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Southwest Airlines Q3 2026 profit rises to $270M

Southwest's reported operating margin rose 4.0 percentage points despite an $821 million year-over-year increase in fuel expense.

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Form Type
8-K

Rhea-AI Filing Summary

Southwest Airlines Co. (LUV) reported third-quarter 2026 operating revenue of $8.422 billion, up 21.2% year over year, and net income of $270 million, compared with $54 million a year earlier. Diluted EPS was $0.55; adjusted diluted EPS was $0.66, versus $0.11 excluding special items a year earlier. Operating margin was 4.5%, up 4.0 percentage points; adjusted operating margin was 5.4%, up 4.8 points. Fuel expense increased $821 million year over year to $2.152 billion, a $1.08 adjusted-EPS headwind, while total operating expenses rose 16.3% to $8.043 billion.

Fourth-quarter 2026 guidance calls for adjusted EPS of $0.55 to $0.80, RASM growth of 19% to 21%, and CASM-X growth of 4.0% to 4.5%. Full-year adjusted EPS guidance is $2.60 to $2.85, and net capital spending is expected to be $2.5 billion to $2.75 billion. Southwest ended the quarter with $5.6 billion in liquidity, including $3.6 billion in cash and cash equivalents and a $2.0 billion revolving credit line, and distributed $176 million in dividends. It had 803 aircraft at quarter-end and expects 67 Boeing 737-8 and 737-7 deliveries and plans to retire approximately 60 aircraft in 2026.

2 points · 0 major

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Positive

  • Moderate pointThird-quarter operating revenue rose 21.2% to $8.422 billion.
  • Moderate pointThird-quarter net income reached $270 million, versus $54 million a year earlier.

Negative

  • Moderate pointFuel expense increased 61.7% to $2.152 billion, a $1.08 adjusted-EPS headwind.

Filing Explained

At September 30, 2026, the balance sheet listed current maturities of long-term debt.

The release reports no common-stock repurchases in the completed quarter, while $450 million remains under the $2.0 billion authorization; that balance is authorization capacity, not purchases already made.

At September 30, 2026, the balance sheet listed current maturities of long-term debt, long-term debt less current maturities, and cash and cash equivalents.

Item 2.02 Results of Operations and Financial Condition Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01 Financial Statements and Exhibits Exhibits
Financial statements, pro forma financial information, or exhibit attachments filed with this report.
Operating revenue $8.422 billion Third quarter 2026; up 21.2% year over year
Net income $270 million Third quarter 2026; compared with $54 million in third quarter 2025
Diluted EPS $0.55 Third quarter 2026; compared with $0.10 in third quarter 2025
Adjusted diluted EPS $0.66 Third quarter 2026; compared with $0.11 excluding special items in third quarter 2025
Operating margin 4.5% Third quarter 2026; up 4.0 percentage points year over year
Fuel expense $2.152 billion Third quarter 2026; up 61.7% year over year
Adjusted EPS outlook $0.55 to $0.80 Fourth-quarter 2026 forecast
RASM financial
"RASM (unit revenue)"
RASM (revenue per available seat mile) measures how much money an airline earns for each seat it can fly one mile, combining ticket sales and other onboard revenue divided by total seat-miles offered. It tells investors how effectively an airline turns its flying capacity into income—similar to checking how much a restaurant makes per available table hour—so rising RASM usually signals better pricing or demand, while falling RASM can warn of weaker revenue performance.
CASM-X financial
"CASM-X increased 3.8 percent year-over-year"
available seat miles technical
"Available seat miles (ASMs or capacity)"
Available seat miles measure the total capacity of an airline to carry passengers, calculated by multiplying the number of seats available on all flights by the distance those flights cover. It indicates how much space an airline has to generate revenue from passenger travel. For investors, higher available seat miles generally suggest a larger operation and potential for increased earnings.
sale-leaseback transactions financial
"proceeds from sale-leaseback transactions"
A sale-leaseback transaction is when an owner sells a property or asset and immediately rents it back from the buyer, like selling your house and signing a lease to keep living in it. For investors, it matters because the seller converts a fixed asset into cash while taking on a new rent expense, which can boost short-term liquidity but change long-term earnings, debt levels and risk profiles that affect valuation and creditworthiness.
gross leverage financial
"Ended the quarter with gross leverage of 1.9x"
Gross leverage is a measure of how much a company or fund is exposed to borrowed money and other obligations before subtracting any cash, liquid assets, or hedging positions. It shows total debt and exposure relative to the size of the business (often versus equity or assets) and matters to investors because higher gross leverage typically means greater sensitivity to interest costs, market swings and unexpected losses—like a household with large mortgages and no rainy-day savings.
Operating revenue $8.422 billion Up 21.2% year over year
Net income $270 million Compared with $54 million in third quarter 2025
Diluted EPS $0.55 Compared with $0.10 in third quarter 2025
Adjusted diluted EPS $0.66 Compared with $0.11 excluding special items in third quarter 2025
Operating margin 4.5% Up 4.0 percentage points year over year
Guidance

Fourth-quarter 2026 adjusted EPS of $0.55 to $0.80; full-year 2026 adjusted EPS of $2.60 to $2.85.

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

How much revenue and net income did Southwest (LUV) report for Q3 2026?
Southwest reported $8.422 billion in operating revenue and $270 million in net income for third-quarter 2026. Revenue was up 21.2% year over year; net income compared with $54 million a year earlier. Diluted EPS was $0.55.

What is Southwest (LUV) forecasting for fourth-quarter 2026?
Southwest forecast fourth-quarter 2026 adjusted EPS of $0.55 to $0.80, RASM growth of 19% to 21%, and CASM-X growth of 4.0% to 4.5%. The outlook is based on the forward fuel curve as of October 15, 2026 and assumes the current fare environment and demand trends remain broadly intact.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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Available on EDGAR Accepted by SEC EDGAR
0000092380false00000923802026-10-212026-10-21

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 21, 2026
 southwestfinal.jpg
SOUTHWEST AIRLINES CO.
(Exact name of registrant as specified in its charter)

Texas1-725974-1563240
(State or other jurisdiction(Commission(I.R.S. Employer
of incorporation)File Number)Identification No.)

P. O. Box 36611
Dallas,Texas75235-1611
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:   (214) 792-4000


Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))




Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock ($1.00 par value)LUVNew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐



Item 2.02    Results of Operations and Financial Condition.

On October 21, 2026, the Registrant issued a press release (the "Earnings Press Release") announcing its financial results for third quarter 2026. The Earnings Press Release is furnished herewith as Exhibit 99.1 and is incorporated by reference into this Item 2.02.

The information furnished in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 9.01    Financial Statements and Exhibits.

(d) Exhibits:

99.1 Registrant’s Earnings Release.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


SOUTHWEST AIRLINES CO.
October 21, 2026By:/s/   Tom Doxey
Tom Doxey
Executive Vice President & Chief Financial Officer
(Principal Financial Officer)

Southwest Airlines Co.
Investor Relations
investor.relations@wnco.com
swalogo-smallermaybe.jpg

SOUTHWEST AIRLINES REPORTS THIRD QUARTER 2026 RESULTS; RECORD REVENUE PERFORMANCE DRIVES YEAR-OVER-YEAR MARGIN EXPANSION

Record third quarter operating revenue and all-time record unit revenues
Expanded margins year-over-year despite significant fuel headwind
Announced Southwest Icon Lounge™ network
Will host a Capital Markets Day in New York City on March 2, 2027

DALLAS, TEXAS - October 21, 2026 - Southwest Airlines Co. (NYSE: LUV) today reported third quarter 2026 financial results, reflecting strong demand for the Southwest product and continued momentum across the business.

"Customers are responding to the enhanced Southwest offering, and it shows in our results. Demand remained strong as we lapped last year's bag fee and other commercial initiatives, reinforcing our belief that the earnings power we've built is durable, even with significantly higher fuel costs.

"With the transformation complete, our efforts have shifted to optimizing the business and delivering the next set of Customer Experience enhancements, both focused on unlocking the next phase of value creation. Robust demand has continued in the fourth quarter, and we are seeing encouraging progress across our product and loyalty initiatives. We remain confident in our ability to further strengthen earnings, improve returns, and expand margins over time.

"We look forward to sharing our multi-year financial framework, the targets we are managing toward, and our path to achieving them at our Capital Markets Day in New York City on March 2, 2027," said Bob Jordan, Southwest Airlines President & Chief Executive Officer.

1


Highlights:
•Net income of $270 million, or $0.55 diluted EPS, adjusted net income¹ of $328 million, or $0.66 adjusted EPS¹
•Operating revenues of $8.4 billion, up 21.2%, a third quarter Company record
•Unit revenues increased 21.6%, exceeding prior guidance, achieving an all-time record
•Operating margin of 4.5%, up 4.0 points year-over-year; adjusted operating margin¹ of 5.4%, up 4.8 points year-over-year despite an $821 million increase in nominal fuel costs
•Returned $176 million to Shareholders through dividends
•Record third quarter passenger revenue and the highest passenger yield in the Company's history
•Managed business revenue reached a third quarter record, with 20 of the 50 all-time top managed business booking days occurring during the quarter
•Announced enhancements to the Rapid Rewards® program, including a new Platinum tier, a faster path to status through card spend, new Milestone Rewards, and new loyalty redemption partners
•Announced plans to launch the Southwest Icon Lounge™ network, the Company's first airport lounges, with the first guests expected in 2027
•Became the first U.S. airline to make flight shopping available through ChatGPT
•Enhanced Southwest Business with the introduction of Business Priority and NDC connectivity, making it easier for corporate Customers to access and book Southwest products and services
•Welcomed TAP Air Portugal and LOT Polish Airlines as Southwest's tenth and eleventh airline partners
•Continued installation of Starlink ultra-fast WiFi across all aircraft, with fleet-wide installation expected to be complete in fall 2027



2



Guidance and Outlook:
The following tables provide guidance for fourth quarter and full-year 2026. The Company's guidance is based on the forward fuel curve as of October 15, 2026 and assumes the current fare environment and demand trends remain broadly intact.
4Q 2026 Forecast
Adjusted EPS1,2
$0.55 to $0.80
ASMs (a), year-over-year3% to 4%
RASM (b), year-over-year19% to 21%
CASM-X (c), year-over-year1,2
4.0% to 4.5%

2026 Forecast
Adjusted EPS1,2
$2.60 to $2.85
(a) Available seat miles ("ASMs" or "capacity").
(b) Operating revenue per available seat mile ("RASM" or "unit revenues").
(c) Operating expenses per available seat mile, excluding aircraft fuel and related taxes expense, special items, and profit sharing ("CASM-X").

3


Revenue:
•Record third quarter 2026 operating revenues of $8.4 billion, up 21.2 percent year-over-year
•Third quarter 2026 RASM reached an all-time record, increasing 21.6 percent year-over-year, on capacity down 0.4 percent
•Fourth quarter 2026 RASM is expected to increase between 19% and 21% year-over-year

Costs:
•Third quarter 2026 operating expenses increased 16.3 percent year-over-year to $8.0 billion; operating expenses excluding special items¹ increased 15.4 percent year-over-year to $8.0 billion
•Third quarter 2026 operating expenses, excluding aircraft fuel and related taxes expense, special items, and profit sharing1, increased 3.4 percent year-over-year
•Third quarter 2026 CASM-X1 increased 3.8 percent year-over-year
•Fourth quarter 2026 CASM-X1,2 is expected to increase between 4.0% and 4.5% year-over-year, which includes an expected 1.0 point headwind from the removal of six seats from the Boeing 737-700 fleet to enable extra legroom seating

Fuel:
•Third quarter 2026 fuel cost was $3.92 per gallon, above prior assumptions of $3.70 to $3.75 per gallon. Fuel expense increased by $821 million compared to the third quarter of 2025 and represented a $1.08 headwind to adjusted EPS
•Fourth quarter 2026 fuel cost per gallon is assumed to be approximately $4.553 based on the forward curve as of October 15, 2026

Capacity, Fleet, and Capital Spending:
•Third quarter 2026 capacity decreased 0.4 percent year-over-year
•Received 20 Boeing 737-8 aircraft and retired 20 aircraft in third quarter 2026, ending the quarter with 803 aircraft (retirements included the sale of three Boeing 737-800 aircraft and the retirement of 17 Boeing 737-700 aircraft)
•Third quarter 2026 gain on sale of $214 million, including $96 million primarily from retiring aircraft and engine sales and $118 million from sale-leaseback transactions
•Third quarter 2026 gross capital expenditures were $1.0 billion, driven primarily by aircraft-related capital spending, as well as technology, facilities, and operational investments
•Expect a total of 67 Boeing 737-8 and 737-7 aircraft deliveries and plan to retire approximately 60 aircraft in 2026
4


•Entered 2026 with a disciplined capacity plan and now expect full-year growth of approximately 1.2%, versus last updated guidance of approximately 1.5%
•Expect 2026 net capital spending4 between $2.5 billion and $2.75 billion
Liquidity and Capital Deployment:
•Ended third quarter 2026 with $5.6 billion in liquidity, comprised of $3.6 billion in cash and cash equivalents and a revolving credit line of $2.0 billion
•Ended the quarter with gross leverage1 of 1.9x
•Have unencumbered aircraft and other related assets with a net book value of approximately $15.8 billion
•Distributed $176 million in dividends during third quarter 2026
•$450 million remains outstanding under the Company's $2.0 billion share repurchase authorization


5


Conference Call:
Southwest will discuss its third quarter 2026 results on a conference call at 10:00 a.m. Eastern Time on October 22, 2026. To listen to a live broadcast of the conference call, please go to
https://www.investors.southwest.com.

Footnotes
1See Note Regarding Use of Non-GAAP Financial Measures for additional information on special items. In addition, information regarding special items is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Items (also referred to as "excluding special items").
2Projections do not reflect the potential impact of special items and/or Aircraft fuel and related taxes expense, special items, and profit sharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, particularly given the unusual or infrequent nature of special items and especially considering the significant volatility of the Aircraft fuel and related taxes expense line item. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.
3Based on market prices as of October 15, 2026. Fuel cost per gallon includes fuel taxes and fuel hedging net premium expense of $0.05 per gallon related to terminated fuel derivative contracts.
4Net capital expenditures include the impact of aircraft sales and sale-leaseback transactions.

Throughout this press release, certain columns and rows may not calculate precisely to the reported totals due to the use of rounded numbers.

Cautionary Statement Regarding Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include, without limitation, statements related to (i) the Company's financial outlook, expectations, plans, targets, and projected results of operations, including with respect to earnings power and margin expansion; (ii) the Company’s initiatives, strategic priorities, focus areas, core strengths, goals, and opportunities, including with respect to product offering enhancements; (iii) the Company’s expectations with respect to demand, competitive positioning, and Customer response to its product offering; (iv) the Company’s capacity plans and expectations; (v) the Company's expectations with respect to fuel costs and fuel efficiency; (vi) the Company’s fleet plans and expectations, including with respect to the Company’s fleet order book, fleet upgrades and modernization, fleet transactions, fleet deliveries and retirements; (vii) the Company's plans, estimates, and assumptions related to capital spending; and (viii) the Company’s plans, expectations, and targets with respect to its investment-grade balance sheet, liquidity, leverage, and share repurchases and other Shareholder returns. These forward-looking statements are based on the Company's current estimates, intentions, beliefs, expectations, goals, strategies, and projections for the future and are not guarantees of future performance. Forward-looking statements involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors include, among others, (i) the impact of geopolitical conflicts, fears or actual outbreaks of diseases, extreme or severe weather and natural disasters, actions of competitors (including, without limitation, pricing, scheduling, capacity, and network decisions, and consolidation and alliance activities), governmental actions, consumer perception, consumer uncertainties with respect to trade policies, tariffs, or government shutdowns, economic conditions, fears or actual acts of terrorism or war, sociodemographic trends, and other factors beyond the Company's control, on consumer behavior and the Company's results of operations and business decisions, plans, strategies, and results; (ii) the Company's ability to timely and effectively implement, transition, operate, maintain, and protect the technology systems, cybersecurity measures, artificial intelligence and other emerging technology capabilities, and infrastructure necessary to support its operations and initiatives; (iii) the Company’s ability to effectively execute and evolve its strategic plans, initiatives, product offerings, and policies, including related consumer behavior and response; (iv) the impact of fuel price changes, fuel price volatility, and fuel availability on the Company's business plans and results of operations; (v) the impact of the Federal Aviation Administration and other governmental regulations and actions, including with respect to government shutdowns and Air Traffic Control staffing shortages and inefficiencies, as well as the Company’s ability to obtain any required governmental approvals, on the Company's business plans, results, and operations; (vi) the Company's dependence on The Boeing Company (“Boeing”) and Boeing suppliers with respect to the Company's aircraft deliveries, fleet and capacity plans, operations, maintenance, strategies, and goals; (vii) the Company's dependence on other third parties, including with respect to technology, revenue management, distribution channels, operational reliability, fuel supply, maintenance, and the impact on the Company's operations and results of operations of any third-party delays or nonperformance; (viii) the impact of labor matters on the Company's business decisions, plans, strategies, and results; (ix) the Company's ability to obtain and maintain adequate infrastructure and equipment to support its operations and initiatives; (x) the Company's dependence on its workforce, including its ability to employ and retain sufficient numbers of qualified Employees with appropriate skills and expertise to effectively and efficiently maintain its operations and execute the Company’s plans; (xi) the cost and effects of the actions of activist shareholders; and (xii) other factors, as described in the Company's filings with the
6


Securities and Exchange Commission, including the detailed factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025.



Investor Contact:
Southwest Airlines Investor Relations
investor.relations@wnco.com

Media Contact:
Southwest Airlines Media Relations
214-792-4847
swamedia@wnco.com


7


Southwest Airlines Co.
Condensed Consolidated Statement of Income
(in millions, except per share amounts)
(unaudited)
Three months endedNine months ended
September 30,September 30,
20262025Percent Change20262025Percent Change
OPERATING REVENUES:
Passenger $7,754 $6,313 22.8$22,091 $18,751 17.8
Freight48 42 14.3141 127 11.0
Other621 594 4.51,872 1,743 7.4
     Total operating revenues8,422 6,949 21.224,104 20,621 16.9
OPERATING EXPENSES:
Salaries, wages, and benefits3,542 3,219 10.010,338 9,583 7.9
Aircraft fuel and related taxes
2,152 1,331 61.75,723 3,907 46.5
Maintenance materials and repairs303 299 1.3855 921 (7.2)
Landing fees and airport rentals623 548 13.71,831 1,638 11.8
Depreciation and amortization398 394 1.01,198 1,189 0.8
Other operating expenses1,026 1,123 (8.6)3,166 3,346 (5.4)
     Total operating expenses8,043 6,914 16.323,110 20,584 12.3
OPERATING INCOME
379 35 n.m.994 37 n.m.
NON-OPERATING EXPENSES (INCOME):
Interest expense70 35 100.0188 120 56.7
Capitalized interest(13)(13)—(38)(38)—
Interest income(33)(34)(2.9)(90)(172)(47.7)
Other gains, net
(1)(21)(95.2)(13)(28)(53.6)
     Total non-operating expenses (income)
24 (33)n.m.47 (118)n.m.
INCOME BEFORE INCOME TAXES
355 68 n.m.946 155 n.m.
PROVISION FOR INCOME TAXES
85 14 n.m.216 37 n.m.
NET INCOME
$270 $54 n.m.$730 $118 n.m.
NET INCOME PER SHARE:
Basic$0.55 $0.10 n.m.$1.48 $0.21 n.m.
Diluted$0.55 $0.10 n.m.$1.47 $0.21 n.m.
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic489 523 (6.5)492 548 (10.2)
Diluted494 526 (6.1)497 551 (9.8)
8


Southwest Airlines Co.
Reconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding special items)
(See Note Regarding Use of Non-GAAP Financial Measures)
(in millions, except per share and per ASM amounts) (unaudited)
Three months endedNine months ended
September 30,PercentSeptember 30,Percent
20262025Change20262025Change
Operating revenues, as reported$8,422 $6,949 $24,104 $20,621 
(a)Add: Breakage revenue adjustment— — 285 — 
Operating revenues, excluding special items$8,422 $6,949 21.2$24,389 $20,621 18.3
Aircraft fuel and related taxes, unhedged$2,123 $1,295 $5,637 $3,797 
(b)Add: Premium cost of fuel contracts designated as hedges29 36 86 110 
Aircraft fuel and related taxes, as reported$2,152 $1,331 61.7$5,723 $3,907 46.5
Total operating expenses, as reported$8,043 $6,914 $23,110 $20,584 
Deduct: Impairment of long-lived assets(30)— (30)(8)
Deduct: Litigation accruals(13)— (13)(19)
Deduct: Transformation costs— (7)— (33)
(c)Deduct: Severance and related costs(30)— (45)(62)
Total operating expenses, excluding special items$7,970 $6,907 15.4$23,022 $20,462 12.5
Deduct: Aircraft fuel and related taxes expense, as reported(2,152)(1,331)(5,723)(3,907)
Operating expenses, excluding Aircraft fuel and related taxes expense and special items$5,818 $5,576 4.3$17,299 $16,555 4.5
Deduct: Profit-sharing expense(62)(11)(165)(26)
Operating expenses, excluding Aircraft fuel and related taxes expense, special items, and profit sharing$5,756 $5,565 3.4$17,134 $16,529 3.7
Operating income, as reported$379 $35 $994 $37 
(a)Add: Breakage revenue adjustment— — 285 — 
Add: Impairment of long-lived assets30 — 30 8 
Add: Litigation accruals13 — 13 19 
Add: Transformation costs— 7 — 33 
(c)Add: Severance and related costs30 — 45 62 
Operating income, excluding special items$452 $42 976.2$1,367 $159 759.7
Total operating revenues, as reported$8,422 $6,949 $24,104 $20,621 
Operating margin, as reported4.5 %0.5 %4.0 pts.4.1 %0.2 %3.9 pts.
Add: Impact of special items0.9 %0.1 %1.5 %0.6 %
Operating margin, excluding special items5.4 %0.6 %4.8 pts.5.6 %0.8 %4.8 pts.
Income before income taxes, as reported$355 $68 $946 $155 
(a)Add: Breakage revenue adjustment— — 285 — 
Add: Litigation accruals13 — 13 19 
Add: Transformation costs— 7 — 33 
(c)Add: Severance and related costs30 — 45 62 
9


Add: Impairment of long-lived assets30 — 30 8 
Income before income taxes, excluding special items$428 $75 470.7$1,320 $277 376.5
Provision for income taxes, as reported$85 $14 $216 $37 
(d)Add: Net income tax impact of special items16 3 85 29 
Provision for income taxes, net, excluding special items$101 $17 494.1$301 $66 356.1
Net income, as reported$270 $54 $730 $118 
(a)Add: Breakage revenue adjustment— — 285 — 
Add: Litigation accruals13 — 13 19 
Add: Transformation costs— 7 — 33 
(c)Add: Severance and related costs30 — 45 62 
Add: Impairment of long-lived assets30 — 30 8 
(d)Deduct: Net income tax impact of special items(16)(3)(85)(29)
Net income, excluding special items$328 $58 465.5$1,019 $211 382.9
Total operating revenues, as reported$8,422 $6,949 $24,104 $20,621 
Net margin, as reported3.2 %0.8 %2.4 pts.3.0 %0.6 %2.4 pts.
Add: Impact of special items0.9 %0.1 %1.5 %0.6 %
(d)Deduct: Net income tax impact of special items(0.2)%— %(0.3)%(0.1)%
Net margin, excluding special items3.9 %0.8 %3.1 pts.4.2 %1.0 %3.2 pts.
Net income per share, diluted, as reported$0.55 $0.10 $1.47 $0.21 
Add: Impact of special items0.15 0.02 0.75 0.22 
(d)Deduct: Net income tax impact of special items(0.04)(0.01)(0.17)(0.05)
Net income per share, diluted, excluding special items$0.66 $0.11 500.0$2.05 $0.38 439.5
Operating revenues per ASM (cents), as reported18.55 ¢15.25 ¢17.92 ¢15.39 ¢
Add: Impact of special items— — 0.21 — 
Operating revenues per ASM, excluding special items (cents)18.55 ¢15.25 ¢21.618.13 ¢15.39 ¢17.8
Operating expenses per ASM (cents)17.72 ¢15.17 ¢17.18 ¢15.36 ¢
Deduct: Impact of special items(0.16)(0.02)(0.07)(0.09)
Deduct: Aircraft fuel and related taxes expense divided by ASMs(4.74)(2.92)(4.25)(2.91)
Deduct: Profit-sharing expense divided by ASMs(0.14)(0.02)(0.12)(0.02)
10


Operating expenses per ASM, excluding Aircraft fuel and related taxes expense, special items, and profit sharing (cents)12.68 ¢12.21 ¢3.812.74 ¢12.34 ¢3.2
(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.
(b) Includes amounts reclassified from Accumulated other comprehensive income associated with hedges previously terminated.
(c) Represents Employee severance and other related payments resulting from corporate workforce reductions.
(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.


11


Southwest Airlines Co.
Comparative Consolidated Operating Statistics
(unaudited)
Relevant comparative operating statistics for the three and nine months ended September 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 endedNine months ended
September 30,PercentSeptember 30,Percent
20262025Change20262025Change
Revenue passengers carried (000s)33,467 34,581 (3.2)96,973 100,078 (3.1)
Enplaned passengers (000s)43,310 43,806 (1.1)125,105 125,330 (0.2)
Revenue passenger miles (RPMs) (in millions) (a)36,214 36,362 (0.4)104,711 103,875 0.8
Available seat miles (ASMs) (in millions) (b)45,393 45,567 (0.4)134,535 133,994 0.4
Load factor (c)79.8 %79.8 %— pts.77.8 %77.5 %0.3 pts.
Average length of passenger haul (miles)1,082 1,051 2.91,080 1,038 4.0
Average aircraft stage length (miles)776 784 (1.0)779 781 (0.3)
Trips flown357,374 356,952 0.11,055,484 1,056,790 (0.1)
Seats flown (000s) (d)57,593 57,643 (0.1)169,631 170,145 (0.3)
Seats per trip (e)161.2 161.5 (0.2)160.7 161.0 (0.2)
Average passenger fare$231.69 $182.56 26.9$227.81 $187.36 21.6
Passenger revenue yield per RPM (cents) (f)21.41 17.36 23.321.10 18.05 16.9
RASM (cents) (g)18.55 15.25 21.617.92 15.39 16.4
RASM, excluding special items (cents)18.55 15.25 21.618.13 15.39 17.8
PRASM (cents) (h)17.08 13.85 23.316.42 13.99 17.4
CASM (cents) (i)17.72 15.17 16.817.18 15.36 11.8
CASM, excluding fuel (cents)
12.98 12.25 6.012.92 12.45 3.8
CASM, excluding special items (cents)17.56 15.16 15.817.11 15.27 12.0
CASM, excluding fuel and special items (cents)
12.82 12.24 4.712.86 12.36 4.0
CASM, excluding fuel, special items, and profit sharing (cents)
12.68 12.21 3.812.74 12.34 3.2
Fuel costs per gallon, including fuel tax (unhedged)$3.87 $2.33 66.1$3.50 $2.33 50.2
Fuel costs per gallon, including fuel tax$3.92 $2.40 63.3$3.56 $2.40 48.3
Fuel consumed, in gallons (millions)548 554 (1.1)1,607 1,624 (1.0)
Active fulltime equivalent Employees73,092 72,223 1.273,092 72,223 1.2
Aircraft at end of period803 802 0.1803 802 0.1
(a) A revenue passenger mile is one paying passenger flown one mile. Also referred to as "traffic," which is a measure of demand for a given period.
(b) An available seat mile is one seat (empty or full) flown one mile. Also referred to as "capacity," which is a measure of supply or the space available to carry passengers in a given period.
(c) Revenue passenger miles divided by available seat miles.
(d) Seats flown is calculated using total number of seats available by aircraft type multiplied by the total trips flown by the same aircraft type during a particular period.
(e) Seats per trip is calculated by dividing seats flown by trips flown.
(f) Calculated as passenger revenue divided by revenue passenger miles. Also referred to as "yield," this is the average cost paid by a paying passenger to fly one mile, which is a measure of revenue production and fares.
(g) RASM (unit revenue) - Operating revenue yield per ASM, calculated as operating revenue divided by available seat miles. Also referred to as "operating unit revenues," this is a measure of operating revenue production based on the total available seat miles flown during a particular period.
(h) PRASM (Passenger unit revenue) - Passenger revenue yield per ASM, calculated as passenger revenue divided by available seat miles. Also referred to as “passenger unit revenues,” this is a measure of passenger revenue production based on the total available seat miles flown during a particular period.
(i) CASM (unit costs) - Operating expenses per ASM, calculated as operating expenses divided by available seat miles. Also referred to as "unit costs" or "cost per available seat mile," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiency.


12


Southwest Airlines Co.
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)
September 30, 2026December 31, 2025
ASSETS
Current assets:
     Cash and cash equivalents$3,624 $3,231 
     Accounts and other receivables1,313 1,149 
     Inventories of parts and supplies, at cost997 775 
     Prepaid expenses and other current assets572 490 
          Total current assets6,506 5,645 
Property and equipment, at cost:
     Flight equipment26,144 26,293 
     Ground property and equipment9,686 9,163 
     Deposits on flight equipment purchase contracts723 401 
     Assets constructed for others88 88 
36,642 35,945 
     Less allowance for depreciation and amortization15,654 15,700 
20,988 20,245 
Goodwill970 970 
Operating lease right-of-use assets994 1,089 
Other assets1,081 1,112 
$30,539 $29,061 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable$1,847 $1,991 
     Accrued liabilities2,382 2,349 
     Current operating lease liabilities278 312 
     Air traffic liability7,078 5,945 
     Current maturities of long-term debt2,153 324 
          Total current liabilities13,738 10,921 
Long-term debt less current maturities3,734 4,577 
Air traffic liability - noncurrent1,199 1,219 
Deferred income taxes2,513 2,289 
Noncurrent operating lease liabilities706 768 
Other noncurrent liabilities1,320 1,306 
Stockholders' equity:
     Common stock888 888 
     Capital in excess of par value4,326 4,322 
     Retained earnings16,853 16,388 
     Accumulated other comprehensive income (loss)51 (24)
     Treasury stock, at cost(14,790)(13,593)
          Total stockholders' equity7,329 7,981 
$30,539 $29,061 

13


Southwest Airlines Co.
Condensed Consolidated Statement of Cash Flows
(in millions) (unaudited)
Three months ended September 30,Nine months ended September 30,
2026202520262025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$270 $54 $730 $118 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization398 394 1,198 1,189 
Impairment of long-lived assets30 — 30 8 
Deferred income taxes83 14 201 37 
Gain on sale of property and equipment
(96)(13)(272)(28)
Gain on sale-leaseback transactions(118)— (118)(3)
Changes in certain assets and liabilities:
Accounts and other receivables(95)(83)(151)64 
Other assets(41)3 (156)359 
Accounts payable and accrued liabilities41 11 (14)(209)
Air traffic liability92 (172)1,113 (117)
Other liabilities(86)16 (216)(19)
Cash collateral provided to derivative counterparties— — — (22)
Other, net33 63 115 170 
Net cash provided by operating activities513 287 2,460 1,547 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(1,006)(735)(2,454)(1,922)
Proceeds from sale of property and equipment285 57 735 108 
Proceeds from sale-leaseback transactions212 — 212 23 
Purchases of short-term investments— (100)— (470)
Proceeds from sales of short-term and other investments— 350 — 1,577 
Other, net— — (6)(3)
Net cash used in investing activities(509)(428)(1,513)(687)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt— — 1,500 — 
Proceeds from Employee stock plans14 14 46 46 
Repurchase of common stock— (250)(1,250)(2,500)
Payments of long-term debt and finance lease obligations(5)(6)(442)(2,603)
Payments of cash dividends(176)(189)(357)(399)
Other, net(4)(1)(51)(11)
Net cash used in financing activities(171)(432)(554)(5,467)
NET CHANGE IN CASH AND CASH EQUIVALENTS(167)(573)393 (4,607)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD3,791 3,475 3,231 7,509 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$3,624 $2,902 $3,624 $2,902 
14


NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES
The Company's unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP. These GAAP financial statements include (i) unrealized noncash reclassifications, as a result of accounting requirements and elections previously made under accounting pronouncements relating to derivative instruments and hedging and (ii) other charges and benefits the Company considers unusual and/or infrequent in nature and thus may make comparisons to its prior or future performance difficult.
Accordingly, the Company also provides financial information in this filing that was not prepared in accordance with GAAP and should not be considered as a substitute for the information prepared in accordance with GAAP. The Company provides supplemental non-GAAP financial information (also referred to as "excluding special items"). Management believes special items can distort the trends associated with the Company’s ongoing performance. Therefore, management utilizes non-GAAP financial measures to evaluate the Company’s financial performance, anticipate future operating results, and assess trends without the impact of items that can vary significantly from period to period. 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; Operating expenses, non-GAAP excluding Aircraft fuel and related taxes expense; Operating expenses, non-GAAP excluding Aircraft fuel and related taxes expense and profit sharing; 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; adjusted net margin; and gross leverage.

For the periods presented, special items include:

1.Charges associated with tentative and/or actual litigation settlements;
2.Expenses associated with professional advisory fees related to the Company's implementation of its comprehensive transformational plan;
3.Charges associated with Employee severance and other related payments resulting from corporate workforce reductions;
4.Reversal of breakage revenue recorded in prior years related to a portion of non-expiring flight credits issued to Customers that have either been redeemed or are expected to be redeemed in future periods;
5.Non-cash impairment charges to remove certain assets no longer in use that are not related to the direct operations of the Company from the unaudited Condensed Consolidated Balance Sheet;
6.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;
7.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; and
8.A credit received from the Department of Transportation ("DOT") regarding a settlement reached for the Company's December 2022 operational disruption in light of the Company significantly improving its on-time performance and completion factor through the Company's investment in its Network Operations Control.

The Company has also provided its calculation of return on invested capital, which is a measure of financial performance used by management to evaluate its investment returns on capital. Return on invested capital is not a substitute for financial results as reported in accordance with GAAP and should not be utilized in place of such GAAP results. 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 return on invested capital is a meaningful measure because it quantifies the Company's effectiveness in generating returns relative to the capital it has invested in its business. Although return on invested capital is commonly used as a measure of capital efficiency, definitions of return on invested capital differ; 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.
15


Southwest Airlines Co.
Non-GAAP Return on Invested Capital (ROIC)
(in millions)
(unaudited)
Twelve months endedTwelve months ended
September 30, 2026September 30, 2025
Operating income, as reported$1,384 $315 
Breakage revenue adjustment285 116 
Severance and related costs45 62 
Voluntary Employee programs— 5 
Net impact from fuel contracts— (25)
Professional advisory fees— 18 
Transformation costs— 37 
DOT settlement(11)— 
Litigation accruals13 19 
Impairments30 8 
Operating income, non-GAAP$1,747 $555 
Net adjustment for aircraft leases (a)214 201 
Adjusted operating income, non-GAAP (A)$1,961 $756 
Non-GAAP tax rate (B)22.7 %(d)22.4 %(e)
Net operating profit after-tax, NOPAT (A* (1-B) = C)$1,516 $587 
Debt, including finance leases (b)$5,244 $5,921 
Equity (b)7,409 9,181 
Net present value of aircraft operating leases (b)814 977 
Average invested capital $13,467 $16,079 
Equity adjustment for hedge accounting (c) (8)32 
Adjusted average invested capital (D)$13,459 $16,111 
Non-GAAP ROIC, pre-tax (A/D)14.6 %4.7 %
Non-GAAP ROIC, after-tax (C/D)11.3 %3.6 %
(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 prior period impact of these gains and/or losses is reflected in the Net impact from fuel contracts in the numerator.
(d) The GAAP twelve month rolling tax rate as of September 30, 2026, was 22.2 percent, and the Non-GAAP twelve month rolling tax rate was 22.7 percent. See Note Regarding Use of Non-GAAP Financial Measures for additional information.
(e) The GAAP twelve month rolling tax rate as of September 30, 2025, was 21.8 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.

16


The Company has also provided gross leverage, which is calculated as adjusted debt divided by trailing twelve month adjusted EBITDAR. Leverage, adjusted debt, and adjusted EBITDAR are non-GAAP measures of financial performance. Management believes these supplemental measures can provide a more accurate view of the Company's leverage and risk, since they consider the Company’s debt and debt-like obligation profile. Leverage ratios are widely used by investors, analysts, and rating agencies in the valuation, comparison, rating, and investment recommendations of companies. Although adjusted debt, adjusted EBITDAR, and leverage ratios are commonly-used financial measures, definitions of each differ; therefore, the Company is providing an explanation of its calculations for non-GAAP adjusted debt and adjusted EBITDAR in the accompanying reconciliation below in order to allow investors to compare and contrast its calculations to the calculations provided by other companies.

Southwest Airlines Co.
Non-GAAP Gross Leverage
(in millions) (unaudited)
September 30, 2026
Current maturities of long-term debt, as reported$2,153 
Long-term debt less current maturities, as reported3,734 
Total debt, including finance leases (A)5,887 
Add: Current operating lease liabilities, as reported278 
Add: Noncurrent operating lease liabilities, as reported706 
Adjusted debt (B)$6,871 
Twelve Months Ended
September 30, 2026
Net income, as reported (C)$1,053 
Interest expense (income), net of capitalized interest, as reported59 
Income tax expense (benefit), as reported300 
Non-operating other (gains) losses, net, as reported(28)
Operating income, as reported1,384 
Impact of special items363 
Operating income, non-GAAP1,747 
Depreciation and amortization1,569 
Fixed portion of operating lease expense345 
Adjusted EBITDAR (D)$3,661 
Total debt to Net income (A/C)5.6x
Adjusted debt to adjusted EBITDAR (B/D)1.9x
17

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