondingly change the fair value of the commodity derivative instruments in place by approximately $148 million.
An immediate 10 percent increase or decrease in underlying fuel-related commodity prices from prices as of December 31, 2024 would correspondingly change the fair value of the commodity derivative instruments in place by approximately $100 million.
The gross fair value of outstanding financial derivative instruments related to the Company’s jet fuel market price risk as of December 31, 2023, was an asset of $223 million. In addition, $50 million in cash collateral deposits were held by the Company in connection with these instruments based on their fair value as of December 31, 2023.
The gross fair value of outstanding financial derivative instruments related to the Company’s jet fuel market price risk as of December 31, 2024, was an asset of $130 million. In addition, $22 million in cash collateral deposits were held by the Company in connection with these instruments based on their fair value as of December 31, 2024.
See Notes 1 and 12 to the Consolidated Financial Statements for further information. The Company currently invests available cash in certificates of deposit, highly rated money market instruments, investment grade commercial paper, treasury securities, U.S. government agency securities, and other highly rated financial instruments, depending on market conditions and operating cash requirements.
See Notes 1 and 11 to the Consolidated Financial Statements for further information. The Company currently invests available cash in certificates of deposit, highly rated money market instruments, treasury securities, U.S. government agency securities, and other highly rated financial instruments, depending on market conditions and operating cash requirements.
A hypothetical 10 percent change in market interest rates as of December 31, 2023, would have resulted in an approximate $74 million change in the fair value of the Company’s fixed-rate debt instruments. See Note 12 to the Consolidated Financial Statements for further information on the fair value of financial instruments.
A hypothetical 10 percent change in market interest rates as of December 31, 2024, would have resulted in an approximate $46 million change in the fair value of the Company’s fixed-rate debt instruments. See Note 11 to the Consolidated Financial Statements for further information on the fair value of financial instruments.
As of December 31, 2023, the Company operated a total of 81 aircraft under operating and finance leases.
As of December 31, 2024, the Company operated a total of 106 aircraft under operating and finance leases.
The Company's total debt divided by total assets was 21.9 percent as of December 31, 2023. The Company also has some risk associated with changing interest rates due to the short-term nature of its invested cash, which totaled $9.3 billion, and short-term investments, which totaled $2.2 billion as of December 31, 2023.
The Company's total debt divided by total assets was 19.8 percent as of December 31, 2024. The Company also has some risk associated with changing interest rates due to the short-term nature of its invested cash, which totaled $7.5 billion, and short-term investments, which totaled $1.2 billion as of December 31, 2024.
Based on this anticipated usage, a change in jet fuel prices of just one cent per gallon would impact the Company’s Fuel and oil expense by approximately $22 million for 2024, excluding any impact associated with fuel derivative instruments held.
The Company currently expects to consume approximately 2.2 billion gallons of jet fuel in 2025. Based on this anticipated usage, a change in jet fuel prices of just one cent per gallon would impact the Company’s Fuel and oil expense by approximately $22 million for 2025, excluding any impact associated with fuel derivative instruments held.
The effect of this termination is that the value of the swaps originally recorded in AOCI, a gain of $23 million, will be amortized to Interest expense over the life of the debt, which will be within the years 2024-2027. See Note 11 to the Consolidated Financial Statements for further information.
The effect of this termination is that the value of the swaps originally recorded in AOCI, a gain of $23 million, will be amortized to Interest expense over the life of new debt instruments, which could be issued through 2027. See Note 10 to the Consolidated Financial Statements for further information.
As a result of the gain realized on this transaction, which is being amortized over the remaining term of the corresponding notes, and based on projected interest rates at the date of termination, the Company does not believe its future interest expense, based on projected future interest rates at the date of termination, associated with these notes will significantly differ from the expense it would have recorded had the notes remained at floating rates. 85 Table of Contents During fourth quarter 2023, the Company terminated $150 million notional value of forward-starting interest rate swap agreements.
As a result of the gain realized on this transaction, which is being amortized over the remaining term of the corresponding notes, and based on projected interest rates at the date of termination, the Company does not believe its future interest expense, based on projected future interest rates at the date of termination, associated with these notes will significantly differ from the expense it would have recorded had the notes remained at floating rates.
As of December 31, 2023, the Company held a net position of fuel derivative instruments that represented a hedge for a portion of its anticipated jet fuel purchases for future periods through 2026. See Note 11 to the Consolidated Financial Statements for further information.
As of December 31, 2024, the Company held a net position of fuel derivative instruments that represented a hedge for a portion of its anticipated jet fuel purchases for future periods through 2027.
The Company is also subject to the risk that the fuel derivatives it uses to hedge against fuel price volatility do not provide adequate protection.
The Company is also subject to the risk that the fuel derivatives it uses to hedge against fuel price volatility do not provide adequate protection. For example, historically, a portion of the fuel derivatives in the Company's hedge portfolio have been based on the market price of WTI crude oil.
The Company’s long-term strategy is to maintain a conservative balance sheet and generate adequate profits and returns on capital, while growing capacity steadily under the right conditions.
The Company’s long-term strategy is to maintain a conservative balance sheet and generate adequate profits and returns on capital, while growing capacity steadily under the right conditions. While the Company uses financial leverage, it strives to maintain a strong balance sheet and has investment grade credit ratings with all three major credit rating agencies as of December 31, 2024.
These swap agreements had been classified as cash flow hedges, and all fair market value changes were recorded to AOCI prior to their termination.
During fourth quarter 2023, the Company terminated $150 million notional value of forward-starting interest rate swap agreements associated with the Company's forecasted issuance of debt. These swap agreements had been classified as cash flow hedges, and all fair market value changes were recorded to AOCI prior to their termination.
The Company's senior unsecured notes outstanding as of December 31, 2023 are all fixed-rate obligations. See Note 7 to the Consolidated Financial Statements for further information. The $100 million 7.375% debentures due 2027 had at one point been converted to a floating rate, but the Company subsequently terminated the fixed-to-floating interest rate swap agreements related to it.
The $100 million 7.375% debentures due 2027 had at one point been converted to a floating rate, but the Company subsequently terminated the fixed-to-floating interest rate swap agreements related to it. The effect of this 95 Table of Contents termination was that the interest associated with this debt prospectively reverted back to its original fixed rate.
Removed
The Company believes there can be significant risk in not hedging against the possibility of such fuel price increases, especially in energy markets in which prices are high and/or rising. The Company currently expects to consume approximately 2.2 billion gallons of jet fuel in 2024.
Added
Based on the current geopolitical and market dynamics, higher premium costs over time, and aggressive cost reductions underway, the Company does not intend to add new hedging positions to its current hedge book. See Note 10 to the Consolidated Financial Statements for further information.
Removed
The effect of this termination was that the interest associated with this debt prospectively reverted back to its original fixed rate.
Added
As mentioned above in "Critical Accounting Policies and Estimates", since the Company could no longer demonstrate that derivatives based on WTI crude oil prices would result in effective hedges on a prospective basis, the change in fair value of all of the Company's derivatives based in WTI have been recorded to Other (gains) losses during the second half of 2024.
Added
The Company currently has no WTI-based derivatives that settle beyond 2024. In recent years, jet fuel prices have been more closely correlated with changes in the price of Brent crude oil, and therefore the Company has attempted to mitigate some of this risk by entering into more fuel hedges based on Brent crude.

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