SOUTHWEST AIRLINES REPORTS THIRD QUARTER 2023 RESULTS

• Net income of $193 million, or $0.31 per diluted share
• Net income, excluding special items1, of $240 million, or $0.38 per diluted share
• Record third quarter operating revenues of $6.5 billion
• Liquidity2 of $12.7 billion, well in excess of debt outstanding of $8.0 billion

Bob Jordan, President and Chief Executive Officer, stated, "Overall, we are pleased with our accomplishments in third quarter 2023. We generated another quarter of profitability and record third quarter operating revenues. Revenue strength was driven by solid leisure demand throughout the quarter and by managed business continuing to perform largely as expected-as we continue to gain initiative-driven market share in the corporate travel space.

"We are proud to be flying our full fleet and completing the restoration of our network. As we move into 2024, we are slowing our ASM growth rate to absorb current capacity, mature development markets, and optimize schedules to current travel patterns. We are in the midst of planning for 2024 and are focused on operational excellence and driving out inefficiencies, increasing productivity, improving reliability, and returning our margins back to historical levels. And, this week, we secured a cost-effective order book with The Boeing Company ("Boeing") to continue the modernization of our fleet and provide plenty of flexibility to adjust our growth up or down to match the dynamic environment. We are also pleased that we reached a tentative agreement for our fantastic Flight Attendants.

"I am very optimistic about the outlook for Southwest Airlines. We have a legendary Culture, driven by our Warrior Spirit. We have a proven and durable business model which produces efficiency-driven cost advantages. We strive to maintain the best domestic network, with market leadership in large and fast-growing metro areas. We have the most friendly and flexible policies, an unmatched loyalty program, and a committed and engaged Customer base. All this, combined with our financial discipline, has allowed us to maintain an industry-leading fortress balance sheet during the most challenging period in aviation history.

"Without a doubt, our greatest strength is our superb Employees. They do an outstanding job day-in and day-out delivering value and Hospitality for our Customers. I would like to thank them for their relentless dedication and hard work."

Guidance and Outlook:

The following tables introduce or update selected financial guidance for fourth quarter and full year 2023, as applicable:

Revenue Results and Outlook:

• Third quarter 2023 operating revenues were a third quarter record $6.5 billion, a 4.9 percent increase, year-over-year
• Third quarter 2023 RASM decreased 6.8 percent, year-over-year-towards the lower end of the Company's previous guidance range due to lower-than-expected close-in bookings

The Company's third quarter 2023 revenue performance was a third quarter record due to strong leisure demand, particularly in July and during the Labor Day holiday, coupled with all-time record quarterly ancillary revenue and record third quarter loyalty program revenue. While the Company experienced lower-than-expected close-in bookings in both August and September, impacted by seasonal trends, overall demand remained stable throughout the quarter. Third quarter 2023 managed business revenues performed largely as expected, as the Company continued to gain business travel market share.

Thus far in fourth quarter 2023, overall demand for travel remains stable, including strong bookings to-date for the holiday travel periods. While leisure demand remains healthy, leisure trends appear to be returning to historically seasonal norms, and business trends continue to be stable. Based on current trends, the Company anticipates record fourth quarter operating revenue driven by record fourth quarter passengers.

The Company expects fourth quarter 2023 RASM to decline in the range of 9 percent to 11 percent, year-over-year. This decline includes an approximate one and one-half point offset from the December 2022 operational disruption. The expected RASM decline is driven by higher-than-seasonally-normal ASM growth in fourth quarter 2023 as the Company closes out the restoration of the network and normalizes the utilization of the fleet. Further, unit revenue pressure is also driven by higher-than-normal investment in development markets and schedules that are not ideally matched to current business travel trends. The Company is addressing these challenges in its 2024 network plan by adjusting capacity and further optimizing the network.

Fuel Costs and Outlook:

• Third quarter 2023 economic fuel costs were $2.78 per gallon1-towards the higher end of the Company's previous expectations as a result of higher-than-expected crude oil market prices and refinery margins-and included $0.05 per gallon in premium expense and $0.16 per gallon in favorable cash settlements from fuel derivative contracts
• Third quarter 2023 fuel efficiency improved 3.9 percent, year-over-year, primarily due to more -8 aircraft, the Company's most fuel-efficient aircraft, as a percentage of its fleet
• As of October 18, 2023, the fair market value of the Company's fuel derivative contracts settling in fourth quarter 2023 through the end of 2026 was an asset of $538 million

The Company's multi-year fuel hedging program continues to provide protection against spikes in energy prices.
The Company's current fuel derivative contracts contain a combination of instruments based on West Texas Intermediate and Brent crude oil, and refined products, such as heating oil. The economic fuel price per gallon sensitivities3
provided in the table below assume the relationship between Brent crude oil and refined products based on market prices as of
October 18, 2023.

In addition, the Company is providing its maximum percentage of estimated fuel consumption6
covered by fuel derivative contracts in the following table:

Non-Fuel Costs and Outlook:

• Third quarter 2023 operating expenses increased 10.0 percent, year-over-year, to $6.4 billion
• Third quarter 2023 operating expenses, excluding fuel and oil expense, special items, and profitsharing1, increased 17.3 percent, year-over-year
• Third quarter 2023 CASM-X increased 4.4 percent, year-over-year-in line with previous expectations
• Accrued $38 million of profitsharing expense in third quarter 2023 for the benefit of Employees

The Company's third quarter 2023 CASM-X came in as expected. The majority of the increase, year-over-year, was attributable to general inflationary cost pressures, in particular higher labor rates for all Employee workgroups, including market wage rate accruals, as well as the timing of planned maintenance expenses.

The Company's third quarter 2023 results included an approximate $96 million expense driven by an increase in the contract ratification bonus offered to Flight Attendants as part of the tentative agreement reached just this week with the Transport Workers Union 556 ("TWU 556"). The Company began accruing for all of its open labor contracts on April 1, 2022, and this incremental $96 million expense extends the timeframe covered by the ratification bonus to the date the Flight Attendant contract became amendable on November 1, 2018, to compensate for missed wage increases over that time period. Therefore, the $96 million change in estimate relates primarily to prior periods and was treated as a special item in the Company's third quarter 2023 Non-GAAP financial results.

Third quarter 2023 other expenses decreased $162 million, year-over-year. The decrease was primarily due to an $86 million increase in interest income driven by higher interest rates, coupled with a $23 million decrease in interest expense driven by various debt repurchases and repayments throughout 2022.

The Company expects fourth quarter 2023 CASM-X to decrease in the range of 16 percent to 19 percent, year-over-year, 15-points of which relates to elevated operating expenses and lower capacity levels in fourth quarter 2022 as a result of the December 2022 operational disruption. The guidance range is inclusive of higher labor rates and market wage rate accruals for all Employee workgroups, including wage rate increases associated with the recently announced tentative agreement with TWU 556.

In light of inflationary pressures, particularly labor rates, combined with moderated capacity growth, the Company is now expecting increased headwinds to 2024 year-over-year unit costs. Once the 2024 plan has been finalized, the Company will provide more specific guidance, including an updated estimate for its network optimization efforts and the continued maturation of its development markets, which the Company now expects to exceed $500 million in incremental year-over-year pre-tax profits.

Capacity, Fleet, and Capital Spending:

The Company's flight schedule is currently published for sale through August 4, 2024. In light of the new Boeing order book and the Company's continued diligence towards an effective 2024 plan, the Company has lowered its expected growth plans for first quarter and full year 2024 to better match current demand trends. The Company now expects first quarter 2024 capacity to increase in the range of 10 percent to 12 percent, year-over-year, compared with its previous guidance to increase in the range of 14 percent to 16 percent, year-over-year. This will result in a sequential decline in nominal ASMs, relative to fourth quarter 2023. The Company also expects full year 2024 capacity to increase in the range of 6 percent to 8 percent, year-over-year. The Company continues to plan for sequentially lower capacity growth, year-over-year, in each quarter of 2024, and anticipates achieving its target of mid-single-digit year-over-year ASM growth in the second half of 2024.

During third quarter 2023, the Company received 18 -8 aircraft and retired four -700 aircraft, ending third quarter with
817
aircraft. In light of the Company's new order book with Boeing, the Company now plans for approximately 85 -8 aircraft deliveries from Boeing in 2023, compared with its previous plan for approximately 70 -8 aircraft. Due to the increase in expected deliveries from Boeing, the Company now plans to accelerate additional -700 aircraft retirements in 2023, retiring a total of approximately 41 -700 aircraft in 2023, compared with its previous plan to retire 26 -700 aircraft. As a result of the currently planned aircraft deliveries and retirements, the Company continues to expect to end the year with 814 aircraft.

The Company's third quarter 2023 capital expenditures were $842
million, driven primarily by aircraft-related capital spending, as well as technology, facilities, and operational investments. The Company continues to estimate its 2023 capital spending to be roughly $3.5
billion, which includes approximately $2.3
billion in aircraft capital spending, assuming approximately 85 -8 aircraft deliveries in 2023, and $1.2
billion in non-aircraft capital spending,
including tens of millions in operational investments related to the Company's winter operations plan. The Company continues to estimate its total annual capital spending to be approximately $4 billion, on average, for the five years 2023 through 2027.

Earlier this week, the Company entered into a Supplemental Agreement with Boeing relating to its contractual order book for -7 and -8 aircraft. The Supplemental Agreement, which extends the order book to 2031, provides flexibility in support of the Company's growth plans and fleet modernization. The following tables provide further information regarding the Company's new contractual order book and compare its contractual order book as of October 26, 2023, with its previous order book as of July 27, 2023.

Liquidity and Capital Deployment:

• The Company ended third quarter 2023 with $11.7 billion in cash and short-term investments and a fully available revolving credit line of $1.0 billion
• The Company had a net cash position7 of $3.7 billion, and adjusted debt to invested capital ("leverage")8 of 45 percent as of September 30, 2023
• The Company has returned $428 million to its Shareholders through the payment of dividends year-to-date as of September 30, 2023
• The Company paid $11 million during third quarter 2023 to retire debt and finance lease obligations, including the retirement of $3 million in principal related to lease buyout transactions and $8 million in scheduled lease payments

Awards and Recognitions:

• Named Best Airline for Families on Money's 2023 Travel Awards list
• Recognized in WalletHub's Best Airline Credit Cards of 2023
• Named a Best Place to Work for Disability Inclusion after achieving a top score on Disability:IN's 2023 Disability Equality Index
• Recognized in D CEO Magazine 2023 Nonprofit & Corporate Citizenship Awards in the Sustainability Leadership category

Environmental, Social, and Governance ("ESG"):

• Launched new tool enabling eligible corporate Customers to support the growth of sustainable aviation fuel through Southwest Business AssistTM
• Announced collaboration with Boeing, the National Aeronautics and Space Administration ("NASA"), and other U.S. airlines to advise the Sustainable Flight Demonstrator ("SFD") project and development of the X-66A research aircraft
• Celebrated the contributions and influence of Hispanic Americans in recognition of Hispanic Heritage Month throughout September 2023
• Updated Human Rights Policy Statement and Combating Trafficking in Persons Compliance Plan to reiterate commitment to Human Rights
• Visit southwest/citizenship for more details about the Company's ongoing ESG efforts

Conference Call:
The Company will discuss its third quarter 2023 results on a conference call at 12:30 p.m. Eastern Time today. To listen to a live broadcast of the conference call, please go to
.

Footnotes

1See Note Regarding Use of Non-GAAP Financial Measures for additional information on special items. In addition, information regarding special items and economic results is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Measures (also referred to as "excluding special items").
2Includes $11.7 billion in cash and cash equivalents, short-term investments, and a fully available revolving credit line of $1.0 billion.
3Based on the Company's existing fuel derivative contracts and market prices as of October 18, 2023, fourth quarter and full year 2023 economic fuel costs per gallon are estimated to be in the range of $2.90 to $3.00 and $2.85 to $2.95, respectively. Economic fuel cost projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate the hedge accounting impact associated with the volatility of the energy markets, or the impact to its financial statements in future periods. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for projected results is not meaningful or available without unreasonable effort. See Note Regarding Use of Non-GAAP Financial Measures.
4Projections do not reflect the potential impact of fuel and oil expense, special items, and profitsharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, especially considering the significant volatility of the fuel and oil expense line item. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.
52023 CASM-X guidance excludes the impact of approximately $84 million related to labor accrual adjustments in second quarter 2023 that related primarily to prior periods. The Company has treated this amount, and the approximately $96 million labor accrual adjustment in third quarter 2023, as special items in its year-to-date 2023 Non-GAAP financial results. See the 'Reconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding special items)' for further information.
6The Company's maximum fuel hedged percentage is calculated using the maximum number of gallons that are covered by derivative contracts divided by the Company's estimate of total fuel gallons to be consumed for each respective period. The Company's maximum number of gallons that are covered by derivative contracts may be at different strike prices and at strike prices materially higher than the current market prices. The volume of gallons covered by derivative contracts that ultimately get exercised in any given period may vary significantly from the volumes used to calculate the Company's maximum fuel hedged percentages, as market prices and the Company's fuel consumption fluctuate.
7Net cash position is calculated as the sum of cash and cash equivalents and short-term investments, less the sum of short-term and long-term debt.
8See Note Regarding Use of Non-GAAP Financial Measures for an explanation of the Company's leverage calculation.

Cautionary Statement Regarding Forward-Looking Statements

This news 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 expectations regarding passenger demand, revenue trends, and bookings, including with respect to managed business revenues and market share; (ii) the Company's plans and expectations with respect to restoration of its network, its capacity, its network optimization efforts, its 2024 network plan and capacity and network adjustments, and the maturation of its development markets, and including factors and assumptions underlying the Company's expectations and projections; (iii) the Company's goals with respect to operational excellence, driving out inefficiencies, increasing productivity, improving reliability, and returning margins to historical levels; (iv) the Company's fleet plans and expectations, including with respect to fleet modernization, fleet utilization, flexibility benefits, and expected fleet deliveries and retirements, and including factors and assumptions underlying the Company's plans and expectations; (v) the Company's financial and operational outlook, expectations, goals, plans, and projected results of operations, including with respect to its network optimization efforts and the maturation of development markets, and including factors and assumptions underlying the Company's expectations and projections; (vi) the Company's expectations with respect to fuel costs, hedging gains, and fuel efficiency, and the Company's related management of risks associated with changing jet fuel prices, including factors underlying the Company's expectations; (vii) the Company's plans, estimates, and assumptions related to repayment of debt obligations, interest expense, effective tax rate, and capital spending, including factors and assumptions underlying the Company's expectations and projections; (viii) the Company's labor plans and expectations; and (ix) the Company's plans, expectations, and goals with respect to environmental sustainability. 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 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), consumer perception, economic conditions, banking 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, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives; (iii) the emergence of additional costs or effects associated with the cancelled flights in December 2022, including litigation, government investigation and actions, and internal actions; (iv) the Company's dependence on its workforce, including its ability to employ and retain sufficient numbers of qualified Employees to effectively and efficiently maintain its operations; (v) the Company's ability to obtain and maintain adequate infrastructure and equipment to support its operations and initiatives; (vi) the impact of fuel price changes, fuel price volatility, volatility of commodities used by the Company for hedging jet fuel, and any changes to the Company's fuel hedging strategies and positions, on the Company's business plans and results of operations; (vii) the Company's dependence on Boeing and Boeing suppliers with respect to the Company's aircraft deliveries, fleet and capacity plans, operations, maintenance, strategies, and goals; (viii) the Company's dependence on Boeing and the Federal Aviation Administration with respect to the certification of the Boeing MAX 7 aircraft; (ix) the Company's dependence on other third parties, in particular with respect to its technology plans, its plans and expectations related to operational excellence and reliability, fuel supply, maintenance, environmental sustainability; Global Distribution Systems, and the impact on the Company's operations and results of operations of any third party delays or non-performance; (x) the Company's ability to timely and effectively prioritize its initiatives and focus areas and related expenditures; (xi) the impact of labor matters on the Company's business decisions, plans, strategies, and results; (xii) the impact of governmental regulations and other governmental actions on the Company's business plans, results, and operations; and (xiii) other factors, as described in the Company's filings with the 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, 2022.