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Item 2. Management’s Discussion and Analysis

2025-07-24 compared with 2025-04-25 · 421 added, 273 removed, 259 unchanged (73% of the section changed)

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

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

Relevant comparative operating statistics for the three and six months ended June 30, 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 March 31,

Three months ended June 30,

2025 2024 Change

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Aircraft at end of period 810 817 (0.9) %

Six months ended June 30,

2025 2024 Change

Revenue passengers carried (000s) 65,497 70,381 (6.9) %

Enplaned passengers (000s) 81,524 88,164 (7.5) %

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

67,513 71,308 (5.3) %

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

88,427 88,497 (0.1) %

Load factor (c)

76.3 % 80.6 % (4.3) pts.

Average length of passenger haul (miles) 1,031 1,013 1.8 %

Average aircraft stage length (miles) 779 760 2.5 %

Trips flown 699,838 725,728 (3.6) %

Seats flown (000s) (d)

112,502 115,469 (2.6) %

Seats per trip (e)

160.8 159.1 1.1 %

Average passenger fare $ 189.90 $ 176.52 7.6 %

Passenger revenue yield per RPM (cents) (f)

18.42 17.42 5.7 %

Operating revenues per ASM (cents) (g)

15.46 15.46 — %

Passenger revenue per ASM (cents) (h)

14.07 14.04 0.2 %

Operating expenses per ASM (cents) (i)

15.46 15.46 — %

Operating expenses per ASM, excluding fuel (cents) 12.55 11.92 5.3 %

Operating expenses per ASM, excluding fuel and profitsharing (cents) 12.53 11.88 5.5 %

Fuel costs per gallon, including fuel tax $ 2.40 $ 2.84 (15.5) %

Fuel costs per gallon, including fuel tax, economic $ 2.40 $ 2.84 (15.5) %

Fuel consumed, in gallons (millions) 1,071 1,101 (2.7) %

Active fulltime equivalent Employees 72,242 74,081 (2.5) %

Aircraft at end of period 810 817 (0.9) %

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

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

Three months ended March 31,

Three months ended June 30,

(in millions, except per share amounts)

GAAP 2025 2024 Change

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 income $ 225 $ 398 (43.5) %

Net income $ 213 $ 367 (42.0) %

Net income per share, diluted $ 0.39 $ 0.58 (32.8) %

Operating income $ 245 $ 405 (39.5) %

Net income $ 230 $ 370 (37.8) %

Net income per share, diluted $ 0.43 $ 0.58 (25.9) %

The Company's operating income and net income for the three months ended June 30, 2025, on a GAAP and non-GAAP basis, decreased compared to the same prior year period.

Operating revenues decreased by 1.5 percent as a result of a decline in travel demand versus the same prior year period, particularly in domestic leisure travel, where the Company is more heavily weighted than larger industry peers.

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.

On a GAAP basis, the Company's Operating expenses increased 0.9 percent year-over-year.

Operating expenses for the three months ended June 30, 2025, on a non-GAAP basis, excluded pre-tax charges of $20 million.

Six months ended June 30,

(in millions, except per share amounts)

GAAP 2025 2024 Change

Operating income $ 2 $ 6 (66.7) %

Net income $ 64 $ 137 (53.3) %

Net income per share, diluted $ 0.11 $ 0.23 (52.2) %

Operating income $ 117 $ 28 n.m.

Net income $ 153 $ 152 0.7 %

Net income per share, diluted $ 0.27 $ 0.25 8.0 %

The Company's net income for the six months ended June 30, 2025, on a GAAP basis, decreased 53.3 percent compared to the same prior year period, while on a non-GAAP basis, net income remained relatively flat year-over-year.

While Operating revenues were flat year-over-year, an increase in Salaries, wages, and benefits expense was offset by the year-over-year decline in Fuel and oil expense.

The Company has implemented cost savings initiatives, including a reduction in its corporate workforce, resulting in a first quarter 2025 charge, but resulting in lower salaries, wages, and benefits on a go-forward basis.

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

Additionally, Net income was impacted by lower interest income driven by lower cash and investment balances, partially offset by lower interest expense as a result of debt repayments.

Company's operating income for the six months ended June 30, 2025, on a non-GAAP basis increased compared to the same prior year period primarily due to lower Fuel and oil expense, partially offset by higher Salaries, wages, and benefits expense.

Operating expense for the six months ended June 30, 2025, on a non-GAAP basis, excluded pre-tax charges of $115 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 third quarter 2025 and full year 2025, and select full year 2025 and 2026 targets.

3Q 2025 Estimation

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

RASM (a), year-over-year Down 2% to up 2%

ASMs (b), year-over-year ~Flat

Fuel cost per gallon (c) $2.40 to $2.50

ASMs per gallon (fuel efficiency) 82 to 84

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

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

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

Scheduled debt repayments (millions) ~$6

Interest expense (millions) ~$35

2025 Estimation

EBIT (g) (millions) $600 to $800

2025 Target 2026 Target

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

EBIT (g) 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").

Fuel cost per gallon includes fuel taxes and fuel hedging net premium expense of $0.07 per gallon related to terminated fuel derivative contracts.

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

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

(e) See Note Regarding Use of Non-GAAP Financial Measures for additional information on special items.

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

(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.

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

See Note Regarding Use of Non-GAAP Financial Measures.

(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) 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.

(g ) Earnings before interest and taxes, excluding special items ("EBIT"), a non-GAAP financial measure, also excludes gains or losses from fleet transactions.

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.

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

This guidance range assumes a modest sequential improvement in demand, as well as an estimated impact of approximately one point related to a temporary reduction in the conversion rate of basic economy bookings on the Company's website following the May 28, 2025 launch of its basic economy product.

The Company took swift action and refined its booking flow and marketing approach in an effort to reduce friction, as well as offer additional promotional activity, and bookings and conversion rates

quickly returned to expected levels.

Company-specific initiatives provide a unique offset to the broader industry revenue impact, and will continue to accelerate throughout third quarter 2025.

Third quarter 2024 RASM included approximately one point of positive year-over-year impact from the CrowdStrike industry event.

The Company continues to expect to achieve its $370 million cost reduction target this year.

The Company anticipates third quarter 2025 CASM-X to increase in the range of 3.5 percent to 5.5 percent, on roughly flat capacity, both on a year-over-year basis.

This increase is driven primarily by the continuation of inflationary pressures, including those associated with labor contracts ratified in 2024, as well as approximately one point from the timing of engine overhaul expenses and one-half point from aircraft retrofit costs in advance of extra legroom seating launching in January 2026.

Excluding the impact of book gains from fleet transactions in the fourth quarter of both years, the Company continues to expect fourth quarter 2025 CASM-X to be up low-single digits, year-over-year.

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.

The Company remains focused on driving efficiencies to offset overall inflationary cost pressures and achieve its multi-year cost reduction targets.

The Company has provided full year 2025 EBIT guidance, which assumes further sequential improvement from third quarter 2025, driven by accelerating incremental revenue from Company-specific initiatives, the recovery of the temporary basic economy optimization impact, and anticipated improvement in domestic leisure travel trends.

The Company realized approximately one-third of its $1.8 billion 2025 initiative EBIT target in first half 2025 and remains highly confident in its ability to realize the remaining amount during second half 2025, as the value of initiatives are expected to accelerate throughout second half 2025 and more meaningfully into 2026.

Company Overview

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.

Transformational Initiative Highlights

The Company is evolving rapidly, implementing its previously announced transformational initiatives, which are expected to enhance optionality for current and future Customers, improve financial performance, and drive Shareholder value.

During second quarter 2025, the Company:

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

The Company continues to offer two free checked bags to Rapid Rewards® A-List Preferred Members and Customers traveling on Business Select fares and offers one free checked bag to A-List Members and co-brand Cardmembers under its credit card program (weight and size limitations apply);

• Introduced a basic fare product beginning on May 28, 2025, in lieu of its prior Wanna Get Away® fare product;

• Updated its flight credit policy for tickets purchased on or after May 28, 2025, with flight credits originating from a basic fare expiring six months from ticketing date and flight credits issued for other fares expiring one year from the date of ticketing;

• Announced plans to transition to new fare products, Choice Extra, Choice Preferred, and Choice (formerly Business Select, Anytime, and Wanna Get Away Plus), in conjunction with sales of assigned and premium seating with a sell date of July 29, 2025 for travel beginning January 27, 2026;

• Announced an international airline partnership with China Airlines, which is expected to launch in early 2026, creating the first trans-Pacific airline partnership for Southwest;

• Expanded its partnership with Icelandair, connecting Customers on dual-carrier itineraries through gateway airports Baltimore/Washington, Denver, and Nashville.

Beginning July 14, 2025, Icelandair and Southwest added connecting service through Orlando, Pittsburgh, and Raleigh-Durham, providing more access between Europe and cities across the Company’s network.

These strategic moves add to the initiatives already underway at Southwest, including the implementation of assigned seating and extra legroom options.

The move to assigned and extra legroom seating requires incorporating new technologies and procedures.

In April, 2025, the Company received necessary approvals and certifications from the Federal Aviation Administration ("FAA") to begin extra legroom seating retrofits on Boeing 737-8 ("-8") and Boeing 737-800 ("-800") aircraft.

Such retrofits began during second quarter 2025 and are expected to continue through the rest of the year.

As of July 24, 2025, the Company has completed retrofits of more than 220 aircraft for extra legroom seating.

The Company expects its Boeing 737-700 ("-700") aircraft to receive necessary approvals and certifications later this 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

In second quarter 2025, the Company returned $1.6 billion to Shareholders through $103 million in dividend payments and a $1.5 billion accelerated share repurchase program, which was launched in April 2025 and which will be completed by the end of July 2025.

The Company has no amounts remaining under its September 2024 $2.5 billion share repurchase authorization.

On July 23, 2025, the Board approved a new $2.0 billion share repurchase authorization of the Company's common stock, which is expected to be completed over a period of up to two years.

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.

On July 14, 2025, the Company announced its intention to commence new service at Cyril E.

King International Airport on St.

Thomas beginning early 2026.

On May 16, 2025, the Company's 35 Network Operations Control Customer Planners, added to the existing Passenger Service Employees craft or class to be represented by the International Association of Machinists and Aerospace Workers (“IAM”), entered into a tentative agreement as part of the accretion process to join an existing collective-bargaining agreement.

The vote to ratify a contract amendment with the Company failed, and the Company is continuing negotiations with the IAM.

In 2025, the Company and JPMorgan Chase Bank, N.A.

("Chase") have amended the co-brand credit card agreement—in the first quarter to extend the term of the agreement and add enhanced airline benefits for Cardmembers associated with the Company's planned assigned seating and premium seating initiative, and again in the second quarter to add benefits to Cardmembers related to the Company's changes in its checked bag policy that went into effect on May 28, 2025.

In February 2025, the Company implemented a reduction in workforce that provided for the reduction of approximately 1,750 Employee roles, or 15 percent of corporate positions.

As a result of the reduction in workforce, the Company incurred a one-time expense of $62 million during first quarter 2025 and estimates 2025 savings of approximately $210 million and 2026 savings of approximately $300 million.

Separations were 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.

As a result of The Boeing Company's ("Boeing") 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.

In second quarter 2025, the Company entered into a supplemental agreement to its purchase agreement with Boeing relating to the Company's purchase of -8 aircraft and Boeing 737-7 aircraft ("-7", and, together with -8, the "MAX aircraft").

The Company previously announced proactive capacity reductions in the second half of 2025 in an effort to better accommodate the current demand environment and capture associated cost savings, and continues to expect full year 2025 capacity to be up roughly 1 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.

The Company has updated its fleet planning assumption to 47 -8 aircraft deliveries in 2025, from its prior estimate of 38 deliveries, as Boeing continues to ramp up production.

With these incremental deliveries, the Company now expects to retire approximately 55 aircraft in 2025, compared with its previous estimate of approximately 50 retirements this year.

This includes the sale of five -800 aircraft expected to occur in the second half of 2025.

The Company continues to expect additional new aircraft deliveries to facilitate the retirement of aircraft from its existing fleet in support of its fleet monetization and capital allocation strategies.

The Company ended second quarter 2025 with 810 Boeing 737 aircraft, including 273 -8 aircraft.

During second quarter 2025, the Company retired seven -700 aircraft and took delivery of 17 -8 aircraft.

As of July 24, 2025, during 2025 the Company has exercised a total of 21 -7 options for delivery in 2026.

The Company's order book with Boeing as of July 24, 2025, consists of a total of 510 MAX firm orders (303 -7 aircraft and 207 -8 aircraft), less 28 -8 deliveries to date in 2025, for the years 2025 through 2031, including 63 MAX aircraft that were contractually committed for 2024, but were not received, and 162 MAX options (-7s or -8s) for the years 2026 through 2031.

Material Changes in Results of Operations

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

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

Comparison of three months ended June 30, 2025 and June 30, 2024

Three months ended June 30,

Increase (Decrease) Percent change

(in millions) 2025 2024

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Operating Revenues

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.

Total operating revenues for second quarter 2025 decreased by $110 million, or 1.5 percent, year-over-year.

Passenger revenues for second quarter 2025 decreased by $85 million, or 1.3 percent, year-over-year, and Other revenues for second quarter 2025 decreased by $24 million, or 4.0 percent, year-over-year.

Second quarter 2025 RASM was 15.41 cents, finishing 3.1 percent lower than second quarter 2024.

The nominal Passenger revenue and unit revenue decreases were primarily due to a 4.1 point year-over-year decline in Load factor, partially offset by a 2.3 percent increase in yield.

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.

Additionally, second quarter 2025 RASM results include a nearly one-half point headwind due to a temporary reduction in the conversion rate of basic economy bookings on the Company's website that occurred following the May 28, 2025 launch of its basic economy product.

Operating Expenses

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.

Operating expenses for second quarter 2025 increased by $63 million, or 0.9 percent, compared with second quarter 2024, and capacity increase d 1.6 percent over the same prior year period.

The vast majority of the dollar increase was due to higher Salaries, wages, and benefits expense and Landing fees and airport rentals 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 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

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

Three months ended June 30, Per ASM

change Percent

7 unchanged sentences

Total 14.94 ¢ 15.04 ¢ (0.10) ¢ (0.7) %

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.

Operating expenses per ASM for second quarter 2025 decreased by 0.7 percent, compared with second quarter 2024, primarily due to a decrease in Fuel and oil expense, partially offset by increases in Salaries, wages, and benefits expense and Landing fees and airport rentals expense.

Op erating expenses per ASM for second quarter 2025, excluding Fuel and oil expense, profit sharing, and special items (a non-GAAP financial measure), increased 4.7 percent, compared with second 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 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 March 31,

Salaries, wages, and benefits expense for second quarter 2025 increased by $263 million, or 8.8 percent, compared with second quarter 2024.

On a per ASM basis, second quarter 2025 Salaries, wages, and benefits expense increased 7.3 percent, compared with second quarter 2024.

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

Fuel and oil expense for second quarter 2025 decreased by $273 million, or 17.1 percent, compared with second quarter 2024.

On a per ASM basis, second quarter 2025 Fuel and oil expense decreased 18.2 percent.

On a dollar and per ASM basis, the decrease was primarily attributable 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 net premium expense and fuel derivative contract settlements:

Three months ended June 30,

Economic fuel costs per gallon $ 2.32 $ 2.76

Fuel hedging premium expense (in millions) $ 37 $ 39

Fuel hedging premium expense (in millions) $ 36 (a) $ 39

Fuel hedging cash settlement gain (in millions) $ — $ 21

Fuel hedging premium expense per gallon $ 0.07 $ 0.08

Fuel hedging premium expense per gallon $ 0.06 (a) $ 0.07

Fuel hedging cash settlement gain per gallon $ — $ 0.04

(a) Includes amounts reclassified from Accumulated Other Comprehensive Income associated with hedges previously terminated.

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

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

The Company's first quarter 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 Company's second quarter 2025 available seat miles per gallon ("fuel efficiency") increased 2.9 percent, year-over-year, primarily 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.

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,

including taxes and fuel hedging premiums (b)

Average Brent Crude Oil

price per barrel Second Quarter 2025

$40 $1.40 - $1.50

$50 $1.70 - $1.80

Current Market (a) $2.20 - $2.30

$70 $2.40 - $2.50

$80 $2.70 - $2.80

$90 $3.00 - $3.10

$100 $3.20 - $3.30

Fair market value of

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.

See Note Regarding Use of Non-GAAP Financial Measures.

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 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.

The Company's maximum number of gallons that are covered by derivative contracts may be at different strike prices and at strike prices materially higher than the current market prices.

The volume of gallons covered by derivative contracts that 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 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)

During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts to effectively close its fuel hedging portfolio.

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

Therefore, as of June 30, 2025, the Company did not have any outstanding fuel derivative contracts to hedge its future fuel consumption.

The Company does not intend to add additional fuel derivatives to its portfolio.

As such, the Company will be fully exposed to fluctuations in jet fuel prices, which are expected to remain volatile.

See Part II, Item 1A.

Risk Factors – “ The Company’s business can be significantly affected by the availability of jet fuel, fuel prices, and volatility of fuel prices, and the Company’s operations are subject to disruption in the event of any delayed supply of fuel;

therefore, the Company’s strategic plans and future profitability are likely to be affected by the Company’s ability to address fuel availability, price increases, and volatility.

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 the periods the originally forecasted transactions occur.

See Note 4 to the unaudited Condensed Consolidated Financial Statements for additional information on AOCI.

The following table displays the Company's deferred amounts in AOCI as of June 30, 2025, and the future periods in which these items will be recognized in the unaudited Condensed Consolidated Statement of Comprehensive Income (in millions):

Year Amount of gains (losses) deferred in AOCI at June 30, 2025

Remainder of 2025 $ (72)

Total $ (209)

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.

Maintenance materials and repairs expense for second quarter 2025 decreased by $19 million, or 5.4 percent, compared with second quarter 2024.

On a per ASM basis, Maintenance materials and repairs expense decreased 7.9 percent compared with second quarter 2024.

On a dollar and per ASM basis, approximately $26 million of the decrease was due to fewer airframes in routine heavy check compared to 2024 and approximately $18 million of the decrease was due to fewer routine bulk purchases of materials for the Company's seat refurbishment efforts.

These decreases were partially offset by an increase of approximately $26 million due to engine shop visits associated with the Company's -700 fleet.

Landing fees and airport rentals expense for second quarter 2025 increased by $56 million, or 11.0 percent, compared with second quarter 2024.

On a per ASM basis, Landing fees and airport rentals expense increased 8.0 percent, compared with second quarter 2024.

On a dollar and per ASM basis, approximately 80 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.

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

Depreciation and amortization expense for second quarter 2025 decreased by $4 million, or 1.0 percent, compared with second quarter 2024.

On a per ASM basis, Depreciation and amortization expense decreased 2.3 percent compared with second quarter 2024 .

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

This decrease was

partially offset by the acquisition of 40 -8 aircraft and new assets for technology and ground equipment being placed into service since second quarter 2024.

Other operating expenses for second quarter 2025 increased by $40 million, or 3.7 percent, compared with second quarter 2024.

Included within this line item was aircraft rentals expense in the amounts of $80 million and $49 million for the three-month periods ended June 30, 2025 and 2024, respectively.

On a per ASM basis, Other operating expenses increased 2.1 percent, compared with second quarter 2024.

On a dollar and per ASM basis, the increase was primarily due to (i) a $31 million increase in aircraft rentals expense associated with recent fleet transactions, (ii) a $21 million increase in maintenance agreement expense driven by expanded cloud-based services, and (iii) a $19 million increase as a result of per diem rates paid to Flight crews.

These increases were partially offset by a $38 million decrease in advertising and promotional campaign costs.

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,

Interest expense for second quarter 2025 decreased by $24 million, or 38.1 percent, compared with second quarter 2024, primarily due to significant debt repayments since second quarter 2024.

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

Interest income for second quarter 2025 decreased by $76 million, or 58.5 percent, compared with second quarter 2024, primarily due to lower cash and investment balances and a lower average interest rate in the Company's total investment portfolio.

The following table displays the components of Other (gains) losses, net, for the three months ended June 30, 2025 and 2024:

Three months ended June 30,

(in millions) 2025 2024

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

Mark-to-market impact from fuel contracts settling in current and future periods $ — $ 2

Premium benefit of fuel contracts not designated as hedges — (1)

Mark-to-market impact on deferred compensation plan investments (28) (8)

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.

The Company's effective tax rate was 23.9 percent in second quarter 2025, compared with 23.2 percent in second quarter 2024.

The year-over-year increase in the tax rate was primarily due to an increase in state taxes.

Comparison of six months ended June 30, 2025 and June 30, 2024

Six months ended June 30,

Increase (Decrease) Percent change

(in millions) 2025 2024

Passenger $ 12,438 $ 12,424 $ 14 0.1 %

Freight 86 87 (1) (1.1)

Other 1,148 1,172 (24) (2.0)

Total operating revenues $ 13,672 $ 13,683 $ (11) (0.1) %

Salaries, wages, and benefits $ 6,364 $ 5,939 $ 425 7.2 %

Fuel and oil 2,575 3,130 (555) (17.7)

Maintenance materials and repairs 623 711 (88) (12.4)

Landing fees and airport rentals 1,090 975 115 11.8

Depreciation and amortization 795 812 (17) (2.1)

Other operating expenses 2,223 2,110 113 5.4

Total operating expenses $ 13,670 $ 13,677 $ (7) (0.1) %

Operating Revenues

Passenger revenues for the six months ended June 30, 2025, increased by $14 million, or 0.1 percent, compared with the first six months of 2024.

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

The dollar increase was primarily due to average yields increasing 5.7 percent due to revenue management actions, partially offset by a 6.9 percent decrease in revenue Passengers carried.

Other revenues for the six months ended June 30, 2025, decreased by $24 million, or 2.0 percent, year-over-year.

On a dollar basis, approximately 50 percent of the decrease was due to a larger portion of the Company’s co-brand credit card benefits from Chase being classified within Passenger revenues during 2025, as a result of the amended co-brand agreement effective in January 2025.

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

The majority of the remainder of the year-over-year decline was due to a reduction in other partner sales attributable to softer travel demand.

Operating Expenses

Operating expenses for the six months ended June 30, 2025, decreased by $7.0 million, or 0.1 percent, compared with the first six months of 2024, and capacity decreased 0.1 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 and higher Landing fees and airport rentals 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 six months of 2025 and 2024, followed by explanations of these changes on a dollar basis.

Six months ended June 30, Per ASM Percent

(in cents, except for percentages) 2025 2024 change change

Salaries, wages, and benefits 7.20 ¢ 6.72 ¢ 0.48 ¢ 7.1 %

Fuel and oil 2.91 3.54 (0.63) (17.8)

Maintenance materials and repairs 0.70 0.80 (0.10) (12.5)

Landing fees and airport rentals 1.23 1.10 0.13 11.8

Depreciation and amortization 0.90 0.92 (0.02) (2.2)

Other operating expenses 2.52 2.38 0.14 5.9

Total 15.46 ¢ 15.46 ¢ — ¢ — %

Operating expenses per ASM for the first six months of 2025 was flat, compared with the first six months of 2024, primarily due to a decrease in the Company's fuel cost per gallon being offset by increases in Salaries, wages, and benefits expense, Other operating expenses, and Landing fees and airport rentals expense.

Operating expenses per ASM for the first six months of 2025, excluding Fuel and oil expense, profit sharing, and special items (a non-GAAP financial measure), increased 4.6 percent, year-over-year, 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 the first six months of 2025 increased by $425 million, or 7.2 percent, compared with the first six months of 2024.

On a per ASM basis, Salaries, wages, and benefits expense for the first six months of 2025 increased 7.1 percent, compared with the first six months of 2024.

On a dollar and per ASM basis, approximately 60 percent of the increase was due to step/pay rate increases and related benefits for certain workgroups.

Additionally, approximately 10 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.

Fuel and oil expense for the first six months of 2025 decreased by $555 million, or 17.7 percent, compared with the first six months of 2024.

On a per ASM basis, Fuel and oil expense for the first six months of 2025 decreased 17.8 percent.

On a dollar and 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:

Six months ended June 30,

Economic fuel costs per gallon $ 2.40 $ 2.84

Fuel hedging premium expense (in millions) $ 73 (a) $ 78

Fuel hedging cash settlement gain (in millions) $ — $ 38

Fuel hedging premium expense per gallon $ 0.07 (a) $ 0.07

Fuel hedging cash settlement gains per gallon $ — $ 0.03

(a) Includes amounts reclassified from Accumulated Other Comprehensive Income associated with hedges previously terminated.

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

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 six months of 2025 decreased by $88 million, or 12.4 percent, compared with the first six months of 2024.

On a per ASM basis, Maintenance materials and repairs expense decreased 12.5 percent, compared with the first six months of 2024.

On a dollar and per ASM basis, the decrease was primarily due to (i) a $45 million decrease in engine shop visits and various other engine expenses for the Company's -800 fleet, (ii) a $42 million decrease driven by fewer airframes in routine heavy check compared to the same period in 2024, and (iii) a $19 million reduction in routine bulk purchases of materials for the Company's seat refurbishment efforts.

These decreases were partially offset by a $32 million increase in engine shop visits and various other engine expenses associated with the Company's -700 fleet.

Landing fees and airport rentals expense for the first six months of 2025 increased by $115 million, or 11.8 percent, compared with the first six months of 2024.

On a per ASM basis, Landing fees and airport rentals expense increased 11.8 percent, compared with the first six months of 2024.

On a dollar and per ASM basis, approximately

75 percent of the increase was largely due to an increase in airport rental expense throughout the network driven by higher rates charged by airports for leased space.

The remainder of the increase was primarily due to receiving fewer favorable settlements and credits from various airports.

Depreciation and amortization expense for the first six months of 2025 decreased by $17 million, or 2.1 percent, compared with the first six months of 2024.

On a per ASM basis, Depreciation and amortization expense decreased 2.2 percent, compared with the first six months of 2024.

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

This decrease was partially offset by an increase due to technology projects being placed into service since second quarter 2024.

Other operating expenses for the first six months of 2025 increased by $113 million, or 5.4 percent, compared with the first six months of 2024.

Included within this line item was aircraft rentals expense in the amount of $167 million and $101 million for the six months ended June 30, 2025 and 2024, respectively.

On a per ASM basis, Other operating expenses increased 5.9 percent, compared with the first six months of 2024.

On a dollar and per ASM basis, the increase was primarily due to (i) a $66 million increase in aircraft rental expense associated with recent fleet transactions, (ii) a $40 million increase due to higher maintenance agreement expense driven by expanded cloud-based service, (iii) a $30 million increase due to higher professional fees driven by professional advisory fees related to the Company's implementation of its transformational plan, and (iv) a $26 million increase due to an increase in per diem rates paid to Flight crews.

These increases were partially offset by a $67 million decrease in advertising and promotional campaigns.

Other expenses (income)

Interest expense for the first six months of 2025 decreased by $43 million, or 33.6 percent, compared with the first six months of 2024, primarily due to significant debt repayments since second quarter 2024.

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

Capitalized interest for the first six months of 2025 increased by $9 million, or 60.0 percent, compared with the first six months of 2024, primarily due to an increase in various technology projects, facilities projects, and aircraft under construction.

Interest income for the first six months of 2025 decreased by $133 million, or 49.1 percent, compared with the first six months of 2024, primarily due to lower cash and investment balances and a lower average interest rate in the Company's total investment portfolio.

The following table displays the components of Other (gains) losses, net, for the six months ended June 30, 2025 and 2024:

Six months ended June 30,

(in millions) 2025 2024

Mark-to-market impact from fuel contracts settling in current and future periods $ — $ 3

Premium benefit of fuel contracts not designated as hedges — (1)

Mark-to-market impact on deferred compensation plan investment (11) (23)

The Company's effective tax rate was approximately 27.4 percent for the first six months of 2025, compared with 24.4 percent for the first six months of 2024.

The year-over-year increase in the tax rate was primarily due to additional federal tax credits recorded in 2024 and the impact of changes in pre-tax book income on the effective tax rate.

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

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

Three months ended March 31, Percent

2025 2024 Change

Three months ended June 30, Percent Six months ended June 30, Percent

2025 2024 Change 2025 2024 Change

Fuel and oil expense, unhedged $ 1,290 $ 1,581 $ 2,502 $ 3,091

Premium cost of fuel contracts designated as hedges 37 39

Premium cost of fuel contracts designated as hedges (a) 36 40 73 79

Fuel hedge gains included in Fuel and oil expense, net — (22) — (40)

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

Fuel and oil expense, as reported $ 1,326 $ 1,599 (17.1) $ 2,575 $ 3,130 (17.7)

Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (b) — 1 — 2

Premium benefit of fuel contracts not designated as hedges — (1) — (1)

Fuel and oil expense, excluding special items (economic) $ 1,326 $ 1,599 (17.1) $ 2,575 $ 3,131 (17.8)

Total operating expenses, as reported $ 7,019 $ 6,956 $ 13,670 $ 13,677

Labor contract adjustment — — — (9)

Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (b) — 1 — 2

Premium benefit of fuel contracts not designated as hedges — (1) — (1)

Impairment of long-lived assets (8) — (8) —

Litigation accruals — — (19) (7)

Transformation costs (12) — (26) —

Severance and related costs (a) (62) —

Severance and related costs (c) — — (62) —

Professional advisory fees — (7) — (7)

Total operating expenses, excluding special items $ 6,999 $ 6,949 0.7 $ 13,555 $ 13,655 (0.7)

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

Fuel and oil expense, excluding special items (economic) (1,326) (1,599) (2,575) (3,131)

Operating expenses, excluding Fuel and oil expense and special items $ 5,673 $ 5,350 6.0 $ 10,980 $ 10,524 4.3

Profit-sharing expense (14) (31) (14) (31)

Operating expenses, excluding Fuel and oil expense, special items, and profit sharing $ 5,659 $ 5,319 6.4 $ 10,966 $ 10,493 4.5

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

Operating income, as reported $ 225 $ 398 $ 2 $ 6

Labor contract adjustment — — — 9

Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (b) — (1) — (2)

Premium benefit of fuel contracts not designated as hedges — 1 — 1

Impairment of long-lived assets 8 — 8 —

Litigation accruals — — 19 7

Transformation costs 12 — 26 —

Severance and related costs (a) 62 —

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

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

Severance and related costs (c) — — 62 —

Professional advisory fees — 7 — 7

Operating income, excluding special items $ 245 $ 405 (39.5) $ 117 $ 28 317.9

Three months ended June 30, Percent Six months ended June 30, Percent

2025 2024 Change 2025 2024 Change

Other gains, net, as reported $ (27) $ (5) $ (9) $ (17)

Mark-to-market impact from fuel contracts settling in future periods (b) — (2) — (3)

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

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

Premium benefit of fuel contracts not designated as hedges — 1 — 1

Other gains, net, excluding special items $ (27) $ (6) n.m.

$ (9) $ (19) (52.6)%

Income before income taxes, as reported $ 280 $ 478 $ 88 $ 181

Labor contract adjustment — — — 9

Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (b) — (1) — (2)

Mark-to-market impact from fuel contracts settling in future periods (b) — 2 — 3

Impairment of long-lived assets 8 — 8 —

Litigation accruals — — 19 7

Transformation costs 12 — 26 —

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)

Severance and related costs (c) — — 62 —

Professional advisory fees — 7 — 7

Income before income taxes, excluding special items $ 300 $ 486 (38.3) $ 203 $ 205 (1.0)

Provision for income taxes, as reported $ 67 $ 111 $ 24 $ 44

Net income tax impact of fuel and special items (d) 3 5 26 9

Provision for income taxes, net, excluding special items $ 70 $ 116 (39.7) $ 50 $ 53 (5.7)

Net income, as reported $ 213 $ 367 $ 64 $ 137

Labor contract adjustment — — — 9

Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI (b) — (1) — (2)

Mark-to-market impact from fuel contracts settling in future periods (b) — 2 — 3

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Transformation costs 12 — 26 —

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)

Severance and related costs (c) — — 62 —

Professional advisory fees — 7 — 7

Impairment of long-lived assets 8 — 8 —

Net income tax impact of special items (d) (3) (5) (26) (9)

Net income, excluding special items $ 230 $ 370 (37.8) $ 153 $ 152 0.7

Three months ended June 30, Percent Six months ended June 30, Percent

2025 2024 Change 2025 2024 Change

Net income per share, diluted, as reported $ 0.39 $ 0.58 $ 0.11 $ 0.23

Impact of special items 0.05 0.01 0.21 0.03

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)

Net income tax impact of special items (d) (0.01) (0.01) (0.05) (0.01)

Net income per share, diluted, excluding special items $ 0.43 $ 0.58 (25.9) $ 0.27 $ 0.25 8.0

Operating expenses per ASM (cents) 14.94 ¢ 15.04 ¢ 15.46 ¢ 15.46 ¢

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Fuel and oil expense divided by ASMs (2.83) (3.46) (2.91) (3.54)

Profit-sharing expense divided by ASMs (0.03) (0.06) (0.02) (0.04)

Operating expenses per ASM, excluding Fuel and oil expense, special items, and profit sharing (cents) 12.04 ¢ 11.50 ¢ 4.7 12.40 ¢ 11.86 ¢ 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).

(a) Includes amounts reclassified from Accumulated Other Comprehensive Income associated with hedges previously terminated.

See Note 3 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.

(c) 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.

(d) 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.

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

Twelve months ended Twelve months ended

March 31, 2025 March 31, 2024

Operating income, as reported $ 491 $ 115

June 30, 2025 June 30, 2024

Operating income (loss), as reported $ 318 $ (281)

Breakage revenue adjustment 116 —

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Litigation accruals 19 7

Impairments 8 —

Operating income, non-GAAP $ 545 $ 314

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The Net present value of aircraft operating leases represents the assumption that all aircraft in the Company’s fleet are owned, as it reflects the remaining contractual commitments discounted at the Company's estimated incremental borrowing rate as of the time each individual lease was signed.

(c) The Equity adjustment in the denominator adjusts for the cumulative impacts, in Accumulated other comprehensive income and Retained earnings, of gains and/or losses that will settle in future periods, including those associated with the Company's fuel hedges.

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 March 31, 2025, was 22.3 percent, and the Non-GAAP twelve month rolling tax rate was 23.1 percent.

(d) The GAAP twelve month rolling tax rate as of June 30, 2025, was 22.3 percent, and the Non-GAAP twelve month rolling tax rate was 22.6 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.

(e) The GAAP twelve month rolling tax rate as of June 30, 2024, was 41.0 percent, and the Non-GAAP twelve month rolling tax rate was 23.8 percent.

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

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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;

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

Operating loss, non-GAAP;

Operating income, non-GAAP;

Adjusted Operating income, non-GAAP;

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

Loss before income taxes, non-GAAP;

Benefit for income taxes, net, non-GAAP;

Net loss, non-GAAP;

Net loss per share, diluted, non-GAAP;

and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and 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.

Income before income taxes, non-GAAP;

Provision for income taxes, net, non-GAAP;

Net income, non-GAAP;

Net income per share, diluted, non-GAAP;

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

and Return on invested capital, non-GAAP.

For periods in which fuel hedge contracts are utilized, the Company's economic Fuel and oil expense results may 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.

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As a result, the aforementioned measures, as presented, may not be directly comparable to similarly titled measures presented by other companies.

Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and Note 3 to the unaudited Condensed Consolidated Financial Statements.

Also, see Note 3 to the unaudited Condensed Consolidated Financial Statements for further information regarding the Company's termination of its remaining fuel hedge derivative instruments.

The Company’s GAAP results in the applicable periods may include other charges or benefits that are also deemed "special items," that the Company believes make its results difficult to compare to prior periods, anticipated future periods, or industry trends.

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

Non-cash impairment charges to remove certain assets from the unaudited Condensed Consolidated Balance Sheet that are no longer in use.

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.

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Total operating expenses, non-GAAP;

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

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

Operating loss, non-GAAP;

Operating income, non-GAAP;

Adjusted Operating income, non-GAAP;

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

Loss before income taxes, non-GAAP;

Benefit for income taxes, net, non-GAAP;

Net loss, non-GAAP;

Net loss per share, diluted, non-GAAP;

and Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and 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.

Return on invested capital is not a substitute for financial results as reported in accordance with GAAP and should not be utilized in place of such GAAP results.

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 loss, non-GAAP and Operating loss, 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;

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

and Return on invested capital, non-GAAP.

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

ROIC is not a substitute for financial results as reported in accordance with GAAP and should not be utilized in place of such GAAP results.

Although ROIC 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.

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.

The Company believes non-GAAP return on invested capital is a meaningful measure because it quantifies the Company's effectiveness in generating returns relative to the capital it has invested in its business.

Although return on invested capital is commonly used as a measure of capital efficiency, definitions of return on invested capital differ;

The Company believes non-GAAP ROIC is a meaningful measure because it quantifies the Company's effectiveness in generating returns relative to the capital it has invested in its business.

Although ROIC is commonly used as a measure of capital efficiency, definitions of return on invested capital differ;

therefore, the Company is providing an explanation of its calculation for non-GAAP return on invested capital in the accompanying reconciliation in order to allow investors to compare and contrast its calculation to the calculations provided by other companies.

Liquidity and Capital Resources

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.

Net cash provided by operating activities was $401 million for the three months ended June 30, 2025, compared with $23 million used in operating activities in the same prior year period.

Net cash provided by operating activities was $1.3 billion for the six months ended June 30, 2025 compared with $128 million used 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.

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

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.

The operating cash flows for the six months ended June 30, 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 $55 million increase in Air traffic liability driven by higher ticket sales despite a softness in bookings.

The operating cash flows for the six months ended June 30, 2024, were largely impacted by the Company's net results (as adjusted for noncash items, 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 the $105 million payout of the Company's Profitsharing Plan contribution for the 2023 Plan year.

These decreases were partially offset by a $798 million increase in Air traffic liability driven by 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 $623 million during the three months ended March 31, 2025, compared with $585 million used in investing activities in the same prior year period.

Net cash used in investing activities totaled $882 million during the three months ended June 30, 2025, compared with $206 million used in investing activities in the same prior year period.

Net Cash used in investing activities totaled $259 million during the six months ended June 30, 2025, compared with $791 million used in investing activities in the same prior year period.

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

During the three months ended March 31, 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.

During the six months ended June 30, 2025 and 2024, Capital expenditures were $1.1 billion.

The Company continues to expect its 2025 capital spending to be in the range of $2.5 billion to $3.0 billion, including the additional aircraft deliveries now expected, as well as the impact of the expected sale of five -800 aircraft this year.

Net cash used in financing activities was $4.2 billion during the three months ended June 30, 2025, compared with $4 million provided by financing activities for the same prior year period.

Net cash used in financing activities was $5.0 billion during the six months ended June 30, 2025, compared with $227 million used in financing activities for the same prior year period.

During the six months ended June 30, 2025, the Company paid $210 million in cash dividends to Shareholders related to the first quarter 2025 and fourth quarter 2024 declarations.

Additionally, the Company expended $2.25 billion to repurchase the Company's outstanding common stock through authorized share repurchases during the six months ended June 30, 2025.

The repurchases of common stock amounts in the unaudited Consolidated Statement of Cash Flows may differ from the unaudited 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 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.

During second quarter 2025, the Company repaid both the Convertible Notes and the PSP1 Payroll Support Program loan in the amounts of $1.6 billion and $976 million, respectively.

See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information on the Convertible Notes, PSP1 Payroll Support Program loan, and future debt maturities.

During the six months ended June 30, 2024, the Company paid $215 million in cash dividends to Shareholders for the fourth quarter 2023 and first quarter 2024 declarations, and the Company repaid $16 million in finance lease obligations.

The Company completed its September 2024 $2.5 billion share repurchase authorization in second quarter 2025, repurchasing $1.5 billion of its outstanding common stock through an accelerated share repurchase program.

Final settlement of the second quarter 2025 accelerated share repurchase program is expected to occur by the end of July 2025.

On July 23, 2025, the Board approved a new $2.0 billion share repurchase authorization of the Company's

common stock, which is expected to be completed over a period of up to two years.

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.

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

The Company currently intends to use the proceeds from any future securities sales off this shelf registration statement for general corporate purposes.

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

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

The Company intends to use the proceeds from any future securities sales off this shelf registration statement for general corporate purposes.

As of June 30, 2025 the Company had access to $1.0 billion under its amended and restated revolving credit facility (the "Amended Credit Agreement"), which expires in August 2028.

For the six months ended June 30, 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 March 31, 2025, the Company carried a working capital deficit of approximately $3.2 billion, in which its current liabilities exceed its current assets.

On July 22, 2025, the Company exercised the accordion feature under the Amended Credit Agreement, increasing the size of the facility to $1.5 billion.

There were no amounts outstanding under the Amended Credit Agreement as of July 24, 2025.

As of June 30, 2025, the Company carried a working capital deficit of approximately $4.8 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 $8.3 billion as of March 31, 2025, and anticipated future internally generated funds from operations.

The Company believes it has various options available to meet its capital and operating commitments, including unrestricted cash and short-term investments of $3.8 billion as of June 30, 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 $16.6 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).

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.

As of July 24, 2025, for the years 2025 through 2031, the Company has firm orders with Boeing for 510 aircraft (less 28 -8 aircraft received to date in 2025), and options for an additional 162 aircraft.

The contractual order book as of July 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 March 31, 2025:

The following table details information on the aircraft in the Company's fleet as of June 30, 2025:

Age (Yrs) Number

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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 plans and expectations with respect to cost reductions;

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

• the Company’s capacity guidance and expectations;

• 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 estimated fuel costs and fuel efficiency and the assumptions underlying the Company’s fuel-related expectations and estimates;

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

• 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 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 expectations regarding passenger demand, revenue management, revenue trends, and bookings;

• the Company’s focus areas, goals, opportunities, and initiatives, including with respect to flight credit expiration, checked bag fees, creating efficiencies, the Company’s fare structure, airline partnerships, financial performance, and the Company’s co-brand credit card agreement with Chase;

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

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

• the Company’s network plans and expectations;

• 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 financial targets and goals, including with respect to leverage, liquidity, balance sheet goals, and cost mitigation;

• the Company’s short-term and long-term financial and operational goals;

• 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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• 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 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 extended legroom seating plans, and other operational plans, strategies, and goals;

• 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 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 impact of fuel price changes, fuel price volatility, and fuel availability on the Company's business plans and results of operations;

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

• the impact of governmental regulations and other governmental actions, as well as the Company's ability to obtain any required governmental approvals, on the Company's plans, strategies, financial results, and operations;

• the Company's dependence on its workforce, including its ability to employ and retain sufficient numbers of qualified Employees to effectively and efficiently maintain its operations;

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• 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.

Caution should be taken not to place undue reliance on the Company's forward-looking statements, which represent the Company's views only as of the date this report is filed.

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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