What changed in this filing

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Item 1. Financial Statements

2025-10-23 compared with 2025-07-24 · 187 added, 137 removed, 612 unchanged (35% of the section changed)

3 unchanged sentences

(in millions)

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Current assets:

42 unchanged sentences

(in millions, except per share amounts)

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

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

2025 2024 2025 2024

48 unchanged sentences

Balance at June 30, 2025 $ 888 $ 4,247 $ 16,199 $ ( 35 ) $ ( 13,299 ) $ 8,000

Repurchase of common stock — — — — ( 252 ) (a) ( 252 )

Issuance of common and treasury stock pursuant to Employee stock plans — 10 — — 4 14

Share-based compensation — 26 — — — 26

Cash dividends, $ 0.18 per share

— — ( 95 ) — — ( 95 )

Comprehensive income — — 54 29 — 83

Balance at September 30, 2025 $ 888 $ 4,283 $ 16,158 $ ( 6 ) $ ( 13,547 ) $ 7,776

(a) Includes excise tax incurred on share repurchases, net of issuances.

14 unchanged sentences

Balance at June 30, 2024 $ 888 $ 4,151 $ 16,218 $ 11 $ ( 10,803 ) $ 10,465

Issuance of common and treasury stock pursuant to Employee stock plans — 10 — — 5 15

Share-based compensation — 19 — — — 19

Cash dividends, $ 0.18 per share

— — ( 107 ) — — ( 107 )

Comprehensive income (loss) — — 67 ( 48 ) — 19

Balance at September 30, 2024 $ 888 $ 4,180 $ 16,178 $ ( 37 ) $ ( 10,798 ) $ 10,411

See accompanying notes.

2 unchanged sentences

(in millions)

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2025 2024 2025 2024

23 unchanged sentences

Other, net — — ( 3 ) ( 29 )

Net cash used in investing activities ( 882 ) ( 206 ) ( 259 ) ( 791 )

Net cash provided by (used in) investing activities ( 428 ) 458 ( 687 ) ( 334 )

CASH FLOWS FROM FINANCING ACTIVITIES:

5 unchanged sentences

Other, net ( 1 ) 2 ( 11 ) ( 19 )

Net cash provided by (used in) financing activities ( 4,178 ) 4 ( 5,036 ) ( 227 )

Net cash used in financing activities ( 432 ) ( 210 ) ( 5,467 ) ( 437 )

NET CHANGE IN CASH AND CASH EQUIVALENTS ( 573 ) 361 ( 4,607 ) ( 785 )

6 unchanged sentences

Right-of-use assets acquired or modified under operating leases $ 4 $ 23 $ 38 $ 42

Flight and ground equipment acquired or modified under finance leases $ 6 $ 17 $ 6 $ 16

See accompanying notes.

4 unchanged sentences

Financial Derivative Instruments

Comprehensive Income (Loss)

Comprehensive Income

Net Income Per Share

14 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States ("GAAP") for complete financial statements as required in Form 10-K.

The unaudited Condensed Consolidated Financial Statements for the interim periods ended June 30, 2025 and 2024 include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods.

The unaudited Condensed Consolidated Financial Statements for the interim periods ended September 30, 2025 and 2024 include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods.

This includes all normal and recurring adjustments and elimination of significant intercompany transactions.

3 unchanged sentences

These and other factors, such as the price of jet fuel in some periods, have created, and may continue to create, significant volatility in the Company's financial results.

Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the results that may be expected for future quarters or for the year ended December 31, 2025.

Operating results for the three and nine months ended September 30, 2025, are not necessarily indicative of the results that may be expected for future quarters or for the year ended December 31, 2025.

For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

On July 4, 2025, the One Big Beautiful Bill Act, was signed into law.

The legislation did not have a material impact on the Company's income tax expense for the quarter ending September 30, 2025, nor is it expected to materially change the Company's effective income tax rate for 2025.

During third quarter 2025, the Company completed an annual review of the estimated residual values of its long-lived assets.

As a result of this review, the Company increased the estimated residual values for its Boeing 737-700 ("-700") airframe and -700, Boeing 737-800 ("-800"), and Boeing 737-8 ("-8") engine assets.

This change took into consideration third party valuation data and recent market transactions.

As this is considered a change in estimate, it has been accounted for on a prospective basis in accordance with Accounting Standards Codification ("ASC") 205, "Accounting Changes and Error Corrections" and thus the Company will record less depreciation expense over the remainder of the useful lives for each related asset.

The effect of this change in estimate was an immaterial change to depreciation expense for the three and nine months ended September 30, 2025.

Operating Segments and Related Disclosures

2 unchanged sentences

Financial Statements.

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

NEW ACCOUNTING PRONOUNCEMENTS

On November 4, 2024, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

On September 18, 2025, the Financial Accounting Standards Board (the "FASB") issued ASU 2025-06, Accounting for and Disclosure of Software Costs.

The new standard modernizes the guidance to reflect the software development approaches currently being used by removing all references to "development stages" from ASC 350-40 Intangibles—Goodwill and Other - Internal-Use Software.

Under ASU 2025-06, only the following criteria in ASC 350-40-25-12(b) and (c) must be met for entities to begin capitalizing software costs:

(i) management, with the relevant authority, implicitly or explicitly authorizes and commits to funding a computer software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended (referred to as the "probable-to-complete recognition threshold").

This standard is effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted.

Entities may apply the guidance prospectively, retrospectively, or via a modified prospective transition method.

The Company is evaluating this new standard, but does not expect it to have a significant impact on its financial statement presentation or results.

On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

2 unchanged sentences

The Company is evaluating this new standard but does not expect it to have a significant impact on its financial statement disclosures.

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

10 unchanged sentences

The Company has historically aimed to reduce volatility in operating expenses through its fuel hedging program.

However, based on higher fuel hedging premium costs over time and other factors, the Company has discontinued its fuel hedging program in 2025 and does not intend to add additional fuel derivatives at this time.

However, based on higher fuel hedging premium costs over time and other factors, the Company discontinued its fuel hedging program in 2025 and does not intend to add additional fuel derivatives at this time.

During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio.

1 unchanged sentence

The cash proceeds from this transaction totaled approximately $ 40 million, which will reduce future premium costs.

Approximately $ 36 million was reclassified from Accumulated Other Comprehensive Income ("AOCI") and recognized as an increase to Fuel and oil expense within the unaudited Condensed Consolidated Statement of Comprehensive Income during second quarter 2025, all of which is characterized as premium expense from fuel hedging activities, including amounts associated with terminated fuel hedge positions.

As of June 30, 2025, approximately $ 209 million remained in AOCI related to these closed positions.

This balance in AOCI does not include any tax impact, will also be characterized as premium expense and similarly reclassified as an increase to Fuel and oil expense in future periods when the originally forecasted transactions occur (through the end of 2027), and is net of the impact of the cash proceeds from the hedge terminations.

Approximately $ 36 million that was previously expended on hedge positions in prior periods was reclassified from Accumulated Other Comprehensive Income ("AOCI") and recognized as an increase to Fuel and oil expense within the unaudited Condensed Consolidated Statement of Comprehensive Income during third quarter 2025, all of which is characterized as premium expense from terminated fuel hedging positions.

As of September 30, 2025,

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

approximately $ 173 million remained in AOCI related to these closed positions.

This balance in AOCI, which does not include any tax impact, will also be characterized as premium expense and similarly reclassified as an increase to Fuel and oil expense in future periods when the originally forecasted transactions occur (through the end of 2027), and is net of the impact of the cash proceeds from the hedge terminations.

See Note 4 for additional information on AOCI.

10 unchanged sentences

In addition, the Company had the following amounts associated with fuel derivative instruments and hedging activities in its unaudited Condensed Consolidated Balance Sheet:

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

Balance Sheet June 30, December 31,

Balance Sheet September 30, December 31,

(in millions) location 2025 2024

7 unchanged sentences

The Company had the following recognized financial assets and financial liabilities resulting from those transactions that meet the scope of the disclosure requirements as necessitated by applicable accounting guidance for balance sheet offsetting:

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

Offsetting of derivative assets

1 unchanged sentence

(i) (ii) (iii) = (i) + (ii) (i) (ii) (iii) = (i) + (ii)

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Description Balance Sheet location Gross amounts of recognized assets Gross amounts offset in the Balance Sheet Net amounts of assets presented in the Balance Sheet Gross amounts of recognized assets Gross amounts offset in the Balance Sheet Net amounts of assets presented in the Balance Sheet

5 unchanged sentences

(i) (ii) (iii) = (i) + (ii) (i) (ii) (iii) = (i) + (ii)

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Description Balance Sheet location Gross amounts of recognized liabilities Gross amounts offset in the Balance Sheet Net amounts of liabilities presented in the Balance Sheet Gross amounts of recognized liabilities Gross amounts offset in the Balance Sheet Net amounts of liabilities presented in the Balance Sheet

2 unchanged sentences

(a) The net amounts of derivative assets and liabilities are reconciled to the individual line item amounts presented in the unaudited Condensed Consolidated Balance Sheet in Note 8.

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

The following tables present the impact of derivative instruments, including terminations, within the unaudited Condensed Consolidated Statement of Comprehensive Income for the three and six months ended June 30, 2025 and 2024:

Location and amount recognized in income on cash flow hedging relationships

Three months ended June 30, 2025 Three months ended June 30, 2024

Three months ended September 30, 2025 Three months ended September 30, 2024

(in millions) Fuel and oil Other operating expenses Fuel and oil Other operating expenses

5 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

Location and amount recognized in income on cash flow hedging relationships

Six months ended June 30, 2025 Six months ended June 30, 2024

Nine months ended September 30, 2025 Nine months ended September 30, 2024

(in millions) Fuel and oil Other operating expenses Fuel and oil Other operating expenses

8 unchanged sentences

Three months ended

September 30,

(in millions) 2025 2024

Fuel derivative contracts $ — $ 61

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

Derivatives designated and qualified in cash flow hedging relationships

(Gain) loss recognized in AOCI on derivatives, net of tax

Six months ended

Nine months ended

September 30,

(in millions) 2025 2024

3 unchanged sentences

Three months ended Location of (gain) loss recognized in income on derivatives

September 30,

(in millions) 2025 2024

Fuel derivative contracts $ — $ 29 Other (gains) losses, net

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

Derivatives not designated as hedges

(Gain) loss recognized in income on derivatives

Six months ended Location of (gain) loss recognized in income on derivatives

Nine months ended

Location of (gain) loss recognized in income on derivatives

September 30,

(in millions) 2025 2024

Fuel derivative contracts $ — $ 31 Other (gains) losses, net

The Company also recorded expenses associated with net premiums paid for fuel derivative contracts that settled/expired and/or terminated during the three and six months ended June 30, 2025 and 2024.

The Company also recorded expenses associated with net premiums paid for fuel derivative contracts that settled/expired and/or terminated during the three and nine months ended September 30, 2025 and 2024.

Gains and/or losses associated with fuel derivatives that qualified for hedge accounting were ultimately recorded to Fuel and oil expense.

1 unchanged sentence

The following tables present the expense impacts and their locations within the unaudited Condensed Consolidated Statement of Comprehensive Income during the periods the contracts settled or were scheduled to settle:

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

Expense (benefit) recognized in income on derivatives

Three months ended Location of expense (benefit) recognized in income on derivatives

September 30,

(in millions) 2025 2024

2 unchanged sentences

Expense (benefit) recognized in income on derivatives

Six months ended Location of expense (benefit) recognized in income on derivatives

Nine months ended

Location of expense (benefit) recognized in income on derivatives

September 30,

(in millions) 2025 2024

2 unchanged sentences

Interest Rate Swaps

The Company is at times party to certain interest rate swap agreements that are accounted for as cash flow hedges, but had none in place as of June 30, 2025, or as of December 31, 2024.

The Company is at times party to certain interest rate swap agreements that are accounted for as cash flow hedges, but had none in place as of September 30, 2025, or as of December 31, 2024.

The Company also did not have any interest rate swap agreements designated as fair value hedges, as defined, during the periods presented.

Credit Risk and Collateral

The Company had no cash collateral posted or received as of June 30, 2025.

The Company had no cash collateral posted or received as of September 30, 2025.

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

COMPREHENSIVE INCOME (LOSS)

COMPREHENSIVE INCOME

Comprehensive income (loss) includes changes in the fair value of certain financial derivative instruments that qualify for hedge accounting an d actuarial gains/losses arising from the Company’s postretirement benefit obligation.

During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio.

The differences between Net income and Comprehensive income for the three and six months ended June 30, 2025 and 2024 were as follows:

Three months ended June 30,

The differences between Net income and Comprehensive income for the three and nine months ended September 30, 2025 and 2024 were as follows:

Three months ended September 30,

(in millions) 2025 2024

NET INCOME $ 54 $ 67

Unrealized loss on fuel derivative instruments, net of

Unrealized gain (loss) on fuel derivative instruments, net of

deferred taxes of $ 8 and ($ 14 )

( 12 ) ( 10 )

28 (a) ( 50 )

Other, net of deferred taxes of $ 1 and $ —

Total other comprehensive loss $ ( 11 ) $ ( 8 )

Total other comprehensive income (loss) $ 29 $ ( 48 )

COMPREHENSIVE INCOME $ 83 $ 19

Six months ended June 30,

(a) Includes reclassification adjustments from Accumulated Other Comprehensive Income into Fuel and oil expense associated with hedges previously terminated.

Nine months ended September 30,

(in millions) 2025 2024

2 unchanged sentences

deferred taxes of $ 5 and ($ 12 )

15 (a) ( 42 )

Other, net of deferred taxes of $ 1 and $ 1

1 unchanged sentence

COMPREHENSIVE INCOME $ 137 $ 167

A rollforward of the amounts included in AOCI, net of taxes, is shown below for the three and six months ended June 30, 2025:

(a) Includes reclassification adjustments from Accumulated Other Comprehensive Income into Fuel and oil expense associated with hedges previously terminated.

A rollforward of the amounts included in AOCI, net of taxes, is shown below for the three and nine months ended September 30, 2025:

(in millions) Fuel derivatives Defined benefit plan items Other Deferred tax impact Accumulated other comprehensive income (loss)

Balance at March 31, 2025 $ ( 193 ) $ 167 $ ( 6 ) $ 8 $ ( 24 )

Balance at June 30, 2025 $ ( 209 ) $ 167 $ ( 4 ) $ 11 $ ( 35 )

Changes in fair value — — — — —

Reclassification to earnings 36 — 2 ( 9 ) 29

Balance at June 30, 2025 $ ( 209 ) $ 167 $ ( 4 ) $ 11 $ ( 35 )

Balance at September 30, 2025 $ ( 173 ) $ 167 $ ( 2 ) $ 2 $ ( 6 )

(in millions) Fuel derivatives Defined benefit plan items Other Deferred tax impact Accumulated other comprehensive income (loss)

2 unchanged sentences

Reclassification to earnings 110 — 5 ( 27 ) 88

Balance at June 30, 2025 $ ( 209 ) $ 167 $ ( 4 ) $ 11 $ ( 35 )

Balance at September 30, 2025 $ ( 173 ) $ 167 $ ( 2 ) $ 2 $ ( 6 )

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

The following tables illustrate the significant amounts reclassified out of each component of AOCI for the three and six months ended June 30, 2025:

Three months ended June 30, 2025

The following tables illustrate the significant amounts reclassified out of each component of AOCI for the three and nine months ended September 30, 2025:

Three months ended September 30, 2025

(in millions) Amounts reclassified from AOCI Affected line item in the unaudited Condensed Consolidated Statement of Comprehensive Income

5 unchanged sentences

Total reclassifications for the period $ 29 Net of tax

Six months ended June 30, 2025

Nine months ended September 30, 2025

(in millions) Amounts reclassified from AOCI Affected line item in the unaudited Condensed Consolidated Statement of Comprehensive Income

10 unchanged sentences

Revenue is categorized by revenue source as the Company believes it best depicts the nature, amount, timing, and uncertainty of revenue and cash flow.

The following table provides the components of Passenger revenue recognized for the three and six months ended June 30, 2025 and 2024:

The following table provides the components of Passenger revenue recognized for the three and nine months ended September 30, 2025 and 2024:

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

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

(in millions) 2025 2024 2025 2024

3 unchanged sentences

Total passenger revenues $ 6,313 $ 6,250 $ 18,751 $ 18,673

As of June 30, 2025, and December 31, 2024, the components of Air traffic liability, including contract liabilities based on tickets sold and unused flight credits available to the Customer, both of which are net of recorded breakage, and loyalty points available for redemption, within the unaudited Condensed Consolidated Balance Sheet were as follows:

As of September 30, 2025, and December 31, 2024, the components of Air traffic liability, including contract liabilities based on tickets sold and unused flight credits available to the Customer, both of which are net of recorded breakage, and loyalty points available for redemption, within the unaudited Condensed Consolidated Balance Sheet were as follows:

Balance as of

(in millions) June 30, 2025 December 31, 2024

(in millions) September 30, 2025 December 31, 2024

Air traffic liability - passenger travel and ancillary passenger services $ 3,620 $ 3,393

3 unchanged sentences

These flight credits are typically created as a result of a prior ticket cancellation or exchange, and are recorded net of associated breakage.

Rollforwards of the Company's Air traffic liability - loyalty program for the three and six months ended June 30, 2025 and 2024 were as follows:

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

Rollforwards of the Company's Air traffic liability - loyalty program for the three and nine months ended September 30, 2025 and 2024 were as follows:

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

(in millions) 2025 2024 2025 2024

5 unchanged sentences

Air traffic liability includes consideration received for ticket and loyalty related performance obligations which have not been satisfied as of a given date.

Rollforwards of the amounts included in Air traffic liability as of June 30, 2025 and 2024 were as follows:

Six months ended June 30,

Rollforwards of the amounts included in Air traffic liability as of September 30, 2025 and 2024 were as follows:

Nine months ended September 30,

(in millions) 2025 2024

9 unchanged sentences

On May 28, 2025, the Company implemented a change to its flight credit policy.

Flight credits created from reservations booked and ticketed or voluntarily changed on or after May 28, 2025, will have a specified expiration date of one year or less, depending on the type of fare purchased.

Flight credits created from reservations booked and ticketed or voluntarily changed on or after May 28, 2025, have a specified expiration date of one year or less, depending on the type of fare purchased.

Flight credits issued between July 28, 2022, and May 28, 2025, including any future issuances associated with bookings made prior to the policy change on May 28, 2025, do not have an expiration date.

As the Company believes that a portion of Customer flight credits issued will not be redeemed, it estimates and records breakage associated with such amounts.

Customer flight credits represent approximately 6 percent and 8 percent of the total Air traffic liability balance as of June 30, 2025, and December 31, 2024, respectively.

The Company recognizes revenue related to the marketing, advertising, and other travel-related benefits of the cash receipts associated with various loyalty partner agreements including, but not limited to, its co-branded credit card agreement with JPMorgan Chase Bank, N.A.

For the three months ended June 30, 2025 and 2024, the Company recognized $ 567 million and $ 556 million of such revenue, respectively, the majority of which is within Other operating revenues.

For the six months ended June 30, 2025 and 2024, the Company recognized $ 1.1 billion in each period of such revenue.

Through the co-branded credit card agreement with Chase, the Company sells loyalty points, certain marketing benefits, which consist of the use of the Southwest Airlines brand and access to Rapid Rewards Member lists, licensing and advertising elements, the use of the Company’s resource team, and other airline benefits.

With the launch of the new Getaways by Southwest™ ("Getaways") product, the Company has begun to issue vacation travel credits for cancelled bookings, with an 18-month expiration period from the original booking date.

As the Company believes that a portion of Customer travel credits (both flight credits and Getaways travel credits) issued will not be redeemed, it estimates and records breakage associated with such amounts.

Customer travel credits represent approximately 5 percent and 8 percent of the total Air traffic liability balance as of September 30, 2025, and December 31, 2024, respectively.

Through the Company's co-branded credit card agreement with JPMorgan Chase Bank, N.A.

("Chase"), the Company sells loyalty points, certain marketing benefits, which consist of the use of the Southwest Airlines brand and access to Rapid Rewards Member lists, licensing and advertising elements, the use of the Company’s resource team, and other airline benefits.

The Company allocates consideration received to performance obligations based on the relative fair value of those obligations.

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

For each change to the agreement, the Company estimated the selling prices and volumes over the term of the amended agreement in order to determine the allocation of proceeds to each of the three performance obligations identified in the agreement, which have been characterized as a transportation component, a marketing component, and an airline benefits component.

The Company records Passenger revenue related to loyalty point redemptions for air travel when the travel is delivered, the marketing elements are recognized as Other revenue when the performance obligations related to those services are satisfied, which is generally the same period consideration is received from Chase, and the airline benefits are recognized as Passenger revenue when they are provided.

The Company defers revenue for points earned by Customers through the Chase agreement, and subsequently records Passenger revenue related to loyalty point redemptions for air travel when the travel is delivered, the marketing elements are recognized as Other revenue when the performance obligations related to those services are satisfied, which is generally the same period consideration is received from Chase, and the airline benefits are recognized as Passenger revenue when they are provided.

As a result of the amended co-brand agreement, a larger portion of the Company’s co-brand credit card benefits from Chase are now being classified within Passenger revenues during 2025.

For the three months ended September 30, 2025 and 2024, the Company recognized $ 723 million and $ 538 million of such revenue, respectively, the majority of which is within Other operating revenues.

For the nine months ended September 30, 2025 and 2024, the Company recognized revenues of $ 1.9 billion and $ 1.6 billion, respectively.

NET INCOME PER SHARE

2 unchanged sentences

Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

For the three and six months ended June 30, 2025 and 2024, an immaterial number of shares related to the Company's restricted stock units were excluded from the denominator because inclusion of such shares would be antidilutive.

During second quarter 2025, the Company's remaining balance of 1.25 percent C onvertible Senior Notes due 2025 (the "Convertible Notes") of $ 1.6 billion was repaid, settling both principal and accrued interest.

Due to this maturity, the Convertible Notes did not have a dilutive impact on the net income per share calculation and interest expense was not added back to the numerator for second quarter 2025.

During second quarter 2025, the Company's remaining balance of 1.25 percent Convertible Senior Notes due 2025 (the "Convertible Notes") of $ 1.6 billion was repaid, settling both principal and accrued interest.

Due to this maturity, the Convertible Notes did not have a dilutive impact on the net income per share calculation and interest expense was not added back to the numerator for the three months ended September 30, 2025.

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

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

2025 2024 2025 2024

Net income $ 54 $ 67 $ 118 $ 204

Interest expense — 5 — 9

Interest expense — — (a) — (a) 15

Net income attributable to common stockholders $ 54 $ 67 $ 118 $ 219

6 unchanged sentences

Diluted $ 0.10 $ 0.11 $ 0.21 $ 0.34

Antidilutive amounts excluded from calculations:

Convertible debt — 44 20 (b) —

Restricted stock units — — — 1

(a) For the nine months ended September 30, 2025 and the three months ended September 30, 2024, Interest expense is not added back to the numerator due to the impact of the Convertible Notes being anti-dilutive.

(b) For the nine months ended September 30, 2025, the Convertible Notes were outstanding for a portion of the period and were anti-dilutive.

See Note 10 for further information on the Convertible Notes.

FAIR VALUE MEASUREMENTS

4 unchanged sentences

and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, 2025, the Company held certain items that are required to be measured at fair value on a recurring basis.

As of September 30, 2025, the Company held certain items that are required to be measured at fair value on a recurring basis.

These included cash equivalents, short-term investments, and available-for-sale securities.

The majority of the Company’s cash equivalents and short-term investments consist of instruments classified as Level 1.

However, the Company has certificates of deposit, commercial paper, and time deposits that are classified as Level 2, due to the fact that the fair value for these instruments is determined utilizing observable inputs in non-active markets.

However, the Company has certificates of deposit and time deposits that are classified as Level 2, due to the fact that the fair value for these instruments is determined utilizing observable inputs in non-active markets.

Equity securities primarily consist of investments with readily determinable market values associated with the Company’s excess benefit plan.

2 unchanged sentences

The Company’s derivative instruments held in prior periods consisted of over-the-counter contracts, which were not traded on a public exchange.

Fuel derivative instruments historically consisted solely of option contracts, whereas interest rate derivatives have historically consisted solely of swap agreements.

Fuel derivative instruments historically consisted solely of option contracts, whereas interest rate derivatives have historically

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

consisted solely of swap agreements.

The Company determined the value of option contracts utilizing an option pricing model based on inputs that are either readily available in public markets, can be derived from information available in publicly quoted markets, or are provided by financial institutions that trade these contracts.

2 unchanged sentences

Because certain inputs used to determine the fair value of option contracts are unobservable (principally implied volatility), the Company categorized these option contracts as Level 3.

Volatility information was obtained from external sources, but was analyzed by the Company for reasonableness and compared to similar information

Notes to Condensed Consolidated Financial Statements

Southwest Airlines Co.

Notes to Condensed Consolidated Financial Statements

received from other external sources.

Volatility information was obtained from external sources, but was analyzed by the Company for reasonableness and compared to similar information received from other external sources.

Holding other inputs constant, an increase (decrease) in implied volatility would have resulted in a higher (lower) fair value measurement, respectively, for the Company’s derivative option contracts in prior periods.

The fair value of option contracts considered both the intrinsic value and any remaining time value associated with those derivatives that had not yet settled.

9 unchanged sentences

The Company records changes in the fair value of plan obligations and plan assets, which net to zero, within the Salaries, wages, and benefits line and Other (gains) losses, net line, respectively, of the unaudited Condensed Consolidated Statement of Comprehensive Income.

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2025, and December 31, 2024:

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2025, and December 31, 2024:

Fair value measurements at reporting date using:

Quoted prices in active markets for identical assets Significant other observable inputs

Description June 30, 2025 (Level 1) (Level 2)

Description September 30, 2025 (Level 1) (Level 2)

Assets (in millions)

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Cash equivalents (a) $ 2,552 $ 2,552 $ —

Commercial paper 180 — 180

Time deposits 350 — 350

Short-term investments:

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Total assets $ 3,451 $ 2,985 $ 466

(a) Cash equivalents are primarily composed of money market investments and treasury bills.

(a) Cash equivalents are primarily composed of money market investments.

Notes to Condensed Consolidated Financial Statements

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(b) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as an asset.

The Company did not have any material assets or liabilities measured at fair value on a nonrecurring basis during the six months ended June 30, 2025, or the year ended December 31, 2024.

The following tables present the Company’s activity for items measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2025:

Fair value measurements using significant unobservable inputs (Level 3)

(in millions) Fuel derivatives

Balance as of March 31, 2025 $ 92

Total loss for the period

Included in other comprehensive income ( 52 )

Proceeds from portfolio termination ( 40 )

Balance as of June 30, 2025 $ —

The Company did not have any material assets or liabilities measured at fair value on a nonrecurring basis during the nine months ended September 30, 2025, or the year ended December 31, 2024.

The following table presents the Company’s activity for items measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2025.

There was no activity for the three months ended September 30, 2025.

Fair value measurements using significant unobservable inputs (Level 3)

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Proceeds from portfolio termination ( 40 )

Balance at June 30, 2025 $ —

The carrying amounts and estimated fair values of the Company’s short-term and long-term debt (including current maturities), as well as the applicable fair value hierarchy tier, as of June 30, 2025, are presented in the table below.

Balance at September 30, 2025 $ —

The fair values of the Company’s publicly held debt are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets;

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All privately held debt agreements are categorized as Level 3.

The Company has determined the estimated fair value of this debt to be Level 3, as certain inputs used to determine the

The Company has determined the estimated fair value of this debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable.

The Company utilizes indicative pricing from counterparties and a discounted cash flow method to estimate the fair value of the Level 3 items.

Notes to Condensed Consolidated Financial Statements

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Notes to Condensed Consolidated Financial Statements

fair value of these agreements are unobservable.

The Company utilizes indicative pricing from counterparties and a discounted cash flow method to estimate the fair value of the Level 3 items.

(in millions) Maturity Date Carrying value Estimated fair value Fair value level hierarchy

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2031 566 573 Level 3

1.000 % Payroll Support Program Loan (a)

1.000 % Payroll Support Program Loan (b)

2031 526 524 Level 3

(a) The interest rate will change to Secured Overnight Financing Rate plus two percent on the fifth anniversary of the loans.

The fifth anniversary for the second and third tranches will occur in January and April 2026, respectively.

(a) The interest rate will change to Secured Overnight Financing Rate plus two percent in January 2026.

See Note 10 for further information.

(b) The interest rate will change to Secured Overnight Financing Rate plus two percent in April 2026.

See Note 10 for further information.

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions) June 30, 2025 December 31, 2024

(in millions) September 30, 2025 December 31, 2024

Trade receivables $ 52 $ 47

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Fuel hedging and receivables — 1

Reinsurance receivable 120 168

Reinsurance receivable and losses recoverable 97 168

Accounts and other receivables $ 1,118 $ 1,110

(in millions) June 30, 2025 December 31, 2024

(in millions) September 30, 2025 December 31, 2024

Derivative contracts $ — $ 90

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Other assets $ 1,073 $ 1,081

(in millions) June 30, 2025 December 31, 2024

(in millions) September 30, 2025 December 31, 2024

Accounts payable trade $ 503 $ 339

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Notes to Condensed Consolidated Financial Statements

(in millions) June 30, 2025 December 31, 2024

(in millions) September 30, 2025 December 31, 2024

Voluntary Separation Program and severance pay $ 2 $ 48

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Interest 36 23

Deferred supplier credits 12 —

Bonus pay 112 208

Reinsurance payable 205 249

Reinsurance payable and losses payable 181 249

Aircraft maintenance 138 92

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Accrued liabilities $ 2,091 $ 2,206

June 30, 2025 December 31, 2024

(in millions) September 30, 2025 December 31, 2024

Postretirement obligation $ 261 $ 256

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The Company's contractual order book with The Boeing Company ("Boeing") for 737-7 ("-7") and -8 aircraft (together, the "MAX aircraft"), which extends to 2031, was designed to support the Company's growth and fleet modernization plans, while also providing significant flexibility and optionality to manage its fleet gauge and size, including opportunities to accelerate fleet modernization efforts if growth opportunities do not materialize.

The Company received 17 -8 aircraft deliveries from Boeing in second quarter 2025 and retired seven 737-700 ("-700") aircraft.

In addition, during second quarter 2025, the Company exercised nine -7 options for delivery in 2026.

The Company received eight -8 aircraft deliveries from Boeing in third quarter 2025 and retired 16 aircraft ( 15 -700 and the sale of one -800).

In addition, during third quarter 2025, the Company exercised four -7 options for delivery in 2026.

Boeing continues to experience delays in fulfilling its commitments with regards to delivery of MAX aircraft to the Company, primarily as a result of manufacturing challenges and delays in achieving Federal Aviation Administration ("FAA") certification of one of its new aircraft types, the -7, for which Southwest expects to be the launch customer.

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

As of June 30, 2025, the Company had the following firm orders and options for future periods:

Year-to-date through September 30, 2025, the Company converted 42 2025 deliveries from -7 to -8 firm orders.

Notes to Condensed Consolidated Financial Statements

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Notes to Condensed Consolidated Financial Statements

As of September 30, 2025, the Company had the following firm orders and options for future periods:

The Boeing Company

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(b) The Company has flexibility to designate firm orders or options as -7s or -8s, upon written advance notification as stated in the contract.

In addition, the Company has included the remaining 63 of its 2024 contractual but undelivered aircraft ( 27 -7s and 36 -8s) within its 2025 contractual commitments.

In addition, the Company has included 63 of its 2024 contractual but undelivered aircraft ( 27 -7s and 36 -8s) within its 2025 contractual commitments.

The 2025 contractual detail is as follows:

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2025 Combined Contractual Total 28 108 136

Based on the Company's current agreement with Boeing, capital commitments associated with firm orders as of June 30, 2025, were:

(in billions) 2025 2026 2027 2028 2029 2030 and thereafter Total

Based on the Company's current agreement with Boeing, capital commitments associated with firm orders as of September 30, 2025, were:

(in billions) Remainder of 2025 2026 2027 2028 2029 2030 and thereafter Total

Payments for capital commitments $ 2.7 (a) $ 2.4 $ 2.5 $ 2.8 $ 2.5 $ 2.7 $ 15.6

(a) Capital commitments associated with the Company's firm orders in 2025 of $ 2.9 billion include approximately $ 1.6 billion primarily related to the existing scheduled 73 MAX aircraft to be delivered in 2025 and $ 1.3 billion related to 63 MAX aircraft ( 27 -7s and 36 -8s) that were contractually committed for 2024, but were not received.

Subsequent to June 30, 2025, and through July 24, 2025, the Company converted eleven 2025 -7 firm orders into 2025 -8 firm orders, resulting in an immaterial change to the Company's capital commitments noted above.

(a) Capital commitments associated with the Company's firm orders in 2025 of $ 2.7 billion include approximately $ 1.4 billion primarily related to the existing remaining scheduled 73 MAX aircraft to be delivered in 2025 and $ 1.3 billion related to 63 MAX aircraft ( 27 -7s and 36 -8s) that were contractually committed for 2024, but were not received.

Subsequent to September 30, 2025, and through October 23, 2025, the Company exercised two -7 options for delivery in 2027, converted one 2025 -7 firm order into a 2025 -8 firm order, and converted five 2026 -7 firm orders into 2026 -8 firm orders, resulting in the Company's 2026 and 2027 capital commitments increasing to $ 2.5 billion and $ 2.6 billion, respectively.

Contingencies

The Company is from time to time subject to various legal proceedings and claims arising in the ordinary course of business and records a liability for such claims when it is probable that a loss will be incurred and the amount is reasonably estimable.

The Company is a defendant in class action litigation asserting it has not provided paid short-term military leave to certain employees, in violation of the federal Uniformed Services Employment and Reemployment Rights Act (“USERRA”).

Notes to Condensed Consolidated Financial Statements

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Notes to Condensed Consolidated Financial Statements

District of Washington granting summary judgment in favor of an airline in a separate case involving substantially the same claims at issue in this action.

The United States District Court for the Northern District of California previously issued an order to effectively stay the action, pending an appeal from an order by the United States District Court for the Eastern District of Washington granting summary judgment in favor of an airline in a separate case involving substantially the same claims at issue in this action.

On February 1, 2023, the Ninth Circuit reversed the district court’s grant of summary judgment and remanded the separate airline case to the District Court.

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The Court granted the stipulation on February 14, 2025.

On June 20, 2025, the Court granted the parties’ stipulated request to continue the deadline for filing a motion for preliminary approval of the class settlement and the Court reset the deadline for August 21, 2025.

The proposed settlement is fully accrued as of June 30, 2025.

On June 20, 2025, the Court granted the parties’ stipulated request to continue the deadline for filing a motion for preliminary approval of the class settlement.

On September 25, 2025, plaintiffs filed a motion for preliminary approval of the settlement class.

The settlement includes an $ 18.5 million settlement fund and prospective relief that includes a differential pay benefit for up to ten days of military leave per year, which will remain in place for at least five years once initiated.

The proposed settlement is fully accrued as of September 30, 2025.

On December 27, 2019, a former customer service agent at Oakland International Airport, filed a putative class action complaint in the Superior Court of California, for the County of Santa Clara, against the Company alleging the following seven claims under the California Labor Code and Business & Professions Code:

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On April 17, 2025, the Company filed a summary judgment motion arguing that Plaintiffs’ first cause of action, and all causes of action predicated thereon, failed as a matter of law.

The motion was argued on July 9, 2025, and the Court has not yet issued a final order.

Trial is currently set for August 11, 2025.

The motion was granted on July 25, 2025.

Judgment was entered in favor of the Company on September 2, 2025, and Plaintiffs filed a notice of appeal on September 4, 2025.

The Company is currently not able to estimate a range of possible loss with regards to the litigation to which it is a defendant.

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The Company recognized interest expense associated with the Convertible Notes as follows:

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

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

(in millions) 2025 2024 2025 2024

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The notes associated with the PSP2 and PSP3 Payroll Support Programs are due in January and April 2031, respectively.

On the day after the fifth anniversary of each of the PSP2 and PSP3 Notes, the applicable interest rates are scheduled to change to the Secured Overnight Financing Rate plus two percent.

On the day after the fifth anniversary of each of the PSP2 and PSP3 Notes, during January and April 2026, respectively, the applicable interest rates are scheduled to change to the Secured Overnight Financing Rate plus two percent.

Revolving Credit Facility

As of 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.

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.

For the six months ended June 30, 2025 and 2024, there were no amounts outstanding under the Amended Credit Agreement.

As of September 30, 2025, the Company had access to $ 1.5 billion under its amended and restated revolving credit facility (the "Amended Credit Agreement"), which expires in August 2028, reflecting the Company’s exercise of the accordion feature to increase the size of the facility on July 22, 2025.

For the nine months ended September 30, 2025 and 2024, there were no amounts outstanding under the Amended Credit Agreement.

Notes to Condensed Consolidated Financial Statements

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This share amount was based on the $ 26.49 closing price of the Company's common stock on April 25, 2025.

Final settlement of the Second Quarter 2025 ASR Program is scheduled to occur by the end of July 2025 and will be based on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period to be completed at time of settlement.

Final settlement of the Second Quarter 2025 ASR Program occurred in August 2025 and was based on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed in July 2025.

Upon settlement, the third-party financial institutions delivered 934,237 additional shares of the Company's common stock to the Company in July 2025, and 388,662 additional shares of the Company's common stock to the Company in August 2025.

Upon completion of the Second Quarter 2025 ASR Program in August 2025, the average purchase price per share for the 46,623,010 shares repurchased was $ 32.17 .

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

Under an accelerated share repurchase program entered into by the Company with a third-party financial institution in third quarter 2025 (the "Third Quarter 2025 ASR Program"), the Company paid $ 250 million and received an initial delivery of 6,368,213 shares during September 2025, representing an estimated 80 percent of the shares to be purchased by the Company under the Third Quarter 2025 ASR Program.

This share amount was based on the $ 31.39 and $ 31.43 closing price of the Company's common stock on September 5, 2025 and September 15, 2025, respectively.

Final settlement of the Third Quarter 2025 ASR Program occurred in October 2025 and was based on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed in October 2025.

Upon settlement, the third-party financial institution delivered 1,409,551 additional shares of the Company’s common stock to the Company.

Upon completion of the Third Quarter 2025 ASR Program in October 2025, the average purchase price per share for the 7,777,764 shares repurchased was $ 32.14 .

Notes to Condensed Consolidated Financial Statements

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As a result of this workforce reduction, the Company recorded a one-time expense of $ 62 million in first quarter 2025, which is included on the unaudited Condensed Consolidated Statement of Comprehensive Income as part of Salaries, wages, and benefits and Other operating expenses.

Substantially all of the expense is due to Employee severance payments and related professional fees and was substantially paid in first and second quarter 2025.

Substantially all of the expense is due to Employee severance payments and related professional fees and was substantially paid in first and second quarter 2025, with approximately $ 2 million remaining in Accrued liabilities on the unaudited Condensed Consolidated Balance Sheet as of September 30, 2025.

The Company does not expect to incur any material additional costs in connection with this reduction in workforce.

Additionally, as of June 30, 2025, $ 6 million of this one-time expense is included as part of Accrued liabilities on the unaudited Condensed Consolidated Balance Sheet .

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 1. Financial Statements