Southwest Airlines (LUV) 10-K risk factor changes: FY2022 vs FY2021

[removed: The] [added: - The] COVID-19 pandemic, including associated variants, has materially and adversely affected, and could [removed: continue to] [added: in the future] materially and adversely affect, the Company’s results of operations, financial position, and [removed: liquidity.][added: liquidity.]

The COVID-19 pandemic, including associated [removed: variants, has] [added: variants] materially and adversely affected passenger demand and [removed: bookings for both business and leisure travel,] [added: bookings,] thereby materially and adversely affecting operating income and cash flows from [removed: operations.][added: operations during 2020, 2021, and early 2022.]

[removed: The extent of the continued] [added: Any further] impact of the COVID-19 pandemic on the Company’s business and its financial and operational performance will depend on future developments, including (i) the duration, spread, severity, or any recurrence of the COVID-19 pandemic, including through any new variant strains of the underlying virus; (ii) the effectiveness, availability, and usage of vaccines; (iii) the [removed: duration and scope] [added: impact] of [removed: governmental orders] [added: government mandates, directives, orders, regulations,] and [removed: restrictions] [added: other governmental actions] related to the COVID-19 pandemic; (iv) the extent of the impact of the COVID-19 pandemic on overall demand for air travel and the Company's related business plans and decisions; (v) the impact of the COVID-19 pandemic on the Company's ability to retain [added: key] Employees; and (vi) the impact of the COVID-19 pandemic on the Company’s access to capital, all of which are highly uncertain and cannot be predicted.

The Company is also dependent on (i) sole or limited suppliers for aircraft engines and certain other aircraft parts, equipment, and services; (ii) [removed: third party vendors; and (iii) service providers.][added: third-]

The COVID-19 pandemic has resulted, and could continue to result, in delays and other performance issues, ceased operations, or even bankruptcies among these suppliers, [removed: third party] [added: third-party] vendors, and service providers.

Further failures of suppliers, [removed: third party] [added: third-party] vendors, or service providers to timely provide adequate products or support for their products, or otherwise fulfill their commitments to the Company, could materially adversely affect the Company’s operations.

If the Company’s credit ratings were to be [removed: further] downgraded, or general market conditions were to ascribe higher risk to the Company’s rating levels, the airline industry, or the Company, the Company’s access to capital and the cost of any debt financing would be negatively affected.

[removed: In particular, consumer] [added: Consumer] behavior related to traveling may [added: continue to] be negatively impacted by adverse changes in business travel patterns or adverse changes in the perceived or actual economic climate, including declines in income levels and/or loss of wealth resulting from the impact of the COVID-19 [removed: pandemic.][added: pandemic or from economic conditions.]

- The Company [removed: is] [added: was] prohibited from repurchasing its common stock and from paying dividends or making capital contributions with respect to its common stock through September 30, 2022;

The airline industry, which is subject to relatively high fixed costs and highly variable and unpredictable demand, is particularly sensitive to changes in economic [removed: conditions.][added: conditions, including changes in consumer discretionary spending as a result of inflation, rising interest rates, or other factors.]

As has become particularly evident as a result of the COVID-19 pandemic, businesses and other travelers are able to forego air travel by using [removed: communication alternatives] [added: other communications] such as videoconferencing, business communication platforms, and the Internet.

In addition, to the extent [removed: businesses continue to permit air] [added: business] travel [removed: during] [added: recovers from] the COVID-19 pandemic, [removed: they are more likely to] [added: businesses may] require the purchase of less expensive tickets to reduce costs.

[removed: The] [added: - The] Company's business can be significantly impacted by [added: the availability of jet fuel and] high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be impacted by the Company's ability to effectively address fuel price increases and fuel price volatility and [removed: availability.][added: availability.]

Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented approximately [removed: 23.5] [added: 26.2] percent of the Company's operating expenses for [removed: 2021.][added: 2022.]

As discussed [removed: above] under "Business - Cost Structure," Fuel and oil expense for [removed: 2021] [added: 2022] increased significantly compared with [removed: 2020,] [added: 2021,] primarily due to higher market jet fuel [removed: prices,] [added: prices] and in part due to higher capacity in response to consumer demand.

[removed: The cost of fuel can be extremely volatile and unpredictable, and even] [added: Even] a small change in market fuel prices can significantly affect profitability.

For example, fuel prices can be impacted by political, [removed: environmental,] [added: environmental (including those related to climate change),] and economic factors, such as (i) dependency on foreign imports of crude oil and the potential for hostilities or other conflicts in oil producing areas; (ii) limitations and/or disruptions in domestic refining or pipeline [added: operations or] capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; and (v) changes in currency exchange rates.

The Company's ability to [removed: effectively] mitigate the impact of fuel price increases could [added: also] 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 the airline industry generally, and the risk that higher fares will drive a decrease in demand.

In addition, the Company is subject to the risk that its fuel derivatives will no longer qualify for hedge accounting under applicable accounting standards, [added: or that the derivative instruments utilized will not effectively offset changes in the price of the jet fuel consumed,] which can create additional earnings volatility.

The airline industry [removed: faces] [added: could face] potential fuel shortages in [removed: 2022] [added: 2023] due to pipeline [removed: shipping space] [added: capacity] constraints resulting from the shifting of [added: jet fuel] allocations during the COVID-19 pandemic as well as a national shortage of interstate trucking capacity.

[added: However,] unless there is additional jet fuel distribution capacity, whether by pipeline and/or by truck, there could be temporary disruptions (e.g., flight cancellations or passenger [removed: lids)] [added: caps)] at one or more of the Company’s airports in [removed: 2022,] [added: 2023,] especially during peak travel periods.

The Company's low-cost structure has [removed: historically] been one of its primary competitive advantages, as it has [added: generally] enabled [removed: it] [added: the Company] to offer low fares, drive traffic volume, grow market share, [removed: and, prior to 2020,] [added: and] protect [removed: profits; however, as has been the case for the Company, the COVID-19 pandemic has forced the Company's competitors to implement significant cost reduction measures.][added: profits.]

Salaries, wages, and benefits constituted approximately [removed: 55.0] [added: 41.0] percent of the Company's operating expenses during [removed: 2021.][added: 2022.]

[removed: The Company's ability to control labor costs is limited by the terms of its collective-bargaining agreements, and this] [added: This] limited control has negatively impacted the Company's low-cost position, in particular in the context of the Company's cost reduction efforts during the COVID-19 pandemic.

As discussed further under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the Company's unionized [removed: workforce, which] [added: workforce] makes up approximately [removed: 82] [added: 83] percent of its [removed: Employees,] [added: Employees and] has had pay scale increases as a result of contractual rate increases, which has put pressure on the Company's labor costs.

Additionally, as indicated [removed: above] under "Business - Employees," the majority of Southwest's unionized [removed: Employee work groups,] [added: Employees,] including its Pilots; Flight Attendants; Ramp, Operations, Provisioning, and Freight Agents; [removed: Customer Service Agents, Customer Representatives,] and [removed: Source of Support Representatives; Aircraft Appearance Technicians; Dispatchers; Meteorologists; Facilities Maintenance Technicians; and Flight Instructors] [added: Meteorologists] are in unions currently in negotiations for labor [removed: agreements or have labor agreements that become amendable in 2022,] [added: agreements,] which could result in additional pressure on the Company's low-cost structure.

Further, [removed: during 2021,] in response to staffing challenges, the Company [added: has] increased the minimum pay for certain of its [removed: workforce,] [added: workforce] and provided incentive pay in certain instances.

As discussed [removed: above] under "Business - Regulation," the airline industry is heavily regulated, and the Company's regulatory compliance costs are subject to potentially significant increases from time to time based on actions by regulatory agencies that are out of the Company's control.

[added: When this occurs, as it has] at times during the pandemic, certain fixed airport costs are allocated among a fewer number of total flights, which can result in increased landing fees and other costs for the Company.

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

[removed: Disruptions] to capital markets, shortages of skilled personnel, supply chain disruptions, [added: increased regulation,] geopolitical developments, and/or adverse economic conditions could subject certain of the Company's [removed: third party] [added: third-party] vendors and service providers to significant financial pressures, which could lead to delays and other performance issues, ceased operations, or even bankruptcies among these [removed: third party] [added: third-party] vendors and service providers.

If a [removed: third party] [added: third-party] vendor or service provider is unable to fulfill its commitments to the Company, the Company may be unable to replace that [removed: third party] [added: third-party] vendor or service provider in a short period of time, or at competitive terms, which could have a material adverse effect on the Company's results of operations.

As discussed [removed: above] under "Business - Insurance," the Company carries insurance of types customary in the airline industry.

[removed: Although the Company has been able to purchase aviation, property, liability, and professional insurance via the commercial insurance marketplace, available] [added: 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 events, including acts of [removed: terrorism.][added: terrorism and severe weather events.]

[removed: Further,] [added: However,] available [removed: cyber-security] [added: cybersecurity] 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 [removed: loss.][added: loss of its data or proprietary and confidential information.]

In addition, an [added: aircraft] accident or other incident involving Southwest [removed: aircraft] could result in costs in excess of its related insurance coverage, which costs could be substantial.

Any aircraft accident or other [removed: incident,] [added: incident involving Southwest,] even if fully insured, could also have a material adverse effect on the public's perception of the Company, which could harm its reputation and business.

As discussed below under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the Company experienced significant unit cost pressure in [removed: 2020] [added: 2020, 2021,] and [removed: 2021] [added: 2022] following the onset of the COVID-19 pandemic.

[removed: Historically, except] [added: Except] for changes in the price of fuel, changes in operating expenses for airlines have been largely driven by changes in capacity.

However, the Company's operating expenses are largely fixed once flight schedules are published; and the Company experienced capacity lower than 2019 during [removed: 2020] [added: 2020, 2021,] and [removed: 2021] [added: 2022] due to the COVID-19 pandemic, which has continued to pressure unit costs.

The Company’s operations and financial results are subject to various risks and uncertainties, including but not limited to those described below.

Other risks are described in “Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and related Notes thereto.

The Company's business could also be affected by additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial.

If any of these risks actually occur, it could materially harm the Company's business, financial condition, or results of operations, or impair the Company's ability to implement its strategic plans.

In that case, the market price of the Company's common stock could decline.

The following risk factors are summarized as financial; operational; information technology; COVID-19; and legal, regulatory, compliance, and reputational.

- The airline industry is particularly sensitive to changes in economic conditions, and continued or future unfavorable economic conditions could negatively affect the Company’s results of operations and require the Company to adjust its business strategies.

- The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have affected and could continue to affect the Company's ability to control its costs.

- The Company's results of operations could be adversely impacted if it is unable to effectively execute its strategic plans.

- The airline industry is intensely competitive.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

- The Company is currently dependent on Boeing as the sole manufacturer of the Company's aircraft.

Prolonged delays in the FAA issuing required certifications or approvals for the -7, or further regulatory actions by the FAA with respect to the MAX aircraft, could materially and adversely affect the Company’s business plans, strategies, and results of operations.

- The Company's business is labor intensive, with most Employees represented by labor unions; therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives or if the Company were unable to employ sufficient numbers of qualified Employees to maintain its operations.

- The airline industry has faced on-going security concerns and related cost burdens; further threatened or actual terrorist attacks, or other hostilities, even if not made directly on the airline industry, could significantly harm the airline industry and the Company's operations.

- Interruptions or disruptions in service at one of the Company’s core stations could have a material adverse impact on its operations.

- The Company’s operations have been, and in the future may again be, materially and adversely disrupted by extreme weather events.

An inability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company’s business, results of operations, and financial condition.

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

- The Company has entered into agreements with Treasury with respect to funding support; pursuant to these agreements the Company has agreed to certain restrictions on how it operates its business and uses its cash, which could limit the ability of the Company to take actions that it otherwise might have determined were in the best interests of the Company and its Shareholders.

- The Company is subject to extensive FAA regulation that may necessitate modifications to the Company’s operations, business plans, and strategies.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

- Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth; changes in or additional governmental regulation could increase the Company's operating costs or otherwise limit the Company's ability to conduct business.

- The Company is subject to risks related to its voluntary sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.

- The Company's future results will suffer if it is unable to effectively manage its international operations and/or Extended Operations.

- Conflicting federal, state, and local laws and regulations may impose additional requirements and restrictions on the Company’s operations, which could increase the Company’s operating costs, result in service disruptions, and increase litigation risk.

Financial Risks

During unfavorable economic conditions, low fares are often used to stimulate traffic.

However, offering low fares typically hampers the ability of airlines to counteract any increases in fuel, labor, and other costs.

The Company's business can be significantly impacted by the availability of jet fuel and high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be impacted by the Company's ability to effectively address fuel price increases and fuel price volatility and availability.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

The cost of fuel can be extremely volatile and unpredictable and subject to factors outside of the Company’s control.

In addition, the occurrence of extreme weather events (regardless of cause), such as flooding, acute or prolonged winter storms, tropical storms, and hurricanes, can also disrupt the jet fuel supply chain and affect fuel prices.

For additional discussion of the availability of jet fuel and SAF, please see “The Company is subject to risks related to its voluntary sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.”

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

The COVID-19 pandemic has forced the Company and the Company's competitors to implement significant cost reduction measures.

Jet fuel and oil constituted approximately 26.2 percent of the Company's operating expenses during 2022, and the Company's ability to control the cost of fuel is subject to the external factors discussed in “The Company's business can be significantly impacted by the availability of jet fuel and high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be impacted by the Company's ability to effectively address fuel price increases and fuel price volatility and availability.”

The Company's ability to control labor costs is limited by the terms of its collective-bargaining agreements.

The COVID-19 pandemic has caused public health officials to recommend precautions to mitigate the spread of the virus.

Since the onset of the COVID-19 pandemic, federal, state, and local authorities have at various times instituted measures such as imposing testing and self-quarantine requirements, issuing directives forcing businesses to reduce operations or temporarily close, restricting international air travel, and issuing shelter-in-place and similar orders limiting the movement of individuals.

Additionally, businesses have restricted non-essential travel for their employees.

Such measures have depressed demand for air travel, disrupted the Company’s operations, and materially adversely affected the Company’s business.

The Company will continue to be adversely affected if businesses continue to restrict travel for their employees.

Moreover, the ability to attract and retain passengers depends, in part, upon the perception and reputation of the Company and the public’s concerns regarding the health and safety of travel generally, especially regarding airline travel.

Actual or perceived risk of infection on Company flights could have a material adverse effect on the public's

comfort with air travel, which could harm the Company's reputation and business.

The Company expects it will continue to incur COVID-19 related costs as it continues to take other actions to limit infection among its Employees and passengers.

In addition, the industry may be subject to further health and hygiene requirements designed to counteract future outbreaks, which requirements may be costly and take a significant amount of time to implement.

For example, as a result of the economic effects of the COVID-19 pandemic, in the first half of 2020, Moody’s, S&P Global, and Fitch downgraded the Company’s senior unsecured debt ratings and issuer ratings.

Even once the pandemic and fears of travel subside, demand for air travel may remain weak for a significant period of time.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

In response to the COVID-19 pandemic, federal, state, and local agencies have issued laws, regulations, and orders relating to health and occupational safety.

Laws, regulations, orders, or other government actions requiring that employees be vaccinated could materially adversely affect the Company's operations.

In September 2021, the President of the United States issued an Executive Order establishing a vaccination requirement for employees of covered federal contractors.

The federal government required that federal contractors have their workforce vaccinated (or request an accommodation) by December 8, 2021.

The deadline was later extended to January 4, 2022.

The Company started an active campaign to notify Employees of the need to submit proof of COVID-19 vaccination, or apply for an accommodation, by January 4, 2022.

On December 3, 2021, the company announced that 93 percent of its Employees were vaccinated, or had requested an accommodation.

Due to legal challenges to the vaccine mandate, the Company announced on December 20, 2021, that it is no longer targeting a January 4, 2022, deadline for compliance.

However, if the vaccine mandate is revived, the Company expects to resume efforts to work with Employees who have not yet either submitted proof of vaccination or requested an accommodation.

The extent to which the Company's Employees choose not to get vaccinated or do not qualify for an accommodation could result in a negative impact to the Company's operations.

Furthermore, the Company’s ability to effectively hire and retain new Employees could be negatively impacted if potential candidates are unable or unwilling to comply with the vaccination requirement.

Federal agencies employing personnel critical to the Company’s operations, such as air traffic control, security, and customs staffing, could be similarly impacted by the Executive

Order requiring the vaccination of federal employees.

A reduction in the number of federal employees available to support the Company's operations could materially adversely affect the Company's operations.

The Company is also dependent on third party vendors and service providers to support its operations.

To the extent third party vendors or service providers are subject to vaccination laws, regulations, orders, or other government actions and they or their employees are unable or unwilling to comply with applicable requirements, the Company’s arrangements with those vendors or providers could be adversely impacted, the Company might not be able to maintain its arrangement with such parties, or at competitive terms, and the Company's operations could be materially adversely affected.

Also, as has become particularly evident as a result of the COVID-19 pandemic, unfavorable economic conditions, when low fares are often used to stimulate traffic, hamper the ability of airlines to raise fares to counteract any increases in

fuel, labor, and other costs.

However,

Jet fuel and oil constituted approximately 23.5 percent of the Company's operating expenses during 2021, and the Company's ability to control the cost of fuel is subject to the external factors discussed in the fifth Risk Factor above.

When this occurs, as it has

representatives; and (v) the Company's dependence on third parties with respect to the execution of its strategic plans.

In particular, during 2020, in connection with the Company's efforts to reduce capital and operating expenditures in response to the COVID-19 pandemic, the Company deferred a significant number of technology projects.

transactions or providing services.

However, 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.

As a result, as of December 31, 2021, the Company had a significantly smaller workforce than it did prior to the COVID-19 pandemic.

The inability to recruit and retain

The Company recorded [added: year-to-date] GAAP and non-GAAP results for [removed: 2021] [added: 2022, 2021,] and [removed: 2020] [added: 2019] as noted in the following tables.

| | | | | | | Year [removed: ended] [added: ended December 31,] | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

| (in millions, except per share amounts) | | | | | | [removed: December] [added: Year ended December] 31, | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

| GAAP | | | | | | [added: 2022 | | | | | |] 2021 | | | | | | [removed: 2020] [added: 2022 Change to 2021] | | | | | | [removed: Percent Change] [added: 2019] | | | [added: | | | 2022 Change to 2019 | | |]

| Operating income (loss) | | | | | | $ | [removed: 1,721] [added: 1,120] | | | | | $ | [removed: (3,816)] [added: (1,281)] | | | | | n.m. | | | [added: | | | $ | 2,957 | | | | | (62.1) | | |]

| Net income (loss) | | | | | | $ | [removed: 977] [added: 723] | | | | | $ | [removed: (3,074)] [added: (1,271)] | | | | | n.m. | | | [added: | | | $ | 2,300 | | | | | (68.6) | | |]

| [removed: Net] [added: Net] income [removed: (loss)] per share, [removed: diluted | | |] [added: diluted, as reported] | | | $ | [removed: 1.61] [added: 0.87] | | | | | $ | [removed: (5.44)] [added: 1.61] | | | | | [removed: n.m.] | | |

| Non-GAAP | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

| Net [removed: loss] [added: income (loss)] per share, diluted | | | | | | $ | [added: 1.16 | | | | | $ |] (2.15) | | | | | [added: n.m. | | | | | |] $ | [removed: (6.22)] [added: 4.27] | | | | | [removed: (65.4)] [added: (72.8)] | | |

See [removed: below and] Note [removed: 2] [added: 5] to the Consolidated Financial Statements for further information.

The Company provides the operating data below for the [removed: three] years ended December 31, [added: 2022,] 2021, [added: and 2019] because these statistics are commonly used in the airline industry and, therefore, allow readers to compare the Company’s performance against its results for prior periods, as well as against the performance of the Company’s peers.

| | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2021] [added: 2022] Change to [removed: 2020] [added: 2021] | | | | | | 2019 | | | | | | [removed: 2020] [added: 2022] Change to 2019 | | | [removed: | | | 2021 Change to 2019(l) | | |]

| Operating Data: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: | | | | | |]

| Revenue passengers carried (000s) | | | | | | [removed: 99,111] [added: 126,586] | | | | | | [removed: 54,088] [added: 99,111] | | | | | | [removed: 83.2] [added: 27.7] | | % | | | | 134,056 | | | | | | [removed: (59.7) | | % | | | | (26.1)] [added: (5.6)] | | % |

| Enplaned passengers (000s) | | | | | | [removed: 123,264] [added: 156,982] | | | | | | [removed: 67,785] [added: 123,264] | | | | | | [removed: 81.8] [added: 27.4] | | % | | | | 162,681 | | | | | | [removed: (58.3) | | % | | | | (24.2)] [added: (3.5)] | | % |

| Revenue passenger miles (RPMs) (in millions)(a) | | | | | | [removed: 103,562] [added: 123,843] | | | | | | [removed: 54,221] [added: 103,562] | | | | | | [removed: 91.0] [added: 19.6] | | % | | | | 131,345 | | | | | | [removed: (58.7) | | % | | | | (21.2)] [added: (5.7)] | | % |

| Available seat miles (ASMs) (in millions)(b) | | | | | | [removed: 132,006] [added: 148,467] | | | | | | [removed: 103,456] [added: 132,006] | | | | | | [removed: 27.6] [added: 12.5] | | % | | | | 157,254 | | | | | | [removed: (34.2) | | % | | | | (16.1)] [added: (5.6)] | | % |

| Load factor(c) | | | | | | [removed: 78.5] [added: 83.4] | | % | | | | [removed: 52.4] [added: 78.5] | | % | | | | 26.1 pts. | | | | | | 83.5 | | % | | | | [removed: (31.1) pts. | | | | | |] (5.0) pts. | | |

| Average length of passenger haul (miles) | | | | | | [removed: 1,045] [added: 978] | | | | | | [removed: 1,002] [added: 1,045] | | | | | | [removed: 4.3] [added: (6.4)] | | % | | | | 980 | | | | | | [removed: 2.2 | | % | | | | 6.6] [added: (0.2)] | | % |

| Average aircraft stage length (miles) | | | | | | [removed: 790] [added: 728] | | | | | | [removed: 743] [added: 790] | | | | | | [removed: 6.3] [added: (7.8)] | | % | | | | 748 | | | | | | [removed: (0.7) | | % | | | | 5.6] [added: (2.7)] | | % |

| Trips flown | | | | | | [removed: 1,066,934] [added: 1,298,219] | | | | | | [removed: 897,540] [added: 1,066,934] | | | | | | [removed: 18.9] [added: 21.7] | | % | | | | 1,367,727 | | | | | | [removed: (34.4) | | % | | | | (22.0)] [added: (5.1)] | | % |

| Seats flown (000s)(d) | | | | | | [removed: 165,580] [added: 201,913] | | | | | | [removed: 137,405] [added: 165,580] | | | | | | [removed: 20.5] [added: 21.9] | | % | | | | 206,390 | | | | | | [removed: (33.4) | | % | | | | (19.8)] [added: (2.2)] | | % |

| Seats per trip(e) | | | | | | [removed: 155.2] [added: 155.5] | | | | | | [removed: 153.1] [added: 155.2] | | | | | | [removed: 1.4] [added: 0.2] | | % | | | | 150.9 | | | | | | [removed: 1.5 | | % | | | | 2.8] [added: 3.0] | | % |

| Average passenger fare | | | | | | $ | [removed: 141.92] [added: 169.12] | | | | | $ | [removed: 141.72] [added: 141.92] | | | | | [removed: 0.1] [added: 19.2] | | % | | | | $ | 154.98 | | | | | [removed: (8.6) | | % | | | | (8.4)] [added: 9.1] | | % |

| Passenger revenue yield per RPM (cents)(f) | | | | | | [removed: 13.58] [added: 17.29] | | | | | | [removed: 14.14] [added: 13.58] | | | | | | [removed: (4.0)] [added: 27.3] | | % | | | | 15.82 | | | | | | [removed: (10.6) | | % | | | | (14.2)] [added: 9.3] | | % |

| Operating revenues per ASM (cents)(g)(j) | | | | | | [removed: 11.96] [added: 16.04] | | | | | | [removed: 8.75] [added: 11.96] | | | | | | [removed: 36.7] [added: 34.1] | | % | | | | 14.26 | | | | | | [removed: (38.6) | | % | | | | (16.1)] [added: 12.5] | | % |

| Passenger revenue per ASM (cents)(h) | | | | | | [removed: 10.66] [added: 14.42] | | | | | | [removed: 7.41] [added: 10.66] | | | | | | [removed: 43.9] [added: 35.3] | | % | | | | 13.21 | | | | | | [removed: (43.9) | | % | | | | (19.3)] [added: 9.2] | | % |

| Operating expenses per ASM (cents)(i) | | | | | | [removed: 10.66] [added: 15.36] | | | | | | [removed: 12.43] [added: 10.66] | | | | | | [removed: (14.2)] [added: 44.1] | | % | | | | 12.38 | | | | | | [removed: 0.4 | | % | | | | (13.9)] [added: 24.1] | | % |

| Operating expenses per ASM, excluding fuel (cents) | | | | | | [removed: 8.15] [added: 11.33] | | | | | | [removed: 10.65] [added: 8.15] | | | | | | [removed: (23.5)] [added: 39.0] | | % | | | | 9.62 | | | | | | [removed: 10.7 | | % | | | | (15.3)] [added: 17.8] | | % |

| Operating expenses per ASM, excluding fuel and profitsharing (cents) | | | | | | [removed: 7.98] [added: 11.25] | | | | | | [removed: 10.65] [added: 7.98] | | | | | | [removed: (25.1)] [added: 41.0] | | % | | | | 9.19 | | | | | | [removed: 15.9 | | % | | | | (13.2)] [added: 22.4] | | % |

| Fuel costs per gallon, including fuel tax | | | | | | $ | [removed: 1.98] [added: 3.10] | | | | | $ | [removed: 1.45] [added: 1.98] | | | | | [removed: 36.6] [added: 56.6] | | % | | | | $ | 2.09 | | | | | [removed: (30.6) | | % | | | | (5.3)] [added: 48.3] | | % |

| Fuel costs per gallon, including fuel tax, economic | | | | | | $ | [removed: 2.01] [added: 3.07] | | | | | $ | [removed: 1.49] [added: 2.01] | | | | | [removed: 34.9] [added: 52.7] | | % | | | | $ | 2.09 | | | | | [removed: (28.7) | | % | | | | (3.8)] [added: 46.9] | | % |

| Fuel consumed, in gallons (millions) | | | | | | [removed: 1,668] [added: 1,922] | | | | | | [removed: 1,273] [added: 1,668] | | | | | | [removed: 31.0] [added: 15.2] | | % | | | | 2,077 | | | | | | [removed: (38.7) | | % | | | | (19.7)] [added: (7.5)] | | % |

| Aircraft at end of period (k) | | | | | | [removed: 728] [added: 770] | | | | | | [removed: 718] [added: 728] | | | | | | [removed: 1.4] [added: 5.8] | | % | | | | 747 | | | | | | [removed: (3.9) | | % | | | | (2.5)] [added: 3.1] | | % |

(j)Included less than 250 [removed: and 10,421] Employees [removed: participating in the] [added: on] Extended Emergency Time Off program as of December 31, [removed: 2021 and 2020, respectively.][added: 2021.]

(k)Included [added: four and] six Boeing [removed: 737] [added: 737-700 ("700")] Next Generation aircraft in temporary storage [removed: and 60 in long-term storage] as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: December 31, 2021,] respectively.

Also included [removed: 32 and] 34 Boeing [removed: MAX] 737 [added: MAX aircraft] in long-term storage as of December 31, [removed: 2020 and 2019, respectively.][added: 2019.]

The following tables present selected financial guidance for first quarter and full year [removed: 2022:][added: 2023:]

| Economic fuel costs per [removed: gallon] [added: gallon (b) (c)] | | | | | | | | | [removed: $2.25] [added: $3.25] to [removed: $2.35 | | | | | | (e)] [added: $3.35] | | |

| Fuel hedging premium expense per gallon | | | | | | | | | $0.06 | | | [removed: | | | (e) | | |]

The Company's financial results in 2021 and 2022, on both an accounting principles generally accepted in the United States ("GAAP") basis and non-GAAP basis, continued to be affected by the COVID-19 pandemic, which began in early 2020.

The Omicron variant of COVID-19 both impacted travel demand and created staffing challenges for the Company, particularly during January and February 2022.

However, strong travel demand, especially associated with leisure travel, accelerated during March 2022 and continued through the remainder of the year, producing record operating revenues of $23.8 billion for 2022.

Managed business revenues improved during 2022, but remained below 2019 levels, including approximately 20 percent below fourth quarter 2019 levels in fourth quarter 2022.

In late December 2022, the Company experienced wide-scale operational disruptions as extreme winter weather across a significant portion of the United States impacted its operational plan and flight schedules.

Subsequent to Winter Storm Elliott, the Company was challenged in its efforts to realign flight crews, flight schedules, and fleet for a period of several days during this peak demand travel period.

The Company returned to a normal operating schedule on December 30, 2022.

However, this disruption and subsequent recovery efforts resulted in the cancellation of more than 16,700 flights during the period from December 21 to December 31, 2022.

The Company estimates the financial impact of this disruption was approximately $800 million on a pre-tax basis, and resulted in the Company reporting a net loss of $220 million for fourth quarter 2022.

A significant portion of this impact was due to the loss of Operating revenue associated with the flight cancellations that is estimated to be approximately $410 million.

The remaining impact primarily related to a net increase of approximately $390 million in operating expenses, primarily due to travel expense reimbursements to Customers, the estimated value of Rapid Rewards points offered as a gesture of goodwill to Customers that are expected to be redeemed, and premium pay and additional compensation for Employees, which were partially offset by lower fuel and oil and profitsharing expenses.

Following the disruption, the Company has put mitigation elements in place to reduce the risk of future operational disruptions that could impede the travel plans of its Customers.

These elements, along with efforts that remain in progress, currently include:

- Creating an early indicator dashboard that closely monitors operational health and signals an alert if the Company approaches predefined operational thresholds,

- Establishing supplemental staffing that can quickly mobilize to support Crew recovery efforts,

- Enhancing its Crew engagement technology to better communicate with large numbers of Crew Members during frequent schedule changes, and

- Updating and upgrading the Company’s Crew recovery system to not only solve current and future schedules, but also provide the ability to optimize established schedules as they are being revised during irregular operations.

Going forward, the Company is also taking additional steps to understand and review the disruption, which will determine the Company's future actions.

The Company has engaged Oliver Wyman, a third-party global aviation consulting firm, to complete an assessment of the event and make recommendations of additional mitigation steps for consideration.

In addition, the Company’s Board of Directors has established an Operations Review Committee that is working with the Company's Management to help oversee the Company's response.

The Company will continue to provide further information regarding these ongoing efforts in future periods.

The Company believes comparisons of current year financial results to 2019 are relevant and show how the Company has continued to recover from the pandemic.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

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| Operating income | | | | | | $ | 1,017 | | | | | $ | 1,721 | | | | | (40.9) | | | | | | $ | 2,957 | | | | | (65.6) | | |

| Net income | | | | | | $ | 539 | | | | | $ | 977 | | | | | (44.8) | | | | | | $ | 2,300 | | | | | (76.6) | | |

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The comparison of the Company's financial results, as shown above on a GAAP basis for the year ended December 31, 2022, versus the year ended December 31, 2021, were impacted by the Company's receipt of $2.7 billion in grant allocations of payroll funding support ("Payroll Support") from the United States Department of the Treasury ("Treasury") in 2021 that significantly benefited 2021 results.

Operating revenues for year ended December 31, 2022, increased 50.8 percent versus 2021 and operating revenues for the year ended December 31, 2022, exceeded the comparative 2019 pre-pandemic levels and was a Company annual record primarily due to strong leisure demand and higher yields.

Operating expenses for the year ended December 31, 2022, exceeded the comparative pre-pandemic 2019 levels primarily due to higher salaries, wages, and benefits expense and fuel prices.

On a non-GAAP basis, the Company's financial results improved significantly for the year ended December 31, 2022, versus the same prior year period due to the significant recovery in travel demand, which was aided by a reduction in COVID-19 cases and hospitalizations, an increase in vaccinations, and a decline in travel-related restrictions across the United States.

For the year ended December 31, 2022, the Company believes a comparison of its 2022 to 2019 (pre-pandemic) operating statistics is relevant and useful as the Company continues to recover from the pandemic.

For the twelve months ended December 31, 2022 and 2021, most of these operating statistics were significantly impacted by the COVID-19 pandemic and decisions the Company made as a result of the pandemic although the effect in 2022 was primarily in first quarter.

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[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

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| Active full-time equivalent Employees (j) | | | | | | 66,656 | | | | | | 55,093 | | | | | | 21.0 | | % | | | | 60,767 | | | | | | 9.7 | | % |

In late February 2020, the Company began to see a negative impact from the COVID-19 pandemic, which quickly accelerated during first quarter 2020 and continued throughout 2021.

While the pandemic has continued to negatively impact results, the Company saw steady improvement as the year progressed, with intermittent periods of decelerated demand that coincided with COVID-19 surges.

The Company's financial results in both years, on both a GAAP and Non-GAAP basis, were significantly impacted by the pandemic and the resulting effect on demand and passenger bookings.

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| Operating loss | | | | | | $ | (1,281) | | | | | $ | (5,032) | | | | | (74.5) | | |

| Net loss | | | | | | $ | (1,271) | | | | | $ | (3,512) | | | | | (63.8) | | |

The significant improvement in both GAAP Net income (loss) and Operating income (loss), year-over-year, was primarily due to the rebound in domestic leisure demand and bookings in 2021 as impacts from the COVID-19 pandemic eased.

This resulted in a 74.5 percent increase in Operating revenues in 2021 versus 2020, although 2021 Operating revenues were still well below 2019 levels.

Further, the Company received $2.7 billion in grant allocations of payroll funding support ("Payroll Support") from the United States Department of Treasury ("Treasury") in 2021, compared with $2.3 billion received in 2020, which the Company utilized in both years to offset a portion of salaries, wages, and benefits.

On a quarterly basis, demand for air travel improved each period of 2021.

Although the Company's GAAP financial results benefited from the impact of Payroll Support recognized during the first three quarters of the year, the Company was able to generate a profit during fourth quarter 2021 despite having no further allocation of Payroll Support.

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| | | | | | | Year ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Active fulltime equivalent Employees (j) | | | | | | 55,093 | | | | | | 56,537 | | | | | | (2.6) | | % | | | | 60,767 | | | | | | (7.0) | | % | | | | (9.3) | | % |

(l)The Company believes certain comparisons with 2019 are more relevant measures of performance than year-over-year comparisons due to the significant impacts in 2020 due to the pandemic.

2022 Outlook

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| | | | | | | | | | 1Q 2022 Estimation | | | | | | Previous estimation | | |

| Operating revenue compared with 2019 (a) | | | | | | | | | Down 10% to 15% | | | | | | (e) | | |

| Load factor | | | | | | | | | 75% to 80% | | | | | | (e) | | |

| ASMs compared with 2019 | | | | | | | | | Down ~9% | | | | | | (e) | | |

| CASM-X (b) compared with 2019 | | | | | | | | | Up 20% to 24% | | | | | | (e) | | |

| Aircraft (c) | | | | | | | | | 725 | | | | | | (e) | | |

| | | | | | | | | | 2022 Estimation | | | | | | Previous estimation | | |

| ASMs compared with 2019 | | | | | | | | | Down ~4% | | | | | | (e) | | |

| CASM-X (b) compared with 2019 | | | | | | | | | Up 12% to 16% | | | | | | (e) | | |

| Aircraft (c) | | | | | | | | | 814 | | | | | | (e) | | |

(a) The Company believes that operating revenues compared with 2019 is a more relevant measure of performance than a year-over-year comparison due to the significant impacts in 2021 due to the pandemic.

(c) Aircraft on property, end of period; net of 6 and 28 retirements planned in first quarter 2022 and full year 2022, respectively.

Two aircraft originally planned for delivery in first quarter 2022 have shifted into the Company's second quarter 2022 planned delivery schedule.

Reflects 12 options exercised through February 3, 2022, five and seven for delivery in first quarter and second quarter 2022, respectively, and the assumption that the Company exercises all 30 remaining 2022 options.

(d) Represents current contractual payments to Boeing for firm aircraft and the assumptions that the Company exercises all 30 remaining 2022 options, in addition to ~$900 million non-aircraft capital spending.

Excluding any further option exercises in 2022, the Company's 2022 capital spending would be ~$3.4 billion, also including ~$900 million in non-aircraft capital spending

(e) Remains unchanged from previously reported estimation.

Following strong travel demand during the fourth quarter 2021 holiday period, the Company is experiencing a revenue headwind in first quarter 2022 due to a softness in bookings and an increase in trip cancellations associated with the Omicron variant.

January and February are seasonally weaker time periods for leisure travel demand, but further softness in leisure bookings related to the Omicron variant, combined with lower than expected business

travel demand, is estimated to reduce operating revenues in January and February 2022 by $330 million, combined.

The Company canceled more than 5,600 flights in January 2022, with the majority attributable to available staffing challenges as a result of the Omicron variant, as well as weather-related cancellations, driving an estimated $50 million negative impact to January 2022 operating revenues.

The Company has interest rate risk in its [removed: floating-rate debt obligations and] interest rate swaps, commodity price risk in jet fuel required to operate its aircraft fleet, and market risk in the derivatives used to manage its fuel hedging program and in the form of fixed-rate debt instruments.

As of December 31, [removed: 2021,] [added: 2022,] the Company operated a total of [removed: 129] [added: 94] aircraft under operating and finance leases.

The Company expects to consume approximately [removed: 1.9] [added: 2.2] billion gallons of jet fuel in [removed: 2022.][added: 2023.]

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: $19] [added: $22] million for [removed: 2022,] [added: 2023,] excluding any impact associated with fuel derivative instruments held.

As of December 31, [removed: 2021,] [added: 2022,] the Company held a net position of fuel derivative instruments that represented a hedge for a portion of its anticipated jet fuel purchases for future periods.

The gross fair value of outstanding financial derivative instruments related to the Company’s jet fuel market price risk at December 31, [removed: 2021,] [added: 2022,] was an asset of [removed: $696] [added: $512] million.

In addition, [removed: $175] [added: $106] million in cash collateral deposits were held by the Company in connection with these instruments based on their fair value as of December 31, [removed: 2021.][added: 2022.]

An immediate 10 percent increase or decrease in underlying fuel-related commodity prices from the December 31, [removed: 2021,] [added: 2022,] prices would correspondingly change the fair value of the commodity derivative instruments in place by approximately [removed: $185] [added: $191] million.

This sensitivity analysis uses industry standard valuation models and holds all inputs constant at December 31, [removed: 2021,] [added: 2022,] levels, except underlying futures prices.

As of December 31, [removed: 2021,] [added: 2022,] the Company had [removed: nine] [added: eight] counterparties for which the derivatives held were an asset.

[added: At December 31, 2022, 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 [removed: counterparty’s credit rating.]

Refer to the counterparty credit risk and collateral table provided in Note 11 to the Consolidated Financial Statements for the fair values of fuel derivatives, amounts held as collateral, and applicable collateral posting threshold amounts as of December 31, [removed: 2021,] [added: 2022,] at which such postings are triggered.

The Company has found that financial derivative instruments in commodities, such as [removed: WTI] [added: West Texas Intermediate ("WTI")] crude oil, Brent crude oil, and refined products, such as heating oil and unleaded gasoline, can be useful in decreasing its exposure to jet fuel price volatility.

As of December 31, [removed: 2021,] [added: 2022,] 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 "BBB+" rating with Fitch, a "BBB" rating with Standard & Poor’s, and a "Baa1" credit rating with Moody’s as of December 31, [removed: 2021,] [added: 2022,] all of which are considered "investment grade." See Note 7 to the Consolidated Financial Statements for more information on the material terms of the Company’s short-term and long-term debt.

The [removed: following table presents the] Company's [removed: fixed-rate] senior unsecured notes outstanding as of December 31, [removed: 2021:][added: 2022 are all fixed-rate obligations.]

The Company's total debt divided by total assets was [removed: 29.5] [added: 22.9] percent as of December 31, [removed: 2021.][added: 2022.]

The Company also has some risk associated with changing interest rates due to the short-term nature of its invested cash, which totaled [removed: $12.5] [added: $9.5] billion, and short-term investments, which totaled [removed: $3.0] [added: $2.8] billion at December 31, [removed: 2021.][added: 2022.]

A hypothetical 10 percent change in market interest rates as of December 31, [removed: 2021,] [added: 2022,] would have resulted in an approximate [removed: $37] [added: $100] million change in the fair value of the Company’s fixed-rate debt instruments.

Assuming floating market rates in effect as of December 31, [removed: 2021] [added: 2022] were held constant throughout a 12-month period, a hypothetical 10 percent change in those rates would have [added: resulted in] an [removed: immaterial] [added: approximate $47 million] 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 from or provided to counterparties, if applicable) and short-term investments outstanding at December 31, [removed: 2021,] [added: 2022,] an increase in rates would have a net positive effect on the Company’s earnings and cash flows, while a decrease in rates would have a net negative effect on the Company’s earnings and cash flows.

The Company’s Amended A&R Credit Agreement contains a financial covenant to maintain total liquidity, [added: as defined therein, of $1.5 billion at all times.]

As of December 31, [removed: 2021,] [added: 2022,] the Company was in compliance with this covenant and there were no amounts outstanding under the Amended A&R Credit Agreement.

There was no cash reserved for this purpose as of December 31, [removed: 2021.][added: 2022.]

Cash reserve requirements are based on the Company’s public debt rating and a [removed: corresponding percentage of the Company’s Air traffic liability.]

As of December 31, [removed: 2021,] [added: 2022,] no holdbacks were in place.

As of December 31, [removed: 2021,] [added: 2022,] the Company was in compliance with all credit card processing agreements.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

counterparty’s credit rating.

See Note 7 to the Consolidated Financial Statements for further information.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

corresponding percentage of the Company’s Air traffic liability.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

The Company also has 14 aircraft under operating leases that have been subleased to another carrier.

Further information about these leases is disclosed in Note 8 to the Consolidated Financial Statements.

At December 31, 2021, the Company had

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| (in millions) | | | | | | December 31, 2021 | | |

| 2.75% Notes due 2022 | | | | | | $ | 300 | |

| 4.75% Notes due 2023 | | | | | | 1,250 | | |

| 5.25% Notes due 2025 | | | | | | 1,550 | | |

| 3.00% Notes due 2026 | | | | | | 300 | | |

| 3.45% Notes due 2027 | | | | | | 300 | | |

| 5.125% Notes due 2027 | | | | | | 2,000 | | |

| 7.375% Debentures due 2027 | | | | | | 100 | | |

| 2.625% Notes due 2030 | | | | | | 500 | | |

as defined therein, of $1.5 billion at all times.

At December 31, [removed: 2021,] [added: 2022,] Southwest had a total of [removed: 728] [added: 770] Boeing 737 aircraft in its fleet and [added: served] 121 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.

The speed with which the effects of the COVID-19 pandemic changed the U.S. economic landscape, outlook, and in particular the travel industry, was swift and [removed: unexpected and resulted in a significant negative impact on travel demand, revenues, and bookings throughout 2020.][added: unexpected.]

[removed: Further,] [added: During] the [added: pandemic, the] Company substantially enhanced its cash holdings by obtaining significant financing in the capital markets, through payroll funding support ("Payroll Support") with the U.S. Department of Treasury ("Treasury"), and elsewhere.

In addition, the Company offered voluntary separation and extended time-off programs for its Employees, which significantly reduced the Company's active [removed: headcount.][added: headcount, to better match the reduced level of travel demand, especially during the early stages of the pandemic.]

The unpredictable fluctuating extent of the travel demand [removed: improvement over the course of 2021,] [added: recovery,] combined with the reduction in the Company's available [removed: workforce,] [added: workforce during 2020 and 2021,] contributed to operational challenges [removed: and resulting declines in the Company's operational performance] [added: during early parts of 2022] as the Company [removed: struggled] [added: aggressively hired new Employees throughout 2022 in order] to return to the staffing levels necessary for operational demands.

As discussed [removed: above] [added: below] under "Business – Worldwide Pandemic," [added: beginning in March 2020,] the travel industry was adversely impacted in [removed: 2020] [added: 2020, 2021,] and [removed: 2021] [added: 2022] by the COVID-19 pandemic, including the [removed: recent Delta and] Omicron [removed: variants.][added: variant in early 2022.]

[removed: Like the Company,] [added: Southwest, like] other U.S. [removed: airlines] [added: airlines,] experienced significant negative impacts to passenger demand and revenues; [removed: however] [added: however,] the impact of the COVID-19 pandemic on some of these airlines was particularly severe because of the percentage of their operations that had historically been dependent on business and international travel, each of which suffered particular harm as a result of the pandemic.

[removed: Like the Company,] [added: Southwest, like] other U.S. [removed: airlines began] [added: airlines, continued] to [removed: mitigate cash losses and] recover from the COVID-19 pandemic in [removed: 2021,] [added: 2022,] while facing challenges such as the [removed: Delta and] Omicron [removed: variants, lower passenger revenue yields (i.e., pricing),] [added: variant early in the year,] higher fuel prices and other cost inflation, [removed: and] [added: economic uncertainty, weather events, and, until the Company returned to pre-pandemic staffing levels in May 2022, operational challenges resulting from] surges in leisure travel demand against constrained personnel [removed: resources resulting in operational challenges.][added: resources.]

Overall, the U.S. airline industry saw a strong recovery of domestic leisure travel demand [removed: during peak travel periods] in [removed: 2021] [added: 2022] as a result of declining reported COVID-19 cases throughout the United [removed: States,] [added: States and] the easing of travel [removed: restrictions, and an increase in the number of individuals vaccinated against COVID-19.][added: restrictions.]

[removed: However, business travel] [added: Business travel, however,] remained at a [removed: significantly] reduced level throughout [removed: 2021,] [added: 2022,] as compared with pre-pandemic levels.

The airline industry has also been particularly susceptible to detrimental events such as economic recessions, jet fuel price volatility, unscheduled maintenance disruptions, U.S. government shutdowns, acts of terrorism, [removed: poor] [added: severe] weather, and natural disasters.

In [removed: 2021,] [added: 2022,] the industry experienced a very challenging fuel environment, as compared with recent years, with year-over-year fuel prices significantly higher throughout [removed: most of 2021.][added: 2022.]

By not concentrating operations [added: exclusively] through one or more central transfer points, Southwest's [removed: point-to-point] route structure has allowed for more direct nonstop routing than hub-and-spoke service.

Approximately [removed: 73] [added: 74] percent of the Company's Customers flew nonstop during [removed: 2021,] [added: 2022,] compared with [removed: 72] [added: 73] percent during [removed: 2020,] [added: 2021,] and compared with [removed: 77] [added: 72] percent during [removed: 2019,] [added: 2020,] and, as of December 31, [removed: 2021,] [added: 2022,] Southwest served [removed: 788] [added: 825] nonstop city pairs, compared with [removed: 667] [added: 788] as of December 31, [removed: 2020,] [added: 2021,] and compared with [removed: 720] [added: 667] as of December 31, [removed: 2019.][added: 2020.]

For [removed: 2021,] [added: 2022,] the Company’s average aircraft trip stage length was [removed: 790] [added: 728] miles, with an average duration of approximately [removed: 2.1] [added: 2.0] hours, as compared with an average aircraft trip stage length of [removed: 743] [added: 790] miles and an average duration of approximately [removed: 2.0] [added: 2.1] hours in [removed: 2020,] [added: 2021,] and as compared with an average aircraft trip stage length of [removed: 748] [added: 743] miles and an average duration of approximately 2.0 hours in [removed: 2019.][added: 2020.]

Southwest’s [removed: point-to-point service] [added: route network] has also enabled it to provide its markets with frequent, conveniently timed flights and low fares.

For example, Southwest currently offers [removed: ten] [added: 12] weekday roundtrips between Dallas Love Field and Houston Hobby (and an additional [removed: six] [added: five] to Houston Bush), [removed: seven] [added: eight] weekday roundtrips between Denver and Chicago Midway (and an additional six to Chicago O'Hare), [removed: seven] [added: ten] weekday roundtrips between Los Angeles International and Las Vegas, [removed: twelve] [added: 12] weekday round trips between Burbank and Oakland, and [removed: nine] [added: 13] weekday roundtrips between Phoenix and Denver.

Southwest complements its high-frequency short-haul routes with long-haul nonstop service including flights between Hawaii and California, Las Vegas, and Phoenix, and between markets such as Los Angeles and Nashville, [added: New York LaGuardia and Houston,] Los Angeles and Baltimore, Oakland and Houston, [removed: Las Vegas] and [removed: Orlando, and] San Diego and Baltimore.

The Company's network and schedule optimization efforts [removed: have been] [added: were] particularly beneficial in addressing the impacts of the COVID-19 pandemic.

For example, these efforts [removed: have] enabled the Company to [removed: continue to] add cities in key existing markets, [removed: such] as [removed: California, as] well as opportunistically introduce service in other markets during the pandemic.

As part of the Company's recovery from the impacts of the COVID-19 pandemic, the Company remains focused on [added: maturing newer markets and] restoring its network to pre-pandemic levels through adding back [removed: depth] [added: breadth] and frequency to the [removed: Company's network while balancing its network schedule with its crew resources.]

The Company has since resumed service to [removed: 13] [added: all 14] of its [removed: 14] international destinations.

[removed: During 2021,] [added: For example, in 2022,] the Company [removed: entered into supplemental agreements with The] [added: added 68] Boeing [removed: Company ("Boeing")] [added: 737-8 (“-8”) aircraft] to [removed: increase] its [removed: 2022 firm orders of Boeing 737 MAX 7 ("-7") aircraft, accelerate options into 2022, 2023, 2024, and 2025, and add new options in 2026 and 2027, in each case] [added: fleet,] with the goal of [added: lowering operating costs,] improving potential growth opportunities, restoring the Company's network closer to pre-pandemic levels, [removed: lowering operating costs,] reducing carbon emissions per available seat mile, and further modernizing the Company's fleet with more fuel efficient aircraft.

[removed: However, with its cost-effective order book, the] [added: The] Company retains significant flexibility to manage its fleet size, including opportunities to accelerate fleet modernization efforts [added: (e.g., through accelerated retirements of the Company's -700 aircraft)] if growth opportunities do not materialize.

The Company continues to plan for [added: 27 Boeing -700 retirements in 2023, and] 30-35 Boeing [removed: 737-700] [added: -700] retirements [removed: annually.][added: annually for the next several years thereafter.]

[added: For further information regarding the Company’s contractual order book see “Properties” and "Management’s Discussion and Analysis of Financial Condition and Results of Operations."] The delivery schedule for the -7 is dependent on the [removed: FAA] [added: Federal Aviation Administration (“FAA”)] issuing required certifications and approvals to Boeing and the Company.

The Company's low-cost strategy includes, among other elements, (i) the use of a single aircraft type, the Boeing 737, (ii) the Company's [removed: point-to-point] route structure, and (iii) its [removed: highly] [added: historically] productive Employees.

Southwest's [removed: point-to-point] route structure includes service to and from many secondary or downtown airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, Burbank, Manchester, Oakland, San Jose, Providence, and Ft.

This, in turn, has reduced the number of aircraft and gate facilities that would otherwise be required and [removed: allows] [added: is designed to allow] for high Employee productivity (lower headcount per aircraft).

The Company's focus on controlling costs also includes a continued commitment to pursuing, implementing, and enhancing initiatives to reduce fuel consumption and improve fuel [removed: efficiency.][added: efficiency (available seat miles per fuel gallon consumed).]

[removed: For example, in 2021] [added: - introduction of] the [removed: Company returned its -8] [added: MAX] aircraft [removed: to service,] [added: into the Company's fleet,] which [removed: are] [added: is] more fuel-efficient and [removed: release] [added: releases] fewer [removed: CO2] [added: CO₂] emissions per available seat mile than the Company's [removed: other aircraft.][added: previous generation of 737 aircraft;]

Fuel and oil expense for [removed: 2021] [added: 2022] increased significantly compared with [removed: 2020,] [added: 2021,] primarily due to higher market jet fuel [removed: prices, and in part due to higher capacity in response to consumer demand.][added: prices.]

Fuel and oil expense remained the Company's second largest operating cost for [removed: 2021.][added: 2022.]

The table below shows the Company's average cost of jet fuel for each year beginning in 2011 and during each quarter of [removed: 2021.][added: 2022.]

| | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | | | | | [removed: 2017] [added: 2018] | | |

| Available seat miles per fuel gallon consumed | | | | | | [removed: 79.2] [added: 77.3] | | | | | | [removed: 81.3] [added: 79.2] | | | | | | [removed: 75.7] [added: 81.3] | | | | | | [removed: 76.3] [added: 75.7] | | | | | | [removed: 75.2] [added: 76.3] | | |

Salaries, wages, and benefits expense constituted approximately [removed: 55.0] [added: 41.0] percent of the Company's operating expenses [removed: during 2021 and was the Company's largest operating cost.]

The Company's labor costs, and risks associated therewith, are discussed [added: in more detail below under "Risk Factors," "Business - Employees," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations."]

Southwest fare products include [removed: three] [added: four] major categories: "Wanna Get Away®," [added: "Wanna Get Away Plus,"] "Anytime," and "Business Select®," to provide Customers options when choosing a fare.

Southwest does not charge fees for [added: cancellations or] changes to flight reservations although fare differences may apply.

The Company experienced significant disruptions in travel and reduced bookings throughout the remainder of 2020, 2021, and early 2022 as a result of the pandemic and subsequent variants of COVID-19.

Following a significant negative impact to revenues and bookings in January and February 2022, which included increased trip cancellations and staffing challenges associated with the Omicron variant, the Company saw improvements in revenue trends in March 2022 and throughout the remainder of 2022 as COVID-19 cases significantly trended downward.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

The Company returned to pre-pandemic staffing levels in May 2022.

While the Company does not operate a traditional hub-and-spoke model, in recent years the Company has increasingly focused on designing its network around core stations in an effort to provide greater connectivity, and support operational reliability and recoverability.

In addition, the Company has focused its efforts in 2022 and thus far in 2023 towards restoring its pre-pandemic network, including long-haul service.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

Company's network while balancing its network schedule with its crew resources.

The Company began service to 14 new destinations in 2021.

The Company continues to focus on restoring its route network, with nearly all planned 2023 capacity growth going toward adding depth and breadth in key Southwest markets, which is designed to improve Employee productivity and operational resilience.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

| 2022 | | | | | | $ | 5,975 | | | | | $ | 3.10 | | | | | 26.2 | | % |

| First Quarter 2022 | | | | | | $ | 1,004 | | | | | $ | 2.30 | | | | | 20.7 | | % |

| Second Quarter 2022 | | | | | | $ | 1,636 | | | | | $ | 3.36 | | | | | 29.4 | | % |

| Third Quarter 2022 | | | | | | $ | 1,750 | | | | | $ | 3.39 | | | | | 30.0 | | % |

| Fourth Quarter 2022 | | | | | | $ | 1,585 | | | | | $ | 3.27 | | | | | 24.2 | | % |

The Company’s fuel efficiency was aided in 2022, as compared with 2021, through the addition of 68 -8 aircraft to its fleet and by the retirement of 26 of its oldest, least fuel-efficient Boeing 737-700 (“-700”) aircraft.

However, the Company’s fuel efficiency decreased in 2022, as compared with 2021, primarily as a result of the Company’s significantly increased Load factor and operating more of its least fuel- efficient -700 aircraft versus 2021 when many of the Company’s -700 aircraft were in storage.

While the Company was contractually scheduled to receive 114 Boeing 737 MAX (“MAX”) deliveries in 2022, including exercised options, 46 of these aircraft were undelivered due to The Boeing Company's ("Boeing") supply chain challenges and delays in the Boeing 737-7 (“-7”) certification.

The Company expects the remaining 46 contractual undelivered aircraft to shift into future years.

The Company exercised a total of 91 MAX options during 2022 and held 147 remaining MAX options at December 31, 2022, in addition to 417 firm orders of MAX aircraft to be delivered through 2030.

Given current supply chain and aircraft delivery delays, the Company will continue working with Boeing to solidify future delivery dates.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

during 2022 and was the Company's largest operating cost.

In 2022, Southwest introduced a new fare product, "Wanna Get Away PlusTM," that adds more flexibility, options, and rewards to Southwest’s fare lineup.

- “Wanna Get Away Plus” fares are non-refundable, but, subject to Southwest’s No-Show Policy, flight credit may be applied towards future travel on Southwest.

“Wanna Get Away Plus” fares earn eight Rapid Rewards points for each dollar spent on the base fare.

“Wanna Get Away Plus” fares offer Transferable Flight CreditTM that enables Customers to transfer an eligible unused flight credit to another traveler for future use.

Both must be Rapid Rewards members and only one transfer is permitted.

For bookings through a Southwest Business (corporate travel) channel, a transfer may only be made to an employee of the same organization.

Subject to Southwest’s No-Show Policy, “Wanna Get Away Plus” fares also enable a same-day confirmed change, free of airline charges, if there is an open seat on another flight that departs on the same day as the original flight and is between the same cities, but the Customer is required to pay any additional government taxes and fees associated with changes in their itinerary.

If there is no open seat on this different flight, a traveler may request to be added to the standby list for that flight.

“Anytime” fares also receive EarlyBird Check-In®.

See

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

“Ancillary Services” below for further information about EarlyBird Check-In.

Additionally, “Anytime” fares receive Priority Lane and Express Lane access through check-in and security lines where available.

Further, “Anytime” fares receive all of the benefits of “Wanna Get Away Plus” fares, including Transferrable Flight Credit and same-day confirmed changes and standby listings.

If this fare is purchased with non-refundable flight credit, then the resulting flight credit will be non-refundable if travel is canceled.

“Business Select” fares also receive all of the benefits of “Anytime” fares, including Priority Lane and Express Lane access through check-in and security lines where available, Transferable Flight Credit, and same-day confirmed changes and standby listings.

During 2021, the Company began service to 14 new destinations including Chicago (O'Hare), Illinois; Houston (Bush), Texas; Jackson, Mississippi; Colorado Springs, Colorado; Savannah, Georgia/Hilton Head, South Carolina; Sarasota, Florida; Santa Barbara, California; Fresno, California; Destin, Florida; Bozeman, Montana; Myrtle Beach, South Carolina; Eugene, Oregon; Bellingham, Washington; and Syracuse, New York.

The Company responded by cancelling a significant portion of its scheduled flights, grounding a significant portion of its fleet, significantly reducing planned capital spending, and significantly reducing its previously scheduled capacity.

The Company continued to experience negative and unpredictable fluctuating pandemic-related impacts to passenger demand and bookings in 2021.

Modest improvements in leisure bookings began in mid-February 2021 and further improved in March 2021.

Travel demand and bookings accelerated during second quarter 2021 as a result of declining reported COVID-19 cases throughout the United States, the easing of travel restrictions, and an increase in the number of individuals vaccinated.

Despite some softness in bookings and elevated trip cancellations due to surging COVID-19 cases in August and September as a result of the Delta variant, and in December as a result of the Omicron variant, third quarter and fourth quarter 2021 domestic leisure demand was also strong and a dramatic improvement from 2020.

In response, the Company continued its efforts to correspondingly adjust capacity throughout 2021 and into first quarter 2022.

In addition, the Company aggressively hired new Employees in third and fourth quarter 2021, and is continuing these efforts in 2022, to balance its schedule with its crew and ground operations resources.

Like the Company, these other airlines responded with adjustments to their flight schedules, capacity, operating costs and capital expenditures, and fleet plans.

Unlike the Company, certain other airlines also furloughed employees and/or ceased service in certain markets.

However, in response to the effects of the COVID-19 pandemic, the Company placed greater reliance in 2020 and 2021 on connecting traffic in an effort to capture Customer demand.

Despite the pandemic, the Company has been able to continue to bolster its presence in California through the addition of new destination options and flights for California Customers.

In 2021, the Company added many new destinations to its route map, including new California service to Santa Barbara and Fresno.

Further, the Company expanded its California to Hawaii network in 2021 by adding inaugural service between Los Angeles and Hawaii in June 2021.

The Company also added inaugural service to Hawaii from Las Vegas and Phoenix in June 2021.

The Company also expanded its service at John Wayne Airport (Orange County) in 2021, including reinstated international service beginning in March 2021.

In addition, the Company is currently scheduled to offer over 700 departures from California on peak flying days in the summer of 2022.

Based on the most recent data available from the U.S. Department of Transportation (the "DOT"), for the year ended September 30, 2021, Southwest carried more California travelers to, from, and within California than any other airline.

The Company's network and schedule optimization efforts have also enabled it to use otherwise idle aircraft, while overall travel demand has been reduced.

This, in turn, has enabled the Company to better optimize its service amongst its core markets and, in 2021, it enabled the Company to provide service to 14 new destinations.

The Company’s operations to the Cayman Islands are temporarily suspended due to impacts from the COVID-19 pandemic, but with the easing of government restrictions and the continued increase in demand for beach and leisure destinations, the Company intends to resume service to the Cayman Islands in 2022.

Boeing 737 MAX

In March 2019, the Federal Aviation Administration (the "FAA") issued an emergency order for all U.S. airlines to ground all Boeing 737 MAX ("MAX") aircraft.

The Company immediately complied with the order and grounded all 34 Boeing 737 MAX 8 ("-8") aircraft in its fleet.

In November 2020, the FAA rescinded the emergency order and issued official requirements to enable U.S. airlines to return the MAX to service.

The Company returned the MAX to service in March 2021, after the Company met all FAA requirements and Pilots received updated, MAX-

related training.

Following the FAA rescission of the emergency order, the Company took delivery of 35 -8 aircraft through the end of 2021 and had 69 -8 aircraft in its fleet at 2021 year-end.

Additionally, during 2021, the Company exercised 42 2022 options for -7 aircraft and exercised 22 2023 options for -7 aircraft.

Fleet and capacity plans will continue to evolve as the Company manages through the pandemic recovery period, and the Company will continue to evaluate its remaining MAX options.

Additional information regarding the Company's current fleet and fleet delivery schedule is included in "Item 2 – Properties" below.

| First Quarter 2021 | | | | | | $ | 469 | | | | | $ | 1.63 | | | | | 25.3 | | % |

| Second Quarter 2021 | | | | | | $ | 803 | | | | | $ | 1.88 | | | | | 23.5 | | % |

| Third Quarter 2021 | | | | | | $ | 990 | | | | | $ | 2.01 | | | | | 25.1 | | % |

| Fourth Quarter 2021 | | | | | | $ | 1,049 | | | | | $ | 2.25 | | | | | 21.6 | | % |

The MAX groundings in early 2019 resulted in the removal of these more fuel-efficient aircraft from the Company's schedule, which, in turn, drove a decline in the Company's overall fuel efficiency in 2019.

Although the Company's MAX aircraft remained grounded throughout 2020, the Company improved its fuel efficiency in 2020, as compared with 2019, primarily by operating fewer of its oldest, least fuel-efficient Boeing 737-700 aircraft as a result of capacity cuts in response to the effects of the COVID-19 pandemic.

Lower load factors, due to COVID-19, also contributed to fuel efficiency during 2020.

Despite the return to service of the MAX aircraft, the Company's 2021 fuel efficiency declined, as compared with 2020, due to higher load factors and the Company's return to service of more of its oldest, least fuel efficient Boeing 737-700 aircraft, which had been placed into storage in 2020 due to capacity cuts in response to the effects of the COVID-19 pandemic.

in more detail below under "Risk Factors," "Business - Employees," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations."

Since then, a number of similar class action complaints were filed in the United States District Courts for the Central District of California, the Northern District of California, the District of Columbia, the Middle District of Florida, the Southern District of Florida, the Northern District of Georgia, the Northern District of Illinois, the Southern District of Indiana, the Eastern District of Louisiana, the District of Minnesota, the District of New Jersey, the Eastern District of New York, the Southern District of New York, the Middle District of North Carolina, the District of Oklahoma, the Eastern District of Pennsylvania, the Northern District of Texas, the District of Vermont, [removed: and the Eastern District of Wisconsin.]

[added: 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.

After notice was provided to the proposed settlement class and the Court held a fairness [removed: hearing,] [added: hearing] the Court issued an order granting final approval of the settlement on May 9, 2019.

On July 11, 2019, a complaint alleging violations of federal and state laws and seeking certification as a class action was filed against Boeing and the Company in the United States District Court for the Eastern District of Texas in [removed: Sherman.][added: Sherman ("Sherman Complaint").]

On January [removed: 7, 2022,] [added: 10, 2023,] the Company and Boeing [removed: each] filed [removed: briefs in support of] [added: a joint response to] the [removed: appeal.][added: Petition.]

[added: The amended complaint asserts claims] under Sections 10(b) and 20 of the Securities Exchange Act and alleges that the Company made material misstatements to investors regarding the Company’s safety and maintenance practices and its compliance with federal regulations and requirements.

The Company [added: denies all allegations of wrongdoing,] believes the plaintiffs' positions are without [removed: merit] [added: merit,] and intends to vigorously defend [removed: itself.][added: itself in all respects.]

The complaint alleges that the Company breached its Contract of Carriage and other alleged agreements in connection with its use of the allegedly defective [removed: 737] MAX aircraft manufactured by The Boeing Company.

On October 27, 2021, the Company filed a multi-faceted motion challenging the [removed: complaint, including seeking a stay or transfer of the case based upon prior pending litigation, dismissal of the Complaint] [added: complaint] based upon lack of subject matter jurisdiction, [added: the existence of the prior-filed Sherman Complaint on appeal in the Fifth Circuit,] improper venue, and failure to state a claim, and seeking to have the [removed: complaint’s] [added: complaint's] class contentions stricken.

The Company denies all allegations of [removed: wrongdoing and] [added: wrongdoing,] believes the plaintiffs' positions are without [removed: merit] [added: merit,] and intends to [added: continue] vigorously [removed: defend] [added: defending] itself in all respects.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

and the Eastern District of Wisconsin.

Following full briefing on the merits of the appeal, a three-judge panel of the Fifth Circuit heard oral argument of the appeal on July 5, 2022.

On November 21, 2022, the Fifth Circuit issued an opinion concluding that, among other things, the plaintiffs "have offered no plausible theory of economic harm" and "have suffered no injury in fact and lack Article III standing," and so their "case therefore must be dismissed." The

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

Fifth Circuit reversed the trial court's September 3, 2021 certification order and remanded the case to the trial court with instructions to dismiss the case for lack of jurisdiction.

On December 5, 2022, the plaintiffs filed a Petition for Rehearing En Banc, which seeks to have the appeal reheard by the Fifth Circuit.

The Petition remains pending before the Fifth Circuit.

That motion was fully briefed by both parties and was argued to a United States Magistrate Judge on June 27, 2022.

On July 5, 2022, the Magistrate Judge granted the motion in part and ordered the case stayed until the issuance of the Fifth Circuit's opinion in the Sherman Complaint.

On November 28, 2022, the parties jointly notified the Court of the Fifth Circuit's decision regarding the Sherman Complaint.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

On January 12, 2023, a complaint alleging violations of federal securities laws and seeking certification as a class action was filed against the Company and certain of its officers in the United States District Court for the Southern District of Texas in Houston.

The complaint seeks damages on behalf of a putative class of persons who purchased the Company's common stock between June 13, 2020, and December 31, 2022.

The complaint asserts claims under Sections 10(b) and 20 of the Securities Exchange Act and alleges that the Company made material misstatements to investors regarding the Company's internal technology and alleged vulnerability to large-scale flight disruptions.

The complaint generally seeks money damages, pre-judgment and post-judgment interest, and attorneys' fees and other costs.

The Company denies all allegations of wrongdoing in the complaint, believes the plaintiff's positions are without merit, and intends to vigorously defend itself in all respects.

On or about January 24, 2023, legal counsel for a purported Southwest shareholder sent a letter to the Company’s senior officers and Board of Directors demanding that the Board investigate claims, initiate legal action, and take remedial measures in connection with the service disruptions occurring in December 2022.

The demand letter broadly asserts that the Company’s directors and senior officers did not make sufficient investments in internal technology systems to prevent large-scale flight disruptions, did not exercise sufficient oversight over the Company’s operations, approved or received unwarranted compensation, caused the Company to make materially misleading public statements, and breached their fiduciary duties to the Company.

On December 20,

The Company intends to strenuously pursue the appeal.

The plaintiffs have a deadline of March 9, 2022, to file response briefs.

The Company further denies all allegations of wrongdoing, including those in the complaint that were not originally dismissed.

The amended complaint asserts claims

That motion was fully briefed by both parties as of December 22, 2021, and is now awaiting determination by the court.

For the fiscal year ended December 31, [removed: 2021][added: 2022]

[removed: ][added: ]

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately [removed: $31,305,364,914] [added: $21,357,830,046] computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, [removed: 2021,] [added: 2022,] 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: 2, 2022: 592,341,878] [added: 3, 2023: 594,286,577] shares

Portions of the Definitive Proxy Statement for the Company’s Annual Meeting of Shareholders to be held May [removed: 18, 2022,] [added: 17, 2023,] are incorporated into Part III of this Annual Report on Form 10-K.

| Item 1. | | | [removed: [Business](#i5767dd3ba4144437b747a57172579cf2_13)] [added: [Business](#i79738292d41746b1bb15858ef354b619_13)] | | | [removed: [3](#i5767dd3ba4144437b747a57172579cf2_13)] [added: [3](#i79738292d41746b1bb15858ef354b619_13)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i5767dd3ba4144437b747a57172579cf2_19)] [added: Factors](#i79738292d41746b1bb15858ef354b619_19)] | | | [removed: [28](#i5767dd3ba4144437b747a57172579cf2_19)] [added: [29](#i79738292d41746b1bb15858ef354b619_19)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i5767dd3ba4144437b747a57172579cf2_22)] [added: Comments](#i79738292d41746b1bb15858ef354b619_22)] | | | [removed: [42](#i5767dd3ba4144437b747a57172579cf2_22)] [added: [47](#i79738292d41746b1bb15858ef354b619_22)] | | |

| Item 2. | | | [removed: [Properties](#i5767dd3ba4144437b747a57172579cf2_25)] [added: [Properties](#i79738292d41746b1bb15858ef354b619_25)] | | | [removed: [43](#i5767dd3ba4144437b747a57172579cf2_25)] [added: [48](#i79738292d41746b1bb15858ef354b619_25)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i5767dd3ba4144437b747a57172579cf2_28)] [added: Proceedings](#i79738292d41746b1bb15858ef354b619_28)] | | | [removed: [44](#i5767dd3ba4144437b747a57172579cf2_28)] [added: [49](#i79738292d41746b1bb15858ef354b619_28)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#i5767dd3ba4144437b747a57172579cf2_31)] [added: Disclosures](#i79738292d41746b1bb15858ef354b619_31)] | | | [removed: [46](#i5767dd3ba4144437b747a57172579cf2_31)] [added: [52](#i79738292d41746b1bb15858ef354b619_31)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity [removed: Securities](#i5767dd3ba4144437b747a57172579cf2_40)] [added: Securities](#i79738292d41746b1bb15858ef354b619_40)] | | | [removed: [49](#i5767dd3ba4144437b747a57172579cf2_40)] [added: [55](#i79738292d41746b1bb15858ef354b619_40)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i5767dd3ba4144437b747a57172579cf2_46)] [added: Operations](#i79738292d41746b1bb15858ef354b619_46)] | | | [removed: [52](#i5767dd3ba4144437b747a57172579cf2_46)] [added: [58](#i79738292d41746b1bb15858ef354b619_46)] | | |

| | | | [Liquidity and Capital [removed: Resources](#i5767dd3ba4144437b747a57172579cf2_67)] [added: Resources](#i79738292d41746b1bb15858ef354b619_67)] | | | [removed: [69](#i5767dd3ba4144437b747a57172579cf2_67)] [added: [74](#i79738292d41746b1bb15858ef354b619_67)] | | |

| | | | [Critical Accounting Policies and [removed: Estimates](#i5767dd3ba4144437b747a57172579cf2_73)] [added: Estimates](#i79738292d41746b1bb15858ef354b619_73)] | | | [removed: [72](#i5767dd3ba4144437b747a57172579cf2_73)] [added: [77](#i79738292d41746b1bb15858ef354b619_73)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i5767dd3ba4144437b747a57172579cf2_76)] [added: Risk](#i79738292d41746b1bb15858ef354b619_79)] | | | [removed: [76](#i5767dd3ba4144437b747a57172579cf2_76)] [added: [81](#i79738292d41746b1bb15858ef354b619_79)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i5767dd3ba4144437b747a57172579cf2_82)] [added: Data](#i79738292d41746b1bb15858ef354b619_85)] | | | [removed: [80](#i5767dd3ba4144437b747a57172579cf2_82)] [added: [85](#i79738292d41746b1bb15858ef354b619_85)] | | |

| | | | [Southwest Airlines Co. Consolidated Balance [removed: Sheet](#i5767dd3ba4144437b747a57172579cf2_85)] [added: Sheet](#i79738292d41746b1bb15858ef354b619_88)] | | | [removed: [80](#i5767dd3ba4144437b747a57172579cf2_85)] [added: [85](#i79738292d41746b1bb15858ef354b619_88)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of Income [removed: (Loss)](#i5767dd3ba4144437b747a57172579cf2_88)] [added: (Loss)](#i79738292d41746b1bb15858ef354b619_91)] | | | [removed: [81](#i5767dd3ba4144437b747a57172579cf2_88)] [added: [86](#i79738292d41746b1bb15858ef354b619_91)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of Comprehensive Income [removed: (Loss)](#i5767dd3ba4144437b747a57172579cf2_91)] [added: (Loss)](#i79738292d41746b1bb15858ef354b619_94)] | | | [removed: [82](#i5767dd3ba4144437b747a57172579cf2_91)] [added: [87](#i79738292d41746b1bb15858ef354b619_94)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of Stockholders’ [removed: Equity](#i5767dd3ba4144437b747a57172579cf2_94)] [added: Equity](#i79738292d41746b1bb15858ef354b619_97)] | | | [removed: [83](#i5767dd3ba4144437b747a57172579cf2_94)] [added: [88](#i79738292d41746b1bb15858ef354b619_97)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of Cash [removed: Flows](#i5767dd3ba4144437b747a57172579cf2_97)] [added: Flows](#i79738292d41746b1bb15858ef354b619_100)] | | | [removed: [84](#i5767dd3ba4144437b747a57172579cf2_97)] [added: [89](#i79738292d41746b1bb15858ef354b619_100)] | | |

| | | | [Notes to Consolidated Financial [removed: Statements](#i5767dd3ba4144437b747a57172579cf2_100)] [added: Statements](#i79738292d41746b1bb15858ef354b619_103)] | | | [removed: [85](#i5767dd3ba4144437b747a57172579cf2_100)] [added: [90](#i79738292d41746b1bb15858ef354b619_103)] | | |

| Item 9. | | | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#i5767dd3ba4144437b747a57172579cf2_181)] [added: Disclosure](#i79738292d41746b1bb15858ef354b619_178)] | | | [removed: [134](#i5767dd3ba4144437b747a57172579cf2_181)] [added: [141](#i79738292d41746b1bb15858ef354b619_178)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#i5767dd3ba4144437b747a57172579cf2_184)] [added: Procedures](#i79738292d41746b1bb15858ef354b619_181)] | | | [removed: [134](#i5767dd3ba4144437b747a57172579cf2_184)] [added: [141](#i79738292d41746b1bb15858ef354b619_181)] | | |

| Item 9B. | | | [Other [removed: Information](#i5767dd3ba4144437b747a57172579cf2_187)] [added: Information](#i79738292d41746b1bb15858ef354b619_184)] | | | [removed: [135](#i5767dd3ba4144437b747a57172579cf2_187)] [added: [142](#i79738292d41746b1bb15858ef354b619_184)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#i5767dd3ba4144437b747a57172579cf2_1838)] [added: Inspections](#i79738292d41746b1bb15858ef354b619_187)] | | | [removed: [135](#i5767dd3ba4144437b747a57172579cf2_1838)] [added: [142](#i79738292d41746b1bb15858ef354b619_187)] | | |

| Item 10. | | | [Directors, Executive Officers, and Corporate [removed: Governance](#i5767dd3ba4144437b747a57172579cf2_193)] [added: Governance](#i79738292d41746b1bb15858ef354b619_193)] | | | [removed: [136](#i5767dd3ba4144437b747a57172579cf2_193)] [added: [143](#i79738292d41746b1bb15858ef354b619_193)] | | |

| Item 11. | | | [Executive [removed: Compensation](#i5767dd3ba4144437b747a57172579cf2_196)] [added: Compensation](#i79738292d41746b1bb15858ef354b619_196)] | | | [removed: [136](#i5767dd3ba4144437b747a57172579cf2_196)] [added: [143](#i79738292d41746b1bb15858ef354b619_196)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i5767dd3ba4144437b747a57172579cf2_199)] [added: Matters](#i79738292d41746b1bb15858ef354b619_199)] | | | [removed: [137](#i5767dd3ba4144437b747a57172579cf2_199)] [added: [144](#i79738292d41746b1bb15858ef354b619_199)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#i5767dd3ba4144437b747a57172579cf2_202)] [added: Independence](#i79738292d41746b1bb15858ef354b619_202)] | | | [removed: [137](#i5767dd3ba4144437b747a57172579cf2_202)] [added: [144](#i79738292d41746b1bb15858ef354b619_202)] | | |

| Item 14. | | | [Principal Accounting Fees and [removed: Services](#i5767dd3ba4144437b747a57172579cf2_205)] [added: Services](#i79738292d41746b1bb15858ef354b619_205)] | | | [removed: [137](#i5767dd3ba4144437b747a57172579cf2_205)] [added: [144](#i79738292d41746b1bb15858ef354b619_205)] | | |

| Item 15. | | | [Exhibits and Financial Statement [removed: Schedules](#i5767dd3ba4144437b747a57172579cf2_211)] [added: Schedules](#i79738292d41746b1bb15858ef354b619_211)] | | | [removed: [139](#i5767dd3ba4144437b747a57172579cf2_211)] [added: [146](#i79738292d41746b1bb15858ef354b619_211)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#i5767dd3ba4144437b747a57172579cf2_214)] [added: Summary](#i79738292d41746b1bb15858ef354b619_214)] | | | [removed: [142](#i5767dd3ba4144437b747a57172579cf2_214)] [added: [150](#i79738292d41746b1bb15858ef354b619_214)] | | |

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Yes ☐ No x

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Yes ☐ No x

| [Signatures](#i79738292d41746b1bb15858ef354b619_217) | | | | | | [151](#i79738292d41746b1bb15858ef354b619_217) | | |

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

| [Signatures](#i5767dd3ba4144437b747a57172579cf2_217) | | | | | | [143](#i5767dd3ba4144437b747a57172579cf2_217) | | |

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

Southwest operated a total of [removed: 728] [added: 770] Boeing 737 aircraft as of December 31, [removed: 2021,] [added: 2022,] of which [removed: 59] [added: 58] and [removed: 70] [added: 36] were under operating and finance leases, respectively.

The following table details information on the [removed: 728] [added: 770] aircraft as of December 31, [removed: 2021:][added: 2022:]

| 737-700 | | | | | | 143 | | | | | | [removed: 17] [added: 18] | | | | | | [removed: 452] [added: 426] | | | | | | [removed: 369] [added: 378] | | | | | | [removed: 83] [added: 48] | | |

| 737-800 | | | | | | 175 | | | | | | [removed: 6] [added: 7] | | | | | | 207 | | | | | | 190 | | | | | | 17 | | |

| 737 [removed: MAX 8] [added: -8] | | | | | | 175 | | | | | | 2 | | | | | | [removed: 69] [added: 137] | | | | | | [removed: 40] [added: 108] | | | | | | 29 | | |

(a)As discussed further in Note 7 to the Consolidated Financial Statements, [removed: 89] [added: 83] of the Company's aircraft were pledged as collateral as of December 31, [removed: 2021, for] [added: 2022, associated with outstanding] secured borrowings.

As of December 31, [removed: 2021,] [added: 2022,] the Company had firm deliveries and options for Boeing 737 [removed: MAX 7] [added: -7] and 737 [removed: MAX 8] [added: -8] aircraft as follows:

| 2024 | | | [removed: 30] [added: 41] | | | | | | — | | | | | | [removed: 56] [added: 45] | | | | | | | | | | | | 86 | | | [added: (b)] | | |

| 2026 | | | [removed: 15] [added: 30] | | | | | | 15 | | | | | | 40 | | | | | | | | | | | | [removed: 70] [added: 85] | | | | | |

| 2030 | | | [removed: 15] [added: —] | | | | | | [removed: 45] [added: 55] | | | | | | — | | | | | | | | | | | | [removed: 60] [added: 55] | | | | | |

[removed: (a)] [added: (c )] The Company has flexibility to designate firm orders or options as -7s or -8s, upon written advance notification as stated in the contract.

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, [added: Denver International Airport,] and Orlando International Airport) and its main corporate headquarters building, also located near Dallas Love Field.

[removed: The Company also leases a][added: | | | | The Boeing Company | | | | | | | | | | | | | | | | | | | | |]

[added: The Company also leases a] warehouse and engine repair facility in Atlanta.

The Company has announced its intent to build a new aircraft maintenance facility, [removed: scheduled] [added: expected] to be completed in [removed: first quarter 2022,] [added: 2025,] at [removed: Denver] [added: Baltimore-Washington] International Airport.

The Company has commitments associated with various airport improvement projects, including construction at [removed: Los Angeles] [added: Houston Hobby] International Airport.

[removed: These projects include] [added: This project includes] the construction of new facilities and the rebuilding or modernization of existing facilities.

Additional information regarding these projects is provided [removed: below under "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and] in Note 5 to the Consolidated Financial Statements.

The Company owns two additional headquarters buildings, located across the street from the Company's main headquarters building, on land owned by the Company including (a) an energy-efficient, modern building, called TOPS, which houses certain operational and training functions, including the Company's 24-hour operations and (b) the Wings Complex, consisting of a Leadership Education and Aircrew Development (LEAD) Center (housing the Company's [removed: 23] [added: 26] Boeing 737 flight simulators and classroom space for Pilot training), an additional office building, and a parking garage.

| Totals | | | | | | | | | | | | 12 | | | | | | 770 | | | | | | 676 | | | | | | 94 | | |

(b)See Note 8 to the Consolidated Financial Statements for more information on the Company's lease transactions.

For purposes of the delivery schedule below, the Company has included the remaining 46 of its 2022 contractual undelivered aircraft within its 2023 contractual commitments, and has not made any further adjustments to this schedule based on current estimations.

The Company is planning for approximately 100 -8 aircraft deliveries in 2023.

| 2023 | | | 31 | | | | | | 105 | | | | | | — | | | | | | | | | | | | 136 | | | (a) | | |

| | | | 182 | | | | | | 235 | | | (c) | | | 147 | | | (b) | | | | | | | | | 564 | | | | | |

(a) The Company has included the remaining 46 of its 2022 contractual undelivered aircraft (14 -7s and 32 -8s) within its 2023 contractual commitments.

Due to Boeing's supply chain challenges and the current status of the -7 certification, the Company currently estimates approximately 100 MAX aircraft deliveries in 2023.

The 2023 contractual detail is as follows:

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

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

| | | | \-7 Firm Orders | | | \-8 Firm Orders | | | | | | | | | | | | Total | | | | | |

| 2022 Contractual Deliveries Remaining | | | 14 | | | 32 | | | | | | | | | | | | 46 | | | | | |

| 2023 Contractual Deliveries | | | 17 | | | 73 | | | | | | | | | | | | 90 | | | | | |

| 2023 Contractual Total | | | 31 | | | 105 | | | | | | | | | | | | 136 | | | | | |

(b) In January 2023, the Company exercised 10 -7 options for delivery in 2024.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

During 2022, the Company closed all seven physical locations of the Customer Support and Services call centers and transitioned Customer Support and Services Employees to remote work.

| Totals | | | | | | | | | | | | 13 | | | | | | 728 | | | | | | 599 | | | | | | 129 | | |

(b)During 2021, the Company had 7 leased Boeing 737-700 aircraft, for which the lease expired and the aircraft was subsequently purchased from the lessor, and thus the aircraft is now represented as owned.

| 2022 | | | 72 | | | | | | — | | | | | | 42 | | | | | | | | | | | | 114 | | | | | |

| 2023 | | | 52 | | | | | | — | | | | | | 38 | | | | | | | | | | | | 90 | | | | | |

| 2031 | | | — | | | | | | 10 | | | | | | — | | | | | | | | | | | | 10 | | | | | |

| | | | 264 | | | | | | 130 | | | (a) | | | 238 | | | (b) | | | | | | | | | 632 | | | | | |

(b) Subsequent to December 31, 2021, and through February 3, 2022, the Company has exercised 12 -8 options for delivery in 2022 and 12 -7 options for delivery in 2023.

The Company has also announced its intent to build a new aircraft maintenance facility, expected to be completed in 2025, at Baltimore-Washington International Airport.

Construction has been completed on an expansion of the LEAD Center, and the LEAD Center has overall space for a total of 26 Boeing 737 flight simulators.

The centers located in Atlanta, San Antonio, Chicago, Albuquerque, and Oklahoma City occupy leased space.

The Company owns its Houston and Phoenix centers.

The following information regarding the Company’s executive officers is as of February [removed: 3, 2022.][added: 1, 2023.]

| Gary C. Kelly | | | Executive Chairman of the Board | | | [removed: 66] [added: 67] | | |

| Robert E. Jordan | | | [added: President &] Chief Executive Officer | | | [removed: 61] [added: 62] | | |

| Tammy Romo | | | Executive Vice President & Chief Financial Officer | | | [removed: 59] [added: 60] | | |

| Mark R. Shaw | | | Executive Vice President & Chief Legal & Regulatory Officer [added: & Corporate Secretary] | | | [removed: 59] [added: 60] | | |

| [removed: Andrew M. Watterson] [added: Ryan C. Green] | | | Executive Vice President & Chief Commercial Officer | | | [removed: 55] [added: 46] | | |

[removed: Jordan* has served as the Company's Chief Executive Officer since February 2022 and] [added: Mr. Jordan] has been a member of the Company's Board of Directors since February 2022.

[removed: Van de Ven*] [added: Jordan*] has served as the Company's [removed: President] [added: Chief Executive Officer] since [removed: September 2021] [added: February 2022] and as its [removed: Chief Operating Officer] [added: President] since [removed: May 2008.][added: January 2023.]

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 2004, Director of Investor Relations from December 1994 to March 2002, Manager of Investor [removed: Relations from September 1994 to December 1994, and Manager of Financial Reporting from September 1991 to September 1994.]

[removed: Rutherford*] [added: Green*] has served as the Company’s Executive Vice President [removed: People] & [removed: Communications] [added: Chief Commercial Officer] since [removed: June 2021.][added: October 2022.]

Ms. Rutherford also served as [added: Executive Vice President People & Communications from June 2021 to October 2022,] Senior Vice President & Chief Communications Officer from October 2017 to June 2021, Vice President & Chief Communications Officer from January 2016 to October 2017, Vice President Communications & Strategic Outreach from April 2007 to January 2016, Vice President Public Relations & Community Affairs from December 2005 to April 2007, Director Public Relations from May 2001 to December [added: 2005, Senior Manager Public Relations from February 1999 to May 2001, and Manager Public Relations from February 1997 to February 1999.]

Watterson* has served as the Company's [removed: Executive Vice President &] Chief [removed: Commercial] [added: Operating] Officer since [removed: January 2020.][added: October 2022.]

Mr. Watterson also served as Executive Vice President & Chief [added: Commercial Officer from January 2020 to October 2022, Executive Vice President & Chief] Revenue Officer from July 2017 to January 2020, 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.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

| Andrew M. Watterson | | | Chief Operating Officer | | | 56 | | |

| Linda B. Rutherford | | | Chief Administration & Communications Officer | | | 56 | | |

*Ryan C.

Mr. Green also served as Senior Vice President & Chief Marketing Officer from February 2019 to October 2022, Vice President & Chief Marketing Officer from April 2017 to February 2019, Vice President Marketing from February 2016 to April 2017, Managing Director Customer Strategy and Development from October 2013 to February 2016, Senior Director Loyalty & Partnerships from July 2010 to October 2013, Director Customer Loyalty from November 2007 to July 2010, Senior Manager Loyalty Marketing from January 2007 to November 2007, and Manager Business Development from July 2004 to January 2007.

Mr. Green joined the Company in 2002 in the Marketing Department.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

Relations from September 1994 to December 1994, and Manager of Financial Reporting from September 1991 to September 1994.

Rutherford* has served as the Company’s Chief Administration & Communications Officer since October 2022.

Mr. Shaw has also served as the Company’s Corporate Secretary since August 2022.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

| Michael G. Van de Ven | | | President & Chief Operating Officer | | | 60 | | |

| Linda B. Rutherford | | | Executive Vice President People & Communications | | | 55 | | |

*Michael G.

Mr. Van de Ven also served as Executive Vice President & Chief Operating Officer from May 2008 to January 2017, Chief of Operations from September 2006 to May 2008, Executive Vice President Aircraft Operations from November 2005 through August 2006, Senior Vice President Planning from August 2004 to November 2005, Vice President Financial Planning & Analysis from 2001 to 2004, Senior Director Financial Planning & Analysis from 2000 to 2001, and Director Financial Planning & Analysis from 1997 to 2000.

Mr. Van de Ven joined the Company in 1993 as its Director Internal Audit.

2005, Senior Manager Public Relations from February 1999 to May 2001, and Manager Public Relations from February 1997 to February 1999.

The Company’s common stock is listed on the New York Stock Exchange ("NYSE") and is traded under the symbol "LUV." Although the Company has a history of declaring dividends on a quarterly basis, the Company [removed: has not paid a dividend since] [added: suspended the payment of dividends following] its 174th consecutive quarterly dividend which was declared and paid in first quarter 2020.

Pursuant to the "PSP1 Payroll Support Program" under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), as supplemented by the "PSP2 Payroll Support Program” under the Consolidated Appropriations Act, 2021, and the "PSP3 Payroll Support Program" under the American Rescue Plan Act of 2021, the Company [removed: is] [added: was] prohibited from paying dividends with respect to its common stock through September 30, 2022.

[removed: Following] [added: The Company currently intends to continue declaring dividends on a quarterly basis for] the [removed: expiration of these restrictions,] [added: foreseeable future; however,] the Company’s Board of Directors [removed: will have sole discretion regarding] [added: may elect to alter] the timing, amount, and payment of dividends on the basis of operational results, financial condition, cash requirements, future prospects, and other factors deemed relevant by the Board.

As of February [removed: 2, 2022,] [added: 3, 2023,] there were approximately [removed: 11,553] [added: 11,378] 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: 2021,] [added: 2022,] 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: 2016,] [added: 2017,] in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.

[removed: ][added: ]

| | | | | | | [removed: 12/31/2016] [added: 12/31/2017] | | | | | | [removed: 12/31/2017] [added: 12/31/2018] | | | | | | [removed: 12/31/2018] [added: 12/31/2019] | | | | | | [removed: 12/31/2019] [added: 12/31/2020] | | | | | | [removed: 12/31/2020] [added: 12/31/2021] | | | | | | [removed: 12/31/2021] [added: 12/31/2022] | | |

| Southwest Airlines Co. | | | | | | $ | 100 | | | | | $ | [removed: 132] [added: 72] | | | | | $ | [removed: 95] [added: 85] | | | | | $ | [removed: 112] [added: 73] | | | | | $ | [removed: 97] [added: 67] | | | | | $ | [removed: 89] [added: 53] | |

| NYSE ARCA Airline | | | | | | $ | 100 | | | | | $ | [removed: 106] [added: 79] | | | | | $ | [removed: 83] [added: 96] | | | | | $ | [removed: 102] [added: 73] | | | | | $ | [removed: 78] [added: 72] | | | | | $ | [removed: 76] [added: 47] | |

The Company has [removed: announced it has] suspended [removed: further] share repurchase activity until further notice.

On December 6, 2022, the Company reinstated and declared a quarterly cash dividend of $.18 per share to Shareholders of record at the close of business on January 10, 2023, on all shares then issued and outstanding.

The quarterly dividend was paid on January 31, 2023.

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

| S&P 500 | | | | | | $ | 100 | | | | | $ | 96 | | | | | $ | 126 | | | | | $ | 149 | | | | | $ | 191 | | | | | $ | 157 | |

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

| S&P 500 | | | | | | $ | 100 | | | | | $ | 122 | | | | | $ | 116 | | | | | $ | 153 | | | | | $ | 181 | | | | | $ | 233 | |

| | | | December 31, [removed: 2021] [added: 2022] | | | | | | December 31, [removed: 2020] [added: 2021] | | |

| Cash and cash equivalents | | | $ | [removed: 12,480] [added: 9,492] | | | | | $ | [removed: 11,063] [added: 12,480] | |

| Short-term investments | | | [removed: 3,024] [added: 2,800] | | | | | | [removed: 2,271] [added: 3,024] | | |

| Accounts and other receivables | | | [removed: 1,357] [added: 1,040] | | | | | | [removed: 1,130] [added: 1,357] | | |

| Inventories of parts and supplies, at cost | | | [removed: 537] [added: 790] | | | | | | [removed: 414] [added: 537] | | |

| Prepaid expenses and other current assets | | | [removed: 638] [added: 686] | | | | | | [removed: 295] [added: 638] | | |

| Total current assets | | | [removed: 18,036] [added: 14,808] | | | | | | [removed: 15,173] [added: 18,036] | | |

| Flight equipment | | | [removed: 21,226] [added: 23,725] | | | | | | [removed: 20,877] [added: 21,226] | | |

| Ground property and equipment | | | [removed: 6,342] [added: 6,855] | | | | | | [removed: 6,083] [added: 6,342] | | |

| Deposits on flight equipment purchase contracts | | | [removed: —] [added: 376] | | | | | | [removed: 305] [added: —] | | |

| Assets constructed for others | | | [removed: 6] | | | | | | [added: | | | | | | $ | — | | | | | $ |] 309 | | | [added: | | $ | 145 | |]

| | | | [removed: 27,574] [added: 30,984] | | | | | | 27,574 | | |

| Less allowance for depreciation and amortization | | | [removed: 12,732] [added: 13,642] | | | | | | [removed: 11,743] [added: 12,732] | | |

| Operating lease right-of-use assets | | | [removed: 1,590] [added: 1,394] | | | | | | [removed: 1,892] [added: 1,590] | | |

| Other assets | | | [removed: 882] [added: 855] | | | | | | [removed: 722] [added: 882] | | |

| Accounts payable | | | $ | [removed: 1,282] [added: 2,004] | | | | | $ | [removed: 931] [added: 1,282] | |

| Accrued liabilities | | | [removed: 1,624] [added: 2,043] | | | | | | [removed: 2,259] [added: 1,624] | | |

| Current operating lease liabilities | | | [removed: 239] [added: 225] | | | | | | [removed: 306] [added: 239] | | |

| Air traffic liability | | | [removed: 5,566] [added: 6,064] | | | | | | [removed: 3,790] [added: 5,566] | | |

| Current maturities of long-term debt | | | [removed: 453] [added: 42] | | | | | | [removed: 220] [added: 453] | | |

| Total current liabilities | | | [removed: 9,164] [added: 10,378] | | | | | | [removed: 7,506] [added: 9,164] | | |

| Long-term debt less current maturities | | | [removed: 10,274] [added: 8,046] | | | | | | [removed: 10,111] [added: 10,274] | | |

| Air traffic liability - noncurrent | | | [removed: 2,159] [added: 2,186] | | | | | | [removed: 3,343] [added: 2,159] | | |

| Deferred income taxes | | | [removed: 1,770] [added: 1,985] | | | | | | [removed: 1,634] [added: 1,770] | | |

| Noncurrent operating lease liabilities | | | [removed: 1,315] [added: 1,118] | | | | | | [removed: 1,562] [added: 1,315] | | |

| Other noncurrent liabilities | | | [removed: 1,224] [added: 969] | | | | | | [removed: 1,247] [added: 1,224] | | |

| Common stock, $1.00 par value: 2,000,000,000 shares authorized; 888,111,634 shares issued in [removed: 2021] [added: 2022] and [removed: 2020] [added: 2021] | | | 888 | | | | | | 888 | | |

| Capital in excess of par value | | | [removed: 4,224] [added: 4,037] | | | | | | [removed: 4,191] [added: 4,224] | | |

| Retained earnings | | | [removed: 15,774] [added: 16,261] | | | | | | [removed: 14,777] [added: 15,774] | | |

| Accumulated other comprehensive income [removed: (loss)] | | | [removed: 388] [added: 344] | | | | | | [removed: (105)] [added: 388] | | |

| Treasury stock, at cost: [removed: 295,991,525] [added: 294,111,813] and [removed: 297,637,297] [added: 295,991,525] shares in [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively | | | [removed: (10,860)] [added: (10,843)] | | | | | | [removed: (10,875)] [added: (10,860)] | | |

| Total stockholders' equity | | | [removed: 10,414] [added: 10,687] | | | | | | [removed: 8,876] [added: 10,414] | | |

| | | | | | | | | | | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Passenger | | | | | | | | | | | | | | | $ | [removed: 14,066] [added: 21,408] | | | | | $ | [removed: 7,665] [added: 14,066] | | | | | $ | [removed: 20,776] [added: 7,665] | |

| Freight | | | | | | | | | | | | | | | [removed: 187] [added: 177] | | | | | | [removed: 161] [added: 187] | | | | | | [removed: 172] [added: 161] | | |

| Other | | | | | | | | | | | | | | | [removed: 1,537] [added: 2,229] | | | | | | [removed: 1,222] [added: 1,537] | | | | | | [removed: 1,480] [added: 1,222] | | |

| Total operating revenues | | | | | | | | | | | | | | | [removed: 15,790] [added: 23,814] | | | | | | [removed: 9,048] [added: 15,790] | | | | | | [removed: 22,428] [added: 9,048] | | |

| Salaries, wages, and benefits | | | | | | | | | | | | | | | [removed: 7,743] [added: 9,376] | | | | | | [removed: 6,811] [added: 7,743] | | | | | | [removed: 8,293] [added: 6,811] | | |

| Payroll support and voluntary Employee programs, net | | | | | | | | | | | | | | | [removed: (2,960)] [added: —] | | | | | | [removed: (967)] [added: (2,960)] | | | | | | [removed: —] [added: (967)] | | |

| Fuel and oil | | | | | | | | | | | | | | | [removed: 3,310] [added: 5,975] | | | | | | [removed: 1,849] [added: 3,310] | | | | | | [removed: 4,347] [added: 1,849] | | |

| | | | 17,342 | | | | | | 14,842 | | |

| | | | $ | 35,369 | | | | | $ | 36,320 | |

| | | | $ | 35,369 | | | | | $ | 36,320 | |

[Table](#i79738292d41746b1bb15858ef354b619_7) [of Contents](#i79738292d41746b1bb15858ef354b619_7)

| Loss on extinguishment of debt | | | | | | | | | | | | | | | 193 | | | | | | 28 | | | | | | — | | |