LUV 10-K report for 2025-12-31

LUV 10-K report for 2025-12-31 luv-20251231 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      For the fiscal year ended December 31 , 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File No. 1-7259 SOUTHWEST AIRLINES CO. (Exact name of registrant as specified in its charter) Texas 74-1563240 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) P.O. Box 36611 Dallas, Texas 75235-1611 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:   ( 214 ) 792-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Common Stock ($1.00 par value) LUV New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes x     No   o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes  o No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x    No   o Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes x     No   o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ 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. ¨ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  x If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.    Yes    ☐   No   x Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).   Yes    ☐   No  x Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes    ☐   No   x The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $ 16,890,396,912 computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, 2025, the last trading day of the registrant’s most recently completed second fiscal quarter. Number of shares of common stock outstanding as of the close of business on February 3, 2026: 491,317,990 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Definitive Proxy Statement for the Company’s Annual Meeting of Shareholders to be held May 07, 2026, are incorporated into Part III of this Annual Report on Form 10-K. TABLE OF CONTENTS PART I Item 1. Business 3 Item 1A. Risk Factors 27 Item 1B. Unresolved Staff Comments 46 Item 1C. Cybersecurity 46 Item 2. Properties 50 Item 3. Legal Proceedings 51 Item 4. Mine Safety Disclosures 57 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 60 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 63 Liquidity and Capital Resources 74 Critical Accounting Policies and Estimates 78 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 81 Item 8. Item 1A. Risk Factors 27 Item 1B. Unresolved Staff Comments 46 Item 1C. Cybersecurity 46 Item 2. Properties 50 Item 3. Legal Proceedings 51 Item 4. Mine Safety Disclosures 57 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 60 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 63 Liquidity and Capital Resources 74 Critical Accounting Policies and Estimates 78 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 81 Item 8. Financial Statements and Supplementary Data 84 Southwest Airlines Co. Consolidated Balance Sheet 84 Southwest Airlines Co. Consolidated Statement of Income 85 Southwest Airlines Co. Consolidated Statement of Comprehensive Income 86 Southwest Airlines Co. Consolidated Statement of Stockholders’ Equity 87 Southwest Airlines Co. Consolidated Statement of Cash Flows 88 Notes to Consolidated Financial Statements 89 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 137 Item 9A. Controls and Procedures 137 Item 9B. Other Information 138 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 138 PART III Item 10. Directors, Executive Officers, and Corporate Governance 139 Item 11. Executive Compensation 139 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 140 Item 13. Certain Relationships and Related Transactions, and Director Independence 140 Item 14. Principal Accounting Fees and Services 141 PART IV Item 15. Exhibits and Financial Statement Schedules 142 Item 16. Form 10-K Summary 147 Signatures 148 2 Table of Contents -PART I- Item 1. Business Company Overview Southwest Airlines Co. (the “Company” or “Southwest”) operates Southwest Airlines, a major passenger airline that provides scheduled air transportation in the United States and near-international markets. Southwest commenced service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio. Southwest’s unique route network, competitive fares, and famous Hospitality continue to make the Company an attractive choice for Customers in cities across the United States and near-international destinations. As of December 31, 2025, Southwest had a total of 803 Boeing 737 aircraft in its fleet and served 117 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. Company Initiatives As part of the Company's ongoing modernization efforts, the Company is executing several transformational initiatives designed to elevate the Customer Experience on its flights, improve financial performance, and drive Shareholder value, including: • Assigned and Extra Legroom Seating : On January 27, 2026, Southwest began operating assigned and extra legroom seating to better align with airline passenger preferences. Passengers can now choose between a standard seat, a preferred seat near the front of the cabin, or an extra legroom seat with additional pitch. • Redesigned Boarding Model : Southwest evolved its boarding process beginning January 27, 2026, by prioritizing Customers into boarding groups based on seat location, fare bundle, and loyalty program status, beginning with extra legroom seats in boarding groups 1 and 2 . • Global Airline Partnerships : In 2025, Southwest launched its first partnerships with international carriers to expand its network and connect Customers with more global destinations to generate additional demand for travel across the Southwest network. • Getaways by Southwest™ : Southwest launched a new in-house vacation product, Getaways by Southwest (“Getaways”), in August 2025 to offer customizable vacation packages that come with Customer-friendly policies including a generous cancellation policy and flexibility with no change fees. • 24-Hour Operations : In 2025, Southwest added 24-hour operation capabilities with the introduction of overnight (i.e., redeye) flights in key markets to maximize aircraft utilization. The Company intends to expand redeye flights to additional markets in 2026. • Marketing & Distribution Evolution : In order to attract new Customers and reach them where they are performing travel searches today, Southwest expanded into new channels such as Expedia, Priceline, Google Flights, Kayak, and Skyscanner to broaden its Customer base and begin to engage them in its loyalty program. Company Operations Route Structure Southwest primarily provides “point-to-point” service, rather than the “hub-and-spoke” service provided by most major U.S. airlines. A point-to-point system enables airlines to connect directly to destinations without providing connecting service . By contrast, the hub-and-spoke system concentrates most of an airline's operations at a limited number of central hub cities and serves most other destinations in the system by providing one-stop or connecting service through a hub. By not concentrating operations exclusively through one or more central transfer points, 3 Table of Contents Southwest's route structure has allowed for more direct nonstop routing than a traditional hub-and-spoke service. To provide greater connectivity and support operational reliability and recoverability, in recent years the Company has increasingly focused on designing its network around core stations. By blending intentional connectivity offered by hub-and-spoke models and point-to-point nonstops, the Company is able to capture nonstop demand and provide reliable one-stop itinerary options. Southwest’s unique route network has also enabled it to provide its markets with frequent, conveniently timed flights and competitive fares. For example, Southwest offers up to 12 weekday roundtrips between Dallas Love Field and Houston Hobby, 12 weekday roundtrips between Sacramento and San Diego, 12 weekday roundtrips between San Diego and San Jose, 12 weekday round trips between Las Vegas and San Diego, and 11 weekday roundtrips between Las Vegas and Sacramento. Southwest complements its high-frequency short-haul routes with mid-range and long-haul nonstop service, including flights between Hawaii and California, Las Vegas, and Phoenix, and between markets such as Las Vegas and Washington Reagan, Los Angeles and Nashville, New York LaGuardia and Houston, Los Angeles and Baltimore, Oakland and Houston, and San Diego and Baltimore. As the domestic travel market has matured and structural changes have reduced the demand for short-haul travel, the Company has increased its proportion of longer-haul flights. Further, the Company introduced 24-hour operation capabilities in 2025 with the commencement of redeye flights. Southwest now offers over 50 peak-day redeye flights during peak periods and includes flights across the continental United States and from Hawaii to the U.S. mainland, with plans to offer flights from Alaska to the U.S. mainland in 2026. The table below sets forth data regarding the Company's nonstop service, aircraft stage length, and trip duration over the last three years: Year ended December 31, 2025 2024 2023 Percentage of Customers flying nonstop 74% 74% 73% Nonstop city pairs 871 850 805 Average stage length (miles) 780 763 730 Average trip duration (hours) 2.1 2.0 2.0 The Company continually works to better optimize its route network and schedule through the adjustment of flights in its existing markets and the addition of new markets and itineraries, while also pruning less profitable flights from its schedule. During 2025, the Company focused on expanding its network, announcing service at five new locations beginning in 2026, including Cyril E. King International Airport in St. Thomas; McGhee Tyson Airport in Knoxville, Tennessee; Ted Stevens Anchorage Inte Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 63 Liquidity and Capital Resources 74 Critical Accounting Policies and Estimates 78 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 81 Item 8. Financial Statements and Supplementary Data 84 Southwest Airlines Co. Consolidated Balance Sheet 84 Southwest Airlines Co. Consolidated Statement of Income 85 Southwest Airlines Co. Consolidated Statement of Comprehensive Income 86 Southwest Airlines Co. Consolidated Statement of Stockholders’ Equity 87 Southwest Airlines Co. Consolidated Statement of Cash Flows 88 Notes to Consolidated Financial Statements 89 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 137 Item 9A. Controls and Procedures 137 Item 9B. Other Information 138 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 138 PART III Item 10. Directors, Executive Officers, and Corporate Governance 139 Item 11. Executive Compensation 139 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 140 Item 13. Certain Relationships and Related Transactions, and Director Independence 140 Item 14. Principal Accounting Fees and Services 141 PART IV Item 15. Exhibits and Financial Statement Schedules 142 Item 16. Form 10-K Summary 147 Signatures 148 2 Table of Contents -PART I- Item 1. Business Company Overview Southwest Airlines Co. (the “Company” or “Southwest”) operates Southwest Airlines, a major passenger airline that provides scheduled air transportation in the United States and near-international markets. Southwest commenced service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio. Southwest’s unique route network, competitive fares, and famous Hospitality continue to make the Company an attractive choice for Customers in cities across the United States and near-international destinations. As of December 31, 2025, Southwest had a total of 803 Boeing 737 aircraft in its fleet and served 117 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. Company Initiatives As part of the Company's ongoing modernization efforts, the Company is executing several transformational initiatives designed to elevate the Customer Experience on its flights, improve financial performance, and drive Shareholder value, including: • Assigned and Extra Legroom Seating : On January 27, 2026, Southwest began operating assigned and extra legroom seating to better align with airline passenger preferences. Passengers can now choose between a standard seat, a preferred seat near the front of the cabin, or an extra legroom seat with additional pitch. • Redesigned Boarding Model : Southwest evolved its boarding process beginning January 27, 2026, by prioritizing Customers into boarding groups based on seat location, fare bundle, and loyalty program status, beginning with extra legroom seats in boarding groups 1 and 2 . • Global Airline Partnerships : In 2025, Southwest launched its first partnerships with international carriers to expand its network and connect Customers with more global destinations to generate additional demand for travel across the Southwest network. • Getaways by Southwest™ : Southwest launched a new in-house vacation product, Getaways by Southwest (“Getaways”), in August 2025 to offer customizable vacation packages that come with Customer-friendly policies including a generous cancellation policy and flexibility with no change fees. • 24-Hour Operations : In 2025, Southwest added 24-hour operation capabilities with the introduction of overnight (i.e., redeye) flights in key markets to maximize aircraft utilization. The Company intends to expand redeye flights to additional markets in 2026. • Marketing & Distribution Evolution : In order to attract new Customers and reach them where they are performing travel searches today, Southwest expanded into new channels such as Expedia, Priceline, Google Flights, Kayak, and Skyscanner to broaden its Customer base and begin to engage them in its loyalty program. Company Operations Route Structure Southwest primarily provides “point-to-point” service, rather than the “hub-and-spoke” service provided by most major U.S. airlines. A point-to-point system enables airlines to connect directly to destinations without providing connecting service . By contrast, the hub-and-spoke system concentrates most of an airline's operations at a limited number of central hub cities and serves most other destinations in the system by providing one-stop or connecting service through a hub. By not concentrating operations exclusively through one or more central transfer points, 3 Table of Contents Southwest's route structure has allowed for more direct nonstop routing than a traditional hub-and-spoke service. To provide greater connectivity and support operational reliability and recoverability, in recent years the Company has increasingly focused on designing its network around core stations. By blending intentional connectivity offered by hub-and-spoke models and point-to-point nonstops, the Company is able to capture nonstop demand and provide reliable one-stop itinerary options. Southwest’s unique route network has also enabled it to provide its markets with frequent, conveniently timed flights and competitive fares. For example, Southwest offers up to 12 weekday roundtrips between Dallas Love Field and Houston Hobby, 12 weekday roundtrips between Sacramento and San Diego, 12 weekday roundtrips between San Diego and San Jose, 12 weekday round trips between Las Vegas and San Diego, and 11 weekday roundtrips between Las Vegas and Sacramento. Southwest complements its high-frequency short-haul routes with mid-range and long-haul nonstop service, including flights between Hawaii and California, Las Vegas, and Phoenix, and between markets such as Las Vegas and Washington Reagan, Los Angeles and Nashville, New York LaGuardia and Houston, Los Angeles and Baltimore, Oakland and Houston, and San Diego and Baltimore. As the domestic travel market has matured and structural changes have reduced the demand for short-haul travel, the Company has increased its proportion of longer-haul flights. Further, the Company introduced 24-hour operation capabilities in 2025 with the commencement of redeye flights. Southwest now offers over 50 peak-day redeye flights during peak periods and includes flights across the continental United States and from Hawaii to the U.S. mainland, with plans to offer flights from Alaska to the U.S. mainland in 2026. The table below sets forth data regarding the Company's nonstop service, aircraft stage length, and trip duration over the last three years: Year ended December 31, 2025 2024 2023 Percentage of Customers flying nonstop 74% 74% 73% Nonstop city pairs 871 850 805 Average stage length (miles) 780 763 730 Average trip duration (hours) 2.1 2.0 2.0 The Company continually works to better optimize its route network and schedule through the adjustment of flights in its existing markets and the addition of new markets and itineraries, while also pruning less profitable flights from its schedule. During 2025, the Company focused on expanding its network, announcing service at five new locations beginning in 2026, including Cyril E. King International Airport in St. Thomas; McGhee Tyson Airport in Knoxville, Tennessee; Ted Stevens Anchorage International Airport in Alaska; Charles M. Schulz Sonoma County Airport in Santa Rosa, California; and Princess Juliana International Airport in St. Maarten. Additionally, the Company launched partnerships with six international airlines to provide Customers access to more global destinations. The Company’s

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