Southwest Airlines (LUV) 10-K risk factor changes: FY2024 vs FY2023

[removed: - The] [added: Jet fuel and oil constituted approximately 21.4 percent of the] Company's [added: operating expenses during 2024, and the Company's ability to control the cost of fuel is subject to the external factors discussed in “The Company's] business can be significantly impacted by the availability of jet fuel and high and/or volatile fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be impacted by the Company's ability to effectively address fuel price increases and fuel price volatility and [removed: availability.][added: availability.”]

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

[added: If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to continue to] experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected.

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

- The Company is currently dependent on a single engine supplier, as well as single suppliers of certain other aircraft parts and equipment; therefore, the Company could be materially adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or equipment [removed: from Boeing] or [removed: other suppliers or] adequate maintenance or other support from any of these suppliers at commercially reasonable terms, (ii) if [removed: Boeing or other] suppliers were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or (iii) in the event of a mechanical or regulatory issue associated with the Company's aircraft parts or equipment.

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

[removed: -] The airline industry is made up of inherently complex systems and is affected by many conditions that are beyond its [removed: control, which can impact the Company's business strategies and results of operations.][added: control.]

Information [removed: Technology] [added: Technology, Cybersecurity, and Data Privacy] Risks

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

- The Company is subject to extensive [removed: FAA] [added: government] regulation that may disrupt or necessitate modifications to the Company’s operations, business plans, and [removed: strategies.][added: strategies, increase the Company's operating costs, or otherwise limit the Company's ability to conduct business.]

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

- The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise, including with respect to the Company's voluntary [added: or mandatory] ESG-related goals and disclosures.

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

Further, some businesses have continued to allow their employees to work remotely following the [added: COVID-19] pandemic and/or have restricted non-essential travel for their employees, which has kept demand for business air travel below pre-pandemic levels.

Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented approximately [removed: 24.0] [added: 21.4] percent of the Company's operating expenses for [removed: 2023.][added: 2024.]

As discussed under "Business - Cost Structure," although market jet fuel prices [removed: remained] [added: were] volatile throughout the year, Fuel and oil expense for [removed: 2023] [added: 2024] remained high, primarily due to [removed: higher capacity] [added: an increase] in [removed: response to consumer demand.][added: fuel gallons consumed.]

Even a small change in market fuel prices can significantly affect [removed: profitability.]

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

The Company [removed: attempts] [added: has historically attempted] to manage its risk associated with volatile jet fuel prices by utilizing over-the-counter fuel derivative instruments to hedge a portion of its future jet fuel purchases.

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

In addition, there can be no assurance that the Company [removed: will] [added: would] be able to cost-effectively hedge against increases in fuel prices.

The Company's fuel hedging arrangements and the various potential impacts of hedge accounting on the Company's financial position, cash flows, and results of operations are discussed in more detail under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk," and in Note 1 and Note [removed: 11] [added: 10] to the Consolidated Financial Statements.

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

As discussed below under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," the Company [removed: experienced significant inflationary cost pressure in 2023, particularly with respect to Salaries, wages, and benefits expense.]

[removed: Jet fuel and oil constituted approximately 24 percent of the Company's operating expenses during 2023, and the Company's ability to control the cost of fuel is subject to the external factors discussed in “The] [added: - 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 [removed: 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.”][added: fuel.]

Salaries, wages, and benefits constituted approximately [removed: 43] [added: 45.1] percent of the Company's operating expenses during [removed: 2023.][added: 2024.]

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

For instance, the cost of insurance premiums related to hail and wind damage has increased for certain facilities, and [removed: certain flood insurance is no longer available.]

[removed: In response,] [added: Additionally,] most major U.S. airlines [removed: now] offer expanded cabin segmentation fare products, such as "basic [removed: economy" and] [added: economy,"] "premium [removed: economy"] [added: economy," and "first class"] products.

The Company is reliant on the success of its [removed: revenue strategies and other] strategic plans and initiatives to [removed: grow] [added: increase revenues] and [removed: to] help offset increasing costs.

Nevertheless, the Company has taken actions to [removed: add] [added: address] staffing and increase the starting wage rate for certain workgroups, manage its fleet and fleet order book, and better optimize its [removed: network in an effort to position itself to opportunistically recover and grow.][added: network.]

The [added: Company’s transformational initiatives are discussed in more detail under “Business.” The] timely and effective execution of the Company's strategies is dependent upon, among other factors, (i) the Company's ability to balance its network schedule and capacity with the availability and location of its crew resources; (ii) the Company's ability to effectively balance its investment of incremental operating expenses and capital expenditures related to its strategies against the need to effectively control costs; (iii) the Company's ability to timely and effectively implement, transition, and maintain related information technology systems and infrastructure; (iv) [removed: as discussed below,] the Company’s ability to maintain satisfactory relations with its Employees or its Employees’ representatives; [removed: and] (v) the [added: Company’s ability to broaden its Customer base; and (vi) the] Company's dependence on third parties with respect to the execution of its strategic plans.

As discussed in more detail under [removed: "Business - Competition,"] [added: "Business—Competition,"] the airline industry is intensely competitive.

The Company's primary competitors include other major domestic airlines, as well as regional and new entrant airlines, [added: public charter operators,] surface transportation, and alternatives to transportation such as videoconferencing, business communication platforms, and the Internet.

If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to [added: continue to] experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected.

Boeing has in the past, and may continue to, experience delays in fulfilling its commitments with regards to delivery of the -8 to the Company as a result of [removed: supply chain constraints.][added: manufacturing challenges.]

The airline business is labor intensive, and for the year ended December 31, [removed: 2023,] [added: 2024,] Salaries, wages, and benefits expense represented approximately [removed: 43] [added: 45.1] percent of the Company's operating expenses.

As of December 31, [removed: 2023,] [added: 2024,] approximately [removed: 83] [added: 82] percent of the Company's Employees were represented for collective bargaining purposes by labor unions, making the Company particularly exposed in the event of labor-related job actions.

The Company’s business is labor intensive; therefore, the Company has been, and could in the future be, adversely affected if it were unable to employ and retain [removed: sufficient] [added: appropriate] numbers of qualified Employees to maintain its operations.

The Company’s success depends on its ability to attract and retain [added: appropriate levels of] skilled personnel.

- Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results.

- The Company is increasingly exposed to cybersecurity attacks and data incidents impacting its IT Systems, or those of the Company’s vendors or service providers.

Such cybersecurity incidents or data incidents could have a disruptive and material adverse effect on the Company’s business, financial position, or results of operations.

- The Company’s plans to develop commercial relationships with airlines in other parts of the world may not produce the results or returns it expects.

- The Company’s business has been, and could in the future be, negatively affected as a result of actions of activist shareholders, and such activism could adversely affect the strategic direction and business results of the Company.

profitability.

In addition, the Company has had to de-designate certain derivative instruments from their hedging relationships because the derivatives no longer qualify for hedge accounting under applicable accounting standards.

Based on the current geopolitical and market dynamics, higher premium costs over time, and aggressive cost reductions underway, the Company does not intend to add new hedging positions to its current hedge book.

has experienced significant inflationary cost pressure, particularly with respect to Salaries, wages, and benefits expense.

Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results.

certain flood insurance is no longer available.

The Company has also announced plans for certain transformational initiatives, such as changing to an assigned seating model, offering premium seating with extra legroom, formalizing partnerships with international carriers to expand its network, offering Getaways by Southwest, introducing 24-hour operations, and reducing the turn times between flights.

The Company’s commercial and operational initiatives are designed to meet evolving Customer preferences, increase revenue opportunities, mitigate cost pressures, and modernize processes.

However, the Company cannot offer any assurances that these measures or any future initiatives will be successful in increasing revenues or offsetting costs.

Additionally, the implementation of these initiatives may create logistical challenges that could harm the operational performance of the airline or result in decreased demand for air travel on Southwest.

If the Company does not successfully execute its transformational initiatives or other strategic plans, or if actual results vary significantly from its expectations, the Company’s business, operating results, and financial condition may be adversely affected.

The Company's low-cost position has been challenged by the removal of fare floors for certain routes by other carriers, leading to a lower fare offering across the industry, as well as “unbundled” service offerings by some carriers, which appeal to price-sensitive travelers through promotion to consumers of relatively low base fare options.

The Company plans to move to an assigned seating model and will offer a premium economy fare product with extra legroom to meet Customer preferences and better compete with the major U.S. airlines.

If the Company cannot adequately retain and attract Customers or differentiate its product offerings from those of its competitors, then its business, financial condition, and results of operations could be materially adversely affected.

Many of the Company’s competitors participate in joint ventures and international alliances, providing for increased financial resources and improved profit margins.

Many major U.S. airlines also offer longer-haul, international routes through extensive global networks.

In order to compete with these activities and expand its transatlantic and transpacific service offerings, the Company began to enter into international partnerships in 2025.

Failure to successfully implement and manage international partnerships could result in financial losses and reputational harm.

The airline industry may also be impacted by mergers, acquisitions, heightened financial pressures, or bankruptcies.

Further consolidation in the airline industry generally could result in the reduction of fares by other airlines, which could in turn affect the Company’s profitability in existing and new markets.

If the Company cannot maintain its costs at a competitive level, then its business, financial condition, and results of operations could be materially adversely affected.

The Company currently operates a higher percentage of the Boeing 737 aircraft than other air carriers in the industry, and therefore may encounter novel hazards, age-related maintenance issues, or airworthiness issues associated with 737 aircraft to a larger degree than other carriers.

Although the Company has reached final labor agreements with its twelve unionized Employee groups, the next of which becomes amendable in October 2026, general wage inflation has resulted, and is expected to continue to result, in pressure on the Company's low-cost structure.

Although the Company surpassed pre-pandemic staffing levels in 2023, Boeing aircraft delivery delays, network optimization efforts, and cost control initiatives required the Company to re-evaluate its hiring needs in 2024 and beyond and moderate staffing in line with demand.

The operations of the Company’s third-party vendors and service providers could also be affected by the policies, procedures, and performance of their suppliers, and the Company may not have visibility into this multi-tiered supply chain.

products, or otherwise fulfill their commitments to the Company, could materially adversely affect the Company’s operations.

Moreover, any resulting economic dislocations could

Any failure, disruption, or delay in implementation of the Company’s IT Systems could

limit or even curtail its growth, delay strategic initiatives, increase its compliance costs, harm its reputation, or reduce its competitive advantage.

The Company’s inability to timely or effectively implement, update, or integrate its IT Systems, could materially affect its business and/or could negatively impact the Company's results of operations and financial performance.

The Company is expanding its use of AI and machine-learning to carry out elements of its business strategy.

The implementation of AI technologies also presents significant operational, legal, and competitive risks to the Company.

Although the Company believes it diligently evaluates, tests, and deploys a limited amount of AI-related technologies, the Company could face numerous AI-related challenges, such as cybersecurity vulnerabilities, algorithmic biases or errors, evolving regulatory requirements across jurisdictions, and potential competitive disadvantage if the Company’s competitors deploy AI technologies more quickly or more successfully.

The complex and evolving legal landscape surrounding AI technologies, particularly regarding intellectual property rights and data privacy, creates additional compliance challenges and potential liability.

For example, emerging regulations and state laws around AI may require companies that develop or deploy AI systems to establish formal governance structures and internal controls, including designated oversight personnel, documented risk assessment procedures, and regular compliance reviews of their AI systems.

If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to

- Developing and expanding data security and privacy requirements could increase the Company's operating costs, and any failure of the Company to maintain the security of certain Customer, Employee, and business-related information could result in disruption to operations and damage to the Company's reputation and could be costly to remediate.

For example, fuel prices can be impacted by political,

The airline industry could face potential fuel shortages in 2024 due to pipeline capacity constraints, resulting from the shifting of jet fuel allocations during the COVID-19 pandemic, as well as a national shortage of interstate trucking capacity.

The Company is working with aviation industry stakeholders to address these issues.

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 caps) at one or more of the Company’s airports in 2024, especially during peak travel periods.

Additionally, as indicated under "Business - Employees," a significant number of Southwest's unionized Employees, including its Flight Attendants; Ramp, Operations, Provisioning, and Freight Agents; and Flight Simulator Technicians are in unions currently in negotiations for labor agreements, which could result in additional pressure on the Company's low-cost structure.

The Company's low-cost position has also been challenged by the growth of "Ultra-Low Cost Carriers" ("ULCCs"), which in some cases have surpassed the Company's cost advantage with larger aircraft, increased seat density, and lower wages.

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

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

A "premium economy" fare targets consumers willing to pay a premium for certain amenities that were previously included in the carriers' base fare (e.g., more favorable seating locations in the main cabin).

In response to competitive ULCC pricing, some carriers removed fare floors for certain routes, leading to a lower fare offering across the industry.

Additionally, three of the Company’s twelve unionized Employee groups are in unions currently in negotiations for labor agreements, which could result in additional pressure on the Company's low-cost structure.

The impact of the COVID-19 pandemic has heightened the Company’s exposure to its labor risks.

At the same time, competition for skilled personnel became fierce, which led to operational challenges in the first half of 2022.

In addition, the Company has been required to provide incentive pay and increase certain starting wage rates to address these challenges.

limit the Company's ability to optimally adjust capacity.

An inability to quickly and effectively restore operations following adverse weather, a

In addition, the Company’s systems may require modification to enable the Company to comply with changing regulatory requirements.

Modifications and refinements to the Company’s systems have been and are expected to continue to be expensive to implement and can divert management’s attention from other matters.

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

Certain new technologies, such as the use of AI, present new and significant risks related to intellectual property, personal data, and confidentiality, among others.

The development of generative AI technologies is complex, and there are legal and practical challenges associated with achieving the desired level of accuracy, efficiency, and reliability.

The algorithms and models utilized in generative AI systems may have limitations, including biases, errors, or inability to handle certain data types or scenarios.

Furthermore, there is a risk of system failures, disruptions, or vulnerabilities that could compromise the confidentiality, integrity, or availability

of the generated content.

The legal landscape is also developing around generative AI technologies and generated content, and the Company's ability to use and commercialize generated content may be affected by legal developments related to intellectual property rights in generated content.

These limitations or failures could result in reputational damage, legal liabilities, or loss of Customer confidence.

There can be no assurance that the usage of AI will enhance the Company’s strategies or initiatives.

While the Company’s crew scheduling software worked as designed during this event, due to a number of factors, including unanticipated changes in the severity of the weather, the Company began implementing frequent close-in flight cancellations.

As the situation escalated and close-in flight cancellations grew, the volume of unanticipated changes were too great to efficiently address through the crew scheduling software, resulting in individual crew member assignment updates being delayed in a significant number of instances.

Without updated, accurate crew member data, the Company’s crew scheduling software could not reassign crew members to solve for flights with crew coverage issues.

As a result, during 2023 the Company enhanced its crew scheduling software to help the Company during events that could result in a large number of broken crew pairings.

Any future operational disruptions or delays could reduce the Company’s operating revenues and the attractiveness of its services, as well as increase the Company’s costs.

Developing and expanding data security and privacy requirements could increase the Company's operating costs, and any failure of the Company to maintain the security of certain Customer, Employee, and business-related information could result in disruption to operations and damage to the Company's reputation and could be costly to remediate.

Many of these laws and regulations are subject to change and reinterpretation, and could result in claims, changes to the Company’s business practices, monetary penalties, increased cost of operations, or other harm to the Company’s business.

In addition, it could be costly to remediate.

In addition, in response to these types of threats, there has been heightened legislative and regulatory focus on data privacy and security in the United States, European Union, and elsewhere.

The regulatory framework for data privacy and security worldwide is continuously evolving and developing and, as a result, the Company must monitor a growing and fast-evolving set of legal requirements and geopolitical risks in this area.

This regulatory environment is increasingly challenging and may present material obligations and risks to the Company's business, including significantly expanded compliance requirements, costs, and enforcement risks.

Other than [removed: the] [added: a] fourth quarter 2023 charge associated with [removed: the] [added: a] DOT [removed: settlement,] [added: settlement of $107 million,] there were no material impacts to operating [removed: revenues or expenses as a result of this disruption beyond first quarter 2023.]

The Company recorded results for [removed: 2023] [added: 2024] and [removed: 2022,] [added: 2023,] on an accounting principles generally accepted in the United States ("GAAP") and non-GAAP basis, as noted in the following tables.

| GAAP | | | | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | Change | | | | | | | | | | | | | | |

| Operating income | | | | | | $ | [removed: 224] [added: 321] | | | | | $ | [removed: 1,017] [added: 224] | | | | | [removed: (78.0)] [added: 43.3] | | | | | | | | | | | | | | |

| Net income | | | | | | $ | 465 | | | | | $ | [removed: 539] [added: 465] | | | | | [removed: (13.7)] [added: —] | | | | | | | | | | | | | | |

| Net income per share, diluted | | | | | | $ | 0.76 | | | | | $ | [removed: 0.87] [added: 0.76] | | | | | [removed: (12.6)] [added: —] | | | | | | | | | | | | | | |

| Operating income | | | | | | $ | [removed: 893] [added: 457] | | | | | $ | [removed: 1,120] [added: 893] | | | | | [removed: (20.3)] [added: (48.8)] | | | | | | | | | | | | | | |

| Net income | | | | | | $ | [removed: 980] [added: 597] | | | | | $ | [removed: 723] [added: 980] | | | | | [removed: 35.5] [added: (39.1)] | | | | | | | | | | | | | | |

| Net income per share, diluted | | | | | | $ | [removed: 1.56] [added: 0.96] | | | | | $ | [removed: 1.16] [added: 1.56] | | | | | [removed: 34.5] [added: (38.5)] | | | | | | | | | | | | | | |

The Company's financial results, as shown above on a GAAP and non-GAAP basis for the year ended December 31, [removed: 2023] [added: 2024] versus the year ended December 31, [removed: 2022,] [added: 2023,] were affected by higher salaries, wages, and benefits [removed: expense and maintenance materials] [added: expense, partially offset by lower Fuel] and [removed: repairs expense.][added: oil expense, primarily driven by lower jet fuel prices.]

Additionally, due to the December 2022 operational disruption, as described [removed: above,] [added: below,] the financial results on a GAAP and non-GAAP basis for the year ended December 31, 2023 included a negative financial impact of approximately $380 million on a pre-tax basis in first quarter 2023 and, on a GAAP basis, a $107 million charge on a pre-tax basis for the [removed: DOT] [added: Department of Transportation ("DOT")] settlement in fourth quarter 2023.

The Company provides the operating data below for the years ended December 31, [removed: 2023] [added: 2024] and [removed: 2022] [added: 2023] because these statistics are commonly used in the airline industry and, therefore, allow readers to compare the Company’s performance against its results for the prior year period, as well as against the performance of the Company’s peers.

| | | | | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | Change | | |

| Revenue passengers carried (000s) | | | | | | [removed: 137,279] [added: 140,023] | | | | | | [removed: 126,586] [added: 137,279] | | | | | | [removed: 8.4] [added: 2.0] | | % |

| Enplaned passengers (000s) | | | | | | [removed: 171,817] [added: 175,466] | | | | | | [removed: 156,982] [added: 171,817] | | | | | | [removed: 9.5] [added: 2.1] | | % |

| Revenue passenger miles (RPMs) (in millions)(a) | | | | | | [removed: 136,256] [added: 142,515] | | | | | | [removed: 123,843] [added: 136,256] | | | | | | [removed: 10.0] [added: 4.6] | | % |

| Available seat miles (ASMs) (in millions)(b) | | | | | | [removed: 170,323] [added: 177,250] | | | | | | [removed: 148,467] [added: 170,323] | | | | | | [removed: 14.7] [added: 4.1] | | % |

| Load factor(c) | | | | | | [removed: 80.0] [added: 80.4] | | % | | | | [removed: 83.4] [added: 80.0] | | % | | | | [removed: (3.4)] [added: 0.4] pts. | | |

| Average length of passenger haul (miles) | | | | | | [removed: 993] [added: 1,018] | | | | | | [removed: 978] [added: 993] | | | | | | [removed: 1.5] [added: 2.5] | | % |

| Average aircraft stage length (miles) | | | | | | [removed: 730] [added: 763] | | | | | | [removed: 728] [added: 730] | | | | | | [removed: 0.3] [added: 4.5] | | % |

| Trips flown | | | | | | [removed: 1,459,427] [added: 1,443,866] | | | | | | [removed: 1,298,219] [added: 1,459,427] | | | | | | [removed: 12.4] [added: (1.1)] | | % |

| Seats flown (000s)(d) | | | | | | [removed: 231,409] [added: 230,187] | | | | | | [removed: 201,913] [added: 231,409] | | | | | | [removed: 14.6] [added: (0.5)] | | % |

| Seats per trip(e) | | | | | | [removed: 158.6] [added: 159.4] | | | | | | [removed: 155.5] [added: 158.6] | | | | | | [removed: 2.0] [added: 0.5] | | % |

| Average passenger [removed: fare] [added: fare(k)] | | | | | | $ | [removed: 172.18] [added: 178.40] | | | | | $ | [removed: 169.12] [added: 172.18] | | | | | [removed: 1.8] [added: 3.6] | | % |

| Passenger revenue yield per RPM [removed: (cents)(f)] [added: (cents)(f)(k)] | | | | | | [removed: 17.35] [added: 17.53] | | | | | | [removed: 17.29] [added: 17.35] | | | | | | [removed: 0.3] [added: 1.0] | | % |

| Operating revenues per ASM [removed: (cents)(g)] [added: (cents)(g)(k)] | | | | | | [removed: 15.32] [added: 15.51] | | | | | | [removed: 16.04] [added: 15.32] | | | | | | [removed: (4.5)] [added: 1.2] | | % |

| Passenger revenue per ASM [removed: (cents)(h)] [added: (cents)(h)(k)] | | | | | | [removed: 13.88] [added: 14.09] | | | | | | [removed: 14.42] [added: 13.88] | | | | | | [removed: (3.7)] [added: 1.5] | | % |

| Operating expenses per ASM (cents)(i) | | | | | | [removed: 15.19] [added: 15.32] | | | | | | [removed: 15.36] [added: 15.19] | | | | | | [removed: (1.1)] [added: 0.9] | | % |

| Operating expenses per ASM, excluding fuel (cents) | | | | | | [removed: 11.54] [added: 12.05] | | | | | | [removed: 11.33] [added: 11.54] | | | | | | [removed: 1.9] [added: 4.4] | | % |

| Operating expenses per ASM, excluding fuel and profitsharing (cents) | | | | | | [removed: 11.47] [added: 11.99] | | | | | | [removed: 11.25] [added: 11.47] | | | | | | [removed: 2.0] [added: 4.5] | | % |

| Fuel costs per gallon, including fuel tax | | | | | | $ | [removed: 2.89] [added: 2.64] | | | | | $ | [removed: 3.10] [added: 2.89] | | | | | [removed: (6.8)] [added: (8.7)] | | % |

| Fuel costs per gallon, including fuel tax, economic | | | | | | $ | [removed: 2.89] [added: 2.66] | | | | | $ | [removed: 3.07] [added: 2.89] | | | | | [removed: (5.9)] [added: (8.0)] | | % |

| Fuel consumed, in gallons (millions) | | | | | | [removed: 2,143] [added: 2,194] | | | | | | [removed: 1,922] [added: 2,143] | | | | | | [removed: 11.5] [added: 2.4] | | % |

| Active full-time equivalent Employees | | | | | | [removed: 74,806] [added: 72,450] | | | | | | [removed: 66,656] [added: 74,806] | | | | | | [removed: 12.2] [added: (3.1)] | | % |

| Aircraft at end of period(j) | | | | | | [removed: 817] [added: 803] | | | | | | [removed: 770] [added: 817] | | | | | | [removed: 6.1] [added: (1.7)] | | % |

Also referred to as "unit costs" or "cost per available seat [removed: mile,"] [added: mile" or "CASM,"] this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies.

(j)Included [removed: four] [added: three] Boeing [removed: 737-700 ("700")] [added: 737] Next Generation aircraft in temporary storage as of December 31, [removed: 2022.][added: 2024.]

The following tables [removed: present] [added: provide] selected financial guidance for first quarter [removed: and] [added: 2025, as well as select] full year [removed: 2024:][added: 2025 guidance and 2027 targets, as applicable:]

| RASM (a), year-over-year | | | | | | | | | Up [removed: 2.5%] [added: 5%] to [removed: 4.5%] [added: 7%] | | |

| ASMs (b), year-over-year | | | | | | [added: Up 1% to 2%] | | | Up [removed: ~10%] [added: 1% to 2%] | | |

The Company had a record full year 2024 revenue performance, producing operating revenues of $27.5 billion, due to continued demand strength and the benefits from the execution of tactical actions related to initiatives announced by the Company in 2024 designed to elevate the Customer Experience on its flights, improve financial performance, and drive Shareholder value.

Additional drivers included record ancillary revenue and passengers carried.

During 2024, the Company continued to return value to its Shareholders.

The Company returned $680 million to Shareholders through $430 million in dividend payments and $250 million through an accelerated share repurchase program entered into by the Company with a third party financial institution in fourth quarter 2024.

The Company subsequently received 6.8 million shares of common stock in October 2024, representing an estimated 80 percent of the shares to be purchased by the Company under the Fourth Quarter 2024 ASR Program, and an additional one million shares in January 2025 in final settlement of the Fourth Quarter 2024 ASR Program.

The number of shares that the Company ultimately repurchased under the Fourth Quarter 2024 ASR Program was determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a

calculation period completed in January 2025.

See "Liquidity and Capital Resources" below for further information on the Company's 2024 share repurchases.

The Company has $2.25 billion remaining under its September 2024 $2.5 billion share repurchase authorization.

On December 5, 2024, the Company announced its intention to launch a $750 million accelerated share repurchase program in first quarter 2025.

See Part II, Item 5 for further information on the Company's share repurchase authorizations.

On a GAAP basis, the Company’s results for the year ended December 31, 2024, included a reversal of $116 million of breakage revenue recorded in prior years related to a portion of flight credits issued to Customers during 2022 and prior that have either been redeemed or are expected to be redeemed in future periods.

The majority of these flight credits were issued during the COVID-19 pandemic as the Company was making significant changes to its flight schedules based on fluctuating demand.

This adjustment was treated as a special item and excluded from the Company's presentation of non-GAAP results.

revenues or expenses as a result of this disruption beyond first quarter 2023.

See Note 1 to the Condensed Consolidated Financial Statements for further information.

(k)The 2024 Passenger and Operating revenue metrics include the impact of the $116 million breakage revenue adjustment recorded as a change in estimate and reduction in Passenger revenue during fourth quarter 2024.

| | | | | | | | | | 1Q 2025 Estimation | | |

| | | | | | | 2025 Estimation | | | 2027 Targets | | |

| Operating margin, excluding special items (c) (g) | | | | | | 3% to 5% | | | ≥ 10% | | |

| Return on invested capital ("ROIC") after-tax (h) (i) | | | | | | 5% to 8% | | | ≥ 15% | | |

(g) Operating margin, excluding special items, is calculated as operating income, excluding special items, divided by operating revenues, excluding special items.

Projections and targets do not reflect the potential impact of special items because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods.

Accordingly, the Company believes reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.

(h) See Note Regarding Use of Non-GAAP Financial Measures for additional information on ROIC.

In addition, information regarding ROIC and economic results is included in the accompanying table Non-GAAP Return on Invested Capital (ROIC).

Projections and targets do not reflect the potential impact of special items because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods.

Accordingly, the Company believes reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.

(i) The Company estimates its full year 2025 effective tax rate to be in the range of 22 percent to 24 percent.

The expected year-over-year improvement is driven primarily by a focus on capacity rationalization and the Company's continued focus on the execution of its tactical initiatives.

The Company also anticipates continued strength in the demand environment.

Year-over-year unit cost trends are expected to improve throughout the year as labor comparisons ease, efficiency initiatives generate modest capacity growth, and cost plan benefits are aggressively pursued.

Based on its current plan, the Company expects to exit 2025 with year-over-year CASM-X growth in the low-single digits.

Improving cost performance is a key focus.

The Company is urgently working to accelerate and exceed the $500 million cost initiative announced at its 2024 Investor Day to help mitigate cost inflation by minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and aggressively improving corporate overhead.

As part of the Company's ongoing modernization efforts, during 2024, the Company announced several new initiatives designed to elevate the Customer Experience on its flights, improve financial performance, and drive Shareholder value.

As part of its ongoing focus on product evolution, the Company is moving forward with plans to assign seats, offer premium seating options, redesign the boarding model, and introduce redeye (i.e., overnight) flying.

The Company has been known for its open seating model for more than 50 years, which was unique in the airline industry and has been popular with Southwest Customers for decades.

Open seating served the Company well as a primarily short-haul carrier.

The open seating design, combined with historically lower load factors, contributed to the efficiency of turning aircraft quickly.

The Company had record full year 2023 revenue performance, producing operating revenues of $26.1 billion, due to healthy leisure demand and continued yield strength combined with record ancillary revenue, loyalty program revenue, and passengers carried.

The Company’s 2022 results were somewhat impacted by the COVID-19 pandemic, as 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 2023.

In 2023, the Company was able to focus on completing a comprehensive winter action plan, restoring its network and operational stability, reaching full utilization of its fleet, and delivering on significant new capabilities for its Customers.

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

For fourth quarter 2022, the Company estimated the financial impact of this disruption was approximately $800 million on a pre-tax basis.

A significant portion of this impact in fourth quarter 2022 was due to the loss of Operating revenue associated with the flight cancellations that was estimated to be approximately $410 million, and 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 were expected to be redeemed, and premium pay and additional compensation for Employees, which were partially offset by lower fuel and oil and profitsharing expenses.

On October 27, 2023, the Department of Transportation ("DOT") notified the Company that it determined the Company had failed to provide adequate customer service assistance, prompt flight status notifications, and proper and prompt refunds and that the assessment of a civil penalty was warranted.

During fourth quarter 2023, the Company accrued an expense of $107 million associated with a settlement reached with the DOT in December 2023 based on their investigation into the disruption, which includes a cash penalty and incorporates a future commitment for Southwest Customer care with a new Customer compensation policy.

An additional $33 million penalty was also assessed by the DOT, but was able to be credited against the substantial value the Company had already provided to its Customers impacted by the disruption, and therefore did not result in further impact to the Company's financial results for 2023.

To boost operational resiliency in key areas across the Company and to mitigate the risk of a recurrence, the Company developed a three-part tactical action plan focused on improving winter operations, accelerating

operational-related investments, and enhancing cross-team collaboration.

The Company's action plan was released in March 2023 and key winter operations steps were completed as of October 2023, as planned.

The expense related to the tentative agreement with Pilots combined with the charge related to the settlement with the DOT resulted in the Company reporting a net loss of $252 million on a GAAP basis for fourth quarter 2023.

Furthermore, on a GAAP and non-GAAP basis, the financial results for the year ended December 31, 2022 included a negative financial impact of approximately $800 million on a pre-tax basis in fourth quarter 2022 related to the December 2022 operational disruption and, on a GAAP basis, the financial results for the year ended December 31, 2022 included a $193 million pre-tax loss on extinguishment of debt primarily due to the repurchase of a portion of the Company's May 1, 2020 public offering of $2.3 billion aggregate principal amount of Convertible Senior notes (the "Convertible Notes").

2024 Outlook

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

| | | | | | | | | | 1Q 2024 Estimation | | |

| | | | | | | | | | 2024 Estimation | | |

| CASM-X (e), year-over-year (c) (f) | | | | | | | | | Up 5.5% to 7% | | |

| Scheduled debt repayments (millions) | | | | | | | | | ~$29 | | |

| Interest expense (millions) | | | | | | | | | ~$249 | | |

| Aircraft (g) | | | | | | | | | 847 | | |

| Effective tax rate | | | | | | | | | 23% to 24% | | |

| Capital spending (billions) | | | | | | | | | $3.5 to $4.0 | | |

(g) Aircraft on property, end of period.

The Company currently plans for approximately 79 Boeing 737 MAX ("MAX") aircraft deliveries and 49 aircraft retirements in 2024, including 45 Boeing 737-700s ("-700") and four Boeing 737-800s ("-800").

The delivery schedule for the 737-7 ("-7") is dependent on the Federal Aviation Administration ("FAA") issuing required certifications and approvals to The Boeing Company ("Boeing") and the Company.

The FAA will ultimately determine the timing of the -7 certification and entry into service, and Boeing may continue to experience supply chain challenges, so the Company offers no assurances that current estimations and timelines will be met.

This increase includes an approximate five point tailwind due to the negative revenue impact incurred in first quarter 2023 associated with the December 2022 operational disruption.

Sequentially, the performance represents a healthy improvement driven primarily by network optimization, market share contributions from the Company's Global Distribution System initiative, growth in the Rapid Rewards loyalty program, and continued strength in overall demand.

The network optimization is materially complete with the March 2024 schedule, at which point the Company expects a return to profitability.

Approximately two to three points of the increase are driven by higher 2024 market wage rate accruals for Employee workgroups with open agreements and for overall 2024 labor cost increases, including the wage rate increases and agreed-upon work rule changes associated with the recently ratified Pilot contract.

The majority of the remaining increase is driven by year-over-year pressure from maintenance expenses.

Furthermore, the Company currently expects similar cost pressures throughout the year, driving 2024 CASM-X to increase approximately 5.5 percent to 7 percent, year-over-year.

Specifically, the Company expects approximately four to five points of the increase to be driven by higher year-over-year labor costs, and the balance of the increase is driven primarily by higher year-over-year maintenance expenses.

Progressing through the year, the Company's focus will be on regaining efficiencies to counter inflationary cost pressures.

To this end, the Company plans to end the year with headcount in the range of flat to down on a year-over-year basis.

The Company's 2024 plan leverages a set of initiatives, which most importantly, includes better aligning the route network to new demand patterns.

The Company expects these initiatives to contribute roughly $1.5 billion in incremental year-over-year pre-tax profits.

As of December 31, [removed: 2023,] [added: 2024,] the Company operated a total of [removed: 81] [added: 106] aircraft under operating and finance leases.

See Note [removed: 11] [added: 10] to the Consolidated Financial Statements for information on the Company’s accounting for its hedging program and for further details on the Company’s financial derivative instruments.

The Company currently expects to consume approximately 2.2 billion gallons of jet fuel in [removed: 2024.][added: 2025.]

Based on this anticipated usage, a change in jet fuel prices of just one cent per gallon would impact the Company’s Fuel and oil expense by approximately $22 million for [removed: 2024,] [added: 2025,] excluding any impact associated with fuel derivative instruments held.

As of December 31, [removed: 2023,] [added: 2024,] the Company held a net position of fuel derivative instruments that represented a hedge for a portion of its anticipated jet fuel purchases for future periods through [removed: 2026.][added: 2027.]

See Note [removed: 11] [added: 10] to the Consolidated Financial Statements for further information.

The gross fair value of outstanding financial derivative instruments related to the Company’s jet fuel market price risk as of December 31, [removed: 2023,] [added: 2024,] was an asset of [removed: $223] [added: $130] million.

In addition, [removed: $50] [added: $22] million in cash collateral deposits were held by the Company in connection with these instruments based on their fair value as of December 31, [removed: 2023.][added: 2024.]

An immediate 10 percent increase or decrease in underlying fuel-related commodity prices from prices as of December 31, [removed: 2023] [added: 2024] would correspondingly change the fair value of the commodity derivative instruments in place by approximately [removed: $148] [added: $100] million.

This sensitivity analysis uses industry standard valuation models and holds all inputs constant as of December 31, [removed: 2023,] [added: 2024,] levels, except underlying futures prices.

As of December 31, [removed: 2023,] [added: 2024,] the Company had [removed: eight] [added: nine] counterparties for which the derivatives held were an asset and none in a loss position.

As of December 31, [removed: 2023,] [added: 2024,] the Company had agreements with all of its active counterparties containing early termination [removed: rights and/or bilateral collateral provisions whereby security is required if market risk exposure exceeds a specified]

The Company also had agreements with counterparties in which cash deposits [removed: and/or] [added: and] letters of credit [removed: are] [added: may be] required to be posted as collateral whenever the net fair value of derivatives associated with those counterparties exceeds specific thresholds.

Refer to the counterparty credit risk and collateral table provided in Note [removed: 11] [added: 10] to the Consolidated Financial Statements for the fair values of fuel derivatives, amounts held as collateral, and applicable collateral posting threshold amounts as of December 31, [removed: 2023,] [added: 2024,] at which such postings are triggered.

The Company has found that financial derivative instruments in commodities, such as [removed: West Texas Intermediate ("WTI")] [added: 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.

In addition, to add further protection, the Company [removed: may] [added: has in the past] periodically [removed: enter] [added: entered] into jet fuel derivatives for short-term timeframes.

As of December 31, [removed: 2023,] [added: 2024,] the Company had no outstanding interest rate swap agreements and therefore no cash collateral deposits provided or held.

Due to the significance of the Company’s [added: current] fuel hedging program and the [added: historical] emphasis that the Company [removed: places] [added: has placed] on utilizing fuel derivatives to reduce its fuel price risk, the Company has created a system of governance and management oversight and has put in place a number of internal controls designed so that procedures are properly followed and accountability is present at the appropriate levels.

The Company's senior unsecured notes outstanding as of December 31, [removed: 2023] [added: 2024] are all fixed-rate obligations.

See Note [removed: 7] [added: 6] to the Consolidated Financial Statements for further information.

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

During fourth quarter 2023, the Company terminated $150 million notional value of forward-starting interest rate swap [removed: agreements.][added: agreements associated with the Company's forecasted issuance of debt.]

The effect of this termination is that the value of the swaps originally recorded in AOCI, a gain of $23 million, will be amortized to Interest expense over the life of [removed: the debt,] [added: new debt instruments,] which [removed: will] [added: could] be [removed: within the years 2024-2027.][added: issued through 2027.]

See Note [removed: 11] [added: 10] to the Consolidated Financial Statements for further information.

The Company's total debt divided by total assets was [removed: 21.9] [added: 19.8] percent as of December 31, [removed: 2023.][added: 2024.]

The Company also has some risk associated with changing interest rates due to the short-term nature of its invested cash, which totaled [removed: $9.3] [added: $7.5] billion, and short-term investments, which totaled [removed: $2.2] [added: $1.2] billion as of December 31, [removed: 2023.][added: 2024.]

See Notes 1 and [removed: 12] [added: 11] to the Consolidated Financial Statements for further information.

The Company currently invests available cash in certificates of deposit, highly rated money market instruments, [removed: investment grade commercial paper,] treasury securities, U.S. government agency securities, and other highly rated financial instruments, depending on market conditions and operating cash requirements.

A hypothetical 10 percent change in market interest rates as of December 31, [removed: 2023,] [added: 2024,] would have resulted in an approximate [removed: $74] [added: $46] million change in the fair value of the Company’s fixed-rate debt instruments.

See Note [removed: 12] [added: 11] to the Consolidated Financial Statements for further information on the fair value of financial instruments.

Assuming floating market rates in effect as of December 31, [removed: 2023] [added: 2024] were held constant throughout a 12-month period, a hypothetical 10 percent change in those rates would have resulted in an approximate [removed: $59] [added: $36] 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 as of December 31, [removed: 2023,] [added: 2024,] an increase in rates would have a net [removed: positive] [added: negative] effect on the Company’s earnings and cash flows, while a decrease in rates would have a net [removed: negative] [added: positive] effect on the Company’s earnings and cash flows.

As of December 31, [removed: 2023,] [added: 2024,] the Company was in compliance with this covenant and there were no amounts outstanding under the Amended Credit Agreement.

See Note [removed: 11] [added: 10] to the Consolidated Financial Statements for further information.

Credit card processors have financial risk associated with tickets purchased for travel because the processor generally forwards the cash related to the purchase to the Company soon after the purchase is completed, but the air travel generally occurs after that time; therefore, the processor will have liability if the Company does not ultimately [added: provide the air travel.]

There was no cash reserved for this purpose as of December 31, [removed: 2023.][added: 2024.]

As of December 31, [removed: 2023,] [added: 2024,] no holdbacks were in place.

As of December 31, [removed: 2023,] [added: 2024,] the Company was in compliance with all credit card processing agreements.

Based on the current geopolitical and market dynamics, higher premium costs over time, and aggressive cost reductions underway, the Company does not intend to add new hedging positions to its current hedge book.

rights and/or bilateral collateral provisions whereby security is required if market risk exposure exceeds a specified threshold amount based on the counterparty’s credit rating.

For example, historically, a portion of the fuel derivatives in the Company's hedge portfolio have been based on the market price of WTI crude oil.

As mentioned above in "Critical Accounting Policies and Estimates", since the Company could no longer demonstrate that derivatives based on WTI crude oil prices would result in effective hedges on a prospective basis, the change in fair value of all of the Company's derivatives based in WTI have been recorded to Other (gains) losses during the second half of 2024.

The Company currently has no WTI-based derivatives that settle beyond 2024.

In recent years, jet fuel prices have been more closely correlated with changes in the price of Brent crude oil, and therefore the Company has attempted to mitigate some of this risk by entering into more fuel hedges based on Brent crude.

While the Company uses financial leverage, it strives to maintain a strong balance sheet and has investment grade credit ratings with all three major credit rating agencies as of December 31, 2024.

See Note 6 to the Consolidated Financial Statements for more information on the material terms of the Company’s short-term and long-term debt.

The effect of this

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

threshold amount based on the counterparty’s credit rating.

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, 2023, all of which are considered "investment grade." See Note 7 to the Consolidated Financial Statements for more information on the material terms of the Company’s short-term and long-term debt.

provide the air travel.

As of December 31, [removed: 2023,] [added: 2024,] Southwest had a total of [removed: 817] [added: 803] Boeing 737 aircraft in its fleet and served [removed: 121] [added: 117] destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.

[removed: The] [added: Historically, the] airline industry has [removed: historically] been an extremely volatile industry.

In [removed: 2023,] [added: 2024,] the U.S. airline industry continued to [removed: recover from the COVID-19 pandemic while facing] [added: face] challenges such as [removed: volatile fuel prices,] inflationary cost pressures (particularly labor costs), delayed aircraft deliveries, [removed: labor availability (namely pilot availability), supply chain challenges,] shifting travel demand patterns, economic uncertainty, disruptive weather events, and natural [removed: disasters such as the wildfires in Maui.][added: disasters.]

In response to ever-evolving travel patterns, the Company and several other U.S. airlines have announced route network changes and slower capacity growth for [removed: early 2024,] [added: 2025,] as compared with [removed: 2023 and/or previously announced plans.][added: 2024.]

Although [added: the Company’s] jet fuel prices [added: per gallon] were [removed: slightly] [added: generally] lower in [removed: 2023] [added: 2024,] as compared with [removed: 2022,] [added: 2023,] they remain at high [removed: levels and continue to be subject to extreme volatility based on a variety of factors.][added: levels.]

Southwest [removed: has historically principally provided] [added: primarily provides] “point-to-point” service, rather than the “hub-and-spoke” service provided by most major U.S. airlines.

A point-to-point system enables airlines to connect directly to destinations without providing [removed: a] connecting service.

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

[added: Southwest’s unique network blends intentional] connectivity offered by hub-and-spoke models and point-to-point nonstops, allowing the Company to capture nonstop demand and provide reliable one-stop itinerary options.

For example, Southwest currently offers 12 weekday roundtrips between Dallas Love Field and Houston [removed: Hobby (and an additional 3 to Houston Bush), 5] [added: Hobby, six] weekday roundtrips between Denver and Chicago [removed: Midway (and an additional 4 to Chicago O'Hare), 7] [added: Midway, six] weekday roundtrips between Los Angeles International and Las Vegas, [removed: 8] [added: eight] weekday round trips between Burbank and Oakland, and [removed: 13] [added: ten] weekday roundtrips between Phoenix and Denver.

The Company continually works to [added: better] optimize its route network and schedule through the adjustment of flights in its existing markets and the addition of new markets and itineraries, while also pruning less profitable flights from its schedule.

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

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

Given ever-evolving travel patterns and labor market challenges, the Company continues to focus on better optimizing its route [removed: network to support orderly, measured,] [added: network, improving operational efficiency] and [removed: consistent growth, reducing inefficiencies,] [added: reliability,] and [removed: improving] [added: increasing] Employee [removed: productivity and operational resilience.][added: productivity.]

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 efficiency [removed: (available seat miles] [added: (ASMs] per fuel gallon consumed).

For example, in [removed: 2023,] [added: 2024,] the Company added [removed: 86] [added: 22] Boeing 737 MAX 8 (“-8”) aircraft to its fleet, with the goal of lowering operating costs, improving potential growth opportunities, [removed: restoring] [added: better optimizing] the Company's [removed: network to pre-pandemic levels,] [added: network,] reducing carbon emissions per [removed: available seat mile,] [added: ASM,] and further modernizing the Company's fleet with more fuel-efficient aircraft.

Fuel and oil expense remained the Company's second largest operating cost category for [removed: 2023.][added: 2024.]

The table below shows the Company's average cost of jet fuel inclusive of fuel taxes and fuel hedging impacts, for each year beginning in 2011 and during each quarter of [removed: 2023.][added: 2024.]

The Company’s fuel efficiency was aided in [removed: 2023,] [added: 2024,] as compared with [removed: 2022,] [added: 2023,] through the addition of [removed: 86] [added: 22] -8 aircraft to its fleet and by the retirement of [removed: 39] [added: 34] of its oldest, least fuel-efficient Boeing 737-700 (“-700”) [added: aircraft and the retirement of two Boeing 737-800 ("-800")] aircraft.

As of December 31, [removed: 2023,] [added: 2024,] the Company had [removed: 223] [added: 245] -8 aircraft in its fleet.

In [added: second and] fourth quarter [removed: 2023,] [added: 2024,] the Company entered into supplemental agreements (the “Supplements”) to its purchase agreement with The Boeing Company (“Boeing”) relating to the Company's purchase of -8 and [removed: -7 aircraft (collectively, “MAX aircraft”).][added: Boeing 737-7 ("-7", and, together with -8, the "MAX aircraft").]

Pursuant to the Supplements, the Company amended its order book delivery schedule to better allocate aircraft deliveries [removed: for orderly and measured growth,] to [removed: extend its firm orders through 2031, and to add 108 firm orders] [added: the Company’s network] and [removed: 108 MAX aircraft options.][added: capacity plans.]

The Company held [removed: 199] [added: 180] remaining MAX options as of December 31, [removed: 2023,] [added: 2024,] in addition to [removed: 495] [added: 492] firm orders of MAX aircraft to be delivered through 2031.

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

The table below sets forth the Company's [removed: available seat miles] [added: ASMs] produced per fuel gallon consumed (fuel-efficiency) over the last five years:

| | | | | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Available seat miles per fuel gallon consumed | | | | | | [removed: 79.5] [added: 80.8] | | | | | | [removed: 77.3] [added: 79.5] | | | | | | [removed: 79.2] [added: 77.3] | | | | | | [removed: 81.3] [added: 79.2] | | | | | | [removed: 75.7] [added: 81.3] | | |

The Company [added: has] also [removed: enters] [added: entered] into fuel derivative contracts to manage its risk associated with significant increases in fuel prices.

The Company's fuel hedging activities, as well as the risks associated with high and/or volatile fuel prices, are discussed in more detail below under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note [removed: 11] [added: 10] to the Consolidated Financial Statements.

Salaries, wages, and benefits expense constituted approximately [removed: 43] [added: 45.1] percent of the Company's operating expenses in [removed: 2023] [added: 2024] and was the Company's largest operating cost category.

They are non-refundable, but, subject to Southwest’s No-Show Policy, flight credit for the fare paid for unused travel by the Customer (“flight credit”) may be applied towards future travel on [added: Southwest.]

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

- “Anytime” fares [removed: may be] [added: are often] subject to advance purchase requirements.

- “Business Select” fares [removed: may be] [added: are often] subject to advance purchase requirements.

Business Select fares also include additional perks such as priority boarding with a boarding position in the first 15 boarding positions within boarding group “A,” 12 Rapid Rewards points per dollar spent on the base fare—the highest loyalty point multiplier of all Southwest fare products, one complimentary premium beverage coupon for the day of travel [added: on flights over 250 miles] (Customers must be of legal drinking age to drink alcoholic beverages), and free [removed: Inflight Internet service on Wi-Fi enabled aircraft,] [added: inflight internet service,] where available.

[added: Transferable] Flight [removed: credits] [added: Credits] or refunds for refundable fares are issued regardless of cancellation time.

In addition, A-List Preferred Members enjoy free inflight [removed: satellite] internet [removed: service on WiFi-enabled aircraft,] [added: service,] where available, and up to two complimentary premium drinks per flight on flights traveling [removed: 176] [added: 250] miles or more, added directly to their mobile boarding passes.

[added: When] these Customers purchase travel at least 36 hours prior to flight time, they receive the best boarding position available (generally, an “A” boarding pass).

In addition, [removed: the Company has announced that, beginning in] [added: since] early 2024, Members [removed: will be] [added: are] able to pay for their flights with a combination of cash and Rapid Rewards points—starting with as few as 1,000 points.

[removed: At launch, bookings] [added: Bookings with flights completed before January 1, 2025,] paid for with a combination of points plus other forms of eligible payment [removed: will] [added: did] not earn Rapid Rewards points, tier qualifying points for A-List or A-List Preferred status, or Companion Pass qualifying points, but [removed: will] [added: did] earn tier qualifying segment credits.

Company Initiatives

As part of the Company's ongoing modernization efforts, during third quarter 2024, the Company announced several transformational initiatives designed to elevate the Customer Experience on its flights, improve financial performance, and drive Shareholder value, including:

- Assigned Seating: Southwest will introduce an assigned seating model to better align with airline passenger preferences.

The Company expects to begin selling assigned seats in the second half of 2025, with its first flights operating with the new seating model in the first half of 2026.

- Premium Seating: Southwest will offer extra legroom options with additional pitch while maintaining a standard economy seat pitch.

- Redesigned Boarding Model: Southwest will evolve its boarding process with seat assignments while focusing on operational efficiency and improving the Customer Experience.

The updated boarding process will be designed to maintain Southwest's unique and popular approach in boarding through position numbers and signage displayed on stanchions within the gate area.

- Global Airline Partnerships: Southwest is seeking partnerships with international carriers to expand its network and connect Customers with more global destinations to generate additional demand for travel across the Southwest network.

Icelandair will become Southwest's initial partner with an expected launch on February 13, 2025 through Baltimore-Washington International Airport, which will serve as its first U.S. gateway for the carriers.

The Icelandair partnership is expected to add Denver and Nashville gateways during 2025, and Southwest intends to add at least one additional partner carrier in 2025.

- Getaways by Southwest™: In 2025, Southwest intends to launch a new product, Getaways by Southwest, offering vacation packages that are unique to the industry and come with Customer-friendly policies.

These customizable vacation bundles are expected to feature Southwest's generous cancellation policy and flexibility with its no change fees for flights extending to hotels and other elements of packaged vacations.

- 24-Hour Operations: Southwest is scheduled to add 24-hour operation capabilities with the introduction of overnight (i.e., redeye) flights on February 13, 2025 in key markets to maximize aircraft utilization.

- Marketing & Distribution Evolution: In order to attract new Customers and reach them where they are performing travel searches today, Southwest has expanded into new channels such as Google Flights, Kayak, and Skyscanner to broaden its Customer base and begin to engage them in its loyalty program.

- Service Modernization: To drive efficiency and improvement in Customer Service, Southwest is transitioning to a digital-first model, offering more self-service options designed to augment the Company’s contact centers and airport experience.

In 2024, the United States Department of Transportation (“DOT”) approved the Company’s bid to offer nonstop round-trip flights between Las Vegas and Washington Reagan.

Service between Las Vegas and Washington Reagan begins February 13, 2025, with daily service beginning March 6, 2025.

As the domestic travel market has matured and structural changes have reduced the demand for short-haul travel, especially post-pandemic, the Company has increased its proportion of longer-haul flights.

Further, during 2024, the Company announced 24-hour operation capabilities with the introduction of redeye flights.

Booking of redeye flying on initial routes became available in July 2024, with the first redeye flights scheduled on February 13, 2025, in five initial nonstop markets: Las Vegas to Baltimore and Orlando; Los Angeles to Baltimore and Nashville; and Phoenix to Baltimore.

The table below sets forth data regarding the Company's nonstop service, aircraft stage length, and trip duration over the last three years:

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

| Percentage of Customers flying nonstop | | | 74% | | | 73% | | | 74% | | |

| Nonstop city pairs | | | 850 | | | 805 | | | 825 | | |

| Average stage length (miles) | | | 763 | | | 730 | | | 728 | | |

| Average trip duration (hours) | | | 2.0 | | | 2.0 | | | 2.0 | | |

During 2024, the Company sought to restructure and better optimize its network to better match capacity to demand and adjust for post-pandemic Customer travel patterns by reducing short-haul trips, redistributing resources to longer-haul trips in more profitable markets, and reducing flying on weekdays and at off-peak times with lower travel demand.

In response to market conditions, the Company ceased service at Cozumel, Mexico; Houston Bush Intercontinental; Syracuse; and Bellingham in 2024.

Further, the Company redeployed underperforming capacity by significantly reducing service at Atlanta, Fort Lauderdale, and Chicago O’Hare, while expanding service at Nashville.

The Company is continuing to improve the connectivity and efficiency of its network through redesigns in smaller cities and the planned introduction of redeye flying.

Additionally, the Company is taking a cross-functional, methodical approach to market maturation efforts.

To further improve international connectivity with its domestic network, as discussed under “Company Initiatives,” the Company is scheduled to begin operating as a partner with Icelandair on February 13, 2025 to provide for transatlantic connectivity and announced plans to add at least one more partner during 2025.

The Company expects to further increase asset utilization through its introduction of redeye flights and its initiatives to decrease the amount of time it takes to turn an aircraft (the time needed to unload Passengers from an arriving flight and load Passengers on the same aircraft for its subsequent flight).

Such investments include moving to a fully digital (i.e., paperless) process, improved communication tools for Employees, and better visual and real-time information to assist both Customers and Employees.

These initiatives are designed to lower unit costs, as the Company is expected to be able to generate either the same number of available seat miles (“ASMs”) with fewer aircraft or produce more ASMs utilizing the same number of aircraft in its fleet.

These efforts are underway and are scheduled to be fully implemented by November 2025.

In addition, the Company is targeting other cost savings initiatives, including capitalizing on identified supply chain opportunities and improving its corporate efficiency through automation and better allocation of resources.

| 2024 | | | | | | $ | 5,812 | | | | | $ | 2.64 | | | | | 21.4 | | % |

| First Quarter 2024 | | | | | | $ | 1,531 | | | | | $ | 2.92 | | | | | 22.8 | | % |

| Second Quarter 2024 | | | | | | $ | 1,599 | | | | | $ | 2.76 | | | | | 23.0 | | % |

Industry

Overall, the U.S. airline industry has experienced a strong recovery of domestic leisure travel demand since mid-2022, as reported COVID-19 cases declined throughout the United States and travel restrictions eased.

International travel demand largely recovered to pre-pandemic levels in summer 2023.

Business travel, while showing modest improvements over several years, remained at reduced levels throughout 2022 and 2023 compared with pre-pandemic levels, as corporate travel patterns continued to lag and evolve post-pandemic.

Historically, airline industry results have been particularly susceptible to fuel price volatility.

Southwest’s network blends intentional

Approximately 73 percent of the Company's Customers flew nonstop during 2023, compared with 74 percent during 2022 and 73 percent during 2021.

As of December 31, 2023, Southwest served 805 nonstop city pairs, compared with 825 as of December 31, 2022, and 788 as of December 31, 2021.

For 2023, the Company’s average aircraft trip stage length was 730 miles, with an average duration of approximately 2.0 hours, as compared with an average aircraft trip stage length of 728 miles and an average duration of approximately 2.0 hours in 2022, and an average aircraft trip stage length of 790 miles and an average duration of approximately 2.1 hours in 2021.

In 2023, the Company focused its efforts towards restoring the depth and breadth of its pre-pandemic network by adding back frequency in existing markets and reconnecting markets that have historically served as points of strength for the network.

While the Company’s network and aircraft utilization were restored to pre-pandemic levels in late 2023, the network was not fully optimized for post-pandemic travel patterns.

The Company’s near-term optimization efforts focus on evaluating its short-haul routes as business travel continues to lag pre-pandemic levels, offering the right number of flights at the right times of day, and reducing certain weekday flights to better match capacity to demand.

The Company also remains focused on maturing newer markets introduced during the pandemic.

The Company entered 18 new destinations during 2020 and 2021, expanding its network to new Customer bases, leisure destinations, and geographic regions.

These services have created additional regional and international connectivity structured to grow the Company's presence in strategic markets that serve as cornerstones for its network and provide additional options for Customers to reach their final destinations.

To further improve international connectivity with its domestic network, the Company has announced its plans to shift the bulk of its international service in Fort Lauderdale to Orlando.

Further, in October 2023, the Company announced its plans to moderate capacity growth in 2024 to better match demand and Customer travel patterns, as well as to absorb its capacity growth from 2023.

Lauderdale-Hollywood.

Although the Company’s jet fuel prices per gallon were slightly lower in 2023, as compared with 2022, they remain at high historical levels.

The Company’s Fuel and oil expense for 2023 increased compared with 2022, primarily due to increased gallons of fuel consumed, largely from increased trips.

| First Quarter 2023 | | | | | | $ | 1,547 | | | | | $ | 3.19 | | | | | 25.8 | | % |

| Second Quarter 2023 | | | | | | $ | 1,403 | | | | | $ | 2.60 | | | | | 22.5 | | % |

| Third Quarter 2023 | | | | | | $ | 1,564 | | | | | $ | 2.80 | | | | | 24.4 | | % |

| Fourth Quarter 2023 | | | | | | $ | 1,703 | | | | | $ | 3.01 | | | | | 23.6 | | % |

The Company is also scheduled to begin receiving the Boeing 737 MAX -7 (“-7”) in 2024.

The Company retired 39 Boeing -700 aircraft in 2023 and currently plans for 49 aircraft retirements in 2024.

For further information regarding the Company’s aircraft contractual order

Operational Disruption Action Plan

In late December 2022, the Company experienced a wide-scale operational disruption as historically extreme winter weather spread across a significant portion of the United States, impacting the Company’s operational plan and flight schedules.

After Winter Storm Elliott, the Company was challenged to realign flight crews, flight schedules, and aircraft for a period of several days during this peak demand travel period.

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

As discussed below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the December 2022 operational disruption had a significant negative impact on the Company’s results of operations in fourth quarter 2022 and first quarter 2023.

For first quarter 2023, these events created a deceleration in bookings, primarily isolated to January and February 2023, as well as increased expenses, primarily in the form of reimbursing Customers for costs incurred as a result of the flight cancellations.

Following these events, the Company conducted a thorough internal review, working with the Company's Board of Directors (the “Board”), and engaged respected aviation consulting firm Oliver Wyman for a third-party assessment.

To boost operational resiliency in key areas across the Company and to mitigate the risk of recurrence, the Company developed a three-part tactical action plan focused on improving winter operations, accelerating operational-related investments, and enhancing cross-team collaboration.

The Company’s action plan was released in March 2023 and key winter operations steps were completed as of October 2023.

Improve Winter Operations

During 2023, the Company reinforced its airport infrastructure, increased available equipment, and bolstered overall winter preparedness at key airports with the potential for severe winter weather.

The major initiatives included

increasing available equipment to manage the effects of winter weather, such as deicing trucks, deicing pads, and ground equipment; storage capacity of deicing fluid at key airports; and engine covers and heaters to protect aircraft and ground equipment in very low temperatures.

[removed: In June 2015,] the Company also received a letter from the Connecticut Attorney General requesting information about capacity.

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

On August 18, 2022, the [removed: court] [added: Court] entered an order that effectively stayed the action, except for attention to the third-party subpoena, until after the Ninth Circuit issued its opinion in the matter of [removed: *Clarkson] [added: Clarkson] v.

Alaska Airlines, Inc. and Horizon Industries, [removed: Inc.*,] [added: Inc.,] an appeal from an order by the United States District Court for the Eastern District of Washington granting summary judgment in defendants’ favor on substantially the same claims at issue in this action.

The Ninth Circuit issued its order in [removed: *Clarkson*] [added: Clarkson] on February 1, 2023, reversing the district court’s grant of summary judgment and remanding the [removed: *Clarkson*] [added: Clarkson] case to the District Court with instructions to consider the “pay during leave” issue in the first instance.

The [removed: amended] complaint [removed: generally] seeks [removed: money damages, pre-judgment and post-judgment interest,] [added: various forms of declaratory] and [added: monetary relief as well as] attorneys’ [removed: fees] [added: fees, interest] and other costs.

[removed: On August 17, 2020, the] Company and the individual defendants filed a [removed: motion to dismiss.][added: reply brief on February 23, 2024.]

On June 22, 2020, a derivative action for breach of fiduciary duty was filed in the United States District Court for the Northern District of Texas naming the members of the Company's Board of Directors [added: (the “Board”)] as defendants and the Company as a nominal defendant (the [removed: "Derivative Action").][added: “Derivative Action”).]

The plaintiff alleges the Board, in the absence of good faith, exhibited reckless [added: disregard for its duties of oversight.]

On October 7, 2020, the Court entered an order staying and administratively closing the Derivative Action, pending the District [removed: Court’s] [added: Court's] final resolution of the [removed: Company’s] [added: Company's] motion to dismiss in [removed: the ongoing 2020 Securities Litigation brought] [added: a parallel securities class action] under [added: Section 10(b) of] the [removed: federal securities laws] [added: Exchange Act that was filed on February 19, 2020,] or upon the occurrence of certain other conditions.

[removed: The] [added: While the parallel securities class action was dismissed with prejudice on October 5, 2023, the] plaintiff in the Derivative Action has taken no steps to lift the stay in the case, which remains stayed.

Since about January 24, 2023, the Company’s senior officers and [added: the] Board [removed: of Directors] have received multiple derivative demand letters from legal counsel for purported Southwest [removed: shareholders] [added: Shareholders] demanding that the Board investigate claims, initiate legal action, and take remedial measures in connection with the service disruptions occurring in December 2022.

Generally, the demand letters broadly assert that the Company’s directors and senior officers did not make sufficient investments in internal technology systems to prevent large-scale flight disruptions, [added: 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.]

The Company and [removed: its] [added: the] Board [removed: of Directors intend to address] [added: have addressed] the [removed: derivative and books and records demands] [added: Derivative Actions] and [removed: the shareholder derivative suits] [added: Demands] in accordance with the applicable Texas statutes governing such demands and litigation.

Pursuant to those statutes, a committee of independent and disinterested directors [removed: (“Special] [added: (the "Special] Litigation [removed: Committee”) has been] [added: Committee") was] appointed to conduct an inquiry regarding the allegations in the [removed: derivative suits] [added: Derivative Actions] and [removed: derivative demand letters.][added: Demands.]

Based on the Company's wide-scale operational disruption, which led to the cancelation of a significant number of flights between December 21 and December 29, 2022, the Company has been subject to inquiries and investigations by governmental agencies [added: (including with respect to a December 2023 settlement with the DOT)] and could be subject to fines and/or penalties resulting from those inquiries and investigations, as well as litigation from Customers and Shareholders.

The Company’s management does not expect that the outcome in any of its currently ongoing legal proceedings or the outcome of any proposed adjustments presented to date by the Internal Revenue Service and state and local income tax authorities, individually or collectively, will have a material adverse effect on the Company’s financial [removed: condition, results of operations, or cash flow.]

In June 2015,

The Company has received the military pay and service records.

On October 29, 2024, the Company filed a motion to decertify the class.

The motion is fully briefed and a hearing on the motion is set for February 27, 2025.

The Court has set a trial date of September 11, 2025.

The case remains stayed, and there has been no effort either to lift the stay or to further pursue the asserted claims following the dismissal of the Sherman Complaint.

Plaintiffs filed an opposition brief on January 26, 2024.

The

On December 5, 2024, the United States District Court for the Southern District of Texas denied the motion to dismiss on the basis that "the issues are better suited for a summary judgment motion after the parties have had the opportunity to engage in discovery." On December 21, 2024, the Company moved for reconsideration of the December 5, 2024, order and, in the alternative, for permission to pursue an interlocutory appeal.

The plaintiffs oppose that relief but have not yet filed their opposition brief.

On June 18, 2024, a fourth shareholder derivative suit was filed in the 101st Judicial District Court of Dallas County, Texas, asserting substantially similar claims as in the first two state court derivative suits.

On June 26, 2024, a fifth shareholder derivative suit was filed in the United States District Court for the Northern District of Texas, asserting substantially similar claims as in the first federal derivative suit.

On July 18, 2024, a sixth shareholder derivative suit was filed in the United States District Court for the Northern District of Texas, asserting substantially similar claims as in the first federal derivative suit (together with the previous demand letters and shareholder derivative suits, the “Derivative Actions and Demands”).

On February 26, 2024, the Company filed a second unopposed motion to extend the stay of the federal derivative case until at least April 26, 2024.

On April 26, 2024, the Company filed a third motion to extend the stay of the federal derivative case until at least June 25, 2024.

On July 2, 2024, the Company filed a fourth motion to extend the stay of the federal derivative case until at least July 25, 2024.

On July 27, 2024, the Company filed an additional motion to further extend the stay until September 23, 2024.

The state court cases have been consolidated into one case, and a motion is pending to consolidate the federal cases into one federal case.

As described above, pursuant to the applicable Texas statutes governing derivative demands and litigation, the Special Litigation Committee was duly appointed to conduct an inquiry regarding the claims and allegations asserted in the Derivative Actions and Demands.

The Derivative Actions and Demands have all been stayed, formally or by agreement, pending the outcome of the investigation by the Special Litigation Committee.

On September 19, 2024, the Special Litigation Committee formally reported its findings and resolution concerning its investigation of the Derivative Actions and Demands, which began in July 2023 and concluded with the September 19, 2024 report and resolution, which in turn were delivered to the Company and its Board on September 23, 2024.

The Special Litigation Committee retained two law firms to represent the Special Litigation Committee in connection with the Special Litigation Committee’s investigation of the Derivative Actions and Demands and the Special Litigation Committee’s review and assessment of evidence gathered in its investigation.

The Special Litigation Committee further reported, among other details, upon its appointment, the independence and disinterestedness of its members, the Special Litigation Committee’s investigative processes, including meetings, scope of investigation, volume of documents reviewed, numbers of witnesses interviewed, other presentations received, review and analysis of evidence and applicable legal standards, work with its counsel, and findings and preparation of the final report and resolution of the Special Litigation Committee.

Based upon the Special Litigation Committee report and the conclusions reached therein, the Special Litigation Committee, consistent with its appointment and delegated authority, unanimously adopted a resolution (i) determining that it is not in the best interests of the Company or its Shareholders to pursue the relief requested in the Derivative Actions and Demands; (ii) determining that it is in the best interests of the Company and its Shareholders to reject the Derivative Actions and Demands; (iii) determining that it is in the best interests of the Company and its Shareholders for the Company to move to dismiss the Derivative Actions and Demands; and (iv) instructing that the Company and counsel take all further actions necessary to implement the resolution.

The Company and its counsel intend to take steps on behalf of the Company to implement the resolution of the Special Litigation Committee, including making appropriate motions in accordance with applicable Texas law governing derivative demands and litigation procedure.

On December 26, 2024, the Board received a seventh demand letter, and on January 31, 2025, received an eighth demand letter, each containing allegations substantially similar to those presented in certain of the prior Derivative Actions and Demands, which will be addressed consistent with applicable Texas law governing such demands.

On January 28, 2025, two participants in the Company’s retirement plans commenced a putative class action in the United States District Court for the Northern District of Texas against the Company, the Board, and certain of the Company’s officers.

Plaintiffs purport to represent a class consisting of participants and beneficiaries in the Southwest Airlines Co. Retirement Savings Plan, the Southwest Airlines Co. 401(k) Plan, and the Southwest Airlines Co. ProfitSharing Plan (collectively, the “Plan”) who invested in the Harbor Capital Appreciation Fund from January 28, 2019 “through the date of judgment.” The complaint asserts that defendants mismanaged Plan assets and failed to monitor the Plan in violation of the Employee Retirement Income Security Act by, among other things, failing to remove the Harbor Fund as an investment option.

The defendants deny all allegations of wrongdoing, believe the plaintiffs’ claims are without merit, and intend to vigorously defend against these claims.

condition, results of operations, or cash flow.

The Company agreed to pay

On February 19, 2020, a complaint alleging violations of federal securities laws and seeking certification as a class action was filed against the Company and certain of its officers in the United States District Court for the Northern District of Texas in Dallas (the “2020 Securities Litigation”).

A lead plaintiff has been appointed in the case, and an amended complaint was filed on July 2, 2020.

The amended complaint seeks damages on behalf of a putative class of persons who purchased the Company’s common stock between February 7, 2017, and January 29, 2020.

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.

On October 1, 2020, the lead plaintiff filed a response in opposition to the motion to dismiss.

The Company filed a reply on or about October 21, 2020.

On September 20, 2023, the District Court issued an opinion granting the Company’s motion to dismiss as to all claims.

On October 5, 2023, the District Court entered a final judgment dismissing the suit in its entirety with prejudice.

The lead plaintiff has filed no timely notice of appeal.

The Company denies all allegations of wrongdoing, including those in the amended complaint.

disregard for its duties of oversight.

On October 5, 2023, the District Court entered a final judgment dismissing the 2020 Securities Litigation in its entirety with prejudice, and the lead plaintiff has filed no timely notice of appeal from that dismissal.

The case remains stayed.

The parties’ respective briefing on the Company’s motion to dismiss is expected to be completed on or around February 21, 2024.

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 October 27, 2023, the DOT notified the Company that it had determined the Company failed to provide adequate customer service assistance, prompt flight status notifications, and proper and prompt refunds and that the assessment of a civil penalty was warranted.

During fourth quarter 2023, the Company accrued an expense of $107 million associated with a settlement reached with the DOT based on their investigation into the disruption, which includes a cash penalty and incorporates a future commitment for Southwest Customer care with a new Customer compensation policy.

An additional $33 million penalty was also assessed by the DOT, but was able to be credited against the substantial value the Company had already provided to its Customers impacted by the disruption, and therefore did not result in further impact to the Company's financial results for 2023.

For the fiscal year ended December 31, [removed: 2023][added: 2024]

[removed: ][added: ]

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately [removed: $21,499,447,826] [added: $17,086,581,902] computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, [removed: 2023,] [added: 2024,] 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, 2024: 596,664,523] [added: 5, 2025: 592,661,084] shares

Portions of the Definitive Proxy Statement for the Company’s Annual Meeting of Shareholders to be held May [removed: 15, 2024,] [added: 14, 2025,] are incorporated into Part III of this Annual Report on Form 10-K.

| Item 1. | | | [removed: [Business](#i8e716f7d23f343d791ba065768ec54bd_13)] [added: [Business](#i4afe0e32efd24336856aece63cff8bbf_13)] | | | [removed: [3](#i8e716f7d23f343d791ba065768ec54bd_13)] [added: [3](#i4afe0e32efd24336856aece63cff8bbf_13)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i8e716f7d23f343d791ba065768ec54bd_19)] [added: Factors](#i4afe0e32efd24336856aece63cff8bbf_19)] | | | [removed: [30](#i8e716f7d23f343d791ba065768ec54bd_19)] [added: [32](#i4afe0e32efd24336856aece63cff8bbf_19)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i8e716f7d23f343d791ba065768ec54bd_22)] [added: Comments](#i4afe0e32efd24336856aece63cff8bbf_22)] | | | [removed: [48](#i8e716f7d23f343d791ba065768ec54bd_22)] [added: [52](#i4afe0e32efd24336856aece63cff8bbf_22)] | | |

| Item 1C. | | | [removed: [Cybersecurity](#i8e716f7d23f343d791ba065768ec54bd_1811)] [added: [Cybersecurity](#i4afe0e32efd24336856aece63cff8bbf_25)] | | | [removed: [48](#i8e716f7d23f343d791ba065768ec54bd_1811)] [added: [52](#i4afe0e32efd24336856aece63cff8bbf_25)] | | |

| Item 2. | | | [removed: [Properties](#i8e716f7d23f343d791ba065768ec54bd_25)] [added: [Properties](#i4afe0e32efd24336856aece63cff8bbf_28)] | | | [removed: [52](#i8e716f7d23f343d791ba065768ec54bd_25)] [added: [56](#i4afe0e32efd24336856aece63cff8bbf_28)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i8e716f7d23f343d791ba065768ec54bd_28)] [added: Proceedings](#i4afe0e32efd24336856aece63cff8bbf_31)] | | | [removed: [53](#i8e716f7d23f343d791ba065768ec54bd_28)] [added: [57](#i4afe0e32efd24336856aece63cff8bbf_31)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#i8e716f7d23f343d791ba065768ec54bd_31)] [added: Disclosures](#i4afe0e32efd24336856aece63cff8bbf_34)] | | | [removed: [56](#i8e716f7d23f343d791ba065768ec54bd_31)] [added: [62](#i4afe0e32efd24336856aece63cff8bbf_34)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity [removed: Securities](#i8e716f7d23f343d791ba065768ec54bd_40)] [added: Securities](#i4afe0e32efd24336856aece63cff8bbf_43)] | | | [removed: [60](#i8e716f7d23f343d791ba065768ec54bd_40)] [added: [65](#i4afe0e32efd24336856aece63cff8bbf_43)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i8e716f7d23f343d791ba065768ec54bd_46)] [added: Operations](#i4afe0e32efd24336856aece63cff8bbf_49)] | | | [removed: [62](#i8e716f7d23f343d791ba065768ec54bd_46)] [added: [67](#i4afe0e32efd24336856aece63cff8bbf_49)] | | |

| | | | [Liquidity and Capital [removed: Resources](#i8e716f7d23f343d791ba065768ec54bd_76)] [added: Resources](#i4afe0e32efd24336856aece63cff8bbf_79)] | | | [removed: [76](#i8e716f7d23f343d791ba065768ec54bd_76)] [added: [85](#i4afe0e32efd24336856aece63cff8bbf_79)] | | |

| | | | [Critical Accounting Policies and [removed: Estimates](#i8e716f7d23f343d791ba065768ec54bd_82)] [added: Estimates](#i4afe0e32efd24336856aece63cff8bbf_85)] | | | [removed: [80](#i8e716f7d23f343d791ba065768ec54bd_82)] [added: [89](#i4afe0e32efd24336856aece63cff8bbf_85)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i8e716f7d23f343d791ba065768ec54bd_88)] [added: Risk](#i4afe0e32efd24336856aece63cff8bbf_91)] | | | [removed: [84](#i8e716f7d23f343d791ba065768ec54bd_88)] [added: [94](#i4afe0e32efd24336856aece63cff8bbf_91)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i8e716f7d23f343d791ba065768ec54bd_94)] [added: Data](#i4afe0e32efd24336856aece63cff8bbf_97)] | | | [removed: [88](#i8e716f7d23f343d791ba065768ec54bd_94)] [added: [98](#i4afe0e32efd24336856aece63cff8bbf_97)] | | |

| | | | [Southwest Airlines Co. Consolidated Balance [removed: Sheet](#i8e716f7d23f343d791ba065768ec54bd_97)] [added: Sheet](#i4afe0e32efd24336856aece63cff8bbf_100)] | | | [removed: [88](#i8e716f7d23f343d791ba065768ec54bd_97)] [added: [98](#i4afe0e32efd24336856aece63cff8bbf_100)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of [removed: Income](#i8e716f7d23f343d791ba065768ec54bd_100)] [added: Comprehensive Income](#i4afe0e32efd24336856aece63cff8bbf_106)] | | | [removed: [89](#i8e716f7d23f343d791ba065768ec54bd_100)] [added: [100](#i4afe0e32efd24336856aece63cff8bbf_106)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of [removed: Comprehensive Income](#i8e716f7d23f343d791ba065768ec54bd_103)] [added: Income](#i4afe0e32efd24336856aece63cff8bbf_103)] | | | [removed: [90](#i8e716f7d23f343d791ba065768ec54bd_103)] [added: [99](#i4afe0e32efd24336856aece63cff8bbf_103)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of Stockholders’ [removed: Equity](#i8e716f7d23f343d791ba065768ec54bd_106)] [added: Equity](#i4afe0e32efd24336856aece63cff8bbf_109)] | | | [removed: [91](#i8e716f7d23f343d791ba065768ec54bd_106)] [added: [101](#i4afe0e32efd24336856aece63cff8bbf_109)] | | |

| | | | [Southwest Airlines Co. Consolidated Statement of Cash [removed: Flows](#i8e716f7d23f343d791ba065768ec54bd_109)] [added: Flows](#i4afe0e32efd24336856aece63cff8bbf_112)] | | | [removed: [92](#i8e716f7d23f343d791ba065768ec54bd_109)] [added: [102](#i4afe0e32efd24336856aece63cff8bbf_112)] | | |

| | | | [Notes to Consolidated Financial [removed: Statements](#i8e716f7d23f343d791ba065768ec54bd_112)] [added: Statements](#i4afe0e32efd24336856aece63cff8bbf_115)] | | | [removed: [93](#i8e716f7d23f343d791ba065768ec54bd_112)] [added: [103](#i4afe0e32efd24336856aece63cff8bbf_115)] | | |

| Item 9. | | | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#i8e716f7d23f343d791ba065768ec54bd_187)] [added: Disclosure](#i4afe0e32efd24336856aece63cff8bbf_193)] | | | [removed: [140](#i8e716f7d23f343d791ba065768ec54bd_187)] [added: [151](#i4afe0e32efd24336856aece63cff8bbf_193)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#i8e716f7d23f343d791ba065768ec54bd_190)] [added: Procedures](#i4afe0e32efd24336856aece63cff8bbf_196)] | | | [removed: [140](#i8e716f7d23f343d791ba065768ec54bd_190)] [added: [151](#i4afe0e32efd24336856aece63cff8bbf_196)] | | |

| Item 9B. | | | [Other [removed: Information](#i8e716f7d23f343d791ba065768ec54bd_193)] [added: Information](#i4afe0e32efd24336856aece63cff8bbf_199)] | | | [removed: [141](#i8e716f7d23f343d791ba065768ec54bd_193)] [added: [152](#i4afe0e32efd24336856aece63cff8bbf_199)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#i8e716f7d23f343d791ba065768ec54bd_196)] [added: Inspections](#i4afe0e32efd24336856aece63cff8bbf_202)] | | | [removed: [141](#i8e716f7d23f343d791ba065768ec54bd_196)] [added: [152](#i4afe0e32efd24336856aece63cff8bbf_202)] | | |

| Item 10. | | | [Directors, Executive Officers, and Corporate [removed: Governance](#i8e716f7d23f343d791ba065768ec54bd_202)] [added: Governance](#i4afe0e32efd24336856aece63cff8bbf_208)] | | | [removed: [142](#i8e716f7d23f343d791ba065768ec54bd_202)] [added: [153](#i4afe0e32efd24336856aece63cff8bbf_208)] | | |

| Item 11. | | | [Executive [removed: Compensation](#i8e716f7d23f343d791ba065768ec54bd_205)] [added: Compensation](#i4afe0e32efd24336856aece63cff8bbf_211)] | | | [removed: [142](#i8e716f7d23f343d791ba065768ec54bd_205)] [added: [153](#i4afe0e32efd24336856aece63cff8bbf_211)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i8e716f7d23f343d791ba065768ec54bd_208)] [added: Matters](#i4afe0e32efd24336856aece63cff8bbf_214)] | | | [removed: [143](#i8e716f7d23f343d791ba065768ec54bd_208)] [added: [154](#i4afe0e32efd24336856aece63cff8bbf_214)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#i8e716f7d23f343d791ba065768ec54bd_211)] [added: Independence](#i4afe0e32efd24336856aece63cff8bbf_217)] | | | [removed: [143](#i8e716f7d23f343d791ba065768ec54bd_211)] [added: [154](#i4afe0e32efd24336856aece63cff8bbf_217)] | | |

| Item 14. | | | [Principal Accounting Fees and [removed: Services](#i8e716f7d23f343d791ba065768ec54bd_214)] [added: Services](#i4afe0e32efd24336856aece63cff8bbf_220)] | | | [removed: [144](#i8e716f7d23f343d791ba065768ec54bd_214)] [added: [155](#i4afe0e32efd24336856aece63cff8bbf_220)] | | |

| Item 15. | | | [Exhibits and Financial Statement [removed: Schedules](#i8e716f7d23f343d791ba065768ec54bd_220)] [added: Schedules](#i4afe0e32efd24336856aece63cff8bbf_226)] | | | [removed: [145](#i8e716f7d23f343d791ba065768ec54bd_220)] [added: [156](#i4afe0e32efd24336856aece63cff8bbf_226)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#i8e716f7d23f343d791ba065768ec54bd_223)] [added: Summary](#i4afe0e32efd24336856aece63cff8bbf_229)] | | | [removed: [149](#i8e716f7d23f343d791ba065768ec54bd_223)] [added: [161](#i4afe0e32efd24336856aece63cff8bbf_229)] | | |

| | | | | | | | | |

| [Signatures](#i4afe0e32efd24336856aece63cff8bbf_232) | | | | | | [162](#i4afe0e32efd24336856aece63cff8bbf_232) | | |

| [Signatures](#i8e716f7d23f343d791ba065768ec54bd_226) | | | | | | [150](#i8e716f7d23f343d791ba065768ec54bd_226) | | |

[removed: These technologies and systems include, among others, the Company's website and] reservation system; [added: mobile application;] flight dispatch and tracking systems; flight simulators; check-in kiosks; aircraft maintenance, planning, and record keeping systems; telecommunications systems; flight planning and scheduling systems; crew scheduling systems; human resources systems; and financial planning, management, and accounting systems.

Additionally, the Company must receive [added: and process] certain confidential or personal information related to its Customers and [added: Employees to run its business, and the Company's operations depend upon secure collection, processing, retention, and transmission of such information.]

The Company takes a [removed: risk-based] [added: risk-based, threat-informed] approach to cybersecurity, which begins with the identification and evaluation of cybersecurity risks or threats that could affect the Company’s operations, finances, legal or regulatory compliance, or reputation.

Once identified, cybersecurity risks and related mitigation efforts are [added: evaluated and] prioritized based on their potential impact, likelihood, velocity, and vulnerability, considering both quantitative and qualitative factors.

Risk mitigation strategies are developed and implemented based on the specific nature of each cybersecurity [removed: risk.][added: risk or threat.]

The Company’s cybersecurity [removed: risk management] [added: program] also includes a Security Operations Center (“SOC”) that conducts ongoing monitoring of networks and systems for potential signs of suspicious activity.

Further, the Company’s cybersecurity program is periodically reviewed by its [removed: Cybersecurity Leaders (as defined below)] [added: Chief Information Officer ("CIO")] and [added: Chief Information Security Officer ("CISO" and, together with the CIO, the Company’s “Cybersecurity Leaders”) and] adjusted in an effort to maintain the program’s agility and responsiveness as circumstances evolve, new cybersecurity threats emerge, and regulations change.

This team [removed: also] collaborates closely with other [added: internal] teams [added: as well as with external legal advisors, communication specialists, and other key stakeholders, as appropriate,] in identifying, protecting from, detecting, responding to, and recovering from cybersecurity incidents.

The Company’s [removed: cybersecurity] incident response team [removed: partners with the Company’s internal cybersecurity teams as well] [added: also coordinates,] as [added: needed,] with external legal advisors, communication specialists, and other key [removed: stakeholders as appropriate to respond to cybersecurity incidents.][added: stakeholders.]

The incident response plan includes standard processes for reporting and escalating cybersecurity [removed: incidents] [added: incidents, as appropriate,] to senior [removed: management.][added: management, the Audit Committee, and the Board.]

This preparedness exercise is intended to provide hands-on training for the participants and helps the Company assess its [added: cybersecurity response plan and its] processes and capabilities in addressing cybersecurity threats.

The Company engages cybersecurity consultants, [removed: auditors,] [added: assessors,] and other third parties to assess and enhance its cybersecurity practices.

These third parties conduct assessments, penetration testing, and vulnerability [removed: assessments] [added: evaluations] to [added: help] identify [added: potential] weaknesses and recommend [added: improvements.]

[removed: This includes] [added: Additionally, the Company leverages] a [added: number of third-party tools and technologies as part of its efforts to enhance cybersecurity functions, such as a] managed security service provider to augment the Company’s dedicated SOC team, an endpoint detection and response system for continuous monitoring, detection, and response capabilities, and a security information and event management solution to automate real-time threat detection, investigation, and prioritization of high-fidelity alerts.

The Company evaluates third-party service providers from a cybersecurity risk perspective, which may include an assessment of that service provider’s cybersecurity posture [removed: or] [added: and/or] a recommendation of specific mitigation [removed: controls.][added: activities.]

As of the date of this report, the Company has not identified any cybersecurity threats that have materially affected or are reasonably [removed: anticipated] [added: likely] to have a material effect on the [removed: organization.][added: Company's business strategy, results of operations, or financial condition.]

Although the Company has not experienced cybersecurity incidents that are individually, or in the aggregate, material, the Company [removed: has] [added: and its service providers have] experienced [removed: cyberattacks] [added: cyber-attacks] in the past, which the Company believes have thus far been mitigated by preventative, detective, and responsive measures put in [removed: place by the Company.][added: place.]

For a detailed discussion of the Company’s cybersecurity related risks, see “Item [removed: 1.A] [added: 1A] Risk Factors—Information [removed: Technology] [added: Technology, Cybersecurity, and Data Privacy] Risks.”

Based on these reports, the Board [removed: requests] [added: may request] follow-up [removed: data] [added: information] and presentations to address any specific concerns and recommendations.

[removed: *The] [added: As needed, the] Audit [removed: Committee*.][added: Committee reviews with]

[added: *The Audit Committee.*] The Audit Committee reviews with management the Company’s technology and cybersecurity frameworks, policies, programs, opportunities, and risk profile [added: as needed] at its regularly scheduled meetings.

The Company’s [removed: Chief Information Officer (“CIO”), Chief Information Security Officer (“CISO”),] [added: CIO, CISO,] members of the cybersecurity team, or other advisors, as requested by the Audit Committee, report quarterly on the Company’s technology, data [removed: privacy,] [added: protection,] and cybersecurity strategies and risks.

[removed: The Audit Committee further reviews with] management the Company’s business continuity and disaster recovery plans and capabilities and the effectiveness of the Company’s escalation procedures.

Based on these management reports, the Audit Committee may request follow-up [removed: data] [added: information] and presentations to address any specific concerns and recommendations.

In addition to this regular reporting, [removed: significant] cybersecurity risks or threats may also be escalated on [removed: as needed] [added: an as-needed] basis to the Audit Committee.

The [removed: CISO and CIO (collectively, the Company’s “Cybersecurity Leaders”)] [added: Cybersecurity Leaders] are actively involved in assessing and managing cybersecurity risks.

The CISO earned a Bachelor of [removed: Science in Industrial Engineering from Louisiana State University, a Master of Science] [added: Business Administration] in Management Information Systems from The University of [removed: Texas at Dallas,] [added: Oklahoma] and [added: holds] a [removed: Master of Business Administration from Southern Methodist University.][added: Certified Information Systems Security Professional certification.]

The Company’s cybersecurity department is comprised of teams that engage in a range of cybersecurity activities such as threat intelligence, [added: incident response,] security [removed: architecture,] [added: operations, vulnerability management, risk] and [removed: incident response.][added: compliance and security engineering.]

Leaders from each team regularly meet with the Cybersecurity Leaders to provide visibility of [removed: major] [added: relevant] issues and seek alignment with strategy.

As noted above under “Incident Response,” the Company’s cybersecurity incident response plan includes standard processes for reporting and escalating cybersecurity [removed: incidents] [added: incidents, as appropriate,] to senior [removed: management.][added: management, the Audit Committee, and the Board.]

These technologies and systems include, among others, the Company's website and

- The CISO is responsible for leading the Company’s cybersecurity strategy and department while ensuring the protection of data and assets across the Company’s facilities, airports, and aircraft.

The CISO has served in various roles in cybersecurity for over 15 years.

The CISO also participates in the Aviation Information Sharing and Analysis Center Board and is the Vice Chair of the Cybersecurity Council at Airlines for America.

Employees to run its business, and the Company's operations depend upon secure collection, processing, retention, and transmission of such information.

improvements.

Additionally, the Company leverages a number of third-party tools and technologies as part of its efforts to enhance cybersecurity functions.

- The CISO is responsible for all aspects of cybersecurity across the Company’s facilities, airports, and aircraft fleet, which includes security engineering, security operations, incident response, threat intelligence, risk and compliance, and vulnerability management.

The CISO has served in various roles in information technology for nearly 40 years at numerous technology companies and consulting firms.

The Company’s incident response team also coordinates with external legal advisors, communication specialists, and other key stakeholders.

Southwest operated a total of [removed: 817] [added: 803] Boeing 737 aircraft as of December 31, [removed: 2023,] [added: 2024,] of which [removed: 57] [added: 88] and [removed: 24] [added: 18] were under operating and finance leases, respectively.

The following table details information on the [removed: 817] [added: 803] aircraft as of December 31, [removed: 2023:][added: 2024:]

| 737-700 | | | | | | 143 | | | | | | [removed: 18] [added: 19] | | | | | | [removed: 387] [added: 353] | | | | | | [removed: 352] [added: 326] | | | | | | [removed: 35] [added: 27] | | |

| 737-800 | | | | | | 175 | | | | | | [removed: 8] [added: 9] | | | | | | [removed: 207] [added: 205] | | | | | | [removed: 190] [added: 155] | | | | | | [removed: 17] [added: 50] | | |

(a)See Note [removed: 8] [added: 7] to the Consolidated Financial Statements for more information on the Company's lease transactions.

In [added: second quarter and] fourth quarter [removed: 2023,] [added: 2024,] the Company entered into supplemental agreements with Boeing relating to its contractual order book for -7 and -8 aircraft.

These [removed: agreements, which include an extended order book to 2031,] [added: agreements] provide flexibility in support of the Company's growth plans and fleet modernization.

As of December 31, [removed: 2023,] [added: 2024,] the Company had firm deliveries and options for -7 and -8 aircraft as follows:

| 2025 | | | [removed: 59] [added: 70] | | | | | | [removed: —] [added: 66] | | | | | | [removed: 15] [added: —] | | | | | | | | | | | | [removed: 74] [added: 136] | | | [added: (c)] | | |

| 2026 | | | [removed: 59] [added: 64] | | | | | | — | | | | | | [removed: 26] [added: 22] | | | | | | | | | | | | [removed: 85] [added: 86] | | | | | |

(a) The delivery timing for the -7 is dependent on the [removed: FAA] [added: Federal Aviation Administration ("FAA")] issuing required certifications and approvals to Boeing and the Company.

Southwest either leases or pays a usage fee for terminal passenger service facilities at each of the airports it [removed: serves] [added: serves,] to which various leasehold improvements have been made.

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

The Company has [removed: announced its intent to build] [added: begun construction on] a new aircraft maintenance facility, expected to be completed in 2025, at Baltimore-Washington International Airport.

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 [removed: (a)] [added: (i)] an energy efficient, modern building, called TOPS, which houses certain operational and training functions, including the Company's 24-hour operations and [removed: (b)] [added: (ii)] the Wings Complex, consisting of a Leadership Education and Aircrew Development (“LEAD”) Center (housing the Company's 26 Boeing 737 flight simulators and classroom space for Pilot training), an additional office building, and a parking garage.

The Company expects to manage the design, development, financing, construction, and commissioning of the project, and expects to commence construction in [removed: early 2025] [added: 2028] with construction to be [removed: complete] [added: completed] in [removed: late 2028 or early 2029.][added: 2032.]

Additional information regarding these projects is provided in Note [removed: 5] [added: 4] to the Consolidated Financial Statements.

| 737 -8 | | | | | | 175 | | | | | | 3 | | | | | | 245 | | | | | | 216 | | | | | | 29 | | |

| Totals | | | | | | | | | | | | 12 | | | | | | 803 | | | | | | 697 | | | | | | 106 | | |

| | | | 296 | | | (a) | | | 196 | | | (b) | | | 180 | | | | | | | | | | | | 672 | | | | | |

(c) The Company has included the remaining 63 of its 2024 contractual but undelivered aircraft (27 -7s and 36 -8s) within its 2025 contractual commitments.

As Boeing continues to ramp up production and works to certify the -7, the Company is currently using a planning assumption of 38 -8 aircraft deliveries in 2025.

The 2025 contractual detail is as follows:

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

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

| | | | The Boeing Company | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| 2024 Contractual Deliveries | | | 27 | | | | | | 36 | | | | | | | | | | | | | | | | | | 63 | | | | | |

| 2025 Contractual Deliveries | | | 43 | | | | | | 30 | | | | | | | | | | | | | | | | | | 73 | | | | | |

| 2025 Combined Contractual Total | | | 70 | | | | | | 66 | | | | | | | | | | | | | | | | | | 136 | | | | | |

In 2024, the Company completed a multi-year, $100 million project, which nearly doubled the size of the Company’s maintenance hangar at Phoenix Sky Harbor.

The 90,000 square foot expansion added three new aircraft bays to the facility.

Construction on the project has begun, and the Company expects construction to be completed in 2027.

| 737 -8 | | | | | | 175 | | | | | | 2 | | | | | | 223 | | | | | | 194 | | | | | | 29 | | |

| Totals | | | | | | | | | | | | 11 | | | | | | 817 | | | | | | 736 | | | | | | 81 | | |

| 2024 | | | 27 | | | | | | 58 | | | | | | — | | | | | | | | | | | | 85 | | | (c) | | |

| | | | 307 | | | (a) | | | 188 | | | (b) | | | 199 | | | | | | | | | | | | 694 | | | | | |

(c) The Company currently plans for approximately 79 MAX aircraft deliveries in 2024.

The

The following information regarding the Company’s executive officers is as of February [removed: 1, 2024.][added: 5, 2025.]

| Robert E. Jordan | | | President & Chief Executive Officer | | | [removed: 63] [added: 64] | | |

| Andrew M. Watterson | | | Chief Operating Officer | | | [removed: 57] [added: 58] | | |

| Ryan C. Green | | | Executive Vice President & Chief [removed: Commercial] [added: Transformation] Officer | | | [removed: 47] [added: 48] | | |

| Justin Jones | | | Executive Vice President Operations | | | [removed: 45] [added: 46] | | |

| Tammy Romo | | | Executive Vice President & Chief Financial Officer | | | [removed: 61] [added: 62] | | |

| Linda B. Rutherford | | | Chief Administration Officer | | | [removed: 57] [added: 58] | | |

[removed: Kelly*] [added: Jordan] has served as the Company's [added: Chief] Executive [removed: Chairman of the Board] [added: Officer] since February 2022 and [removed: has served] as [removed: the Company's Chairman of the Board] [added: its President] since [removed: May 2008.][added: January 2023.]

[removed: *Robert] [added: Robert] E.

[removed: Jordan*] [added: Green] has served as the [removed: Company's Chief] [added: Company’s] Executive [removed: Officer since February 2022 and as its] [added: Vice] President [added: & Chief Transformation Officer] since [removed: January 2023.][added: November 2024.]

Mr. Jordan has been a member of the [removed: Company's] Board [removed: of Directors] since February 2022.

[removed: *Andrew] [added: Andrew] M.

[removed: Watterson*] [added: Watterson] has served as the Company's Chief Operating Officer since October 2022.

[removed: *Ryan] [added: Ryan] C.

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

Mr. Green also served as [added: Executive Vice President Commercial Transformation from July to November 2024, Executive Vice President & Chief Commercial Officer from October 2022 to July 2024,] Senior Vice President & Chief Marketing Officer from February 2019 to October 2022, Vice President & Chief Marketing Officer from April 2017 to February 2019, Vice President Marketing from February 2016 to April 2017, Managing Director Customer Strategy and Development from October 2013 to February 2016, Senior Director Loyalty & Partnerships from July 2010 to October 2013, Director Customer Loyalty from November 2007 to July 2010, Senior Manager Loyalty Marketing from January 2007 to November 2007, and Manager Business Development from July 2004 to January 2007.

[removed: *Justin Jones*] [added: Justin Jones] has served as the Company’s Executive Vice President Operations since December 2023.

[removed: *Tammy Romo*] [added: Tammy Romo] has served as the Company's Executive Vice President & Chief Financial Officer since July 2015.

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

[removed: *Linda] [added: Linda] B.

| | | | | | | | | |

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

The Company has announced Ms. Romo’s resignation from her position of Executive Vice President & Chief Financial Officer effective April 1, 2025.

The Company has announced Ms. Rutherford’s resignation from her position of Chief Administration Officer effective April 1, 2025.

| Gary C. Kelly | | | Executive Chairman of the Board | | | 68 | | |

| Mark R. Shaw | | | Executive Vice President & Chief Legal & Regulatory Officer & Corporate Secretary | | | 61 | | |

*Gary C.

Mr. Kelly also served as Chief Executive Officer from July 2004 to February 2022, President from July 2008 to January 2017, Executive Vice President & Chief Financial Officer from June 2001 to July 2004, and Vice President Finance & Chief Financial Officer from 1989 to 2001.

Mr. Kelly joined the Company in 1986 as its Controller.

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

*Mark R.

Shaw* has served as the Company's Executive Vice President & Chief Legal & Regulatory Officer since November 2018.

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

Mr. Shaw also served as Executive Vice President, Chief Legal & Regulatory Officer, & Corporate Secretary from August 2018 to November 2018, Senior Vice President, General Counsel, & Corporate Secretary from July 2015 to August 2018, Vice President, General Counsel, & Corporate Secretary from February 2013 to July 2015, and as Associate General Counsel - Corporate & Transactions from February 2008 to February 2013.

Mr. Shaw joined the Company in 2000 as an Attorney in the General Counsel Department.

The [added: Company’s common stock is listed on the New York Stock Exchange ("NYSE") and is traded under the symbol "LUV." The] Company currently intends to continue declaring dividends on a quarterly basis for the foreseeable future; however, the Board may elect to alter the timing, amount, and payment of dividends on the basis of operational results, financial condition, cash requirements, future prospects, and other factors deemed relevant by the Board.

As of February [removed: 2, 2024,] [added: 5, 2025,] there were approximately [removed: 11,028] [added: 10,623] holders of record of the Company’s common stock.

The following graph compares the cumulative total [removed: shareholder] [added: Shareholder] return on the Company’s common stock over the five-year period ended December 31, [removed: 2023,] [added: 2024,] 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: 2018,] [added: 2019,] in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.

[removed: ][added: ]

| | | | | | | [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] | | | | | | [removed: 12/31/2022] [added: 12/31/2023] | | | | | | [removed: 12/31/2023] [added: 12/31/2024] | | |

| Southwest Airlines Co. | | | | | | $ | 100 | | | | | $ | [removed: 118] [added: 87] | | | | | $ | [removed: 102] [added: 80] | | | | | $ | [removed: 94] [added: 63] | | | | | $ | [removed: 74] [added: 55] | | | | | $ | [removed: 65] [added: 66] | |

| NYSE ARCA Airline | | | | | | $ | 100 | | | | | $ | [removed: 123] [added: 76] | | | | | $ | [removed: 93] [added: 74] | | | | | $ | [removed: 91] [added: 48] | | | | | $ | [removed: 59] [added: 63] | | | | | $ | [removed: 77] [added: 63] | |

[added: (1)] On May 15, 2019, the Board authorized the repurchase of up to $2.0 billion of the Company’s common [removed: stock.][added: stock, of which approximately $899 million remained as of September 2024.]

| S&P 500 | | | | | | $ | 100 | | | | | $ | 118 | | | | | $ | 152 | | | | | $ | 125 | | | | | $ | 157 | | | | | $ | 197 | |

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

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

| Issuer Purchases of Equity Securities (1) | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| Period | | | | | | Total number of shares purchased | | | | | | Average price paid per share (2) | | | | | | Total number of shares purchased as part of publicly announced plans or programs | | | | | | Maximum dollar value of shares that may yet be purchased under the plans or programs | | |

| October 1, 2024 through October 31, 2024 | | | | | | 6,795,787 | | | | | | $ | — | | (3) | | | 6,795,787 | | | | | | $ | 2,250,000,000 | |

| November 1, 2024 through November 30, 2024 | | | | | | — | | | | | | $ | — | | | | | — | | | | | | $ | 2,250,000,000 | |

| December 1, 2024 through December 31, 2024 | | | | | | — | | | | | | $ | — | | | | | — | | | | | | $ | 2,250,000,000 | |

| Total | | | | | | 6,795,787 | | | | | | | | | | | | 6,795,787 | | | | | | | | |

On September 25, 2024, the Board terminated and replaced this previous share repurchase authorization with a new $2.5 billion share repurchase authorization of the Company’s common stock.

(2) Excludes immaterial amount of excise tax on share repurchases, net of issuances, payable in April 2025.

(3) Under an accelerated share repurchase program entered into by the Company with a third party financial institution in fourth quarter 2024 (the "Fourth Quarter 2024 ASR Program"), the Company paid $250 million and received an initial delivery of 6,795,787 shares during October 2024, representing an estimated 80 percent of the shares to be purchased by the Company under the Fourth Quarter 2024 ASR Program.

This share amount was based on the $29.43 closing price of the Company's common stock on October 25, 2024.

Final settlement of the Fourth Quarter 2024 ASR Program occurred in January 2025 and was based on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed in January 2025.

Upon settlement, the third party financial institution delivered 1,010,663 additional shares of the Company’s common stock to the Company.

Upon completion of the Fourth Quarter 2024 ASR Program in January 2025, the average purchase price per share for the 7,806,450 shares repurchased was $32.02.

The Company’s common stock is listed on the New York Stock Exchange ("NYSE") and is traded under the symbol "LUV." Although the Company previously suspended the payment of dividends in second quarter 2020 through September 30, 2022, pursuant to payroll funding support agreements with the U.S. Department of the Treasury, the Company reinstated and declared a quarterly cash dividend of $.18 per share on December 6, 2022, and has continued to pay quarterly dividends since the reinstatement.

| S&P 500 | | | | | | $ | 100 | | | | | $ | 131 | | | | | $ | 156 | | | | | $ | 200 | | | | | $ | 164 | | | | | $ | 207 | |

The Company has suspended share repurchase activity until further notice.

The Company has approximately $899 million remaining under its current share repurchase authorization.

| | | | December 31, [removed: 2023] [added: 2024] | | | | | | December 31, [removed: 2022] [added: 2023] | | |

| Cash and cash equivalents | | | $ | [removed: 9,288] [added: 7,509] | | | | | $ | [removed: 9,492] [added: 9,288] | |

| Short-term investments | | | [removed: 2,186] [added: 1,216] | | | | | | [removed: 2,800] [added: 2,186] | | |

| Accounts and other receivables | | | [removed: 1,154] [added: 1,110] | | | | | | [removed: 1,040] [added: 1,154] | | |

| Inventories of parts and supplies, at cost | | | [removed: 807] [added: 800] | | | | | | [removed: 790] [added: 807] | | |

| Prepaid expenses and other current assets | | | [removed: 520] [added: 639] | | | | | | [removed: 686] [added: 520] | | |

| Total current assets | | | [removed: 13,955] [added: 11,274] | | | | | | [removed: 14,808] [added: 13,955] | | |

| Flight equipment | | | [removed: 26,060] [added: 25,202] | | | | | | [removed: 23,725] [added: 26,060] | | |

| Ground property and equipment | | | [removed: 7,460] [added: 8,244] | | | | | | [removed: 6,855] [added: 7,460] | | |

| Deposits on flight equipment purchase contracts | | | [removed: 236] [added: 413] | | | | | | [removed: 376] [added: 236] | | |

| Assets constructed for others | | | [removed: 62] [added: 88] | | | | | | [removed: 28] [added: 62] | | |

| Less allowance for depreciation and amortization | | | [removed: 14,443] [added: 14,891] | | | | | | [removed: 13,642] [added: 14,443] | | |

| Operating lease right-of-use assets | | | [removed: 1,223] [added: 1,369] | | | | | | [removed: 1,394] [added: 1,223] | | |

| Other assets | | | [removed: 964] [added: 1,081] | | | | | | [removed: 855] [added: 964] | | |

| Accounts payable | | | $ | [removed: 1,862] [added: 1,818] | | | | | $ | [removed: 2,004] [added: 1,862] | |

| Accrued liabilities | | | [removed: 3,606] [added: 2,206] | | | | | | [removed: 2,043] [added: 3,606] | | |

| Current operating lease liabilities | | | [removed: 208] [added: 328] | | | | | | [removed: 225] [added: 208] | | |

| Air traffic liability | | | [removed: 6,551] [added: 6,294] | | | | | | [removed: 6,064] [added: 6,551] | | |

| Current maturities of long-term debt | | | [removed: 29] [added: 1,630] | | | | | | [removed: 42] [added: 29] | | |

| Total current liabilities | | | [removed: 12,256] [added: 12,276] | | | | | | [removed: 10,378] [added: 12,256] | | |

| Long-term debt less current maturities | | | [removed: 7,978] [added: 5,069] | | | | | | [removed: 8,046] [added: 7,978] | | |

| Air traffic liability - noncurrent | | | [removed: 1,728] [added: 1,948] | | | | | | [removed: 2,186] [added: 1,728] | | |