þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended September 30, 2012
|
|
or
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from ________ to ________
|
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)
|
Large accelerated filer
þ
|
Accelerated filer
¨
|
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
¨
|
|
Number of shares of Common Stock outstanding as of the close of business on October 24, 2012: 737,979,436
|
September 30, 2012
|
December 31, 2011
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 1,168 | $ | 829 | ||||
Short-term investments
|
2,067 | 2,315 | ||||||
Accounts and other receivables
|
430 | 299 | ||||||
Inventories of parts and supplies, at cost
|
544 | 401 | ||||||
Deferred income taxes
|
219 | 263 | ||||||
Prepaid expenses and other current assets
|
224 | 238 | ||||||
Total current assets
|
4,652 | 4,345 | ||||||
Property and equipment, at cost:
|
||||||||
Flight equipment
|
16,177 | 15,542 | ||||||
Ground property and equipment
|
2,671 | 2,423 | ||||||
Deposits on flight equipment purchase contracts
|
446 | 456 | ||||||
19,294 | 18,421 | |||||||
Less allowance for depreciation and amortization
|
6,722 | 6,294 | ||||||
12,572 | 12,127 | |||||||
Goodwill
|
970 | 970 | ||||||
Other assets
|
619 | 626 | ||||||
$ | 18,813 | $ | 18,068 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 1,140 | $ | 1,057 | ||||
Accrued liabilities
|
1,040 | 996 | ||||||
Air traffic liability
|
2,524 | 1,836 | ||||||
Current maturities of long-term debt
|
265 | 644 | ||||||
Total current liabilities
|
4,969 | 4,533 | ||||||
Long-term debt less current maturities
|
2,961 | 3,107 | ||||||
Deferred income taxes
|
2,701 | 2,566 | ||||||
Deferred gains from sale and leaseback of aircraft
|
66 | 75 | ||||||
Other noncurrent liabilities
|
1,114 | 910 | ||||||
Stockholders' equity:
|
||||||||
Common stock
|
808 | 808 | ||||||
Capital in excess of par value
|
1,228 | 1,222 | ||||||
Retained earnings
|
5,700 | 5,395 | ||||||
Accumulated other comprehensive loss
|
(125 | ) | (224 | ) | ||||
Treasury stock, at cost
|
(609 | ) | (324 | ) | ||||
Total stockholders' equity
|
7,002 | 6,877 | ||||||
$ | 18,813 | $ | 18,068 | |||||
See accompanying notes.
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
Net income (loss)
|
$ | 16 | $ | (140 | ) | $ | 343 | $ | 26 | |||||||
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
|
||||||||||||||||
Depreciation and amortization
|
217 | 191 | 620 | 523 | ||||||||||||
Unrealized (gain) loss on fuel derivative instruments
|
(16 | ) | 393 | (154 | ) | 274 | ||||||||||
Deferred income taxes
|
82 | (90 | ) | 120 | 33 | |||||||||||
Amortization of deferred gains on sale and leaseback of aircraft
|
(3 | ) | (3 | ) | (9 | ) | (10 | ) | ||||||||
Changes in certain assets and liabilities:
|
||||||||||||||||
Accounts and other receivables
|
(2 | ) | 11 | (107 | ) | (96 | ) | |||||||||
Other assets
|
(74 | ) | (42 | ) | (164 | ) | (180 | ) | ||||||||
Accounts payable and accrued liabilities
|
(187 | ) | (39 | ) | 114 | 266 | ||||||||||
Air traffic liability
|
(5 | ) | (92 | ) | 688 | 485 | ||||||||||
Cash collateral received from (provided to) derivative counterparties
|
252 | (409 | ) | 218 | (429 | ) | ||||||||||
Other, net
|
184 | 2 | 164 | 93 | ||||||||||||
Net cash provided by (used in) operating activities
|
464 | (218 | ) | 1,833 | 985 | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
Payment to acquire AirTran, net of AirTran cash on hand
|
- | - | - | (35 | ) | |||||||||||
Payments for purchase of property and equipment, net
|
(406 | ) | (276 | ) | (949 | ) | (548 | ) | ||||||||
Purchases of short-term investments
|
(663 | ) | (1,525 | ) | (1,918 | ) | (4,788 | ) | ||||||||
Proceeds from sales of short-term investments
|
775 | 1,664 | 2,192 | 4,414 | ||||||||||||
Other, net
|
17 | - | 31 | - | ||||||||||||
Net cash used in investing activities
|
(277 | ) | (137 | ) | (644 | ) | (957 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
Proceeds from Employee stock plans
|
5 | 4 | 22 | 35 | ||||||||||||
Proceeds from termination of interest rate derivative instrument
|
- | - | - | 76 | ||||||||||||
Payments of long-term debt and capital lease obligations
|
(48 | ) | (48 | ) | (517 | ) | (110 | ) | ||||||||
Payments of convertible debt obligations
|
- | - | - | (81 | ) | |||||||||||
Payments of cash dividends
|
(7 | ) | (3 | ) | (22 | ) | (14 | ) | ||||||||
Repurchase of common stock
|
(50 | ) | (175 | ) | (325 | ) | (175 | ) | ||||||||
Other, net
|
(2 | ) | (2 | ) | (8 | ) | (4 | ) | ||||||||
Net cash used in financing activities
|
(102 | ) | (224 | ) | (850 | ) | (273 | ) | ||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
85 | (579 | ) | 339 | (245 | ) | ||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,083 | 1,595 | 829 | 1,261 | ||||||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 1,168 | $ | 1,016 | $ | 1,168 | $ | 1,016 |
CASH PAYMENTS FOR:
|
||||||||||||||||
Interest, net of amount capitalized
|
$ | 39 | $ | 48 | $ | 119 | $ | 130 | ||||||||
Income taxes
|
$ | 2 | $ | - | $ | 97 | $ | 5 | ||||||||
See accompanying notes.
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
NUMERATOR:
|
||||||||||||||||
Net income (loss)
|
$ | 16 | $ | (140 | ) | $ | 343 | $ | 26 | |||||||
Incremental income effect of
|
||||||||||||||||
interest on 5.25% convertible notes
|
- | - | 2 | - | ||||||||||||
Net income (loss) after assumed conversion
|
$ | 16 | $ | (140 | ) | $ | 345 | $ | 26 | |||||||
DENOMINATOR:
|
||||||||||||||||
Weighted-average shares
|
||||||||||||||||
outstanding, basic
|
739 | 792 | 756 | 773 | ||||||||||||
Dilutive effect of Employee stock options
|
||||||||||||||||
and restricted stock units
|
1 | - | - | 1 | ||||||||||||
Dilutive effect of 5.25% convertible notes
|
- | - | 6 | - | ||||||||||||
Adjusted weighted-average shares
|
||||||||||||||||
outstanding, diluted
|
740 | 792 | 762 | 774 | ||||||||||||
NET INCOME (LOSS) PER SHARE:
|
||||||||||||||||
Basic
|
$ | .02 | $ | (.18 | ) | $ | .45 | $ | .03 | |||||||
Diluted
|
$ | .02 | $ | (.18 | ) | $ | .45 | $ | .03 | |||||||
Potentially dilutive amounts
|
||||||||||||||||
excluded from calculations:
|
||||||||||||||||
Stock options and restricted stock units
|
32 | 48 | 40 | 48 | ||||||||||||
5.25% convertible notes
|
6 | 6 | - | 6 |
Asset derivatives
|
Liability derivatives
|
||||||||||||
Balance Sheet
|
Fair value at
|
Fair value at
|
Fair value at
|
Fair value at
|
|||||||||
(in millions)
|
location
|
09/30/12
|
12/31/11
|
09/30/12
|
12/31/11
|
||||||||
Derivatives designated as hedges*
|
|||||||||||||
Fuel derivative contracts (gross)
|
Other current assets
|
$
|
27
|
$
|
17
|
$
|
-
|
$
|
-
|
||||
Fuel derivative contracts (gross)
|
Other assets
|
296
|
542
|
20
|
107
|
||||||||
Fuel derivative contracts (gross)
|
Accrued liabilities
|
21
|
97
|
2
|
8
|
||||||||
Fuel derivative contracts (gross)
|
Other noncurrent liabilities
|
-
|
93
|
-
|
24
|
||||||||
Interest rate derivative contracts
|
Other assets
|
71
|
64
|
-
|
-
|
||||||||
Interest rate derivative contracts
|
Accrued liabilities
|
-
|
2
|
-
|
-
|
||||||||
Interest rate derivative contracts
|
Other noncurrent liabilities
|
-
|
-
|
132
|
132
|
||||||||
Total derivatives designated as hedges
|
$
|
415
|
$
|
815
|
$
|
154
|
$
|
271
|
|||||
Derivatives not designated as hedges*
|
|||||||||||||
Fuel derivative contracts (gross)
|
Other current assets
|
$
|
255
|
$
|
124
|
$
|
215
|
$
|
58
|
||||
Fuel derivative contracts (gross)
|
Other assets
|
405
|
26
|
513
|
272
|
||||||||
Fuel derivative contracts (gross)
|
Accrued liabilities
|
158
|
326
|
279
|
687
|
||||||||
Fuel derivative contracts (gross)
|
Other noncurrent liabilities
|
-
|
9
|
-
|
122
|
||||||||
Total derivatives not designated as hedges
|
$
|
818
|
$
|
485
|
$
|
1,007
|
$
|
1,139
|
|||||
Total derivatives
|
$
|
1,233
|
$
|
1,300
|
$
|
1,161
|
$
|
1,410
|
|||||
* Represents the position of each trade before consideration of offsetting positions with each counterparty and does not include the impact of cash collateral deposits provided to or received from counterparties. See discussion of credit risk and collateral following in this Note.
|
Balance Sheet
|
September 30,
|
December 31,
|
|||||||
(in millions)
|
location
|
2012
|
2011
|
||||||
Cash collateral deposits provided
|
Offset against Other
|
||||||||
to counterparties - noncurrent
|
noncurrent liabilities
|
$
|
-
|
$
|
41
|
||||
Cash collateral deposits provided
|
Offset against Accrued
|
||||||||
to counterparties - current
|
liabilities
|
13
|
185
|
||||||
Due to third parties for fuel contracts
|
Accrued liabilities
|
8
|
21
|
||||||
Receivable from third parties for
|
Accounts and other
|
||||||||
fuel contracts - current
|
receivables
|
-
|
3
|
||||||
Receivable from third parties for
|
|||||||||
fuel contracts - noncurrent
|
Other assets
|
54
|
-
|
Three months ended September 30,
|
||||||||
(in millions)
|
2012
|
2011
|
||||||
NET INCOME (LOSS)
|
$ | 16 | $ | (140 | ) | |||
Unrealized gain (loss) on fuel derivative instruments, net of
|
||||||||
deferred taxes of $120 and ($233)
|
192 | (372 | ) | |||||
Unrealized loss on interest rate derivative instruments, net of
|
||||||||
deferred taxes of ($2) and ($19)
|
(3 | ) | (30 | ) | ||||
Other, net of deferred taxes of $3 and ($3)
|
6 | (4 | ) | |||||
Total other comprehensive income (loss)
|
$ | 195 | $ | (406 | ) | |||
COMPREHENSIVE INCOME (LOSS)
|
$ | 211 | $ | (546 | ) | |||
Nine months ended September 30,
|
||||||||
(in millions)
|
2012
|
2011
|
||||||
NET INCOME
|
$ | 343 | $ | 26 | ||||
Unrealized gain (loss) on fuel derivative instruments, net of
|
||||||||
deferred taxes of $63 and ($137)
|
100 | (219 | ) | |||||
Unrealized loss on interest rate derivative instruments, net of
|
||||||||
deferred taxes of ($3) and ($22)
|
(5 | ) | (34 | ) | ||||
Other, net of deferred taxes of $2 and $1
|
4 | 2 | ||||||
Total other comprehensive income (loss)
|
$ | 99 | $ | (251 | ) | |||
COMPREHENSIVE INCOME (LOSS)
|
$ | 442 | $ | (225 | ) | |||
Accumulated other
|
|||||||||||||
Fuel
|
Interest rate
|
comprehensive
|
|||||||||||
(in millions)
|
derivatives
|
derivatives
|
Other
|
income (loss)
|
|||||||||
Balance at June 30, 2012
|
$
|
(275)
|
$
|
(68)
|
$
|
23
|
$
|
(320)
|
|||||
Changes in fair value
|
167
|
(3)
|
6
|
170
|
|||||||||
Reclassification to earnings
|
25
|
-
|
-
|
25
|
|||||||||
Balance at September 30, 2012
|
$
|
(83)
|
$
|
(71)
|
$
|
29
|
$
|
(125)
|
Accumulated other
|
|||||||||||||
Fuel
|
Interest rate
|
comprehensive
|
|||||||||||
(in millions)
|
derivatives
|
derivatives
|
Other
|
income (loss)
|
|||||||||
Balance at December 31, 2011
|
$
|
(183)
|
$
|
(66)
|
$
|
25
|
$
|
(224)
|
|||||
Changes in fair value
|
24
|
(5)
|
4
|
23
|
|||||||||
Reclassification to earnings
|
76
|
-
|
-
|
76
|
|||||||||
Balance at September 30, 2012
|
$
|
(83)
|
$
|
(71)
|
$
|
29
|
$
|
(125)
|
September 30,
|
December 31,
|
|||||||
(in millions)
|
2012
|
2011
|
||||||
Derivative contracts
|
$ | 294 | $ | 253 | ||||
Intangible assets
|
144 | 155 | ||||||
Non-current investments
|
42 | 97 | ||||||
Other
|
139 | 121 | ||||||
Other assets
|
$ | 619 | $ | 626 |
September 30,
|
December 31,
|
|||||||
(in millions)
|
2012
|
2011
|
||||||
Retirement plans
|
$ | 114 | $ | 110 | ||||
Aircraft rentals
|
105 | 57 | ||||||
Vacation pay
|
263 | 248 | ||||||
Health
|
60 | 56 | ||||||
Derivative contracts
|
90 | 85 | ||||||
Workers compensation
|
155 | 162 | ||||||
Accrued taxes
|
61 | 68 | ||||||
Other
|
192 | 210 | ||||||
Accrued liabilities
|
$ | 1,040 | $ | 996 | ||||
September 30,
|
December 31,
|
|||||||
(in millions)
|
2012
|
2011
|
||||||
Postretirement obligation
|
$ | 116 | $ | 107 | ||||
Non-current lease-related obligations
|
419 | 311 | ||||||
Airport construction obligation
|
304 | 202 | ||||||
Other
|
275 | 290 | ||||||
Other non-current liabilities
|
$ | 1,114 | $ | 910 | ||||
Fair value measurements at reporting date using:
|
|||||||||||||
Quoted prices in
|
Significant
|
Significant
|
|||||||||||
active markets
|
other observable
|
unobservable
|
|||||||||||
for identical assets
|
inputs
|
inputs
|
|||||||||||
Description
|
December 31, 2011
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||
Assets
|
(in millions)
|
||||||||||||
Cash equivalents
|
|||||||||||||
Cash equivalents (a)
|
$
|
774
|
$
|
774
|
$
|
-
|
$
|
-
|
|||||
Commercial paper
|
48
|
-
|
48
|
-
|
|||||||||
Certificates of deposit
|
7
|
-
|
7
|
-
|
|||||||||
Short-term investments:
|
|||||||||||||
Treasury bills
|
2,014
|
2,014
|
-
|
-
|
|||||||||
Certificates of deposit
|
221
|
-
|
221
|
-
|
|||||||||
Commercial paper
|
80
|
-
|
80
|
-
|
|||||||||
Noncurrent investments (b)
|
|||||||||||||
Auction rate securities
|
67
|
-
|
-
|
67
|
|||||||||
Certificates of deposit
|
25
|
-
|
25
|
-
|
|||||||||
Interest rate derivatives (see Note 5)
|
66
|
-
|
66
|
-
|
|||||||||
Fuel derivatives:
|
|||||||||||||
Option contracts (c)
|
709
|
-
|
-
|
709
|
|||||||||
Swap contracts (d)
|
180
|
-
|
180
|
-
|
|||||||||
Option contracts (d)
|
345
|
-
|
-
|
345
|
|||||||||
Other available-for-sale securities
|
43
|
38
|
-
|
5
|
|||||||||
Total assets
|
$
|
4,579
|
$
|
2,826
|
$
|
627
|
$
|
1,126
|
|||||
Liabilities
|
|||||||||||||
Fuel derivatives:
|
|||||||||||||
Swap contracts (c)
|
$
|
(65)
|
$
|
-
|
$
|
(65)
|
$
|
-
|
|||||
Option contracts (c)
|
(371)
|
-
|
-
|
(371)
|
|||||||||
Swap contracts (d)
|
(576)
|
-
|
(576)
|
-
|
|||||||||
Option contracts (d)
|
(266)
|
-
|
-
|
(266)
|
|||||||||
Interest rate derivatives (see Note 5)
|
(132)
|
-
|
(132)
|
-
|
|||||||||
Deferred Compensation
|
(121)
|
(121)
|
-
|
-
|
|||||||||
Total liabilities
|
$
|
(1,531)
|
$
|
(121)
|
$
|
(773)
|
$
|
(637)
|
|||||
(a) Cash equivalents are primarily composed of money market investments.
|
|||||||||||||
(b) Noncurrent investments are included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
|
|||||||||||||
(c) In the unaudited Condensed Consolidated Balance Sheet, amounts are presented as a net asset, and are also net of cash collateral received from counterparties. See Note 5.
|
|||||||||||||
(d) In the unaudited Condensed Consolidated Balance Sheet, amounts are presented as a net liability, and are also net of cash collateral provided to counterparties. See Note 5.
|
Fair value measurements using significant
|
||||||||||||
unobservable inputs (Level 3)
|
||||||||||||
Fuel
|
Auction rate
|
Other
|
||||||||||
(in millions)
|
derivatives
|
securities
|
securities
|
Total
|
||||||||
Balance at June 30, 2012
|
$
|
64
|
$
|
54
|
$
|
5
|
$
|
123
|
||||
Total gains (realized or unrealized)
|
||||||||||||
Included in earnings
|
(11)
|
-
|
-
|
(11)
|
||||||||
Included in other comprehensive income
|
259
|
6
|
-
|
265
|
||||||||
Purchases
|
79
|
-
|
-
|
79
|
||||||||
Sales
|
(121)
|
(23)
|
-
|
(144)
|
||||||||
Settlements
|
(46)
|
-
|
-
|
(46)
|
||||||||
Balance at September 30, 2012
|
$
|
224
|
$
|
37
|
(a)
|
$
|
5
|
$
|
266
|
|||
The amount of total losses for the
|
||||||||||||
period included in earnings attributable to the
|
||||||||||||
change in unrealized gains or losses relating to
|
||||||||||||
assets still held at September 30, 2012
|
$
|
(17)
|
$
|
-
|
$
|
-
|
$
|
(17)
|
||||
(a) Included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
|
Carrying
|
Estimated fair
|
Fair value level
|
|||||||
(
in millions
)
|
value
|
value
|
hierarchy
|
||||||
French Credit Agreements due 2012 - 1.23%
|
$
|
3
|
$
|
3
|
Level 3
|
||||
5.25% Notes due 2014
|
368
|
384
|
Level 2
|
||||||
5.75% Notes due 2016
|
333
|
369
|
Level 2
|
||||||
5.25% Convertible Senior Notes due 2016
|
117
|
119
|
Level 2
|
||||||
5.125% Notes due 2017
|
331
|
364
|
Level 2
|
||||||
Fixed-rate 717 Aircraft Notes payable through 2017 - 10.39%
|
64
|
62
|
Level 2
|
||||||
French Credit Agreements due 2018 - 1.43%
|
61
|
61
|
Level 3
|
||||||
Fixed-rate 737 Aircraft Notes payable through 2018 - 7.02%
|
37
|
39
|
Level 3
|
||||||
Term Loan Agreement due 2019 - 6.315%
|
248
|
248
|
Level 3
|
||||||
Term Loan Agreement due 2019 - 6.84%
|
95
|
101
|
Level 3
|
||||||
Term Loan Agreement due 2020 - 5.223%
|
460
|
411
|
Level 3
|
||||||
Floating-rate 737 Aircraft Notes payable through 2020 - 3.97%
|
562
|
537
|
Level 3
|
||||||
Pass Through Certificates due 2022 - 6.24%
|
394
|
444
|
Level 2
|
||||||
7.375% Debentures due 2027
|
138
|
151
|
Level 2
|
Three months ended September 30,
|
||||||||||||
2012
|
2011
|
Change
|
||||||||||
Revenue passengers carried
|
28,318,779
|
28,208,036
|
0.4
|
%
|
||||||||
Enplaned passengers
|
34,913,698
|
35,010,060
|
(0.3)
|
%
|
||||||||
Revenue passenger miles (RPMs) (000s)
(1)
|
27,162,606
|
27,322,289
|
(0.6)
|
%
|
||||||||
Available seat miles (ASMs) (000s)
(2)
|
33,080,807
|
33,318,089
|
(0.7)
|
%
|
||||||||
Load factor
(3)
|
82.1
|
%
|
82.0
|
%
|
0.1
|
pts
|
||||||
Average length of passenger haul (miles)
|
959
|
969
|
(1.0)
|
%
|
||||||||
Average aircraft stage length (miles)
|
697
|
690
|
1.0
|
%
|
||||||||
Trips flown
|
347,346
|
359,630
|
(3.4)
|
%
|
||||||||
Average passenger fare
|
$
|
142.86
|
$
|
143.03
|
(0.1)
|
%
|
||||||
Passenger revenue yield per RPM (cents)
(4)
|
14.89
|
14.77
|
0.8
|
%
|
||||||||
Operating revenue per ASM (cents)
(5)
|
13.02
|
12.94
|
0.6
|
%
|
||||||||
Passenger revenue per ASM (cents)
(6)
|
12.23
|
12.11
|
1.0
|
%
|
||||||||
Operating expenses per ASM (cents)
(7)
|
12.87
|
12.26
|
5.0
|
%
|
||||||||
Operating expenses per ASM, excluding fuel (cents)
|
8.25
|
7.50
|
10.0
|
%
|
||||||||
Operating expenses per ASM, excluding fuel and profitsharing (cents)
|
8.16
|
7.39
|
10.4
|
%
|
||||||||
Fuel costs per gallon, including fuel tax
|
$
|
3.19
|
$
|
3.23
|
(1.2)
|
%
|
||||||
Fuel costs per gallon, including fuel tax, economic
|
$
|
3.16
|
$
|
3.18
|
(0.6)
|
%
|
||||||
Fuel consumed, in gallons (millions)
|
478
|
490
|
(2.4)
|
%
|
||||||||
Active fulltime equivalent Employees
|
46,048
|
45,112
|
2.1
|
%
|
||||||||
Aircraft in service at period-end
(8)
|
692
|
699
|
(1.0)
|
%
|
||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||||||||||
(in millions, except per share amounts)
|
September 30,
|
September 30,
|
||||||||||||||||||||||
GAAP
|
2012
|
2011
|
Percent Change
|
2012
|
2011
|
Percent Change
|
||||||||||||||||||
Net income
|
$ | 16 | $ | (140 | ) |
n.a
|
$ | 343 | $ | 26 |
n.a.
|
|||||||||||||
Net income per share, diluted
|
0.02 | (0.18 | ) |
n.a
|
0.45 | 0.03 |
n.a.
|
|||||||||||||||||
Operating income
|
51 | 225 | (77.3 | ) | 532 | 546 | (2.6 | ) | ||||||||||||||||
Non-GAAP
|
||||||||||||||||||||||||
Net income
|
$ | 97 | $ | 122 | (20.5 | ) | $ | 352 | $ | 263 | 33.8 | |||||||||||||
Net income per share, diluted
|
0.13 | 0.15 | (13.3 | ) | 0.46 | 0.34 | 35.3 | |||||||||||||||||
Operating income
|
208 | 285 | (27.0 | ) | 702 | 672 | 4.5 |
·
|
The acquisition and integration of AirTran.
The 2011 acquisition of AirTran increased the Company’s fleet size by 140 aircraft and expanded the Company’s network into key U.S. markets such as Atlanta and Washington Reagan, and near-international locations such as the Caribbean and Mexico. The Company has been able to produce significant synergies and continues to plan for net pre-tax annual synergies of $400 million in 2013 (excluding acquisition and integration expenses). Significant changes are underway to AirTran’s route network, including the closure of several airports that proved unsustainable as a result of high fuel costs, and the re-deployment of aircraft in new markets. In addition, during the first quarter of 2012, the Company obtained a single operating certificate from the FAA. The Company has also continued the process of transferring AirTran aircraft to Southwest to be converted to the Southwest livery. As of October 17, 2012, nine AirTran 737-700 aircraft had completed the conversion process and re-entered service as Southwest aircraft. In addition, the Company transitioned AirTran’s airport facilities in Seattle and Des Moines to Southwest in third quarter 2012 and plans to continue transitioning AirTran airport facilities to Southwest.
|
·
|
The launch of Southwest’s All-New Rapid Rewards® frequent flyer program in first quarter 2011.
The results of the program have exceeded the Company’s expectations with respect to the number of new frequent flyer members, the amount spent per member on airfare, the number of flights taken by members, the number of Southwest’s co-branded Chase® Visa credit card holders added, the number of points sold to business partners, and the number of frequent flyer points purchased by program members.
|
·
|
The addition of a larger aircraft, the Boeing 737-800, to Southwest’s fleet.
The Company is scheduled to receive a total of 34 Boeing 737-800s during 2012, of which 26 had been delivered as of October 17, 2012. The Boeing 737-800 (i) is better suited for potential new destinations, including near-international locations, (ii) has the opportunity to generate additional revenue by replacing current aircraft on specified routes and locations that are restricted due to space constraints or slot controls (a “slot” is the right of an air carrier, pursuant to regulations of the FAA, to operate a takeoff or landing at a specific time at certain airports), and (iii) operates at a lower unit cost than aircraft in the Company’s existing fleet.
|
·
|
Fleet modernization efforts.
The Company announced in December 2011 that Southwest will be the first airline to accept delivery of Boeing’s new, more fuel-efficient 737 MAX aircraft, which is expected to enter service in 2017. The Company placed orders for a total of 150 Boeing 737 MAX aircraft and added a total of 58 Boeing 737NG aircraft to its existing firm order book. The 737 MAX is expected to reduce CO2 emissions and improve fuel burn by an additional 10 to 11 percent over today’s most fuel-efficient, single-aisle airplane. In January 2012, the Company also announced it would retrofit its 737-700 fleet with an updated cabin interior.
Evolve: The New Southwest Experienc
e is intended to enhance Customer comfort, personal space, and the overall travel experience, while improving fleet efficiency and being environmentally responsible. By maximizing the space inside the plane,
Evolve
allows for the added benefit of six additional seats on each 737-700 aircraft, along with more climate-friendly and cost-effective materials. These retrofits for Southwest 737-700 aircraft began in March 2012 and are expected to be completed in 2013. Over the next several years, AirTran aircraft that are transitioned to the Southwest fleet will also receive the new
Evolve
interior. As of October 17, 2012, 156 of the Company’s 737-700 aircraft had been converted to the
Evolve
interior, including nine transitioned AirTran aircraft. The Company has also made the decision to retrofit a portion of its 737-300 fleet with
Evolve
.
|
·
|
Reservation System Replacement.
The Company has entered into a contract with Amadeus IT Group to implement Amadeus’ Altea reservations solution to support the Company’s international service. The Amadeus technology is expected to support Southwest’s operation of international flights, which are expected to begin in 2014. The contract also provides the option for Southwest to migrate its domestic business to Amadeus in the future.
|
Three months ended September 30,
|
Per-ASM
|
Percent
|
||||||||||||||
(in cents, except for percentages)
|
2012
|
2011
|
change
|
change
|
||||||||||||
Salaries, wages, and benefits
|
3.59 | ¢ | 3.44 | ¢ | .15 | ¢ | 4.4 | % | ||||||||
Fuel and oil
|
4.62 | 4.76 | (.14 | ) | (2.9 | ) | ||||||||||
Maintenance materials
|
||||||||||||||||
and repairs
|
.91 | .82 | .09 | 11.0 | ||||||||||||
Aircraft rentals
|
.28 | .27 | .01 | 3.7 | ||||||||||||
Landing fees and other rentals
|
.84 | .77 | .07 | 9.1 | ||||||||||||
Depreciation and amortization
|
.65 | .57 | .08 | 14.0 | ||||||||||||
Acquisition and integration
|
.44 | .07 | .37 |
n.a.
|
||||||||||||
Other operating expenses
|
1.54 | 1.56 | (.02 | ) | (1.3 | ) | ||||||||||
Total
|
12.87 | ¢ | 12.26 | ¢ | .61 | ¢ | 5.0 | % |
Average percent of estimated fuel consumption
|
|||||||
covered by fuel derivative contracts at
|
|||||||
Period
|
varying WTI/Brent crude-equivalent price levels
|
||||||
2013
|
less than 15%
|
||||||
2014
|
approx. 50%
|
||||||
2015
|
approx. 30%
|
||||||
2016
|
approx. 15%
|
||||||
Fair value
|
Amount of gains
|
|||||
(liability) of fuel
|
(losses) deferred
|
|||||
derivative contracts
|
in AOCI at September 30,
|
|||||
Year
|
at September 30, 2012
|
2012 (net of tax)
|
||||
Fourth quarter 2012
|
$
|
(29)
|
$
|
(21)
|
||
2013
|
(9)
|
(87)
|
||||
2014
|
87
|
51
|
||||
2015
|
49
|
(31)
|
||||
2016
|
35
|
5
|
||||
Total
|
$
|
133
|
$
|
(83)
|
Three months ended
|
||||||||
September 30,
|
||||||||
(in millions)
|
2012
|
2011
|
||||||
Mark-to-market impact from fuel contracts settling in future periods
|
$ | (37 | ) | $ | 288 | |||
Ineffectiveness from fuel hedges settling in future periods
|
5 | 78 | ||||||
Realized ineffectiveness and mark-to-market (gains) or losses
|
4 | 3 | ||||||
Premium cost of fuel contracts
|
15 | 36 | ||||||
Other
|
3 | - | ||||||
$ | (10 | ) | $ | 405 |
Nine months ended September 30,
|
Per ASM
|
Percent
|
||||||||||||||
(in cents, except for percentages)
|
2012
|
2011
|
change
|
change
|
||||||||||||
Salaries, wages, and benefits
|
3.67 | ¢ | 3.61 | ¢ | .06 | ¢ | 1.7 | % | ||||||||
Fuel and oil
|
4.76 | 4.64 | .12 | 2.6 | ||||||||||||
Maintenance materials
|
||||||||||||||||
and repairs
|
.89 | .80 | .09 | 11.3 | ||||||||||||
Aircraft rentals
|
.28 | .24 | .04 | 16.7 | ||||||||||||
Landing fees and other rentals
|
.82 | .79 | .03 | 3.8 | ||||||||||||
Depreciation and amortization
|
.64 | .59 | .05 | 8.5 | ||||||||||||
Acquisition and integration
|
.17 | .11 | .06 | 54.5 | ||||||||||||
Other operating expenses
|
1.54 | 1.54 | - | - | ||||||||||||
Total
|
12.77 | ¢ | 12.32 | ¢ | .45 | ¢ | 3.7 | % |
Nine months ended
|
||||||||
September 30,
|
||||||||
(in millions)
|
2012
|
2011
|
||||||
Mark-to-market impact from fuel contracts settling in future periods
|
$ | (193 | ) | $ | 148 | |||
Ineffectiveness from fuel hedges settling in future periods
|
45 | 115 | ||||||
Realized ineffectiveness and mark-to-market (gains) or losses
|
(8 | ) | (6 | ) | ||||
Premium cost of fuel contracts
|
33 | 93 | ||||||
Other
|
4 | 1 | ||||||
$ | (119 | ) | $ | 351 |
Average
|
Number
|
Number
|
Number
|
|||||||
Type
|
Seats
|
Age (Yrs)
|
of Aircraft
|
Owned
|
Leased
|
|||||
717-200
|
117
|
11
|
88
|
8
|
80
|
|||||
737-300
|
137
|
20
|
136
|
84
|
52
|
|||||
737-500
|
122
|
21
|
20
|
11
|
9
|
|||||
737-700
|
137 or 143
|
8
|
424
|
379
|
45
|
|||||
737-800
|
175
|
-
|
24
|
19
|
5
|
|||||
TOTALS
|
692
|
501
|
191
|
|||||||
·
|
the Company’s strategic initiatives and related financial and operational goals and expectations;
|
·
|
the Company’s plans with respect to its acquisition of AirTran and related financial and operational goals and expectations, including without limitation anticipated integration timeframes and expected benefits and costs associated with the acquisition;
|
·
|
the Company’s fleet plans, including its fleet modernization plans, and related financial and operational goals expectations;
|
·
|
the Company’s growth plans and expectations, including its network and capacity plans and expectations;
|
·
|
the Company’s financial outlook and projected results of operations;
|
·
|
the Company’s plans and expectations with respect to managing risk associated with changing jet fuel prices;
|
·
|
the Company’s expectations with respect to liquidity, including anticipated needs for, and sources of, funds;
|
·
|
the Company’s assessment of market risks; and
|
·
|
the Company’s plans and expectations related to legal proceedings.
|
·
|
the impact of the economy on demand for the Company’s services and the impact of fuel prices, economic conditions, and actions of competitors on the Company’s business decisions, plans, and strategies;
|
·
|
changes in the price of aircraft fuel, the impact of hedge accounting, and any changes to the Company’s fuel hedging strategies and positions;
|
·
|
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;
|
·
|
the Company’s ability to effectively integrate AirTran and realize the expected synergies and other benefits from the acquisition;
|
·
|
the Company’s ability to timely and effectively prioritize its strategic initiatives and related expenditures;
|
·
|
the Company’s dependence on third parties with respect to certain of its initiatives, in particular its fleet plans;
|
·
|
the impact of governmental and other regulation on the Company’s operations; and
|
·
|
other factors as set forth 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 year ended December 31, 2011.
|
Issuer Purchases of Equity Securities (1)
|
|||||||
(a)
|
(b)
|
(c)
|
(d)
|
||||
Total number of
|
Maximum dollar
|
||||||
shares purchased
|
value of shares that
|
||||||
Total number
|
Average
|
as part of publicly
|
may yet be purchased
|
||||
of shares
|
price paid
|
announced plans
|
under the plans
|
||||
Period
|
purchased
|
per share
|
or programs
|
or programs
|
|||
July 1, 2012 through
|
|||||||
July 31, 2012
|
5,598,900
|
$
|
8.81
|
5,598,900
|
$
|
450,713,208
|
|
August 1, 2012 through
|
|||||||
August 31, 2012
|
76,100
|
$
|
9.18
|
76,100
|
$
|
450,014,922
|
|
September 1, 2012 through
|
|||||||
September 30, 2012
|
-
|
$
|
-
|
-
|
$
|
450,014,922
|
|
Total
|
5,675,000
|
5,675,000
|
|||||
(1)
|
In January 2008, the Company’s Board of Directors authorized the repurchase of up to $500 million of the Company’s common stock. Through February 15, 2008, the Company had repurchased 4.4 million shares for a total of approximately $54 million, at which time repurchases under the program were suspended. On August 5, 2011, the Company’s Board of Directors authorized the Company to resume a share repurchase program and approved the Company’s repurchase, on a discretionary basis, of a total of up to $500 million of the Company’s common stock following such authorization. On May 16, 2012, the Company’s Board of Directors increased the previous share repurchase authorization by an additional $500 million. Repurchases are made in accordance with applicable securities laws in the open market or in private transactions from time to time, depending on market conditions, and may be discontinued at any time.
|
3.1
|
Restated Certificate of Formation of the Company, effective May 18, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (File No. 1-7259)).
|
3.2
|
Amended and Restated Bylaws of the Company, effective November 19,
|
2009 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report
|
|
on Form 8-K dated November 19, 2009 (File No. 1-7259)).
|
|
10.1
|
Supplemental Agreement No. 78 to Purchase Agreement No. 1810, dated January 19, 1994, between The Boeing Company and the Company. (1)
|
10.2
|
Supplemental Agreement No. 79 to Purchase Agreement No. 1810, dated January 19, 1994, between The Boeing Company and the Company. (1)
|
31.1
|
Rule 13a-14(a) Certification of Chief Executive Officer.
|
31.2
|
Rule 13a-14(a) Certification of Chief Financial Officer.
|
32.1
|
Section 1350 Certifications of Chief Executive Officer and Chief Financial
|
Officer. (2)
|
|
101.INS
|
XBRL Instance Document.
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
a)
|
Exhibits
|
(1)
|
Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission.
|
(2)
|
Furnished, not filed.
|
|
SOUTHWEST AIRLINES CO.
|
|
October 26, 2012
|
By
|
/s/ Tammy Romo
|
Tammy Romo
|
||
Chief Financial Officer
|
||
(On behalf of the Registrant and in
|
||
her capacity as Principal Financial
|
||
and Accounting Officer)
|
3.1
|
Restated Certificate of Formation of the Company, effective May 18, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (File No. 1-7259)).
|
3.2
|
Amended and Restated Bylaws of the Company, effective November 19,
|
2009 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report
|
|
on Form 8-K dated November 19, 2009 (File No. 1-7259)).
|
|
10.1
|
Supplemental Agreement No. 78 to Purchase Agreement No. 1810, dated January 19, 1994, between The Boeing Company and the Company. (1)
|
10.2
|
Supplemental Agreement No. 79 to Purchase Agreement No. 1810, dated January 19, 1994, between The Boeing Company and the Company. (1)
|
31.1
|
Rule 13a-14(a) Certification of Chief Executive Officer.
|
31.2
|
Rule 13a-14(a) Certification of Chief Financial Officer.
|
32.1
|
Section 1350 Certifications of Chief Executive Officer and Chief Financial
|
Officer. (2)
|
|
101.INS
|
XBRL Instance Document.
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
(1)
|
Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission.
|
(2)
|
Furnished, not filed.
|
By:
|
/s/ Gary C. Kelly
|
|
Gary C. Kelly
|
||
Chief Executive Officer
|
||
By:
|
/s/ Tammy Romo
|
|
Tammy Romo
|
||
Chief Financial Officer
|
||
By:
|
/s/ Gary C. Kelly
|
|
Gary C. Kelly
|
||
Chief Executive Officer
|
||
By:
|
/s/ Tammy Romo
|
|
Tammy Romo
|
||
Chief Financial Officer
|
||
Supplemental Agreement No. 78
|
to
|
Purchase Agreement No. 1810
|
between
|
THE BOEING COMPANY
|
and
|
SOUTHWEST AIRLINES CO.
|
Relating to Boeing Model 737-7H4 and 737-8H4 Aircraft
|
THE BOEING COMPANY
|
SOUTHWEST AIRLINES CO.
|
|
By:
/s/ Cheri A. Fischer
|
By:
/s/ Laura Wright
|
|
Its:
Attorney-In-Fact
|
Its:
Sr VP Finance & CFO
|
1.
|
Subject Matter of Sale
|
1-1
|
SA-75
|
2.
|
Delivery, Title and Risk
of Loss
|
2-1
|
SA-28
|
3.
|
Price of Aircraft
|
3-1
|
SA-75
|
4.
|
Taxes
|
4-1
|
|
5.
|
Payment
|
5-1
|
|
6.
|
Excusable Delay
|
6-1
|
|
7.
|
Changes to the Detail
Specification
|
7-1
|
SA-73
|
8.
|
Federal Aviation Requirements and
Certificates and Export License
|
8-1
|
|
9.
|
Representatives, Inspection,
Flights and Test Data
|
9-1
|
|
10.
|
Assignment, Resale or Lease
|
10-1
|
|
11.
|
Termination for Certain Events
|
11-1
|
|
12.
|
Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance
|
12-1
|
|
13.
|
Buyer Furnished Equipment and
Spare Parts
|
13-1
|
|
14.
|
Contractual Notices and Requests
|
14-1
|
|
15.
|
Miscellaneous
|
15-1
|
TABLE OF CONTENTS
|
|
SA
Number
|
1.
|
Aircraft Information Table
|
SA-75
|
1a | Aircraft Information Table - Block 700LUV Aircraft | SA-77 |
1b
|
Aircraft Information Table - Block 800LUV Aircraft
|
SA-78
|
EXHIBITS
|
|
A-4
|
Aircraft Configuration- 737-700 Block T-W-2b Aircraft
|
SA-66
|
A-5
|
Aircraft Configuration - Block 700LUV Aircraft
|
SA-75
|
|
|
|
A-6 | Aircraft Configuration - Block 700LUV Aircraft | SA-75 |
|
|
B
|
***
|
SA-75
|
C
|
Customer Support Document
|
|
|
|
|
C-2 | 737-800 Customer Support Document | SA-75 |
|
|
D
|
Price Adjustment Due to
Economic Fluctuations - Aircraft Price Adjustment
(July 1992 Base Price)
|
|
D-1
|
Price Adjustment Due to
Economic Fluctuations - Aircraft Price Adjustment
(July 1999 Base Price)
|
SA-13
|
|
|
|
D-2 |
Economic Price Adjustment
ECI-MFG/CPI (July 2011 Base Price)
|
SA-75 |
|
|
E
|
Buyer Furnished Equipment
Provisions Document
Attachment A - 737-7H4 Aircraft (through 2012)
Attachment B - 737-8H4 Aircraft (2012-2018)
|
SA-75
SA-77
|
F
|
Defined Terms Document
|
|
1810-1R1
|
Waiver of Aircraft Demonstration Flight
|
SA-75
|
P.A. No. 1810
|
ii
|
SA-78
|
K/SWA
|
TABLE OF CONTENTS
|
|
SA
Number
|
SWA-PA-1810-LA-1105885
|
***
|
SA-75
|
SWA-PA-1810-LA-1105886
|
***
|
SA-75
|
SWA-PA-1810-LA-1105887
|
***
|
SA-75
|
SWA-PA-1810-LA-1105888
|
***
|
SA-78
|
SWA-PA-1810-LA-1105889
|
***
|
SA-75
|
|
INACTIVE / DELETED TABLES, EXHIBITS, AND LETTER AGREEMENTS
|
|
TABLE
|
|
Table
|
Title
|
Last Updated under SA
|
Current Status
|
2
|
Option Aircraft Information Table
|
SA-74
|
Deleted under SA-75
|
Exhibits
|
Title
|
Last Updated under SA
|
Current Status
|
A
|
Aircraft Configuration – 737-700
|
SA-36
|
Inactive
|
A-Winglet
|
Aircraft Configuration
|
SA-36
|
Inactive
|
A-1-Winglet
|
Aircraft Configuration
|
SA-36
|
Inactive
|
A-1A
|
Aircraft Configuration - 737-700 Block T-W-2c
|
SA-36
|
Inactive
|
TABLE OF CONTENTS
|
Exhibits
|
Title
|
Last Updated
Under SA
|
Current Status
|
A-2
|
Aircraft Configuration - 737-700 Block T-W-2 / T-W-2a
|
SA-47
|
Inactive
|
A-3
|
Aircraft Configuration - 737-700 Block T-W-2 / T-W-2a
|
SA-61
|
Inactive
|
C.2
|
737-800 Customer Support Variables
|
SA-71
|
Deleted under SA-75
|
E.2
|
737-800 Buyer Furnished Equipment Provisions Document
|
SA-73
|
Deleted under SA-75
|
Letter Agreement
|
Title
|
Last Updated under SA
|
Current Status
|
6-1162-RLL-933R21
|
Option Aircraft
|
SA-60
|
Deleted under SA-75
|
6-1162-RLL-935R1
|
Performance Guarantees
|
SA-1
|
Inactive
|
6-1162-RLL-936R4
|
Certain Contractual Matters
|
SA-4
|
Inactive
|
6-1162-RLL-937
|
Alternate Advance Payment Schedule
|
Inactive
|
|
6-1162-RLL-938
|
***
|
Inactive
|
|
6-1162-RLL-939R1
|
Certification Flight Test Aircraft
|
SA-1
|
Inactive
|
6-1162-RLL-940R1
|
Training Matters
|
SA-1
|
Inactive
|
6-1162-RLL-942
|
Open Configuration Matters
|
Inactive
|
|
6-1162-RLL-943R1
|
Substitution Rights
|
SA-6
|
Deleted under SA 75
|
6-1162-RLL-944
|
***
|
Inactive
|
|
6-1162-RLL-945
|
Comparison of 737-7H4 and 737-3H4 Block Fuel Burn
|
Inactive
|
|
6-1162-RLL-1855R3
|
Additional Contractual Matters
|
SA-4
|
Inactive
|
6-1162-RLL-1856
|
***
|
SA-1
|
Inactive
|
6-1162-RLL-1857
|
Service Ready Validation Program Field Test
|
SA-1
|
Inactive
|
6-1162-RLL-1858R1
|
Escalation Matters
|
SA-4
|
Inactive
|
6-1162-RLL-2036
|
Amortization of Costs for Customer Unique Changes
|
SA-1
|
Inactive
|
6-1162-RLL-2037
|
Reconciliation of the Aircraft Basic Price
|
SA-1
|
Inactive
|
P.A. No. 1810
|
v
|
SA-78
|
K/SWA
|
TABLE OF CONTENTS
|
Letter Agreement
|
Title
|
Last Updated
Under SA
|
Current Status
|
6-1162-RLL-2073
|
Maintenance Training Matters
|
SA-1
|
Inactive
|
6-1162-KJJ-058R1
|
Additional Substitution Rights
|
SA-71
|
Deleted under SA-75
|
6-1162-KJJ-150
|
Flight Control Computer & Mode Control Panel Spares Matter
|
SA-14
|
Inactive
|
6-1162-MSA-185R3
|
Delivery Change Contractual Matters
|
SA-21
|
Inactive
|
6-1162-JMG-747R1
|
***
|
SA-36
|
Inactive
|
6-1162-CHL-217
|
Rescheduled Flight Test Aircraft
|
SA-32
|
Inactive
|
6-1162-NIW-606R1
|
***
|
SA-36
|
Inactive
|
6-1162-NIW-640
|
Early Delivery of Two April 2004 Aircraft
|
SA-35
|
Inactive
|
6-1162-NIW-889
|
Warranty - Exterior Color Schemes and Markings for YA143 and on
|
SA-39
|
Inactive
|
6-1162-NIW-1142
|
***
|
SA-43
|
Inactive
|
6-1162-NIW-1369
|
***
|
SA-46
|
Inactive
|
6-1162-NIW-1983
|
***
|
SA-62
|
Inactive
|
SWA-PA-1810-LA-1000419
|
***
|
SA-64
|
Inactive
|
P.A. No. 1810
|
vi
|
SA-78
|
K/SWA
|
Table 1b to
|
Purchase Agreement No. PA-01810
|
Aircraft Delivery, Description, Price and Advance Payments
|
Block 800LUV Aircraft
|
Airframe Model/MTOW:
|
737-800
|
174200 pounds
|
Detail Specification:
|
D019A001SWA38P-1 Rev New
|
|||
Engine Model/Thrust:
|
CFM56-7B26
|
26400 pounds
|
Airframe
Base Aircraft Price Base Year/Escalation Formul
|
Jul-11
|
ECI-MFG/CPI
|
Base Aircraft Price:
|
***
|
Engine Price Base Year/Escalation Formula:
|
N/A
|
N/A
|
|
Special Features:
|
***
|
Notes 1 & 2
|
|||
Sub-Total of Aircraft Base Price and Features:
|
***
|
Aircraft Price Escalation Data:
|
|||
Engine Price (Per Aircraft):
|
***
|
Base Year Index (ECI):
|
|
*** | |
Aircraft Basic Price (Excluding BFE/SPE):
|
***
|
Base Year Index (CPI):
|
|
*** | |
Buyer Furnished Equipment (BFE) Estimate:
|
***
|
||||
Seller Purchased Equipment (SPE) Estimate:
|
***
|
||||
Delivery
Date
|
Number of
Aircraft
|
Escalation Factor
(Airframe)
|
Aircraft
Serial
Number
|
Escalation Estimate
Adv Payment Base
Price Per A/P
|
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
|
||||
At Signing
***
|
24 Mos.
***
|
21/18/12/9/6 Mos.
***
|
Total
***
|
||||||
Mar-2012
|
1
|
***
|
36980
|
Note 1 & 3
|
***
|
***
|
***
|
***
|
***
|
Mar-2012
|
1
|
***
|
36680
|
Note 2 & 3
|
***
|
***
|
***
|
***
|
***
|
Apr-2012
|
3
|
***
|
36681, 36983, 36683
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
May-2012
|
3
|
***
|
36682, 36985, 36987
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Jun-2012
|
4
|
***
|
38807, 38808, 38809, 38810
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Jul-2012
|
3
|
***
|
36684, 36990, 38811
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Aug-2012
|
2
|
***
|
36685, 36992
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Sep-2012
|
2
|
***
|
36686, 36994
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Oct-2012
|
2
|
***
|
36687, 36997
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Nov-2012
|
4
|
***
|
37005, 37003, 35969, 35966
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Dec-2012
|
3
|
***
|
37006, 37009, 38818,
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Dec-2012
|
1
|
***
|
36891
|
***
|
***
|
***
|
***
|
***
|
|
Jan-2013
|
3
|
***
|
35964, 36638, 36634
|
***
|
***
|
***
|
***
|
***
|
|
Feb-2013
|
2
|
***
|
36635, 36893
|
***
|
***
|
***
|
***
|
***
|
|
Mar-2013
|
2
|
***
|
36892, 36973
|
***
|
***
|
***
|
***
|
***
|
|
Apr-2013
|
2
|
***
|
36908, 36998
|
***
|
***
|
***
|
***
|
***
|
|
Sep-2013
|
1
|
***
|
36933
|
***
|
***
|
***
|
***
|
***
|
|
Oct-2013
|
2
|
***
|
36912, 36914
|
***
|
***
|
***
|
***
|
***
|
|
Nov-2013
|
3
|
***
|
36915, 33939, 42526
|
***
|
***
|
***
|
***
|
***
|
SWA-PA01810
|
Page 1
|
|
57774, 57776, 57777, 60261-1F.TXT
|
Boeing Proprietary
|
SA-78
|
Table 1b to
|
Purchase Agreement No. PA-01810
|
Aircraft Delivery, Description, Price and Advance Payments
|
Block 800LUV Aircraft
|
Delivery
Date
|
Number of
Aircraft
|
Escalation Factor
(Airframe)
|
Aircraft
Serial
Number
|
Escalation Estimate
Adv Payment Base
Price Per A/P
|
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
|
||||
At Signing
***
|
24 Mos.
***
|
21/18/12/9/6 Mos.
***
|
Total
***
|
||||||
Dec-2013
|
5
|
***
|
36917, 36919, 36731, 42529, 42530
|
***
|
***
|
***
|
***
|
***
|
|
Mar-2014
|
1
|
***
|
37004
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Apr-2014
|
4
|
***
|
42384, 36894, 36895, 36896
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
May-2014
|
3
|
***
|
36897, 42385, 42521
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Jun-2014
|
3
|
***
|
36898, 36905, 42522
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Jul-2014
|
2
|
***
|
42523, 36911
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Aug-2014
|
4
|
***
|
36907, 42524,35973, 42525
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Sep-2014
|
4
|
***
|
36935, 42528, 42527, 42531
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Oct-2014
|
3
|
***
|
36909, 36732, 36920
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Total:
|
73
|
SWA-PA01810
|
Page 2
|
|
57774, 57776, 57777, 60261-1F.TXT
|
Boeing Proprietary
|
SA-78
|
BOEING
|
The Boeing Company
P.O. Box 3707
Seattle, WA 98124-2207
|
Subject:
|
***
|
Reference:
|
a)
|
Purchase Agreement No. 1810 (
Purchase Agreement
) between The Boeing Company (
Boeing
) and Southwest Airlines Co. (
Buyer
) relating to Model 737-7H4 and 737-8H4 aircraft
|
*** Aircraft by MSN
|
|
36717
|
33943
|
34861
|
33925
|
33923
|
36724
|
36718
|
33917
|
33929
|
34479
|
36399
|
34862
|
33927
|
35110
|
33928
|
33918
|
35109
|
33930
|
35788
|
33931
|
36091
|
33921
|
33926
|
33922
|
33919
|
36725
|
33934
|
33933
|
33924
|
36716
|
THE BOEING COMPANY
|
||
By
|
/s/ Cheri A. Fischer
|
|
Its
|
Attorney-In-Fact
|
|
ACCEPTED AND AGREED TO this
|
||
Date:
|
August 7, 2012
|
|
SOUTHWEST AIRLINES CO.
|
||
By
|
/s/ Laura Wright
|
|
Laura Wright
|
||
Its
|
Sr VP Finance & CFO
|
Supplemental Agreement No. 79
|
to
|
Purchase Agreement No. 1810
|
between
|
THE BOEING COMPANY
|
and
|
SOUTHWEST AIRLINES CO.
|
Relating to Boeing Model 737-7H4 and 737-8H4 Aircraft
|
THE BOEING COMPANY
|
SOUTHWEST AIRLINES CO.
|
By:
/s/Cheri A. Fischer
|
By:
/s/ Laura Wright
|
Its:
Attorney-In-Fact
|
Its:
Sr VP Finance & CFO
|
1.
|
Subject Matter of Sale
|
1-1
|
SA-75
|
2.
|
Delivery, Title and Risk
of Loss
|
2-1
|
SA-28
|
3.
|
Price of Aircraft
|
3-1
|
SA-75
|
4.
|
Taxes
|
4-1
|
|
5.
|
Payment
|
5-1
|
|
6.
|
Excusable Delay
|
6-1
|
|
7.
|
Changes to the Detail
Specification
|
7-1
|
SA-73
|
8.
|
Federal Aviation Requirements and
Certificates and Export License
|
8-1
|
|
9.
|
Representatives, Inspection,
Flights and Test Data
|
9-1
|
|
10.
|
Assignment, Resale or Lease
|
10-1
|
|
11.
|
Termination for Certain Events
|
11-1
|
|
12.
|
Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance
|
12-1
|
|
13.
|
Buyer Furnished Equipment and
Spare Parts
|
13-1
|
|
14.
|
Contractual Notices and Requests
|
14-1
|
|
15.
|
Miscellaneous
|
15-1
|
1.
|
Aircraft Information Table
|
SA-75
|
1a
|
Aircraft Information Table – Block 700LUV Aircraft
|
SA-77
|
1b
|
Aircraft Information Table – Block 800LUV Aircraft
|
SA-79
|
|
EXHIBITS
|
A-4
|
Aircraft Configuration - 737-700 Block T-W-2b Aircraft
|
SA-66
|
A-5
|
Aircraft Configuration – Block 700LUV Aircraft
|
SA-75
|
A-6
|
Aircraft Configuration – Block 800LUV Aircraft
|
SA-75
|
B
|
***
|
SA-75
|
C
|
Customer Support Document
|
|
C-2
|
737-800 Customer Support Document
|
SA-75
|
D
|
Price Adjustment Due to
Economic Fluctuations – Aircraft Price Adjustment
(July 1992 Base Price)
|
|
D-1
|
Price Adjustment Due to
Economic Fluctuations – Aircraft Price Adjustment
(July 1999 Base Price)
|
SA-13
|
D-2
|
Economic Price Adjustment
|
SA-75
|
ECI-MFG/CPI (July 2011 Base Price)
|
||
E
|
Buyer Furnished Equipment
|
SA-75
|
Provisions Document
|
||
Attachment A – 737-7H4 Aircraft (through 2012)
|
||
Attachment B – 737-8H4 Aircraft (2012-2018)
|
SA-77
|
|
F
|
Defined Terms Document
|
1810-1R1
|
Waiver of Aircraft Demonstration Flight
|
SA-75
|
6-1162-RLL-932R3
|
***
|
SA-75
|
|
6-1162-RLL-934R5
|
Disclosure of Confidential
|
SA-75
|
|
Information
|
|||
6-1162-NIW-890R1
|
***
|
SA-75
|
|
SA-39
|
|||
6-1162-RLL-941R3
|
Other Matters
|
SA-75
|
|
6-1162-KJJ-054R2
|
Business Matters
|
SA-75
|
|
(
Not applicable to Block 700LUV & Block 800LUV Aircraft)
|
|||
6-1162-KJJ-055R1
|
Structural Matters
|
SA-25
|
|
6-1162-KJJ-056
|
Noise and Emission Matters
|
SA-13
|
|
6-1162-KJJ-057
|
Product Development Matters
|
SA-13
|
|
6-1162-JMG-669R9
|
***
|
SA-75
|
|
SA-75
|
|||
SA-54
|
|||
SWA-PA-1810-LA-1001315R1
|
***
|
SA-75
|
|
Attachment A
|
SA-77
|
||
SWA-PA-1810-LA-02710
|
***
|
SA-72
|
|
SWA-PA-1810-LA-1003498 R1
|
***
|
SA-75
|
|
SWA-PA-1810-LA-1003490R1
|
***
|
SA-75
|
|
SWA-PA-1810-LA-1003367R1
|
***
|
SA-75
|
|
SWA-PA-1810-LA-1105883
|
Aircraft Model Substitution
|
SA-75
|
|
SWA-PA-1810-LA-1105884
|
Option Aircraft
|
SA-75
|
|
Attachment – Option Aircraft Information Table
|
SWA-PA-1810-LA-1105885
|
***
|
SA-75
|
SWA-PA-1810-LA-1105886
|
***
|
SA-75
|
SWA-PA-1810-LA-1105887
|
***
|
SA-75
|
SWA-PA-1810-LA-1105888
|
***
|
SA-78
|
SWA-PA-1810-LA-1105889
|
***
|
SA-75
|
|
INACTIVE / DELETED TABLES, EXHIBITS, AND LETTER AGREEMENTS
|
|
TABLE
|
Table
|
Title
|
Last Updated under SA
|
Current Status
|
2
|
Option Aircraft Information Table
|
SA-74
|
Deleted under SA-75
|
Exhibits
|
Title
|
Last Updated under SA
|
Current Status
|
A
|
Aircraft Configuration – 737-700
|
SA-36
|
Inactive
|
A-Winglet
|
Aircraft Configuration
|
SA-36
|
Inactive
|
A-1-Winglet
|
Aircraft Configuration
|
SA-36
|
Inactive
|
A-1A
|
Aircraft Configuration - 737-700 Block T-W-2c
|
SA-36
|
Inactive
|
TABLE OF CONTENTS
|
|
SA
Number
|
Exhibits
|
Title
|
Last Updated under SA
|
Current Status
|
A-2
|
Aircraft Configuration - 737-700 Block T-W-2 / T-W-2a
|
SA-47
|
Inactive
|
A-3
|
Aircraft Configuration - 737-700 Block T-W-2 / T-W-2a
|
SA-61
|
Inactive
|
C.2
|
737-800 Customer Support Variables
|
SA-71
|
Deleted under SA-75
|
E.2
|
737-800 Buyer Furnished Equipment Provisions Document
|
SA-73
|
Deleted under SA-75
|
Letter Agreement
|
Title
|
Last Updated under SA
|
Current Status
|
6-1162-RLL-933R21
|
Option Aircraft
|
SA-60
|
Deleted under SA-75
|
6-1162-RLL-935R1
|
Performance Guarantees
|
SA-1
|
Inactive
|
6-1162-RLL-936R4
|
Certain Contractual Matters
|
SA-4
|
Inactive
|
6-1162-RLL-937
|
Alternate Advance Payment Schedule
|
Inactive
|
|
6-1162-RLL-938
|
***
|
Inactive
|
|
6-1162-RLL-939R1
|
Certification Flight Test Aircraft
|
SA-1
|
Inactive
|
6-1162-RLL-940R1
|
Training Matters
|
SA-1
|
Inactive
|
6-1162-RLL-942
|
Open Configuration Matters
|
Inactive
|
|
6-1162-RLL-943R1
|
Substitution Rights
|
SA-6
|
Deleted under SA 75
|
6-1162-RLL-944
|
***
|
Inactive
|
|
6-1162-RLL-945
|
Comparison of 737-7H4 and 737-3H4 Block Fuel Burn
|
Inactive
|
|
6-1162-RLL-1855R3
|
Additional Contractual Matters
|
SA-4
|
Inactive
|
6-1162-RLL-1856
|
***
|
SA-1
|
Inactive
|
6-1162-RLL-1857
|
Service Ready Validation Program Field Test
|
SA-1
|
Inactive
|
6-1162-RLL-1858R1
|
Escalation Matters
|
SA-4
|
Inactive
|
6-1162-RLL-2036
|
Amortization of Costs for Customer Unique Changes
|
SA-1
|
Inactive
|
6-1162-RLL-2037
|
Reconciliation of the Aircraft Basic Price
|
SA-1
|
Inactive
|
Letter Agreement
|
Title
|
Last Updated under SA
|
Current Status
|
6-1162-RLL-2073
|
Maintenance Training Matters
|
SA-1
|
Inactive
|
6-1162-KJJ-058R1
|
Additional Substitution Rights
|
SA-71
|
Deleted under SA-75
|
6-1162-KJJ-150
|
Flight Control Computer & Mode Control Panel Spares Matter
|
SA-14
|
Inactive
|
6-1162-MSA-185R3
|
Delivery Change Contractual Matters
|
SA-21
|
Inactive
|
6-1162-JMG-747R1
|
***
|
SA-36
|
Inactive
|
6-1162-CHL-217
|
Rescheduled Flight Test Aircraft
|
SA-32
|
Inactive
|
6-1162-NIW-606R1
|
***
|
SA-36
|
Inactive
|
6-1162-NIW-640
|
Early Delivery of Two April 2004 Aircraft
|
SA-35
|
Inactive
|
6-1162-NIW-889
|
Warranty - Exterior Color Schemes and Markings for YA143 and on
|
SA-39
|
Inactive
|
6-1162-NIW-1142
|
***
|
SA-43
|
Inactive
|
6-1162-NIW-1369
|
***
|
SA-46
|
Inactive
|
6-1162-NIW-1983
|
***
|
SA-62
|
Inactive
|
SWA-PA-1810-LA-1000419
|
***
|
SA-64
|
Inactive
|
P.A. No. 1810
|
vi
|
|
K/SWA
|
SA-79
|
Table 1b to
|
Purchase Agreement No. PA-01810
|
Aircraft Delivery, Description, Price and Advance Payments
|
Block 800LUV Aircraft
|
Airframe Model/MTOW:
|
737-800
|
174200 pounds
|
Detail Specification:
|
D019A001SWA38P-1 Rev New
|
|||
Engine Model/Thrust:
|
CFM56-7B26
|
26400 pounds
|
Airframe
Base Aircraft Price Base Year/Escalation Formul
|
Jul-11
|
ECI-MFG/CPI
|
Base Aircraft Price:
|
***
|
Engine Price Base Year/Escalation Formula:
|
N/A
|
N/A
|
|
Special Features:
|
***
|
Notes 1 & 2
|
|||
Sub-Total of Aircraft Base Price and Features:
|
***
|
Aircraft Price Escalation Data:
|
|||
Engine Price (Per Aircraft):
|
***
|
Base Year Index (ECI):
|
***
|
||
Aircraft Basic Price (Excluding BFE/SPE):
|
***
|
Base Year Index (CPI):
|
***
|
||
Buyer Furnished Equipment (BFE) Estimate:
|
***
|
||||
Seller Purchased Equipment (SPE) Estimate:
|
***
|
||||
Delivery
Date
|
Number of
Aircraft
|
Escalation Factor
(Airframe)
|
Aircraft
Serial
Number
|
Escalation Estimate
Adv Payment Base
Price Per A/P
|
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
|
||||
At Signing
***
|
24 Mos.
***
|
21/18/12/9/6 Mos.
***
|
Total
***
|
||||||
Mar-2012
|
1
|
***
|
36980
|
Note 1 & 3
|
***
|
***
|
***
|
***
|
***
|
Mar-2012
|
1
|
***
|
36680
|
Note 2 & 3
|
***
|
***
|
***
|
***
|
***
|
Apr-2012
|
3
|
***
|
36681, 36983, 36683
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
May-2012
|
3
|
***
|
36682, 36985, 36987
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Jun-2012
|
4
|
***
|
38807, 38808, 38809, 38810
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Jul-2012
|
3
|
***
|
36684, 36990, 38811
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Aug-2012
|
2
|
***
|
36685, 36992
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Sep-2012
|
2
|
***
|
36686, 36994
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Sep- 2012
|
1
|
***
|
36687
|
Note 5
|
***
|
***
|
***
|
***
|
***
|
Oct-2012
|
1
|
***
|
36997
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Nov-2012
|
4
|
***
|
37005, 37003, 35969, 35966
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Dec-2012
|
3
|
***
|
37006, 37009, 38818,
|
Note 3
|
***
|
***
|
***
|
***
|
***
|
Dec-2012
|
1
|
***
|
36891
|
***
|
***
|
***
|
***
|
***
|
|
Jan-2013
|
3
|
***
|
35964, 36638, 36634
|
***
|
***
|
***
|
***
|
***
|
|
Feb-2013
|
2
|
***
|
36635, 36893
|
***
|
***
|
***
|
***
|
***
|
|
Mar-2013
|
2
|
***
|
36892, 36973
|
***
|
***
|
***
|
***
|
***
|
|
Apr-2013
|
2
|
***
|
36908, 36998
|
***
|
***
|
***
|
***
|
***
|
|
Sep-2013
|
1
|
***
|
36933
|
***
|
***
|
***
|
***
|
***
|
|
Oct-2013
|
2
|
***
|
36912, 36914
|
***
|
***
|
***
|
***
|
***
|
SWA-PA01810
|
Page 1
|
|
57774, 57776, 57777, 60261-1F.TXT
|
Boeing Proprietary
|
SA-79
|
Table 1b to
|
Purchase Agreement No. PA-01810
|
Aircraft Delivery, Description, Price and Advance Payments
|
Block 800LUV Aircraft
|
Delivery
Date
|
Number of
Aircraft
|
Escalation Factor
(Airframe)
|
Aircraft
Serial
Number
|
Escalation Estimate
Adv Payment Base
Price Per A/P
|
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
|
||||
At Signing
***
|
24 Mos.
***
|
21/18/12/9/6 Mos.
***
|
Total
***
|
||||||
Nov-2013
|
3
|
***
|
36915, 33939, 42526
|
***
|
***
|
***
|
***
|
***
|
|
Dec-2013
|
5
|
***
|
36917, 36919, 36731, 42529, 42530
|
***
|
***
|
***
|
***
|
***
|
|
Mar-2014
|
1
|
***
|
37004
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Apr-2014
|
4
|
***
|
42384, 36894, 36895, 36896
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
May-2014
|
3
|
***
|
36897, 42385, 42521
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Jun-2014
|
3
|
***
|
36898, 36905, 42522
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Jul-2014
|
2
|
***
|
42523, 36911
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Aug-2014
|
4
|
***
|
36907, 42524,35973, 42525
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Sep-2014
|
4
|
***
|
36935, 42528, 42527, 42531
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Oct-2014
|
3
|
***
|
36909, 36732, 36920
|
Note 4
|
***
|
***
|
***
|
***
|
***
|
Total:
|
73
|