Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Relevant comparative operating statistics for the three months ended March 31, 2022, 2021, and 2019 are included below. The Company provides these operating statistics because they are commonly used in the airline industry and, as such, 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. The Company believes a comparison of its first quarter 2022 operating statistics to first quarter 2019 (pre-pandemic) is relevant and useful as the Company continues to recover from the pandemic. In the first three months of 2021 and 2022, most of these operating statistics were significantly impacted by the COVID-19 pandemic and decisions the Company made as a result of the pandemic. See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information.

						Three months ended March 31,
						2022						2021						2022 Change to 2021						2019			2022 Change to 2019
Revenue passengers carried (000s)						26,029						14,225						83.0		%				31,296			(16.8)		%
Enplaned passengers (000s)						32,005						17,927						78.5		%				37,813			(15.4)		%
Revenue passenger miles (RPMs) (in millions)(a)						26,483						14,875						78.0		%				30,704			(13.7)		%
Available seat miles (ASMs) (in millions)(b)						34,384						23,146						48.6		%				37,885			(9.2)		%
Load factor(c)						77.0		%				64.3		%				12.7			pts.			81.0		%	(4.0)			pts.
Average length of passenger haul (miles)						1,017						1,046						(2.8)		%				981			3.7		%
Average aircraft stage length (miles)						765						772						(0.9)		%				751			1.9		%
Trips flown						287,751						192,401						49.6		%				326,390			(11.8)		%
Seats flown (000s)(d)						44,547						29,791						49.5		%				49,473			(10.0)		%
Seats per trip(e)						154.8						154.8						—		%				151.6			2.1		%
Average passenger fare						$	158.88					$	120.36					32.0		%				$	151.61		4.8		%
Passenger revenue yield per RPM (cents)(f)						15.62						11.51						35.7		%				15.45			1.1		%
Operating revenues per ASM (cents)(g)						13.65						8.86						54.1		%				13.59			0.4		%
Passenger revenue per ASM (cents)(h)						12.03						7.40						62.6		%				12.52			(3.9)		%
Operating expenses per ASM (cents)(i)						14.09						8.00						76.1		%				12.26			14.9		%
Operating expenses per ASM, excluding fuel (cents)						11.17						5.98						86.8		%				9.58			16.6		%
Operating expenses per ASM, excluding fuel and profitsharing (cents)						11.06						5.88						88.1		%				9.35			18.3		%
Fuel costs per gallon, including fuel tax						$	2.30					$	1.63					41.1		%				$	2.05		12.2		%
Fuel costs per gallon, including fuel tax, economic						$	2.30					$	1.70					35.3		%				$	2.05		12.2		%
Fuel consumed, in gallons (millions)						436						286						52.4		%				493			(11.6)		%
Active fulltime equivalent Employees(j)						58,865						56,051						5.0		%				59,436			(1.0)		%
Aircraft at end of period(k)						722						730						(1.1)		%				753			(4.1)		%

(a) A revenue passenger mile is one paying passenger flown one mile. Also referred to as "traffic," which is a measure of demand for a given period.

(b) An available seat mile is one seat (empty or full) flown one mile. Also referred to as "capacity," which is a measure of the space available to carry passengers in a given period.

(c) Revenue passenger miles divided by available seat miles.

(d) Seats flown is calculated using total number of seats available by aircraft type multiplied by the total trips flown by the same aircraft type during a particular period.

(e) Seats per trip is calculated by dividing seats flown by trips flown.

(f) Calculated as passenger revenue divided by revenue passenger miles. Also referred to as "yield," this is the average cost paid by a paying passenger to fly one mile, which is a measure of revenue production and fares.

(g) Calculated as operating revenues divided by available seat miles. Also referred to as "operating unit revenues" or "RASM," this is a measure of operating revenue production based on the total available seat miles flown during a particular period.

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(h) Calculated as passenger revenue divided by available seat miles. Also referred to as "passenger unit revenues," this is a measure of passenger revenue production based on the total available seat miles flown during a particular period.

(i) Calculated as operating expenses divided by available seat miles. Also referred to as "unit costs", "cost per available seat mile," or "CASM" this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies.

(j) Included 8,164 Employees on Extended Emergency Time Off as of March 31, 2021. See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information.

(k) Included four Boeing 737 Next Generation aircraft in temporary storage as of March 31, 2022. Also included seven Boeing 737 MAX ("MAX") and 59 Boeing 737 Next Generation aircraft in temporary storage as of March 31, 2021.

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Financial Overview

Since late February 2020, the Company has experienced negative impacts associated with the COVID-19 pandemic; however, the Company saw steady improvement throughout much of 2021 and 2022, with intermittent periods of decelerated demand that coincided with COVID-19 variant surges. The Company's financial results in both years, on both an accounting principles generally accepted in the United States ("GAAP") and Non-GAAP basis, were significantly impacted by the pandemic and the resulting effect on demand and passenger bookings.

The Company recorded first quarter GAAP and non-GAAP results for 2022, 2021, and 2019 as noted in the following tables. The Company believes comparisons of certain financial results to 2019 continue to be relevant given the significant impacts in 2020 and 2021 resulting from the pandemic. See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.

						Three months ended March 31,
(in millions, except per share amounts)
GAAP						2022						2021						2022 Change to 2021						2019						2022 Change to 2019
Operating income (loss)						$	(151)					$	199					n.m.						$	505					n.m.
Net income (loss)						$	(278)					$	116					n.m.						$	387					n.m.
Net income (loss) per share, diluted						$	(0.47)					$	0.19					n.m.						$	0.70					n.m.
Non-GAAP
Operating income (loss)						$	(135)					$	(1,269)					(89.4)						$	505					n.m.
Net income (loss)						$	(191)					$	(1,015)					(81.2)						$	387					n.m.
Net income (loss) per share, diluted						$	(0.32)					$	(1.72)					(81.2)						$	0.70					n.m.

The Company's GAAP financial results were comparatively worse in first quarter 2022 versus first quarter 2021, primarily due to $1.2 billion in grant allocations of payroll funding support ("Payroll Support") from the United States Department of the Treasury ("Treasury") in 2021 utilized to fund a portion of salaries, wages, and benefits. See below and Note 2 to the unaudited Condensed Consolidated Financial Statements for further information. On a non-GAAP basis, the Company's Operating loss and Net loss improved significantly in first quarter 2022 versus the same prior year period due to the significant recovery in travel demand, which was aided by a reduction in COVID-19 cases and hospitalizations, a significant increase in vaccinations, and a decline in travel-related restrictions across the United States. See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures. These impacts combined resulted in a 128.8 percent increase in Operating revenues for the three months ended March 31, 2022, versus the same prior year period. Operating revenues for first quarter 2022 continued to fall below first quarter 2019 pre-pandemic levels primarily due to lower capacity and load factors in first quarter 2022; however, Operating expenses exceeded first quarter 2019 pre-pandemic levels primarily due to higher salaries, wages and benefits and fuel prices in first quarter 2022.

2022 Outlook

The following tables present current selected financial guidance for second quarter and full year 2022:

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									2Q 2022 Estimation
Operating revenue compared with 2019 (a)									Up 8% to 12%
Load factor									~85%
ASMs compared with 2019									Down ~7%
Economic fuel costs per gallon (b)(c)									$3.05 to $3.15
Fuel hedging premium expense per gallon									$0.05
Fuel hedging cash settlement gains per gallon									$0.61
ASMs per gallon (fuel efficiency)									76 to 78
CASM-X (d) compared with 2019 (e)									Up 14% to 18%
Debt repayments (millions)									~$20
Interest expense (millions)									~$90

									2022 Estimation
ASMs compared with 2019 (f)									Down ~4%
Economic fuel costs per gallon (b)(c)									$2.75 to $2.85
Fuel hedging premium expense per gallon									$0.04
Fuel hedging cash settlement gains per gallon									$0.54
CASM-X (d) compared with 2019 (e)									Up 12% to 16%
Debt repayments (millions)									~$650
Interest expense (millions)									~$360
Aircraft (g)									814
Effective tax rate (h)									24% to 26%
Capital spending (billions) (i)									~$5.0

(a) The Company believes that operating revenues compared with 2019 is a relevant measure of performance due to the significant impacts in 2020 and 2021 from the pandemic.

(b) See Note Regarding Use of Non-GAAP Financial Measures for additional information on special items. In addition, information regarding special items and economic results is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Items (also referred to as "excluding special items").

(c) Based on the Company's existing fuel derivative contracts and market prices as of April 21, 2022, second quarter, second half, and full year 2022 economic fuel costs per gallon are estimated to be in the range of $3.05 to $3.15, $2.75 to $2.85, and $2.75 to $2.85, respectively. Economic fuel cost projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate the hedge accounting impact associated with the volatility of the energy markets, the impact of COVID-19 cases on air travel demand, or the impact to its financial statements in future periods. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for projected results is not meaningful or available without unreasonable effort. See Note Regarding Use of Non-GAAP Financial Measures.

(d) Operating expenses per available seat mile, excluding fuel and oil expense, profitsharing, and special items.

(e) Projections do not reflect the potential impact of fuel and oil expense, special items, and profitsharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, especially considering the significant volatility of the fuel and oil expense line item. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.

(f) While the Company's flight schedule remains published for sale through November 5, 2022, the Company recently adjusted its published flight schedules for June through August 2022 to provide additional buffer to the operation in light of continued available staffing challenges headed into the busy summer travel season. The Company will continue to monitor staffing trends, along with booking and cancellation trends, and adjust capacity, as needed. As such, the Company's actual flown capacity may differ from currently published flight schedules or current guidance.

(g) Aircraft on property, end of period; net of 22 retirements planned in the remaining three quarters of 2022. Reflects all exercised activity as of April 28, 2022 and the assumption that the Company exercises all 12 remaining 2022 options. The delivery schedule for the Boeing 737-7 ("-7") is dependent on the Federal Aviation Administration ("FAA") issuing required certifications and approvals to Boeing and the Company. The FAA will ultimately determine the timing of the -7 certification and entry into service, and the Company therefore offers no assurances that current estimations and timelines are correct.

(h) The Company's estimated effective tax rate is impacted by the extinguishment of $164 million in principal of its 1.25% Convertible Senior Notes due 2025 (the “Convertible Notes”) for a cash payment of $230 million, which occurred in first quarter 2022. The loss on partial extinguishment of Convertible Notes is largely disallowed as a deduction for tax purposes.

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(i) Represents current contractual payments to Boeing for firm aircraft and the assumptions that the Company exercises all 12 remaining 2022 options, in addition to ~$900 million non-aircraft capital spending. Excluding any further option exercises, the Company's 2022 capital spending would be ~$4.2 billion, also including ~$900 million in non-aircraft capital spending.

COVID-19 Pandemic Impacts

As detailed in Note 2 to the unaudited Condensed Consolidated Financial Statements, in connection with the major negative impact of COVID-19 on air carriers, the Company has received significant financial assistance from Treasury in the form of Payroll Support, and this assistance had a significant impact on the Company's reported GAAP financial results in 2021. Such impact ended in third quarter 2021, and the Company's first quarter 2022 results did not reflect the benefit of this Payroll Support, and its future periods are not expected to benefit from such Payroll Support. However, future cash flows will be impacted through the portion of Payroll Support that was in the form of loans that will have to be repaid to Treasury.

During second quarter 2020, the Company introduced Voluntary Separation Program 2020 ("Voluntary Separation Program") and the Extended Emergency Time Off ("Extended ETO") program which helped closer align staffing to reduced flight schedules and enabled the Company to avoid involuntary furloughs and layoffs associated with the impacts of the pandemic. Approximately 16,000 Employees elected to participate in one of these programs. All Employees that elected to participate in the Extended ETO program have since returned or been recalled to work, or have chosen to permanently separate from the Company, and no Employees remained on Extended ETO as of March 31, 2022. The Company realized approximately $1.1 billion of full year 2021 cost savings from the Voluntary Separation Program and Extended ETO but expects no material cost savings from these programs in 2022 and beyond. See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information.

The Company continues to have a smaller workforce than it did prior to the COVID-19 pandemic. However, in addition to recalling all of the Employees that participated in Extended ETO, the Company met its 2021 hiring goals and is planning to add more than 10,000 additional Employees during 2022 as it strives to provide sufficient staffing to support its anticipated flight schedule plans for 2022 and beyond. For the three months ended March 31, 2022, the Company met its hiring goals, adding 3,300 Employees, net of attrition. The Company is making additional investments to attract and retain talent, including the decision to further raise the Company's starting hourly pay rates from $15 per hour to $17 per hour for certain of its workgroups, subject, in each case, to acceptance of such change by the applicable union. The Company also continues to evaluate staffing needs to align with planned flight activity.

In September 2021, the President of the United States issued an Executive Order establishing a vaccination requirement for employees of covered federal contractors. The federal government required that federal contractors have their workforce vaccinated (or request an accommodation) by December 8, 2021. The deadline was later extended to January 4, 2022. The Company started an active campaign to notify Employees of the need to submit proof of COVID-19 vaccination, or apply for an accommodation, by January 4, 2022. On December 3, 2021, the company announced that 93 percent of its Employees were vaccinated, or had requested an accommodation. Due to legal challenges to the vaccine mandate, the Company announced on December 20, 2021, that it is no longer imposing a deadline for compliance. However, if the vaccine mandate is revived, the Company will resume efforts to work with Employees who have not yet either submitted proof of vaccination or requested an accommodation.

Company Overview

The Company has entered into supplemental agreements with The Boeing Company ("Boeing") to increase aircraft orders and accelerate certain options with the goal of improving potential growth opportunities, restoring its network closer to pre-pandemic levels, lowering operating costs, and further modernizing its fleet with less carbon-intensive aircraft. See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information. The Company continues to expect that more than half of the MAX aircraft in its firm order book will replace a significant amount of its 446 Boeing 737-700 ("-700") aircraft over the next 10 to 15 years to support the modernization of the Company's fleet, a key component of its environmental sustainability efforts.

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The Company ended first quarter 2022 with 722 Boeing 737 aircraft, compared with the Company's previous guidance of 725 aircraft, due to three scheduled aircraft deliveries planned in first quarter 2022 shifting to later in 2022. As expected, the Company retired five owned -700 aircraft, and returned one leased -700 aircraft during first quarter 2022. As of March 31, 2022, four -700 aircraft remained in temporary storage due to first quarter and second quarter 2022 capacity remaining below respective 2019 levels. The Company continues to expect to retire a total of 28 -700 aircraft in 2022.

The Company has published its flight schedule through November 5, 2022. During 2022, the Company is focusing on restoring its network, primarily in cities with a very strong Customer base by adding city pair frequencies and connecting new service with existing points-of-strength to increase Customer depth.

The COVID-19 pandemic has had a particularly negative impact on international operations and led to the Company's suspension of international operations at the beginning of the pandemic. The Company has since resumed service to all 14 of its international destinations.

On March 24, 2022, the Company announced a new fare product, Wanna Get Away Plus™, expected to be available to Customers in second quarter 2022. Wanna Get Away Plus is expected to provide Customers with more flexibility, choice, and rewards for a modest buy-up from the Company's Wanna Get Away® fare product. In addition to all of the usual day of travel benefits and booking flexibility offered to Customers across all of the Company's fares, Wanna Get Away Plus provides additional benefits as compared to the Wanna Get Away fare product, including:

• Transferable flight credit(s), a new benefit that generally enables Customers to make a one-time transfer of eligible unused flight credit to a new traveler for future use;

• More flexibility through same-day confirmed change/same-day standby; and

• More earning power in the Company's Rapid Rewards® loyalty program, with 8X points awarded on flights instead of the 6X points awarded on Wanna Get Away fares.

On February 8, 2022, the Company reached a tentative collective-bargaining agreement with the Transport Workers Union Local 550 ("TWU 550"), which represents the Company's approximately 400 Employees in the Dispatchers workgroup. However, during March 2022, the TWU 550 membership voted not to ratify the agreement. The Company will continue to engage in discussions on a new agreement with TWU 550.

On March 28, 2022, the Company reached a tentative collective-bargaining agreement with the International Association of Machinists and Aerospace Workers, AFL-CIO ("IAM"), which represents the Company's approximately 6,000 Customer Service Agents, Customer Representatives, and Source of Support Representatives. The ratification vote is scheduled to conclude on May 6, 2022. If the tentative agreement is ratified, it will become amendable May 6, 2026.

As part of its commitment to corporate sustainability, on April 22, 2022, the Company published its 2021 One Report describing the Company's sustainability strategies, which include the Company’s fuel conservation and emissions reduction initiatives and other efforts to reduce greenhouse gas emissions and address other environmental matters such as energy and water conservation, waste minimization, and recycling. The Company also published its first ever Diversity, Equity, and Inclusion ("DEI") Report. A companion piece to the One Report, the DEI Report takes a deeper dive into the Company's DEI goals, commitments, and initiatives and highlights the path forward. Information contained in the Southwest One Report is not incorporated by reference into, and does not constitute a part of, this Form 10-Q. While the Company believes that the disclosures contained in the Southwest One Report and other voluntary disclosures regarding environmental, social, and governance (“ESG”) matters are responsive to various areas of investor interest, the Company believes that these disclosures do not currently address matters that are material in the near term to the Company’s operations, strategy, financial condition, or financial results, although this view may change in the future based on new information that could materially alter the estimates, assumptions, or timelines used to create these disclosures. Given the estimates,

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assumptions, and timelines used to create the Southwest One Report and other voluntary disclosures, the materiality of these disclosures is inherently difficult to assess in advance.

Material Changes in Results of Operations

Comparison of three months ended March 31, 2022 and March 31, 2021

Operating Revenues

Total operating revenues for first quarter 2022 increased by $2.6 billion, or 128.8 percent, year-over-year, to $4.7 billion. First quarter 2022 operating revenues per ASM (RASM) were 13.65 cents, an increase of 54.1 percent, compared with first quarter 2021. The dollar increase was driven primarily by the improvements in leisure Passenger demand and bookings in first quarter 2022 versus the severe impacts to demand and bookings from the COVID-19 pandemic in first quarter 2021. In addition, demand strengthened considerably throughout the quarter, and the Company's operating revenues for March 2022 were strong and above March 2019 levels, which represented the first monthly operating revenue increase relative to respective 2019 levels since the pandemic began. For first quarter 2022, the year-over-year RASM increase was primarily driven by a 35.7 percent improvement in yield and an increase in Load factor of 12.7 points.

Passenger revenues for first quarter 2022 increased by $2.4 billion, or 141.5 percent, year-over-year. On a unit basis, Passenger revenues increased 35.7 percent, year-over-year. The year-over-year increase in Passenger revenues on both a dollar and unit basis was primarily due to easing of negative impacts associated with the COVID-19 pandemic, which resulted in improvements in Passenger demand and bookings, the majority of which were for leisure oriented travel. These increases were achieved despite $430 million of headwinds experienced during first quarter 2022. Approximately $380 million of the operating revenue headwinds related to softness in bookings and increased passenger cancellations in January and February 2022 associated with the Omicron variant, which is higher than the Company's previous estimate of $330 million. In addition, the Company's flight cancellations in January 2022 due to available staffing challenges—exacerbated by weather—resulted in a $50 million negative impact to operating revenues, as previously estimated. The Company's first quarter 2022 revenue performance from its loyalty program was strong and included incremental revenue from its new co-brand credit card agreement, as expected. First quarter 2022 managed business revenues decreased 55 percent, compared with first quarter 2019. March 2022 managed business revenues decreased 36 percent compared with March 2019, outperforming the Company's previous guidance of down approximately 40 percent, driven by an increase in business passengers and yields and boosted by its participation in Global Distribution System platforms. The Company currently expects April 2022 managed business revenues to decrease approximately 30 percent, compared with April 2019, and currently expects continued sequential improvement in May and June 2022, compared with their respective 2019 levels

Other revenues for first quarter 2022 increased by $220 million, or 74.1 percent, compared with first quarter 2021. The increase was primarily due to an increase in income from business partners, including Chase Bank USA, N.A. ("Chase"). The improving economy throughout 2021 and rebound in travel demand resulted in higher spend on the Company's co-branded credit card, as well as additional revenues earned through the Company's rental car and hotel partners. Additionally, the Company received incremental revenue from its new co-brand credit card agreement secured in December 2021.

Operating Expenses

Operating expenses for first quarter 2022 increased by $3.0 billion, or 161.5 percent, compared with first quarter 2021, while capacity increased 48.6 percent over the same prior year period. Approximately 50 percent of the operating expense increase was due to $1.2 billion in Payroll Support allocated to offset a portion of salaries, wages and benefits in first quarter 2021 compared with no support received in first quarter 2022, 20 percent of the increase was due to higher Salaries, wages, and benefits, and 20 percent of the increase was due to higher Fuel and oil expense. Historically, except for changes in the price of fuel, changes in Operating expenses for airlines have been

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largely driven by changes in capacity, or ASMs. The following table presents the Company's Operating expenses per ASM for the first quarter of 2022 and 2021, followed by explanations of these changes on a dollar basis. Unless otherwise specified, changes on a per ASM basis were driven by changes in capacity, which increased with the improvement of travel demand, causing the Company's fixed costs to be spread over significantly more ASMs.

			Three months ended March 31,												Per ASM change						Percent change
(in cents, except for percentages)			2022						2021
Salaries, wages, and benefits			6.48		¢				6.79		¢				(0.31)		¢				(4.6)		%
Payroll support and voluntary Employee programs, net			—						(6.25)						6.25						(100.0)
Fuel and oil			2.92						2.02						0.90						44.6
Maintenance materials and repairs			0.61						0.75						(0.14)						(18.7)
Landing fees and airport rentals			1.01						1.35						(0.34)						(25.2)
Depreciation and amortization			0.94						1.35						(0.41)						(30.4)
Other operating expenses			2.13						1.99						0.14						7.0
Total			14.09		¢				8.00		¢				6.09		¢				76.1		%

Based on current cost trends, the Company expects second quarter 2022 operating expenses per ASM, excluding fuel and oil expense, profitsharing, and special items to increase in the range of 14 percent to 18 percent compared with second quarter 2019, due to labor rate inflation across all workgroups; inflation in airport costs; and headwinds from operating at suboptimal productivity levels. The Company continues to experience higher unit cost inflation as it continues to navigate the pandemic recovery and capacity levels remain muted due to available staffing challenges. The Company's second quarter 2022 published flight schedules include increased short-haul trips in business markets to support the anticipated increase in business travel, relative to its first quarter 2022 flight schedules. Compared with respective 2019 levels, the increase in short-haul trips is expected to drive a sequential 5-point decrease in average stage length from first quarter 2022 to second quarter 2022, adding further pressure to second quarter 2022 operating expenses per ASM, excluding fuel and oil expense, profitsharing, and special items. Based on current second half 2022 capacity plans, the Company currently expects operating expenses per ASM, excluding fuel and oil expense, profitsharing, and special items trends to ease sequentially from first half 2022 to second half 2022, but remain elevated above its longer-term expected run rate as the Company scales and better optimizes its network and operations.

Operating expenses per ASM for first quarter 2022 increased by 76.1 percent, compared with first quarter 2021, primarily due to first quarter 2021 including Payroll Support from the Consolidated Appropriations Act, 2021. Operating expenses per ASM for first quarter 2022, excluding Fuel and oil expense, profitsharing, and special items (a non-GAAP financial measure), decreased 9.2 percent, compared with first quarter 2021 primarily due to a significant increase in capacity. See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.

Salaries, wages, and benefits expense for first quarter 2022 increased by $658 million, or 41.9 percent, compared with first quarter 2021. On a per ASM basis, first quarter 2022 Salaries, wages, and benefits expense decreased 4.6 percent, compared with first quarter 2021. On a dollar basis, the increase was primarily driven by higher salaries and wages due to significantly more trips, step/pay rate increases for certain workgroups, and $127 million of additional salaries, wages, and benefits expense as a result of incentive pay offered to the Company's Operations Employees through early February 2022 in an effort to address available staffing challenges related to the Omicron variant.

Payroll support and voluntary Employee programs, net (a reduction to expense) had no amounts for first quarter 2022. First quarter 2021 consisted of the following items:

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• $1.2 billion of Payroll Support proceeds allocated (credit to expense);

• $116 million credit to expense associated with the Employee Retention Tax Credit for continuing to pay Employees' salaries during the time they were not working, as allowed under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), and subsequent legislation;

• A $115 million net reduction in the Extended ETO liability relating to certain Employees being recalled prior to their previously elected return dates.

See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information.

Fuel and oil expense for first quarter 2022 increased by $535 million, or 114.1 percent, compared with first quarter 2021. On a per ASM basis, first quarter 2022 Fuel and oil expense increased 44.6 percent. On a dollar basis, approximately 55 percent of the increase was attributable to an increase in jet fuel prices, and the remainder of the increase was due to an increase in fuel gallons consumed. The Company's first quarter 2022 average economic jet fuel price of $2.30 per gallon is net of approximately $229 million in gains from hedging activities. On a per ASM basis, the majority of the change was due to higher jet fuel prices. The following table provides more information on the Company's economic fuel cost per gallon, including the impact of fuel hedging premium expense and fuel derivative contract settlements:

			Three months ended March 31,
			2022						2021
Economic fuel costs per gallon			$	2.30					$	1.70
Fuel hedging premium expense (in millions)			$	26					$	25
Fuel hedging premium expense per gallon			$	0.06					$	0.09
Fuel hedging cash settlement gain per gallon			$	0.52					$	0.01

See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.

The Company's first quarter 2022 available seat miles per gallon ("fuel efficiency") declined 2.6 percent, year-over-year, due to the Company's return to service of more of its least fuel-efficient aircraft, the -700. When compared with first quarter 2019, fuel efficiency improved 2.6 percent in first quarter 2022 due to more 737 MAX aircraft, the Company's most fuel-efficient aircraft, in the fleet. The MAX remains critical to the Company's efforts to modernize its fleet, reduce carbon emissions intensity, and achieve its near-term environmental sustainability goals. The Company expects second quarter 2022 fuel efficiency to be in the range of 76 to 78 ASMs per gallon, on a nominal basis.

The Company's fuel hedge is providing excellent protection against rising energy prices and significantly offset the market price increase in jet fuel in first quarter 2022. The Company's current fuel derivative contracts contain a combination of instruments based in West Texas Intermediate and Brent crude oil; however, the economic fuel price per gallon sensitivities provided in the table below assume the relationship between Brent crude oil and refined products based on market prices as of April 21, 2022.

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			Estimated economic fuel price per gallon, including taxes and fuel hedging premiums
Average Brent Crude Oil price per barrel			2Q 2022 (b)			2H 2022 (b)
$80			$2.50 - $2.60			$2.40 - $2.50
$90			$2.70 - $2.80			$2.55 - $2.65
Current Market (a)			$3.05 - $3.15			$2.75 - $2.85
$110			$3.10 - $3.20			$2.95 - $3.05
$120			$3.25 - $3.35			$3.15 - $3.25
$130			$3.45 - $3.55			$3.45 - $3.55
Fair market value			$295 million			$468 million
Estimated premium costs			$26 million			$26 million

(a) Brent crude oil average market prices as of April 21, 2022, were approximately $107 and $102 per barrel for second quarter 2022 and second half 2022, respectively.

(b) Based on the Company's existing fuel derivative contracts and market prices as of April 21, 2022, second quarter, second half, and full year 2022 economic fuel costs per gallon are estimated to be in the range of $3.05 to $3.15, $2.75 to $2.85, and $2.75 to $2.85, respectively. Economic fuel cost projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate the hedge accounting impact associated with the volatility of the energy markets, the impact of COVID-19 cases on air travel demand, or the impact to its financial statements in future periods. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for projected results is not meaningful or available without unreasonable effort. See Note Regarding Use of Non-GAAP Financial Measures.

In addition, the Company is providing its maximum percent of estimated fuel consumption covered by fuel derivative contracts in the following table:

Period			Maximum fuel hedged percentage (c)
2022			63% (a)
2023			37% (b)
2024			17% (b)

(a) Based on the Company's available seat mile plans for full year 2022. The Company is currently 63 percent hedged for second quarter 2022 and 60 percent hedged for second half 2022.

(b) Due to uncertainty regarding available seat mile plans in future years, the Company believes that providing the maximum percent of fuel consumption covered by derivative contracts in 2023 and 2024 relative to 2019 fuel gallons consumed is a more relevant measure for future coverage.

(c) The Company's maximum fuel hedged percentage is calculated using the maximum number of gallons that are covered by derivative contracts divided by the Company's estimate of total fuel gallons to be consumed for each respective period. The Company's maximum number of gallons that are covered by derivative contracts may be at different strike prices and at strike prices materially higher than the current market prices. The volume of gallons covered by derivative contracts that ultimately get exercised in any given period may vary significantly from the volumes used to calculate the Company's maximum fuel hedged percentages, as market prices and the Company's fuel consumption fluctuate.

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As a result of applying hedge accounting in prior periods, the Company has amounts in Accumulated other comprehensive income ("AOCI") that will be recognized in earnings in future periods when the underlying fuel derivative contracts settle. The following table displays the Company's estimated fair value of remaining fuel derivative contracts (not considering the impact of the cash collateral provided to or received from counterparties—see Note 4 to the unaudited Condensed Consolidated Financial Statements for further information), as well as the deferred amounts in AOCI at March 31, 2022, and the expected future periods in which these items are expected to settle and/or be recognized in earnings (in millions):

Year						Fair value of fuel derivative contracts at March 31, 2022						Amount of gains deferred in AOCI at March 31, 2022 (net of tax)
Remainder of 2022						$	682					$	494
2023						461						307
2024						130						72
Total						$	1,273					$	873

Maintenance materials and repairs expense for first quarter 2022 increased by $38 million, or 22.0 percent, compared with first quarter 2021. On a per ASM basis, Maintenance materials and repairs expense decreased 18.7 percent, compared with first quarter 2021. On a dollar basis, approximately 60 percent of the increase was due to the timing of regular airframe maintenance checks as some costs had previously been deferred while a portion of the fleet was placed into temporary storage during the COVID-19 pandemic. There were multiple other increases on a dollar basis, primarily related to an increase in various repairs as a result of deferring costs and reduced operations in first quarter 2021 due to the COVID-19 pandemic. These increases were partially offset by a decrease in engines and components expense due to the "power-by-the-hour" contract for the -700 engines expiring at the end of 2021, in which expense was incurred based primarily upon engine hours flown. At January 1, 2022, a time and materials contract commenced, pursuant to which -700 engine expense is based on actual repairs.

Landing fees and airport rentals expense for first quarter 2022 increased by $33 million, or 10.5 percent, compared with first quarter 2021. On a per ASM basis, Landing fees and airport rentals expense decreased 25.2 percent, compared with first quarter 2021. On a dollar basis, approximately 75 percent of the increase was due to an increase in landing fees from the increased number of trips flown.

Depreciation and amortization expense for first quarter 2022 increased by $12 million, or 3.8 percent, compared with first quarter 2021. On a per ASM basis, Depreciation and amortization expense decreased by 30.4 percent, compared with first quarter 2021. On a dollar basis, the increase was primarily associated with higher depreciation expense associated with owned aircraft and engines, including the 28 -700s planned for retirement in 2022.

Other operating expenses for first quarter 2022 increased by $268 million, or 57.9 percent, compared with first quarter 2021. Included within this line item was aircraft rentals expense in the amounts of $48 million and $51 million for the three-month periods ended March 31, 2022 and 2021, respectively. On a per ASM basis, Other operating expenses increased 7.0 percent, compared with first quarter 2021. On a dollar basis, 25 percent of the increase was due to higher revenue related expenses (including credit card processing charges) and 15 percent of the increase was due to higher insurance and taxes. The majority of the remainder was due to various flight-driven expenses.

Other

Other expenses (income) include interest expense, capitalized interest, interest income, and other gains and losses.

Interest expense for first quarter 2022 decreased by $21 million, or 18.4 percent, compared with first quarter 2021, primarily due to elimination of the debt discount due to the adoption of ASU 2020-06. See Note 3 to the unaudited Condensed Consolidated Financial Statements for further information.

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Capitalized interest for first quarter 2022 decreased by $2 million, or 18.2 percent, compared with first quarter 2021, primarily due to several large technology and facilities projects that were completed and placed into service since first quarter 2021.

Interest income for first quarter 2022 increased by $1 million, or 50.0 percent, compared with first quarter 2021, primarily due to higher interest rates.

The following table displays the components of Other (gains) losses, net, for the three months ended March 31, 2022 and 2021:

			Three months ended March 31,
(in millions)			2022						2021
Mark-to-market impact from fuel contracts settling in current and future periods			$	34					$	1
Premium cost of fuel contracts not designated as hedges			—						11
Unrealized mark-to-market adjustment on available for sale securities			5						—
Mark-to-market impact on deferred compensation plan investments			33						—
Correction on investment gains related to prior periods			—						(60)
Loss on partial extinguishment of convertible and unsecured notes			72						—
			$	144					$	(48)

Income Taxes

The Company's effective tax rate was approximately 26.1 percent in first quarter 2022, compared with 20.6 percent in first quarter 2021. The higher tax rate for first quarter 2022 was primarily due to losses on the Company's convertible debt repurchases, which are largely disallowed as a deduction for tax purposes. The Company currently estimates its annual 2022 effective tax rate to be approximately 24 percent to 26 percent.

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Reconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding special items) (unaudited)

(in millions, except per share amounts and per ASM amounts)

			Three months ended March 31,												Percent
			2022						2021						Change
Fuel and oil expense, unhedged			$	1,207					$	464
Add: Premium cost of fuel contracts designated as hedges			26						14
Deduct: Fuel hedge gains included in Fuel and oil expense, net			(229)						(9)
Fuel and oil expense, as reported			$	1,004					$	469
Add: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (a)			—						8
Add: Premium cost of fuel contracts not designated as hedges			—						11
Fuel and oil expense, excluding special items (economic)			$	1,004					$	488					105.7
Total operating expenses, net, as reported			$	4,845					$	1,853
Add: Payroll support and voluntary Employee programs, net			—						1,448
Add: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (a)			—						8
Add: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI (a)			—						1
Add: Premium cost of fuel contracts not designated as hedges			—						11
Deduct: Impairment of long-lived assets			(16)						$	—
Total operating expenses, excluding special items			$	4,829					$	3,321					45.4
Deduct: Fuel and oil expense, excluding special items (economic)			(1,004)						(488)
Operating expenses, excluding Fuel and oil expense and special items			$	3,825					$	2,833					35.0
Deduct: Profitsharing expense			(37)						(24)
Operating expenses, excluding Fuel and oil expense, special items, and profitsharing			$	3,788					$	2,809					34.9
Operating income (loss), as reported			$	(151)					$	199
Deduct: Payroll support and voluntary Employee programs, net			—						(1,448)
Deduct: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (a)			—						(8)
Deduct: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI (a)			—						(1)
Deduct: Premium cost of fuel contracts not designated as hedges			—						(11)
Add: Impairment of long-lived assets			16						—
Operating loss, excluding special items			$	(135)					$	(1,269)					(89.4)
Other (gains) losses, net, as reported			$	144					$	(48)
Deduct: Mark-to-market impact from fuel contracts settling in current and future periods (a)			(34)						(1)
Deduct: Premium cost of fuel contracts not designated as hedges			—						(11)
Deduct: Unrealized mark-to-market adjustment on available for sale investments			(5)						—
Deduct: Loss on partial extinguishment of convertible and unsecured notes			(72)						—
Other (gains) losses, net, excluding special items			$	33					$	(60)					n.m.
Income (loss) before income taxes, as reported			$	(376)					$	146
Deduct: Payroll support and voluntary Employee programs, net			—						(1,448)
Deduct: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (a)			—						(8)
Deduct: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI (a)			—						(1)
Add: Mark-to-market impact from fuel contracts settling in current and future periods (a)			34						1
Add: Impairment of long-lived assets			16						—
Add: Unrealized mark-to-market adjustment on available for sale investments			5						—

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			Three months ended March 31,												Percent
			2022						2021						Change
Add: Loss on partial extinguishment of convertible and unsecured notes			72						—
Loss before income taxes, excluding special items			$	(249)					$	(1,310)					(81.0)
Provision (benefit) for income taxes, as reported			$	(98)					$	30
Add (Deduct): Net income (loss) tax impact of fuel and special items (b)			40						(325)
Benefit for income taxes, net, excluding special items			$	(58)					$	(295)					(80.3)
Net income (loss), as reported			$	(278)					$	116
Deduct: Payroll support and voluntary Employee programs, net			—						(1,448)
Deduct: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (a)			—						(8)
Deduct: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI (a)			—						(1)
Add: Mark-to-market impact from fuel contracts settling in current and future periods (a)			34						1
Add: Loss on partial extinguishment of convertible and unsecured notes			72						—
Add: Impairment of long-lived assets			16						—
Add: Unrealized mark-to-market adjustment on available for sale investments			5						—
Add (Deduct): Net income (loss) tax impact of special items (b)			(40)						325
Net loss, excluding special items			$	(191)					$	(1,015)					(81.2)
Net income (loss) per share, diluted, as reported			$	(0.47)					$	0.19
Add (Deduct): Impact of special items			0.16						(2.38)
Add (Deduct): Net impact of net income (loss) above from fuel contracts divided by dilutive shares			0.06						(0.01)
Add (Deduct): Net income (loss) tax impact of special items (b)			(0.07)						0.53
Deduct: GAAP to Non-GAAP diluted weighted average shares difference (c)			—						(0.05)
Net loss per share, diluted, excluding special items			$	(0.32)					$	(1.72)					(81.4)
Operating expenses per ASM (cents)			14.09		¢				8.00		¢
Add (Deduct): Impact of special items			(0.04)						6.25
Deduct: Fuel and oil expense divided by ASMs			(2.92)						(2.02)
Deduct: Profitsharing expense divided by ASMs			(0.11)						(0.10)
Operating expenses per ASM, excluding Fuel and oil expense, profitsharing, and special items (cents)			11.02		¢				12.13		¢				(9.2)

(a) See Note 4 to the unaudited Condensed Consolidated Financial Statements for further information.

(b) Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item.

(c) Adjustment related to GAAP and Non-GAAP diluted weighted average shares difference, due to the Company being in a Net income position on a GAAP basis versus a Net loss position on a Non-GAAP basis for the quarter ended March 31, 2021. See Note 7 to the unaudited Condensed Consolidated Financial Statements for further information.

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Note Regarding Use of Non-GAAP Financial Measures

The Company's unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP. These GAAP financial statements may include (i) unrealized noncash adjustments and reclassifications, which can be significant, as a result of accounting requirements and elections made under accounting pronouncements relating to derivative instruments and hedging and (ii) other charges and benefits the Company believes are unusual and/or infrequent in nature and thus may make comparisons to its prior or future performance difficult.

As a result, the Company also provides financial information in this filing that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. The Company provides supplemental non-GAAP financial information (also referred to as "excluding special items"), including results that it refers to as "economic," which the Company's management utilizes to evaluate its ongoing financial performance and the Company believes provides additional insight to investors as supplemental information to its GAAP results. The non-GAAP measures provided that relate to the Company’s performance on an economic fuel cost basis include Fuel and oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing; Operating loss, non-GAAP; Other (gains) losses, net, non-GAAP; Loss before income taxes, non-GAAP; Benefit for income taxes, net, non-GAAP; Net loss, non-GAAP; Net loss per share, diluted, non-GAAP; and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents). The Company's economic Fuel and oil expense results differ from GAAP results in that they only include the actual cash settlements from fuel hedge contracts - all reflected within Fuel and oil expense in the period of settlement. Thus, Fuel and oil expense on an economic basis has historically been utilized by the Company, as well as some of the other airlines that utilize fuel hedging, as it reflects the Company’s actual net cash outlays for fuel during the applicable period, inclusive of settled fuel derivative contracts. Any net premium costs paid related to option contracts that are designated as hedges are reflected as a component of Fuel and oil expense, for both GAAP and non-GAAP (including economic) purposes in the period of contract settlement. The Company believes these economic results provide further insight into the impact of the Company's fuel hedges on its operating performance and liquidity since they exclude any unrealized, noncash adjustments and reclassifications that are recorded in GAAP results in accordance with accounting guidance relating to derivative instruments, and they reflect all cash settlements related to fuel derivative contracts within Fuel and oil expense. This enables the Company's management, as well as investors and analysts, to consistently assess the Company's operating performance on a year-over-year or quarter-over-quarter basis after considering all efforts in place to manage fuel expense. However, because these measures are not determined in accordance with GAAP, such measures are susceptible to varying calculations, and not all companies calculate the measures in the same manner. As a result, the aforementioned measures, as presented, may not be directly comparable to similarly titled measures presented by other companies.

Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Note 4 to the unaudited Condensed Consolidated Financial Statements.

The Company’s GAAP results in the applicable periods may include other charges or benefits that are also deemed "special items," that the Company believes make its results difficult to compare to prior periods, anticipated future periods, or industry trends. Financial measures identified as non-GAAP (or as excluding special items) have been adjusted to exclude special items. For the periods presented, in addition to the items discussed above, special items include:

1.Proceeds related to the Payroll Support programs, which were used to pay a portion of Employee salaries, wages, and benefits;

2.Charges and adjustments to previously accrued amounts related to the Company's extended leave programs;

3.Adjustments for prior period losses reclassified from AOCI associated with forward-starting interest rate swap agreements that were terminated in prior periods related to 12 Boeing 737-8 ("-8") aircraft leases;

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4.Noncash impairment charges, primarily associated with adjustments to the salvage values for previously retired airframes;

5.Unrealized mark-to-market adjustment associated with certain available for sale investments; and

6.Losses associated with the partial extinguishment of the Company's Convertible Notes and early prepayment of debt.

Because management believes special items can distort the trends associated with the Company’s ongoing performance as an airline, the Company believes that evaluation of its financial performance can be enhanced by a supplemental presentation of results that exclude the impact of special items in order to enhance consistency and comparativeness with results in prior periods that do not include such items and as a basis for evaluating operating results in future periods. The following measures are often provided, excluding special items, and utilized by the Company’s management, analysts, and investors to enhance comparability of year-over-year results, as well as to industry trends: Fuel and oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing; Operating loss, non-GAAP; Other (gains) losses, net, non-GAAP; Loss before income taxes, non-GAAP; Benefit for income taxes, net, non-GAAP; Net loss, non-GAAP; Net loss per share, diluted, non-GAAP; and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents).

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Liquidity and Capital Resources

The enormous impact of the COVID-19 pandemic on the U.S. travel industry created an urgent liquidity crisis for the entire airline industry, including the Company. However, due to the Company's pre-pandemic low balance sheet leverage, large base of unencumbered assets, and investment-grade credit ratings, the Company was able to quickly access additional liquidity during 2020, as Customer cancellations and ticket refunds spiked and sales and revenues dropped while the Company continued to experience significant fixed operating expenses. See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information regarding the impact of the COVID-19 pandemic and assistance obtained under Payroll Support programs.

Net cash provided by operating activities was $1.1 billion for the three months ended March 31, 2022, compared with $645 million provided by operating activities in the same prior year period. Operating cash inflows are historically primarily derived from providing air transportation to Customers. The vast majority of tickets are purchased prior to the day on which travel is provided and, in some cases, several months before the anticipated travel date. Operating cash outflows are related to the recurring expenses of airline operations. The operating cash flows for the three months ended March 31, 2022 included an $885 million increase in Air traffic liability driven by higher ticket sales related to an increase in travel demand, and included a $385 million increase in cash collateral received from derivative counterparties due to an increase in the fuel hedge portfolio, driven by increases in the forward curve year-to-date. The operating cash flows for the three months ended March 31, 2021, included $1.2 billion in Payroll Support grant proceeds received, and were also driven by an increase in Air Traffic Liability of $599 million as a result of increased ticket sales from the increase in travel demand. These increases were partially offset by amounts paid out under the Company's Voluntary Separation Program and Extended ETO plans during the three months ended March 31, 2021, which totaled approximately $188 million. Net cash provided by operating activities is primarily used to finance capital expenditures, repay debt, and provide working capital. Historically, the Company has also used net cash provided by operating activities to fund stock repurchases and pay dividends; however, these Shareholder return activities have been suspended due to restrictions associated with Payroll Support. See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information

Net cash used in investing activities totaled $139 million during the three months ended March 31, 2022, compared with $201 million used in investing activities in the same prior year period. Investing activities in both years included Capital expenditures, and changes in the balance of the Company's short-term and noncurrent investments. During the three months ended March 31, 2022, Capital expenditures were $510 million, compared with $95 million in the same prior year period. Capital expenditures increased, year-over-year, largely due to an increase in progress payments made on future aircraft deliveries during the three months ended March 31, 2022, compared to the same prior year period, when progress payments were not made due to delivery credits provided by Boeing to the Company resulting from the settlement of 2020 estimated damages relating to the FAA grounding of the MAX aircraft.

The Company continues to estimate its 2022 capital spending to be approximately $5.0 billion, which assumes the exercise of its 12 remaining 2022 Boeing aircraft order book options and remains unchanged despite the shift of -7 firm orders to -8 firm orders as the Company contemplated various scenarios in its 2022 plan. The Company’s 2022 capital spending guidance continues to include approximately $900 million in non-aircraft capital spending.

Net cash used in financing activities was $314 million during the three months ended March 31, 2022, compared with $464 million provided by financing activities for the same prior year period. The Company repaid $323 million in debt and finance lease obligations, including the extinguishment of $164 million in principal of its Convertible Notes for a cash payment of $230 million during the three months ended March 31, 2022, and is scheduled to repay approximately $21 million in debt and finance lease obligations during second quarter 2022. During the three months ended March 31, 2021, the Company borrowed $488 million of loan proceeds under the PSP2 Payroll Support Program. See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information. The Company repaid $67 million in debt and finance lease obligations during the three months ended March 31, 2021.

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The Company is a "well-known seasoned issuer" and currently has an effective shelf registration statement registering an indeterminate amount of debt and equity securities for future sales. The Company currently intends to use the proceeds from any future securities sales off this shelf registration statement for general corporate purposes.

The Company has access to $1.0 billion under its amended and restated revolving credit facility (the "Amended A&R Credit Agreement"). The Amended A&R Credit Agreement has an accordion feature that would allow the Company, subject to, among other things, the procurement of incremental commitments, to increase the size of the facility to $1.5 billion. Interest on the facility is based on the Company's credit ratings at the time of borrowing. At the Company's current ratings, the interest cost would be the London Interbank Offered Rate ("LIBOR") plus a spread of 200 basis points. The facility contains a financial covenant to maintain total liquidity, as defined in the Amended A&R Credit Agreement, of $1.5 billion at all times under the Amended A&R Credit Agreement; the Company was compliant with this requirement as of March 31, 2022. There were no amounts outstanding under the Amended A&R Credit Agreement as of March 31, 2022.

Although not the case at March 31, 2022 due to the Company's significant financing activities throughout the early stages of the pandemic, the Company has historically carried a working capital deficit, in which its current liabilities exceed its current assets. This is common within the airline industry and is primarily due to the nature of the Air traffic liability account, which is related to advance ticket sales, unused funds available to Customers, and loyalty deferred revenue, which are performance obligations for future Customer flights, do not require future settlement in cash, and are mostly nonrefundable. See Note 6 to the unaudited Condensed Consolidated Financial Statements for further information.

The Company believes it has various options available to meet its capital and operating commitments, including unrestricted cash and short-term investments of $15.7 billion as of March 31, 2022, and anticipated future internally generated funds from operations. However, the COVID-19 pandemic continues to evolve and could have a material adverse impact on the Company's ability to meet its capital and operating commitments. See Note 2 to the unaudited Condensed Consolidated Financial Statements for further information on the impacts of the COVID-19.

As of March 31, 2022, the Company's total firm and option order book was 632 aircraft. See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information.

The following table details information on the aircraft in the Company's fleet as of March 31, 2022:

												Average Age (Yrs)						Number of Aircraft						Number Owned						Number Leased
Type						Seats
737-700						143						17						446			(a)			364						82
737-800						175						7						207						190						17
737 -8						175						2						69						40						29
Totals												13						722						594						128

(a) Included 4 Boeing 737 Next Generation aircraft in temporary storage as of March 31, 2022.

Critical Accounting Policies and Estimates

For information regarding the Company’s Critical Accounting Policies and Estimates, see the "Critical Accounting Policies and Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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Cautionary Statement Regarding Forward-Looking Statements

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on, and include statements about, the Company's estimates, expectations, beliefs, intentions, and strategies for the future, and the assumptions underlying these forward-looking statements. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, statements related to the following:

• the Company’s financial guidance for second quarter and full year 2022 and factors that could impact actual results;

• the Company’s plans related to capacity decisions;

• the Company’s fleet plans and expectations, including underlying assumptions and dependencies, and the Company’s related goals with respect to improvement of potential growth opportunities, restoration of its network, reduction of operating costs, and further fleet modernization with less carbon-intensive aircraft;

• the Company’s hiring plans and expectations;

• the Company’s expectations related to its new fare product, Wanna Get Away Plus™;

• the Company's expectations with respect to Customer demand, including with respect to business travel;

• the Company’s expectations related to fuel efficiency;

• the Company’s plans, expectations, and estimates related to fuel costs, the Company’s related management of risk associated with changing jet fuel prices, and the Company’s assumptions underlying its fuel-related expectations and estimates;

• the Company’s expectations with respect to capital expenditures, in particular with respect to aircraft capital expenditures;

• the Company’s plans for the repayment of debt;

• the Company’s expectations with respect to its ability to meet its ongoing capital and operating commitments, including underlying assumptions and factors that could impact this ability;

• the Company's assessment of market risks; and

• the Company's plans and expectations related to legal and regulatory proceedings.

While management believes these forward-looking statements are reasonable as and when made, forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed in or indicated by the Company's forward-looking statements or from historical experience or the Company's present expectations. Factors that could cause these differences include, among others:

• any negative developments related to the COVID-19 pandemic, including, for example, with respect to (i) the duration, spread, severity, or any recurrence of the COVID-19 pandemic or any new variant strains of the underlying virus; (ii) the effectiveness, availability, and usage of COVID-19 vaccines; (iii) the impact of government mandates, directives, orders, regulations, and other governmental actions related to COVID-19 on the Company’s business plans and its ability to retain key Employees; (iv) the extent of the impact of COVID-19 on overall demand for air travel and the Company's related business plans and decisions; and (v) the impact of the COVID-19 pandemic on the Company's access to capital;

• the impact of labor and hiring matters on the Company’s business decisions, plans, and strategies;

• the impact of fuel price changes, fuel price volatility, volatility of commodities used by the Company for hedging jet fuel, and any changes to the Company’s fuel hedging strategies and positions on the Company's business plans and results of operations;

• the Company's dependence on Boeing with respect to the Company's fleet, fuel, and other operational strategies and goals;

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• the impact of governmental actions and governmental regulations on the Company's plans, strategies, financial results, and operations;

• the impact of fears or actual outbreaks of other diseases, extreme or severe weather and natural disasters, actions of competitors (including, without limitation, pricing, scheduling, capacity, and network decisions, and consolidation and alliance activities), consumer perception, economic conditions, fears of terrorism or war, socio-demographic trends, and other factors beyond the Company's control on consumer behavior and the Company's results of operations and business decisions, plans, strategies, and results;

• the impact of fears or actual acts of terrorism or war, political instability, cyber-attacks, and other factors beyond the Company’s control on the Company’s plans, financial results, operations, and ability to adequately insure against risks;

• the Company's ability to timely and effectively implement, transition, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives;

• the Company's dependence on third parties, in particular with respect to its fuel supply, carbon emissions strategies, and corporate travel enhancements, and the impact on the Company's operations and results of operations of any third party delays or non-performance;

• the Company's dependence on Boeing and the FAA with respect to certification of the -7 aircraft; and

• other factors as set forth in the Company's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Caution should be taken not to place undue reliance on the Company's forward-looking statements, which represent the Company's views only as of the date this report is filed. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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