What changed in this filing

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Item 1A. Risk Factors

2024-02-06 compared with 2023-02-07 · 167 added, 166 removed, 315 unchanged (51% of the section changed)

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

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

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

experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected.

• The Company's business is labor intensive, with most Employees represented by labor unions;

therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives or if the Company were unable to employ sufficient numbers of qualified Employees to maintain its operations.

therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives or if the Company were unable to employ and retain sufficient numbers of qualified Employees to maintain its operations.

• The Company is currently dependent on a single engine supplier, as well as single suppliers of certain other aircraft parts and equipment;

therefore, the Company could be materially adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or equipment from Boeing or other suppliers or adequate maintenance or other support from any of these suppliers, (ii) if Boeing or other suppliers were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or (iii) in the event of a mechanical or regulatory issue associated with the Company's aircraft parts or equipment.

therefore, the Company could be materially adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or equipment from Boeing or other suppliers or adequate maintenance or other support from any of these suppliers at commercially reasonable terms, (ii) if Boeing or other suppliers were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or (iii) in the event of a mechanical or regulatory issue associated with the Company's aircraft parts or equipment.

• The airline industry has faced on-going security concerns and related cost burdens;

further threatened or actual terrorist attacks, or other hostilities, even if not made directly on the airline industry, could significantly harm the airline industry and the Company's operations.

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

further threatened or actual terrorist attacks, war, or other hostilities, even if not made directly on the airline industry, could significantly harm the airline industry and the Company's operations.

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

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

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

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

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

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• The Company is increasingly dependent on technology to operate its business and continues to implement substantial changes to its information systems;

any failure, disruption, breach, or delay in implementation of the Company's information systems could materially adversely affect its operations.

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

COVID-19 Risks

• The COVID-19 pandemic, including associated variants, has materially and adversely affected, and could in the future materially and adversely affect, the Company’s results of operations, financial position, and liquidity.

• The Company has entered into agreements with Treasury with respect to funding support;

pursuant to these agreements the Company has agreed to certain restrictions on how it operates its business and uses its cash, which could limit the ability of the Company to take actions that it otherwise might have determined were in the best interests of the Company and its Shareholders.

any failure, disruption, breach, or delay in implementation of necessary changes to the Company's information systems could materially adversely affect its operations.

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

Legal, Regulatory, Compliance, and Reputational Risks

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

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

• Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth;

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• The Company is subject to various environmental requirements and risks, including increased regulation, changing consumer preferences, physical, environmental, and climate risks, and risks associated with climate change;

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

the cost of compliance with more stringent environmental regulations, failure to comply with environmental regulations, or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on the Company’s results of operations.

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

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

• The Company is currently subject to pending litigation, and if judgment were to be rendered against the Company in litigation, such judgment could adversely affect the Company's operating results.

• The Company is currently subject to regulatory actions and pending litigation, and if judgment, penalties, or fines were to be rendered against the Company, such judgment, penalties, or fines could adversely affect the Company's operating results.

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

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

In addition, to the extent business travel recovers from the COVID-19 pandemic, businesses may require the purchase of less expensive tickets to reduce costs.

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

In addition, to the extent business travel recovers to pre-pandemic levels, businesses may require the purchase of less expensive tickets to reduce costs.

This, in turn, can result in a decrease in average revenue per seat.

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

Consumer behavior related to traveling may be negatively impacted by adverse changes in the perceived or actual economic climate, including declines in income levels or disposable income, and/or loss of wealth resulting from the impact of economic conditions.

Any continuing or future U.S.

or global economic uncertainty could further negatively affect the Company's results of operations and could cause the Company to further adjust its business strategies.

Additionally, because expenses of a flight do not vary significantly with the number of passengers carried, a relatively small change in the number of passengers can have a disproportionate effect on an airline’s operating and financial results.

Additionally, because a significant portion of expenses to operate a flight do not vary significantly with the number of passengers carried, a relatively small change in the number of passengers can have a disproportionate effect on an airline’s operating and financial results.

Therefore, any general reduction in airline passenger traffic could adversely affect the Company's results of operations.

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Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented approximately 24.0 percent of the Company's operating expenses for 2023.

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

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

As discussed under "Business - Cost Structure," although market jet fuel prices remained volatile throughout the year, Fuel and oil expense for 2023 remained high, primarily due to higher capacity in response to consumer demand.

Even a small change in market fuel prices can significantly affect profitability.

Furthermore, volatility in fuel prices can be due to many external factors that are beyond the Company's control.

For example, fuel prices can be impacted by political, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and the potential for hostilities or other conflicts in oil producing areas;

Furthermore, the cost of fuel can be extremely volatile and unpredictable and subject to many external factors that are beyond the Company's control.

For example, fuel prices can be impacted by political,

environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and the potential for hostilities or other conflicts in oil producing areas;

(ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors;

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However, energy prices can fluctuate significantly in a relatively short amount of time.

Because the Company uses a variety of different derivative instruments at different price points, the Company is subject to the risk that the fuel derivatives it uses will not provide adequate protection against significant increases in fuel prices and in some cases could in fact result in hedging losses, which could result in the Company effectively paying higher than market prices for fuel, thus creating additional volatility in the Company's earnings.

In some cases, these derivative instruments could result in hedging losses, which could result in the Company effectively paying higher than market prices for fuel, thus creating additional volatility in the Company's earnings.

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

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The Company is also reliant upon the readily available supply and timely delivery of jet fuel to the airports that it serves.

A disruption in that supply could present significant challenges to the Company's operations and could ultimately cause the cancellation of flights and/or the inability of the Company to provide service to a particular airport.

A disruption in that supply could present significant challenges to the Company's operations and could ultimately cause the cancellation of flights and/or hinder the Company’s ability to provide service to a particular airport.

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

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The Company's low-cost structure has been one of its primary competitive advantages, as it has generally enabled the Company to offer low fares, drive traffic volume, grow market share, and protect profits.

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

Competitor cost reduction measures such as accelerated fleet retirements, capacity cuts, and network reductions, could have a negative impact on the Company's relative cost position.

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

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

In response, most major U.S.

airlines now offer expanded cabin segmentation fare products, such as "basic economy" and "premium economy" products.

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

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

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

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

The Company's low-cost structure can also be negatively impacted by costs over which the Company has limited control.

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

This limited control has negatively impacted the Company's low-cost position, in particular in the context of the Company's cost reduction efforts during the COVID-19 pandemic.

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

Additionally, as indicated under "Business - Employees," the majority of Southwest's unionized Employees, including its Pilots;

Flight Attendants;

This limited control has negatively impacted the Company's low-cost structure and position.

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

Additionally, as indicated under "Business - Employees," a significant number of Southwest's unionized Employees, including its Flight Attendants;

Ramp, Operations, Provisioning, and Freight Agents;

and Meteorologists are in unions currently in negotiations for labor agreements, which could result in additional pressure on the Company's low-cost structure.

and Flight Simulator Technicians are in unions currently in negotiations for labor agreements, which could result in additional pressure on the Company's low-cost structure.

Further, in response to staffing challenges, the Company has increased the minimum pay for certain of its workforce and provided incentive pay in certain instances.

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Further, the Company cannot control decisions by other airlines to reduce their capacity.

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

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

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

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

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

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

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Available commercial insurance could be more expensive in the future and/or have material differences in coverage than insurance that has historically been provided and may not be adequate to protect against the Company's risk of loss from future events, including acts of terrorism and severe weather events.

With respect to any insurance claims, policy coverages and claims are subject to acceptance by the many insurers involved and may require arbitration and/or mediation to effectively settle the claims over prolonged periods of time.

With respect to any insurance claims, policy coverages and claims are subject to acceptance by the many insurers involved and may require arbitration, mediation, and/or litigation to effectively settle the claims over prolonged periods of time.

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

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

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

Except for changes in the price of fuel, changes in operating expenses for airlines have been largely driven by changes in capacity.

However, the Company's operating expenses are largely fixed once flight schedules are published;

and the Company experienced capacity lower than 2019 during 2020, 2021, and 2022 due to the COVID-19 pandemic, which has continued to pressure unit costs.

During the COVID-19 pandemic, the Company has made schedule adjustments based on consumer demand, booking trends, and available crew resources.

The limits on availability of crew resources could continue to require the Company to make additional schedule adjustments and could have a material adverse impact on the Company's results of operations.

The Company participates in fuel consortium arrangements and fuel committees at certain airports.

Fuel consortiums and fuel committees have, directly or indirectly, incurred debt obligations for improvements and capital projects for fuel facilities.

While each participating airline in a consortium is generally allocated a share of the consortium’s costs based on usage, the inability of other participating airlines to satisfy their obligations with respect to fuel consortiums and fuel committees could adversely impact the Company’s financial results.

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

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

In response, most major U.S.

airlines now offer expanded cabin segmentation fare products, such as "basic economy" and "premium economy" products.

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

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

The Company is reliant on the success of its revenue strategies and other strategic plans and initiatives to grow and to help offset increasing costs.

The execution of the Company's strategic plans has been significantly negatively affected by the COVID-19 pandemic.

Nevertheless, the Company began to take actions in 2021 and 2022 to add staffing and increase the starting wage rate for certain workgroups, manage its fleet and fleet order book, and better optimize its network in an effort to position itself to opportunistically recover and grow as the pandemic subsides.

The execution of the Company's strategic plans was significantly negatively affected by the COVID-19 pandemic.

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

The timely and effective execution of the Company's strategies is dependent upon, among other factors, (i) the Company's ability to balance its network schedule and capacity with the availability and location of its crew resources;

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

The Company's revenues are sensitive to the actions of other carriers with respect to pricing, routes, loyalty programs, scheduling, capacity, customer service, operational reliability, comfort and amenities, cost structure, aircraft fleet, strategic alliances, and code-sharing and similar activities.

The Company's revenues are sensitive to the actions of other carriers with respect to pricing, routes, loyalty programs, scheduling, capacity, customer service, operational reliability, comfort and amenities, product offerings, cost structure, aircraft fleet, strategic alliances, and code-sharing and similar activities.

Operational Risks

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

The Boeing 737 MAX aircraft are crucial to the Company’s growth plans and fleet modernization initiatives.

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

The Boeing MAX aircraft are crucial to the Company’s ability to operate and grow its business and fleet modernization initiatives.

The Company operates the -8 out of the MAX family of aircraft and is awaiting delivery of the -7 out of the MAX family of aircraft.

The Company's contractual delivery schedule for the -7 is dependent on the FAA issuing required certifications and approvals to Boeing and the Company.

Deliveries of MAX aircraft from Boeing to the Company are subject to Boeing's production schedules and volumes.

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

In January 2024, the FAA announced that it had informed Boeing that the FAA would not (i) agree to any request from Boeing for an expansion in production or (ii) approve additional production lines for the MAX aircraft until the FAA is satisfied that any applicable Boeing quality control issues are resolved.

Further, the Company's contractual delivery schedule for the -7 is dependent on the FAA issuing required certifications and approvals to Boeing and the Company.

In January 2024, Boeing announced plans to withdraw an exemption request with the FAA and incorporate an engineering solution as part of the -7 certification process.

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.

Boeing no longer manufactures versions of the 737 other than the MAX family of aircraft.

If the 737 MAX aircraft were to again become unavailable for the Company’s flight operations, or if the -7 certification is not completed in a timely manner, the Company’s growth would be restricted unless and until it could procure and operate other types of aircraft from Boeing or another manufacturer, seller, or lessor, and the Company’s operations would be materially adversely affected.

In particular, if the Company’s growth were to be dependent upon the introduction of a new aircraft make and model to the Company’s fleet, the Company would need to, among other things, (i) develop and implement new maintenance, operating, and training programs;

If the MAX aircraft were to become unavailable for the Company’s flight operations, the Company's operations would be materially adversely affected.

Further, if the -7 certification is not completed in a timely manner, the Company’s growth and network plans could be restricted unless and until it could procure and operate other types of aircraft from Boeing or another manufacturer, seller, or lessor.

If the Company’s operations or growth were to be dependent upon the introduction of a new aircraft make and model to the Company’s fleet, the Company would need to, among other things, (i) develop and implement new maintenance, operating, and training programs;

(ii) secure extensive regulatory approvals;

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

As of December 31, 2022, approximately 83 percent of the Company's Employees were represented for collective bargaining purposes by labor unions, making the Company particularly exposed in the event of labor-related job actio ns.

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

Employment-related matters (some of which relate to negotiated items) that have impacted the Company's results of operations include hiring/retention rates, attendance, pay rates, outsourcing, work rules, health care costs, and retirement benefits.

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

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

The Company’s results could be materially adversely affected in the event of conflicts with its Employees or its Employees’ representatives.

The Company’s business is labor intensive;

therefore, the Company would be adversely affected if it were to continue to be unable to employ sufficient numbers of qualified Employees to maintain its operations.

therefore, the Company has been, and could in the future be, adversely affected if it were unable to employ and retain sufficient numbers of qualified Employees to maintain its operations.

The Company’s success depends on its ability to attract and retain skilled personnel.

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

Staffing-related challenges could continue to intensify and limit the Company's ability to optimally adjust capacity.

Although the Company has surpassed pre-pandemic staffing levels as of December 31, 2023, staffing-related challenges could continue to occur in certain areas and

limit the Company's ability to optimally adjust capacity.

The inability to recruit and retain skilled personnel or the unexpected loss of key skilled personnel could continue to adversely affect the Company’s operations.

The Company is currently dependent on a single engine supplier, as well as single suppliers of certain other aircraft parts and equipment;

therefore, the Company could be materially adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or equipment from Boeing or other suppliers or adequate maintenance or other support from any of these suppliers at commercially reasonable terms, (ii) if Boeing or other suppliers were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or (iii) in the event of a mechanical or regulatory issue associated with the Company's aircraft parts or equipment.

The Company is dependent on Boeing as its sole supplier for many of its aircraft parts.

The Company is also dependent on sole or limited suppliers for certain other aircraft parts, equipment, and services.

If Boeing, or other suppliers, were unable or unwilling to timely provide adequate products or support for their products, were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or in the event of a mechanical or regulatory issue associated with engines or other parts, the Company's operations could be materially adversely affected.

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

The Company is also dependent on sole or limited suppliers for aircraft engines and certain other aircraft parts, equipment, and services.

If Boeing, or other suppliers, were unable or unwilling to timely provide adequate products or support for their products at commercially reasonable terms, were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or in the event of a mechanical or regulatory issue associated with engines or other parts or services, the Company's operations could be materially adversely affected.

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

The Company is also dependent on third-party vendors and service providers.

The COVID-19 pandemic and current economic conditions have resulted, and could continue to result, in delays and other performance issues, ceased operations, or even bankruptcies among suppliers, third-party vendors, and service providers.

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

The airline industry has faced on-going security concerns and related cost burdens;

further threatened or actual terrorist attacks, or other hostilities, even if not made directly on the airline industry, could significantly harm the airline industry and the Company's operations.

Terrorist attacks or other crimes and hostilities, actual and threatened, have from time to time materially adversely affected the demand for air travel and also have necessitated increased safety and security measures and related costs for the Company and the airline industry generally.

Terrorist attacks or other crimes and hostilities, actual and threatened, have from time to time materially adversely affected the demand for air travel and have necessitated increased safety and security measures and related costs for the Company and the airline industry generally.

Safety and security measures can create delays and inconveniences, which in turn can reduce the Company's competitiveness against surface transportation for short-haul routes and alternatives to transportation such as videoconferencing, business communication platforms, and the Internet.

Additional terrorist attacks or other hostilities, even if not made directly on the airline industry, or the fear of such attacks or other hostilities (including elevated national threat warnings, government travel warnings to certain destinations, travel restrictions, or selective cancellation or redirection of flights due to terror threats) would likely have a further significant negative impact on the Company and the airline industry.

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

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

In recent years, the Company has increasingly focused on designing its network around core stations in an effort to provide greater connectivity and support operational reliability and recoverability.

A significant interruption or disruption in service at one of the Company’s core stations, resulting from air traffic control systems, weather incidents, performance by third-party service providers, interruption of the Company’s technology, the availability and location of the Company’s crew resources, fuel supplies, or otherwise, could result in the cancellation or delay of a significant portion of the Company’s flights and, as a result, could have a severe impact on its business, results of operations and financial condition.

A significant interruption or disruption in service at one of the Company’s core stations (such as Denver or Chicago-Midway), resulting from air traffic control systems, weather incidents, performance by third-party service providers, interruption of the Company’s technology, the availability and location of the Company’s crew resources, fuel supplies, or otherwise, has resulted, and could again in the future result, in the cancellation or delay of a significant portion of the Company’s flights and, as a result, has had, and could again in the future have, a severe impact on its business, results of operations and financial condition.

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

An inability to quickly and effectively restore operations following adverse weather or

a localized disaster or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company’s business, results of operations, and financial condition.

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

localized disaster, or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company’s business, results of operations, and financial condition.

While the Company operates across a diverse geographic footprint, its operations at times have been adversely and materially impacted by severe weather, such as Hurricanes Harvey and Irma in 2017 and Winter Storm Elliott in December 2022.

Depending on location, the Company’s assets and route network are or could be exposed to ongoing risks arising from a variety of adverse weather conditions or localized natural or manmade disasters such as earthquakes, volcanoes, wildfires, hurricanes, tropical storms, tornadoes, floods, sea-level rise, severe winter weather, sustained or extreme cold or heat, drought, or other disturbances, actual or threatened.

Depending on location, the Company’s assets and route network are or could be exposed to ongoing risks arising from a variety of adverse weather conditions or localized natural or manmade disasters such as earthquakes, volcanoes, wildfires (such as the 2023 Maui wildfires), hurricanes, tropical storms, tornadoes, floods, sea-level rise, severe winter weather, sustained or extreme cold or heat, drought, or other disturbances, actual or threatened.

Extreme weather conditions, including increases in the frequency, severity, or duration of severe weather events (whether or not caused by anthropogenic climate change), can disrupt air travel from time to time, ground planes, damage equipment and increase maintenance costs, cause delays and cancellations or other network disruptions, require implementation of weight limitations due to increased temperatures, increase turbulence-related injuries, cause increases in fuel consumption to avoid such weather, disrupt the Company’s supply chains (including fuel, parts, and service provider disruptions), and otherwise adversely affect the Company’s assets, operations, and infrastructure.

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• adverse weather and natural disasters and the associated effects on the Company's operations, which have, in certain circumstances, such as Winter Storm Elliott, impacted the Company's operational recovery to a greater degree than other airlines;

• changes in consumer preferences, perceptions, spending patterns, or demographic trends (including, for example, changes in travel patterns due to weather, government restrictions or sequestration);

• actual or potential disruptions in the air traffic control system (including, for example, as a result of FAA system outages or inadequate FAA staffing levels due to government restrictions or sequestration);

• changes in consumer preferences, perceptions, spending patterns, or demographic trends (including, for example, changes in travel patterns due to economic conditions, weather, or government restrictions, sequestration, or shutdowns);

• actual or potential disruptions in the air traffic control system (including, for example, as a result of FAA system outages or inadequate FAA staffing levels, as the United States has recently seen a shortage of air traffic controllers);

• actual or perceived delays at various airports resulting from government restrictions (including, for example, longer wait-times at TSA checkpoints due to inadequate TSA staffing levels);

• changes in the competitive environment due to industry consolidation, industry bankruptcies, and other factors;

• delays in deliveries of new aircraft (including, for example, due to delays in FAA certification or due to the closure of the FAA's aircraft registry during government restrictions);

• delays in deliveries of new aircraft (including, for example, due to delays in the manufacturing process, in FAA certification, or due to the closure of the FAA's aircraft registry during government restrictions or shutdowns);

• collective bargaining requirements and demands;

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The Company is increasingly dependent on technology to operate its business and continues to implement substantial changes to its information systems;

any failure, disruption, breach, or delay in implementation of the Company's information systems could materially adversely affect its operations.

any failure, disruption, breach, or delay in implementation of necessary changes of the Company's information systems could materially adversely affect its operations.

The Company is increasingly dependent on the use of complex technology and systems to run its ongoing operations and support its strategic objectives.

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Implementation and integration require a balancing between the introduction of new capabilities and the managing of existing systems, and present the risk of operational or security inadequacy or interruption, which could materially affect the Company's ability to effectively operate its business and/or could negatively impact the Company's results of operations.

The Company is also reliant upon the performance of third parties for timely and effective implementation and support of many of its technology initiatives, to provide required data and information services, and for maintaining adequate information security measures within the services and/or software they deliver, and such third parties are occasionally not timely in providing the services required by the Company.

If any of the Company's significant technologies or automated systems were to cease functioning, or if its third-party service providers or data providers were to fail to adequately and timely provide required information or reports, technical support, system maintenance, security, or software upgrades for any of the Company's existing systems, the Company could experience service interruptions, delays, and loss of critical data, which could harm its operations and result in financial losses and reputational damage.

If any of the Company's significant technologies or third-party systems were to cease functioning, or if its third-party service providers or data providers were to fail to adequately and timely provide required information or reports, technical support, system maintenance, security, or software upgrades for any of the Company’s existing systems, the Company could experience service interruptions, delays, and loss of critical data, which could harm its operations and result in financial losses and reputational damage.

In the ordinary course of business, the Company’s systems will continue to require modification and refinements to address operational reliability, growth, and changing business requirements.

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

Changes to the Company’s technology and systems could also expose the Company to intellectual property risks, such as allegations of infringement of third-party patents or copyrights.

Defending against allegations could involve significant fees and resources.

If the Company is found to infringe, the Company may be liable for damages.

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

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

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

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

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

of the generated content.

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

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

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

The Company has experienced material technology system interruptions and delays that have made its websites and operational systems unavailable or slow to respond, which has prevented the Company from efficiently processing Customer transactions or providing services.

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Similarly, the Company has experienced operational challenges in connection with severe weather events and associated crew scheduling, such as during and subsequent to Winter Storm Elliott.

While the Company is still assessing the causes of the disruption, the Company’s preliminary assessment is that the crew scheduling software worked as designed during this event.

However, due to a number of factors, including unanticipated changes in the severity of the

weather, the Company began implementing frequent close-in flight cancellations.

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

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

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

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

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

The Company believes the unanticipated crew scheduling challenges, together with several other factors, contributed to the extent of the operational disruption.

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

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

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Any of these events could damage the Company's reputation and be expensive to remedy.

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

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

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

The Company must receive information related to its Customers and Employees in order to run its business, and the Company's operations depend upon secure retention and the secure transmission of information over public networks, including information permitting cashless payments.

This information is subject to the continually evolving risk of intrusion, tampering, and theft.

The Company must receive information related to its Customers and Employees in order to run its business, and the Company's operations depend upon secure processing, storage, and retention, including the secure transmission of information over public networks such as for information permitting cashless payments.

All information processed, stored, and retained by Company or on behalf of Company is subject to the continually evolving risk of intrusion, tampering, and theft.

Although the Company maintains systems to prevent or defend against these risks, these systems require ongoing monitoring and updating as technologies change, and security could be compromised, personal or confidential information could be misappropriated, or system disruptions could occur.

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

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

A compromise of the Company's security systems could adversely affect the Company's reputation and disrupt its operations and could also result in litigation against the Company or the imposition of penalties.

While the Company seeks to obtain assurances that these third parties will protect this information and systems in accordance with legal requirements and industry standards, there is a risk the security of systems and data held by third parties could be compromised.

A compromise of the Company's systems could adversely affect the Company's reputation and disrupt its operations and could also result in litigation against the Company or the imposition of penalties.

In addition, it could be costly to remediate.

Although the Company has not experienced cyber incidents that are individually, or in the aggregate, material, the Company has experienced cyber-attacks in the past, which have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company.

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

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

Although the Company has not experienced cyber incidents that are individually, or in the aggregate, material, the Company has experienced cyber-attacks in

the past, which have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company.

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

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

It is possible that these types of inquiries regarding cybersecurity breaches increase in frequency and scope.

In addition, new laws, amendments to or reinterpretations of existing laws, regulations, standards, and other obligations may require the Company to incur additional costs and restrict its business operations, and may require the Company to change how it uses, collects, stores, transfers, or otherwise processes certain types of personal information and to implement new processes to comply with those laws and its Customers’ exercise of their rights thereunder.

These laws also are not uniform, as certain laws may be more

stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information, and such laws may differ from each other, which may complicate compliance efforts.

Compliance in the event of a widespread data breach may be costly.

As a result, it is possible that these types of inquiries regarding cybersecurity incidents increase in frequency and scope.

In addition, new laws, amendments to or reinterpretations of existing laws, regulations, standards, and other obligations may require the Company or its third-party service providers to incur additional costs and restrict its business operations, and may require the Company or its third-party service providers to change how they use, collect, store, transfer, or otherwise process certain types of personal information and to implement new processes to comply with those laws and its Customers’ exercise of their rights thereunder.

These laws also are not uniform, as certain laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information, and such laws may differ from each other, which may complicate compliance efforts.

Accordingly, compliance in the event of a widespread data breach may be costly.

Any failure or perceived failure by the Company or its third-party service providers to comply with any applicable federal, state, or similar foreign laws, rules, regulations, industry standards, policies, certifications, or orders relating to data privacy and security, or any compromise of security that results in the theft, unauthorized access, acquisition, use, disclosure, or misappropriation of personal data or other customer data, could result in significant awards, fines, civil and/or criminal penalties or judgments, proceedings, or litigation by governmental agencies or customers, including class action privacy litigation in certain jurisdictions and negative publicity and reputational harm, one or all of which could have an adverse effect on the Company’s reputation, business, financial condition, and results of operations.

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The Company continues to assess and invest in the growing needs of the cybersecurity team through the allocation of skilled personnel, ongoing training, and support of the adoption and implementation of technologies coupled with cybersecurity risk management frameworks.

Additionally, as cyber incidents and disruptions to technology networks become increasingly sophisticated, the Company may also incur significant costs to modify, upgrade, or enhance its cybersecurity measures to protect against such attacks.

Additionally, as cyber attacks become increasingly sophisticated, the Company may also incur significant costs to modify, upgrade, or enhance its cybersecurity measures to protect against such attacks.

The Company may not be able to anticipate, detect, or prevent cyberattacks or security breaches, particularly because the methodologies used by attackers change frequently or may not be recognized until such attack is launched, and because attackers are increasingly using technologies specifically designed to circumvent cybersecurity measures and avoid detection.

During the majority of 2020, and continuing through 2021 and 2022, the Company has offered the ability to work remotely to many of the Company's office and clerical Employees, including many of its Employees at the Company's headquarters campus.

The Company offers the ability to work remotely to many of the Company's office and clerical Employees, including many of its Employees at the Company's headquarters campus.

Maintaining a remote work force significantly increases the risk of cyber incidents and events, such as computer viruses and security breaches, due to increased targeted attacks, which have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company.

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

COVID-19 Risks

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

The COVID-19 pandemic, including associated variants materially and adversely affected passenger demand and bookings, thereby materially and adversely affecting operating income and cash flows from operations during 2020, 2021, and early 2022.

Any further impact of the COVID-19 pandemic on the Company’s business and its financial and operational performance will depend on future developments, including (i) the duration, spread, severity, or any recurrence of the COVID-19 pandemic, including through any new variant strains of the underlying virus;

(ii) the effectiveness, availability, and usage of vaccines;

(iii) the impact of government mandates, directives, orders, regulations, and other governmental actions related to the COVID-19 pandemic;

(iv) the extent of the impact of the COVID-19 pandemic on overall demand for air travel and the Company's related business plans and decisions;

(v) the impact of the COVID-19 pandemic on the Company's ability to retain key Employees;

and (vi) the impact of the COVID-19 pandemic on the Company’s access to capital, all of which are highly uncertain and cannot be predicted.

The COVID-19 pandemic may also materially and adversely affect the Company’s supply chain.

For example, the Company is dependent on Boeing as its sole supplier for many of its aircraft parts.

The Company is also dependent on (i) sole or limited suppliers for aircraft engines and certain other aircraft parts, equipment, and services;

party vendors;

and (iii) service providers.

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

The effects of the COVID-19 pandemic on the financial markets may materially and adversely affect the Company’s access to capital and cost of capital, including its ability to raise funds through equity or debt financings.

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

The terms of future debt agreements could include more restrictive covenants or require incremental collateral, which could further restrict the Company’s business operations.

There is no guarantee that debt or equity financings will be available in the future to fund the Company’s obligations, or that they will be available on terms consistent with the Company’s expectations.

Some businesses have continued to restrict non-essential travel for their employees, which has kept demand for business air travel below pre-pandemic levels.

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

The COVID-19 pandemic continues to evolve.

The Company has entered into agreements with Treasury with respect to funding support;

Since the start of the pandemic, the Company entered into definitive documentation with Treasury with respect to 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;

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.

Pursuant to these agreements, the Company has agreed to certain ongoing restrictions on, and requirements with respect to, its business and operations, including the following:

• The Company was prohibited from repurchasing its common stock and from paying dividends or making capital contributions with respect to its common stock through September 30, 2022;

• The Company must place certain restrictions on certain higher-paid employee and executive pay, including limiting pay increases and severance pay or other benefits upon terminations, until April 1, 2023;

• The Company must maintain certain internal controls and records relating to the Payroll Support funds, and is subject to additional reporting requirements.

These restrictions and requirements may necessitate that the Company take, or limit taking, actions it might otherwise believe to be in the best interests of the Company and its Shareholders.

For example, the restrictions could require that the Company change certain of its business practices, risk the Company's ability to retain key personnel, and expose the Company to additional costs (including increased compliance costs).

Legal, Regulatory, Compliance, and Reputational Risks

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

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

The FAA promulgates and enforces regulations affecting the airline industry and exercises extensive regulatory oversight of the Company’s operations.

The FAA from time to time also issues orders or directives relating to the

maintenance and operation of aircraft.

FAA orders and directives can be issued with little or no notice, and in certain instances, require the temporary grounding of aircraft and/or the responsive investment of operational and financial resources.

The issuance of new FAA regulations, regulatory amendments, or orders or directives, such as FAA restrictions associated with certain wireless telecommunications systems, could result in flight schedule adjustments and groundings or delays in aircraft deliveries, as well as lower operating revenues, operating income, and net income due to a variety of factors, including, among others, (i) lost revenue due to flight cancellations and disruptions as a result of a smaller operating aircraft fleet, (ii) the lack of ability to make corresponding reductions in expenses because of the fixed nature of many expenses, and (iii) possible negative effects on Customer confidence and airline choice.

The FAA from time to time also issues orders or directives relating to the maintenance and operation of aircraft.

FAA orders and directives can be issued with little or no notice, and in certain instances, require the temporary grounding of aircraft, such as the FAA’s March 2019 grounding of all Boeing 737 MAX aircraft, and/or the responsive investment of operational and financial resources.

The issuance of new FAA regulations, regulatory amendments, or orders or directives, such as FAA restrictions associated with certain wireless telecommunications systems, could result in flight schedule adjustments and groundings or delays in aircraft deliveries, as well as lower operating revenues, operating income, and net income due to a variety of factors, including, among others, (i) lost revenue due to flight cancellations and operational disruptions as a result of a smaller operating aircraft fleet, (ii) the lack of ability to make corresponding reductions in expenses because of the fixed nature of many expenses, and (iii) possible negative effects on Customer confidence and airline choice.

Government regulation affecting the Company is discussed in more detail in “Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth;

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The FAA's protracted transition to modernized air traffic control systems and newer technologies could adversely impact airspace capacity and the overall efficiency of the system, resulting in limited opportunities for the Company to grow, longer scheduled flight times, increased delays and cancellations, and increased fuel consumption and aircraft emissions.

For example, due to air traffic control staffing challenges, government agencies have had to implement short-term capacity constraints during peak travel periods or adverse weather conditions in certain markets, resulting in delays and disruptions of air traffic.

The continuation of these air traffic control constraints or the FAA's inability to meet staffing needs on a long-term basis may have a material adverse effect on the Company's operations.

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• changes to environmental regulations;

• mandates that affect the usage of SAF;

• enhanced emissions and climate reporting obligations;

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• changes in laws that may limit or regulate the Company's ability to promote the Company’s business or fares;

• changes in laws that could affect the value of the Company’s existing contracts or agreements, such as its co-branded credit card agreement;

• airspace closures or restrictions, such as restrictions on operations in markets where certain wireless telecommunications systems may cause interference with certain aircraft avionics;

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The Company is subject to various environmental requirements and risks, including increased regulation, changing consumer preferences, physical, environmental, and climate risks, and risks associated with climate change;

The Company is subject to federal, state, local, and international laws and regulations relating to the protection of the environment, including those relating to aircraft and ground-based emissions, discharges to water systems, safe drinking water, and the management of hazardous substances and waste materials.

The Company is subject to evolving federal, state, local, and international laws and regulations relating to the protection of the environment, including those relating to aircraft and ground-based emissions, discharges to water systems, safe drinking water, and the management of hazardous substances and waste materials.

In addition, while the Company cannot predict what requirements may be imposed in the future, federal, state, local, and international legislative and regulatory bodies are generally increasingly focused on climate change and reducing greenhouse gas emissions (“GHG”), including CO 2 emissions.

For example, as discussed in more detail under “Business – Regulation,” the federal government, as well as several state and local governments, the governments of other countries, and the United Nations’ International Civil Aviation Organization have implemented legislative and regulatory proposals and voluntary measures intended to reduce GHG emissions.

Future policy, legal, regulatory, or other market developments could require the Company to reduce its emissions, modify its supply chain practices or aspects of its operations, make capital investments to purchase specific types of equipment or technologies, secure carbon offset credits, disclose or report additional GHG information, or otherwise incur additional costs related to climate objectives or because of the Company’s GHG emissions.

Future policy, legal, regulatory, or other market developments could require the Company to reduce its emissions, increase its usage of SAF and other forms of lower carbon energy, modify its supply chain practices or aspects of its operations, make capital investments to purchase specific types of equipment or technologies, secure carbon offset credits, disclose or report additional GHG information, or otherwise incur additional costs related to climate objectives or because of the Company’s GHG emissions.

Additional regulation could result in increased regulatory or permitting requirements for the Company from multiple jurisdictions, as well as added costs on fuel suppliers that may be passed through to the Company.

For example, the California Air Resources Board has proposed amendments to California’s Low Carbon Fuel Standard (“ LCFS”) regulation that would subject intrastate fossil jet fuel to the LCFS, which could in turn increase the demand for and the costs of the limited supply of SAF currently available.

The proposed amendments could also result in increased costs of fossil jet fuel in the California market because of the need for jet fuel producers to produce SAF or buy LCFS credits.

Other states could propose or adopt similar obligations in the future.

Until the timing, scope, and extent of such future policy, legal, regulatory, or other market developments become known, the Company cannot predict their effect on the Company’s cost structure or its operating results.

Violations of environmental and climate change-related laws and regulations could lead to significant fines and penalties and reputational harm.

The Company could also face increased risks of litigation resulting from any enhanced disclosure requirements related to climate change.

Furthermore, to the extent that the Company may seek to achieve its voluntary climate goals and mandatory climate obligations through the use of carbon offsets, it may be exposed to additional costs associated with the procurement of offsets or limited supply in the voluntary carbon offsets market.

In addition, to the extent the Company does utilize offsets, it will need to obtain these offsets from third parties, and while the Company generally seeks to purchase only quality offsets verified by reputable third parties, it can make no guarantees that the underlying offset project will provide the full or any claimed GHG emission reduction benefits.

In addition to risks from potential changes to environmental regulation and policy, the transition to lower-carbon technologies could materially adversely affect the Company’s financial results.

For example, lower-carbon technologies, such as SAF, are currently not available at scale and may take a significant amount of time to develop and mature, and the cost to transition to them could be prohibitively expensive without appropriate government support, policies, and incentives in place (including tax credits).

For additional disclosure related to the risks of SAF, see the Risk Factor entitled, “The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.”

Concern among consumers of the impacts of climate change may mean some customers choose to fly less frequently or fly on an airline they perceive as operating in a manner that is more sustainable to the climate, and customers may choose to use alternatives to travel, such as virtual meetings and workspaces.

Greater development of high-speed rail in markets now served by short-haul flights could provide passengers with lower-carbon alternatives to flying.

Longer-term changes in weather patterns could adversely impact any of the Company’s destination cities and, as a result, alter the travel behavior of its Customers.

Longer-term changes in weather patterns could adversely impact any of the Company’s destination cities and, as a result, alter Customers’ travel behavior.

The Company’s collateral to secure loans, including in the form of aircraft, could lose value as customer demand shifts and economies move to low-carbon alternatives, which may increase the Company’s financing costs.

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

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

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

In addition to responding to legislative and regulatory requirements, the Company has voluntarily set near- and long-term environmental sustainability plans and goals.

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Supplies of SAF are limited and may not be developed in sufficient quantities to support the Company’s business or sustainability goals.

The Company cannot guarantee that it will be able to purchase SAF on a cost-effective basis due to supply constraints;

The cost to transition to SAF could be prohibitively expensive without appropriate government support, policies, and incentives in place (including tax credits).

Further, SAF incentives that are currently in place could expire or be repealed, and the Company may have binding SAF purchase commitments that extend beyond various incentives currently in place.

Additionally, SAF purchase agreements may pertain to production from facilities that are planned but not yet

operational, and which may utilize technology that has not been proven at commercial scale.

There is no assurance that these facilities will produce SAF at commercial scale or that they will meet contracted production timelines and volumes.

SAF has a limited distribution system and is subject to higher transportation risks than jet fuel.

In the event SAF is not delivered on schedule or in sufficient volumes, there can be no assurance that the Company will be able to source a supply of SAF sufficient to meet its stated goals, or that it will be able to do so on favorable economic terms.

As more businesses publicly announce environmental sustainability goals, it could become increasingly more difficult to negotiate SAF purchase agreements with suppliers at commercially reasonable terms.

Moreover, there is no guarantee that Customers, regulators, or other stakeholders will not object to any use of “book and claim” accounting methods (or similar constructs) for claims of GHG emission reductions in connection with the Company’s SAF purchase agreements, as such claims may be based on the separation of potential GHG emission reductions from the physical delivery of SAF.

The Company cannot guarantee that it will be able to purchase SAF on a cost-effective basis , and in addition to the factors already discussed, the ability to leverage SAF as part of its sustainability efforts could also be adversely affected by any of the following:

technology challenges in the production, development, transportation, storage, and distribution of SAF;

inability to scale SAF on a commercially competitive basis;

failures by governments to implement or extend policies and incentives (including tax credits) to reduce the cost or incentivize production of SAF;

compliance with and/or changes to taxes and regulations;

failure of industry standards, accounting protocols, or other applicable requirements to allow the Company to realize benefits from SAF (including blend limitations);

or requirements related to GHG emissions, carbon costs, or climate related goals.

In addition, SAF has a limited distribution system and is subject to higher transportation risks than jet fuel.

compliance with and/or changes to government regulations;

modifications to or failure of industry standards, accounting protocols, approaches to modeling life cycle GHG emissions, or other applicable requirements to allow the Company to realize benefits from SAF (including blend limitations);

or changes in carbon costs or climate-related goals.

As more businesses have publicly announced environmental sustainability goals, the cost of carbon offsets has also increased significantly and will likely continue to do so.

The Company’s ability to achieve its environmental sustainability goals is subject to risks and uncertainties, many of which are outside of its control.

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or other new developments related to the potential impacts of climate change.

There is no assurance that the Company will be able to successfully execute its strategies and achieve its previously announced environmental and sustainability goals.

The Company also makes certain disclosures regarding sustainability, including the Company’s sustainability goals to address carbon emissions, and many of these disclosures are necessarily based on (i) estimates and assumptions that are inherently difficult to assess and may involve third party data that the Company does not independently verify, and (ii) timelines that are longer than the timelines associated with the Company’s required disclosures.

There is no assurance that the Company will be able to successfully execute its strategies and achieve its previously announced environmental and sustainability goals and plans.

The Company also makes certain disclosures regarding sustainability, including the Company’s sustainability goals and plans to address carbon emissions, and many of these disclosures are necessarily based on (i) estimates and assumptions that are inherently difficult to assess and may involve third-party data that the Company does not independently verify, and (ii) timelines that are longer than the timelines associated with the Company’s required disclosures.

Given the estimates, assumptions, and timelines used to create these disclosures, the materiality of these disclosures is inherently difficult to assess in advance, and given the uncertainty of the estimates and assumptions used to create these disclosures, the Company may not be able to anticipate in advance whether or the degree to which it will or will not be able to meet its sustainability plans or goals, or how expensive it will be to do so.

Additionally, the Company is subject to increasing regulation imposing mandatory disclosure of sustainability and climate-related goals.

As discussed under “Business—Regulation—Environmental Regulation,” the state of California recently enacted a number of new climate-disclosure related laws, including the CCDAA and CRFRA, that require GHG emissions or climate-related risk disclosures, and the VCMDA that requires disclosure regarding the use of voluntary carbon offsets in certain circumstances.

The reporting obligations of the CCDAA, CRFRA, VCMDA, and other state or federal laws or rules requiring the disclosure of climate-related risks or emissions may cause the Company to incur additional increased costs for compliance as well as increased costs regarding access to capital.

Failure to comply with these disclosure laws and regulations can result in the imposition of substantial fines or penalties.

Enhanced climate-related disclosures pursuant to these requirements could also lead to reputational or other harm with Customers, regulators, investors, or other stakeholders.

The Company could also face increased litigation risks relating to alleged direct or indirect climate-related damages resulting from the Company’s operations, statements alleged to have been made by the Company or others in the aviation industry regarding climate change risks, or in connection with any future disclosures the Company may make regarding reported emissions, particularly given the inherent uncertainties and estimations with respect to calculating and reporting GHG emissions.

The Company’s reputation or brand, as well as its Customer and other stakeholder relationships, could be adversely impacted as a result of, among other things, (i) any failure to meet its sustainability plans or goals, including those that relate to climate change;

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however, the Company is not able to predict the impact, if any, that various CBP measures or the lack of CBP resources will have on Company revenues and costs, either in the short-term or the long-term.

International flying requires the Company to modify certain processes, as the airport environment is dramatically different in certain international locations with respect to, among other things, common-use ticket counters and gate areas, passenger entry requirements (including health requirements imposed in response to the COVID-19 pandemic), local operating requirements, and cultural preferences.

International flying requires the Company to modify certain processes, as the airport environment can be dramatically different in certain international locations with respect to, among other things, common-use ticket counters and gate areas, passenger entry requirements (including health requirements), local operating requirements, staffing, infrastructure, and cultural preferences.

Certain international routes served by the Company are also subject to specific aircraft equipage requirements and unique consumer behavior.

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laws governed these operations.

Although the Company has policies and procedures in place that are designed to promote compliance with the laws of the jurisdictions in which it operates, a violation by the Company's Employees, contractors, or agents or other intermediaries could nonetheless occur.

Although the Company has policies and procedures in

place that are designed to promote compliance with the laws of the jurisdictions in which it operates, a violation by the Company's Employees, contractors, or agents or other intermediaries could nonetheless occur.

Any violation (or alleged or perceived violation), even if prohibited by the Company's policies, could have an adverse effect on the Company's reputation and/or its results of operations.

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The Company is subject to additional, ongoing, ETOPS-specific regulatory and procedural requirements, which present operational and compliance risks to the Company’s business, including costs associated therewith.

The Company is currently subject to pending litigation, and if judgment were to be rendered against the Company in litigation, such judgment could adversely affect the Company's operating results.

As discussed below under "Legal Proceedings," the Company is subject to pending litigation.

The Company is currently subject to regulatory actions and pending litigation, and if judgment, penalties, or fines were to be rendered against the Company, such judgment, penalties, or fines could adversely affect the Company's operating results.

As discussed below under "Legal Proceedings," the Company is subject to regulatory actions and pending litigation.

Regardless of merit, these litigation matters and any potential future claims against the Company may be both time consuming and disruptive to the Company's operations and cause significant expense and diversion of management attention.

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These laws could affect the Company’s relationship with its workforce and cause its expenses to increase without an ability to pass through these costs.

In recent years, the airline industry has experienced an increase in litigation asserting the application of state and local employment laws, particularly in California.

On June 30, 2022, the U.S.

Supreme Court denied review of the Ninth Circuit’s ruling in Bernstein v.

Virgin America, Inc., which held that federal law did not preempt the California state meal-and-rest-break regulations for flight attendants at issue.

The Company is a defendant in multiple proceedings asserting wage and hour claims with respect to certain employees who work in, or are based in, California.

The Bernstein decision may adversely affect the Company’s defenses in some or all of those proceedings and may give rise to additional litigation in these or other areas previously believed to be preempted by federal law.

In recent years, the airline industry has experienced an increase in litigation asserting the application of state and local employment laws.

Application of state and local laws to the Company’s operations may conflict with federal laws—or with the laws of other states and local governments—and may subject the Company to additional requirements and restrictions.

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(iii) Customer perceptions of the Company’s use of social media;

(iv) customer perceptions of statements made by the Company, its Employees and executives, agents, or other third parties;

(iv) Customer and other stakeholder perceptions of statements made by the Company, its Employees and executives, agents, any industry trade associations, or other third parties;

or (v) public pressure from investors or policy groups to change the Company's policies.

Such statements or initiatives with respect to ESG matters are increasingly subject to heightened scrutiny from the public and governmental authorities, as well as other parties, due to the risk of potential “greenwashing,” i.e.

, the process of conveying misleading information or making false claims that overstate potential ESG benefits.

As a result, the Company may face increased litigation risks from private parties or regulatory scrutiny from governmental authorities related to its ESG efforts.

Moreover, any alleged claims of greenwashing against the Company or others in the aviation industry may lead to negative

sentiment or perception of the Company, its brand, or the industry.

To the extent that the Company is unable to respond timely and appropriately to negative publicity, the Company’s reputation and brand can be harmed.

Damage to the Company’s overall reputation and brand could have a negative impact on its financial results and require additional resources for the Company to rebuild its reputation.

ability of the Company’s Shareholders to bring a claim in a judicial forum viewed by the Shareholders as more favorable for disputes with the Company or the Company’s directors, officers, or other Employees.

The Company’s Bylaws designate specific courts as the exclusive forum for certain legal actions between the Company and its Shareholders, which could increase costs to bring a claim, discourage claims, or limit the ability of the Company’s Shareholders to bring a claim in a judicial forum viewed by the Shareholders as more favorable for disputes with the Company or the Company’s directors, officers, or other Employees.

The Company’s Bylaws provide, to the fullest extent permitted by law, that, unless the Company consents in writing to the selection of an alternative forum, the United States District Court for the Northern District of Texas or, if such court lacks jurisdiction, the state district court of Dallas County, Texas, will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company;

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The Company’s Bylaws also provide that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act of 1933 (the “Securities Act”).

We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

The Company notes, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

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Alternatively, if a court were to find the forum selection provision contained in the Company’s Bylaws to be inapplicable or unenforceable in an action, the Company could incur additional costs associated with resolving such action in other jurisdictions.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors