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, Oct. 21, 2026 /PRNewswire/ -- 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.

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

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.

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-X^1,2 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
• 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

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 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.

Southwest Airlines Co.

Condensed Consolidated Statement of Income

(in millions, except per share amounts)

(unaudited)

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)

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. 

Southwest Airlines Co.

Condensed Consolidated Balance Sheet

(in millions)

(unaudited)

Southwest Airlines Co.

Condensed Consolidated Statement of Cash Flows

(in millions) (unaudited)

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.

Southwest Airlines Co.

Non-GAAP Return on Invested Capital (ROIC)

(in millions)

(unaudited)

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)

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SOURCE Southwest Airlines Co.