filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
Southwest Airlines Co.
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)
| September 30, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,902 | $ | 7,509 | |||||||
| Short-term investments | 116 | 1,216 | |||||||||
| Accounts and other receivables | 1,118 | 1,110 | |||||||||
| Inventories of parts and supplies, at cost | 792 | 800 | |||||||||
| Prepaid expenses and other current assets | 467 | 639 | |||||||||
| Total current assets | 5,395 | 11,274 | |||||||||
| Property and equipment, at cost: | |||||||||||
| Flight equipment | 26,009 | 25,202 | |||||||||
| Ground property and equipment | 8,776 | 8,244 | |||||||||
| Deposits on flight equipment purchase contracts | 402 | 413 | |||||||||
| Assets constructed for others | 88 | 88 | |||||||||
| 35,275 | 33,947 | ||||||||||
| Less allowance for depreciation and amortization | 15,570 | 14,891 | |||||||||
| 19,705 | 19,056 | ||||||||||
| Goodwill | 970 | 970 | |||||||||
| Operating lease right-of-use assets | 1,169 | 1,369 | |||||||||
| Other assets | 1,073 | 1,081 | |||||||||
| $ | 28,312 | $ | 33,750 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 1,708 | $ | 1,818 | |||||||
| Accrued liabilities | 2,091 | 2,206 | |||||||||
| Current operating lease liabilities | 310 | 328 | |||||||||
| Air traffic liability | 6,862 | 6,294 | |||||||||
| Current maturities of long-term debt | 23 | 1,630 | |||||||||
| Total current liabilities | 10,994 | 12,276 | |||||||||
| Long-term debt less current maturities | 4,079 | 5,069 | |||||||||
| Air traffic liability - noncurrent | 1,263 | 1,948 | |||||||||
| Deferred income taxes | 2,210 | 2,167 | |||||||||
| Noncurrent operating lease liabilities | 846 | 1,031 | |||||||||
| Other noncurrent liabilities | 1,144 | 909 | |||||||||
| Stockholders' equity: | |||||||||||
| Common stock | 888 | 888 | |||||||||
| Capital in excess of par value | 4,283 | 4,199 | |||||||||
| Retained earnings | 16,158 | 16,332 | |||||||||
| Accumulated other comprehensive loss | (6) | (25) | |||||||||
| Treasury stock, at cost | (13,547) | (11,044) | |||||||||
| Total stockholders' equity | 7,776 | 10,350 | |||||||||
| $ | 28,312 | $ | 33,750 |
See accompanying notes.
Southwest Airlines Co.
Condensed Consolidated Statement of Comprehensive Income
(in millions, except per share amounts)
(unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||||||||
| Passenger | $ | 6,313 | $ | 6,250 | $ | 18,751 | $ | 18,673 | |||||||||||||||
| Freight | 42 | 43 | 127 | 131 | |||||||||||||||||||
| Other | 594 | 577 | 1,743 | 1,749 | |||||||||||||||||||
| Total operating revenues | 6,949 | 6,870 | 20,621 | 20,553 | |||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||
| Salaries, wages, and benefits | 3,219 | 3,070 | 9,583 | 9,010 | |||||||||||||||||||
| Fuel and oil | 1,331 | 1,417 | 3,907 | 4,548 | |||||||||||||||||||
| Maintenance materials and repairs | 299 | 335 | 921 | 1,046 | |||||||||||||||||||
| Landing fees and airport rentals | 548 | 493 | 1,638 | 1,468 | |||||||||||||||||||
| Depreciation and amortization | 394 | 438 | 1,189 | 1,250 | |||||||||||||||||||
| Other operating expenses | 1,123 | 1,079 | 3,346 | 3,188 | |||||||||||||||||||
| Total operating expenses | 6,914 | 6,832 | 20,584 | 20,510 | |||||||||||||||||||
| OPERATING INCOME | 35 | 38 | 37 | 43 | |||||||||||||||||||
| NON-OPERATING EXPENSES (INCOME): | |||||||||||||||||||||||
| Interest expense | 35 | 63 | 120 | 191 | |||||||||||||||||||
| Capitalized interest | (13) | (9) | (38) | (24) | |||||||||||||||||||
| Interest income | (34) | (121) | (172) | (392) | |||||||||||||||||||
| Other (gains) losses, net | (21) | 16 | (28) | (1) | |||||||||||||||||||
| Total non-operating income | (33) | (51) | (118) | (226) | |||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 68 | 89 | 155 | 269 | |||||||||||||||||||
| PROVISION FOR INCOME TAXES | 14 | 22 | 37 | 65 | |||||||||||||||||||
| NET INCOME | $ | 54 | $ | 67 | $ | 118 | $ | 204 | |||||||||||||||
| NET INCOME PER SHARE, BASIC | $ | 0.10 | $ | 0.11 | $ | 0.21 | $ | 0.34 | |||||||||||||||
| NET INCOME PER SHARE, DILUTED | $ | 0.10 | $ | 0.11 | $ | 0.21 | $ | 0.34 | |||||||||||||||
| COMPREHENSIVE INCOME | $ | 83 | $ | 19 | $ | 137 | $ | 167 | |||||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||||||||||
| Basic | 523 | 599 | 548 | 598 | |||||||||||||||||||
| Diluted | 526 | 601 | 551 | 643 |
See accompanying notes.
Southwest Airlines Co.
Condensed Consolidated Statement of Stockholders' Equity
(in millions, except per share amounts)
(unaudited)
| Common Stock | Capital in excess of par value | Retained earnings | Accumulated other comprehensive income (loss) | Treasury stock | Total | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 888 | $ | 4,199 | $ | 16,332 | $ | (25) | $ | (11,044) | $ | 10,350 | ||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | (758) | (a) | (758) | |||||||||||||||||||||||||||||||
| Issuance of common and treasury stock pursuant to Employee stock plans | — | (10) | — | — | 13 | 3 | ||||||||||||||||||||||||||||||||
| Share-based compensation | — | 21 | — | — | — | 21 | ||||||||||||||||||||||||||||||||
| Cash dividends, $0.18 per share | — | — | (103) | — | — | (103) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | (149) | 1 | — | (148) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | 888 | $ | 4,210 | $ | 16,080 | $ | (24) | $ | (11,789) | $ | 9,365 | ||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | (1,515) | (a) | (1,515) | |||||||||||||||||||||||||||||||
| Issuance of common and treasury stock pursuant to Employee stock plans | — | 12 | — | — | 5 | 17 | ||||||||||||||||||||||||||||||||
| Share-based compensation | — | 25 | — | — | — | 25 | ||||||||||||||||||||||||||||||||
| Cash dividends, $0.18 per share | — | — | (94) | — | — | (94) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | 213 | (11) | — | 202 | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | 888 | $ | 4,247 | $ | 16,199 | $ | (35) | $ | (13,299) | $ | 8,000 | ||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | (252) | (a) | (252) | |||||||||||||||||||||||||||||||
| Issuance of common and treasury stock pursuant to Employee stock plans | — | 10 | — | — | 4 | 14 | ||||||||||||||||||||||||||||||||
| Share-based compensation | — | 26 | — | — | — | 26 | ||||||||||||||||||||||||||||||||
| Cash dividends, $0.18 per share | — | — | (95) | — | — | (95) | ||||||||||||||||||||||||||||||||
| Comprehensive income | — | — | 54 | 29 | — | 83 | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | 888 | $ | 4,283 | $ | 16,158 | $ | (6) | $ | (13,547) | $ | 7,776 |
(a) Includes excise tax incurred on share repurchases, net of issuances.
| Common Stock | Capital in excess of par value | Retained earnings | Accumulated other comprehensive income (loss) | Treasury stock | Total | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | 888 | $ | 4,153 | $ | 16,297 | $ | — | $ | (10,823) | $ | 10,515 | ||||||||||||||||||||||||||
| Issuance of common and treasury stock pursuant to Employee stock plans | — | (25) | — | — | 15 | (10) | ||||||||||||||||||||||||||||||||
| Share-based compensation | — | 10 | — | — | — | 10 | ||||||||||||||||||||||||||||||||
| Cash dividends, $0.18 per share | — | — | (107) | — | — | (107) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | (231) | 19 | — | (212) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | 888 | $ | 4,138 | $ | 15,959 | $ | 19 | $ | (10,808) | $ | 10,196 | ||||||||||||||||||||||||||
| Issuance of common and treasury stock pursuant to Employee stock plans | — | 12 | — | — | 5 | 17 | ||||||||||||||||||||||||||||||||
| Share-based compensation | — | 7 | — | — | — | 7 | ||||||||||||||||||||||||||||||||
| Cash dividends, $0.18 per share | — | — | (108) | — | — | (108) | ||||||||||||||||||||||||||||||||
| Stock warrants repurchase | — | (6) | — | — | — | (6) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | 367 | (8) | — | 359 | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | 888 | $ | 4,151 | $ | 16,218 | $ | 11 | $ | (10,803) | $ | 10,465 | ||||||||||||||||||||||||||
| Issuance of common and treasury stock pursuant to Employee stock plans | — | 10 | — | — | 5 | 15 | ||||||||||||||||||||||||||||||||
| Share-based compensation | — | 19 | — | — | — | 19 | ||||||||||||||||||||||||||||||||
| Cash dividends, $0.18 per share | — | — | (107) | — | — | (107) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | 67 | (48) | — | 19 | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | 888 | $ | 4,180 | $ | 16,178 | $ | (37) | $ | (10,798) | $ | 10,411 |
See accompanying notes.
Southwest Airlines Co.
Condensed Consolidated Statement of Cash Flows
(in millions)
(unaudited)
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||||||
| Net income | $ | 54 | $ | 67 | $ | 118 | $ | 204 | |||||||||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | 394 | 438 | 1,189 | 1,250 | |||||||||||||||||||
| Impairment of long-lived assets | — | — | 8 | — | |||||||||||||||||||
| Unrealized/realized loss on fuel derivative instruments | — | 15 | — | 17 | |||||||||||||||||||
| Deferred income taxes | 14 | 19 | 37 | 62 | |||||||||||||||||||
| Gain on sale-leaseback transactions | — | — | (3) | — | |||||||||||||||||||
| Changes in certain assets and liabilities: | |||||||||||||||||||||||
| Accounts and other receivables | (83) | 193 | 64 | (80) | |||||||||||||||||||
| Other assets | 3 | (13) | 359 | 4 | |||||||||||||||||||
| Accounts payable and accrued liabilities | 11 | (196) | (209) | (1,668) | |||||||||||||||||||
| Air traffic liability | (172) | (377) | (117) | 421 | |||||||||||||||||||
| Other liabilities | 16 | (18) | (19) | (136) | |||||||||||||||||||
| Cash collateral provided to derivative counterparties | — | (8) | (22) | (28) | |||||||||||||||||||
| Other, net | 50 | (7) | 142 | (60) | |||||||||||||||||||
| Net cash provided by (used in) operating activities | 287 | 113 | 1,547 | (14) | |||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||||||||
| Capital expenditures | (678) | (517) | (1,814) | (1,594) | |||||||||||||||||||
| Assets constructed for others | — | (10) | — | (26) | |||||||||||||||||||
| Proceeds from sale-leaseback transactions | — | — | 23 | — | |||||||||||||||||||
| Purchases of short-term investments | (100) | (636) | (470) | (3,845) | |||||||||||||||||||
| Proceeds from sales of short-term and other investments | 350 | 1,621 | 1,577 | 5,160 | |||||||||||||||||||
| Other, net | — | — | (3) | (29) | |||||||||||||||||||
| Net cash provided by (used in) investing activities | (428) | 458 | (687) | (334) | |||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||||||
| Payroll Support Program stock warrants repurchase | — | — | — | (6) | |||||||||||||||||||
| Proceeds from Employee stock plans | 14 | 15 | 46 | 46 | |||||||||||||||||||
| Repurchase of common stock | (250) | — | (2,500) | — | |||||||||||||||||||
| Payments of long-term debt and finance lease obligations | (6) | (11) | (2,603) | (27) | |||||||||||||||||||
| Payments of cash dividends | (189) | (216) | (399) | (431) | |||||||||||||||||||
| Other, net | (1) | 2 | (11) | (19) | |||||||||||||||||||
| Net cash used in financing activities | (432) | (210) | (5,467) | (437) | |||||||||||||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (573) | 361 | (4,607) | (785) | |||||||||||||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 3,475 | 8,142 | 7,509 | 9,288 | |||||||||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 2,902 | $ | 8,503 | $ | 2,902 | $ | 8,503 | |||||||||||||||
| CASH PAYMENTS FOR: | |||||||||||||||||||||||
| Interest, net of amount capitalized | $ | 3 | $ | 14 | $ | 67 | $ | 124 | |||||||||||||||
| Income taxes | $ | — | $ | — | $ | 5 | $ | 7 | |||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS: | |||||||||||||||||||||||
| Right-of-use assets acquired or modified under operating leases | $ | 4 | $ | 23 | $ | 38 | $ | 42 | |||||||||||||||
| Flight and ground equipment acquired or modified under finance leases | $ | 6 | $ | 17 | $ | 6 | $ | 16 |
See accompanying notes.
Southwest Airlines Co.
Notes to Condensed Consolidated Financial Statements
(unaudited)
2. New Accounting Pronouncements
3. Financial Derivative Instruments
8. Supplemental Financial Information
9. Commitments and Contingencies
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
- BASIS OF PRESENTATION
Basis of Presentation
Southwest Airlines Co. (the "Company" or "Southwest") operates Southwest Airlines, a major passenger airline that provides scheduled air transportation in the United States and near-international markets. The unaudited Condensed Consolidated Financial Statements include accounts of the Company and its wholly owned subsidiaries.
The accompanying unaudited Condensed Consolidated Financial Statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States ("GAAP") for complete financial statements as required in Form 10-K. The unaudited Condensed Consolidated Financial Statements for the interim periods ended September 30, 2025 and 2024 include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. This includes all normal and recurring adjustments and elimination of significant intercompany transactions. Financial results for the Company and airlines in general can be seasonal in nature. For example, absent other factors, travel demand is generally higher during the summer period, or the Company’s second and third fiscal quarters. However, air travel is also significantly impacted by general economic conditions, the amount of disposable income available to consumers and changes in consumer behavior, unemployment levels, corporate travel budgets, global pandemics, extreme or severe weather and natural disasters, fears of terrorism or war, governmental actions, and other factors beyond the Company's control. These and other factors, such as the price of jet fuel in some periods, have created, and may continue to create, significant volatility in the Company's financial results. Operating results for the three and nine months ended September 30, 2025, are not necessarily indicative of the results that may be expected for future quarters or for the year ended December 31, 2025. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
On July 4, 2025, the One Big Beautiful Bill Act, was signed into law. The legislation did not have a material impact on the Company's income tax expense for the quarter ending September 30, 2025, nor is it expected to materially change the Company's effective income tax rate for 2025.
During third quarter 2025, the Company completed an annual review of the estimated residual values of its long-lived assets. As a result of this review, the Company increased the estimated residual values for its Boeing 737-700 ("-700") airframe and -700, Boeing 737-800 ("-800"), and Boeing 737-8 ("-8") engine assets. This change took into consideration third party valuation data and recent market transactions. As this is considered a change in estimate, it has been accounted for on a prospective basis in accordance with Accounting Standards Codification ("ASC") 205, "Accounting Changes and Error Corrections" and thus the Company will record less depreciation expense over the remainder of the useful lives for each related asset. The effect of this change in estimate was an immaterial change to depreciation expense for the three and nine months ended September 30, 2025.
Operating Segments and Related Disclosures
The Company's chief operating decision maker, the Company's President, Chief Executive Officer, & Vice Chairman of the Board of Directors, assesses performance for the Company's single reportable segment and decides how to allocate resources based on its Net income or loss (see the unaudited Condensed Consolidated Statement of Comprehensive Income).
For single reportable segment-level financial information, total assets, revenues from external customers, depreciation and amortization expense, interest income and interest expense, provision for income taxes, other non-operating expenses, and significant non-cash transactions, see Item 1. Financial Statements.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
- NEW ACCOUNTING PRONOUNCEMENTS
On September 18, 2025, the Financial Accounting Standards Board (the "FASB") issued ASU 2025-06, Accounting for and Disclosure of Software Costs. The new standard modernizes the guidance to reflect the software development approaches currently being used by removing all references to "development stages" from ASC 350-40 Intangibles—Goodwill and Other - Internal-Use Software. Under ASU 2025-06, only the following criteria in ASC 350-40-25-12(b) and (c) must be met for entities to begin capitalizing software costs: (i) management, with the relevant authority, implicitly or explicitly authorizes and commits to funding a computer software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended (referred to as the "probable-to-complete recognition threshold"). This standard is effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. Entities may apply the guidance prospectively, retrospectively, or via a modified prospective transition method. The Company is evaluating this new standard, but does not expect it to have a significant impact on its financial statement presentation or results.
On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard responds to investor input by requiring public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. This standard is effective for all entities that are subject to Subtopic 220-40, for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, but early adoption is permitted. The Company is evaluating this new standard but does not expect it to have a significant impact on its financial statement disclosures.
On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard increases transparency and decision usefulness of income tax disclosures for investors by requiring information to better assess how an entity's operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. This standard requires entities to provide enhanced disclosures related to the income tax rate reconciliation and income taxes paid. This standard is effective for all entities that are subject to Topic 740, Income Taxes for annual periods beginning after December 15, 2024, but early adoption is permitted. The Company has evaluated this new standard and does not expect it to have a significant impact on its financial statement disclosures. The Company will include all required disclosures within its Form 10-K for the year ended December 31, 2025, utilizing the retrospective application as permitted in the standard.
- FINANCIAL DERIVATIVE INSTRUMENTS
Fuel Contracts
Airline operators are inherently dependent upon energy to operate and, therefore, are impacted by changes in jet fuel prices. Furthermore, jet fuel typically represents one of the largest operating expenses for airlines. The Company has historically aimed to reduce volatility in operating expenses through its fuel hedging program. However, based on higher fuel hedging premium costs over time and other factors, the Company discontinued its fuel hedging program in 2025 and does not intend to add additional fuel derivatives at this time.
During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio. This resulted in the derecognition of all remaining related hedge assets in the unaudited Condensed Consolidated Balance Sheet. The cash proceeds from this transaction totaled approximately $40 million, which will reduce future premium costs. Approximately $36 million that was previously expended on hedge positions in prior periods was reclassified from Accumulated Other Comprehensive Income ("AOCI") and recognized as an increase to Fuel and oil expense within the unaudited Condensed Consolidated Statement of Comprehensive Income during third quarter 2025, all of which is characterized as premium expense from terminated fuel hedging positions. As of September 30, 2025,
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
approximately $173 million remained in AOCI related to these closed positions. This balance in AOCI, which does not include any tax impact, will also be characterized as premium expense and similarly reclassified as an increase to Fuel and oil expense in future periods when the originally forecasted transactions occur (through the end of 2027), and is net of the impact of the cash proceeds from the hedge terminations. See Note 4 for additional information on AOCI.
All cash flows associated with purchasing and selling fuel derivatives (including terminations) are classified as Other operating cash flows in the unaudited Condensed Consolidated Statement of Cash Flows. The following table presents the location of all assets and liabilities associated with the Company’s derivative instruments within the unaudited Condensed Consolidated Balance Sheet:
| Asset derivatives | ||||||||||||||||||||||||||||||||
| Balance Sheet | Fair value at | Fair value at | ||||||||||||||||||||||||||||||
| (in millions) | location | 9/30/2025 | 12/31/2024 | |||||||||||||||||||||||||||||
| Derivatives designated as hedges (a) | ||||||||||||||||||||||||||||||||
| Fuel derivative contracts (gross) | Prepaid expenses and other current assets | $ | — | $ | 22 | |||||||||||||||||||||||||||
| Fuel derivative contracts (gross) | Other assets | — | 108 | |||||||||||||||||||||||||||||
| Total derivatives designated as hedges | $ | — | $ | 130 | ||||||||||||||||||||||||||||
(a) Represents the position of each trade before consideration of offsetting positions with each counterparty and does not include the impact of cash collateral deposits provided to or received from counterparties.
In addition, the Company had the following amounts associated with fuel derivative instruments and hedging activities in its unaudited Condensed Consolidated Balance Sheet:
| Balance Sheet | September 30, | December 31, | ||||||||||||||||||
| (in millions) | location | 2025 | 2024 | |||||||||||||||||
| Cash collateral deposits held from counterparties for fuel contracts - current | Offset against Prepaid expenses and other current assets | $ | — | $ | 4 | |||||||||||||||
| Cash collateral deposits held from counterparties for fuel contracts - noncurrent | Offset against Other assets | — | 18 | |||||||||||||||||
| Receivable from third parties for fuel contracts | Accounts and other receivables | — | 1 | |||||||||||||||||
All of the Company's prior period fuel derivative instruments were subject to agreements that follow the netting guidance in the applicable accounting standards for derivatives and hedging. The types of derivative instruments the Company determined were subject to netting requirements in the accompanying unaudited Condensed Consolidated Balance Sheet are those in which the Company paid or received cash for transactions with the same counterparty and in the same currency via one net payment or receipt. For cash collateral held by the Company or provided to counterparties, the Company netted such amounts against the fair value of the Company's derivative portfolio by each counterparty. The Company elected to utilize netting for its prior period fuel derivative instruments and also classified such amounts as either current or noncurrent, based on the net fair value position with each of the Company's counterparties in the unaudited Condensed Consolidated Balance Sheet.
The Company had the following recognized financial assets and financial liabilities resulting from those transactions that meet the scope of the disclosure requirements as necessitated by applicable accounting guidance for balance sheet offsetting:
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| Offsetting of derivative assets | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| (i) | (ii) | (iii) = (i) + (ii) | (i) | (ii) | (iii) = (i) + (ii) | ||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Description | Balance Sheet location | Gross amounts of recognized assets | Gross amounts offset in the Balance Sheet | Net amounts of assets presented in the Balance Sheet | Gross amounts of recognized assets | Gross amounts offset in the Balance Sheet | Net amounts of assets presented in the Balance Sheet | ||||||||||||||||||||||||||||||||||||||||
| Fuel derivative contracts | Prepaid expenses and other current assets | $ | — | $ | — | $ | — | $ | 22 | $ | (4) | $ | 18 | ||||||||||||||||||||||||||||||||||
| Fuel derivative contracts | Other assets | $ | — | $ | — | $ | — | $ | 108 | $ | (18) | $ | 90 | (a) | |||||||||||||||||||||||||||||||||
(a) The net amounts of derivative assets and liabilities are reconciled to the individual line item amounts presented in the unaudited Condensed Consolidated Balance Sheet in Note 8.
| Offsetting of derivative liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| (i) | (ii) | (iii) = (i) + (ii) | (i) | (ii) | (iii) = (i) + (ii) | ||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Description | Balance Sheet location | Gross amounts of recognized liabilities | Gross amounts offset in the Balance Sheet | Net amounts of liabilities presented in the Balance Sheet | Gross amounts of recognized liabilities | Gross amounts offset in the Balance Sheet | Net amounts of liabilities presented in the Balance Sheet | ||||||||||||||||||||||||||||||||||||||||
| Fuel derivative contracts | Prepaid expenses and other current assets | $ | — | $ | — | $ | — | $ | 4 | $ | (4) | $ | — | ||||||||||||||||||||||||||||||||||
| Fuel derivative contracts | Other assets | $ | — | $ | — | $ | — | $ | 18 | $ | (18) | $ | — | (a) | |||||||||||||||||||||||||||||||||
(a) The net amounts of derivative assets and liabilities are reconciled to the individual line item amounts presented in the unaudited Condensed Consolidated Balance Sheet in Note 8.
The following tables present the impact of derivative instruments, including terminations, within the unaudited Condensed Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2025 and 2024:
| Location and amount recognized in income on cash flow hedging relationships | ||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, 2025 | Three months ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||
| (in millions) | Fuel and oil | Other operating expenses | Fuel and oil | Other operating expenses | ||||||||||||||||||||||||||||||||||
| Total | $ | 36 | $ | 2 | $ | 15 | $ | 2 | ||||||||||||||||||||||||||||||
| Loss on cash flow hedging relationships | ||||||||||||||||||||||||||||||||||||||
| Commodity contracts: | ||||||||||||||||||||||||||||||||||||||
| Amount of loss reclassified from AOCI into income | 36 | (a) | 15 | |||||||||||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||||
| Amount of loss reclassified from AOCI into income | — | 2 | — | 2 |
(a) Includes amounts reclassified from Accumulated Other Comprehensive Income associated with hedges previously terminated.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| Location and amount recognized in income on cash flow hedging relationships | ||||||||||||||||||||||||||||||||||||||
| Nine months ended September 30, 2025 | Nine months ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||
| (in millions) | Fuel and oil | Other operating expenses | Fuel and oil | Other operating expenses | ||||||||||||||||||||||||||||||||||
| Total | $ | 110 | $ | 5 | $ | 54 | $ | 6 | ||||||||||||||||||||||||||||||
| Loss on cash flow hedging relationships | ||||||||||||||||||||||||||||||||||||||
| Commodity contracts: | ||||||||||||||||||||||||||||||||||||||
| Amount of loss reclassified from AOCI into income | 110 | (a) | — | 54 | — | |||||||||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||||
| Amount of loss reclassified from AOCI into income | — | 5 | — | 6 |
(a) Includes amounts reclassified from Accumulated Other Comprehensive Income associated with hedges previously terminated.
| Derivatives designated and qualified in cash flow hedging relationships | |||||||||||
| (Gain) loss recognized in AOCI on derivatives, net of tax | |||||||||||
| Three months ended | |||||||||||
| September 30, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Fuel derivative contracts | $ | — | $ | 61 | |||||||
| Derivatives designated and qualified in cash flow hedging relationships | ||||||||||||||||||||
| (Gain) loss recognized in AOCI on derivatives, net of tax | ||||||||||||||||||||
| Nine months ended | ||||||||||||||||||||
| September 30, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | ||||||||||||||||||
| Fuel derivative contracts | $ | 69 | $ | 83 | ||||||||||||||||
| Derivatives not designated as hedges | |||||||||||||||||
| (Gain) loss recognized in income on derivatives | |||||||||||||||||
| Three months ended | Location of (gain) loss recognized in income on derivatives | ||||||||||||||||
| September 30, | |||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||
| Fuel derivative contracts | $ | — | $ | 29 | Other (gains) losses, net |
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| Derivatives not designated as hedges | |||||||||||||||||
| (Gain) loss recognized in income on derivatives | |||||||||||||||||
| Nine months ended | Location of (gain) loss recognized in income on derivatives | ||||||||||||||||
| September 30, | |||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||
| Fuel derivative contracts | $ | — | $ | 31 | Other (gains) losses, net | ||||||||||||
The Company also recorded expenses associated with net premiums paid for fuel derivative contracts that settled/expired and/or terminated during the three and nine months ended September 30, 2025 and 2024. Gains and/or losses associated with fuel derivatives that qualified for hedge accounting were ultimately recorded to Fuel and oil expense. Gains and/or losses associated with fuel derivatives that did not qualify for hedge accounting were recorded to Other (gains) losses, net. The following tables present the expense impacts and their locations within the unaudited Condensed Consolidated Statement of Comprehensive Income during the periods the contracts settled or were scheduled to settle:
| Expense (benefit) recognized in income on derivatives | |||||||||||||||||
| Three months ended | Location of expense (benefit) recognized in income on derivatives | ||||||||||||||||
| September 30, | |||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||
| Fuel derivative contracts designated as hedges | $ | 36 | $ | 34 | Fuel and oil | ||||||||||||
| Fuel derivative contracts not designated as hedges | — | 5 | Other (gains) losses, net |
| Expense (benefit) recognized in income on derivatives | |||||||||||||||||
| Nine months ended | Location of expense (benefit) recognized in income on derivatives | ||||||||||||||||
| September 30, | |||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||
| Fuel derivative contracts designated as hedges | $ | 110 | $ | 114 | Fuel and oil | ||||||||||||
| Fuel derivative contracts not designated as hedges | — | 5 | Other (gains) losses, net |
Interest Rate Swaps
The Company is at times party to certain interest rate swap agreements that are accounted for as cash flow hedges, but had none in place as of September 30, 2025, or as of December 31, 2024. The Company also did not have any interest rate swap agreements designated as fair value hedges, as defined, during the periods presented.
Credit Risk and Collateral
The Company had no cash collateral posted or received as of September 30, 2025.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
- COMPREHENSIVE INCOME
Comprehensive income (loss) includes changes in the fair value of certain financial derivative instruments that qualify for hedge accounting and actuarial gains/losses arising from the Company’s postretirement benefit obligation. During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio. See Note 3. The differences between Net income and Comprehensive income for the three and nine months ended September 30, 2025 and 2024 were as follows:
| Three months ended September 30, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| NET INCOME | $ | 54 | $ | 67 | |||||||
| Unrealized gain (loss) on fuel derivative instruments, net of deferred taxes of $8 and ($14) | 28 | (a) | (50) | ||||||||
| Other, net of deferred taxes of $1 and $— | 1 | 2 | |||||||||
| Total other comprehensive income (loss) | $ | 29 | $ | (48) | |||||||
| COMPREHENSIVE INCOME | $ | 83 | $ | 19 |
(a) Includes reclassification adjustments from Accumulated Other Comprehensive Income into Fuel and oil expense associated with hedges previously terminated.
| Nine months ended September 30, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| NET INCOME | $ | 118 | $ | 204 | |||||||
| Unrealized gain (loss) on fuel derivative instruments, net of deferred taxes of $5 and ($12) | 15 | (a) | (42) | ||||||||
| Other, net of deferred taxes of $1 and $1 | 4 | 5 | |||||||||
| Total other comprehensive income (loss) | $ | 19 | $ | (37) | |||||||
| COMPREHENSIVE INCOME | $ | 137 | $ | 167 |
(a) Includes reclassification adjustments from Accumulated Other Comprehensive Income into Fuel and oil expense associated with hedges previously terminated.
A rollforward of the amounts included in AOCI, net of taxes, is shown below for the three and nine months ended September 30, 2025:
| (in millions) | Fuel derivatives | Defined benefit plan items | Other | Deferred tax impact | Accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | (209) | $ | 167 | $ | (4) | $ | 11 | $ | (35) | |||||||||||||||||||||||||
| Changes in fair value | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Reclassification to earnings | 36 | — | 2 | (9) | 29 | ||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | (173) | $ | 167 | $ | (2) | $ | 2 | $ | (6) |
| (in millions) | Fuel derivatives | Defined benefit plan items | Other | Deferred tax impact | Accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | (193) | $ | 167 | $ | (7) | $ | 8 | $ | (25) | |||||||||||||||||||||||||
| Changes in fair value | (90) | — | — | 21 | (69) | ||||||||||||||||||||||||||||||
| Reclassification to earnings | 110 | — | 5 | (27) | 88 | ||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | (173) | $ | 167 | $ | (2) | $ | 2 | $ | (6) |
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
The following tables illustrate the significant amounts reclassified out of each component of AOCI for the three and nine months ended September 30, 2025:
| Three months ended September 30, 2025 | ||||||||||||||
| (in millions) | Amounts reclassified from AOCI | Affected line item in the unaudited Condensed Consolidated Statement of Comprehensive Income | ||||||||||||
| AOCI components | ||||||||||||||
| Unrealized loss on fuel derivative instruments | $ | 36 | Fuel and oil expense | |||||||||||
| 8 | Less: Tax expense | |||||||||||||
| $ | 28 | Net of tax | ||||||||||||
| Other | $ | 2 | Other operating expenses | |||||||||||
| 1 | Less: Tax expense | |||||||||||||
| $ | 1 | Net of tax | ||||||||||||
| Total reclassifications for the period | $ | 29 | Net of tax |
| Nine months ended September 30, 2025 | ||||||||||||||
| (in millions) | Amounts reclassified from AOCI | Affected line item in the unaudited Condensed Consolidated Statement of Comprehensive Income | ||||||||||||
| AOCI components | ||||||||||||||
| Unrealized loss on fuel derivative instruments | $ | 110 | Fuel and oil expense | |||||||||||
| 26 | Less: Tax expense | |||||||||||||
| $ | 84 | Net of tax | ||||||||||||
| Other | $ | 5 | Other operating expenses | |||||||||||
| 1 | Less: Tax expense | |||||||||||||
| $ | 4 | Net of tax | ||||||||||||
| Total reclassifications for the period | $ | 88 | Net of tax |
- REVENUE
Passenger Revenues
The Company’s contracts with its Customers primarily consist of its tickets sold, which are initially deferred as Air traffic liability. Passenger revenue associated with tickets is recognized when the performance obligation to the Customer is satisfied, which is primarily when travel is provided. For air travel on Southwest, the amount of tickets (which includes flight credits—also referred to as partial tickets) that will go unused, referred to as breakage, is estimated and recognized in Passenger revenue once the scheduled flight date has passed.
Revenue is categorized by revenue source as the Company believes it best depicts the nature, amount, timing, and uncertainty of revenue and cash flow. The following table provides the components of Passenger revenue recognized for the three and nine months ended September 30, 2025 and 2024:
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Passenger non-loyalty | $ | 4,896 | $ | 5,092 | $ | 15,110 | $ | 15,316 | |||||||||||||||
| Passenger loyalty - air transportation | 805 | 896 | 2,475 | 2,589 | |||||||||||||||||||
| Passenger ancillary sold separately | 612 | 262 | 1,166 | 768 | |||||||||||||||||||
| Total passenger revenues | $ | 6,313 | $ | 6,250 | $ | 18,751 | $ | 18,673 |
As of September 30, 2025, and December 31, 2024, the components of Air traffic liability, including contract liabilities based on tickets sold and unused flight credits available to the Customer, both of which are net of recorded breakage, and loyalty points available for redemption, within the unaudited Condensed Consolidated Balance Sheet were as follows:
| Balance as of | |||||||||||
| (in millions) | September 30, 2025 | December 31, 2024 | |||||||||
| Air traffic liability - passenger travel and ancillary passenger services | $ | 3,620 | $ | 3,393 | |||||||
| Air traffic liability - loyalty program | 4,505 | 4,849 | |||||||||
| Total Air traffic liability | $ | 8,125 | $ | 8,242 |
The balance in Air traffic liability - passenger travel and ancillary passenger services also includes flight credits not currently associated with a ticket that can be applied by Customers towards the purchase of future travel. These flight credits are typically created as a result of a prior ticket cancellation or exchange, and are recorded net of associated breakage. Rollforwards of the Company's Air traffic liability - loyalty program for the three and nine months ended September 30, 2025 and 2024 were as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Air traffic liability - loyalty program - beginning balance | $ | 4,693 | $ | 4,962 | 4,849 | $ | 4,916 | ||||||||||||||||
| Amounts deferred associated with points awarded | 649 | 851 | 2,214 | 2,645 | |||||||||||||||||||
| Revenue recognized from points redeemed - Passenger | (805) | (896) | (2,475) | (2,589) | |||||||||||||||||||
| Revenue recognized from points redeemed - Other | (32) | (31) | (83) | (86) | |||||||||||||||||||
| Air traffic liability - loyalty program - ending balance | $ | 4,505 | $ | 4,886 | $ | 4,505 | $ | 4,886 |
Air traffic liability includes consideration received for ticket and loyalty related performance obligations which have not been satisfied as of a given date. Rollforwards of the amounts included in Air traffic liability as of September 30, 2025 and 2024 were as follows:
| Nine months ended September 30, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Air traffic liability - beginning balance | $ | 8,242 | $ | 8,279 | |||||||
| Current period sales (a) | 18,496 | 19,181 | |||||||||
| Revenue from amounts included in contract liability opening balances | (4,634) | (4,593) | |||||||||
| Revenue from current period sales | (13,979) | (14,167) | |||||||||
| Air traffic liability - ending balance | $ | 8,125 | $ | 8,700 |
(a)Current period sales include passenger travel, ancillary services, flight loyalty, and partner loyalty
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
On May 28, 2025, the Company implemented a change to its flight credit policy. Flight credits created from reservations booked and ticketed or voluntarily changed on or after May 28, 2025, have a specified expiration date of one year or less, depending on the type of fare purchased. Flight credits issued between July 28, 2022, and May 28, 2025, including any future issuances associated with bookings made prior to the policy change on May 28, 2025, do not have an expiration date. With the launch of the new Getaways by Southwest™ ("Getaways") product, the Company has begun to issue vacation travel credits for cancelled bookings, with an 18-month expiration period from the original booking date. As the Company believes that a portion of Customer travel credits (both flight credits and Getaways travel credits) issued will not be redeemed, it estimates and records breakage associated with such amounts. Customer travel credits represent approximately 5 percent and 8 percent of the total Air traffic liability balance as of September 30, 2025, and December 31, 2024, respectively.
Through the Company's co-branded credit card agreement with JPMorgan Chase Bank, N.A. ("Chase"), the Company sells loyalty points, certain marketing benefits, which consist of the use of the Southwest Airlines brand and access to Rapid Rewards Member lists, licensing and advertising elements, the use of the Company’s resource team, and other airline benefits. The Company allocates consideration received to performance obligations based on the relative fair value of those obligations. In 2025, the Company and Chase amended the co-brand credit card agreement—in the first quarter to extend the term of the agreement and add enhanced airline benefits for Cardmembers associated with the Company's planned assigned seating and premium seating initiative, and again in the second quarter to add benefits to Cardmembers related to the Company's changes in its checked bag policy that went into effect on May 28, 2025. For each change to the agreement, the Company estimated the selling prices and volumes over the term of the amended agreement in order to determine the allocation of proceeds to each of the three performance obligations identified in the agreement, which have been characterized as a transportation component, a marketing component, and an airline benefits component. The Company defers revenue for points earned by Customers through the Chase agreement, and subsequently records Passenger revenue related to loyalty point redemptions for air travel when the travel is delivered, the marketing elements are recognized as Other revenue when the performance obligations related to those services are satisfied, which is generally the same period consideration is received from Chase, and the airline benefits are recognized as Passenger revenue when they are provided. As a result of the amended co-brand agreement, a larger portion of the Company’s co-brand credit card benefits from Chase are now being classified within Passenger revenues during 2025.
The Company recognizes revenue related to the marketing, advertising, and other travel-related benefits of the cash receipts associated with various loyalty partner agreements including, but not limited to, its co-branded credit card agreement with Chase. For the three months ended September 30, 2025 and 2024, the Company recognized $723 million and $538 million of such revenue, respectively, the majority of which is within Other operating revenues. For the nine months ended September 30, 2025 and 2024, the Company recognized revenues of $1.9 billion and $1.6 billion, respectively.
- NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income per share (in millions, except per share amounts). Basic net income per share is calculated by dividing net income by the weighted average of shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. During second quarter 2025, the Company's remaining balance of 1.25 percent Convertible Senior Notes due 2025 (the "Convertible Notes") of $1.6 billion was repaid, settling both principal and accrued interest. Due to this maturity, the Convertible Notes did not have a dilutive impact on the net income per share calculation and interest expense was not added back to the numerator for the three months ended September 30, 2025.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| NUMERATOR: | ||||||||||||||||||||||||||
| Net income | $ | 54 | $ | 67 | $ | 118 | $ | 204 | ||||||||||||||||||
| Add: Interest expense | — | — | (a) | — | (a) | 15 | ||||||||||||||||||||
| Net income attributable to common stockholders | $ | 54 | $ | 67 | $ | 118 | $ | 219 | ||||||||||||||||||
| DENOMINATOR: | ||||||||||||||||||||||||||
| Weighted-average shares outstanding, basic | 523 | 599 | 548 | 598 | ||||||||||||||||||||||
| Dilutive effects of Convertible Notes | — | — | — | 43 | ||||||||||||||||||||||
| Dilutive effect of restricted stock units | 3 | 2 | 3 | 2 | ||||||||||||||||||||||
| Weighted-average shares outstanding, diluted | 526 | 601 | 551 | 643 | ||||||||||||||||||||||
| NET INCOME PER SHARE: | ||||||||||||||||||||||||||
| Basic | $ | 0.10 | $ | 0.11 | $ | 0.21 | $ | 0.34 | ||||||||||||||||||
| Diluted | $ | 0.10 | $ | 0.11 | $ | 0.21 | $ | 0.34 | ||||||||||||||||||
| Antidilutive amounts excluded from calculations: | ||||||||||||||||||||||||||
| Convertible debt | — | 44 | 20 | (b) | — | |||||||||||||||||||||
| Restricted stock units | — | — | — | 1 |
(a) For the nine months ended September 30, 2025 and the three months ended September 30, 2024, Interest expense is not added back to the numerator due to the impact of the Convertible Notes being anti-dilutive.
(b) For the nine months ended September 30, 2025, the Convertible Notes were outstanding for a portion of the period and were anti-dilutive. See Note 10 for further information on the Convertible Notes.
- FAIR VALUE MEASUREMENTS
Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of September 30, 2025, the Company held certain items that are required to be measured at fair value on a recurring basis. These included cash equivalents, short-term investments, and available-for-sale securities. The majority of the Company’s cash equivalents and short-term investments consist of instruments classified as Level 1. However, the Company has certificates of deposit and time deposits that are classified as Level 2, due to the fact that the fair value for these instruments is determined utilizing observable inputs in non-active markets. Equity securities primarily consist of investments with readily determinable market values associated with the Company’s excess benefit plan.
During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio. See Note 3 for further information on the Company’s derivative instruments and hedging activities. The Company’s derivative instruments held in prior periods consisted of over-the-counter contracts, which were not traded on a public exchange. Fuel derivative instruments historically consisted solely of option contracts, whereas interest rate derivatives have historically
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
consisted solely of swap agreements. The Company determined the value of option contracts utilizing an option pricing model based on inputs that are either readily available in public markets, can be derived from information available in publicly quoted markets, or are provided by financial institutions that trade these contracts. The option pricing model historically used by the Company is an industry standard model for valuing options and is a similar model used by the broker/dealer community (i.e., the Company’s counterparties). The inputs to this option pricing model are the option strike price, underlying price, risk free rate of interest, time to expiration, and volatility. Because certain inputs used to determine the fair value of option contracts are unobservable (principally implied volatility), the Company categorized these option contracts as Level 3. Volatility information was obtained from external sources, but was analyzed by the Company for reasonableness and compared to similar information received from other external sources. Holding other inputs constant, an increase (decrease) in implied volatility would have resulted in a higher (lower) fair value measurement, respectively, for the Company’s derivative option contracts in prior periods. The fair value of option contracts considered both the intrinsic value and any remaining time value associated with those derivatives that had not yet settled. The Company also considered counterparty credit risk and its own credit risk in its determination of all estimated fair values. To validate the reasonableness of the Company’s option pricing model, on a monthly basis, the Company compared its option valuations to third party valuations. Any significant differences noted were researched in order to determine the reason. However, historically, no significant differences were noted. The Company consistently applied these valuation techniques in prior periods presented and believes it obtained the most accurate information available for the types of derivative contracts it held.
Included in Equity securities are the Company’s investments primarily associated with its deferred compensation plans, which consist of mutual funds that are publicly traded and for which market prices are readily available. These plans are non-qualified deferred compensation plans designed to hold contributions in excess of limits established by the Internal Revenue Code of 1986, as amended. The distribution timing and payment amounts under these plans are made based on the participant’s distribution election and plan balance. Assets related to the funded portions of the deferred compensation plans are held in a rabbi trust, and the Company remains liable to these participants for the unfunded portion of the plans. The Company records changes in the fair value of plan obligations and plan assets, which net to zero, within the Salaries, wages, and benefits line and Other (gains) losses, net line, respectively, of the unaudited Condensed Consolidated Statement of Comprehensive Income.
The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2025, and December 31, 2024:
| Fair value measurements at reporting date using: | ||||||||||||||||||||||||||
| Quoted prices in active markets for identical assets | Significant other observable inputs | |||||||||||||||||||||||||
| Description | September 30, 2025 | (Level 1) | (Level 2) | |||||||||||||||||||||||
| Assets | (in millions) | |||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Cash equivalents (a) | $ | 2,552 | $ | 2,552 | $ | — | ||||||||||||||||||||
| Time deposits | 350 | — | 350 | |||||||||||||||||||||||
| Short-term investments: | ||||||||||||||||||||||||||
| Certificates of deposit | 16 | — | 16 | |||||||||||||||||||||||
| Time deposits | 100 | — | 100 | |||||||||||||||||||||||
| Equity Securities | 433 | 433 | — | |||||||||||||||||||||||
| Total assets | $ | 3,451 | $ | 2,985 | $ | 466 | ||||||||||||||||||||
(a) Cash equivalents are primarily composed of money market investments.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| Fair value measurements at reporting date using: | ||||||||||||||||||||||||||
| Quoted prices in active markets for identical assets | Significant other observable inputs | Significant unobservable inputs | ||||||||||||||||||||||||
| Description | December 31, 2024 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||||||
| Assets | (in millions) | |||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Cash equivalents (a) | $ | 7,209 | $ | 7,209 | $ | — | $ | — | ||||||||||||||||||
| Time deposits | 300 | — | 300 | — | ||||||||||||||||||||||
| Short-term investments: | ||||||||||||||||||||||||||
| Treasury bills | 1,094 | 1,094 | — | — | ||||||||||||||||||||||
| Certificates of deposit | 122 | — | 122 | — | ||||||||||||||||||||||
| Fuel derivatives: | ||||||||||||||||||||||||||
| Option contracts (b) | 130 | — | — | 130 | ||||||||||||||||||||||
| Equity Securities | 367 | 367 | — | — | ||||||||||||||||||||||
| Total assets | $ | 9,222 | $ | 8,670 | $ | 422 | $ | 130 | ||||||||||||||||||
(a) Cash equivalents are primarily composed of money market investments and treasury bills.
(b) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as an asset. See Note 3.
The Company did not have any material assets or liabilities measured at fair value on a nonrecurring basis during the nine months ended September 30, 2025, or the year ended December 31, 2024. The following table presents the Company’s activity for items measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2025. There was no activity for the three months ended September 30, 2025.
| Fair value measurements using significant unobservable inputs (Level 3) | ||||||||||||||
| (in millions) | Fuel derivatives | |||||||||||||
| Balance at December 31, 2024 | $ | 130 | ||||||||||||
| Total loss for the period | ||||||||||||||
| Included in other comprehensive income | (90) | |||||||||||||
| Proceeds from portfolio termination | (40) | |||||||||||||
| Balance at September 30, 2025 | $ | — | ||||||||||||
The carrying amounts and estimated fair values of the Company’s short-term and long-term debt (including current maturities), as well as the applicable fair value hierarchy tier, as of September 30, 2025, are presented in the table below. The fair values of the Company’s publicly held debt are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company has categorized these agreements as Level 2. All privately held debt agreements are categorized as Level 3. The Company has determined the estimated fair value of this debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes indicative pricing from counterparties and a discounted cash flow method to estimate the fair value of the Level 3 items.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| (in millions) | Maturity Date | Carrying value | Estimated fair value | Fair value level hierarchy | ||||||||||||||||
| 3.00% Notes | 2026 | $ | 300 | $ | 296 | Level 2 | ||||||||||||||
| 7.375% Debentures | 2027 | 105 | 109 | Level 2 | ||||||||||||||||
| 3.45% Notes | 2027 | 300 | 295 | Level 2 | ||||||||||||||||
| 5.125% Notes | 2027 | 1,727 | 1,749 | Level 2 | ||||||||||||||||
| 2.625% Notes | 2030 | 500 | 461 | Level 2 | ||||||||||||||||
| 1.000% Payroll Support Program Loan (a) | 2031 | 566 | 573 | Level 3 | ||||||||||||||||
| 1.000% Payroll Support Program Loan (b) | 2031 | 526 | 524 | Level 3 |
(a) The interest rate will change to Secured Overnight Financing Rate plus two percent in January 2026. See Note 10 for further information.
(b) The interest rate will change to Secured Overnight Financing Rate plus two percent in April 2026. See Note 10 for further information.
- SUPPLEMENTAL FINANCIAL INFORMATION
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Trade receivables | $ | 52 | $ | 47 | ||||||||||
| Credit card receivables | 199 | 143 | ||||||||||||
| Business partners | 736 | 573 | ||||||||||||
| Taxes receivable | 10 | 11 | ||||||||||||
| Fuel hedging and receivables | — | 1 | ||||||||||||
| Reinsurance receivable and losses recoverable | 97 | 168 | ||||||||||||
| Other | 24 | 167 | ||||||||||||
| Accounts and other receivables | $ | 1,118 | $ | 1,110 |
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Derivative contracts | $ | — | $ | 90 | ||||||||||
| Intangible assets, net | 295 | 300 | ||||||||||||
| Equity securities | 433 | 367 | ||||||||||||
| Prepaid maintenance | 282 | 263 | ||||||||||||
| Other | 63 | 61 | ||||||||||||
| Other assets | $ | 1,073 | $ | 1,081 |
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Accounts payable trade | $ | 503 | $ | 339 | ||||||||||
| Salaries, withholdings and payroll taxes | 452 | 536 | ||||||||||||
| Ticket taxes and fees | 302 | 318 | ||||||||||||
| Aircraft maintenance payable | 43 | 33 | ||||||||||||
| Fuel payable | 65 | 86 | ||||||||||||
| Dividends payable | — | 107 | ||||||||||||
| Third party services | 177 | 176 | ||||||||||||
| Other payable | 166 | 223 | ||||||||||||
| Accounts payable | $ | 1,708 | $ | 1,818 |
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Voluntary Separation Program and severance pay | $ | 2 | $ | 48 | ||||||||||
| Profit-sharing and savings plans | 44 | 151 | ||||||||||||
| Vacation pay | 682 | 657 | ||||||||||||
| Health | 218 | 192 | ||||||||||||
| Workers compensation | 225 | 178 | ||||||||||||
| Property and income taxes | 69 | 53 | ||||||||||||
| Interest | 36 | 23 | ||||||||||||
| Deferred supplier credits | 12 | — | ||||||||||||
| Bonus pay | 112 | 208 | ||||||||||||
| Reinsurance payable and losses payable | 181 | 249 | ||||||||||||
| Aircraft maintenance | 138 | 92 | ||||||||||||
| Other | 372 | 355 | ||||||||||||
| Accrued liabilities | $ | 2,091 | $ | 2,206 |
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Postretirement obligation | $ | 261 | $ | 256 | ||||||||||
| Other deferred compensation | 487 | 412 | ||||||||||||
| Other | 396 | 241 | ||||||||||||
| Other noncurrent liabilities | $ | 1,144 | $ | 909 |
For further information on derivative instruments, see Note 3.
Other Operating Expenses
Other operating expenses consist of aircraft rentals, distribution costs, advertising expenses, personnel expenses, professional fees, and certain technology-related costs, among other operating costs, none of which individually exceeded 10 percent of Total operating expenses.
- COMMITMENTS AND CONTINGENCIES
Commitments
The Company's contractual order book with The Boeing Company ("Boeing") for 737-7 ("-7") and -8 aircraft (together, the "MAX aircraft"), which extends to 2031, was designed to support the Company's growth and fleet modernization plans, while also providing significant flexibility and optionality to manage its fleet gauge and size, including opportunities to accelerate fleet modernization efforts if growth opportunities do not materialize. The Company received eight -8 aircraft deliveries from Boeing in third quarter 2025 and retired 16 aircraft (15 -700 and the sale of one -800). In addition, during third quarter 2025, the Company exercised four -7 options for delivery in 2026.
Boeing continues to experience delays in fulfilling its commitments with regards to delivery of MAX aircraft to the Company, primarily as a result of manufacturing challenges and delays in achieving Federal Aviation Administration ("FAA") certification of one of its new aircraft types, the -7, for which Southwest expects to be the launch customer. As a result of Boeing's delivery delays, the Company has previously replanned its capacity and delivery expectations multiple times and will continue to closely monitor the ongoing aircraft delivery delays with Boeing and further adjust expectations as needed. Year-to-date through September 30, 2025, the Company converted 42 2025 deliveries from -7 to -8 firm orders.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
As of September 30, 2025, the Company had the following firm orders and options for future periods:
| The Boeing Company | |||||||||||||||||||||||||||||||||||||||||
| -7 Firm Orders | -8 Firm Orders | -7 or -8 Options | Total | ||||||||||||||||||||||||||||||||||||||
| 2025 | 28 | 108 | — | 136 | (c) | ||||||||||||||||||||||||||||||||||||
| 2026 | 86 | — | — | 86 | |||||||||||||||||||||||||||||||||||||
| 2027 | 19 | 46 | 25 | 90 | |||||||||||||||||||||||||||||||||||||
| 2028 | 15 | 50 | 25 | 90 | |||||||||||||||||||||||||||||||||||||
| 2029 | 38 | 34 | 18 | 90 | |||||||||||||||||||||||||||||||||||||
| 2030 | 45 | — | 45 | 90 | |||||||||||||||||||||||||||||||||||||
| 2031 | 45 | — | 45 | 90 | |||||||||||||||||||||||||||||||||||||
| 276 | (a) | 238 | (b) | 158 | 672 |
(a) The delivery timing for the -7 is dependent on the 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.
(b) The Company has flexibility to designate firm orders or options as -7s or -8s, upon written advance notification as stated in the contract.
(c) Includes 36 -8 deliveries received year-to-date through September 30, 2025. In addition, the Company has included 63 of its 2024 contractual but undelivered aircraft (27 -7s and 36 -8s) within its 2025 contractual commitments. 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 | 1 | 72 | 73 | |||||||||||||||||||||||||||||
| 2025 Combined Contractual Total | 28 | 108 | 136 |
Based on the Company's current agreement with Boeing, capital commitments associated with firm orders as of September 30, 2025, were:
| (in billions) | Remainder of 2025 | 2026 | 2027 | 2028 | 2029 | 2030 and thereafter | Total | |||||||||||||||||||
| Payments for capital commitments | $ | 2.7 | (a) | $ | 2.4 | $ | 2.5 | $ | 2.8 | $ | 2.5 | $ | 2.7 | $ | 15.6 |
(a) Capital commitments associated with the Company's firm orders in 2025 of $2.7 billion include approximately $1.4 billion primarily related to the existing remaining scheduled 73 MAX aircraft to be delivered in 2025 and $1.3 billion related to 63 MAX aircraft (27 -7s and 36 -8s) that were contractually committed for 2024, but were not received.
Subsequent to September 30, 2025, and through October 23, 2025, the Company exercised two -7 options for delivery in 2027, converted one 2025 -7 firm order into a 2025 -8 firm order, and converted five 2026 -7 firm orders into 2026 -8 firm orders, resulting in the Company's 2026 and 2027 capital commitments increasing to $2.5 billion and $2.6 billion, respectively.
Contingencies
The Company is from time to time subject to various legal proceedings and claims arising in the ordinary course of business and records a liability for such claims when it is probable that a loss will be incurred and the amount is reasonably estimable.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
The Company is a defendant in class action litigation asserting it has not provided paid short-term military leave to certain employees, in violation of the federal Uniformed Services Employment and Reemployment Rights Act (“USERRA”). The United States District Court for the Northern District of California previously issued an order to effectively stay the action, pending an appeal from an order by the United States District Court for the Eastern District of Washington granting summary judgment in favor of an airline in a separate case involving substantially the same claims at issue in this action. On February 1, 2023, the Ninth Circuit reversed the district court’s grant of summary judgment and remanded the separate airline case to the District Court. The Ninth Circuit’s decision may adversely affect the Company’s defenses in the USERRA proceeding and may give rise to additional litigation in this or other areas. On October 29, 2024, the Company filed a motion to decertify the class, which was then fully briefed and set for hearing. On February 13, 2025, the parties filed a notice of settlement advising the Court that they reached a settlement in principle, and the parties made a stipulated request for the Court to vacate the case schedule, including the hearing on the Company's decertification motion, and to set a deadline of June 19, 2025, for the filing of either a motion for preliminary approval of the class settlement or a status update about the timing of the remaining steps in the settlement process. The Court granted the stipulation on February 14, 2025. On June 20, 2025, the Court granted the parties’ stipulated request to continue the deadline for filing a motion for preliminary approval of the class settlement. On September 25, 2025, plaintiffs filed a motion for preliminary approval of the settlement class. The settlement includes an $18.5 million settlement fund and prospective relief that includes a differential pay benefit for up to ten days of military leave per year, which will remain in place for at least five years once initiated. The proposed settlement is fully accrued as of September 30, 2025.
On December 27, 2019, a former customer service agent at Oakland International Airport, filed a putative class action complaint in the Superior Court of California, for the County of Santa Clara, against the Company alleging the following seven claims under the California Labor Code and Business & Professions Code: (1) failure to provide meal periods; (2) failure to provide rest periods; (3) failure to pay hourly wages; (4) failure to provide accurate wage statements; (5) failure to timely pay all final wages; (6) unfair competition; and (7) civil penalties for the foregoing. Plaintiff filed a First Amended Complaint on October 15, 2021, that asserted the same causes of action and added a named plaintiff. The First Amended Complaint primarily seeks unpaid wages, interest thereon, and associated civil and statutory penalties, along with attorneys’ fees and costs. On February 26, 2025, the Court granted class certification as to the first cause of action for failure to provide meal periods, denied certification on the second through fourth causes of action, and granted certification on the fifth and sixth causes of action only insofar as they are predicated on the first cause of action. The certified class consists of all of the Company’s non-exempt ground employees in California who worked a shift in excess of five hours for the time period between October 24, 2014, forward. On April 17, 2025, the Company filed a summary judgment motion arguing that Plaintiffs’ first cause of action, and all causes of action predicated thereon, failed as a matter of law. The motion was granted on July 25, 2025. Judgment was entered in favor of the Company on September 2, 2025, and Plaintiffs filed a notice of appeal on September 4, 2025. The Company is currently not able to estimate a range of possible loss with regards to the litigation to which it is a defendant.
- FINANCING ACTIVITIES
Convertible Notes due 2025
On May 1, 2020, the Company completed the public offering of $2.3 billion aggregate principal amount of the Convertible Notes, bearing interest at a rate of 1.25 percent, payable semi-annually in arrears. The Company repurchased $689 million during the two year period ending December 31, 2022, and the remaining $1.6 billion principal amount of the Convertible Notes was repaid at maturity during second quarter 2025 utilizing available cash on hand. An immaterial amount of Convertible Note conversions settled at maturity.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
The Company recognized interest expense associated with the Convertible Notes as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Non-cash amortization of debt issuance costs | $ | — | $ | 3 | $ | 3 | $ | 8 | |||||||||||||||
| Contractual coupon interest | — | 5 | 7 | 15 | |||||||||||||||||||
| Total interest expense | $ | — | $ | 8 | $ | 10 | $ | 23 |
The unamortized debt issuance costs were recognized as non-cash interest expense based on the 5-year term of the notes, through May 1, 2025, less amounts that were required to be accelerated immediately upon conversion or repurchases. The Company had no changes to contingencies with regards to the Convertible Notes through the settlement date, May 1, 2025.
Payroll Support Program Loan due 2030
During 2020 and 2021, the Company entered into definitive documentation with the United States Department of the Treasury ("Treasury") with respect to payroll funding support ("Payroll Support") pursuant to three separate Payroll Support programs: the "PSP1 Payroll Support Program" in April 2020 under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"); the "PSP2 Payroll Support Program” in January 2021 under the Consolidated Appropriations Act, 2021; and the "PSP3 Payroll Support Program" in April 2021 under the American Rescue Plan Act of 2021.
As consideration for its receipt of funding under each of these Payroll Support programs, the Company issued promissory notes in favor of Treasury (each initially classified as a component of Long-term debt less current maturities in the unaudited Condensed Consolidated Balance Sheet). The note associated with the PSP1 Payroll Support Program was originally due in April 2030 but was redeemed early on April 17, 2025 in the amount of $976 million, utilizing available cash on hand. The notes associated with the PSP2 and PSP3 Payroll Support Programs are due in January and April 2031, respectively.
On the day after the fifth anniversary of each of the PSP2 and PSP3 Notes, during January and April 2026, respectively, the applicable interest rates are scheduled to change to the Secured Overnight Financing Rate plus two percent.
Revolving Credit Facility
As of September 30, 2025, the Company had access to $1.5 billion under its amended and restated revolving credit facility (the "Amended Credit Agreement"), which expires in August 2028, reflecting the Company’s exercise of the accordion feature to increase the size of the facility on July 22, 2025. For the nine months ended September 30, 2025 and 2024, there were no amounts outstanding under the Amended Credit Agreement.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
Repurchase of Common Stock
Under an accelerated share repurchase program entered into by the Company with third-party financial institutions in first quarter 2025 (the "First Quarter 2025 ASR Program"), the Company paid $750 million and received an initial delivery of 19,867,550 shares during February 2025, representing an estimated 80 percent of the shares to be purchased by the Company under the First Quarter 2025 ASR Program. This share amount was based on the $30.20 closing price of the Company's common stock on February 19, 2025. Final settlement of the First Quarter 2025 ASR Program occurred in April 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 April 2025. Upon settlement, the third-party financial institutions delivered 4,242,267 additional shares of the Company’s common stock to the Company. Upon completion of the First Quarter 2025 ASR Program in April 2025, the average purchase price per share for the 24,109,817 shares repurchased was $31.11.
Under an accelerated share repurchase program entered into by the Company with third-party financial institutions in second quarter 2025 (the "Second Quarter 2025 ASR Program"), the Company paid $1.5 billion and received an initial delivery of 45,300,111 shares during April 2025, representing an estimated 80 percent of the shares to be purchased by the Company under the Second Quarter 2025 ASR Program. This share amount was based on the $26.49 closing price of the Company's common stock on April 25, 2025. Final settlement of the Second Quarter 2025 ASR Program occurred in August 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 July 2025. Upon settlement, the third-party financial institutions delivered 934,237 additional shares of the Company's common stock to the Company in July 2025, and 388,662 additional shares of the Company's common stock to the Company in August 2025. Upon completion of the Second Quarter 2025 ASR Program in August 2025, the average purchase price per share for the 46,623,010 shares repurchased was $32.17.
On July 23, 2025, the Board approved a new $2.0 billion share repurchase authorization of the Company's common stock. Under an accelerated share repurchase program entered into by the Company with a third-party financial institution in third quarter 2025 (the "Third Quarter 2025 ASR Program"), the Company paid $250 million and received an initial delivery of 6,368,213 shares during September 2025, representing an estimated 80 percent of the shares to be purchased by the Company under the Third Quarter 2025 ASR Program. This share amount was based on the $31.39 and $31.43 closing price of the Company's common stock on September 5, 2025 and September 15, 2025, respectively. Final settlement of the Third Quarter 2025 ASR Program occurred in October 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 October 2025. Upon settlement, the third-party financial institution delivered 1,409,551 additional shares of the Company’s common stock to the Company. Upon completion of the Third Quarter 2025 ASR Program in October 2025, the average purchase price per share for the 7,777,764 shares repurchased was $32.14.
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co. Notes to Condensed Consolidated Financial Statements (unaudited) |
- RESTRUCTURING
On February 17, 2025, the Company announced a reduction in its workforce designed to reduce operating costs, increase efficiency, and create a leaner and more agile organization as part of its transformational plan. The workforce reduction of approximately 1,750 Employee roles was focused almost entirely on corporate overhead and leadership positions and represented approximately 15 percent of corporate positions, including senior leadership. Separations were substantially complete by the end of second quarter 2025.
As a result of this workforce reduction, the Company recorded a one-time expense of $62 million in first quarter 2025, which is included on the unaudited Condensed Consolidated Statement of Comprehensive Income as part of Salaries, wages, and benefits and Other operating expenses. Substantially all of the expense is due to Employee severance payments and related professional fees and was substantially paid in first and second quarter 2025, with approximately $2 million remaining in Accrued liabilities on the unaudited Condensed Consolidated Balance Sheet as of September 30, 2025. The Company does not expect to incur any material additional costs in connection with this reduction in workforce.
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