Southwest Airlines (LUV) 10-K risk factor changes: FY2017 vs FY2016

Although the U.S. economy has experienced [removed: moderate] [added: modest] economic growth over the course of the past several years, any continuing or future U.S. or global economic uncertainty could negatively affect the [removed: Company’s] [added: Company's] results of operations and could cause the Company to adjust its business strategies.

Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented approximately 22 percent of the [removed: Company’s] [added: Company's] operating expenses for [removed: 2016.][added: 2017.]

Although [removed: 2016] [added: 2017] fuel prices were [removed: lower] [added: moderately higher] than [removed: in 2015,] [added: 2016 fuel prices,] as discussed above under "Business - Cost Structure," the cost of fuel can be extremely volatile and unpredictable, and even a small change in market fuel prices can significantly affect profitability.

For example, fuel prices can be impacted by political 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) limited domestic refining or pipeline [removed: capacity;] [added: 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.

The [removed: Company’s] [added: Company's] ability to effectively address fuel price increases could be limited by factors such as its historical low-fare reputation, the portion of its Customer base that purchases travel for leisure purposes, the competitive nature of [removed: the airline industry generally, and the risk that higher fares will drive a decrease in demand.]

However, [removed: as evidenced by the extreme decline in jet fuel prices in late 2015,] energy prices can fluctuate significantly in a relatively short amount of time.

The Company is also subject to the risk that [removed: additional] cash collateral may be required to be posted to fuel hedge counterparties, which could have a significant impact on the [removed: Company’s] [added: Company's] financial position and liquidity.

The [removed: Company’s] [added: Company's] low-cost structure has historically been one of its primary competitive advantages, as it has enabled it to offer low fares, drive traffic volume, [removed: and] grow market [removed: share; however fuel] [added: share,] and [removed: labor costs, as well as other costs such as regulatory compliance costs, can negatively affect the Company’s ability to control its costs.][added: protect profits.]

Jet fuel and oil constituted approximately 22 percent of the [removed: Company’s] [added: Company's] operating expenses during [removed: 2016,] [added: 2017,] and the [removed: Company’s] [added: Company's] ability to control the cost of fuel is subject to the external factors discussed in the second Risk Factor above.

Salaries, wages, and benefits constituted approximately 41 percent of the [removed: Company’s] [added: Company's] operating expenses during [removed: 2016.][added: 2017.]

As discussed further under [removed: “Management’s] [added: "Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations,”] [added: Operations,"] the [removed: Company’s] [added: Company's] unionized workforce, which makes up approximately [removed: 83%] [added: 83 percent] of its Employees, has had pay scale increases as a result of contractual rate increases.

Additionally, the majority of [removed: Southwest’s] [added: Southwest's] unionized Employees, including its Pilots; Flight Attendants; Ramp, Operations, Provisioning, and Freight Agents; Aircraft Appearance Technicians; and Flight Crew Training Instructors, [removed: have] ratified new collective-bargaining agreements during 2016, which have put pressure on the [removed: Company’s] [added: Company's] low-cost structure.

Furthermore, as indicated above under [removed: “Business] [added: "Business] - [removed: Employees,”] [added: Employees,"] other Southwest unionized Employees, including its [removed: Mechanics; Material Specialists;] [added: Mechanics] and [removed: Facilities Maintenance Technicians,] [added: Material Specialists,] are in unions currently in negotiations for labor agreements, which could result in additional pressure on the [removed: Company’s] [added: Company's] low-cost structure.

When this occurs, airport costs are allocated among a fewer number of total [added: flights,]

[removed: flights,] which can result in increased landing fees and other costs for the Company.

The Company is also reliant upon third party vendors and service providers, [removed: and] [added: in particular with respect to] its [added: fleet and technology initiatives and performance, and the Company's] low-cost advantage is also dependent in part on its ability to obtain and maintain commercially reasonable terms with those parties.

Although the Company has been able to purchase [removed: war-risk (terrorism)] [added: aviation, property, liability, and professional] insurance via the commercial insurance marketplace, available commercial insurance could be more expensive in the future and/or have material differences in coverage than insurance that has historically been provided and may not be adequate to protect against the Company's risk of loss from future [added: events, including] acts of terrorism.

In addition, like Southwest, some competitors have [removed: plans to add] [added: added] a significant number of new [added: and different] aircraft to their fleets, which could potentially decrease their operating costs through better fuel efficiencies and lower maintenance costs.

The Company is increasingly dependent on technology to operate its business and continues to implement substantial changes to its information systems; any failure, disruption, [added: breach,] or [removed: breach] [added: delay] in [added: implementation of] the [removed: Company’s] [added: Company's] information systems could materially adversely affect its operations.

The Company is increasingly dependent on the use of complex technology and systems to run its ongoing [removed: operations,] [added: operations] and [removed: the Company continues to implement technology initiatives to] support its [removed: ongoing operations and strategies.][added: strategic objectives.]

[removed: Integration] [added: Implementation and integration] of complex systems and technology presents significant challenges in terms of costs, human resources, and development of effective internal controls.

[removed: Integration also presents] [added: Implementation and integration require a balancing between] the [added: 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 [removed: Company’s] [added: Company's] ability to effectively operate its business and/or could negatively impact the [removed: Company’s] [added: Company's] results of operations.

The Company is also reliant upon [added: the performance of its] third party [removed: performance] [added: vendors] for timely and effective completion of many of its technology [removed: initiatives.][added: initiatives and for maintaining adequate information security measures.]

Modifications and refinements to the [removed: Company’s] [added: Company's] systems have been and are expected to continue to be expensive to implement and [removed: may] [added: can] divert management’s attention from other matters.

In addition, the [removed: Company’s] [added: Company's] operations could be adversely affected, or it could face imposition of regulatory penalties, if it were unable to timely or effectively modify its systems as [removed: necessary.][added: necessary or appropriately balance the introduction of new capabilities with the management of existing systems.]

The Company has [removed: occasionally] experienced system interruptions and delays that make its websites and services unavailable or slow to respond, which can prevent the Company from efficiently processing Customer transactions or providing services, and these could continue to occur in the future.

These system interruptions and delays can reduce the [removed: Company’s] [added: Company's] operating revenues and the attractiveness of its [removed: services] [added: services,] as well as increase the [removed: Company’s] [added: Company's] costs.

Salaries, wages, and benefits represented approximately 41 percent of the [removed: Company’s] [added: Company's] operating expenses for the year ended December 31, [removed: 2016.][added: 2017.]

In addition, as of December 31, [removed: 2016,] [added: 2017,] approximately 83 percent of the [removed: Company’s] [added: 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 currently dependent on single aircraft and engine suppliers, as well as single suppliers of certain other parts; therefore, the Company would be materially adversely affected if it were unable to obtain additional equipment or support from any of these [removed: suppliers or] [added: suppliers,] in the event of a mechanical or regulatory issue associated with their [removed: equipment.][added: equipment, or in the event the pricing and operational attributes of the Company's equipment become less competitive.]

Therefore, if the Company [removed: were] [added: was] unable to acquire additional aircraft from Boeing, or if Boeing [removed: were] [added: was] unable or unwilling to make timely deliveries of aircraft or to provide adequate support for its products, the [removed: Company’s] [added: Company's] operations would be materially adversely affected.

The Company believes, however, that its years of experience with the Boeing 737 aircraft type, as well as the efficiencies Southwest has historically achieved by operating with a single aircraft type, [added: continue to] outweigh the risks associated with its single aircraft supplier strategy.

In the ordinary course of its business, the Company [added: also] provides certain confidential, proprietary, and personal information to third parties.

While the Company seeks to obtain assurances that these third parties will protect this information, there is a risk the [removed: confidentiality] [added: security] of data held by third parties could be breached.

However, organic growth remains challenging because (i) the opportunities for domestic expansion are limited; (ii) the Company's international network is relatively small [removed: and international expansion presents unique challenges; and (iii) the Company has faced an increased presence of other low-cost, low-fare carriers.]

As a result, the Company is reliant on the success of its revenue strategies to help offset [added: certain increasing costs.]

Terrorist attacks or other [added: crimes and] hostilities, actual and threatened, have from time to time materially adversely affected the demand for air travel and also have resulted in increased safety and security costs for the Company and the airline industry generally.

The [removed: FAA’s] [added: FAA's] protracted transition to a satellite-based air traffic control system, as well as the implementation of policies and standards that account for the precision of global positioning system-supported aircraft technologies, could continue to adversely impact airspace capacity and the overall efficiency of the system, resulting in limited opportunities for the Company to grow, longer scheduled flight times, [removed: more] [added: increased] delays and cancellations, and increased fuel consumption and aircraft emissions.

| • | limitations on airport gate capacity or use of other airport facilities such as the 2016 [added: and 2017] reallocation of slots at John Wayne Airport in Orange County, California, which caused the Company to reduce service at that airport; |

| • | outbreaks of disease; [added: and] |

the airline industry generally, and the risk that higher fares will drive a decrease in demand.

Also, see Note 2 to the Consolidated Financial Statements for information on future changes in applicable standards for hedge accounting.

The Company's low-cost position has become even more significant with the increased presence of ULCCs and changes to the legacy fare offerings discussed above; however, it has become increasingly difficult for the Company to improve upon its industry cost position.

For example, labor and fuel costs, as well as other costs such as regulatory compliance costs, can negatively affect the Company's ability to control its costs.

Further, available cyber-security insurance with regards to data protection and business interruption could be more expensive in the future and/or have material differences in coverage than insurance that has historically been provided and may not be adequate to protect the Company's risk of loss.

ULCCs, which have increased capacity in the Company's markets, have surpassed the Company's cost advantage.

The Company could also be materially adversely affected if the pricing or operational attributes of its equipment were to become less competitive.

and international expansion presents unique challenges; and (iii) the Company has faced an increased presence of other low-cost, low-fare carriers.

| • | adverse weather and natural disasters such as the hurricanes and earthquakes in third quarter 2017, which resulted in approximately $100 million in reduced revenues for the Company as a result of approximately 5,000 canceled flights; |

As discussed above under “Regulation – Operational, Safety, and Health Regulation,” in January 2018, the Company submitted a formal application to the FAA for authorization to conduct ETOPS using Boeing 737-800 aircraft, in connection with the Company’s plans to begin service to Hawaii.

If the Company receives FAA authorization and commences ETOPS, the Company will be subject to additional, ongoing, ETOPS-specific regulatory and procedural requirements, which could add operational and compliance risks to the Company’s business, including costs associated therewith.

Some so called “ultra low-cost carriers” have surpassed the Company’s cost advantage while continuing to add aircraft, expand their networks, and add competition to the Company’s routes.

Furthermore, some of the Company’s competitors have taken advantage of reorganization in bankruptcy, and even the threat of bankruptcy, not only to lower employee pay scales, but also to decrease operating costs through renegotiated supply and financing agreements.

In addition, some airlines have consolidated and reported significant cost synergies.

certain increasing costs and to continue to improve Customer Service.

| • | adverse weather and natural disasters; |

Laws in some jurisdictions differ in significant

For the [removed: 44th] [added: 45th] consecutive year, the Company was profitable, recording GAAP and non-GAAP results for [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] as noted in the following tables.

| GAAP | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | Percent Change |

| Operating [removed: income] [added: income, as reported] | [added: $] | [added: 3,515 | | |] $ | 3,760 | | | $ | 4,116 | | [removed: | (8.6) |]

| Net income | | $ | [removed: 2,244] [added: 3,488] | | | $ | [removed: 2,181] [added: 2,244] | | | [removed: 2.9] [added: 55.4] |

| Net income per share, diluted | | $ | [removed: 3.55] [added: 5.79] | | | $ | [removed: 3.27] [added: 3.55] | | | [removed: 8.6] [added: 63.1] |

| Operating income | | $ | [removed: 3,957] [added: 3,455] | | | $ | 3,957 | | | [removed: —] [added: (12.7)] |

| Net income | | $ | [removed: 2,370] [added: 2,107] | | | $ | [removed: 2,355] [added: 2,370] | | | [removed: 0.6] [added: (11.1)] |

| Net income per share, diluted | | $ | [removed: 3.75] [added: 3.50] | | | $ | [removed: 3.52] [added: 3.75] | | | [removed: 6.5] [added: (6.7)] |

Net income for the year ended December 31, [removed: 2016,] [added: 2017,] was [removed: a Company record $2.24] [added: $3.5] billion, a [removed: 2.9] [added: 55.4] percent increase year-over-year, or [removed: $3.55] [added: $5.79] per diluted [added: share, and non-GAAP Net income was $2.1 billion, an 11.1 percent decrease year-over-year, or $3.50 per diluted] share.

[removed: Year] [added: Operating income for the year] ended December 31, [removed: 2016 Operating income] [added: 2017] was [removed: $3.8 billion] [added: $3.52 billion, a decrease of 6.5 percent year-over-year,] and non-GAAP Operating income was [removed: $4.0] [added: $3.46] billion.

For the twelve months ended December 31, [removed: 2016,] [added: 2017,] the [removed: Company] [added: Company's earnings performance, combined with its actions to manage invested capital,] produced a [removed: 30.0] [added: 25.9] percent [removed: Return] [added: pre-tax non-GAAP return] on invested capital ("ROIC"), compared with [removed: 32.7] [added: the Company's ROIC of 30.0] percent for the twelve months ended December 31, [removed: 2015.][added: 2016.]

During [removed: 2016,] [added: 2017,] the Company continued to return [removed: significant] value to its Shareholders.

The Company returned [removed: a record $2.0] [added: $1.9] billion to Shareholders through [removed: a combined $222] [added: $274] million in dividend payments and [removed: $1.75] [added: $1.6] billion through [removed: five] [added: four] separate accelerated share repurchase [removed: programs.][added: programs and other open market repurchases.]

During November [removed: 2016,] [added: 2017,] the Company launched the Fourth Quarter [removed: 2016] [added: 2017] ASR Program by advancing [removed: $300] [added: $250] million to a financial institution in a privately negotiated transaction.

The specific number of shares that the Company ultimately will repurchase under the [removed: Fourth] [added: First] Quarter [removed: 2016] [added: 2018] ASR Program will be determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period to be completed [removed: in February 2017.][added: no later than May 2018.]

With the addition of these new markets, the Company now serves [removed: 101 cities] [added: 100 destinations] across [removed: nine countries] [added: 40 states] and [added: ten near-international countries, and] operates over [removed: 3,900] [added: 4,000] departures a day.

During [removed: 2016,] [added: 2017,] the Company took delivery of [removed: 38] [added: 39 new] 737-800 aircraft from [removed: Boeing] [added: Boeing, 13 new 737 MAX 8 aircraft from Boeing,] and [removed: 23] [added: 18] pre-owned Boeing 737-700 aircraft from third parties.

The Company also retired [removed: 31 Boeing 737-300 ("Classic") aircraft and] its remaining [removed: 11] [added: 87] Boeing [removed: 737-500] [added: 737-300 ("Classic") aircraft, which included 61 Classic] aircraft [removed: during the year.][added: grounded in September 2017 as part of an accelerated retirement schedule.]

For 2018, the Company's current firm aircraft commitments would result in [removed: 743] [added: 750] aircraft by year-end [removed: 2018, including nine Boeing 737-800 options exercised during 2016, and two Boeing 737-800 options exercised in January 2017.][added: 2018.]

See Note [removed: 4] [added: 2] to the Consolidated Financial Statements for further information.

The Company [removed: is] [added: became] the [removed: launch customer for] [added: first airline in North America to offer scheduled service utilizing] Boeing’s new, more [removed: fuel-efficient 737-8] [added: fuel-efficient, 737 MAX 8] aircraft, which [removed: is expected to enter] [added: entered] service in fourth quarter 2017.

[removed: Southwest] [added: The Company] is [removed: also] [added: scheduled to be] the launch customer for the Boeing [removed: 737-7] [added: 737 MAX 7] series aircraft, with deliveries expected to begin in 2019.

Currently, the Company has firm orders in place for [removed: 170 737-8] [added: 197 737 MAX 8] aircraft and 30 [removed: 737-7] [added: 737 MAX 7] aircraft.

[removed: | • | The] [added: During November 2017, the] Company's [removed: Aircraft Appearance] [added: Facilities Maintenance] Technicians, represented by [removed: the] Aircraft Mechanics Fraternal Association ("AMFA"), ratified a [removed: new] [added: tentative] collective-bargaining agreement with the Company. [removed: The newly ratified contract becomes amendable in November 2020. |]

[removed: Holding all other factors constant, the increase was primarily attributable to a 5.7 percent increase in capacity as strong] Customer demand for low-fare air travel enabled the Company to fill the additional seats, as evidenced by a Company record annual load factor of 84.0 percent.

On a unit basis, Passenger revenues decreased 3.8 percent, year-over-year, largely driven by a 4.3 percent decrease in passenger revenue yield, year-over-year, which included a reduction to 2016 Passenger revenues associated with the [removed: Agreement] [added: Company's July 2015 amended co-branded credit card agreement ("Agreement")] with [removed: Chase, as] [added: Chase Bank USA, N.A. ("Chase") and] a [removed: result of the] [added: resulting] required change in accounting [removed: methodology in 2015.][added: methodology.]

See Note [removed: 1] [added: 2] to the Consolidated Financial Statements for further information.

Based on current trends, the Company currently expects Freight revenues in first quarter [removed: 2017] [added: 2018] to [removed: be comparable] [added: increase, compared] with first quarter [removed: 2016.][added: 2017.]

See Note [removed: 1 to the Consolidated Financial Statements and the Note] Regarding Use of Non-GAAP Financial Measures for further information.

Other revenues for 2016 increased [added: by] $490 million, or 41.9 percent, compared with 2015, primarily as a result of the Agreement with Chase and the resulting required change in accounting methodology.

Excluding this impact of the Agreement with Chase, Other revenues increased primarily due to higher ancillary revenues associated with EarlyBird Check-in® and A1-15 select [added: open priority] boarding positions sold at the airport.

The Company currently expects Other revenues in first quarter [removed: 2017] [added: 2018] to increase, compared with first quarter [removed: 2016.][added: 2017.]

Based on revenue and booking trends thus far in first quarter [removed: 2017,] [added: 2018,] the Company is currently expecting first quarter [removed: 2017] [added: 2018] operating unit revenues to [removed: be flat to down] [added: increase in the] one [removed: percent,] [added: to two percent range,] compared with first quarter [removed: 2016.][added: 2017.]

Operating expenses for 2016 increased [added: by] $961 million, or 6.1 percent, compared with 2015, while capacity increased 5.7 percent over the same period.

Historically, except for changes in the price of fuel, changes in Operating expenses for [added: airlines have been largely driven by changes in capacity, or ASMs.]

[added: Historically, except for changes in the price of fuel, changes in Operating expenses for] airlines have been largely driven by changes in capacity, or ASMs.

The following table presents the Company's Operating expenses per ASM for 2016 and 2015, followed by explanations of these changes on a per ASM basis [removed: and] [added: and/or on a] dollar basis:

| (in cents, except for percentages) | 2016 | | | | 2015 | | | | change | | | | [removed: change] | |

| Depreciation and amortization | 0.82 | | | | 0.72 | | | | 0.10 | | | | [removed: 13.9] [added: —] | |

| Acquisition and integration | — | | | | 0.03 | | | | (0.03 | | ) | | [removed: n.m.] [added: (100.0] | [added: )] |

| Operating income | | $ | 3,515 | | | $ | 3,760 | | | (6.5) |

The increase in GAAP Net income was primarily driven by a $1.4 billion reduction in Provision for income taxes related to the Tax Cuts and Jobs Act legislation enacted in December 2017, which resulted in a re-measurement of the Company's deferred tax assets and liabilities at the new federal corporate tax rate of 21 percent.

The decrease in Operating Income was driven by a 7.7 percent increase in Salaries, wages, and benefits expense, primarily due to wage rate increases resulting from amended collective-bargaining agreements reached with multiple unionized workgroups, coupled with an 8.0 percent increase in Fuel and oil expense, primarily due to increases in market prices.

These factors were partially offset by a 2.9 percent increase in Passenger revenues driven by strong demand for low-fare air travel and a 3.6 percent year-over-year capacity growth, holding Load factor and Passenger yield constant.

Prior year results included $356 million of contract ratification bonuses accrued in Salaries, wages, and benefits expense associated with tentative collective-bargaining agreements reached with multiple unionized workgroups.

The primary cause of the year-over-year decline in ROIC was the decrease in Operating income for the twelve months ended December 31, 2017, compared with the twelve months ended December 31, 2016.

The Company received 4.1 million shares in total under the Fourth Quarter 2017 ASR Program, which was completed in January 2018.

On January 31, 2018, the Company launched a new accelerated share repurchase program by advancing $500 million to a financial institution in a privately negotiated transaction ("First Quarter 2018 ASR Program").

The purchase will be recorded as a treasury share purchase for purposes of calculating earnings per share.

Subsequent to the launch of the First Quarter 2018 ASR Program, the Company has $850 million remaining under its May 2017 $2.0 billion share repurchase authorization.

During 2017, the Company began scheduled service to new international destinations of Grand Cayman Island and Providenciales, Turks & Caicos, as well as new domestic service to Cincinnati/Northern Kentucky International airport.

Additionally, the Company announced plans to begin selling tickets in 2018 for service to Hawaii, subject to requisite governmental approvals, including approval from the FAA for Extended Operations ("ETOPS"), a regulatory requirement to operate between the U.S. mainland and the Hawaiian Islands.

The Company recorded a charge of $63 million related to the leased portion of the Classic fleet, representing the remaining net lease payments due and certain lease return requirements that could have to be performed on these leased aircraft prior to their return to the lessors, as of the cease-use date.

See Part I, Item 2 for further information.

See Part I, Item 2 for further information.

The Company currently plans to grow its 2018 available seat miles in the low five percent range, year-over-year, with first half 2018 year-over-year growth in the low three percent range and second half 2018 year-over-year growth in the low seven percent range.

The Company continues to expect the retirement of its Classic aircraft to produce significant incremental cost savings and improvements in pre-tax results of at least $200 million, cumulatively, by the end of 2020.

On May 9, 2017, the Company completed a multi-year initiative to completely transition its reservation system to the Amadeus Altéa Passenger Service System.

The new reservation system, which represented the largest technology project in the Company's history, was designed to improve flight scheduling and inventory management, enable operational enhancements to manage flight disruptions, such as those caused by extreme weather conditions, enable revenue enhancements, further schedule optimization, support additional international growth, and enable other foundational and operational capabilities.

The Company continues to expect the new reservation system to produce incremental benefits in pretax results of approximately $200 million in 2018.

The newly ratified contract becomes amendable in November 2022.

2017 Compared with 2016

Holding Load factor and Passenger yield constant, the increase was primarily attributable to a 3.6 percent increase in capacity, partially offset by approximately $100 million in reduced revenues as a result of the hurricanes and earthquakes during third quarter 2017.

Load factor remained solid at 83.9 percent.

Other revenues for 2017 increased by $197 million, or 11.9 percent, compared with 2016.

Approximately 70 percent of the increase was due to an increase in revenue associated with cardholder spend on the Company's co-branded Chase® Visa credit card, and the remainder of the increase was due to higher ancillary revenues primarily as a result of EarlyBird Check-In revenues of $358 million in 2017, an increase of $29 million, or 8.7 percent, compared with 2016.

The Company currently expects EarlyBird Check-in revenues to have a similar year-over-year growth rate in 2018, as compared with 2017.

Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

Therefore, the Company will adopt the standard as of January 1, 2018, utilizing the full retrospective method of adoption allowed by the standard, in order to provide for comparative results in all periods presented.

As such, in the Company's first quarter 2018 Form 10–Q, both first quarter 2018 results and first quarter 2017 results will be presented under the new standard.

On the Consolidated Statement of Income, the estimated impact of this ASU for full year 2017 and 2016 will be a decrease to Operating revenues of approximately $25 million and $135 million, respectively, and a decrease to Operating expenses of approximately $40 million in each year.

The ASU will also result in the reclassification of certain ancillary revenues from Other revenues to Passenger revenues for each period.

| Salaries, wages, and benefits | | 4.76 | ¢ | | | 4.57 | ¢ | | | 0.19 | ¢ | | 4.2 | % |

| Fuel and oil | 2.56 | | | | 2.46 | | | | 0.10 | | | | 4.1 | |

| Maintenance materials and repairs | 0.65 | | | | 0.70 | | | | (0.05 | | ) | | (7.1 | ) |

| Aircraft rentals | 0.13 | | | | 0.15 | | | | (0.02 | | ) | | (13.3 | ) |

| Depreciation and amortization | 0.79 | | | | 0.82 | | | | (0.03 | | ) | | (3.7 | ) |

| Other operating expenses | 1.75 | | | | 1.70 | | | | 0.05 | | | | 2.9 | |

| Total | | 11.48 | ¢ | | | 11.22 | ¢ | | | 0.26 | ¢ | | 2.3 | % |

Operating expenses per ASM for 2017 increased 2.3 percent, compared with 2016, primarily due to wage rate increases, increases in market jet fuel prices, and charges associated with the grounding of the Company's remaining Classic aircraft.

This increase was primarily driven by a 41.9 percent increase in Other operating revenues due to the Company's July 2015 amended co-branded credit card agreement ("Agreement") with Chase Bank USA, N.A. ("Chase") and a resulting required change in accounting methodology (see Note 1 to the Consolidated Financial Statements for further information), coupled with increased Passenger revenues driven by strong demand for low-fare air travel and a 5.7 percent year-over-year capacity growth.

This increase was partially offset by an increase in Salaries, wages, and benefits expense, an increase in Depreciation and amortization expense, and an increase in Other operating expenses.

These items are discussed in more detail below.

Excluding special items in both years, non-GAAP Net income was a record $2.37 billion, a 0.6 percent increase year-over-year, or $3.75 per diluted share.

During December 2016, the Company received an initial delivery of 4.7 million shares of common stock, representing an estimated 75 percent of shares to be purchased by the Company under the Fourth Quarter 2016 ASR Program.

During 2016, the Company began scheduled service to Long Beach, California and scheduled service to three Cuban cities: Havana, Varadero, and Santa Clara.

Also in January 2017, the Company filed an application with the DOT to serve Owen Roberts International Airport in Grand Cayman, and announced plans to launch service to Cincinnati/Northern Kentucky International Airport, both scheduled to begin in June 2017.

The Company currently plans to grow its 2017 available seat miles approximately 3.5 percent, year-over-year, with approximately 2.5 points of that increase relating to domestic growth.

By the end of third quarter 2017, the Company intends to retire the 87 Classic aircraft remaining in its fleet at December 31, 2016.

After taking into account scheduled deliveries for new and pre-owned aircraft in 2017, this accelerated retirement schedule is expected to decrease the Company's fleet to 703 aircraft by year-end 2017.

The 737-8 is expected to reduce fuel burn and CO2 emissions approximately 20 percent, compared with the 737-300 and 737-500 aircraft when they first entered service.

The Company is in the midst of a multi-year project to completely replace its reservation system.

In 2014, the Company launched the Amadeus Altéa reservations solution to support the Company’s international service.

The Company has since begun implementing Amadeus' Altéa reservations solution as the Company's future single reservation system for both domestic and international reservations.

The implementation consists of two foundational releases.

Release 1 was completed in December 2016, and added functionality to enable the sale of domestic tickets on the new reservation system.

Release 2 is expected to be completed on May 9, 2017 and will add functionality to enable operational capabilities such as passenger check-in and boarding and baggage check-in on the new reservation system.

Subsequent releases will add functionality to enable revenue enhancements, further schedule optimization, support for international growth, and additional foundational and operational capabilities.

During 2016, the following events took place regarding the Company's unionized Employee groups in contract negotiations:

| | |

| --- | --- |

| • | The Company's Flight Crew Training Instructors, represented by Transport Workers Union ("TWU") Local 557, ratified a new collective-bargaining agreement with the Company. The newly ratified contract becomes amendable in December 2019. |

| • | The Company's Ramp, Operations, Provisioning, and Freight Agents, represented by TWU Local 555, ratified a new collective-bargaining agreement with the Company. The newly ratified contract becomes amendable in February 2021. |

| • | The Company's Pilots, represented by the Southwest Airlines Pilots' Association, ratified a new collective-bargaining agreement. The newly ratified contract becomes amendable in September 2020. |

| • | The Company's Flight Attendants, represented by TWU Local 556, ratified a new collective-bargaining agreement with the Company. The newly ratified contract becomes amendable in November 2018. |

| • | The Company's Facilities Maintenance Technicians, represented by AMFA, reached a tentative collective-bargaining agreement with the Company, which was announced in October 2016. The Facilities Maintenance Technicians failed to ratify this agreement, as announced by the Company on December 29, 2016, and the parties will continue negotiations. |

The transportation element of the consideration received is now allocated a lower relative value, resulting in a reduction in the revenues classified as Passenger on a prospective basis, and the higher relative value associated with the non-transportation elements results in an increase in the portion of revenues classified as Other within the Consolidated Statement of Income; however, the precise revenue impact for future periods is not determinable until the volume of future transactions for the period is known.

The Company recorded a Special revenue adjustment during 2015 of $172 million.

The Company currently expects to record a charge during 2017 associated with the grounding of its remaining Classic fleet.

This charge primarily relates to future contractual payments due to lessors for leased Classic aircraft with lease terms extending beyond third quarter 2017.

The Company continues to negotiate with these lessors in order to attempt to terminate certain leases early and potentially buy-out the remainder of the lease.

Therefore, the Company cannot yet accurately predict the amounts and/or timing of such charges during the first three quarters of 2017.

| Southwest Facilities Maintenance Technicians | 40 | AMFA | N/A |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | Maximum percent of estimated fuel consumption covered by | | | | |

| Period | | Heating Oil, and Gulf Coast Jet Fuel-equivalent price levels (1) | | | | |

| 2017 | | 63% | | | | |

| 2018 | | 57% | | | | |

The following table displays the Company's estimated fair value of remaining fuel derivative contracts

As of December 31, [removed: 2016, Southwest] [added: 2017, the Company] operated a total of [removed: 134] [added: 122] aircraft under operating and capital lease.

Further information about [removed: this sublease arrangement] [added: these leases] is disclosed in Note 7 to the Consolidated Financial Statements.

The Company believes there can be significant risk in not hedging against the possibility of such fuel price increases, especially in energy [removed: markets in which prices are high and/or rising.]

The Company expects to consume approximately [removed: 2] [added: 2.1] billion gallons of jet fuel in [removed: 2017.][added: 2018.]

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 [removed: $20] [added: $21] million for [removed: 2017,] [added: 2018,] excluding any impact associated with fuel derivative instruments held.

As of December 31, [removed: 2016,] [added: 2017,] the Company held a net position of fuel derivative instruments that represented a hedge for a portion of its anticipated jet fuel purchases for [removed: each year from 2017 through 2019.][added: future periods.]

The gross fair value of outstanding financial derivative instruments related to the Company’s jet fuel market price risk at December 31, [removed: 2016,] [added: 2017,] was a net [removed: liability] [added: asset] of [removed: $326] [added: $248] million.

In addition, [removed: $301] [added: $15] million in cash collateral deposits were [removed: provided] [added: held] by the Company in connection with these instruments based on their fair value as of December 31, [removed: 2016.][added: 2017.]

An immediate 10 percent increase or decrease in underlying fuel-related commodity prices from the December 31, [removed: 2016 (for all years from 2017 through 2019)] [added: 2017,] prices would correspondingly change the fair value of the commodity derivative instruments in place by approximately [removed: $266] [added: $214] million.

This sensitivity analysis uses industry standard valuation models and holds all inputs constant at December 31, [removed: 2016,] [added: 2017,] 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 an asset [added: position] to the Company.

As of December 31, [removed: 2016,] [added: 2017,] the Company had [removed: five] [added: eight] counterparties in which the derivatives held were a net asset.

However, if one or more of these counterparties were in a liability position to the Company and were unable to meet their obligations, [added: any open derivative contracts with the counterparty could be subject to early termination, which could result in substantial losses for the Company.]

At December 31, [removed: 2016,] [added: 2017,] 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 threshold amount based on the counterparty’s credit rating.

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 [removed: posted] [added: held] as collateral, and applicable collateral posting threshold amounts as of December 31, [removed: 2016,] [added: 2017,] at which such postings are triggered.

Due to the [added: Company's investment grade credit rating,] terms of the Company’s current fuel hedging agreements with [removed: counterparties] [added: counterparties,] and the types of derivatives [removed: held,] [added: held as of December 31, 2017,] in the [removed: Company’s] [added: Company's] judgment, it does not have [removed: significant additional] cash collateral exposure.

As of December 31, [removed: 2016,] [added: 2017,] no cash collateral deposits were provided by or held by the Company based on its outstanding interest rate swap agreements.

While the Company uses financial leverage, it strives to maintain a strong balance sheet and has a [removed: “BBB+”] [added: "BBB+"] rating with Fitch, a [removed: “BBB”] [added: "BBB+"] rating with Standard & Poor’s, and [removed: a “Baa1”] [added: an "A3"] credit rating with Moody’s as of December 31, [removed: 2016,] [added: 2017,] all of which are considered [removed: “investment grade.”] [added: "investment grade."] The Company’s French Credit Agreements due 2018 do not give rise to significant fair value risk but do give rise to interest rate risk because this borrowing was originally issued as floating-rate debt.

[added: Although there is interest rate] risk associated with these floating rate borrowings, the risk of the French Credit Agreements due 2018 is somewhat mitigated by the fact that the Company may prepay this debt under certain conditions.

As of December 31, [removed: 2016,] [added: 2017,] excluding the notes or debentures that have been converted to a floating rate, the Company’s fixed-rate senior unsecured notes outstanding included its $300 million [removed: 5.125%] [added: 2.75%] senior unsecured notes due [removed: 2017,] [added: 2022,] its $300 million 3.00% senior unsecured notes due 2026, [removed: and] its $100 million 7.375% senior unsecured notes due [added: 2027, and its $300 million 3.45% senior unsecured notes due] 2027.

[removed: Excluding the] [added: The $100 million 7.375% senior unsecured] notes due [removed: 2026, these notes] [added: 2027] had at one point been converted to [added: a] floating [removed: rates,] [added: rate,] but the Company subsequently terminated the fixed-to-floating interest rate swap agreements related to [removed: them.][added: it.]

The effect of [removed: these terminations] [added: this termination] was that the interest associated with [removed: these debts] [added: this debt] prospectively reverted back to [removed: their] [added: its] original fixed [removed: rates.][added: rate.]

As a result of the [removed: gains] [added: gain] realized on [removed: these transactions,] [added: this transaction,] which [removed: are] [added: 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.

The following table displays the characteristics of the Company’s secured fixed rate debt as of December 31, [removed: 2016:][added: 2017:]

| Term Loan Agreement | | $ | [removed: 106] [added: 66] | | | 6.315 | % | | 5/6/2019 | | 14 specified Boeing 737-700 aircraft |

| Term Loan Agreement | | [removed: 28] [added: 19] | | | | 4.84 | % | | 7/1/2019 | | 4 specified Boeing 737-700 aircraft |

| Term Loan Agreement | | [removed: 284] [added: 237] | | | | 5.223 | % | | 5/9/2020 | | 21 specified Boeing 737-700 aircraft |

The carrying value of the Company’s floating rate debt totaled [removed: $1.1] [added: $1.0] billion, and this debt had a weighted-average maturity of [removed: 4.69] [added: 3.04] years at floating rates averaging [removed: 1.97] [added: 2.42] percent for the year ended December 31, [removed: 2016.][added: 2017.]

In total, the Company’s fixed-rate debt and floating rate debt represented [removed: 12.44] [added: 13] percent and [removed: 5.59] [added: 5] percent, respectively, of consolidated noncurrent assets at December 31, [removed: 2016.][added: 2017.]

The Company also has some risk associated with changing interest rates due to the short-term nature of its invested cash, which totaled [removed: $1.7] [added: $1.5] billion, and short-term investments, which totaled [removed: $1.6] [added: $1.8] billion at December 31, [removed: 2016.][added: 2017.]

A hypothetical 10 percent change in market interest rates as of December 31, [removed: 2016,] [added: 2017,] would not have a material effect on the fair value of the Company’s fixed-rate debt instruments.

Assuming floating market rates in effect as of December 31, [removed: 2016] [added: 2017] were held constant throughout a 12-month period, a hypothetical 10 percent change in those rates would have an immaterial impact on the Company’s net earnings and cash flows.

Utilizing these assumptions and considering the Company’s cash balance (excluding the impact of cash collateral deposits held or provided to counterparties, if applicable), short-term investments, and floating-rate debt outstanding at December 31, [removed: 2016,] [added: 2017,] an increase in rates would have a net [removed: negative] [added: positive] effect on the Company’s earnings and cash flows, while a decrease in rates would have a net [removed: positive] [added: negative] effect on the Company’s earnings and cash flows.

The Company is also subject to a financial covenant included in its revolving credit facility, and is subject to credit rating triggers related to its credit card transaction processing agreements, the pricing related to any funds drawn under [added: its revolving credit facility, and some of its hedging counterparty agreements.]

As of December 31, [removed: 2016,] [added: 2017,] the Company was in compliance with this covenant and there were no amounts outstanding under the revolving credit facility.

The Company’s hedging counterparty agreements contain ratings triggers in which [removed: additional] cash collateral could be required to be posted with the counterparty if the Company’s credit rating were to fall below investment grade by two of the three major rating agencies, and if the Company [removed: were] [added: was] in a net liability position with the counterparty.

As of December 31, [removed: 2016,] [added: 2017,] the Company was in compliance with all credit card processing agreements.

[removed: However, the] [added: The] inability to enter into credit card processing agreements would have a material adverse effect on the business of the Company.

In addition, the Company has 15 remaining Classic aircraft under operating leases which were grounded in September 2017.

markets in which prices are high and/or rising.

The Company has found that financial derivative instruments in commodities, such as West Texas Intermediate 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.

any open derivative contracts with the counterparty could be subject to early termination, which could result in substantial losses for the Company.

Given its investment grade credit rating, the Company can meet any additional significant collateral calls by posting aircraft and/or letters of credit.

As an example, if market prices for the commodities used in the Company’s fuel hedging activities were to decrease by 25 percent from market prices as of December 31, 2016, given the Company’s current fuel derivative portfolio, its aircraft collateral facilities, and its investment grade credit rating, it would likely provide an additional $256 million in collateral.

The Company would have the option of providing cash, letters of credit, and/or pledging aircraft in order to meet this collateral requirement.

At December 31, 2016, the Company had $1.6 billion in aircraft available to be posted as collateral.

In addition, the Company would expect to also benefit from lower market prices paid for fuel used in its operations.

In recent years, jet fuel prices have been closely correlated with changes in the price of Brent crude oil.

The Company has attempted to mitigate some of this risk by entering into more fuel hedges based on Brent crude oil.

Although there is interest rate

its revolving credit facility, and some of its hedging counterparty agreements.

As of December 31, 2016, $301 million in cash collateral deposits were provided by the Company under these provisions.

If the Company’s credit rating had been below investment grade as of that date, the Company would not have been required to post additional cash collateral deposits with fuel hedge counterparties because it had room available under its existing aircraft collateral facilities.

A complaint alleging violations of federal antitrust laws and seeking certification as a class action was filed against Delta Air Lines, Inc. and AirTran [added: Holdings, Inc. and its subsidiary AirTran Airways, Inc. (collectively with AirTran Holdings, Inc., "AirTran")] in the United States District Court for the Northern District of Georgia in Atlanta on May 22, 2009.

In addition to treble damages for the amount of first baggage fees paid to AirTran and to Delta, the Consolidated Amended Complaint [removed: seeks] [added: sought] injunctive relief against a broad range of alleged anticompetitive activities, as well as attorneys' fees.

On June 18, 2012, the parties filed a Stipulation and Order that plaintiffs [removed: have] abandoned their claim that AirTran and Delta conspired to reduce capacity.

The CID seeks information and documents about the Company’s capacity from January 2010 to the [removed: present] [added: date of the CID] including public statements and communications with third parties about capacity.

In June 2015, the Company also received a letter from the Connecticut Attorney General requesting information about capacity; and on August 21, 2015, the Attorney General of the State of Ohio issued an investigative demand seeking information and documents about the Company’s capacity from December 2013 to the [removed: present.][added: date of the CID.]

The Company denies all allegations of wrongdoing and intends to vigorously defend [removed: these] [added: this] civil [removed: cases.][added: case in Canada.]

In December 2015, the Company entered into Tolling and Discontinuance agreements with putative class counsel in the Federal [removed: Court and] [added: Court,] British [removed: Columbia] [added: Columbia,] and Ontario proceedings and a discontinuance agreement with putative class counsel in the Quebec proceeding.

On [removed: September 28, 2016,] [added: February 14, 2017,] the [removed: plaintiff filed a] [added: Quebec Court granted the plaintiff’s] motion to discontinue the Quebec proceeding against the Company and to stay that proceeding against the other defendants.

The [added: Saskatchewan claim has not been served on the Company, and the] time for the Company to respond to [removed: the remaining complaints] [added: that complaint] has not yet [removed: expired.][added: begun to run.]

The [removed: plaintiffs] [added: plaintiff] in [removed: the remaining complaints] [added: that case] generally [removed: seek] [added: seeks] damages (including punitive damages in certain cases), prejudgment interest, disgorgement of any benefits accrued by the defendants as a result of the allegations, injunctive relief, and attorneys' fees and other costs.

The following information regarding the Company’s executive officers is as of February 1, [removed: 2017.][added: 2018.]

| Gary C. Kelly | Chairman of the Board & Chief Executive Officer | [removed: 61] [added: 62] |

| Thomas M. Nealon | President | [removed: 55] [added: 56] |

| Michael G. Van de Ven | Chief Operating Officer | [removed: 55] [added: 56] |

| Robert E. Jordan | Executive Vice President [removed: & Chief Commercial Officer] [added: Corporate Services] | [removed: 56] [added: 57] |

| Tammy Romo | Executive Vice President & Chief Financial Officer | [removed: 54] [added: 55] |

| Gregory D. Wells | Executive Vice President Daily Operations | [removed: 58] [added: 59] |

| Mark R. Shaw | Senior Vice President, General Counsel, & Corporate Secretary | [removed: 54] [added: 55] |

Mr. Kelly also served as President from July 2008 to January 2017, Executive Vice President & Chief [added: Financial Officer from June 2001 to July 2004, and Vice President Finance & Chief Financial Officer from 1989 to 2001.]

Jordan has served as the [removed: Company’s] [added: Company's] Executive Vice President [removed: & Chief Commercial Officer] [added: Corporate Services] since [removed: September 2011] [added: July 2017] and as President of AirTran Airways, Inc. since May 2011.

Mr. Jordan also served as Executive Vice President [added: & Chief Commercial Officer from September 2011 to July 2017, Executive Vice President] Strategy & Planning from May 2008 to September 2011, Executive Vice President Strategy & Technology from September 2006 to May 2008, Senior Vice President Enterprise Spend Management from August 2004 to September 2006, Vice President Technology from 2002 to 2004, Vice President Purchasing from 2001 to 2002, Controller from 1997 to 2001, Director Revenue Accounting from 1994 to 1997, and Manager Sales Accounting from 1990 to 1994.

[removed: Jeff Lamb] [added: Watterson] has served as the [removed: Company’s] [added: Company's] Executive Vice President [removed: Corporate Services] [added: & Chief Revenue Officer] since July [removed: 2015.][added: 2017.]

Ms. 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 [removed: 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.]

Mr. Wells has [removed: almost] [added: over] 35 years of experience with the Company.

Mr. Shaw also served as Vice President, General Counsel, & Corporate Secretary from February 2013 to July [added: 2015 and as Associate General Counsel - Corporate & Transactions from February 2008 to February 2013.]

Defendants have appealed that decision.

On March 29, 2017, the Court granted defendants’ motion for summary judgment and dismissed all claims against AirTran.

On April 13, 2017, the plaintiffs filed a notice of appeal from the district court's judgment, and on April 24, 2017, AirTran filed a conditional notice of cross-appeal to appeal the Court's order certifying a class.

The appeals of the class certification and summary judgment orders have been consolidated.

The Court has scheduled oral argument for the appeals on March 7, 2018.

On December 20, 2017, the Company reached an agreement to settle

these cases with a proposed class of all persons who purchased domestic airline transportation services from July 1, 2011, to the date of the settlement.

The Company agreed to pay $15 million and to provide certain cooperation with the plaintiffs as set forth in the settlement agreement.

The Court granted preliminary approval of the settlement on January 3, 2018, and it is anticipated that the Court will establish a schedule for providing notice to the class, for class members to object or opt out, and for a final fairness hearing.

The Company denies all allegations of wrongdoing.

On March 10, 2017, the Ontario Court granted the plaintiff’s motion to discontinue that proceeding as to the Company.

On September 29, 2017, the Company and the other defendants entered into a tolling agreement suspending any limitations periods that may apply to possible claims among them for contribution and indemnity arising from the Canadian litigation.

The Company does not currently serve Canada.

| Andrew M. Watterson | Executive Vice President & Chief Revenue Officer | 51 |

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.

Andrew M.

Mr. Watterson also served as Senior Vice President & Chief Revenue Officer from January 2017 to July 2017, Senior Vice President of Network & Revenue from January 2016 to January 2017, and as Vice President of Network Planning & Performance from October 2013 to January 2016.

Prior to becoming an officer of the Company, Mr. Watterson served as Vice President of Planning and Revenue Management at Hawaiian Airlines from May 2011 to October 2013.

The parties engaged in extensive discovery, and discovery has now closed.

The parties filed motions to exclude the opinions of the other parties' experts on class certification and on the merits.

On January 8, 2016, the parties completed briefing on defendants' motions for summary judgment, plaintiffs' motion for class certification, and the motions to exclude the opinions of experts.

Defendants submitted a petition to appeal the class certification decision, which the Court of Appeals for the Eleventh Circuit granted on October 7, 2016, and the appeal is ongoing.

Defendants’ motions for summary judgment have been submitted for decision and are still pending.

On January 31, 2017, the Court entered a case management schedule

that calls for discovery to be completed, and for plaintiffs to file a motion for class certification, by April 27, 2018.

An initial case conference in the Ontario litigation was held on January 27, 2017, and the case managing judge scheduled a motion to discontinue that proceeding as to the Company for March 10, 2017.

The Company denies all allegations of wrongdoing and intends to vigorously defend these civil cases in Canada.

| Jeff Lamb | Executive Vice President Corporate Services | 54 |

Financial Officer from June 2001 to July 2004, and Vice President Finance & Chief Financial Officer from 1989 to 2001.

Mr. Lamb also served as Executive Vice President & Chief People & Administrative Officer from September 2011 to July 2015, Senior Vice President Administration & Chief People Officer from October 2007 to September 2011, Vice President People & Leadership Development from February 2006 to October 2007, and as Senior Director People Development from December 2004 until February 2006.

2015 and as Associate General Counsel - Corporate & Transactions from February 2008 to February 2013.

10-K 1 [removed: luv-12312016x10k.htm] [added: luv-12312017x10k.htm] FORM 10-K

| | For the fiscal year ended December 31, [removed: 2016] [added: 2017] |

[removed: ][added: ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or a] smaller reporting [added: company, or an emerging growth] company.

See the definitions of [removed: “large] [added: "large] accelerated [removed: filer,” “accelerated filer” and “smaller] [added: filer," "accelerated filer," "smaller] reporting [removed: company”] [added: company," and "emerging growth company"] in Rule 12b-2 of the Exchange Act.

| [removed: Large accelerated filer | | þ | | Accelerated filer | | ¨ | |] Non-accelerated filer [removed: | |] ¨ | | Smaller reporting company [removed: | |] ¨ | [removed: |]

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately [removed: $24,270,482,662] [added: $37,211,057,645] computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, [removed: 2016,] [added: 2017,] the last trading day of the registrant’s most recently completed second fiscal quarter.

Number of shares of common stock outstanding as of the close of business on February [removed: 3, 2017: 615,254,524] [added: 5, 2018: 587,950,973] shares

Portions of the Definitive Proxy Statement for the Company’s Annual Meeting of Shareholders to be held May [removed: 17, 2017,] [added: 16, 2018,] are incorporated into Part III of this Annual Report on Form 10-K.

| Item 1. | [removed: [Business](#sBF52A3334A2753EDB682E287A4BCA566)] [added: [Business](#s8CACB078D01F5E199D575A9D4BB07FE5)] | [removed: [4](#sBF52A3334A2753EDB682E287A4BCA566)] [added: [4](#s8CACB078D01F5E199D575A9D4BB07FE5)] |

| Item 1A. | [Risk [removed: Factors](#s11C20A20575F5AD286EF8C56EB38931D)] [added: Factors](#s3E305E87B5855E8982B98D3E49F5701D)] | [removed: [20](#s11C20A20575F5AD286EF8C56EB38931D)] [added: [21](#s3E305E87B5855E8982B98D3E49F5701D)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s2D37B4C079C553D3A682CC376B1B7075)] [added: Comments](#s5FB7FE874FC75715AEEBA4D9A455ECB1)] | [removed: [26](#s2D37B4C079C553D3A682CC376B1B7075)] [added: [27](#s5FB7FE874FC75715AEEBA4D9A455ECB1)] |

| Item 2. | [removed: [Properties](#sCBDC6FB501245E95B268FD50A1B9D966)] [added: [Properties](#sD416F1B3E7875626A1D705FEB3EF0F70)] | [removed: [26](#sCBDC6FB501245E95B268FD50A1B9D966)] [added: [28](#sD416F1B3E7875626A1D705FEB3EF0F70)] |

| Item 3. | [Legal [removed: Proceedings](#s49AA948F0627572DA25042C9336D5E61)] [added: Proceedings](#s4DB798FAC67E50F4860BCF3825ABFDAA)] | [removed: [28](#s49AA948F0627572DA25042C9336D5E61)] [added: [30](#s4DB798FAC67E50F4860BCF3825ABFDAA)] |

| Item 4. | [Mine Safety [removed: Disclosures](#sB66B9F5B40045F22A44804505BB18010)] [added: Disclosures](#sA175203B0A34516FA8080ADC8963A7C4)] | [removed: [29](#sB66B9F5B40045F22A44804505BB18010)] [added: [31](#sA175203B0A34516FA8080ADC8963A7C4)] |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity [removed: Securities](#s1D7E6B03D92957ABA03FF8044B61AD1D)] [added: Securities](#sC9DEE18549CD52CAAE2BC1E67F6F4767)] | [removed: [32](#s1D7E6B03D92957ABA03FF8044B61AD1D)] [added: [34](#sC9DEE18549CD52CAAE2BC1E67F6F4767)] |

| Item 6. | [Selected Financial [removed: Data](#sA0EA33312D5D5F668DDAC7AE2AC0CBC9)] [added: Data](#sFB36BCF4E1135BFC8F2B9EA3C96F0C10)] | [removed: [34](#sA0EA33312D5D5F668DDAC7AE2AC0CBC9)] [added: [37](#sFB36BCF4E1135BFC8F2B9EA3C96F0C10)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sFCC7B348993058999E391799154EB859)] [added: Operations](#s754993E3789753CAB06975084773D1CF)] | [removed: [36](#sFCC7B348993058999E391799154EB859)] [added: [39](#s754993E3789753CAB06975084773D1CF)] |

| | [Liquidity and Capital [removed: Resources](#sB5FE867D0AC85A50A7825C3E1961A35E)] [added: Resources](#sD22CB1608B015F4494A8884142337F65)] | [removed: [49](#sB5FE867D0AC85A50A7825C3E1961A35E)] [added: [55](#sD22CB1608B015F4494A8884142337F65)] |

| | [Off-Balance Sheet Arrangements, Contractual Obligations, and Contingent Liabilities and [removed: Commitments](#sB5A59AC88A0353CC8BB9322F038E7A24)] [added: Commitments](#s4A68CD19FD055BB2A88E418FE3AD8F46)] | [removed: [51](#sB5A59AC88A0353CC8BB9322F038E7A24)] [added: [57](#s4A68CD19FD055BB2A88E418FE3AD8F46)] |

| | [Critical Accounting Policies and [removed: Estimates](#s6599287EE105547B8424EF709A60113B)] [added: Estimates](#s12F63C13861357CA84F311F13222B664)] | [removed: [54](#s6599287EE105547B8424EF709A60113B)] [added: [59](#s12F63C13861357CA84F311F13222B664)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s88253CC3DE11555EAF47D78314A18368)] [added: Risk](#sFBDDEAC6295F5D138A2E613ABF686CED)] | [removed: [60](#s88253CC3DE11555EAF47D78314A18368)] [added: [66](#sFBDDEAC6295F5D138A2E613ABF686CED)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#s1C6594E502915E9FA0CD3970251F9720)] [added: Data](#s011A96757716573AB6AC9366F7FE8CFA)] | [removed: [63](#s1C6594E502915E9FA0CD3970251F9720)] [added: [71](#s011A96757716573AB6AC9366F7FE8CFA)] |

| | [Southwest Airlines Co. Consolidated Balance [removed: Sheet](#s06BB168C1C525326B6E295C3D1EC824C)] [added: Sheet](#sCDC9D9947F165AD1A3308B39CAD0E327)] | [removed: [63](#s06BB168C1C525326B6E295C3D1EC824C)] [added: [71](#sCDC9D9947F165AD1A3308B39CAD0E327)] |

| | [Southwest Airlines Co. Consolidated Statement of [removed: Income](#s9B0259E7C2A850EA989CCD10F80FB408)] [added: Income](#sD0F271D1667655F4AD0F5DE4AD45DF8A)] | [removed: [64](#s9B0259E7C2A850EA989CCD10F80FB408)] [added: [72](#sD0F271D1667655F4AD0F5DE4AD45DF8A)] |

| | [Southwest Airlines Co. Consolidated Statement of Comprehensive [removed: Income](#sAAF911135F6C52E698991866A21104AA)] [added: Income](#sFBBAD60C18395E82BF9B297ED8266DC6)] | [removed: [65](#sAAF911135F6C52E698991866A21104AA)] [added: [73](#sFBBAD60C18395E82BF9B297ED8266DC6)] |

| | [Southwest Airlines Co. Consolidated Statement of Stockholders’ [removed: Equity](#s4FD5968B8825504781B641220682815E)] [added: Equity](#s88FA8807426450E8A969C647DA9B47E0)] | [removed: [66](#s4FD5968B8825504781B641220682815E)] [added: [73](#s88FA8807426450E8A969C647DA9B47E0)] |

| | [Southwest Airlines Co. Consolidated Statement of Cash [removed: Flows](#s30D88EEBE39F5DDE9A6F8FF761035A33)] [added: Flows](#s769371C3879959ACB3C1B7A2BBFF5BD7)] | [removed: [67](#s30D88EEBE39F5DDE9A6F8FF761035A33)] [added: [74](#s769371C3879959ACB3C1B7A2BBFF5BD7)] |

| | [Notes to Consolidated Financial [removed: Statements](#sE54E1DD70F2E53C6AC31C256A2F37FDB)] [added: Statements](#sCDCD4FFF862D548395A9F9800C6333A2)] | [removed: [68](#sE54E1DD70F2E53C6AC31C256A2F37FDB)] [added: [75](#sCDCD4FFF862D548395A9F9800C6333A2)] |

| Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#sF8CF722E4B0451878EFC200C64F9C8A1)] [added: Disclosure](#s97D550C19E6B5EF29F2376AEA8C5CB27)] | [removed: [106](#sF8CF722E4B0451878EFC200C64F9C8A1)] [added: [113](#s97D550C19E6B5EF29F2376AEA8C5CB27)] |

| Item 9A. | [Controls and [removed: Procedures](#s0402287DF69955459714C883DF41D1EA)] [added: Procedures](#s6B3216642AEF5916823437033EAF7176)] | [removed: [106](#s0402287DF69955459714C883DF41D1EA)] [added: [113](#s6B3216642AEF5916823437033EAF7176)] |

| Item 9B. | [Other [removed: Information](#sF726D3968F0C565F95B1A85563F1346C)] [added: Information](#s574C9B1403BE5D0381C85B62858A4CCB)] | [removed: [107](#sF726D3968F0C565F95B1A85563F1346C)] [added: [114](#s574C9B1403BE5D0381C85B62858A4CCB)] |

| Item 10. | [Directors, Executive Officers, and Corporate [removed: Governance](#sD83C8497728E57C981277A2E0ABA5CD9)] [added: Governance](#s7402175E0A03502B93380C13BB51CB50)] | [removed: [107](#sD83C8497728E57C981277A2E0ABA5CD9)] [added: [115](#s7402175E0A03502B93380C13BB51CB50)] |

| Item 11. | [Executive [removed: Compensation](#sABE107F5F2175036A2CF275BA5DEDFFA)] [added: Compensation](#s3B84D45FAA675D2DA0B56F343C6B9244)] | [removed: [107](#sABE107F5F2175036A2CF275BA5DEDFFA)] [added: [115](#s3B84D45FAA675D2DA0B56F343C6B9244)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s609E1011C6A85053BBB827C6FBC79C5A)] [added: Matters](#sC4CD0C4AFB745F97AE9E71FA6F4259D2)] | [removed: [107](#s609E1011C6A85053BBB827C6FBC79C5A)] [added: [115](#sC4CD0C4AFB745F97AE9E71FA6F4259D2)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sB3CCC15F7BFC52D9A4ADCEC080C9BF0C)] [added: Independence](#s22B906B229DF52FF92461553EB18B793)] | [removed: [108](#sB3CCC15F7BFC52D9A4ADCEC080C9BF0C)] [added: [116](#s22B906B229DF52FF92461553EB18B793)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s150450E5E69850BDB6A1F4DC05BC6C8B)] [added: Services](#s885DF2B30426532484C332CEC211B4DF)] | [removed: [108](#s150450E5E69850BDB6A1F4DC05BC6C8B)] [added: [116](#s885DF2B30426532484C332CEC211B4DF)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#sCB19C84AB9355151959CC8C0A7DBA5E0)] [added: Schedules](#sC8195BF6911152768E2FF1CB1C2CCC99)] | [removed: [109](#sCB19C84AB9355151959CC8C0A7DBA5E0)] [added: [117](#sC8195BF6911152768E2FF1CB1C2CCC99)] |

For the [removed: 44th] [added: 45th] consecutive year, the Company was profitable, earning [removed: $2.2] [added: $3.5] billion in net income.

At December 31, [removed: 2016,] [added: 2017,] Southwest operated a total of [removed: 723] [added: 706] Boeing 737 aircraft and served [removed: 101] [added: 100] destinations in 40 states, the District of Columbia, the Commonwealth of Puerto Rico, and [removed: eight] [added: ten] near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, [added: Cuba, the Cayman Islands,] and [removed: Cuba.][added: Turks and Caicos.]

| Large accelerated filer þ | | Accelerated filer ¨ |

| | | Emerging growth company ¨ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| --- | --- | --- |

| | | |

| | | |

| Item 16. | [Form 10-K Summary](#s75cecd6c78874e1d965cdbeec0f3ee9c) | [122](#s75cecd6c78874e1d965cdbeec0f3ee9c) |

| [Signatures](#sA39960FC1A0D566D8115C04C75632BDC) | | [123](#sA39960FC1A0D566D8115C04C75632BDC) |

During 2017, the Company announced plans to begin selling tickets in 2018 for service to Hawaii, subject to requisite governmental approvals, including approval from the Federal Aviation Administration ("FAA") for Extended Operations ("ETOPS"), a regulatory requirement to operate between the U.S. mainland and the Hawaiian Islands.

The Company further announced its decision to cease service at Bishop International Airport in Flint, Michigan, with the last day of service on June 6, 2018.

In January 2018, the Company announced its intent to begin service at a new commercial aircraft facility at Paine Field in Everett, Washington, scheduled to be completed in 2018.

In 2017, the Company completed its deployment of a new single reservation system, the largest technology project in the Company's history.

The new reservation system was designed to improve flight scheduling and inventory management, enable revenue enhancements, support additional international growth, and enable other foundational and operational capabilities.

Further, in 2017, the Company became the first airline in North America to offer scheduled service utilizing Boeing's new, more fuel efficient, 737 MAX 8 aircraft.

The Company also retired its remaining Boeing 737-300 aircraft.

Strategic capacity increases are expected to continue in 2018.

In 2017, the airline industry continued to be impacted by the significant growth of "Ultra-Low Cost Carriers" ("ULCCs").

ULCCs offer "unbundled" service offerings, which enable them to appeal to price-sensitive travelers through promotion to consumers of an extremely low relative base fare for a seat, while separately charging for related services and products.

In response, certain major U.S. airlines (sometimes referred to as "legacy" or "network" carriers) have introduced new fare products, such as a "Basic Economy" product.

The Basic Economy product provides for a lower

base fare to compete with a ULCC base fare, but includes significant additional restrictions on amenities such as seat assignments (including restrictions on group and family seating), order of boarding, checked baggage and use of overhead bin space, flight changes and refunds, and eligibility for upgrades.

Also in response to ULCC pricing, some legacy carriers have removed their fare floors for certain routes, leading to lower fares across the industry.

Conversely, some legacy carriers offer a "Premium Economy" fare that targets consumers willing to pay extra for additional amenities such as more favorable seating options in segmented aircraft.

The Company continued its focus on California in 2017, and continues to invest significant resources to solidify its leadership position in California, including the planned addition of new domestic and international destination options and flights for California Customers, as well as additional marketing programs, loyalty incentives, and local outreach efforts designed to retain, engage, and acquire Customers.

During 2017, the Company commenced international service out of Oakland, San Diego, Nashville, and St. Louis.

In addition, the Company announced commencement in 2018 of international service out of Indianapolis, San Jose, Sacramento, Columbus, New Orleans, Pittsburgh, and Raleigh-Durham.

The Company has also concentrated its service to Cuba in Havana and ceased operations during 2017 to Varadero and Santa Clara, Cuba.

In 2017, to further support its near-international operations, the Company opened a new five-gate international concourse at Fort Lauderdale-Hollywood International Airport (FLL).

The Company expanded its international flight schedule for South Florida to a total of nine international nonstop destinations including Montego Bay, Jamaica; Belize City, Belize; Cancun, Mexico; Grand Cayman; Havana, Cuba; Nassau, The Bahamas; San Jose, Costa Rica; Punta Cana, Dominican Republic; and Turks and Caicos.

| 2017 | | $ | 3,940 | | | $ | 1.92 | | | 22.3 | % |

| First Quarter 2017 | | $ | 922 | | | $ | 1.89 | | | 21.8 | % |

| Second Quarter 2017 | | $ | 990 | | | $ | 1.84 | | | 22.0 | % |

| Third Quarter 2017 | | $ | 1,003 | | | $ | 1.92 | | | 22.6 | % |

| Fourth Quarter 2017 | | $ | 1,025 | | | $ | 2.04 | | | 22.8 | % |

The Company retired all remaining Boeing 737-300 aircraft

from its fleet in September 2017 and began scheduled service with its first Boeing 737 MAX 8 aircraft in October 2017.

The Boeing 737 MAX 8 is expected to significantly reduce fuel use and CO2 emissions, as compared with the Company's other aircraft.

The Company ended 2017 with 13 Boeing 737 MAX 8 aircraft in its fleet.

| • | "Wanna Get Away" fares are generally the lowest fares and are typically subject to advance purchase requirements. They are nonrefundable, but, subject to Southwest's No Show Policy, funds may be applied to future travel on Southwest. |

Southwest's No Show Policy applies if a Customer does not change or cancel a flight segment at least ten minutes prior to scheduled departure and the Customer does not travel on the scheduled flight.

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| [Signatures](#s35E54FFD1A2551CDBF23487A391D72DD) | | [114](#s35E54FFD1A2551CDBF23487A391D72DD) |

The Company also expanded its domestic footprint during 2016, with the commencement of service at Long Beach Airport, the Company's fifth service point in the L.A. Basin and tenth airport in California.

General

airports, by adding seats for such routes without increasing the number of flights (a “slot” is the right of an air carrier, pursuant to regulations of the Federal Aviation Administration (“FAA”), to operate a takeoff or landing at a specific time at certain airports).

With the addition of Long Beach Airport to the Company’s route map in 2016, the Company added four weekday flights from Long Beach to Oakland, which, in turn, has brought connectivity between Long Beach and 20 cities on the Southwest network across the Pacific Northwest and mid-America.

The Company has announced plans to add service, beginning in June 2017, to Cincinnati/Northern Kentucky International Airport and, subject to requisite government approvals, to Owen Roberts International Airport in Grand Cayman.

International Service

During 2016, the Company commenced international service out of Los Angeles International Airport by introducing service to Liberia, Costa Rica, and later to three airports in Mexico’s coastal regions: Cancun, San Jose del Cabo/Los Cabos, and Puerto Vallarta.

Also during 2016, the Company began scheduled international service from Fort Lauderdale with daily service to Nassau, Bahamas.

The Company has also announced its first ever international service from Oakland International Airport and San Diego International Airport, its 14th and 15th international gateway cities within the 48 contiguous United States, with daily flights from Oakland to San Jose del Cabo/Los Cabos and Puerto Vallarta scheduled to begin in February 2017 and from San Diego to San Jose del Cabo/Los Cabos scheduled to begin in April 2017.

In connection with the scheduled opening of a new five-gate international concourse at Fort Lauderdale-Hollywood International Airport (FLL) in June 2017, the Company has announced a significantly expanded international flight schedule for South Florida to a total of eight international nonstop destinations.

In addition to existing service, beginning in June 2017, the Company is scheduled to offer new daily international nonstop service from Fort Lauderdale to Montego Bay, Jamaica; Belize City, Belize; and Cancun, Mexico, and subject to requisite government approvals, Grand Cayman.

The Company's operating revenues in 2014 included the operating revenues of AirTran Airways ("AirTran").

AirTran's final passenger service occurred on December 28, 2014, and it has been integrated into Southwest.

and Ft.

| First Quarter 2016 | | $ | 852 | | | $ | 1.80 | | | 21.9 | % |

| Second Quarter 2016 | | $ | 903 | | | $ | 1.75 | | | 22.0 | % |

| Third Quarter 2016 | | $ | 941 | | | $ | 1.83 | | | 21.2 | % |

| Fourth Quarter 2016 | | $ | 952 | | | $ | 1.90 | | | 22.5 | % |

The Company also announced its intent to accelerate the retirement of its 737-300 aircraft to no later than third quarter 2017, when it is scheduled to take delivery of its first, more fuel-efficient, Boeing 737-8 aircraft.

| • | “Wanna Get Away” fares are generally the lowest fares and are typically subject to advance purchase requirements. They are nonrefundable but, subject to compliance with Southwest’s No Show policy, funds may be applied to future travel on Southwest without a change fee. Southwest’s No Show policy applies if a Customer has booked a nonrefundable fare anywhere in his/her itinerary and that portion of the flight is not used and not canceled or changed by the Customer at least ten minutes prior to scheduled departure. In such event, subject to certain exceptions, all unused funds on the full itinerary will be forfeited, and the remaining reservation will be canceled. The intent of the No Show policy is to promote Customer behavior that will enable Southwest to re-sell the open seat prior to departure. |

Southwest offers inflight satellite-based WiFi service on all of its 737-700 and 737-800 aircraft, representing over 87 percent of Southwest’s fleet.

Southwest’s Customers with small portable electronic devices are able to utilize the airline’s onboard WiFi from gate-to-gate when traveling on a Southwest WiFi-enabled aircraft.

Southwest was the first carrier to offer gate-to-gate connectivity.

Due to licensing restrictions, free live TV may not be available onboard WiFi-enabled

international flights.

In late 2016, the Company entered into new WiFi connectivity agreements designed to yield greater WiFi bandwidth available to Customers on WiFi-equipped aircraft beginning in mid-2017.

By the end of 2017, the Company expects to operate a 100 percent WiFi-equipped fleet.

The program continues to exceed the Company’s expectations with respect to the number of Members added, the amount spent per Member on airfare, the number of flights taken by Members, the number of Southwest’s co-branded Chase Visa credit card holders added, the number of points sold to business partners, and the number of frequent flyer points purchased by Members.

During 2015, the Company entered into an amended co-branded credit card agreement with Chase Bank USA, N.A. Additional information regarding this amended co-branded credit card agreement, including the effect of the resulting change in accounting methodology, is provided below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 1 to the Consolidated Financial Statements.

During 2014, the Company also operated AirTran.

Southwest.com

The Company’s Internet website, Southwest.com®, is the only avenue for Southwest Customers to purchase and manage travel online.

Customers’ trips can be planned and managed directly from the Southwest.com home page.

The “My Account” section of the website provides a detailed view into a Customer’s travel and loyalty activity.

Additionally, Southwest offers Customers a mobile website and apps (iOS and Android) to provide Customers the ability to transact with Southwest anytime they have access to their mobile device.

The Company introduced a new Heart aircraft livery, airport experience, and logo.

Aircraft already in the Company's fleet were scheduled to receive the newly painted livery within the aircraft's existing repainting schedule, while new aircraft have been delivered in the Heart livery.

Southwest operated a total of [removed: 723] [added: 706] Boeing 737 aircraft as of December 31, [removed: 2016,] [added: 2017,] of which [removed: 83] [added: 53] and [removed: 51] [added: 69] were under operating and capital leases, respectively.

The following table details information on the [removed: 723] [added: 706] aircraft as of December 31, [removed: 2016:][added: 2017:]

| 737-700 | | 143 | | [removed: 13] [added: 14] | | | [removed: 494] [added: 512] | | | 397 | | | [removed: 97] [added: 115] | |

| 737-800 | | 175 | | [removed: 2] [added: 3] | | | [removed: 142] [added: 181] | | | [removed: 135] [added: 174] | | | 7 | |

| (a) | As discussed further in Note 6 to the Consolidated Financial Statements, [removed: 202] [added: 203] of the Company's aircraft were pledged as collateral as of December 31, [removed: 2016,] [added: 2017,] for secured borrowings and/or in the case that the Company has obligations related to its fuel derivative instruments with counterparties that exceed certain thresholds. |

As of December 31, [removed: 2016,] [added: 2017,] the Company had firm deliveries and options for Boeing 737-700, 737-800, [removed: 737-7,] [added: 737 MAX 7,] and [removed: 737-8] [added: 737 MAX 8] aircraft as follows:

| | The Boeing Company | | | | | | | | | | | | | | | [removed: | | |]

| | \-800 Firm Orders | | [removed: \-800 Options | | | \-7] [added: MAX 7] Firm Orders | | [removed: \-8] [added: MAX 8] Firm Orders | | | [removed: \-8] [added: MAX 8] Options | | | Additional -700s | | | Total | |

| 2018 | [removed: 21 | | 9 |] [added: 26] | | — | | [removed: 13] [added: 14] | | | — | | | 4 | | | [removed: 47] [added: 44] | |

| 2019 | — | | [removed: — |] [added: 7] | | 15 | | [removed: —] | [removed: | | 5] [added: —] | | | — | | | [removed: 20] [added: 22] | |

| 2020 | — | | — | | [added: 25] | [removed: 14] | | — | | | [removed: 8 | | |] — | | | [removed: 22] [added: 25] | |

| 2021 | — | | — | | [removed: | 1 | | 13] [added: 34] | | | [removed: 18] [added: —] | | | — | | | [removed: 32] [added: 34] | |

| 2022 | — | | — | | [removed: | — | | 15] [added: 17] | | | [removed: 19] [added: 14] | | | — | | | [removed: 34] [added: 31] | |

| 2023 | — | | [removed: — | | | —] [added: 12] | | [removed: 34] [added: 22] | | | 23 | | | — | | | 57 | |

| 2024 | — | | [removed: — | | | —] [added: 11] | | [removed: 41] [added: 30] | | | 23 | | | — | | | 64 | |

| 2025 | — | | — | | [removed: | — | |] 40 | | | 36 | | | — | | | 76 | |

| 2026 | — | | — | | [removed: |] — | | [removed: —] | [removed: | |] 36 | | | — | | | 36 | |

| 2027 | — | | — | | [removed: |] — | | [removed: —] | [removed: | |] 23 | | | — | | | 23 | |

[removed: (b)] [added: (a)] The Company has flexibility to substitute [removed: 737-7] [added: 737 MAX 7] in lieu of [removed: 737-8] [added: 737 MAX 8] firm orders beginning in 2019.

[removed: (c)] [added: (b)] To be acquired in leases from various third parties.

The Company leases the land and/or structures on a long-term basis for its aircraft maintenance centers (located at Dallas Love Field, Houston Hobby, Phoenix Sky Harbor, Chicago Midway, Hartsfield-Jackson Atlanta International Airport, and Orlando International [removed: Airport), its current flight training center at Dallas Love Field (which currently houses Boeing 737 flight simulators),] [added: Airport)] and its main corporate headquarters building, also located [removed: at] [added: near] Dallas Love Field.

The Company has commitments associated with various airport improvement projects, including ongoing construction at [removed: Fort Lauderdale-Hollywood International Airport and] Los Angeles International Airport.

In 2016, the Company broke ground on an additional headquarters [removed: building,] [added: complex,] called [removed: Wings, designed] [added: the Wings Complex, consisting of a Leadership Education and Aircrew Development (LEAD) Center (designed] to house flight [removed: simulators,] [added: simulators and] classroom space for Pilot [removed: training, and] [added: training), an] additional [removed: work areas.][added: office building, and a parking garage.]

The Wings [removed: building] [added: Complex] is scheduled to be completed in 2018 and is also located across the street from the [removed: Company’s] [added: Company's] main headquarters building on land owned by the Company.

The Company [removed: expects to begin] [added: began] moving its [removed: 12] [added: Boeing] 737 flight simulators to the [removed: Wings building] [added: LEAD Center] during 2017 and expects to have [removed: all of its] [added: 15 Boeing 737] flight simulators in the [removed: Wings building] [added: LEAD Center] by mid-2018.

As of December 31, [removed: 2016,] [added: 2017,] the Company operated seven Customer Support and Services call centers.

| 737 MAX 8 | | 175 | | — | | | 13 | | | 13 | | | — | |

| Totals | | | | 11 | | | 706 | | | 584 | | | 122 | |

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | |

| | 26 | | 30 | | 197 | | (a) | 155 | | | 4 | | (b) | 412 | |

| 737-300 | | 137 or 143 | | 22 | | | 87 | | (b) | 57 | | | 30 | |

| Totals | | | | 12 | | | 723 | | | 589 | | | 134 | |

| | |

| --- | --- |

| (b) | Of the total, 77 737-300 aircraft have 143 seats and 10 have 137 seats. |

| | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2017 | 39 | | — | | | — | | 14 | | | — | | | 14 | | | 67 | |

| | 60 | | 9 | | (a) | 30 | | 170 | | (b) | 191 | | | 18 | | (c) | 478 | |

(a) Includes two -800 options exercised in January 2017.

In 2017, the Company expects to add a pedestrian safety bridge to its corporate campus in order to connect the main headquarters building, the TOPS building, and the Wings building.

As of February [removed: 3, 2017,] [added: 5, 2018,] there were approximately [removed: 12,850] [added: 12,531] holders of record of the Company’s common stock.

The following graph compares the cumulative total shareholder return on the Company’s common stock over the five-year period ended December 31, [removed: 2016,] [added: 2017,] with the cumulative total return during such period of the Standard and Poor’s 500 Stock Index and the NYSE ARCA Airline Index.

The comparison assumes $100 was invested on December 31, [removed: 2011,] [added: 2012,] in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.

[removed: ][added: ]

| | | [removed: 12/31/2011 | | | |] 12/31/2012 | | | | 12/31/2013 | | | | 12/31/2014 | | | | 12/31/2015 | | | | 12/31/2016 | | | [added: | 12/31/2017 | | |]

| Issuer Purchases of Equity Securities (1) | | | | | | | | | | | | | | | | [removed: |]

| | | | | | | | | | [removed: |] Total number of | | | Maximum dollar | | | |

| | | | | | | | | | [removed: |] shares purchased | | | value of shares that | | | |

| | | Total number | | | Average | | | | [removed: |] as part of publicly | | | may yet be purchased | | | |

| | | of shares | | | price paid | | | | [removed: |] announced plans | | | under the plans | | | |

| Period | | purchased | | | per share | | | | [removed: |] or programs | | | or programs | | | |

| (1) | On May [removed: 18, 2016,] [added: 17, 2017,] the Company’s Board of Directors authorized the repurchase of up to $2.0 billion of the Company’s common stock. Repurchases are made in accordance with applicable securities laws in open market, private, or accelerated repurchase transactions from time to time, depending on market conditions, and may be discontinued at any time. |

| (2) | Under an accelerated share repurchase program entered into by the Company with a third party financial institution in third quarter [removed: 2016] [added: 2017] (the "Third Quarter [removed: 2016] [added: 2017] ASR Program"), the Company paid [removed: $250] [added: $300] million and received an initial delivery of [removed: 4,956,384] [added: 4,130,592] shares during [removed: third quarter 2016,] [added: August 2017,] representing an estimated 75 percent of the shares to be purchased by the Company under the Third Quarter [removed: 2016] [added: 2017] ASR Program based on a [added: volume-weighted average] price of [removed: $37.83] [added: $54.4716] per share, which was the closing price of the Company’s common stock on the New York Stock Exchange [removed: on July 22, 2016.] [added: during a calculation period between August 1, 2017 and August 24, 2017.] Final settlement of [removed: this] [added: the] Third Quarter [removed: 2016] [added: 2017] ASR Program occurred in October [removed: 2016] [added: 2017] and was determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed in October [removed: 2016.] [added: 2017.] Upon settlement, the third party financial institution delivered [removed: 1,709,877] [added: 1,206,365] additional shares of the Company’s common stock to the Company. In total, the average purchase price per share for the [removed: 6,666,261] [added: 5,336,957] shares repurchased under the Third Quarter [removed: 2016] [added: 2017] ASR Program, upon completion of the Third Quarter [removed: 2016] [added: 2017] ASR Program in October [removed: 2016,] [added: 2017,] was [removed: $37.5023.] [added: $56.2118.] |

| (3) | Under an accelerated share repurchase program entered into by the Company with a third party financial institution in fourth quarter [removed: 2016] [added: 2017] (the "Fourth Quarter [removed: 2016] [added: 2017] ASR Program"), the Company paid [removed: $300] [added: $250] million in November [removed: 2016] [added: 2017] and received an initial delivery of [removed: 4,723,420] [added: 3,323,537] shares during December [removed: 2016,] [added: 2017,] representing an estimated 75 percent of the shares to be purchased by the Company under the Fourth Quarter [removed: 2016] [added: 2017] ASR Program based on a volume-weighted average price of [removed: $47.6350] [added: $56.4158] per share of the Company’s common stock on the New York Stock Exchange during a calculation period between November [removed: 18, 2016] [added: 8, 2017] and December [removed: 8, 2016. The specific number] [added: 6, 2017. Final settlement] of [removed: shares that] the [removed: Company ultimately will repurchase under the] Fourth Quarter [removed: 2016] [added: 2017] ASR Program [removed: will be] [added: occurred in January 2018 and was] determined based generally on a discount to the volume-weighted average price per share of the [removed: Company’s] [added: Company's] common stock during a calculation period [removed: to be] completed in [removed: February 2017. At] [added: January 2018. Upon] settlement, [removed: under certain circumstances,] the third party financial institution [removed: may be required to deliver] [added: delivered 736,838] additional shares of [added: the Company’s] common stock to the [removed: Company, or under certain circumstances,] [added: Company. In total,] the [removed: Company may be required to deliver] [added: average purchase price per share for the 4,060,375] shares [added: repurchased under the Fourth Quarter 2017 ASR Program, upon completion] of [removed: its common stock or may elect to make a cash payment to] the [removed: third party financial institution.] [added: Fourth Quarter 2017 ASR Program in January 2018, was $61.5707.] |

| 2017 | | | | | | | | | | | | |

| 1st Quarter | | $ | 0.10000 | | | $ | 59.68 | | | $ | 48.75 | |

| 2nd Quarter | | 0.12500 | | | | 62.74 | | | | 52.89 | | |

| 3rd Quarter | | 0.12500 | | | | 64.39 | | | | 49.76 | | |

| 4th Quarter | | 0.12500 | | | | 66.99 | | | | 52.78 | | |

| Southwest Airlines Co. | | $ | 100 | | | $ | 185 | | | $ | 418 | | | $ | 428 | | | $ | 500 | | | $ | 661 | |

| S&P 500 | | $ | 100 | | | $ | 132 | | | $ | 150 | | | $ | 152 | | | $ | 170 | | | $ | 206 | |

| NYSE ARCA Airline | | $ | 100 | | | $ | 158 | | | $ | 237 | | | $ | 201 | | | $ | 258 | | | $ | 274 | |

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | |

| | | (a) | | | (b) | | | | (c) | | | (d) | | | |

| October 1, 2017 through October 31, 2017 | | 1,206,365 | | | $ | — | | (2) | 1,206,365 | | | $ | 1,700,000,000 | | |

| November 1, 2017 through November 30, 2017 | | 670,000 | | | $ | — | | (3)(4) | 670,000 | | | $ | 1,410,017,716 | | |

| December 1, 2017 through December 31, 2017 | | 4,280,204 | | | $ | — | | (3)(5) | 4,280,204 | | | $ | 1,350,032,588 | | |

| Total | | 6,156,569 | | | | | | | 6,156,569 | | | | | | |

| | |

| --- | --- |

| (4) | During the period from November 29, 2017 through November 30, 2017, the Company repurchased 670,000 shares of its common stock on the open market at an average price of $59.6751 per share. |

| | |

| --- | --- |

| (5) | During the period from December 1, 2017 through December 15, 2017, the Company repurchased 956,667 shares of its common stock on the open market at an average price of $62.7022 per share. |

| 2015 | | | | | | | | | | | | |

| 1st Quarter | | $ | 0.06000 | | | $ | 47.17 | | | $ | 38.26 | |

| 2nd Quarter | | 0.07500 | | | | 44.19 | | | | 33.02 | | |

| 3rd Quarter | | 0.07500 | | | | 40.87 | | | | 31.36 | | |

| 4th Quarter | | 0.07500 | | | | 51.34 | | | | 37.00 | | |

| Southwest Airlines Co. | | $ | 100 | | | $ | 120 | | | $ | 222 | | | $ | 502 | | | $ | 514 | | | $ | 600 | |

| S&P 500 | | $ | 100 | | | $ | 116 | | | $ | 153 | | | $ | 177 | | | $ | 176 | | | $ | 197 | |

| NYSE ARCA Airline | | $ | 100 | | | $ | 138 | | | $ | 218 | | | $ | 327 | | | $ | 277 | | | $ | 356 | |

| | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | (a) | | | (b) | | | | | (c) | | | (d) | | | |

| October 1, 2016 through October 31, 2016 | | 1,709,877 | | | $ | — | | (2 | ) | 1,709,877 | | | $ | 1,250,000,000 | | |

| November 1, 2016 through November 30, 2016 | | — | | | $ | — | | (3 | ) | — | | | $ | 950,000,000 | | |

| December 1, 2016 through December 31, 2016 | | 4,723,420 | | | $ | — | | (3 | ) | 4,723,420 | | | $ | 950,000,000 | | |

| Total | | 6,433,297 | | | | | | | | 6,433,297 | | | | | | |

The following financial information, for the five years ended December 31, [removed: 2016,] [added: 2017,] has been derived from the Company’s Consolidated Financial Statements.

| | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Operating revenues | | $ | [removed: 20,425] [added: 21,171] | | | $ | [removed: 19,820] [added: 20,425] | | | $ | [removed: 18,605] [added: 19,820] | | | $ | [removed: 17,699] [added: 18,605] | | | $ | [removed: 17,088] [added: 17,699] | |

| Operating expenses | | [removed: 16,665] [added: 17,656] | | | | [removed: 15,704] [added: 16,665] | | | | [removed: 16,380] [added: 15,704] | | | | [removed: 16,421] [added: 16,380] | | | | [removed: 16,465] [added: 16,421] | | |

| Operating income | | [removed: 3,760] [added: 3,515] | | | | [removed: 4,116] [added: 3,760] | | | | [removed: 2,225] [added: 4,116] | | | | [removed: 1,278] [added: 2,225] | | | | [removed: 623] [added: 1,278] | | |

| Other expenses (income) net | | [removed: 213] [added: 264] | | | | [removed: 637] [added: 213] | | | | [removed: 409] [added: 637] | | | | [removed: 69] [added: 409] | | | | [removed: (62] [added: 69] | | [removed: )] |

| Income before taxes | | [removed: 3,547] [added: 3,251] | | | | [removed: 3,479] [added: 3,547] | | | | [removed: 1,816] [added: 3,479] | | | | [removed: 1,209] [added: 1,816] | | | | [removed: 685] [added: 1,209] | | |

| Provision for income taxes | | [removed: 1,303] [added: (237] | | [added: )] | | [removed: 1,298] [added: 1,303] | | | | [removed: 680] [added: 1,298] | | | | [removed: 455] [added: 680] | | | | [removed: 264] [added: 455] | | |

| Net income | | $ | [removed: 2,244] [added: 3,488] | | | $ | [removed: 2,181] [added: 2,244] | | | $ | [removed: 1,136] [added: 2,181] | | | $ | [removed: 754] [added: 1,136] | | | $ | [removed: 421] [added: 754] | |

| Net income per share, basic | | $ | [removed: 3.58] [added: 5.80] | | | $ | [removed: 3.30] [added: 3.58] | | | $ | [removed: 1.65] [added: 3.30] | | | $ | [removed: 1.06] [added: 1.65] | | | $ | [removed: 0.56] [added: 1.06] | |

| Net income per share, diluted | | $ | [removed: 3.55] [added: 5.79] | | | $ | [removed: 3.27] [added: 3.55] | | | $ | [removed: 1.64] [added: 3.27] | | | $ | [removed: 1.05] [added: 1.64] | | | $ | [removed: 0.56] [added: 1.05] | |

| Cash dividends per common share | | $ | [removed: 0.3750] [added: 0.4750] | | | $ | [removed: 0.2850] [added: 0.3750] | | | $ | [removed: 0.2200] [added: 0.2850] | | | $ | [removed: 0.1300] [added: 0.2200] | | | $ | [removed: 0.0345] [added: 0.1300] | |

| Total assets at period-end [removed: (1)] | | $ | [removed: 23,286] [added: 25,110] | | | $ | [removed: 21,312] [added: 23,286] | | | $ | [removed: 19,723] [added: 21,312] | | | $ | [removed: 19,177] [added: 19,723] | | | $ | [removed: 18,350] [added: 19,177] | |

| Long-term obligations at period-end | | $ | [removed: 2,821] [added: 3,320] | | | $ | [removed: 2,541] [added: 2,821] | | | $ | [removed: 2,434] [added: 2,541] | | | $ | [removed: 2,191] [added: 2,434] | | | $ | [removed: 2,883] [added: 2,191] | |

| Stockholders’ equity at period-end | | $ | [removed: 8,441] [added: 10,430] | | | $ | [removed: 7,358] [added: 8,441] | | | $ | [removed: 6,775] [added: 7,358] | | | $ | [removed: 7,336] [added: 6,775] | | | $ | [removed: 6,992] [added: 7,336] | |

| Revenue passengers carried | | [removed: 124,719,765] [added: 130,256,190] | | | | [removed: 118,171,211] [added: 124,719,765] | | | | [removed: 110,496,912] [added: 118,171,211] | | | | [removed: 108,075,976] [added: 110,496,912] | | | | [removed: 109,346,509] [added: 108,075,976] | | |

| Enplaned passengers | | [removed: 151,740,357] [added: 157,677,218] | | | | [removed: 144,574,882] [added: 151,740,357] | | | | [removed: 135,767,188] [added: 144,574,882] | | | | [removed: 133,155,030] [added: 135,767,188] | | | | [removed: 133,978,100] [added: 133,155,030] | | |

| Revenue passenger miles (RPMs) (000s) [removed: (2)] [added: (a)] | | [removed: 124,797,986] [added: 129,041,420] | | | | [removed: 117,499,879] [added: 124,797,986] | | | | [removed: 108,035,133] [added: 117,499,879] | | | | [removed: 104,348,216] [added: 108,035,133] | | | | [removed: 102,874,979] [added: 104,348,216] | | |

| Available seat miles (ASMs) (000s) [removed: (3)] [added: (b)] | | [removed: 148,522,051] [added: 153,811,072] | | | | [removed: 140,501,409] [added: 148,522,051] | | | | [removed: 131,003,957] [added: 140,501,409] | | | | [removed: 130,344,072] [added: 131,003,957] | | | | [removed: 128,137,110] [added: 130,344,072] | | |

| Load factor [removed: (4)] [added: (c)] | | [removed: 84.0] [added: 83.9] | | % | | [removed: 83.6] [added: 84.0] | | % | | [removed: 82.5] [added: 83.6] | | % | | [removed: 80.1] [added: 82.5] | | % | | [removed: 80.3] [added: 80.1] | | % |

| Average length of passenger haul (miles) | | [removed: 1,001] [added: 991] | | | | [removed: 994] [added: 1,001] | | | | [removed: 978] [added: 994] | | | | [removed: 966] [added: 978] | | | | [removed: 941] [added: 966] | | |

| Average aircraft stage length (miles) | | [removed: 760] [added: 754] | | | | [removed: 750] [added: 760] | | | | [removed: 721] [added: 750] | | | | [removed: 703] [added: 721] | | | | [removed: 693] [added: 703] | | |

| Trips flown | | [removed: 1,311,149] [added: 1,347,893] | | | | [removed: 1,267,358] [added: 1,311,149] | | | | [removed: 1,255,502] [added: 1,267,358] | | | | [removed: 1,312,785] [added: 1,255,502] | | | | [removed: 1,361,558] [added: 1,312,785] | | |

| Seats flown [removed: (5)] [added: (d)] | | [removed: 193,167,695] [added: 200,878,967] | | | | [removed: 184,955,094] [added: 193,167,695] | | | | [removed: 179,733,055] [added: 184,955,094] | | | | [removed: 183,563,527] [added: 179,733,055] | | | | [removed: 184,208,891] [added: 183,563,527] | | |

| Seats per trip [removed: (6)] [added: (e)] | | [removed: 147.33] [added: 149.03] | | | | [removed: 145.94] [added: 147.33] | | | | [removed: 143.16] [added: 145.94] | | | | [removed: 139.83] [added: 143.16] | | | | [removed: 135.92] [added: 139.83] | | |

| Average passenger fare [removed: (11)] [added: (j)] | | $ | [removed: 149.09] [added: 146.95] | | | $ | [removed: 154.85] [added: 149.09] | | | $ | [removed: 159.80] [added: 154.85] | | | $ | [removed: 154.72] [added: 159.80] | | | $ | [removed: 147.17] [added: 154.72] | |

| Passenger revenue yield per RPM (cents) [removed: (7)(11)] [added: (f)(j)] | | [removed: 14.90] [added: 14.83] | | | | [removed: 15.57] [added: 14.90] | | | | [removed: 16.34] [added: 15.57] | | | | [removed: 16.02] [added: 16.34] | | | | [removed: 15.64] [added: 16.02] | | |

| Operating revenue per ASM (cents) [removed: (8)] [added: (g)] | | [removed: 13.75] [added: 13.76] | | | | [removed: 13.98] [added: 13.75] | | | | [removed: 14.20] [added: 13.98] | | | | [removed: 13.58] [added: 14.20] | | | | [removed: 13.34] [added: 13.58] | | |

| Passenger revenue per ASM (cents) [removed: (9)(11)] [added: (h)(j)] | | [removed: 12.52] [added: 12.44] | | | | [removed: 13.02] [added: 12.52] | | | | [removed: 13.48] [added: 13.02] | | | | [removed: 12.83] [added: 13.48] | | | | [removed: 12.56] [added: 12.83] | | |

| Operating expenses per ASM (cents) [removed: (10)] [added: (i)] | | [removed: 11.22] [added: 11.48] | | | | [removed: 11.18] [added: 11.22] | | | | [removed: 12.50] [added: 11.18] | | | | [removed: 12.60] [added: 12.50] | | | | [removed: 12.85] [added: 12.60] | | |

| Operating expenses per ASM, excluding fuel (cents) | | [removed: 8.76] [added: 8.92] | | | | [removed: 8.60] [added: 8.76] | | | | [removed: 8.46] [added: 8.60] | | | | [removed: 8.18] [added: 8.46] | | | | [removed: 8.07] [added: 8.18] | | |

| Operating expenses per ASM, excluding fuel and profitsharing (cents) | | [removed: 8.37] [added: 8.56] | | | | [removed: 8.16] [added: 8.37] | | | | [removed: 8.19] [added: 8.16] | | | | [removed: 8.01] [added: 8.19] | | | | [removed: 7.98] [added: 8.01] | | |

| Fuel costs per gallon, including fuel tax | | $ | [removed: 1.82] [added: 1.92] | | | $ | [removed: 1.90] [added: 1.82] | | | $ | [removed: 2.93] [added: 1.90] | | | $ | [removed: 3.16] [added: 2.93] | | | $ | [removed: 3.30] [added: 3.16] | |

| Fuel costs per gallon, including fuel tax, economic | | $ | [removed: 1.92] [added: 2.00] | | | $ | [removed: 2.07] [added: 1.92] | | | $ | [removed: 2.92] [added: 2.07] | | | $ | [removed: 3.12] [added: 2.92] | | | $ | [removed: 3.28] [added: 3.12] | |

| Fuel consumed, in gallons (millions) | | [removed: 1,996] [added: 2,045] | | | | [removed: 1,901] [added: 1,996] | | | | [removed: 1,801] [added: 1,901] | | | | [removed: 1,818] [added: 1,801] | | | | [removed: 1,847] [added: 1,818] | | |

| Active fulltime equivalent Employees | | [removed: 53,536] [added: 56,110] | | | | [removed: 49,583] [added: 53,536] | | | | [removed: 46,278] [added: 49,583] | | | | [removed: 44,381] [added: 46,278] | | | | [removed: 45,861] [added: 44,381] | | |