What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-23 compared with 2026-04-23 · 353 added, 152 removed, 199 unchanged (72% 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, 2026 and 2025 are included below.

Relevant comparative operating statistics for the three and six months ended June 30, 2026 and 2025 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,

2026 2025 Change

19 unchanged sentences

17.91 15.41 16.2 %

Operating revenues per ASM, excluding special items (cents) 18.51 15.41 20.1 %

Passenger revenue per ASM (cents) (h)

3 unchanged sentences

Operating expenses per ASM, excluding fuel (cents) 12.60 12.11 4.0 %

Operating expenses per ASM, excluding fuel and profit sharing (cents) 13.11 13.04 0.5 %

Operating expenses per ASM, excluding special items (cents) 17.27 14.89 16.0 %

Operating expenses per ASM, excluding fuel and special items (cents) 12.56 12.07 4.1 %

Operating expenses per ASM, excluding fuel, profitsharing, and special items (cents) 12.45 12.04 3.4 %

Fuel costs per gallon, including fuel tax (unhedged) $ 3.87 $ 2.26 71.2 %

Fuel costs per gallon, including fuel tax $ 3.92 $ 2.32 69.0 %

Fuel costs per gallon, including fuel tax (economic) $ 2.73 $ 2.49 9.6 %

Fuel consumed, in gallons (millions) 564 570 (1.1) %

Active fulltime equivalent Employees 73,401 71,506 2.7 %

Active full-time equivalent Employees 73,456 72,242 1.7 %

Aircraft at end of period 803 810 (0.9) %

Six months ended June 30,

2026 2025 Change

Revenue passengers carried (000s) 63,506 65,497 (3.0) %

Enplaned passengers (000s) 81,795 81,524 0.3 %

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

68,497 67,513 1.5 %

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

89,142 88,427 0.8 %

Load factor (c)

76.8 % 76.3 % 0.5 pts.

Average length of passenger haul (miles) 1,079 1,031 4.7 %

Average aircraft stage length (miles) 781 779 0.3 %

Trips flown 698,110 699,838 (0.2) %

Seats flown (000s) (d)

112,039 112,502 (0.4) %

Seats per trip (e)

160.5 160.8 (0.2) %

Average passenger fare $ 225.76 $ 189.90 18.9 %

Passenger revenue yield per RPM (cents) (f)

20.93 18.42 13.6 %

Operating revenues per ASM (cents) (g)

17.59 15.46 13.8 %

Operating revenues per ASM, excluding special items (cents) 17.91 15.46 15.8 %

Passenger revenue per ASM (cents) (h)

16.08 14.07 14.3 %

Operating expenses per ASM (cents) (i)

16.90 15.46 9.3 %

Operating expenses per ASM, excluding fuel (cents) 12.90 12.55 2.8 %

Operating expenses per ASM, excluding special items (cents) 16.89 15.33 10.2 %

Operating expenses per ASM, excluding fuel and special items (cents) 12.88 12.42 3.7 %

Operating expenses per ASM, excluding fuel, profitsharing, and special items (cents) 12.76 12.40 2.9 %

Fuel costs per gallon, including fuel tax (unhedged) $ 3.31 $ 2.33 42.1 %

Fuel costs per gallon, including fuel tax $ 3.37 $ 2.40 40.4 %

Fuel consumed, in gallons (millions) 1,059 1,071 (1.1) %

Active full-time equivalent Employees 73,456 72,242 1.7 %

Aircraft at end of period 803 810 (0.9) %

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

17 unchanged sentences

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

Three months ended March 31,

Three months ended June 30,

(in millions, except per share amounts)

GAAP 2026 2025 % Change

Operating income (loss) $ 330 $ (223) n.m.

Net income (loss) $ 227 $ (149) n.m.

Net income (loss) per share, diluted $ 0.45 $ (0.26) n.m.

Operating income (loss) $ 330 $ (128) n.m.

Net income (loss) $ 227 $ (77) n.m.

Net income (loss) per share, diluted $ 0.45 $ (0.13) n.m.

The Company recorded first quarter 2026 operating revenues of $7.2 billion, a first quarter Company record.

This increase was driven primarily by additional ancillary revenues as a result of the Company's previously announced transformational initiatives, resulting in a year-over-year increase in operating revenues of $821 million.

Despite the highly volatile fuel environment, the Company's Operating income and Net income for the three months ended March 31, 2026, on a GAAP and non-GAAP basis, improved significantly compared to the same prior year period aided by the record first quarter revenue performance, partially offset by higher Salaries, wages, and benefits expense.

Operating income $ 285 $ 225 26.7 %

Net income $ 233 $ 213 9.4 %

Net income per share, diluted $ 0.47 $ 0.39 20.5 %

Operating income $ 585 $ 245 138.8 %

Net income $ 465 $ 230 102.2 %

Net income per share, diluted $ 0.94 $ 0.43 119.0 %

Six months ended June 30,

(in millions, except per share amounts)

GAAP 2026 2025 % Change

Operating income $ 615 $ 2 n.m.

Net income $ 460 $ 64 n.m.

Net income per share, diluted $ 0.92 $ 0.11 n.m.

Operating income $ 915 $ 117 n.m.

Net income $ 691 $ 153 n.m.

Net income per share, diluted $ 1.39 $ 0.27 n.m.

Despite a dynamic cost and fuel environment, the Company’s Operating income, Net income, and Net income per share, diluted, for the three and six months ended June 30, 2026, on a GAAP and non-GAAP basis, improved compared with the same prior year period, driven primarily by strong revenue performance, including an all-time quarterly record Operating revenue performance for the three months ended June 30, 2026, partially offset by higher Aircraft fuel and related taxes expense and Salaries, wages, and benefits expense.

On a GAAP basis, the Company’s results for the three and six months ended June 30, 2026, included a reversal of $285 million of breakage revenue recorded in prior years related to a portion of flight credits issued to Customers between July 2022 and December 2025 that have either been redeemed or are expected to be redeemed in future periods.

This adjustment was treated as a special item and excluded from the Company’s presentation of non-GAAP results.

See Note Regarding Use of Non-GAAP Financial Measures and Notes 1 and 5 to the unaudited Condensed Consolidated Financial Statements for further information.

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 February 2025 reduction in workforce.

Company Overview

First Quarter 2026 Transformational Initiative Highlights

The Company is focused on executing its previously announced transformational initiatives, which were planned and designed to attract new Customers and improve both the Company's operational and financial performance.

The Company began operation of assigned and extra legroom seating flights on January 27, 2026, which required retrofitting 780 aircraft in the months leading up to the change.

In addition, the Company entered into a new partnership with All Nippon Airways, which will enable jointly operated itineraries connecting through the carriers' shared gateway airports in Honolulu, San Francisco, Seattle-Tacoma, and Los Angeles.

Since February 13, 2025, the Company has implemented and/or announced strategic partnerships with a total of seven carriers, through which Customers can book itineraries that connect the Company's vast domestic network to destinations around the world.

The Company's strategic initiatives have resulted in significant earnings improvement to its financial results.

During the quarter, the Company experienced upsell revenue opportunities from close-in bookings, which are more closely affiliated with business and price-flexible Customers, as well as growth in business and leisure Customer segments driven by the Company's more-attractive new product offerings.

The Company has also continued to enhance its onboard offerings, with improvements such as in-seat power, larger overhead bins, and upgraded WiFi, including the planned integration of at least 300 Starlink-equipped aircraft into the Company's fleet by the end of 2026.

The Company has substantially completed the implementation of its previously announced transformational initiatives, which were planned and designed to attract new Customers and improve both the Company's operational and financial performance.

Since the introduction of assigned and extra legroom seating on January 27, 2026, the Company has successfully integrated these offerings into its operations, contributing to improved passenger yields and incremental revenue.

Despite significantly higher fuel costs, results reflect record revenue performance, significant earnings growth and margin expansion, broad demand strength, continued cost discipline, and strong Customer engagement with the Company’s enhanced product offering.

The Company has also continued to enhance its onboard offerings, with improvements such as in-seat power, larger overhead bins, and upgraded WiFi, with the first Starlink-equipped aircraft entering service on June 22, 2026, marking the beginning of a new era of inflight connectivity at Southwest.

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

As of April 22, 2026, 84 aircraft retrofitted with RECARO seats have been placed into service.

Other Initiatives and Quarterly Developments

The Company delivered strong financial performance and significant margin improvement for first quarter 2026 despite significantly higher fuel costs.

Results reflect continued progress on the Company’s transformational initiatives, resilient Customer demand during the quarter, and disciplined cost management.

While the external environment remains uncertain, the Company remains focused on driving revenue, managing costs, and executing at a high level across the business.

The escalation of geopolitical developments in the Middle East has impacted the market prices of products that are derived from crude oil, including jet fuel.

The Company’s first quarter Aircraft fuel and related taxes expense was $1.4 billion, or $2.73 per gallon, which was approximately $164 million higher than it had originally forecasted for the period.

However, since the rapid rise primarily took place in March, the impacts to second quarter 2026 results and beyond could be more significant if prices remain elevated.

The forward curve on April 16, 2026 implied a second quarter 2026 fuel cost per gallon, including related taxes, between $4.10 and $4.15.

The Company currently expects to utilize approximately 555 million gallons of jet fuel during second quarter 2026.

In first quarter 2026, the Company returned over $1.3 billion to Shareholders through a combination of share repurchases and dividends.

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.

To improve its financial performance, the Company has also intensified its network optimization efforts.

In first quarter 2026, the Company announced plans to suspend operations at Chicago O'Hare International Airport and Washington Dulles International Airport and reduce staffing at Hartsfield-Jackson Atlanta International Airport, Fort Lauderdale-Hollywood International Airport, and Philadelphia International Airport, effective June 4, 2026.

A majority of affected Employees were offered the ability to bid for vacant positions across the Company's network and were able to remain employed by the Company.

On February 9, 2026, C.

David Cush and Gregg A.

Saretsky each submitted his resignation from the Company's Board of Directors (the "Board"), effective February 23, 2026.

In connection with the resignations and in accordance with the Company's Fifth Amended and Restated Bylaws, the Board decreased the size of the Board to 11 members effective February 23, 2026.

As of July 22, 2026, 107 aircraft retrofitted with RECARO seats have been placed into service.

In addition, the Company entered into new partnerships with Singapore Airlines, which will enable jointly operated itineraries connecting through the carriers' shared gateway airports in Los Angeles, Seattle-Tacoma, and San Francisco, and with Air Premia, which will enable travel across the Pacific with interline connections at the carriers' shared gateway airports in Honolulu, Los Angeles, and San Francisco.

Since February 13, 2025, the Company has implemented and/or announced strategic partnerships with a total of nine carriers, through which Customers can book itineraries that connect the Company's vast domestic network to destinations around the world.

The ongoing geopolitical developments in the Middle East continue to impact the market prices of products that are derived from crude oil, including jet fuel.

The Company’s second quarter Aircraft fuel and related taxes expense was $2.2 billion, or $3.92 per gallon, compared with the first quarter Aircraft fuel and related taxes expense of $1.4 billion, or $2.73 per gallon.

The forward curve on July 17, 2026 implied a third quarter 2026 fuel cost per gallon, including related taxes, between $3.70 and $3.75.

The Company currently expects to utilize approximately 532 million gallons of jet fuel during third quarter 2026.

In second quarter 2026, the Company also paid $88 million to Shareholders through dividends.

See "Liquidity and Capital Resources" below for further information.

To further improve its financial performance, the Company has also intensified its network optimization efforts.

Effective June 4, 2026, the Company suspended operations at Chicago O'Hare International Airport and Washington Dulles International Airport and reduced staffing at Hartsfield-Jackson Atlanta International Airport, Fort Lauderdale-Hollywood International Airport, and Philadelphia International Airport.

A majority of affected Employees were able to transfer to similar positions across the Company's network and remain employed by Southwest.

On April 7, 2026, the Company's 34 Network Operations Control Customer Planners represented by the International Association of Machinists and Aerospace Workers ("IAM") voted to ratify the tentative agreement reached on March 27, 2026, as part of the accretion process to join an existing IAM-represented collective bargaining unit.

1 unchanged sentence

Material Changes in Results of Operations

Comparison of the three months ended March 31, 2026 and 2025

Three months ended March 31,

Comparison of the three months ended June 30, 2026 and 2025

Three months ended June 30,

Increase (Decrease) Percent change

12 unchanged sentences

Operating Revenues

Total operating revenues for first quarter 2026 increased by $821 million, or 12.8 percent, year-over-year, to achieve a first quarter Company record of $7.2 billion.

Passenger revenues for first quarter 2026 increased by $780 million, or 13.4 percent, year-over-year, driven primarily by additional ancillary revenues as a result of the Company's transformational initiatives, including the implementation of bag fees for most fare products beginning in second quarter 2025, and the operation of assigned and extra legroom seating for travel beginning on January 27, 2026.

Other revenues for first quarter 2026 increased by $38 million, or 6.6 percent, year-over-year.

First quarter 2026 RASM was 17.24 cents, finishing 11.2 percent higher than first quarter 2025.

The unit revenue increase was primarily due to an 11.5 percent increase in yield as a result of broad-based demand strength across the network and initiative contributions, including an increase in ancillary revenues, along with a 0.2 point year-over-year increase in Load factor.

Total operating revenues for second quarter 2026 increased by $1.2 billion, or 16.4 percent, year-over-year, to achieve an all-time quarterly Company record of $8.4 billion, despite a $285 million decrease related to a breakage adjustment, which was treated as a special item and excluded from the Company's presentation of non-GAAP results.

See Note Regarding Use of Non-GAAP Financial Measures and see Notes 1 and 5 to the unaudited Condensed Consolidated Financial Statements for further information.

Passenger revenues for second quarter 2026 increased by $1.1 billion, or 16.9 percent, year-over-year, driven primarily by a higher percentage of Customers purchasing higher fare categories as a result of the enhanced fare structure, coupled with an increase in new ancillary products implemented by the Company, including bag fee revenues for first and second checked bags for tickets purchased on or after May 28, 2025, and operating assigned and extra legroom seating for travel beginning January 27, 2026 , which includes the co-brand impact associated with those initiatives.

Other revenues for second quarter 2026 increased by $64 million, or 11.2 percent, year-over-year, driven primarily by improved retail spend on the Company's co-branded credit cards.

Second quarter 2026 RASM was 17.91 cents, finishing 16.2 percent higher than second quarter 2025.

The unit revenue increase was primarily due to a 15.4 percent increase in yield as a result of broad demand strength and strong Customer engagement with the Company's enhanced product offering, including an increase in ancillary revenues, along with a 0.8 point year-over-year increase in Load factor.

Second quarter 2026 RASM, excluding special items, was 18.51 cents, finishing 20.1 percent higher than second quarter 2025.

See Reconciliation of Reported Amounts to Non-GAAP Financial Measures and Note Regarding Use of Non-GAAP Financial Measures for further information.

Operating Expenses

Operating expenses for first quarter 2026 increased by $268 million, or 4.0 percent, compared with first quarter 2025, and capacity increased 1.5 percent over the same prior year period.

The vast majority of the dollar increase was due to higher Salaries, wages, and benefits expense and Aircraft fuel and related taxes expense.

The following table presents the Company's Operating expenses per ASM for the first quarter of 2026 and 2025, followed by explanations of these changes on both a dollar and unit basis.

Three months ended March 31, Per ASM

Operating expenses for second quarter 2026 increased by $1.1 billion, or 16.1 percent, compared with second quarter 2025, and capacity increased 0.2 percent over the same prior year period.

Operating expenses, excluding special items, increased $1.1 billion , or 16.2 percent, compared with second quarter 2025.

The vast majority of the dollar increase was due to higher Aircraft fuel and related taxes expense and Salaries, wages, and benefits expense.

The following table presents the Company's Operating expenses per ASM for the second quarter of 2026 and 2025, 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 17.30 ¢ 14.94 ¢ 2.36 ¢ 15.8 %

Operating expenses per ASM for first quarter 2026 increased by 2.6 percent compared with first quarter 2025, primarily due to an increase in Salaries, wages, and benefits expense, which exceeded the year-over-year increase in

Operating expenses per ASM for first quarter 2026, excluding Aircraft fuel and related taxes expense, profit sharing, and special items (a non-GAAP financial measure), increased 2.3 percent, compared with first quarter 2025, primarily due to contract-driven wage rate inflation in Salaries, wages, and benefits expense in 2026.

Operating expenses per ASM for second quarter 2026 increased by 15.8 percent compared with second quarter 2025, primarily due to an increase in Aircraft fuel and related taxes expense and Salaries, wages, and benefits expense.

Operating expenses per ASM for second quarter 2026, excluding Aircraft fuel and related taxes expense, profit sharing, and special items (a non-GAAP financial measure), increased 3.4 percent, compared with second quarter 2025, primarily due to wage rate inflation in Salaries, wages, and benefits expense in 2026.

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 2026 increased by $195 million, or 6.3 percent, compared with first quarter 2025.

On a per ASM basis, first quarter 2026 Salaries, wages, and benefits expense increased 4.7 percent, compared with first quarter 2025.

On a dollar and per ASM basis, the majority of the increase was due to contractual step/pay rate increases and related benefits for the Company's workforce.

Aircraft fuel and related taxes expense for first quarter 2026 increased by $107 million, or 8.6 percent, compared with first quarter 2025.

On a per ASM basis, first quarter 2026 Aircraft fuel and related taxes expense increased 7.3 percent.

On a dollar and per ASM basis, the increase was primarily attributable to increased jet fuel prices, mainly due to increases during the month of March, particularly due to recent market disruptions and geopolitical events.

The following table provides more information on the Company's economic fuel costs per gallon, including the impact of fuel hedging net premium expense associated with previously terminated fuel derivative contracts:

Three months ended March 31,

Economic fuel costs per gallon $ 2.73 $ 2.49

Fuel hedging premium expense (in millions) $ 29 (a) $ 37

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

Salaries, wages, and benefits expense for second quarter 2026 increased by $237 million, or 7.3 percent, compared with second quarter 2025.

On a per ASM basis, second quarter 2026 Salaries, wages, and benefits expense increased 7.2 percent, compared with second quarter 2025.

On a dollar and per ASM basis, the majority of the increase was due to step/pay rate increases and related benefits for the Company's workforce.

Aircraft fuel and related taxes expense for second quarter 2026 increased by $889 million, or 67.0 percent, compared with second quarter 2025.

On a per ASM basis, second quarter 2026 Aircraft fuel and related taxes expense increased 66.1 percent.

On a dollar and per ASM basis, the increase was primarily attributable to increased jet fuel prices, particularly due to recent market disruptions and worldwide geopolitical events.

The following table provides more information on the Company's fuel costs per gallon, including the impact of fuel hedging net premium expense associated with previously terminated fuel derivative contracts:

Three months ended June 30,

Fuel costs per gallon $ 3.92 $ 2.32

Fuel hedging premium expense (in millions) $ 29 (a) $ 36 (a)

Fuel hedging premium expense per gallon $ 0.05 (a) $ 0.06 (a)

(a) Includes amounts reclassified from AOCI associated with hedges previously terminated.

See Notes 3 and 4 to the unaudited Condensed Consolidated Financial Statements for further information on the Company's derivative instruments and AOCI, respectively.

The Company's first quarter 2026 available seat miles per gallon ("fuel efficiency") increased 2.4 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 Company's second quarter 2026 available seat miles per gallon ("fuel efficiency") increased 1.3 percent, year-over-year, with the improvement 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.

Maintenance materials and repairs expense for first quarter 2026 decrease d by $33 million, or 11.3 percent, compared with first quarter 2025.

On a per ASM basis, Maintenance materials and repairs expense decrease d 11.4 percent compared with first quarter 2025.

Maintenance materials and repairs expense for second quarter 2026 decrease d by $37 million, or 11.2 percent, compared with second quarter 2025.

On a per ASM basis, Maintenance materials and repairs expense decrease d 11.4 percent compared with second quarter 2025.

On a dollar and per ASM basis, t he decrease was primarily due to a decrease in -700 engine shop visits.

Landing fees and airport rentals expense for first quarter 2026 increased by $50 million, or 9.6 percent, compared with first quarter 2025.

On a per ASM basis, Landing fees and airport rentals expense increased 7.9 percent, compared with first quarter 2025.

Landing fees and airport rentals expense for second quarter 2026 increased by $69 million, or 12.2 percent, compared with second quarter 2025.

On a per ASM basis, Landing fees and airport rentals expense increased 11.6

percent, compared with second quarter 2025.

On a dollar and per ASM basis, approximately 50 percent of the increase was attributable to an increase in airport rental expense throughout the network driven by the higher rates charged by airports for leased space, approximately 25 percent of the increase was due to higher landing fees throughout the network driven by increased usage of the heavier -8 aircraft as well as higher rates, and the remaining increase was primarily due to receiving fewer favorable settlements and credits from various airports in 2026.

Depreciation and amortization expense for first quarter 2026 increase d $2 million, or 0.5 percent, compared with first quarter 2025.

On a per ASM basis, Depreciation and amortization expense decreased 1.0 percent compared with first quarter 2025 .

On a dollar basis, this increase was primarily due to a $24 million increase driven by new assets for technology, ground equipment, and leasehold improvements being placed into service since first quarter 2025 and a $14 million increase as a result of the acquisition of 54 -8 aircraft being placed into service since first quarter 2025.

These increases were partially offset by a $28 million decrease due to a change in estimate for the residual values of certain airframes and engine assets as a result of prevailing market conditions and an $18 million

decrease due to certain Next Generation aircraft and engine assets being retired or becoming fully depreciated since first quarter 2025.

Other operating expenses for first quarter 2026 decrease d by $53 million, or 4.9 percent, compared with first quarter 2025.

Included within this line item was aircraft rentals expense in the amounts of $76 million and $87 million for the three-month periods ended March 31, 2026 and 2025, respectively.

On a per ASM basis, Other operating expenses decreased 6.5 percent , compared with first quarter 2025.

On a dollar and per ASM basis, the largest component of the year-over-year decrease was a focused Companywide effort to reduce discretionary expenses, the largest of which was a significant reduction in external consulting spend due to the completion of various transformational initiatives since first quarter 2025.

Depreciation and amortization expense for second quarter 2026 increase d by $2 million, or 0.5 percent, compared with second quarter 2025.

On a per ASM basis, Depreciation and amortization expense remained flat compared with second quarter 2025 .

On a dollar basis, this increase was primarily due to approximately $40 million in increased depreciation as a result of new assets acquired and placed into service, including aircraft, technology, and ground equipment, which was mostly offset by a $25 million decrease in depreciation as a result of a change in estimate for certain airframe and engine assets due to prevailing market conditions and a $16 million reduction due to aircraft and related assets that were retired and/or became fully depreciated since second quarter 2025.

Other operating expenses for second quarter 2026 decrease d by $32 million, or 2.8 percent, compared with second quarter 2025.

Included within this line item was aircraft rentals expense in the amounts of $75 million and $80 million for the three-month periods ended June 30, 2026 and 2025, respectively.

On a per ASM basis, Other operating expenses decreased 2.9 percent , compared with second quarter 2025.

On a dollar and per ASM basis, the decrease was primarily due to higher year-over-year gains on the disposition of assets, primarily previously retired engines and aircraft, partially offset by an increase in revenue-related expenses driven by increased credit card transactions, the Company's free inflight WiFi offering, and higher Employee-related expenses driven by redeye flying.

Non-Operating Expenses (Income)

Interest expense for first quarter 2026 increased by $8 million, or 17.4 percent, compared with first quarter 2025, primarily due to various debt financing transactions executed since first quarter 2025.

Interest expense for second quarter 2026 increased by $25 million, or 64.1 percent, compared with second quarter 2025, primarily due to various debt financing transactions executed since second quarter 2025.

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

Interest income for first quarter 2026 decreased by $61 million, or 72.6 percent, compared with first quarter 2025, 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 March 31, 2026 and 2025:

Three months ended March 31,

Interest income for second quarter 2026 decreased by $21 million, or 38.9 percent, compared with second quarter 2025, primarily due to lower investment balances and a lower average interest rate in the Company's total investment portfolio.

Other (gains) losses, net, for second quarter 2026 increased by $13 million, or 48.1 percent, compared with second quarter 2025, primarily related to impacts from the Company's nonqualified benefit plan obligations driven by volatility in the stock market.

The Company's effective tax rate was 23.8 percent in second quarter 2026, compared with 23.9 percent in second quarter 2025.

Comparison of the six months ended June 30, 2026 and 2025

Six months ended June 30,

Increase (Decrease) Percent change

(in millions) 2026 2025

Mark-to-market impact on deferred compensation plan investments $ 25 $ 18

The Company's effective tax rate was 20.4 percent in first quarter 2026, compared with 22.3 percent in first quarter 2025.

The year-over-year decrease in the tax rate was primarily due to higher tax benefits recognized from restricted stock units that vested during first quarter 2026 compared with first quarter 2025.

Passenger $ 14,337 $ 12,438 $ 1,899 15.3 %

Freight 93 86 7 8.1

Other 1,252 1,148 104 9.1

Total operating revenues $ 15,682 $ 13,672 $ 2,010 14.7 %

Salaries, wages, and benefits $ 6,797 $ 6,364 $ 433 6.8 %

Aircraft fuel and related taxes 3,571 2,575 996 38.7

Maintenance materials and repairs 552 623 (71) (11.4)

Landing fees and airport rentals 1,208 1,090 118 10.8

Depreciation and amortization 800 795 5 0.6

Other operating expenses 2,139 2,223 (84) (3.8)

Total operating expenses $ 15,067 $ 13,670 $ 1,397 10.2 %

Operating Revenues

Total operating revenues for the first six months of 2026 increased $2.0 billion, or 14.7 percent, year-over-year, despite a $285 million decrease related to a breakage adjustment, which was treated as a special item and excluded from the Company's presentation of non-GAAP results.

See Note Regarding Use of Non-GAAP Financial Measures and see Note 1 to the unaudited Condensed Consolidated Financial Statements for further information.

Passenger revenues for the six months ended June 30, 2026, increased by $1.9 billion, or 15.3 percent, compared with the first six months of 2025, primarily due to a higher percentage of Customers purchasing higher fare categories as a result of the enhanced fare structure, coupled with an increase in bag fee revenues for the first and second checked bags for tickets purchased on or after May 28, 2025, and operating assigned and extra legroom seating for travel beginning January 27, 2026, which includes the co-brand impact associated with those initiatives.

Other revenues for the first six months of 2026 increased by $104 million, or 9.1 percent, year-over-year, driven primarily by improved retail spend on the Company's co-branded credit cards.

The first six months of 2026 RASM was $17.59 cents, finishing 13.8 percent higher than the first six months of 2025.

The unit revenue increase was primarily due to a 13.6 percent increase in yield as a result of broad demand strength and strong Customer engagement with the Company's enhanced product offering, including an increase in ancillary revenues, along with a 0.5 point year-over-year increase in Load factor.

The first six months of 2026 RASM, excluding special items was 17.91 cents, finishing 15.8 percent higher than the first six months of 2025.

See Reconciliation of Reported Amounts to Non-GAAP Financial Measures and Note Regarding Use of Non-GAAP Financial Measures for further information.

Operating Expenses

Operating expenses for the first six months of 2026 increased $1.4 billion, or 10.2 percent, compared with the first six months of 2025, and capacity increased 0.8 percent over the same prior year period.

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

The following table presents the Company's Operating expenses per ASM for the first six months of 2026 and 2025, followed by explanations of these changes on a dollar and unit basis.

Six months ended June 30, Per ASM Percent

(in cents, except for percentages) 2026 2025 change change

Salaries, wages, and benefits 7.61 ¢ 7.20 ¢ 0.41 ¢ 5.7 %

Aircraft fuel and related taxes 4.00 2.91 1.09 37.5

Maintenance materials and repairs 0.62 0.70 (0.08) (11.4)

Landing fees and airport rentals 1.36 1.23 0.13 10.6

Depreciation and amortization 0.90 0.90 — —

Other operating expenses 2.41 2.52 (0.11) (4.4)

Total 16.90 ¢ 15.46 ¢ 1.44 ¢ 9.3 %

Operating expenses per ASM for the first six months of 2026 increased 9.3 percent, compared with the first six months of 2025, primarily due to an increase in Aircraft fuel and related taxes expense, Salaries, wages, and benefits expense, and Landing fees and airport rentals expense.

Operating expenses per ASM for the first six months of 2026, excluding Aircraft fuel and related taxes expense, profit sharing, and special items (a non-GAAP financial measure), increased 2.9 percent, year-over-year, primarily due to wage rate inflation in Salaries, wages, and benefits expense.

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 2026 increased by $433 million, or 6.8 percent, compared with the first six months of 2025.

On a per ASM basis, Salaries, wages, and benefits expense for the first six months of 2026 increased 5.7 percent, compared with the first six months of 2025.

On a dollar and per ASM basis, the majority of the increase was due to step/pay rate increases and related benefits for the Company's workforce.

Aircraft fuel and related taxes expense for the first six months of 2026 increased $996 million, or 38.7 percent, compared with the first six months of 2025.

On a per ASM basis, Aircraft fuel and related taxes expense for the first six months of 2026 increased 37.5 percent.

On a dollar and per ASM basis, the increase was primarily attributable to higher jet fuel prices, particularly due to market disruptions and worldwide geopolitical events that began in March 2026.

The following table provides more information on the Company's fuel cost per gallon, including the impact of fuel hedging net premium expense associated with previously terminated fuel derivative contracts:

Six months ended June 30,

Fuel costs per gallon $ 3.37 $ 2.40

Fuel hedging premium expense (in millions) $ 58 (a) $ 73 (a)

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

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

See Notes 3 and 4 to the unaudited Condensed Consolidated Financial Statements for further information on the Company's derivative instruments and AOCI, respectively.

Maintenance materials and repairs expense for the first six months of 2026 decreased $71 million, or 11.4 percent, compared with the first six months of 2025.

On a per ASM basis, Maintenance materials and repairs expense decreased 11.4 percent, compared with the first six months of 2025.

On a dollar and per ASM basis, t he decrease was primarily due to a decrease in -700 engine shop visits.

Landing fees and airport rentals expense for the first six months of 2026 increased $118 million, or 10.8 percent, compared with the first six months of 2025.

On a per ASM basis, Landing fees and airport rentals expense increased 10.6 percent, compared with the first six months of 2025.

On a dollar and per ASM basis, approximately 55 percent of the increase was attributable to an increase in airport rental expense throughout the network driven by the higher rates charged by airports for leased space, approximately 25 percent of the increase was due to higher

landing fees throughout the network driven by increased usage of the heavier -8 aircraft as well as higher rates, and approximately 20 percent was due to receiving fewer favorable settlements and credits from various airports in 2026.

Depreciation and amortization expense for the first six months of 2026 increased $5 million, or 0.6 percent, compared with the first six months of 2025.

On a per ASM basis, Depreciation and amortization expense remained flat compared with the first six months of 2025.

On a dollar basis, this increase was primarily due to approximately $78 million in increased depreciation as a result of new assets acquired and placed into service, including aircraft, technology, and ground equipment, and various other individual increases that were not significant.

These increases were mostly offset by a $53 million decrease in depreciation as a result of a change in estimate for certain airframe and engine assets due to prevailing market conditions and a $34 million reduction due to aircraft and related assets that were retired and/or became fully depreciated since second quarter 2025.

Other operating expenses for the first six months of 2026 decreased $84 million, or 3.8 percent, compared with the first six months of 2025.

Included within this line item was aircraft rentals expense in the amount of $150 million and $167 million for the six months ended June 30, 2026 and 2025, respectively.

On a per ASM basis, Other operating expenses decreased 4.4 percent, compared with the first six months of 2025.

Non-Operating Expenses (Income)

Interest expense for the first six months of 2026 increased $33 million, or 38.8 percent, compared with the first six months of 2025, primarily due to various debt financing transactions executed since second quarter 2025.

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

Interest income for the first six months of 2026 decreased $81 million, or 58.7 percent, compared with the first six months of 2025, primarily due to lower investment balances and a lower average interest rate in the Company's total investment portfolio.

Other (gains) losses, net, for the first six months of 2026 increased $4 million, or 44.4 percent, compared with the first six months of 2025, primarily related to impacts from the Company's nonqualified benefit plan obligations driven by volatility in the stock market.

The Company's effective tax rate was approximately 22.2 percent for the first six months of 2026, compared with 27.4 percent for the first six months of 2025.

The first half 2025 tax rate was higher than first half 2026 due to certain discrete tax items and lower pre-tax book income in 2025, both of which had a disproportionate impact on first half 2025's 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

2026 2025 Change

(in millions, except per share amounts and per ASM amounts) (See Note Regarding Use of Non-GAAP Financial Measures for further information)

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

2026 2025 Change 2026 2025 Change

Operating revenues, as reported $ 8,432 $ 7,244 $ 15,682 $ 13,672

Breakage revenue adjustment 285 — 285 —

Operating revenues, excluding special items $ 8,717 $ 7,244 20.3 $ 15,967 $ 13,672 16.8

Aircraft fuel and related taxes, unhedged $ 2,186 $ 1,290 $ 3,513 $ 2,502

Premium cost of fuel contracts designated as hedges 29 36 58 73

Aircraft fuel and related taxes, as reported (and economic) $ 1,356 $ 1,249 8.6

Aircraft fuel and related taxes, as reported $ 2,215 $ 1,326 67.0 $ 3,571 $ 2,575 38.7

Total operating expenses, as reported $ 8,147 $ 7,019 $ 15,067 $ 13,670

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

Litigation accruals — — — (19)

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Total operating expenses, excluding special items $ 8,132 $ 6,999 16.2 $ 15,052 $ 13,555 11.0

Aircraft fuel and related taxes expense, excluding special items (economic) (1,356) (1,249)

Aircraft fuel and related taxes expense, as reported (2,215) (1,326) (3,571) (2,575)

Operating expenses, excluding Aircraft fuel and related taxes expense and special items $ 5,917 $ 5,673 4.3 $ 11,481 $ 10,980 4.6

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Operating expenses, excluding Aircraft fuel and related taxes expense, special items, and profit sharing $ 5,864 $ 5,659 3.6 $ 11,378 $ 10,966 3.8

Operating income (loss), as reported $ 330 $ (223)

Operating income, as reported $ 285 $ 225 $ 615 $ 2

Breakage revenue adjustment 285 — 285 —

Impairment of long-lived assets — 8 — 8

Litigation accruals — — — 19

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Severance and related costs 15 — 15 62

Operating income (loss), excluding special items $ 330 $ (128) n.m.

Income (loss) before income taxes, as reported $ 285 $ (192)

Operating income, excluding special items $ 585 $ 245 138.8 $ 915 $ 117 682.1

Total operating revenues, as reported $ 8,432 $ 7,244 $ 15,682 $ 13,672

Operating margin, as reported 3.4 % 3.1 % 0.3 pts.

3.9 % — % 3.9 pts.

Impact of special items 3.3 % 0.3 % 1.8 % 0.9 %

Operating margin, excluding special items 6.7 % 3.4 % 3.3 pts.

5.7 % 0.9 % 4.8 pts.

Income before income taxes, as reported $ 306 $ 280 $ 592 $ 88

Breakage revenue adjustment 285 — 285 —

Impairment of long-lived assets — 8 — 8

Litigation accruals — — — 19

Transformation costs — 12 — 26

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

2026 2025 Change 2026 2025 Change

Severance and related costs 15 — 15 62

Income (loss) before income taxes, excluding special items $ 285 $ (97) n.m.

Provision (benefit) for income taxes, as reported $ 58 $ (43)

Net loss tax impact of fuel and special items — 23

Provision (benefit) for income taxes, net, excluding special items $ 58 $ (20) n.m.

Net income (loss), as reported $ 227 $ (149)

Income before income taxes, excluding special items $ 606 $ 300 102.0 $ 892 $ 203 339.4

Provision for income taxes, as reported $ 73 $ 67 $ 132 $ 24

Net income tax impact of fuel and special items 68 3 69 26

Provision for income taxes, net, excluding special items $ 141 $ 70 101.4 $ 201 $ 50 302.0

Net income, as reported $ 233 $ 213 $ 460 $ 64

Breakage revenue adjustment 285 — 285 —

Litigation accruals — — — 19

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Severance and related costs 15 — 15 62

Net loss tax impact of special items — (23)

Net income (loss), excluding special items $ 227 $ (77) n.m.

Three months ended March 31, Percent

2026 2025 Change

Net income (loss) per share, diluted, as reported $ 0.45 $ (0.26)

Impairment of long-lived assets — 8 — 8

Net income tax impact of special items (68) (3) (69) (26)

Net income, excluding special items $ 465 $ 230 102.2 $ 691 $ 153 351.6

Total operating revenues, as reported $ 8,432 $ 7,244 $ 15,682 $ 13,672

Net margin, as reported 2.8 % 2.9 % (0.1) pts.

2.9 % 0.5 % 2.4 pts.

Impact of special items 3.3 % 0.3 % 1.8 % 0.8 %

Net loss tax impact of special items — (0.03)

Net income (loss) per share, diluted, excluding special items $ 0.45 $ (0.13) n.m.

Net income tax impact of special items (0.8) % — % (0.4) % (0.2) %

Net margin, excluding special items 5.3 % 3.2 % 2.1 pts.

4.3 % 1.1 % 3.2 pts.

Net income per share, diluted, as reported $ 0.47 $ 0.39 $ 0.92 $ 0.11

Impact of special items 0.61 0.05 0.61 0.21

Net income tax impact of special items (0.14) (0.01) (0.14) (0.05)

Net income per share, diluted, excluding special items $ 0.94 $ 0.43 118.6 $ 1.39 $ 0.27 414.8

Operating revenues per ASM (cents), as reported 17.91 ¢ 15.41 ¢ 17.59 ¢ 15.46 ¢

Impact of special items 0.60 — 0.32 —

Operating revenues per ASM, excluding special items (cents) 18.51 ¢ 15.41 ¢ 20.1 17.91 ¢ 15.46 ¢ 15.8

Operating expenses per ASM (cents) 17.30 ¢ 14.94 ¢ 16.90 ¢ 15.46 ¢

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Operating expenses per ASM, excluding Aircraft fuel and related taxes expense, special items, and profit sharing (cents) 12.45 ¢ 12.04 ¢ 3.4 12.76 ¢ 12.40 ¢ 2.9

(a) Includes amounts reclassified from AOCI associated with hedges previously terminated.

(a) Represents a change in breakage revenue estimate related to non-expiring flight credits the Company issued to Passengers between July 2022 and December 2025.

Due to higher-than-projected Customer redemptions of these non-expiring flight credits, along with updated projections of future redemptions, the Company has revised its estimates with regards to the

remaining non-expiring flight credits that remain available for redemption.

See Notes 1 and 5 to the unaudited Condensed Consolidated Financial Statements.

(b) Includes amounts reclassified from AOCI associated with hedges previously terminated.

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

(b) 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).

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

(d) 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

June 30, 2026 June 30, 2025

Operating income, as reported

$ 1,041 $ 318

Breakage revenue adjustment 285 116

Severance and related costs 15 62

Voluntary Employee programs — 5

Net impact from fuel contracts — (43)

Professional advisory fees — 30

Transformation costs 7 30

DOT settlement (11) —

Litigation accruals — 19

Impairments — 8

Operating income, non-GAAP $ 1,337 $ 545

Net adjustment for aircraft leases (a) 211 182

Adjusted operating income, non-GAAP (A) $ 1,548 $ 727

Non-GAAP tax rate (B) 22.4 % (d) 22.6 % (e)

Net operating profit after-tax, NOPAT (A* (1-B) = C) $ 1,201 $ 563

Debt, including finance leases (b) $ 4,888 $ 6,699

Equity (b) 7,543 9,718

Net present value of aircraft operating leases (b) 857 967

Average invested capital $ 13,288 $ 17,384

Equity adjustment for hedge accounting (c) 8 31

Adjusted average invested capital (D) $ 13,296 $ 17,415

Non-GAAP ROIC, pre-tax (A/D) 11.6 % 4.2 %

Non-GAAP ROIC, after-tax (C/D) 9.0 % 3.2 %

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

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

(b) Calculated as an average of the five most recent quarter end balances or remaining obligations.

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 terminated 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 June 30, 2026, was 21.5 percent, and the Non-GAAP twelve month rolling tax rate was 22.4 percent.

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

(e) 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.

Note Regarding Use of Non-GAAP Financial Measures

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

Operating revenues, non-GAAP;

Total operating expenses, non-GAAP;

1 unchanged sentence

Operating expenses, non-GAAP excluding Aircraft fuel and related taxes expense and profit sharing;

Operating income (loss), non-GAAP ;

Income (loss) before income taxes, non-GAAP;

Provision (benefit) for income taxes, net, non-GAAP;

Net income (loss), non-GAAP;

Net income (loss) per share, diluted, non-GAAP;

and Operating expenses per ASM, non-GAAP, excluding Aircraft fuel and related taxes expense and profit sharing (cents).

Operating income, non-GAAP ;

Adjusted Operating income, 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 revenues per ASM, non-GAAP (cents);

Operating expenses per ASM, non-GAAP, excluding Aircraft fuel and related taxes expense and profit sharing (cents);

Return on invested capital, non-GAAP;

adjusted operating margin;

and adjusted net margin.

For the periods presented, special items include:

1 unchanged sentence

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

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

Charges associated with Employee severance and other related payments resulting from corporate workforce reductions;

Reversal of breakage revenue recorded in prior years related to a portion of non-expiring flight credits issued to Customers between July 2022 and December 2025 that have either been redeemed or are expected to be redeemed in future periods;

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

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

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

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

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.

Return on invested capital is not a measure defined by GAAP.

It is calculated by the Company, in part, using non-GAAP financial measures, which include charges or benefits that are deemed "special items." As noted above, the Company believes "special items" make it difficult to compare to prior periods, anticipated future periods, or industry trends since these items cannot be reliably predicted or estimated.

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

N et cash provided by operating activities was $1.4 billion for the three months ended March 31, 2026, compared with $860 million provided by operating activities in the same prior year period.

N et cash provided by operating activities was $530 million for the three months ended June 30, 2026, compared with $401 million provided by operating activities in the same prior year period.

Net cash provided by operating activities was $1.9 billion for the six months ended June 30, 2026 compared with $1.3 billion provided by operating activities in the same prior year period.

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

1 unchanged sentence

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

The operating cash flows for the three months ended March 31, 2026, were largely impacted by the Company's net results (as adjusted for noncash items), a $97 million profit-sharing contribution related to 2025 results pursuant to the Company's Retirement Savings Plan, and a $1.1 billion increase in Air traffic liability driven by seasonal bookings for future travel.

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 items), a $103 million profit-sharing contribution related to 2024 results 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 six months ended June 30, 2026, were largely impacted by the Company's net results (as adjusted for noncash items), a $97 million profit-sharing contribution related to 2025 results pursuant to the Company's Retirement Savings Plan, and a $1.0 billion increase in Air traffic liability driven by seasonal bookings for future travel.

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 items), a $103 million profit-sharing contribution related to 2024 results pursuant to the Company's Retirement Savings Plan, and a $55 million increase i n Air traffic liability driven by higher ticket sales.

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

Net cash used in investing activities totaled $445 million during the three months ended March 31, 2026, compared with $623 million provided by investing activities in the same prior year period.

Net cash used in investing activities totaled $560 million during the three months ended June 30, 2026, compared with $882 million used in investing activities in the same prior year period.

Net cash used in investing activities totaled $1.0 billion during the six months ended June 30, 2026, compared with $259 million used in investing activities in the same prior year period.

Investing activities in both years included Capital expenditures, as well as proceeds from the sale of various capital assets, and the prior year also included changes in the balance of the Company's short-term and noncurrent investments.

During the three months ended March 31, 2026, gross Capital expenditures were $630 million, and the Company had $192 million proceeds from sales, compared with $527 million gross Capital expenditures, and $26 million proceeds from sales in the same prior year period.

Capital expenditures increased, year-over-year, largely due to an increase in average delivery payment balances for scheduled future aircraft deliveries during the three months ended March 31, 2026, compared to the same prior year period.

Proceeds from sales increased, year-over-year, due to the timing of various aircraft and engine sales in the three months ended March 31, 2026, compared to March 31, 2025.

The Company continues to expect its 2026 net capital spending to be in the range of $3.0 billion to $3.5 billion based on its expectation of 66 -8 aircraft deliveries in 2026, with the remainder representing non-aircraft capital spending, partially offset by proceeds from sales of various capital assets.

During the six months ended June 30, 2026, gross Capital expenditures were $1.4 billion, and the Company had $450 million proceeds from sales of assets, compared with $1.2 billion gross Capital expenditures, and $51 million proceeds from sales of assets in the same prior year period.

Capital expenditures increased, year-over-year, largely due to an increase in average delivery payment balances for scheduled future aircraft deliveries during the six months ended June 30, 2026, compared with the same prior year period.

Proceeds from sales increased, year-over-year, due to the timing and volume of various aircraft and engine sales in the six months ended June 30, 2026, compared with June 30, 2025.

The Company expects its 2026 net capital spending to be toward the low end of, or below, the $3.0 billion to $3.5 billion range based on its expectation of 64 -8 aircraft deliveries in 2026, with the remainder representing non-aircraft capital spending, partially offset by proceeds from sales of assets.

The Company continues to plan for approximately 60 aircraft retirements in 2026.

Net cash used in financing activities was $876 million during the three months ended March 31, 2026, compared with $858 million used in financing activities for the same prior year period.

During the three months ended March 31, 2026, the Company paid $93 million in cash dividends to Shareholders related to the fourth quarter 2025 declaration.

The first quarter 2026 dividend declaration of $89 million was paid in April 2026.

Additionally, the Company expended $1.25 billion to repurchase the Company's outstanding common stock through accelerated share repurchase programs (each, an "ASR") and open market share repurchases during the three months ended March 31, 2026.

Net cash provided by financing activities was $493 million during the three months ended June 30, 2026, compared with $4.2 billion used in financing activities for the same prior year period.

Net cash used in financing activities was $383 million during the six months ended June 30, 2026, compared with $5.0 billion used in financing activities for the same prior year period.

During the six months ended June 30, 2026, the Company paid $181 million in cash dividends to Shareholders related to the first quarter 2026 and fourth quarter 2025 declarations.

The second quarter 2026 dividend declaration of $87 million was paid in July 2026.

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.

During the three months ended March 31, 2026, the Company entered into the Term Loan Credit Agreement with a third-party bank, providing for the $500 million senior secured Term Loan Credit Facility that was drawn in full on the closing date.

During the six months ended June 30, 2026, the Company entered into the Term Loan Credit Agreement with a third-party bank, providing for the $500 million senior secured Term Loan Credit Facility that was drawn in full on March 11, 2026.

On May 19, 2026, the Company executed an upsize of the Term Loan Facility for $1 billion of incremental term loan commitments.

The Term Loan Facility matures in full on March 11, 2029.

Additionally, during first quarter 2026, the Company made the decision to prepay the PSP3 Payroll Support Program in advance of the fifth anniversary date in April 2026.

As a result, the balance as of March 31, 2026, was classified as Current maturities of long-term debt in the accompanying unaudited Condensed Consolidated Balance Sheet.

Additionally, the Company prepaid the $426 million outstanding balance of the note associated with the PSP3 Payroll Support Program in April 2026.

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

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

however, no other potential early future repurchases are included in the Company's Current maturities of long-term debt unless otherwise disclosed as of March 31, 2026.

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 and the Company repurchased $750 million of the Company's outstanding common stock through authorized share repurchases.

however, no other potential early future repurchases are included in the Company's Current maturities of long-term debt unless otherwise disclosed as of June 30, 2026.

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 ASRs.

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

The Company repurchased $750 million of its outstanding common stock through an ASR in January 2026 (the "January 2026 ASR Program") under its current $2.0 billion authorization.

The Company received a total of 17,965,193 shares under the January 2026 ASR Program.

The Company also repurchased $400 million of its outstanding common stock through an ASR from January to March 2026 (the "First Quarter 2026 ASR Program") under its current $2.0 billion authorization.

The Company received a total of 7,970,589 shares under the First Quarter 2026 ASR Program.

Following the completion of the First Quarter 2026 ASR Program, during the period from March 13, 2026 through March 19, 2026, the Company repurchased $100 million of its outstanding common stock on the open market.

The Company received a total of 2,494,040 shares of its common stock through the open market repurchases.

During the six months ended June 30, 2026, the Company repurchased 28,429,822 shares of its common stock, all of which occurred during first quarter of 2026.

The Company did not repurchase any shares during second quarter of 2026.

As of June 30, 2026, approximately $450 million remained available under the Company’s share repurchase authorization.

See Part II, Item 2 for further information on the Company's share repurchases.

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The Company has access to $1.5 billion under the Amended Credit Agreement, which expires in August 2028.

For the three months ended March 31, 2026 and 2025 there were no amounts outstanding under the Amended Credit Agreement.

For the six months ended June 30, 2026 and 2025 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, 2026, the Company carried a working capital deficit of approximately $6.5 billion, in which its current liabilities exceed its current assets.

As of June 30, 2026, the Company carried a working capital deficit of approximately $6.8 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 of $3.3 billion as of March 31, 2026, 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 of $3.8 billion as of June 30, 2026, and anticipated future internally generated funds from operations.

The Company continues to have a large base of unencumbered aircraft and other related assets with a net book value of approximately $15.7 billion.

1 unchanged sentence

The Company may consider, from time to time, additional financing arrangements, including secured or unsecured debt, as appropriate.

In March 2026, the Company entered into the Term Loan Facility, which is secured by a grant of a security interest in certain aircraft and related assets with a minimum collateral coverage ratio requirement.

In March 2026, the Company entered into the Term Loan Facility and subsequently, in May 2026, executed an upsize for incremental loan commitments.

The commitments are secured by a grant of a security interest in certain aircraft and related assets with a minimum collateral coverage ratio requirement.

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 23, 2026, for the years 2026 through 2031, the Company has firm orders with Boeing for 473 MAX aircraft (258 -7s and 215 -8s), less 10 -8 aircraft received to date in 2026, and 144 MAX options (-7s or -8s).

The contractual order book as of April 23, 2026, 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 23, 2026, for the years 2026 through 2031, the Company has firm orders with Boeing for 479 MAX aircraft (264 -7s and 215 -8s), less 25 -8 aircraft received to date in 2026, and 138 MAX options (-7s or -8s).

The contractual order book as of July 23, 2026, 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, 2026:

The following table details information on the aircraft in the Company's fleet as of June 30, 2026:

Age (Yrs) Number

14 unchanged sentences

• the Company's expectations with respect to share repurchases;

• 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 continued progress on the Company’s transformational initiatives, driving revenue, managing costs, and executing at a high level across the business;

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

• the Company’s focus areas, goals, opportunities, and initiatives, including with respect to the Company's transformational initiatives and strong Customer engagement with the Company’s enhanced product offering;

• the Company’s plans and expectations with respect to the Company’s delivery of WiFi and Starlink-equipped aircraft, airline partnerships, cabin design and seating, and the Company’s Co-brand Agreement with Chase;

2 unchanged sentences

• the Company’s network plans and expectations;

• the Company’s labor plans and expectations, including with respect to reducing staffing at certain airports;

• the Company’s financial expectations, targets and goals, including with respect to fuel prices, income taxes, leverage, liquidity, balance sheet goals, and cost mitigation;

• the Company’s labor plans and expectations;

• the Company’s financial expectations, targets and goals, including with respect to leverage, liquidity, balance sheet goals, and cost discipline;

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

11 unchanged sentences

• 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, and other operational plans, strategies, and goals;

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

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

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

8 unchanged sentences

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