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Item 2. Management’s Discussion and Analysis

2025-04-25 compared with 2024-10-28 · 313 added, 535 removed, 219 unchanged (79% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Relevant comparative operating statistics for the three and nine months ended September 30, 2024 and 2023 are included below.

Relevant comparative operating statistics for the three months ended March 31, 2025 and 2024 are included below.

The Company provides these operating statistics because they are commonly used in the airline industry and, as such, allow readers to compare the Company’s performance against its results for the prior year period, as well as against the performance of the Company’s peers.

Three months ended September 30,

2024 2023 Change

Revenue passengers carried (000s) 35,516 35,349 0.5 %

Enplaned passengers (000s) 44,711 44,598 0.3 %

Revenue passenger miles (RPMs) (in millions) (a)

36,735 35,624 3.1 %

Available seat miles (ASMs) (in millions) (b)

45,219 44,169 2.4 %

Load factor (c)

81.2 % 80.7 % 0.5 pts.

Average length of passenger haul (miles) 1,034 1,008 2.6 %

Average aircraft stage length (miles) 770 735 4.8 %

Trips flown 364,609 374,926 (2.8) %

Seats flown (000s) (d)

58,119 59,494 (2.3) %

Seats per trip (e)

159.4 158.7 0.4 %

Average passenger fare $ 175.97 $ 167.24 5.2 %

Passenger revenue yield per RPM (cents) (f)

17.01 16.60 2.5 %

Operating revenues per ASM (cents) (g)

15.19 14.77 2.8 %

Passenger revenue per ASM (cents) (h)

13.82 13.38 3.3 %

Operating expenses per ASM (cents) (i)

15.11 14.51 4.1 %

Operating expenses per ASM, excluding fuel (cents) 11.97 10.97 9.1 %

Operating expenses per ASM, excluding fuel and profitsharing (cents) 11.94 10.88 9.7 %

Fuel costs per gallon, including fuel tax $ 2.52 $ 2.80 (10.0) %

Fuel costs per gallon, including fuel tax (economic) $ 2.55 $ 2.78 (8.3) %

Fuel consumed, in gallons (millions) 562 557 0.9 %

Active fulltime equivalent Employees 73,463 74,181 (1.0) %

Aircraft at end of period (j)

811 817 (0.7) %

Nine months ended September 30,

Three months ended March 31,

2025 2024 Change

24 unchanged sentences

Operating expenses per ASM, excluding fuel (cents) 13.04 12.28 6.2 %

Operating expenses per ASM, excluding fuel and profitsharing (cents) 11.90 11.19 6.3 %

Operating expenses per ASM, excluding fuel and profit sharing (cents) 13.04 12.28 6.2 %

Fuel costs per gallon, including fuel tax $ 2.49 $ 2.92 (14.7) %

2 unchanged sentences

Active fulltime equivalent Employees 71,506 74,695 (4.3) %

Aircraft at end of period (j)

811 817 (0.7) %

Aircraft at end of period 800 819 (2.3) %

(a) A revenue passenger mile is one paying passenger flown one mile.

13 unchanged sentences

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

(j) Included three Boeing 737 Next Generation aircraft in storage as of September 30, 2023.

Financial Overview

Financial Highlights

The Company reports its results in accordance with accounting principles generally accepted in the United States ("GAAP").

1 unchanged sentence

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

Three months ended September 30,

(in millions, except per share amounts)

GAAP 2024 2023 Change

Operating income $ 38 $ 117 (67.5) %

Net income $ 67 $ 193 (65.3) %

Net income per share, diluted $ 0.11 $ 0.31 (64.5) %

Operating income $ 32 $ 224 (85.7) %

Net income $ 89 $ 240 (62.9) %

Net income per share, diluted $ 0.15 $ 0.38 (60.5) %

The Company recorded third quarter 2024 operating revenues of $6.9 billion, a third quarter Company record, driven by record third quarter passenger revenue, other revenue, and passengers carried.

Despite the third quarter record revenue performance, the Company's operating income and net income for the three months ended September 30, 2024, on a GAAP and non-GAAP basis, decreased compared to the same prior year period primarily due to higher operating expenses, driven by higher Salaries, wages, and benefits expense, which exceeded the year-over-year increase in Operating revenues.

On a GAAP basis, the Company's Operating expenses increased 6.6 percent year-over-year, while Operating revenues increased 5.3 percent.

Operating expenses on a GAAP basis for the three months ended September 30, 2023 included incremental expense of $96 million related to the contract ratification bonus for the Company's Flight Attendants as part of the tentative agreement reached in October 2023 and ratified in April 2024.

Nine months ended September 30,

Three months ended March 31,

(in millions, except per share amounts)

GAAP 2025 2024 Change

Operating income $ 43 $ 628 (93.2) %

Net income $ 204 $ 717 (71.5) %

Net income per share, diluted $ 0.34 $ 1.15 (70.4) %

Operating income $ 60 $ 832 (92.8) %

Net income $ 241 $ 836 (71.2) %

Net income per share, diluted $ 0.40 $ 1.33 (69.9) %

The Company's operating income and net income for the nine months ended September 30, 2024, on a GAAP and non-GAAP basis, decreased compared to the same prior year period, driven by higher Salaries, wages, and benefits expense and higher Maintenance materials and repairs expense.

On a GAAP basis, although Operating revenues increased 6.7 percent, the Company's Operating expenses increased 10.0 percent year over year.

Operating expenses for the nine months ended September 30, 2023 included incremental expense of $180 million related to the contract

ratification bonus for the Company's Flight Attendants as part of the tentative agreement reached in October 2023 and ratified in April 2024.

The following tables present current selected financial guidance for fourth quarter 2024:

Operating loss $ (223) $ (393) (43.3) %

Net loss $ (149) $ (231) (35.5) %

Net loss per share, diluted $ (0.26) $ (0.39) (33.3) %

Operating loss $ (128) $ (377) (66.0) %

Net loss $ (77) $ (218) (64.7) %

Net loss per share, diluted $ (0.13) $ (0.36) (63.9) %

The Company recorded first quarter 2025 operating revenues of $6.4 billion, a first quarter Company record.

This record revenue performance was achieved, despite year-over-year declines in capacity and load factor, due to commercial actions, including network and revenue management initiatives, driving an all-time record yield performance.

Both Passenger revenue and Other revenue were first quarter records.

The Company has also implemented cost savings initiatives, including corporate overhead reductions.

See Note 11 to the unaudited Condensed Consolidated Financial Statements for further information.

Aided by the record first quarter revenue performance, the Company's operating loss and net loss for the three months ended March 31, 2025, on a GAAP and non-GAAP basis, decreased compared to the same prior year period.

Operating expenses remained relatively flat, driven by higher Salaries, wages, and benefits expense, partially offset by lower Fuel and oil expense.

On a GAAP basis, the Company's Operating expenses decreased 1.1 percent year-over-year, while Operating revenues increased 1.6 percent.

Operating expenses for the three months ended March 31, 2025, on a non-GAAP basis, excluded pre-tax charges of $95 million, most notably $62 million related to severance and related professional fees associated with the Company's reduction in workforce.

The following tables provide select financial guidance for second quarter 2025, as well as select full year 2025 and 2026 targets.

Amid the current macroeconomic uncertainty, it is difficult to forecast given recent and short-lived booking trends.

As such, the Company is not reiterating its full year 2025 or 2026 earnings before interest and taxes, excluding special items ("EBIT") guides.

However, the Company remains confident in and committed to continued strong execution of its initiatives and is reaffirming its targets of $1.8 billion full year 2025 and $4.3 billion full year 2026 incremental EBIT contribution from those initiatives.

2Q 2025 Estimation

RASM (a), year-over-year Up 3.5% to 5.5%

ASMs (b), year-over-year Down ~4%

Economic fuel costs per gallon (c)(d) $2.25 to $2.35

Fuel hedging premium expense per gallon $0.07

Fuel hedging cash settlement gains per gallon $0.01

RASM (a), year-over-year Flat to down 4%

ASMs (b), year-over-year Up 1% to 2%

Fuel cost per gallon (c)(d) $2.20 to $2.30

ASMs per gallon (fuel efficiency) 82 to 83

CASM-X (e), year-over-year (c)(f) Up 3.5% to 5.5%

Scheduled debt repayments (millions) ~$5

Scheduled debt repayments (billions) (g) ~$2.6

Interest expense (millions) ~$39

Aircraft (g) 796

2025 Target 2026 Target

EBIT (h) contribution from initiatives (billions) ~$1.8 ~$4.3

(a) Operating revenue per available seat mile ("RASM" or "unit revenues").

(b) Available seat miles ("ASMs" or "capacity").

The Company's flight schedule is published for sale through June 4, 2025.

The Company expects first quarter 2025 capacity to decrease in the range of 1 percent to 3 percent, year-over-year.

In addition, information regarding special items and economic results is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Measures (also referred to as "excluding special items").

(d) Based on the Company's existing fuel derivative contracts and market prices as of October 16, 2024, fourth quarter and full year 2024 economic fuel costs per gallon are estimated to be in the range of $2.25 to $2.35 and $2.60 to $2.70, respectively.

(d) Economic fuel cost per gallon ("Fuel cost per gallon") includes fuel taxes, fuel hedging premium expense, and any related cash settlements from fuel derivative contracts.

Based on the Company's existing fuel derivative contracts and market prices as of April 15, 2025, second quarter 2025 economic fuel costs per gallon were estimated to be in the range of $2.20 to $2.30, including fuel hedging premium expense of $0.06 per gallon and no cash settlements from fuel derivative contracts.

Economic fuel cost projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate the hedge accounting impact associated with the volatility of the energy markets, or the impact to its financial statements in future periods.

1 unchanged sentence

See Note Regarding Use of Non-GAAP Financial Measures.

(e) Operating expenses per available seat mile, excluding fuel and oil expense, special items, and profitsharing ("CASM-X").

(f) Projections do not reflect the potential impact of fuel and oil expense, special items, and profitsharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, especially considering the significant volatility of the fuel and oil expense line item.

(e) Operating expenses per available seat mile, excluding fuel and oil expense, special items, and profit sharing ("CASM-X" or "unit costs").

(f) Projections do not reflect the potential impact of fuel and oil expense, special items, and profit sharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, especially considering the significant volatility of the fuel and oil expense line item.

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

(g) Aircraft on property, end of period.

The Company continues to plan for 20 Boeing 737-8 ("-8") aircraft deliveries and now expects 41 aircraft retirements in 2024, comprised of 37 Boeing 737-700s ("-700") and four Boeing 737-800s ("-800").

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

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

The Company expects fourth quarter 2024 unit revenues to increase in the range of 3.5 percent to 5.5 percent on a year-over-year basis with capacity down approximately 4 percent, also on a year-over-year basis.

This guidance range contemplates a headwind of just under one-half point from Hurricane Milton and the resulting Customer cancellations.

Thus far in the quarter, travel demand remains healthy and bookings-to-date for the holiday season are strong, demonstrating the continued resilience of the leisure travel market.

The guidance range represents another sequential year-over-year unit revenue improvement driven by the Company's focus on tactical actions including network optimization and capacity moderation, marketing and distribution evolution, and continued efforts to advance revenue management techniques.

The Company anticipates fourth quarter 2024 CASM-X to increase in the range of 11 percent to 13 percent, year-over-year, as cost pressures continue, particularly from new labor contracts.

Fourth quarter CASM-X is further

pressured by a 4 percent reduction in year-over-year capacity, as well as just over one-half point of unit cost headwind from flight cancellations associated with Hurricane Milton.

(g) Includes a $976 million prepayment made on April 17, 2025 for the first tranche of the Payroll Support Program notes.

(h) A non-GAAP financial measure calculated as earnings before interest and taxes, excluding special items ("EBIT").

EBIT (a) excludes annual average of $400 million to $500 million for fleet initiative over the three-year period from 2025 to 2027, (b) assumes profit sharing of 15 percent, and (c) assumes a fuel price of ~$2.33 per gallon in 2025 and 2026.

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

The Company expects second quarter 2025 unit revenues to be in the range of flat to down 4 percent on capacity in the range of up 1 percent to 2 percent, both on a year-over-year basis.

This guidance range contemplates benefits from continued execution of Company-specific initiatives, offset by softness in the demand environment.

Thus far, the Company has seen no evidence of book-away following its recent announcement of policy changes, including flight credit expiration and checked bag fees.

The Company's second quarter guidance assumes current trends will persist through the remainder of the quarter.

The Company anticipates second quarter 2025 CASM-X to increase in the range of 3.5 percent to 5.5 percent, year-over-year, driven primarily by the continuation of inflationary pressures, including those associated with labor contracts ratified in 2024.

The Company remains focused on driving efficiencies to offset overall inflationary cost pressures and achieve its accelerated cost initiative targets.

Company Overview

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

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

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

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

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

The Company’s low-cost model enabled low fares and, combined with great Customer Service, allowed the Company to grow across the country and eventually become the nation’s largest domestic carrier.

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

The importance of having an assigned seat grows among Customers as the length of flight gets longer.

In addition, Customer travel frequency and preferences have evolved—for both frequent flyers, as well as those of more infrequent travelers who are not accustomed to the open seating policy currently utilized by the Company—especially as Southwest has opened several new markets and expanded its route network during the past few years.

The Company has continually monitored Customer feedback regarding seating preferences for decades, and Customer travel patterns and preferences have evolved and a seat assignment is generally preferred.

Recent research conducted by the Company indicates that a vast majority of both existing Southwest Customers and potential Customers prefer an assigned seat, which supports the Company’s decision to now evolve its boarding and seating processes.

In addition to assigning seats, the Company plans to offer a premium, extended legroom portion of the cabin that research shows many Customers also prefer.

The Company expects roughly one-third of seats across the fleet to offer extended legroom, in-line with that offered by industry peers on narrowbody aircraft.

The decision to update the seating and boarding model is part of the Company's continued modernization and Customer Experience transformation.

Following a Customer study regarding the inflight experience, the Company has continued to enhance its onboard offerings during the past two years with both completed and ongoing improvements being made, such as faster WiFi, in-seat power, and larger overhead bins.

Work is well underway on a refreshed cabin design, including new, more comfortable RECARO seats.

The move to assigned and premium seating will be a significant undertaking by the Company.

In addition to incorporating new technologies and procedures for a seamless transition, the new cabin layout will require approvals from the FAA.

The Company currently expects to make assigned seat and extended legroom bookings available in mid-2025, with related flights occurring in early 2026.

The Company also announced it is adding 24-hour operation capabilities with the introduction of redeye flights.

Booking of redeye flying on initial routes became available starting July 25, 2024 through Southwest.com, with the first redeye flights landing on February 14, 2025 in five initial nonstop markets:

Las Vegas to Baltimore and Orlando;

Los Angeles to Baltimore and Nashville;

and Phoenix to Baltimore.

These and other initiatives are intended to improve the Company’s financial performance and metrics, including return on invested capital and operating margins, over the next three years.

The Company will focus on the following tactical initiatives:

Continual network optimization and maturation;

Marketing and distribution evolution;

and Revenue management maturation.

Continual network optimization and maturation includes (i) reduced short-haul flying and redistributing resources to long-haul flying in profitable markets, (ii) reduced flying on weekdays with lower travel demand, (iii) restructured service and network connectivity in stations with lower demand, and (iv) taking a cross-functional, methodical approach to market maturation efforts.

Marketing and distribution evolution includes (i) a new advertising campaign to highlight the unique, flexible value Southwest offers and target

a new generation of travelers, (ii) partnerships with flight search engines, including Google Flights and Kayak, intended to increase visibility and drive traffic for bookings to Southwest.com, and (iii) creating the option for Customers to use a combination of cash and Rapid Rewards® points to pay for travel, providing more ways to take advantage of the Company's loyalty program.

Revenue management maturation efforts include (i) refinements to the Company's revenue management system, designed to achieve better, more customized results based on the Company's primarily domestic network, (ii) additional staffing to the Company's Revenue Management team to support focusing on driving results, and (iii) recalibrating probability curves, which are expected to improve yields by capturing more demand at higher fares.

The Company has also summarized recently announced strategic initiatives into three broad categories:

Monetize the Company's value proposition;

Increase efficiency and lower costs;

and Optimize capital allocation.

Monetize the Company's value proposition

In addition to the assigned seating and extended legroom changes discussed above, the Company also plans to offer an in-house vacation package product to Customers beginning in 2025 called “Getaways by Southwest”, versus the outsourced product it has historically offered.

This new vacation booking platform is expected to be designed to allow the Company to appeal directly to its significant existing Customer base with an enhanced offering that includes both lodging and excursions, which is expected to drive growth with leisure travelers and grow higher-margin revenues with a relatively low capital and headcount investment.

The Company also announced it will pursue partnerships with other airlines in order to further expand the reach of the Company’s network and connect Customers with more global destinations to generate additional demand.

The Company expects to launch its first such partnership in first quarter 2025 with transatlantic connectivity with Icelandair and plans to add at least one more partner during 2025.

Increase efficiency and lower costs

In addition to the aforementioned introduction of redeye flights, which is designed to maximize or increase asset utilization, another one of the Company's efficiency initiatives includes investments that will decrease the amount of time it takes to turn an aircraft (unload Passengers from an arriving flight and load Passengers on the same aircraft for its subsequent flight).

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

These efforts are rolling out and are expected to be fully implemented in November 2025.

These initiatives are expected to result in a lowering of unit costs, as the Company is expected to be able to generate either the same number of ASMs with fewer aircraft, or produce more ASMs utilizing the same number of aircraft in its fleet, respectively.

The Company also continues to invest in various technologies and digital products designed to improve the Customer travel experience.

In addition, the Company is targeting other cost initiatives that are expected to result in savings, including minimizing hiring in order to right-size current operations and match the Company’s lower expected growth rates in the near term, capitalizing on identified supply chain opportunities, and improving its corporate efficiency through automation and better allocation of resources.

These and other initiatives are currently expected to deliver more than $500 million in annual cost savings by 2027.

Optimize capital allocation

In addition, the Company intends to focus on prudent capital deployment by minimizing fleet capital expenditures, continuing to invest in infrastructure, manage debt levels, and provide returns to Shareholders through dividends and planned share repurchases.

The Company continues to have favorable pricing in its order book with Boeing for new 737 MAX aircraft that allows additional flexibility in being able to replace certain aircraft in its existing fleet, given current market conditions, with more fuel efficient and less-maintenance intensive models over the near term.

The Company plans to pursue opportunities to take advantage of current market conditions through the sale and/or sale-leaseback of certain aircraft, with the intention of replacing most, if not all, of such aircraft with new MAX aircraft from Boeing by the end of 2031, assuming that Boeing is able to meet aircraft delivery expectations.

As a result of these efforts, the Company’s expected net fleet capital expenditures during the near term are expected to moderate significantly from recent levels, with the added benefit of further accelerating the modernization of its fleet.

The Company also intends to preserve the strength of its balance sheet with manageable debt maturities, with the goal of lowering the Company's leverage closer to pre-pandemic levels.

Finally, the Company intends to return

value back to its Shareholders through dividends and share repurchases, and will continually review its return of capital program based in large part upon the Company's free cash flow and leverage with an eye to maintaining investment-grade ratings.

Through these initiatives, the Company expects to return to historical levels of financial performance in which its return on invested capital exceeds its weighted-average cost of capital.

The targets the Company has set through 2027 include the following:

• Annual capacity growth of approximately one to two percent, year-over-year, beginning in 2025

• Annual Operating margins of at least 10 percent, in 2027

• Free cash flow exceeding $1 billion per year in 2027

• Return on invested capital, after-tax, of at least 15 percent in 2027

• Financial leverage in the low to mid 30’s percent range in 2027

• Continue to maintain an investment-grade credit rating

The Company's Board of Directors (“the Board”) received a letter dated June 10, 2024, from Elliott Investment Management L.P.

("Elliott") stating that Elliott had made an investment of approximately $1.9 billion in the Company, representing an approximately 11 percent economic interest in the Company, and advocating for changes to the Company's management, the Board, and the Company's corporate strategy.

Because of this activist activity, the Company has incurred increased professional advisory fees and other costs related to Shareholder activism matters.

Additionally, in order to provide the Board with time to make informed decisions that are in the best interests of the Company and its Shareholders, on July 2, 2024, the Board adopted a shareholder rights plan (the "Rights Agreement") and declared a dividend of one right in respect of each of the Company’s issued and outstanding shares of common stock, which would have caused substantial dilution to any person or group acquiring 12.5 percent or more of the Company’s outstanding common stock without the prior approval of the Board.

The Rights Agreement was designed to deter the acquisition of actual, de facto, or negative control of the Company by any person or group without appropriately compensating its Shareholders for that control.

On September 9, 2024, Gary C.

Kelly, Executive Chairman of the Board notified the Company and the Board that he would not stand for re-election at the Company's 2025 Annual Meeting of Shareholders (the "2025 Annual Meeting") and would retire from the Board and his office as Executive Chairman of the Board, effective immediately following the 2025 Annual Meeting.

Also on September 9, 2024, David W.

Veronica Biggins, Roy Blunt, William H.

Cunningham, Thomas W.

Gilligan, and Jill A.

Soltau (the “Retiring Directors”) each submitted his or her resignation from the Board, effective immediately following the Company’s regularly scheduled fourth quarter Board meeting (currently scheduled for November 21, 2024).

On September 26, 2024, the Company announced the addition of Robert L.

Fornaro to the Board.

In connection with the Retiring Directors' resignations and the appointment of Robert L.

Fornaro to the Board, and in accordance with the Company's Fourth Amended and Restated Bylaws, the Board decreased the size of the Board to ten members, effective upon the effectiveness of the Retiring Directors' resignations.

The Board further resolved to decrease the size of the Board to nine members, effective immediately following the 2025 Annual Meeting.

However, the Board also expressed its desire to identify and appoint up to three new independent Directors.

None of the departures from the Board described herein are due to any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.

On October 14, 2024, the Company confirmed that Elliott requested a Special Meeting of Shareholders to consider Elliott's proposals, including to remove without cause eight members of Southwest's Board and elect eight Director candidates chosen by Elliott.

On October 23, 2024 (the "Effective Date"), the Company entered into a Cooperation Agreement (the "Cooperation Agreement") with Elliott, Elliott Associates, L.P., Elliott International, L.P., and The Liverpool Limited Partnership.

Pursuant to the Cooperation Agreement, the Company has agreed to, among other things, (i) appoint David Cush,

Sarah Feinberg, David Grissen, Gregg Saretsky and Patricia Watson (collectively, the “Cooperation Agreement Directors”) to the Board, effective 11:59 p.m.

Central Time on November 1, 2024 (the "Appointment Date"), each with an initial term expiring at the 2025 Annual Meeting;

(ii) announce that two incumbent Directors as of the Effective Date will not stand for re-election to the Board at the 2025 Annual Meeting;

and (iii) include the Cooperation Agreement Directors, together with the other persons recommended by the Board, in the Company’s slate of nominees for election as a Director at the 2025 Annual Meeting.

The Cooperation Agreement includes certain voting commitments, customary standstill restrictions and mutual non-disparagement provisions that remain in place until the earlier of (x) the date that is 30 days prior to the notice deadline under the Company's Fourth Amended and Restated Bylaws for the nomination of non-proxy access Director candidates for election to the Board at the Company's 2026 Annual Meeting of Shareholders and (y) February 14, 2026 (such period, the "Cooperation Period").

On October 23, 2024, (i) Gary C.

Kelly, Executive Chairman of the Board, notified the Company and the Board that he will retire from the Board and his office of Executive Chairman of the Board, effective 11:59 p.m.

Central Time on November 1, 2024 and (ii) David W.

Veronica Biggins, Roy Blunt, William H.

Cunningham, Thomas W.

Gilligan, and Jill A.

Soltau each submitted his or her resignation from the Board, effective 11:59 p.m.

Central Time on November 1, 2024.

None of the departures from the Board described herein are due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

Also on October 23, 2024, the Board appointed Pierre Breber as a member of the Board, effective 11:59 p.m.

Central Time on November 1, 2024, with an initial term expiring at the 2025 Annual Meeting.

In connection with the appointments of Mr.

Breber and the Cooperation Agreement Directors, the Board decreased the current size of the Board from 16 members to 15 members, effective 11:59 p.m.

Central Time on November 1, 2024, and in connection with the Cooperation Agreement, the Board agreed to limit the size of the Board to (i) no more than 15 members from the Appointment Date until the 2025 Annual Meeting and (ii) no more than 13 members from the conclusion of the 2025 Annual Meeting until the expiration of the Cooperation Period.

The foregoing description of the Cooperation Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Cooperation Agreement, which is filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on October 24, 2024.

On October 25, 2024, pursuant to the Cooperation Agreement, the Company and Equiniti Trust Company, LLC entered into the Amendment to the Rights Agreement (the "Amendment to the Rights Agreement"), which amended the Rights Agreement.

The Amendment to the Rights Agreement terminated the Rights Agreement by advancing the expiration time of the Company's common stock purchase rights (collectively, the "Rights") to 5:00 p.m., New York City time, on October 25, 2024.

At the time of the termination of the Rights Agreement, all of the Rights, which were previously distributed to holders of the Company’s Common Stock, pursuant to the Rights Agreement, expired.

On September 16, 2024, the Company announced its more than 50 Flight Simulator Technicians, represented by the International Brotherhood of Teamsters, had voted to ratify a four-year contract extension with the Company.

The newly ratified agreement becomes amendable in September 2028.

With this result, all the Company's labor contracts are now closed until the next labor contract becomes amendable in October 2026.

Since October 2022, each of the 12 union-represented workgroups, which collectively represent approximately 83 percent of the Company's Employees, have ratified new contracts.

The Company continues to receive updates from Boeing regarding further aircraft delivery delays, which presents significant planning challenges for both 2024 and 2025.

During 2024, as a result of Boeing's ongoing delivery delays, the Company conservatively re-planned its capacity and delivery expectations for the remainder of this year and for 2025.

In September 2024, Boeing and the International Association of Machinists and Aerospace Workers at Boeing did not reach an agreement before their contract expired on September 12, 2024, and a worker strike is now underway.

The Company ended third quarter 2024 with 811 Boeing 737 aircraft, including 242 -8 aircraft.

During third quarter 2024, the Company retired 14 -700 aircraft and one -800 aircraft and took delivery of nine -8 aircraft.

In July 2024, the Company exercised two -7 options for delivery in 2025 and converted two 2025 -7 firm orders into 2025 -8 firm orders.

In September 2024, the Company exercised four -7 options for delivery in 2025.

In October 2024, the Company exercised five -7 options for delivery in 2025, one -7 option for delivery in 2026, and converted nine 2025 -7 firm orders into 2025 -8 firm orders.

The Company continues to plan for 20 -8 aircraft deliveries in 2024, which differs from its contractual order book due to Boeing's continued manufacturing challenges and the current status of the -7 certification.

The Company has also chosen to retire six additional aircraft in 2024, bringing total aircraft retirements for the year to 41, comprised of 37 -700s and 4 -800s in 2024, ending the year with roughly 796 aircraft in its fleet.

The Company's aircraft delivery and retirement expectations for 2025 and beyond are fluid and subject to Boeing's production capability.

The Company has published its flight schedule through June 4, 2025.

The Company continues to focus on its goals of operational excellence and reliability, regaining efficiencies, increasing productivity, and returning financial margins back to historical levels.

As part of its commitment to corporate sustainability, the Company published its 2023 One Report and Diversity, Equity, and Inclusion (“DEI”) Report on May 8, 2024.

These reports describe the Company's sustainability strategies, which include the Company’s fuel conservation and emissions mitigation initiatives and other efforts to minimize greenhouse gas emissions and address other environmental matters such as energy and water conservation, waste minimization, and recycling, and dive deeper into the Company's DEI goals and initiatives and highlight the Company's DEI plans for the future.

Information contained in the Southwest One Report and/or the DEI Report is not incorporated by reference into, and does not constitute a part of, this Form 10-Q.

While the Company believes that the disclosures contained in the Southwest One Report, the DEI Report, and other voluntary disclosures regarding environmental, social, and governance (“ESG”) matters are responsive to various areas of investor interest, the Company believes that certain of these disclosures address matters that are currently not material in the near term to the Company’s operations, strategy, financial condition, or financial results, although this view may change in the future based on new information that could materially alter the estimates, assumptions, or timelines used to create these disclosures.

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

Transformational Revenue Initiatives

The Company is evolving rapidly, implementing new initiatives that are expected to enhance optionality for current and future Customers, improve financial performance, and drive Shareholder value.

As announced on March 11, 2025:

• For flights booked and ticketed or changed on or after May 28, 2025, Southwest will introduce bag fees for most fare products.

However, the Company will continue to offer two free checked bags to Rapid Rewards® A-List Preferred Members and Customers traveling on Business Select fares and offer one free checked bag to A-List Members.

Southwest will also credit one checked bag for co-brand Cardmembers under its credit card program.

Customers who do not qualify for these free bag options will be charged for their checked bags (weight and size limitations apply).

• The Company is further optimizing its loyalty program by re-aligning the number of Rapid Rewards points Customers earn on qualifying flights with the fare paid.

Customers now earn more points on Business Select fares, while earning fewer on Wanna Get Away and Wanna Get Away Plus fares.

The Company also has introduced variable redemption rates across higher-demand and lower-demand flights.

• The Company will introduce a new, Basic fare on its lowest-priced tickets purchased on or after May 28, 2025, in advance of offering assigned seating and extra legroom options.

• Flight credits originating from a Basic fare purchase will expire six months from ticketing date.

Flight credits issued for other fares for tickets purchased on or after May 28, 2025, will expire one year from the date of ticketing.

• The Company expanded distribution to online travel agencies with the launch of its relationship with Expedia on February 26, 2025.

These strategic moves add to the initiatives already underway at Southwest, including the implementation of assigned seating and extended legroom options, as well as an initial international airline partnership with Icelandair that began on February 13, 2025, the same day the Company operated its first-ever scheduled overnight redeye flights.

The move to assigned and premium seating will require incorporating new technologies and procedures for a seamless transition, and the new cabin layout requires approvals from the Federal Aviation Administration ("FAA").

The Company recently received necessary approvals and certifications to begin extra legroom seating retrofits on Boeing 737-8 ("-8") and Boeing 737-800 ("-800") aircraft, and expects the Boeing 737-700 ("-700") aircraft to receive necessary approvals and certifications later this year.

The Company expects to begin selling assigned and extra legroom seats in third quarter 2025 for operation beginning in first quarter of next year.

The Company has also continued to enhance its onboard offerings, with improvements such as faster WiFi, in-seat power, and larger overhead bins, and work is well underway on a refreshed cabin design, including new, more comfortable RECARO seats.

Through these initiatives, the Company's goal is to return to historical levels of financial performance, focusing on its accelerated cost reduction plan, return on invested capital, and earnings before interest and taxes, excluding special items.

Other Initiatives and Quarterly Developments

In first quarter 2025, the Company returned $857 million to Shareholders through $107 million in dividend payments and a $750 million accelerated share repurchase program, which was launched in February 2025 and completed in April 2025.

The Company has $1.5 billion remaining under its $2.5 billion share repurchase authorization.

On March 11, 2025, the Company announced its intention to launch an accelerated share repurchase program in second quarter 2025 for the remaining $1.5 billion, which it expects to complete by the end of July

See "Liquidity and Capital Resources" below and Part II, Item 2 - Issuer Purchases of Equity Securities for further information on the Company's share repurchases.

In January 2025, the Company reached an amended co-brand agreement with Chase Bank USA, N.A.

The amendment includes enhanced Cardmember benefits associated with the Company's planned assigned and premium seating initiative and supports its multi-year financial targets.

On February 19, 2025, the Company entered into an Amendment (the "Amendment") to the Cooperation Agreement among the Company, Elliott Investment Management L.P., Elliott Associates, L.P., Elliott International, L.P., and The Liverpool Limited Partnership (collectively, the "Elliott Parties"), dated October 23, 2024 (the "Cooperation Agreement"), which, among other things, (i) increases the maximum aggregate economic exposure that the Elliott Parties may acquire during the term of the Cooperation Agreement from 14.9 percent to 19.9 percent of the Company's then-outstanding common stock, par value $1.00, and (ii) extends the restriction on the Elliott Parties acquiring more than the maximum beneficial ownership of 12.49 percent of the then-outstanding common stock until 9:00 a.m.

Central Time on the earlier of (x) the day after the record date for the Company's 2026 Annual Meeting of Shareholders and (y) April 1, 2026.

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is filed as Exhibit 10.1 to this Form 10-Q.

In February 2025, the Company implemented a reduction in workforce to reduce operating costs, increase efficiency, and create a leaner and more agile organization as part of the Company's transformational plan.

The reduction in workforce focused almost entirely on corporate overhead and leadership positions and provided for the reduction of approximately 1,750 Employee roles, or 15 percent of corporate positions.

Separations are expected to be substantially complete by the end of second quarter 2025.

See Note 11 to the unaudited Condensed Consolidated Financial Statements for further information.

As a result of the reduction in workforce, the Company estimates 2025 savings of approximately $210 million and 2026 savings of approximately $300 million.

These savings exclude a one-time GAAP pre-tax charge in first quarter 2025 of $62 million, substantially all of which is due to severance and related professional fees, which the Company has treated as a special item.

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

One-time costs may vary based on specific Employee elections, and the majority of the associated future cash expenditures are expected to take place in second quarter 2025.

Fleet Information

As a result of Boeing's delivery delays, the Company has previously replanned its capacity and delivery expectations multiple times and will continue to closely monitor the ongoing aircraft delivery delays with Boeing and further adjust expectations as needed.

The Company is now proactively reducing capacity in the second half of 2025 to accommodate a lower demand environment and capture associated cost savings.

While schedules are not final, the Company expects to reduce both third quarter and fourth quarter capacity by roughly one and one-half points and anticipates that full year 2025 capacity will now be up roughly 1 percent, year-over-year, which would be on the low end of the prior expectation of up 1 percent to 2 percent, year-over-year.

This modest growth is driven entirely by an increase in aircraft utilization provided by redeye flying and turn time reduction initiatives.

The Company is not making any material updates to its fleet assumptions, including aircraft delivery and retirement expectations, at this time.

The Company will continue to evaluate the potential for fleet transactions on an opportunistic basis.

The Company ended first quarter 2025 with 800 Boeing 737 aircraft, including 256 -8 aircraft.

During first quarter 2025, the Company retired 12 -700 aircraft and two -800 aircraft and took delivery of 11 -8 aircraft.

As of April 24, 2025, during 2025 the Company has exercised a total of 12 Boeing 737-7 ("-7") options for delivery in 2026.

The Company's order book with Boeing as of April 24, 2025, consists of a total of 504 MAX firm orders (308 -7 aircraft

and 196 -8 aircraft), less 11 -8 deliveries in 2025, for the years 2025 through 2031, including 63 MAX aircraft that were contractually committed for 2024, but were not received, and 168 MAX options (-7s or -8s) for the years 2026 through 2031.

In January 2025, the Company completed the sale-leaseback of one -800 aircraft.

See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information on the sale-leaseback transaction.

Material Changes in Results of Operations

Comparison of three months ended September 30, 2024 and September 30, 2023

Comparison of three months ended March 31, 2025 and March 31, 2024

Three months ended March 31, Increase (Decrease) Percent change

(in millions) 2025 2024

Passenger $ 5,811 $ 5,712 $ 99 1.7 %

Freight 41 42 (1) (2.4)

Other 576 575 1 0.2

Total operating revenues $ 6,428 $ 6,329 $ 99 1.6 %

Salaries, wages, and benefits $ 3,102 $ 2,940 $ 162 5.5 %

Fuel and oil 1,249 1,531 (282) (18.4)

Maintenance materials and repairs 292 361 (69) (19.1)

Landing fees and airport rentals 522 464 58 12.5

Depreciation and amortization 396 408 (12) (2.9)

Other operating expenses 1,090 1,018 72 7.1

Total operating expenses $ 6,651 $ 6,722 $ (71) (1.1) %

Operating Revenues

Total operating revenues for third quarter 2024 increased by $345 million, or 5.3 percent, year-over-year, to achieve an all-time third quarter Company record of $6.9 billion.

Passenger revenues for third quarter 2024 increased by $338 million, or 5.7 percent, year-over-year.

Other revenues for third quarter 2024 increased by $8 million, or 1.4 percent, year-over-year.

These revenue increases were primarily due to a 2.4 percent increase in capacity and aided by all-time third quarter Company records for other revenue and passengers carried.

The Company's Rapid Rewards® loyalty program had a record third quarter level of Member engagement, as measured by a third quarter record spend on the Company's co-branded Chase® Visa credit card.

As a result of the record revenue performance, third quarter 2024 RASM was 15.19 cents, finishing 2.8 percent higher than third quarter 2023, primarily driven by an increase in yield of 2.5 percent coupled with an increase in Load factor of 0.5 points.

The unit revenue sequential improvement was also driven by the improving industry backdrop, tactical commercial actions including network and revenue management initiatives, as well as an approximate one point tailwind from the reaccommodation of Customers affected by other airlines' cancellations following their CrowdStrike technology outage incident in July.

Total operating revenues for first quarter 2025 increased by $99 million, or 1.6 percent, year-over-year.

Passenger revenues for first quarter 2025 increased by $99 million, or 1.7 percent, year-over-year, and Other revenues for first quarter 2025 increased by $1 million, or 0.2 percent, year-over-year, to achieve all time first quarter Company records of $5.8 billion and $576 million, respectively.

These revenue increases were primarily due to a 9.9 percent increase in yield, partially offset by a year-over-year decline in Load factor.

The yield improvements were primarily due to revenue management actions and capacity moderation.

The Company's Rapid Rewards® loyalty program had a record first quarter level of Member engagement, as measured by first quarter spend on the Company's co-branded Chase® Visa credit card.

First quarter 2025 RASM was 15.51 cents, finishing 3.5 percent higher than first quarter 2024, primarily driven by an increase in yield of 9.9 percent, partially offset by a decrease in Load factor of 4.4 points.

These revenue r esults were impacted as demand weakened throughout the quarter, driving softness in bookings, particularly in domestic leisure travel, where the Company is currently more heavily weighted compared with larger industry peers.

Operating Expenses

Operating expenses for third quarter 2024 increased by $424 million, or 6.6 percent, compared with third quarter 2023, and capacity increased 2.4 percent over the same prior year period.

The vast majority of the dollar increase was due to higher Salaries, wages, and benefits expense, partially offset by a year-over-year decrease in Fuel and oil expense.

Historically, except for changes in the price of fuel, changes in Operating expenses for airlines have been largely driven by changes in capacity, or ASMs.

The following table presents the Company's Operating expenses per ASM for the third quarter of 2024 and 2023, followed by explanations of these changes on a dollar basis.

Three months ended September 30, Per ASM

Operating expenses for first quarter 2025 decreased by $71 million, or 1.1 percent, compared with first quarter 2024, and capacity decreased 1.9 percent over the same prior year period.

The vast majority of the dollar decrease was due to a year-over-year decrease in Fuel and oil expense, partially offset by higher Salaries, wages, and benefits expense.

Historically, except for changes in the price of fuel, changes in Operating expenses for airlines have been largely driven by cha nges in capacity, or ASMs.

The following table presents the Company's Operating expenses per ASM for the first quarter of 2025 and 2024, followed by explanations of these changes on both a dollar and unit basis.

Three months ended March 31, Per ASM

change Percent

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Total 16.05 ¢ 15.91 ¢ 0.14 ¢ 0.9 %

Operating expenses per ASM for third quarter 2024 increased by 4.1 percent, compared with third quarter 2023, primarily due to increases in Salaries, wages and benefits expense, which included incremental expense in the three months ended September 30, 2023 related to the contract ratification bonus for the Company's Flight Attendants as part of the tentative agreement reached in October 2023 and ratified in April 2024, partially offset by a decrease in Fuel and oil expense.

Operating expenses per ASM for third quarter 2024, excluding Fuel and oil expense, profitsharing, and special items (a non-GAAP financial measure), increased 11.6 percent, compared with third quarter 2023, primarily due to market-driven rate inflation in Salaries, wages, and benefits expense in 2024.

Operating expenses per ASM for first quarter 2025 increased by 0.9 percent, compared with first quarter 2024, primarily due to increases in Salaries, wages and benefits expense and Other operating expenses, partially offset by a decrease in Fuel and oil expense.

Op erating expenses per ASM for first quarter 2025, excluding Fuel and oil expense, profit sharing, and special items (a non-GAAP financial measure), increased 4.6 percent, compared with first quarter 2024, primarily due to contract-driven wage rate inflation in Salaries, wages, and benefits expense in 2025.

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

Salaries, wages, and benefits expense for third quarter 2024 increased by $342 million, or 12.5 percent, compared with third quarter 2023.

On a per ASM basis, third quarter 2024 Salaries, wages, and benefits expense increased 9.9 percent, compared with third quarter 2023.

On a dollar basis, approximately 40 percent of the increase was due to step/pay rate increases and related benefits for certain workgroups (including the recently ratified labor contracts with the Company's Pilots, Flight Attendants, and Ramp, Operations, Provisioning, and Cargo Agents), approximately 15 percent of the increase was driven by an increase in capacity and/or number of trips flown, and the majority of the remainder was due to various other benefits associated with the higher contractual wages, such as earned vacation pay, and additional supplemental pay and benefits, primarily for Pilots.

On a per ASM basis, the increase is due to higher wage rates.

Fuel and oil expense for third quarter 2024 decreased by $147 million, or 9.4 percent, compared with third quarter 2023.

On a per ASM basis, third quarter 2024 Fuel and oil expense decreased 11.3 percent.

On a dollar and per ASM basis, the decrease was primarily attributable to a decrease in fuel prices.

Salaries, wages, and benefits expense for first quarter 2025 increased by $162 million, or 5.5 percent, compared with first quarter 2024.

On a per ASM basis, first quarter 2025 Salaries, wages, and benefits expense increased 7.6 percent, compared with first quarter 2024.

On a dollar basis, approximately 55 percent of the increase was due to net step/pay rate increases and related benefits for certain workgroups.

Additionally, approximately 20 percent of the increase was due to a one-time severance cost as a result of the workforce reduction in February 2025, which was considered a special item and excluded from the Company's non-GAAP financials.

On a per ASM basis, the increase was primarily due to higher wage rates.

See Note 11 to the unaudited Condensed Consolidated Financial Statements for additional detail regarding the reduction in workforce, and Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.

Fuel and oil expense for first quarter 2025 decreased by $282 million, or 18.4 percent, compared with first quarter 2024.

On a per ASM basis, first quarter 2025 Fuel and oil expense decreased 17.1 percent.

On a dollar basis, approximately 75 percent of the decrease was attributable to a decrease in fuel prices, and the remainder was due to a decrease in fuel gallons consumed.

On a per ASM basis, the majority of the change was due to lower jet fuel prices.

The following table provides more information on the Company's economic fuel cost per gallon, including the impact of fuel hedging premium expense and fuel derivative contract settlements:

Three months ended September 30,

Three months ended March 31,

Economic fuel costs per gallon $ 2.49 $ 2.92

4 unchanged sentences

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

The Company's third quarter 2024 available seat miles per gallon ("fuel efficiency") increased 1.5 percent, year-over-year, due to operating more -8 aircraft, the Company's most fuel-efficient aircraft, as a percentage of its fleet.

The continued deliveries of MAX aircraft are expected to remain critical to the Company's efforts to modernize its fleet, reduce carbon emissions intensity, and achieve its near-term environmental sustainability goals.

The Company's multi-year fuel hedging program continues to provide protection against spikes in energy prices.

The Company's current fuel derivative contracts contain a combination of instruments based on West Texas Intermediate and Brent crude oil, and refined products, such as heating oil.

The economic fuel price per gallon sensitivities provided in the table below assume the relationship between Brent crude oil and refined products based on market prices as of October 16, 2024.

The Company's first quarter 2025 available seat miles per gallon ("fuel efficiency") increased 2.6 percent, year-over-year, primarily due to operating more -8 aircraft, the Company's most fuel-efficient aircraft, as a percentage of

The continued deliveries of MAX aircraft are expected to remain critical to the Company's efforts to modernize its fleet.

The Company's current fuel derivative contracts contain instruments based on Brent crude oil.

The economic fuel price per gallon sensitivities provided in the table below assume the relationship between Brent crude oil and refined products based on market prices as of April 15, 2025.

Estimated economic fuel price per gallon,

1 unchanged sentence

Average Brent Crude Oil

price per barrel 4Q 2024 2024

price per barrel Second Quarter 2025

$40 $1.40 - $1.50

4 unchanged sentences

$90 $3.00 - $3.10

$100 $3.20 - $3.30

Fair market value of

fuel derivative contracts settling in period $8 million $57 million

Estimated premium costs $39 million $158 million

(a) Brent crude oil average market prices as of October 16, 2024, were $74 and $80 per barrel for fourth quarter and full year 2024, respectively.

(b) Based on the Company's existing fuel derivative contracts and market prices as of October 16, 2024, fourth quarter and full year 2024 economic fuel costs per gallon are estimated to be in the range of $2.25 to $2.35 and $2.60 to $2.70, respectively.

fuel derivative contracts settling in period $—

Estimated premium costs $37 million

(a) Brent crude oil average market price as of April 15, 2025 was $64 per barrel for second quarter 2025.

(b) Based on the Company's existing fuel derivative contracts and market prices as of April 15, 2025, second quarter 2025 economic fuel costs per gallon were estimated to be in the range of $2.20 to $2.30, including fuel hedging premium expense of $0.06 per gallon and no cash settlements from fuel derivative contracts.

1 unchanged sentence

See Note Regarding Use of Non-GAAP Financial Measures.

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

Period Maximum fuel hedged percentage (a)(b)

2027 Less than 10%

Based on higher fuel hedging premium costs over time and other factors, the Company has discontinued its fuel hedging program and has no plans to add additional derivatives to its portfolio, which currently extends through 2027.

The Company is providing its maximum percentage of estimated fuel consumption covered by fuel derivative contracts in the following table:

Period Maximum fuel hedged percentage (a)(b) Estimated premium costs

2025 47% $148 million

2026 43% $135 million

2027 13% $40 million

(a) Based on the Company's current available seat mile plans .

The Company is currently 59 percent hedged for fourth quarter 2024.

The Company is currently 45 percent hedged in second quarter 2025 and 46 percent hedged in second half 2025.

(b) The Company's maximum fuel hedged percentage is calculated using the maximum number of gallons that are covered by derivative contracts divided by the Company's estimate of total fuel gallons to be consumed for each respective period.

1 unchanged sentence

The volume of gallons covered by derivative contracts that are ultimately exercised in any given period may vary significantly from the volumes used to calculate the Company's maximum fuel hedged percentages, as market prices and the Company's fuel consumption fluctuate.

As a result of applying hedge accounting in prior periods, the Company has amounts in Accumulated other comprehensive income ("AOCI") that will be recognized in the unaudited Condensed Consolidated Statement of Comprehensive Income in future periods when the underlying fuel derivative contracts settle.

The following table displays the Company's estimated fair value of remaining fuel derivative contracts (not considering the impact of the cash collateral provided to or received from counterparties—see Note 3 to the unaudited Condensed Consolidated Financial Statements for further information), as well as the deferred amounts in AOCI as of September 30, 2024, and the expected future periods in which these items are expected to settle and/or be recognized in the unaudited Condensed Consolidated Statement of Comprehensive Income (in millions):

Year Fair value of fuel derivative contracts at September 30, 2024

Amount of gains (losses) deferred in AOCI at September 30, 2024 (net of tax)

As a result of applying hedge accounting in prior periods, the Company has amounts in Accumulated other comprehensive income ("AOCI") that will be recognized in the unaudited Condensed Consolidated Statement of Comprehensive Loss in future periods when the underlying fuel derivative contracts settle.

The following table displays the Company's estimated fair value of remaining fuel derivative contracts (not considering the impact of the cash collateral provided to or received from counterparties—see Note 3 to the unaudited Condensed Consolidated Financial Statements for further information), as well as the deferred amounts in AOCI as of March 31, 2025, and the expected future periods in which these items are expected to settle and/or be recognized in the unaudited Condensed Consolidated Statement of Comprehensive Loss (in millions):

Year Fair value of fuel derivative contracts at March 31, 2025

Amount of gains (losses) deferred in AOCI at March 31, 2025 (net of tax)

Remainder of 2025 $ 10 $ (77)

Total $ 92 $ (148)

Maintenance materials and repairs expense for third quarter 2024 increased by $9 million, or 2.8 percent, compared with third quarter 2023.

On a per ASM basis, Maintenance materials and repairs expense remained flat compared with third quarter 2023.

On a dollar basis, approximately 60 percent of the increase was due to increased bulk purchases of materials for the Company's seat refurbishment efforts on its entire fleet.

The remainder of the increase was primarily due to increases in engine shop visits and other engine expenses for the Company's -700 and -800 fleet.

Landing fees and airport rentals expense for third quarter 2024 increased by $36 million, or 7.9 percent, compared with third quarter 2023.

On a per ASM basis, Landing fees and airport rentals expense increased 4.8 percent, compared with third quarter 2023.

On a dollar and per ASM basis, the increase was primarily attributable to an increase in airport rental expense and higher landing fees throughout the network driven by the higher rates charged by airports, partially offset by more favorable settlements and credits from various airports received in third quarter 2024.

Depreciation and amortization expense for third quarter 2024 increased by $63 million, or 16.8 percent, compared with third quarter 2023.

On a per ASM basis, Depreciation and amortization expense increased 14.1 percent, compared with third quarter 2023.

On a dollar and per ASM basis, approximately 50 percent of the increase was due to accelerating the depreciation for certain -700 aircraft planned for early retirement in 2024 and 2025, and

approximately 25 percent of the increase was due to the acquisition of 36 -8 aircraft since third quarter 2023, partially offset by 40 -700 owned and finance leased aircraft retirements.

Other operating expenses for third quarter 2024 increased by $121 million, or 12.6 percent, compared with third quarter 2023.

Included within this line item was aircraft rentals expense in the amounts of $52 million and $49 million for the three-month periods ended September 30, 2024 and 2023, respectively.

On a per ASM basis, Other operating expenses increased 10.1 percent, compared with third quarter 2023.

On a dollar and per ASM basis, (i) approximately 20 percent of the increase was due to higher professional fees driven by an increase in consulting services related to various Company initiatives, (ii) approximately 20 percent of the increase was due to higher software license and maintenance agreement expense driven by expanded cloud-based services, (iii) approximately 15 percent of the increase was due to higher ad valorem tax rates, and (iv) approximately 10 percent of the increase was due to higher per diem rates paid to Flight crews, primarily driven by the new Pilot and Flight Attendant ratified agreements.

The majority of the remainder of the increase was due to various other flight-driven and revenue related expenses.

Other expenses (income)

Capitalized interest for third quarter 2024 increased by $5 million, or 125.0 percent, compared with third quarter 2023, primarily due to an increase in various technology projects, facilities projects, and aircraft under construction.

Interest income for third quarter 2024 decreased by $35 million, or 22.4 percent, compared with third quarter 2023, primarily due to lower cash and investment balances in the total investment portfolio and lower interest rates.

The following table displays the components of Other (gains) losses, net, for the three months ended September 30, 2024 and 2023:

Three months ended September 30,

Maintenance materials and repairs expense for first quarter 2025 decreased by $69 million, or 19.1 percent, compared with first quarter 2024.

On a per ASM basis, Maintenance materials and repairs expense decreased by 17.6 percent compared with first quarter 2024.

On a dollar and per ASM basis, the decrease was primarily due to a decrease in engine shop visits and other engine expenses associated with the Company's -800 fleet.

Landing fees and airport rentals expense for first quarter 2025 increased by $58 million, or 12.5 percent, compared with first quarter 2024.

On a per ASM basis, Landing fees and airport rentals expense increased 14.5 percent, compared with first quarter 2024.

On a dollar and per ASM basis, approximately 60 percent of the increase was primarily attributable to an increase in airport rental expense throughout the network driven by the higher rates charged by airports for leased space.

The remainder of the increase was due to receiving fewer favorable settlements and credits from various airports in first quarter 2025.

Depreciation and amortization expense for first quarter 2025 decreased by $12 million, or 2.9 percent, compared with first quarter 2024.

On a per ASM basis, Depreciation and amortization expense remained flat compared with first quarter 2024.

On a dollar basis, the decrease was primarily due to accelerating depreciation for fewer -700 aircraft planned for early retirement in 2025 compared to 2024.

Other operating expenses for first quarter 2025 increased by $72 million, or 7.1 percent, compared with first quarter 2024.

Included within this line item was aircraft rentals expense in the amounts of $87 million and $51 million for the three-month periods ended March 31, 2025 and 2024, respectively.

On a per ASM basis, Other operating expenses increased 9.1 percent, compared with first quarter 2024.

On a dollar and per ASM basis, the increase was primarily due to an approximately $36 million increase in aircraft rentals expense associated with recent fleet transactions, and an approximately $31 million increase in professional fees driven by professional advisory fees related to the Company's implementation of its comprehensive transformational plan.

These increases were partially offset by a year-over-year decrease in marketing and advertising costs.

See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information on the recent fleet transactions.

Non-Operating Expenses (Income)

Interest expense for first quarter 2025 decreased by $19 million, or 29.2 percent, compared with first quarter 2024, primarily due to prepaying the 5.25% senior unsecured notes due May 2025 in December 2024.

Interest income for first quarter 2025 decreased by $57 million, or 40.4 percent, compared with first quarter 2024, primarily due to lower cash and investment balances and a lower interest rate in the total investment portfolio.

The following table displays the components of Other (gains) losses, net, for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

(in millions) 2025 2024

Mark-to-market impact from fuel contracts settling in current and future periods $ 29 $ (33)

Premium benefit of fuel contracts not designated as hedges 5 —

Mark-to-market impact from fuel contracts settling in future periods $ — $ 1

Mark-to-market impact on deferred compensation plan investments 18 (14)

The Company's effective tax rate was 24.0 percent in third quarter 2024, compared with 18.5 percent in third quarter 2023.

The year-over-year increase in the tax rate was primarily due to a third quarter 2024 deferred tax liability adjustment combined with the impact of lower pre-tax book income on discrete tax items.

The Company currently estimates its annual 2024 effective tax rate to be approximately 24 percent.

Comparison of nine months ended September 30, 2024 and September 30, 2023

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

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

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

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

The financial impact of this disruption on first quarter 2023 results was approximately $380 million on a pre-tax basis.

Other than a fourth quarter 2023 charge associated with a Department of Transportation settlement of $107 million, there were no material impacts to operating revenues or expenses as a

result of this disruption beyond first quarter 2023.

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

Operating Revenues

Passenger revenues for the nine months ended September 30, 2024, increased by $1.2 billion, or 7.2 percent, compared with the first nine months of 2023.

On a unit basis, Passenger revenues remained flat, year-over-year.

The dollar increase was primarily due to a 7.1 percent increase in capacity due to increased flight activity and strong operational performance and completion factor for the nine months ended September 30, 2024 versus 2023.

In addition, the Company has continued to gain experience with a new revenue management system that was implemented in 2023, which it believes will deliver better long-term performance compared with its prior system.

However, during the first half of 2024, the Company believes it sold an excess number of seats for the peak summer travel period too early in the booking curve, leading to a dilution in unit revenues.

Other revenues for the nine months ended September 30, 2024, increased by $38 million, or 2.2 percent, year-over-year.

On a dollar basis, the increase was primarily due to additional marketing revenue from Chase Bank USA, N.A., driven by improved retail spend on the Company's co-brand credit card.

Operating Expenses

Operating expenses for the nine months ended September 30, 2024, increased by $1.9 billion, or 10.0 percent, compared with the first nine months of 2023, and capacity increased 7.1 percent over the same prior year period.

Approximately 55 percent of the increase in expense was due to higher Salaries, wages, and benefits expense, approximately 10 percent was due to higher Maintenance materials and repairs expense, approximately 10 percent was due to higher Landing fees and airport rentals expense, and approximately 10 percent was due to higher Depreciation and amortization expense.

Historically, except for changes in the price of fuel, changes in Operating expenses for airlines have been largely driven by changes in capacity, or ASMs.

The following table presents the Company's Operating expenses per ASM for the first nine months of 2024 and 2023, followed by explanations of these changes on a dollar basis.

Nine months ended September 30, Per ASM Percent

(in cents, except for percentages) 2024 2023 change change

Salaries, wages, and benefits 6.74 ¢ 6.40 ¢ 0.34 ¢ 5.3 %

Fuel and oil 3.40 3.61 (0.21) (5.8)

Maintenance materials and repairs 0.78 0.67 0.11 16.4

Landing fees and airport rentals 1.10 1.06 0.04 3.8

Depreciation and amortization 0.93 0.89 0.04 4.5

Other operating expenses 2.39 2.30 0.09 3.9

Total 15.34 ¢ 14.93 ¢ 0.41 ¢ 2.7 %

Operating expenses per ASM for the first nine months of 2024 increased by 2.7 percent, compared with the first nine months of 2023, primarily due to increases in Salaries, wages, and benefits expense, which included incremental expense of $180 million in the nine months ended September 30, 2023 related to the contract ratification bonus for the Company's Flight Attendants as part of the tentative agreement reached in October 2023 and ratified in April 2024.

The majority of the remainder of the year-over-year unit cost increase was primarily due to Maintenance materials and repairs expense, partially offset by a decrease in the Company's fuel cost per gallon.

Operating expenses per ASM for the first nine months of 2024, excluding Fuel and oil expense, profitsharing, and special items (a non-GAAP financial measure), increased 7.5 percent, year-over-year.

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

Salaries, wages, and benefits expense for the first nine months of 2024 increased by $1.0 billion, or 12.8 percent, compared with the first nine months of 2023.

On a per ASM basis, Salaries, wages, and benefits expense for the first nine months of 2024 increased 5.3 percent, compared with the first nine months of 2023.

On a dollar basis, approximately 65 percent of the increase was due to step/pay rate increases for certain workgroups (including the recently ratified labor contracts with the Company's Pilots, Flight Attendants, and Ramp, Operations, Provisioning, and Cargo Agents) and approximately 25 percent of the increase was driven by an increase in capacity and/or number of trips flown.

The majority of the remainder was due to various other benefits associated with the higher contractual wages, such as earned vacation pay, and additional supplemental pay and benefits, primarily for Pilots.

On a per ASM basis, the increase was due to step/pay rate increases.

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

Fuel and oil expense for the first nine months of 2024 increased by $34 million, or 0.8 percent, compared with the first nine months of 2023.

On a per ASM basis, Fuel and oil expense for the first nine months of 2024 decreased 5.8 percent.

On a dollar basis, the increase was primarily attributable to an increase in fuel gallons consumed, partially offset by a decrease in the Company's fuel cost per gallon.

On a per ASM basis, the decrease was primarily attributable to a decrease in the Company's fuel cost per gallon.

The following table provides more information on the Company's economic fuel cost per gallon, including the impact of fuel hedging premium expense and fuel derivative contracts:

Nine months ended September 30,

Economic fuel costs per gallon $ 2.74 $ 2.85

Fuel hedging premium expense (in millions) $ 119 $ 91

Fuel hedging cash settlement gain (in millions) $ 49 $ 196

Fuel hedging premium expense per gallon $ 0.07 $ 0.06

Fuel hedging cash settlement gains per gallon $ 0.03 $ 0.12

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

Maintenance materials and repairs expense for the first nine months of 2024 increased by $210 million, or 25.1 percent, compared with the first nine months of 2023.

On a per ASM basis, Maintenance materials and repairs expense increased 16.4 percent, compared with the first nine months of 2023.

On a dollar and per ASM basis, approximately 60 percent of the increase was primarily due to an increase in engine shop visits and various other engine expenses for the Company's -700 and -800 fleet, approximately 15 percent of the increase was driven by airframe repairs due to a higher average cost per event and the timing of regular maintenance events, and approximately 10 percent was due to increased bulk purchases of materials for the Company's seat refurbishment efforts on its entire fleet.

Landing fees and airport rentals expense for the first nine months of 2024 increased by $144 million, or 10.9 percent, compared with the first nine months of 2023.

On a per ASM basis, Landing fees and airport rentals expense increased 3.8 percent, compared with the first nine months of 2023.

On a dollar and per ASM basis, approximately 85 percent of the increase was largely due to an increase in airport rental expense throughout the network driven by higher rates charged by airports.

Depreciation and amortization expense for the first nine months of 2024 increased by $143 million, or 12.9 percent, compared with the first nine months of 2023.

On a per ASM basis, Depreciation and amortization expense increased 4.5 percent, compared with the first nine months of 2023.

On a dollar and per ASM basis, approximately 45 percent of the increase was due to accelerating the depreciation for certain -700 aircraft planned for early retirement in 2024

and 2025, and approximately 30 percent of the increase was due to the acquisition of 36 -8 aircraft since third quarter 2023, partially offset by 40 -700 owned and finance leased aircraft retirements.

Other operating expenses for the first nine months of 2024 increased by $320 million, or 11.2 percent, compared with the first nine months of 2023.

Included within this line item was aircraft rentals expense in the amount of $153 million and $149 million for the nine months ended September 30, 2024 and 2023, respectively.

On a per ASM basis, Other operating expenses increased 3.9 percent, compared with the first nine months of 2023.

On a dollar and per ASM basis, (i) approximately 30 percent of the year-over-year increase was due to higher advertising expense, (ii) approximately 15 percent of the increase was due to higher per diem rates paid to Flight crews, primarily driven by the new Pilot and Flight Attendant ratified agreements, (iii) approximately 15 percent of the increase was due to higher professional fees primarily driven by an increase in spend on technology enhancements and replacement projects, and (iv) approximately 15 percent of the increase was due to higher maintenance agreement expense driven by expanded cloud-based services.

Other expenses (income)

Capitalized interest for the first nine months of 2024 increased by $9 million, or 60.0 percent, compared with the first nine months of 2023, primarily due to an increase in various technology projects, facilities projects, and aircraft under construction.

Interest income for the first nine months of 2024 decreased by $33 million, or 7.8 percent, compared with the first nine months of 2023, primarily due to lower cash and investment balances in the total investment portfolio and lower interest rates.

The following table displays the components of Other (gains) losses, net, for the nine months ended September 30, 2024 and 2023:

Nine months ended September 30,

(in millions) 2024 2023

Mark-to-market impact from fuel contracts settling in current and future periods $ 31 $ (26)

Premium benefit of fuel contracts not designated as hedges 5 —

Unrealized mark-to-market adjustment on available for sale securities — (4)

Mark-to-market impact on deferred compensation plan investment (40) (17)

The Company's effective tax rate was approximately 24.3 percent for the first nine months of 2024, compared with 22.0 percent for the first nine months of 2023.

The year-over-year increase in the tax rate was primarily due to the impact of year-to-date lower pre-tax book income on discrete tax items.

The Company's effective tax rate was 22.3 percent in first quarter 2025, compared with 22.5 percent in first quarter 2024.

The year-over-year decrease in the tax rate was primarily due to additional federal tax credits generated in 2025.

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

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

Three months ended September 30, Percent Nine months ended September 30, Percent

2024 2023 Change 2024 2023 Change

Three months ended March 31, Percent

2025 2024 Change

Fuel and oil expense, unhedged $ 1,212 $ 1,510

1 unchanged sentence

Fuel hedge gains included in Fuel and oil expense, net — (18)

Fuel and oil expense, as reported $ 1,417 $ 1,564 (9.4) $ 4,548 $ 4,514 0.8

Add (Deduct):

Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) 14 (11) 14 (12)

Premium cost of fuel contracts not designated as hedges 5 — 5 —

Fuel and oil expense, excluding special items (economic) $ 1,436 $ 1,553 (7.5) $ 4,567 $ 4,502 1.4

Total operating expenses, net, as reported $ 6,832 $ 6,408 $ 20,510 $ 18,640

Labor contract adjustment (b) — (96) (9) (180)

Add (Deduct):

Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) 14 (11) 14 (12)

Premium cost of fuel contracts not designated as hedges 5 — 5 —

Litigation settlements — — (7) (12)

Professional advisory fees (13) — (20) —

Fuel and oil expense, as reported (and economic) $ 1,249 $ 1,531 (18.4)

Total operating expenses, as reported $ 6,651 $ 6,722

Labor contract adjustment — (9)

Litigation accruals (19) (7)

Transformation costs (14) —

Severance and related costs (a) (62) —

Total operating expenses, excluding special items $ 6,556 $ 6,706 (2.2)

Fuel and oil expense, excluding special items (economic) (1,436) (1,553) (4,567) (4,502)

Operating expenses, excluding Fuel and oil expense and special items $ 5,402 $ 4,748 13.8 $ 15,926 $ 13,934 14.3

Profitsharing expense (18) (38) (49) (158)

Operating expenses, excluding Fuel and oil expense, special items, and profitsharing $ 5,384 $ 4,710 14.3 $ 15,877 $ 13,776 15.3

Operating income, as reported $ 38 $ 117 $ 43 $ 628

Labor contract adjustment (b) — 96 9 180

Add (Deduct):

Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) (14) 11 (14) 12

Premium cost of fuel contracts not designated as hedges (5) — (5) —

Litigation settlements — — 7 12

Professional advisory fees 13 — 20 —

Operating income, excluding special items $ 32 $ 224 (85.7) $ 60 $ 832 (92.8)

Fuel and oil expense, as reported (and economic) (1,249) (1,531)

Operating expenses, excluding Fuel and oil expense, special items, and profit sharing $ 5,307 $ 5,175 2.6

Operating loss, as reported $ (223) $ (393)

Labor contract adjustment — 9

Litigation accruals 19 7

Transformation costs 14 —

Severance and related costs (a) 62 —

Operating loss, excluding special items $ (128) $ (377) (66.0)

Other (gains) losses, net, as reported $ 18 $ (12)

Add (Deduct):

Mark-to-market impact from fuel contracts settling in current and future periods (a) (29) 33 (31) 26

Premium cost of fuel contracts not designated as hedges (5) — (5) —

Unrealized mark-to-market adjustment on available for sale securities — — — 4

Mark-to-market impact from fuel contracts settling in future periods (b) — (1)

Other (gains) losses, net, excluding special items $ 18 $ (13) n.m.

$ (37) $ (14) 164.3%

Three months ended September 30, Percent Nine months ended September 30, Percent

2024 2023 Change 2024 2023 Change

Income before income taxes, as reported $ 89 $ 237 $ 269 $ 919

Labor contract adjustment (b) — 96 9 180

Add (Deduct):

Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) (14) 11 (14) 12

Add (Deduct):

Mark-to-market impact from fuel contracts settling in current and future periods (a) 29 (33) 31 (26)

Litigation settlements — — 7 12

Professional advisory fees 13 — 20 —

Unrealized mark-to-market adjustment on available for sale securities — — — (4)

Income before income taxes, excluding special items $ 117 $ 311 (62.4) $ 322 $ 1,093 (70.5)

Provision for income taxes, as reported $ 22 $ 44 $ 65 $ 202

Net income tax impact of fuel and special items (c) 6 27 16 55

Provision for income taxes, net, excluding special items $ 28 $ 71 (60.6) $ 81 $ 257 (68.5)

Net income, as reported $ 67 $ 193 $ 204 $ 717

Labor contract adjustment (b) — 96 9 180

Add (Deduct):

Fuel hedge contracts settling in the current period, but for which (gains) losses were reclassified from AOCI (a) (14) 11 (14) 12

Add (Deduct):

Mark-to-market impact from fuel contracts settling in current and future periods (a) 29 (33) 31 (26)

Litigation settlements — — 7 12

Professional advisory fees 13 — 20 —

Unrealized mark-to-market adjustment on available for sale securities — — — (4)

Net income tax impact of special items (c) (6) (27) (16) (55)

Net income, excluding special items $ 89 $ 240 (62.9) $ 241 $ 836 (71.2)

Net income per share, diluted, as reported $ 0.11 $ 0.31 $ 0.34 $ 1.15

Loss before income taxes, as reported $ (192) $ (298)

Labor contract adjustment — 9

Mark-to-market impact from fuel contracts settling in future periods (b) — 1

Litigation accruals 19 7

Transformation costs 14 —

Severance and related costs (a) 62 —

Loss before income taxes, excluding special items $ (97) $ (281) (65.5)

Benefit for income taxes, as reported $ (43) $ (67)

Net loss tax impact of fuel and special items (c) 23 4

Benefit for income taxes, net, excluding special items $ (20) $ (63) (68.3)

Net loss, as reported $ (149) $ (231)

Labor contract adjustment — 9

Mark-to-market impact from fuel contracts settling in future periods (b) — 1

Litigation accruals 19 7

Transformation costs 14 —

Severance and related costs (a) 62 —

Net loss tax impact of special items (c) (23) (4)

Net loss, excluding special items $ (77) $ (218) (64.7)

Three months ended March 31, Percent

2025 2024 Change

Net loss per share, diluted, as reported $ (0.26) $ (0.39)

Impact of special items 0.16 0.04

Add (Deduct):

Net impact of net income above from fuel contracts divided by dilutive shares 0.02 (0.03) 0.03 (0.02)

Net income tax impact of special items (c) — (0.04) (0.03) (0.09)

GAAP to Non-GAAP diluted weighted average shares difference (d) 0.01 — — —

Net income per share, diluted, excluding special items $ 0.15 $ 0.38 (60.5) $ 0.40 $ 1.33 (69.9)

Net loss tax impact of special items (c) (0.03) (0.01)

Net loss per share, diluted, excluding special items $ (0.13) $ (0.36) (63.9)

Operating expenses per ASM (cents) 16.05 ¢ 15.91 ¢

1 unchanged sentence

Fuel and oil expense divided by ASMs (3.01) (3.63)

Profitsharing expense divided by ASMs (0.03) (0.08) (0.04) (0.12)

Three months ended September 30, Percent Nine months ended September 30, Percent

2024 2023 Change 2024 2023 Change

Operating expenses per ASM, excluding Fuel and oil expense, special items, and profitsharing (cents) 11.91 ¢ 10.67 ¢ 11.6 11.87 ¢ 11.04 ¢ 7.5

(a) See Note 3 to the unaudited Condensed Consolidated Financial Statements for further information.

(b) Represents incremental expense associated with contract ratification bonuses for various workgroups related to additional compensation for services performed by Employees outside of the applicable fiscal period.

See the Note Regarding Use of Non-GAAP Financial Measures for further information.

Operating expenses per ASM, excluding Fuel and oil expense, special items, and profit sharing (cents) 12.81 ¢ 12.25 ¢ 4.6

(a) Represents Employee severance payments and related professional fees resulting from the workforce reduction in February 2025 ($53 million in Salaries, wages, and benefits and $9 million in Other operating expenses).

See Note 11 to the unaudited Condensed Consolidated Financial Statements for further information.

(b) See Note 3 to the unaudited Condensed Consolidated Financial Statements for further information.

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

(d) Adjustment related to GAAP and Non-GAAP diluted weighted average shares difference due to the Convertible Notes being anti-dilutive for GAAP but dilutive for Non-GAAP for the three months ended September 30, 2024.

Non-GAAP Return on Invested Capital (ROIC) (in millions) (unaudited)

Twelve months ended

September 30, 2024

Operating loss, as reported $ (361)

Twelve months ended Twelve months ended

March 31, 2025 March 31, 2024

Operating income, as reported $ 491 $ 115

Breakage revenue adjustment 116 —

Severance and related costs 62 —

Voluntary Employee programs 5 —

TWU 555 contract adjustment — 9

TWU 556 contract adjustment — 180

SWAPA contract adjustment — 354

1 unchanged sentence

Professional advisory fees 37 —

Transformation costs 18 —

DOT settlement — 107

Litigation settlements 7

Litigation accruals 19 19

Operating income, non-GAAP $ 705 $ 801

1 unchanged sentence

Adjusted operating income, non-GAAP (A) $ 865 $ 929

Non-GAAP tax rate (B) 24.3 % (d)

Non-GAAP tax rate (B) 23.1 % (d) 23.5 % (e)

Net operating profit after-tax, NOPAT (A* (1-B) = C) $ 665 $ 711

7 unchanged sentences

Non-GAAP ROIC, after-tax (C/D) 3.6 % 3.7 %

(a) Net adjustment related to presumption that all aircraft in fleet are owned (i.e., the impact of eliminating aircraft rent expense and replacing with estimated depreciation expense for those same aircraft).

(a) Net adjustment to reflect all aircraft in fleet as owned (i.e., the impact of eliminating aircraft rent expense and replacing with estimated depreciation expense for those same aircraft).

The Company makes this adjustment to enhance comparability to other entities that have different capital structures by utilizing alternative financing decisions.

3 unchanged sentences

The current period impact of these gains and/or losses is reflected in the Net impact from fuel contracts in the numerator.

(d) The GAAP twelve month rolling tax rate as of September 30, 2024, was (186.0) percent, and the Non-GAAP twelve month rolling tax rate was 24.3 percent.

The GAAP twelve month rolling tax rate as of September 30, 2024 is negative primarily due to the Company's pre-tax book loss for the twelve months ended September 30, 2024.

(d) The GAAP twelve month rolling tax rate as of March 31, 2025, was 22.3 percent, and the Non-GAAP twelve month rolling tax rate was 23.1 percent.

See Note Regarding Use of Non-GAAP Financial Measures for additional information.

(e) The GAAP twelve month rolling tax rate as of March 31, 2024, was 27.1 percent, and the Non-GAAP twelve month rolling tax rate was 23.5 percent.

See Note Regarding Use of Non-GAAP Financial Measures for additional information.

Note Regarding Use of Non-GAAP Financial Measures

The Company's unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP.

to derivative instruments and hedging and (ii) other charges and benefits the Company believes are unusual and/or infrequent in nature and thus may make comparisons to its prior or future performance difficult.

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

As a result, the Company also provides financial information in this filing that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP.

The Company provides supplemental non-GAAP financial information (also referred to as "excluding special items"), including results that it refers to as "economic," which the Company's management utilizes to evaluate its ongoing financial performance and the Company believes provides additional insight to investors as supplemental information to its GAAP results.

The non-GAAP measures provided that relate to the Company’s performance on an economic fuel cost basis include Operating expenses, non-GAAP excluding Fuel and oil expense;

Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing;

Operating income, non-GAAP;

The non-GAAP measures provided that relate to the Company’s performance on an economic fuel cost basis include Total operating expenses, non-GAAP;

Operating expenses, non-GAAP excluding Fuel and oil expense and profit sharing;

Operating loss, non-GAAP;

Adjusted Operating income, non-GAAP;

Other (gains) losses, net, non-GAAP;

Income before income taxes, non-GAAP;

Provision for income taxes, net, non-GAAP;

Net income, non-GAAP;

Net income per share, diluted, non-GAAP;

and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents).

Loss before income taxes, non-GAAP;

Benefit for income taxes, net, non-GAAP;

Net loss, non-GAAP;

Net loss per share, diluted, non-GAAP;

and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profit sharing (cents).

The Company's economic Fuel and oil expense results differ from GAAP results in that they only include the actual cash settlements from fuel hedge contracts - all reflected within Fuel and oil expense in the period of settlement.

Thus, Fuel and oil expense on an economic basis has historically been utilized by the Company, as well as some of the other airlines that utilize fuel hedging, as it reflects the Company’s actual net cash outlays for fuel during the applicable period, inclusive of settled fuel derivative contracts.

Any net premium costs paid related to option contracts that are designated as hedges are reflected as a component of Fuel and oil expense, for both GAAP and non-GAAP (including economic) purposes in the period of contract settlement.

Any net fuel hedging premium costs paid related to option contracts that are designated as hedges are reflected as a component of Fuel and oil expense, for both GAAP and non-GAAP (including economic) purposes in the period of contract settlement.

The Company believes these economic results provide further insight into the impact of the Company's fuel hedges on its operating performance and liquidity since they exclude the unrealized, noncash adjustments and reclassifications that are recorded in GAAP results in accordance with accounting guidance relating to derivative instruments, and they reflect all cash settlements related to fuel derivative contracts within Fuel and oil expense.

7 unchanged sentences

Incremental expense associated with contract ratification bonuses for various workgroups related to additional compensation for services performed by Employees outside the applicable fiscal period;

Charges associated with tentative litigation settlements regarding certain California state meal-and-rest-break regulations for flight attendants and an arbitration award in favor of the Company's Pilots relating to a collective-bargaining matter;

Expenses associated with incremental professional advisory fees related to activist investor activities, which were not budgeted by the Company, are not associated with the ongoing operation of the airline, and are difficult to predict in future periods;

Unrealized mark-to-market adjustment associated with certain available for sale securities;

A charge associated with a settlement reached with the Department of Transportation as a result of the Company's December 2022 operational disruption.

Charges associated with tentative litigation settlements regarding paid short-term military leave to certain Employees, certain California state meal-and-rest break regulations for Flight Attendants, and an arbitration award in favor of the Company's Pilots relating to a collective-bargaining matter;

Expenses associated with professional advisory fees related to the Company's implementation of its comprehensive transformational plan;

Charges associated with severance, post-employment benefits, and professional fees as a result of the Company's reduction in workforce;

Reversal of breakage revenue recorded in prior years related to a portion of flight credits issued to Customers during 2022 and prior that have either been redeemed or are expected to be redeemed in future periods.

The majority of these flight credits were issued during the COVID-19 pandemic as the Company was making significant changes to its flight schedules based on fluctuating demand, which made it difficult to estimate future redemption patterns when compared against historical Customer behavior;

Incremental expense associated with a voluntary separation program that allowed eligible Employees the opportunity to voluntarily separate from the Company in exchange for severance, medical/dental coverage for a specified period of time, and travel privileges based on years of service;

Expenses associated with incremental professional advisory fees related to activist investor activities, which were not budgeted by the Company or associated with the ongoing operation of the airline;

A charge associated with a settlement reached with the DOT as a result of the Company's December 2022 operational disruption.

Because management believes special items can distort the trends associated with the Company’s ongoing performance as an airline, the Company believes that evaluation of its financial performance can be enhanced by a supplemental presentation of results that exclude the impact of special items in order to enhance consistency and comparativeness with results in prior periods that do not include such items and as a basis for evaluating operating results in future periods.

The following measures are often provided, excluding special items, and utilized by the Company’s management, analysts, and investors to enhance comparability of year-over-year results, as well as to industry trends:

Operating expenses, non-GAAP excluding Fuel and oil expense;

Operating expenses, non-GAAP excluding Fuel and oil expense and profitsharing;

Operating income, non-GAAP;

Total operating expenses, non-GAAP;

Operating expenses, non-GAAP excluding Fuel and oil expense and profit sharing;

Operating loss, non-GAAP;

Adjusted Operating income, non-GAAP;

Other (gains) losses, net, non-GAAP;

Income before income taxes, non-GAAP;

Provision for income taxes, net, non-GAAP;

Net income, non-GAAP;

Net income per share, diluted, non-GAAP;

and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing (cents).

Loss before income taxes, non-GAAP;

Benefit for income taxes, net, non-GAAP;

Net loss, non-GAAP;

Net loss per share, diluted, non-GAAP;

and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profit sharing (cents).

The Company has also provided its calculation of return on invested capital, which is a measure of financial performance used by management to evaluate its investment returns on capital.

1 unchanged sentence

Although return on invested capital is not a measure defined by GAAP, it is calculated by the Company, in part, using non-GAAP financial measures.

Those non-GAAP financial measures are utilized for the same reasons as those noted above for Net income, non-GAAP and Operating income, non-GAAP.

Those non-GAAP financial measures are utilized for the same reasons as those noted above for Net loss, non-GAAP and Operating loss, non-GAAP.

The comparable GAAP measures include charges or benefits that are deemed "special items" that the Company believes make its results difficult to compare to prior periods, anticipated future periods, or industry trends, and the Company’s profitability targets and estimates, both internally and externally, are based on non-GAAP results since "special items" cannot be reliably predicted or estimated.

3 unchanged sentences

Liquidity and Capital Resources

Net cash provided by operating activities was $113 million for the three months ended September 30, 2024, compared with $616 million provided by operating activities in the same prior year period.

Net cash used in operating activities was $14 million for the nine months ended September 30, 2024, compared with $2.7 billion provided by operating activities in the same prior year period.

Net cash provided by operating activities was $860 million for the three months ended March 31, 2025, compared with $104 million used in operating activities in the same prior year period.

Historically, operating cash inflows are primarily derived from selling tickets for future flights and providing air transportation to Customers.

1 unchanged sentence

Operating cash outflows are related to the recurring expenses of airline operations.

The operating cash flows for the nine months ended September 30, 2024, were largely impacted by the Company's net income (as adjusted for noncash item s, primarily Depreciation and amortization);

the approxima tely $1.9 billion paid to Pilots, Flight Attendants, and Ramp, Operations, Provisioning, and Cargo Agents as bonuses upon the ratification of the labor contract agreements with the Southwest Airlines Pilots Association ("SWAPA"), Transport Workers of America Union Local 556 ("TWU 556"), and the Transport Workers Union Local 555 ("TWU 555"), respectively, and a $98 million decrease related to the purchase of fuel derivative instruments, which is included within Other, net operating cash flows in the accompanying unaudited Condensed Consolidated Statement of Cash Flows.

These decreases were partially offset by a $421 million increase in Air traffic liability driven by higher ticket sales.

The operating cash flows for the nine months ended September 30, 2023 , were largely impacted by the Company's net income (as adjusted for noncash items, primarily Depreciation and amortization), a $750 million increase in Air traffic liability driven by higher ticket sales related to an increase in travel demand, partially offset by a $245 million decrease related to the purchase of fuel derivative instruments, which is included within Other, net operating cash flows in the accompanying unaudited Condensed Consolidated Statement of Cash Flows, and a $215 million decrease due to the payment of Customer reimbursement expenses in first quarter 2023 related to the

December 2022 operational disruption.

The operating cash flows for the three months ended March 31, 2025, were largely impacted by the Company's net results (as adjusted for noncash item s, primarily Depreciation and amortization), a $103 million profit-sharing contribution for 2024 pursuant to the Company's Retirement Savings Plan, and a $660 million increase i n Air traffic

liability driven by seasonal bookings for future travel.

The operating cash flows for the three months ended March 31, 2024 , were largely impacted by the Company's net results (as adjusted for noncash items, primarily Depreciation and amortization), a $1.35 billion outflow due to contract ratification bonuses paid to the Company's Pilots as a result of ratifying a new labor contract in January 2024, a $105 million payout of the Company's ProfitSharing Plan contribution for 2023, and a $51 million decrease related to the purchase of fuel derivative instruments, which is included within Other, net operating cash flows in the accompanying unaudited Condensed Consolidated Statement of Cash Flows, partially offset by a $1.1 billion increase in Air traffic liability driven by seasonal bookings for future travel and higher ticket sales related to an increase in capacity.

Net cash provided by operating activities is primarily used to finance capital expenditures, repay debt, provide Shareholder returns, and provide working capital.

Net cash provided by investing activities totaled $458 million during the three months ended September 30, 2024, compared with $64 million used in investing activities in the same prior year period.

Net cash used in investing activities for the nine months ended September 30, 2024 was $334 million, compared with $2.3 billion used in investing activities in the same prior year period.

Net cash provided by investing activities totaled $623 million during the three months ended March 31, 2025, compared with $585 million used in investing activities in the same prior year period.

Investing activities in both years included Capital expenditures and changes in the balance of the Company's short-term and noncurrent investments.

During the nine months ended September 30, 2024, Capital expenditures were $1.6 billion, compared with $2.8 billion in the same prior year period.

Capital expenditures decreased, year-over-year, largely due to fewer aircraft deliveries during the nine months ended September 30, 2024, compared to the same prior year period.

The Company now estimates its 2024 capital spending to be roughly $2.1 billion, which includes approximately $825 million in aircraft capital spending, assuming 20 -8 aircraft deliveries in 2024.

The Company and Boeing are in ongoing discussions regarding the negative financial impacts to the Company as a result of aircraft delivery delays.

In accordance with applicable accounting guidance, any compensation negotiated and received from Boeing for financial damages associated with such delays would be expected to be realized as a reduction in the cost basis of certain aircraft either in the Company's fleet or associated with future deliveries from Boeing.

Net cash used in financing activities was $210 million during the three months ended September 30, 2024, compared with $213 million used in financing activities for the same prior year period.

Net cash used in financing activities was $437 million during the nine months ended September 30, 2024, compared with $466 million used in financing activities for the same prior year period.

The Company paid $431 million in cash dividends to Shareholders and repaid $27 million in finance lease obligations during the nine months ended September 30, 2024.

During the three months ended March 31, 2025, Capital expenditures were $501 million, compared with $583 million in the same prior year period.

Capital expenditures decreased, year-over-year, largely due to a decrease in average progress payment balances for scheduled future aircraft deliveries during the three months ended March 31, 2025, compared to the same prior year period.

The Company continues to expect its 2025 capital spending to be in the range of $2.5 billion to $3.0 billion, which does not include the impact of potential future fleet transactions.

These transactions could lower the Company's net capital spending if executed.

Net cash used in financing activities was $858 million during the three months ended March 31, 2025, compared with $232 million used in financing activities for the same prior year period.

During the three months ended March 31, 2025, the Company paid $107 million in cash dividends to Shareholders related to the fourth quarter 2024 declaration.

The first quarter 2025 dividend declaration of $103 million was paid in April 2025.

Additionally, the Company repurchased $750 million of the Company's outstanding common stock through authorized share repurchases during the three months ended March 31, 2025.

The repurchases of common stock amounts in the Consolidated Statement of Cash Flows may differ from the Consolidated Statement of Stockholder's Equity due to the timing of excise taxes incurred and subsequent payment on share repurchases, net of issuances.

The Company may engage in early debt repurchases from time to time at its discretion;

however, any early future repurchases are not included in the Company's current maturities of long-term debt.

The Company's 2024 total scheduled debt repayments are expected to be $31 million.

As the Company's $1.6 billion in Convertible Senior Notes and its $1.3 billion in Senior Unsecured Notes mature in second quarter 2025, they are reflected in Current maturities of long-term debt in the accompanying unaudited Condensed Consolidated Balance Sheet as of September 30, 2024.

See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information on future debt maturities.

During the nine months ended September 30, 2023, the Company paid $428 million in cash dividends to Shareholders and repaid $78 million in finance lease obligations.

however, any early future repurchases are not included in the Company's current maturities of long-term debt unless otherwise disclosed.

During first quarter 2025, the Company made the decision to prepay the first Payroll Support Program Loan in advance of the fifth anniversary date of April 20, 2025.

As a result, the balance as of March 31, 2025, is classified as Current maturities of long-term debt in the accompanying unaudited Condensed Consolidated Balance Sheet.

See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information on the Payroll Support Program Loan and future debt maturities.

During the three months ended March 31, 2024, the Company paid $215 million in cash dividends to Shareholders for the fourth quarter 2023 and first quarter 2024 declarations.

Additionally, the Company repaid $8 million in finance lease obligations.

The Company repurchased $750 million of its outstanding common stock through an accelerated share repurchase program entered into in first quarter 2025 under its current $2.5 billion authorization, which also impacted net cash used in financing activities.

The Company received a total of 24,109,817 million shares under the first quarter 2025 accelerated share repurchase program, which was completed in April 2025.

These purchases were recorded as treasury share repurchases for purposes of calculating earnings per share.

On March 11, 2025, the Company announced its intention to launch an additional $1.5 billion accelerated share repurchase program in second quarter 2025, and expects the program to be completed by the end of July 2025.

The Company is a "well-known seasoned issuer" and currently has an effective shelf registration statement registering an indeterminate amount of debt and equity securities for future sales.

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The Company has access to $1.0 billion under its amended and restated revolving credit facility (the "Amended Credit Agreement"), which expires in August 2028.

For the nine months ended September 30, 2024 and 2023 there were no amounts outstanding under the Amended Credit Agreement.

For the three months ended March 31, 2025 and 2024 there were no amounts outstanding under the Amended Credit Agreement.

See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information.

As of September 30, 2024, the Company carried a working capital deficit of approximately $1.6 billion, in which its current liabilities exceed its current assets.

As of March 31, 2025, the Company carried a working capital deficit of approximately $3.2 billion, in which its current liabilities exceed its current assets.

This is common within the airline industry and is primarily due to the nature of the Air traffic liability account, which is related to advance ticket sales, unused flight credits available to Customers, and loyalty deferred revenue, which are performance obligations for future Customer flights, do not require future settlement in cash, and are mostly nonrefundable.

See Note 5 to the unaudited Condensed Consolidated Financial Statements for further information.

The Company believes it has various options available to meet its capital and operating commitments, including unrestricted cash and short-term investments of $9.4 billion as of September 30, 2024, and anticipated future internally generated funds from operations.

The Company continues to have a large base of unencumbered assets with a net book value of approximately $17.1 billion, including $14.2 billion in aircraft value and $2.9 billion in

non-aircraft assets such as spare engines, ground equipment, and real estate.

The Company believes it has various options available to meet its capital and operating commitments, including unrestricted cash and short-term investments of $8.3 billion as of March 31, 2025, and anticipated future internally generated funds from operations.

The Company continues to have a large base of unencumbered aircraft and primarily aircraft-related assets with a net book value of approximately $16.3 billion.

In addition, the Company continues to maintain investment-grade credit ratings by all three major credit agencies (Moody's, S&P Global, and Fitch).

On May 15, 2019, the Company’s Board authorized the repurchase of up to $2.0 billion of the Company’s common stock, of which approximately $899 million remained as of September 2024.

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

Subject to certain conditions, repurchases may be made in accordance with applicable securities laws in open market or private, including accelerated, repurchase transactions from time to time, depending on market conditions.

No repurchases had been made as of September 30, 2024 under this new authorization;

however, on October 24, 2024, the Company announced its intention to launch an initial $250 million accelerated share repurchase program in fourth quarter 2024.

As of October 24, 2024, for the years 2024 through 2031, the Company has firm orders with Boeing for 507 aircraft, and options for an additional 187 aircraft.

The contractual order book as of October 24, 2024 does not include the impact of delivery delays and is subject to change based on ongoing discussions with Boeing.

As of April 24, 2025, for the years 2025 through 2031, the Company has firm orders with Boeing for 504 aircraft (less 11 -8 aircraft received to date in 2025), and options for an additional 168 aircraft.

The contractual order book as of April 24, 2025 does not include the impact of delivery delays and is subject to change based on ongoing discussions with Boeing and their production capability.

See Note 9 to the unaudited Condensed Consolidated Financial Statements for further information.

The following table details information on the aircraft in the Company's fleet as of September 30, 2024:

The following table details information on the aircraft in the Company's fleet as of March 31, 2025:

Age (Yrs) Number

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Critical Accounting Policies and Estimates

Financial Derivative Instruments

Fair values for financial derivative instruments are estimated prior to the time that the financial derivative instruments settle.

However, once settlement of the financial derivative instruments occurs and the hedged jet fuel is purchased and consumed, all values and prices are known and are recognized in the financial statements.

Although the Company continues to use a prospective assessment to determine that commodities continue to qualify for hedge accounting in specific locations where the Company hedges, there are no assurances that these commodities will continue to qualify in the future.

This is due to the fact that future price changes in these refined products may not be consistent with historical price changes.

Increased volatility in these commodity markets for an extended period of time, especially if such volatility were to worsen, could cause the Company to lose hedge accounting altogether for the commodities used in its fuel hedging program.

During third quarter 2024, the routine statistical analysis performed by the Company to determine which commodities qualify for special hedge accounting treatment on a prospective basis indicated that WTI crude oil based derivatives no longer qualify for hedge accounting.

This change is primarily due to the fact that the correlation between WTI crude oil prices and jet fuel prices during recent periods has not been as strong as in the past, and therefore the Company can no longer demonstrate that derivatives based on WTI crude oil prices will result in effective hedges on a prospective basis.

As such, all WTI-based instruments have been de-designated from their hedging relationships and the change in fair value of all of the Company's derivatives based in WTI have been recorded to Other (gains) losses for third quarter 2024, and will also be marked to market in the same manner in fourth quarter 2024.

The Company currently has no WTI crude oil based derivatives that settle beyond December 31, 2024.

The change in fair value of the Company's WTI derivative contracts during third quarter 2024 was a decrease of $23 million which resulted in a corresponding loss in the Condensed Consolidated Statement of Comprehensive Income.

Any amounts previously recorded to AOCI will remain there until such time as the original forecasted transaction occurs in accordance with hedge accounting requirements.

Further, should the occurrence of anticipated fuel purchases covered by the Company's fuel hedges no

longer be probable, the Company would discontinue hedge accounting.

The loss of hedge accounting would create further volatility in the Company’s GAAP financial results.

For information regarding the Company’s Critical Accounting Policies and Estimates, see the "Critical Accounting Policies and Estimates" section of "Item 7.

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Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, statements related to the following:

• the Company’s financial guidance for fourth quarter and full year 2024 and factors that could impact the Company’s financial results;

• the Company’s financial targets for 2025 and 2026 and factors that could impact the Company’s financial results;

• the Company’s financial guidance for second quarter 2025 and factors that could impact the Company’s financial results;

• the Company’s capacity guidance and expectations;

• the Company’s estimated fuel costs, hedging gains, and fuel efficiency and the assumptions underlying the Company’s fuel-related expectations and estimates, including expectations related to the Company’s fuel derivative contracts;

• the Company’s estimated fuel costs and fuel efficiency and the assumptions underlying the Company’s fuel-related expectations and estimates, including expectations related to the Company’s fuel derivative contracts;

• the Company’s plans and expectations for the repayment of debt and its interest expense;

• the Company’s fleet plans, including with respect to fleet modernization, seats and trips, fleet utilization, flexibility, fleet strategy and extracting value from the fleet and the fleet order book, and expected fleet deliveries and retirements, and underlying expectations and dependencies;

• the Company’s focus areas, goals, opportunities, and initiatives, including with respect to network optimization and maturation, marketing and distribution evolution, and efforts to advance revenue management techniques;

• the Company’s initiatives associated with Customer Experience on flights, improved financial performance, and driving Shareholder value;

• the Company’s focus areas, goals, opportunities, and initiatives, including with respect to flight credit expiration, checked bag fees, cost reductions and efficiencies, loyalty program optimization, the Company’s fare structure, financial performance, and the Company’s co-brand credit card agreement with Chase Bank;

• the Company’s plans and expectations with respect to assigned and premium seating, cabin design and seating, redesigned boarding model, aircraft turn times, and redeye flying;

• the Company’s expectations regarding revenue management, passenger demand, revenue trends, and bookings;

• the Company’s plans and expectations with respect to airline partnerships and its in-house vacation product;

• the Company’s financial targets and goals, including with respect to balance sheet goals and cost mitigation;

• the Company’s fleet plans and expectations, including with respect to fleet modernization, fleet retrofits, fleet utilization, flexibility, fleet strategy and extracting value from the fleet and the fleet order book, and expected fleet deliveries and retirements, and underlying expectations and dependencies;

• the Company’s plans and expectations with respect to capital allocation, capital deployment, infrastructure investments, leverage, and Shareholder returns;

• the Company’s labor plans and expectations;

• the Company’s short-term and long-term financial and operational goals, including with respect to hiring plans and expectations, regaining efficiencies and increasing productivity;

• the Company’s labor plans and expectations including with respect to the Company’s reduction in force;

• the Company’s financial targets and goals, including with respect to balance sheet goals and cost mitigation;

• the Company’s expectations regarding revenue management, passenger demand, revenue trends, and bookings;

• the Company’s short-term and long-term financial and operational goals, including with respect to increasing efficiency and creating a leaner and more agile organization;

• the Company’s cash flow expectations and capital spending guidance, in particular with respect to aircraft capital expenditures and underlying aircraft delivery expectations;

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Factors that could cause these differences include, among others:

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

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

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

• the Company's dependence on Boeing, Boeing’s suppliers, and the FAA with respect to the Company's fleet plans and deliveries, capacity and operational plans, assigned and premium seating plans, and other operational plans, strategies, and goals;

• the cost and effects of the actions of activist shareholders;

• consumer behavior and response with respect to the Company's new commercial products and policies;

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

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

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

• the Company's dependence on other third parties, in particular with respect to its technology plans, its plans and expectations related to operational excellence and reliability, fuel supply, maintenance, environmental sustainability, Global Distribution Systems, and the impact on the Company's operations and results of operations of any third party delays or non-performance;

• the Company's ability to obtain and maintain adequate infrastructure and equipment to support its operations and initiatives;

• the emergence of additional costs or effects associated with the December 2022 operational disruption, including litigation, government investigation and actions, and internal actions;

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

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

• the cost and effects of the actions of activist shareholders;

• other factors as set forth in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the detailed factors discussed under the heading “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

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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-Q

Item 2. Management’s Discussion and Analysis