þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended March 31, 2014
|
|
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
¨
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,741
|
|
|
$
|
1,355
|
|
Short-term investments
|
1,757
|
|
|
1,797
|
|
||
Accounts and other receivables
|
457
|
|
|
419
|
|
||
Inventories of parts and supplies, at cost
|
438
|
|
|
467
|
|
||
Deferred income taxes
|
180
|
|
|
168
|
|
||
Prepaid expenses and other current assets
|
241
|
|
|
250
|
|
||
Total current assets
|
4,814
|
|
|
4,456
|
|
||
|
|
|
|
||||
Property and equipment, at cost:
|
|
|
|
|
|
||
Flight equipment
|
17,107
|
|
|
16,937
|
|
||
Ground property and equipment
|
2,716
|
|
|
2,666
|
|
||
Deposits on flight equipment purchase contracts
|
762
|
|
|
764
|
|
||
Assets constructed for others
|
478
|
|
|
453
|
|
||
|
21,063
|
|
|
20,820
|
|
||
Less allowance for depreciation and amortization
|
7,643
|
|
|
7,431
|
|
||
|
13,420
|
|
|
13,389
|
|
||
Goodwill
|
970
|
|
|
970
|
|
||
Other assets
|
772
|
|
|
530
|
|
||
|
$
|
19,976
|
|
|
$
|
19,345
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
1,299
|
|
|
$
|
1,247
|
|
Accrued liabilities
|
1,168
|
|
|
1,229
|
|
||
Air traffic liability
|
3,332
|
|
|
2,571
|
|
||
Current maturities of long-term debt
|
642
|
|
|
629
|
|
||
Total current liabilities
|
6,441
|
|
|
5,676
|
|
||
|
|
|
|
||||
Long-term debt less current maturities
|
2,172
|
|
|
2,191
|
|
||
Deferred income taxes
|
2,997
|
|
|
2,934
|
|
||
Construction obligation
|
450
|
|
|
437
|
|
||
Other noncurrent liabilities
|
726
|
|
|
771
|
|
||
Stockholders' equity:
|
|
|
|
|
|
||
Common stock
|
808
|
|
|
808
|
|
||
Capital in excess of par value
|
1,256
|
|
|
1,231
|
|
||
Retained earnings
|
6,555
|
|
|
6,431
|
|
||
Accumulated other comprehensive loss
|
(12
|
)
|
|
(3
|
)
|
||
Treasury stock, at cost
|
(1,417
|
)
|
|
(1,131
|
)
|
||
Total stockholders' equity
|
7,190
|
|
|
7,336
|
|
||
|
$
|
19,976
|
|
|
$
|
19,345
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
OPERATING REVENUES:
|
|
|
|
||||
Passenger
|
$
|
3,933
|
|
|
$
|
3,838
|
|
Freight
|
40
|
|
|
39
|
|
||
Other
|
193
|
|
|
207
|
|
||
Total operating revenues
|
4,166
|
|
|
4,084
|
|
||
|
|
|
|
||||
OPERATING EXPENSES:
|
|
|
|
|
|
||
Salaries, wages, and benefits
|
1,275
|
|
|
1,183
|
|
||
Fuel and oil
|
1,314
|
|
|
1,457
|
|
||
Maintenance materials and repairs
|
250
|
|
|
291
|
|
||
Aircraft rentals
|
81
|
|
|
93
|
|
||
Landing fees and other rentals
|
266
|
|
|
266
|
|
||
Depreciation and amortization
|
221
|
|
|
210
|
|
||
Acquisition and integration
|
18
|
|
|
13
|
|
||
Other operating expenses
|
526
|
|
|
501
|
|
||
Total operating expenses
|
3,951
|
|
|
4,014
|
|
||
|
|
|
|
||||
OPERATING INCOME
|
215
|
|
|
70
|
|
||
|
|
|
|
||||
OTHER EXPENSES (INCOME):
|
|
|
|
|
|
||
Interest expense
|
33
|
|
|
29
|
|
||
Capitalized interest
|
(7
|
)
|
|
(5
|
)
|
||
Interest income
|
(2
|
)
|
|
(2
|
)
|
||
Other gains (losses), net
|
(53
|
)
|
|
(46
|
)
|
||
Total other income
|
(29
|
)
|
|
(24
|
)
|
||
|
|
|
|
||||
INCOME BEFORE INCOME TAXES
|
244
|
|
|
94
|
|
||
PROVISION FOR INCOME TAXES
|
92
|
|
|
35
|
|
||
|
|
|
|
||||
NET INCOME
|
$
|
152
|
|
|
$
|
59
|
|
|
|
|
|
||||
NET INCOME PER SHARE, BASIC
|
$
|
0.22
|
|
|
$
|
0.08
|
|
|
|
|
|
||||
NET INCOME PER SHARE, DILUTED
|
$
|
0.22
|
|
|
$
|
0.08
|
|
|
|
|
|
||||
COMPREHENSIVE INCOME
|
$
|
143
|
|
|
$
|
67
|
|
|
|
|
|
||||
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
||
Basic
|
698
|
|
|
725
|
|
||
Diluted
|
707
|
|
|
727
|
|
||
|
|
|
|
||||
Cash dividends declared per common share
|
$
|
.0400
|
|
|
$
|
.0100
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
152
|
|
|
$
|
59
|
|
Adjustments to reconcile net income to cash provided by (used in) operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
221
|
|
|
210
|
|
||
Unrealized gains on fuel derivative instruments
|
(60
|
)
|
|
(21
|
)
|
||
Deferred income taxes
|
92
|
|
|
2
|
|
||
Changes in certain assets and liabilities:
|
|
|
|
|
|
||
Accounts and other receivables
|
(72
|
)
|
|
(97
|
)
|
||
Other assets
|
7
|
|
|
(25
|
)
|
||
Accounts payable and accrued liabilities
|
24
|
|
|
120
|
|
||
Air traffic liability
|
761
|
|
|
707
|
|
||
Cash collateral paid to derivative counterparties
|
11
|
|
|
28
|
|
||
Other, net
|
(17
|
)
|
|
—
|
|
||
Net cash provided by operating activities
|
1,119
|
|
|
983
|
|
||
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Capital expenditures
|
(407
|
)
|
|
(534
|
)
|
||
Purchases of short-term investments
|
(770
|
)
|
|
(725
|
)
|
||
Proceeds from sales of short-term and other investments
|
819
|
|
|
787
|
|
||
Net cash used in investing activities
|
(358
|
)
|
|
(472
|
)
|
||
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from Employee stock plans
|
49
|
|
|
6
|
|
||
Payments of long-term debt and capital lease obligations
|
(46
|
)
|
|
(164
|
)
|
||
Payments of cash dividends
|
(56
|
)
|
|
(15
|
)
|
||
Repayment of construction obligation
|
(3
|
)
|
|
—
|
|
||
Repurchase of common stock
|
(315
|
)
|
|
(100
|
)
|
||
Other, net
|
(4
|
)
|
|
(13
|
)
|
||
Net cash used in financing activities
|
(375
|
)
|
|
(286
|
)
|
||
|
|
|
|
||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
386
|
|
|
225
|
|
||
|
|
|
|
||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,355
|
|
|
1,113
|
|
||
|
|
|
|
||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
1,741
|
|
|
$
|
1,338
|
|
|
|
|
|
||||
CASH PAYMENTS FOR:
|
|
|
|
||||
Interest, net of amount capitalized
|
$
|
34
|
|
|
$
|
41
|
|
Income taxes
|
$
|
—
|
|
|
$
|
2
|
|
|
|
|
|
||||
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
|
|
|
|
||||
Assets constructed for others
|
$
|
13
|
|
|
$
|
28
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
NUMERATOR:
|
|
|
|
||||
Net income
|
$
|
152
|
|
|
$
|
59
|
|
Incremental income effect of interest on 5.25% convertible notes
|
1
|
|
|
—
|
|
||
Net income after assumed conversion
|
$
|
153
|
|
|
$
|
59
|
|
|
|
|
|
||||
DENOMINATOR:
|
|
|
|
|
|
||
Weighted-average shares outstanding, basic
|
698
|
|
|
725
|
|
||
Dilutive effect of Employee stock options and restricted stock units
|
3
|
|
|
2
|
|
||
Dilutive effect of 5.25% convertible notes
|
6
|
|
|
—
|
|
||
Adjusted weighted-average shares outstanding, diluted
|
707
|
|
|
727
|
|
||
|
|
|
|
||||
NET INCOME PER SHARE:
|
|
|
|
|
|
||
Basic
|
$
|
0.22
|
|
|
$
|
0.08
|
|
Diluted
|
$
|
0.22
|
|
|
$
|
0.08
|
|
|
|
|
|
||||
Potentially dilutive amounts excluded from calculations:
|
|
|
|
|
|
||
Stock options and restricted stock units
|
—
|
|
|
17
|
|
||
5.25% convertible notes
|
—
|
|
|
6
|
|
|
|
Fuel hedged as of
|
|
|
|
|
|
March 31, 2014
|
|
Derivative underlying commodity type as of
|
|
Period (by year)
|
|
(gallons in millions)
(a)
|
|
March 31, 2014
|
|
Remainder of 2014
|
|
459
|
|
|
WTI crude, Brent crude oil, and Gulf Coast jet fuel
|
2015
|
|
1,404
|
|
|
WTI crude, Brent crude oil, and Gulf Coast jet fuel
|
2016
|
|
914
|
|
|
Brent crude oil
|
2017
|
|
933
|
|
|
WTI crude and Brent crude oil
|
|
|
|
|
Asset derivatives
|
|
Liability derivatives
|
||||||||||||
|
|
Balance Sheet
|
|
Fair value at
|
|
Fair value at
|
|
Fair value at
|
|
Fair value at
|
||||||||
(in millions)
|
|
location
|
|
3/31/2014
|
|
12/31/2013
|
|
3/31/2014
|
|
12/31/2013
|
||||||||
Derivatives designated as hedges*
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fuel derivative contracts (gross)
|
|
Prepaid expenses and other current assets
|
|
$
|
72
|
|
|
$
|
74
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Fuel derivative contracts (gross)
|
|
Other assets
|
|
215
|
|
|
209
|
|
|
—
|
|
|
1
|
|
||||
Interest rate derivative contracts
|
|
Other assets
|
|
18
|
|
|
20
|
|
|
—
|
|
|
—
|
|
||||
Interest rate derivative contracts
|
|
Other noncurrent liabilities
|
|
—
|
|
|
—
|
|
|
73
|
|
|
77
|
|
||||
Total derivatives designated as hedges
|
|
$
|
305
|
|
|
$
|
303
|
|
|
$
|
73
|
|
|
$
|
78
|
|
||
Derivatives not designated as hedges*
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fuel derivative contracts (gross)
|
|
Prepaid expenses and other current assets
|
|
$
|
140
|
|
|
$
|
175
|
|
|
$
|
159
|
|
|
$
|
182
|
|
Fuel derivative contracts (gross)
|
|
Other assets
|
|
19
|
|
|
16
|
|
|
69
|
|
|
99
|
|
||||
Fuel derivative contracts (gross)
|
|
Accrued liabilities
|
|
—
|
|
|
9
|
|
|
—
|
|
|
21
|
|
||||
Total derivatives not designated as hedges
|
|
|
|
$
|
159
|
|
|
$
|
200
|
|
|
$
|
228
|
|
|
$
|
302
|
|
Total derivatives
|
|
|
|
$
|
464
|
|
|
$
|
503
|
|
|
$
|
301
|
|
|
$
|
380
|
|
|
|
Balance Sheet
|
|
March 31,
|
|
December 31,
|
||||
(in millions)
|
|
location
|
|
2014
|
|
2013
|
||||
Cash collateral deposits held from counterparties for fuel
contracts - current
|
|
Offset against Prepaid expenses and other current assets
|
|
$
|
10
|
|
|
$
|
—
|
|
Cash collateral deposits provided to counterparties for interest
rate contracts - noncurrent
|
|
Offset against Other noncurrent liabilities
|
|
32
|
|
|
32
|
|
||
Receivable from third parties for fuel contracts - current
|
|
Accounts and other receivables
|
|
47
|
|
|
57
|
|
|
Counterparty (CP)
|
|
|
||||||||||||||||||||||||
(in millions)
|
A
|
|
B
|
|
C
|
|
D
|
|
E
|
|
Other
(a)
|
|
Total
|
||||||||||||||
Fair value of fuel derivatives
|
$
|
52
|
|
|
$
|
33
|
|
|
$
|
54
|
|
|
$
|
38
|
|
|
$
|
20
|
|
|
$
|
21
|
|
|
$
|
218
|
|
Cash collateral held from (by) CP
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||||
Aircraft collateral pledged to CP
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Letters of credit (LC)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Option to substitute LC for aircraft
|
(250) to (650) (d)
|
|
(100) to (500) (d)
|
|
N/A
|
|
(250) to (650) (d)
|
|
N/A
|
|
|
|
|
||||||||||||||
Option to substitute LC for cash
|
N/A
|
|
>(500)
|
|
(100) to (150) (e)
|
|
(50) to (250) or >(650) (d)
|
|
N/A
|
|
|
|
|
||||||||||||||
If credit rating is investment
grade, fair value of fuel
derivative level at which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash is provided to CP
|
(50) to (250) or >(650)
|
|
(50) to (100) or >(500)
|
|
>(50)
|
|
(50) to (250) or >(650)
|
|
>(50)
|
|
|
|
|
||||||||||||||
Cash is received from CP
|
>50
|
|
>150
|
|
>175 (c)
|
|
>200
|
|
>30
|
|
|
|
|
||||||||||||||
Aircraft or cash can be pledged to
CP as collateral
|
(250) to (650) (d)
|
|
(100) to (500) (d)
|
|
N/A
|
|
(250) to (650) (d)
|
|
N/A
|
|
|
|
|
||||||||||||||
If credit rating is non-investment
grade, fair value of fuel derivative
level at which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash is provided to CP
|
(0) to (250) or >(650)
|
|
(0) to (100) or >(500)
|
|
(b)
|
|
(0) to (250) or >(650)
|
|
(b)
|
|
|
|
|
||||||||||||||
Cash is received from CP
|
(b)
|
|
(b)
|
|
(b)
|
|
(b)
|
|
(b)
|
|
|
|
|
||||||||||||||
Aircraft or cash can be pledged to
CP as collateral
|
(250) to (650)
|
|
(100) to (500)
|
|
N/A
|
|
(250) to (650)
|
|
N/A
|
|
|
|
|
|
Three months ended March 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
NET INCOME
|
$
|
152
|
|
|
$
|
59
|
|
Unrealized loss on fuel derivative instruments, net of
deferred taxes of ($7) and ($1)
|
(13
|
)
|
|
(3
|
)
|
||
Unrealized gain on interest rate derivative instruments, net of
deferred taxes of $1 and $5
|
2
|
|
|
8
|
|
||
Other, net of deferred taxes of $1 and $2
|
2
|
|
|
3
|
|
||
Total other comprehensive income (loss)
|
$
|
(9
|
)
|
|
$
|
8
|
|
COMPREHENSIVE INCOME
|
$
|
143
|
|
|
$
|
67
|
|
(in millions)
|
Fuel derivatives
|
|
Interest rate derivatives
|
|
Defined benefit plan items
|
|
Other
|
|
Deferred tax
|
|
Accumulated other
comprehensive income (loss)
|
||||||||||||
Balance at December 31, 2013
|
$
|
(20
|
)
|
|
$
|
(58
|
)
|
|
$
|
65
|
|
|
$
|
8
|
|
|
$
|
2
|
|
|
(3
|
)
|
|
Changes in fair value
|
(20
|
)
|
|
(3
|
)
|
|
—
|
|
|
3
|
|
|
7
|
|
|
(13
|
)
|
||||||
Reclassification to earnings
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
4
|
|
||||||
Balance at March 31, 2014
|
$
|
(40
|
)
|
|
$
|
(55
|
)
|
|
$
|
65
|
|
|
$
|
11
|
|
|
$
|
7
|
|
|
$
|
(12
|
)
|
Three months ended March 31, 2014
|
||||||
(in millions)
|
|
Amounts reclassified from AOCI
|
|
Affected line item in the unaudited Condensed Consolidated Statement of Comprehensive Income
|
||
AOCI components
|
|
|
||||
Unrealized gain on interest rate derivative instruments
|
|
$
|
6
|
|
|
Interest expense
|
|
|
$
|
2
|
|
|
Less: Tax Expense
|
Total reclassifications for the period
|
|
$
|
4
|
|
|
Net of tax
|
Other assets (in millions)
|
March 31, 2014
|
|
December 31, 2013
|
||||
Derivative contracts
|
$
|
183
|
|
|
$
|
145
|
|
Intangible assets (a)
|
372
|
|
|
166
|
|
||
Non-current investments
|
37
|
|
|
44
|
|
||
Other
|
180
|
|
|
175
|
|
||
Other assets
|
$
|
772
|
|
|
$
|
530
|
|
Accounts payable (in millions)
|
March 31, 2014
|
|
December 31, 2013
|
||||
Accounts payable trade
|
$
|
187
|
|
|
$
|
189
|
|
Salaries payable
|
150
|
|
|
156
|
|
||
Taxes payable
|
218
|
|
|
146
|
|
||
Aircraft maintenance payable
|
336
|
|
|
331
|
|
||
Fuel payable
|
100
|
|
|
102
|
|
||
Other payable
|
308
|
|
|
323
|
|
||
Accounts payable
|
$
|
1,299
|
|
|
$
|
1,247
|
|
Accrued liabilities (in millions)
|
March 31, 2014
|
|
December 31, 2013
|
||||
Profitsharing and savings plans
|
$
|
267
|
|
|
$
|
244
|
|
Aircraft and other lease related obligations
|
109
|
|
|
173
|
|
||
Vacation pay
|
282
|
|
|
278
|
|
||
Health
|
71
|
|
|
73
|
|
||
Derivative contracts
|
—
|
|
|
12
|
|
||
Workers compensation
|
162
|
|
|
161
|
|
||
Accrued taxes
|
60
|
|
|
65
|
|
||
Other
|
217
|
|
|
223
|
|
||
Accrued liabilities
|
$
|
1,168
|
|
|
$
|
1,229
|
|
Other noncurrent liabilities (in millions)
|
March 31, 2014
|
|
December 31, 2013
|
||||
Postretirement obligation
|
$
|
140
|
|
|
$
|
138
|
|
Non-current lease-related obligations
|
266
|
|
|
290
|
|
||
Other deferred compensation
|
156
|
|
|
163
|
|
||
Deferred gains from sale and leaseback of aircraft
|
62
|
|
|
65
|
|
||
Derivative contracts
|
41
|
|
|
45
|
|
||
Other
|
61
|
|
|
70
|
|
||
Other noncurrent liabilities
|
$
|
726
|
|
|
$
|
771
|
|
(in millions)
|
|
B717 lease/sublease liability
|
||
Balance at December 31, 2012
|
|
$
|
128
|
|
Lease/sublease accretion
|
|
6
|
|
|
Lease/sublease payments, net (a)
|
|
(12
|
)
|
|
Balance at December 31, 2013
|
|
$
|
122
|
|
Lease/sublease accretion
|
|
2
|
|
|
Lease/sublease payments, net (a)
|
|
(29
|
)
|
|
Balance at March 31, 2014
|
|
$
|
95
|
|
|
|
|
|
Fair value measurements at reporting date using:
|
||||||||||||
|
|
|
|
Quoted prices in
active markets
for identical assets
|
|
Significant
other observable
inputs
|
|
Significant
unobservable
inputs
|
||||||||
Description
|
|
March 31, 2014
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets
|
|
(in millions)
|
||||||||||||||
Cash equivalents
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents (a)
|
|
$
|
1,381
|
|
|
$
|
1,381
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
|
280
|
|
|
—
|
|
|
280
|
|
|
—
|
|
||||
Certificates of deposit
|
|
10
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||
Eurodollar time deposits
|
|
70
|
|
|
—
|
|
|
70
|
|
|
—
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Treasury bills
|
|
1,520
|
|
|
1,520
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
|
237
|
|
|
—
|
|
|
237
|
|
|
—
|
|
||||
Noncurrent investments (b)
|
|
|
|
|
|
|
|
|
||||||||
Auction rate securities
|
|
32
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||
Interest rate derivatives
|
|
18
|
|
|
—
|
|
|
18
|
|
|
—
|
|
||||
Fuel derivatives:
|
|
|
|
|
|
|
|
|
||||||||
Swap contracts (c)
|
|
20
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||
Option contracts (c)
|
|
426
|
|
|
—
|
|
|
—
|
|
|
426
|
|
||||
Other available-for-sale securities
|
|
61
|
|
|
56
|
|
|
—
|
|
|
5
|
|
||||
Total assets
|
|
$
|
4,055
|
|
|
$
|
2,957
|
|
|
$
|
635
|
|
|
$
|
463
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Fuel derivatives:
|
|
|
|
|
|
|
|
|
||||||||
Swap contracts (c)
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
Option contracts (c)
|
|
(220
|
)
|
|
—
|
|
|
—
|
|
|
(220
|
)
|
||||
Interest rate derivatives
|
|
(73
|
)
|
|
—
|
|
|
(73
|
)
|
|
—
|
|
||||
Deferred compensation
|
|
(150
|
)
|
|
(150
|
)
|
|
—
|
|
|
—
|
|
||||
Total liabilities
|
|
$
|
(451
|
)
|
|
$
|
(150
|
)
|
|
$
|
(81
|
)
|
|
$
|
(220
|
)
|
|
|
|
|
Fair value measurements at reporting date using:
|
||||||||||||
|
|
|
|
Quoted prices in
active markets
for identical assets
|
|
Significant
other observable
inputs
|
|
Significant
unobservable
inputs
|
||||||||
Description
|
|
December 31, 2013
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets
|
|
(in millions)
|
||||||||||||||
Cash equivalents
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents (a)
|
|
$
|
992
|
|
|
$
|
992
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
|
280
|
|
|
—
|
|
|
280
|
|
|
—
|
|
||||
Certificates of deposit
|
|
23
|
|
|
—
|
|
|
23
|
|
|
—
|
|
||||
Eurodollar time deposits
|
|
60
|
|
|
—
|
|
|
60
|
|
|
—
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Treasury bills
|
|
1,570
|
|
|
1,570
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
|
227
|
|
|
—
|
|
|
227
|
|
|
—
|
|
||||
Noncurrent investments (b)
|
|
|
|
|
|
|
|
|
||||||||
Auction rate securities
|
|
39
|
|
|
—
|
|
|
—
|
|
|
39
|
|
||||
Interest rate derivatives
|
|
20
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||
Fuel derivatives:
|
|
|
|
|
|
|
|
|
||||||||
Swap contracts (c)
|
|
16
|
|
|
—
|
|
|
16
|
|
|
—
|
|
||||
Option contracts (c)
|
|
458
|
|
|
—
|
|
|
—
|
|
|
458
|
|
||||
Option contracts (d)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||
Other available-for-sale securities
|
|
63
|
|
|
58
|
|
|
—
|
|
|
5
|
|
||||
Total assets
|
|
$
|
3,757
|
|
|
$
|
2,620
|
|
|
$
|
626
|
|
|
$
|
511
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Fuel derivatives:
|
|
|
|
|
|
|
|
|
||||||||
Swap contracts (c)
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
Option contracts (c)
|
|
(274
|
)
|
|
—
|
|
|
—
|
|
|
(274
|
)
|
||||
Option contracts (d)
|
|
(21
|
)
|
|
—
|
|
|
—
|
|
|
(21
|
)
|
||||
Interest rate derivatives
|
|
(77
|
)
|
|
—
|
|
|
(77
|
)
|
|
—
|
|
||||
Deferred Compensation
|
|
(158
|
)
|
|
(158
|
)
|
|
—
|
|
|
—
|
|
||||
Total liabilities
|
|
$
|
(538
|
)
|
|
$
|
(158
|
)
|
|
$
|
(85
|
)
|
|
$
|
(295
|
)
|
|
Fair value measurements using significant
unobservable inputs (Level 3)
|
||||||||||||||
|
Fuel
|
|
Auction rate
|
|
Other
|
|
|
||||||||
(in millions)
|
derivatives
|
|
securities
|
|
securities
|
|
Total
|
||||||||
Balance at December 31, 2013
|
$
|
172
|
|
|
$
|
39
|
|
|
$
|
5
|
|
|
$
|
216
|
|
Total gains or (losses) (realized or unrealized)
|
|
|
|
|
|
|
|
|
|
|
|
||||
Included in earnings
|
69
|
|
|
—
|
|
|
—
|
|
|
69
|
|
||||
Included in other comprehensive income
|
(22
|
)
|
|
2
|
|
|
—
|
|
|
(20
|
)
|
||||
Purchases
|
21
|
|
(a)
|
—
|
|
|
—
|
|
|
21
|
|
||||
Sales
|
(27
|
)
|
(a)
|
(9
|
)
|
|
—
|
|
|
(36
|
)
|
||||
Settlements
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
||||
Balance at March 31, 2014
|
$
|
206
|
|
|
$
|
32
|
|
(b)
|
$
|
5
|
|
|
$
|
243
|
|
The amount of total gains for the period
included in earnings attributable to the
change in unrealized gains or losses relating
to assets still held at March 31, 2014
|
$
|
67
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
67
|
|
(in millions)
|
Carrying value
|
|
Estimated fair value
|
|
Fair value level hierarchy
|
||||
5.25% Notes due 2014
|
$
|
355
|
|
|
$
|
361
|
|
|
Level 2
|
5.75% Notes due 2016
|
318
|
|
|
349
|
|
|
Level 2
|
||
5.25% Convertible Senior Notes due 2016
|
114
|
|
|
206
|
|
|
Level 2
|
||
5.125% Notes due 2017
|
321
|
|
|
347
|
|
|
Level 2
|
||
Fixed-rate 717 Aircraft Notes payable through 2017 - 10.38%
|
50
|
|
|
50
|
|
|
Level 2
|
||
French Credit Agreements due 2018 - 1.05%
|
46
|
|
|
46
|
|
|
Level 3
|
||
Fixed-rate 737 Aircraft Notes payable through 2018 - 7.02%
|
28
|
|
|
29
|
|
|
Level 3
|
||
Term Loan Agreement due 2019 - 6.315%
|
203
|
|
|
206
|
|
|
Level 3
|
||
Term Loan Agreement due 2019 - 6.84%
|
79
|
|
|
84
|
|
|
Level 3
|
||
Term Loan Agreement due 2020 - 5.223%
|
403
|
|
|
380
|
|
|
Level 3
|
||
Floating-rate 737 Aircraft Notes payable through 2020
|
329
|
|
|
324
|
|
|
Level 3
|
||
Pass Through Certificates due 2022 - 6.24%
|
363
|
|
|
420
|
|
|
Level 2
|
||
7.375% Debentures due 2027
|
136
|
|
|
162
|
|
|
Level 2
|
|
|
Three months ended March 31,
|
|
|
|
|||||
|
|
2014
|
|
2013
|
|
Change
|
||||
Revenue passengers carried
|
|
25,055,809
|
|
|
25,203,934
|
|
|
(0.6
|
)%
|
|
Enplaned passengers
|
|
30,656,581
|
|
|
30,712,625
|
|
|
(0.2
|
)%
|
|
Revenue passenger miles (RPMs) (000s)
(1)
|
|
24,155,317
|
|
|
23,756,743
|
|
|
1.7
|
%
|
|
Available seat miles (ASMs) (000s)
(2)
|
|
30,474,582
|
|
|
30,801,424
|
|
|
(1.1
|
)%
|
|
Load factor
(3)
|
|
79.3
|
%
|
|
77.1
|
%
|
|
2.2
|
|
pts
|
Average length of passenger haul (miles)
|
|
964
|
|
|
943
|
|
|
2.2
|
%
|
|
Average aircraft stage length (miles)
|
|
710
|
|
|
693
|
|
|
2.5
|
%
|
|
Trips flown
|
|
299,638
|
|
|
318,514
|
|
|
(5.9
|
)%
|
|
Average passenger fare
|
|
156.96
|
|
|
152.29
|
|
|
3.1
|
%
|
|
Passenger revenue yield per RPM (cents)
(4)
|
|
16.28
|
|
|
16.16
|
|
|
0.7
|
%
|
|
Operating revenue per ASM (cents)
(5)
|
|
13.67
|
|
|
13.26
|
|
|
3.1
|
%
|
|
Passenger revenue per ASM (cents)
(6)
|
|
12.90
|
|
|
12.46
|
|
|
3.5
|
%
|
|
Operating expenses per ASM (cents)
(7)
|
|
12.96
|
|
|
13.03
|
|
|
(0.5
|
)%
|
|
Operating expenses per ASM, excluding fuel (cents)
|
|
8.65
|
|
|
8.30
|
|
|
4.2
|
%
|
|
Operating expenses per ASM, excluding fuel and profitsharing (cents)
|
|
8.56
|
|
|
8.25
|
|
|
3.8
|
%
|
|
Fuel costs per gallon, including fuel tax
|
|
3.10
|
|
|
3.36
|
|
|
(7.7
|
)%
|
|
Fuel costs per gallon, including fuel tax, economic
|
|
3.08
|
|
|
3.29
|
|
|
(6.4
|
)%
|
|
Fuel consumed, in gallons (millions)
|
|
422
|
|
|
432
|
|
|
(2.3
|
)%
|
|
Active fulltime equivalent Employees
|
|
45,163
|
|
|
45,791
|
|
|
(1.4
|
)%
|
|
Aircraft at end of period
(8)
|
|
676
|
|
|
699
|
|
|
(3.3
|
)%
|
|
|
Three months ended March 31,
|
|
Percent
|
|||||||
|
2014
|
|
2013
|
|
Change
|
|||||
Fuel and oil expense, unhedged
|
$
|
1,332
|
|
|
$
|
1,405
|
|
|
|
|
Add (Deduct): Fuel hedge (gains) losses included in Fuel and oil expense
|
(18
|
)
|
|
52
|
|
|
|
|||
Fuel and oil expense, as reported
|
$
|
1,314
|
|
|
$
|
1,457
|
|
|
|
|
Deduct: Net impact from fuel contracts
|
(9
|
)
|
|
(29
|
)
|
|
|
|||
Fuel and oil expense, non-GAAP (economic)
|
$
|
1,305
|
|
|
$
|
1,428
|
|
|
(8.6
|
)%
|
|
|
|
|
|
|
|||||
Total operating expenses, as reported
|
$
|
3,951
|
|
|
$
|
4,014
|
|
|
|
|
Deduct: Reclassification between Fuel and oil and Other (gains) losses, net,
associated with current period settled contracts
|
(1
|
)
|
|
—
|
|
|
|
|
||
Deduct: Contracts settling in the current period, but for which gains have been
recognized in a prior period*
|
(8
|
)
|
|
(29
|
)
|
|
|
|
||
Deduct: Acquisition and integration costs
|
(18
|
)
|
|
(13
|
)
|
|
|
|
||
Total operating expenses, non-GAAP
|
$
|
3,924
|
|
|
$
|
3,972
|
|
|
(1.2
|
)%
|
|
|
|
|
|
|
|||||
Operating income, as reported
|
$
|
215
|
|
|
$
|
70
|
|
|
|
|
Add: Reclassification between Fuel and oil and Other (gains) losses, net,
associated with current period settled contracts
|
1
|
|
|
—
|
|
|
|
|
||
Add: Contracts settling in the current period, but for which gains have been
recognized in a prior period*
|
8
|
|
|
29
|
|
|
|
|
||
Add: Acquisition and integration costs
|
18
|
|
|
13
|
|
|
|
|
||
Operating income, non-GAAP
|
$
|
242
|
|
|
$
|
112
|
|
|
116.1
|
%
|
|
|
|
|
|
|
|||||
Net income, as reported
|
$
|
152
|
|
|
$
|
59
|
|
|
|
|
Deduct: Mark-to-market impact from fuel contracts settling in future periods
|
(55
|
)
|
|
(61
|
)
|
|
|
|
||
Add (Deduct): Ineffectiveness from fuel hedges settling in future periods
|
(13
|
)
|
|
10
|
|
|
|
|
||
Add: Other net impact of fuel contracts settling in the current or a prior period
(excluding reclassifications)
|
8
|
|
|
29
|
|
|
|
|
||
Add: Income tax impact of fuel contracts
|
23
|
|
|
8
|
|
|
|
|
||
Add: Acquisition and integration costs, net (a)
|
11
|
|
|
8
|
|
|
|
|
||
Net income, non-GAAP
|
$
|
126
|
|
|
$
|
53
|
|
|
137.7
|
%
|
|
|
|
|
|
|
|||||
Net income per share, diluted, as reported
|
$
|
0.22
|
|
|
$
|
0.08
|
|
|
|
|
Deduct: Net impact to net income above from fuel contracts
divided by dilutive shares (a)
|
(0.06
|
)
|
|
(0.02
|
)
|
|
|
|
||
Add: Impact of special items, net (a)
|
0.02
|
|
|
0.01
|
|
|
|
|
||
Net income per share, diluted, non-GAAP
|
$
|
0.18
|
|
|
$
|
0.07
|
|
|
157.1
|
%
|
|
|
|
|
|
|
|||||
Operating expenses per ASM (cents)
|
|
12.96
|
¢
|
|
|
13.03
|
¢
|
|
|
|
Deduct: Fuel expense divided by ASMs
|
(4.31
|
)
|
|
(4.73
|
)
|
|
|
|
||
Deduct: Impact of special items
|
(0.06
|
)
|
|
(0.04
|
)
|
|
|
|
||
Operating expenses per ASM, non-GAAP, excluding fuel and special items (cents)
|
|
8.59
|
¢
|
|
|
8.26
|
¢
|
|
4.0
|
%
|
|
|
|
|
||||
|
Twelve Months Ended
|
|
Twelve Months Ended
|
||||
|
March 31, 2014
|
|
March 31, 2013
|
||||
Operating Income, as reported
|
$
|
1,423
|
|
|
$
|
672
|
|
Net impact from fuel contracts
|
63
|
|
|
86
|
|
||
Acquisition and integration costs
|
92
|
|
|
182
|
|
||
Operating Income, non-GAAP
|
$
|
1,578
|
|
|
$
|
940
|
|
Net adjustment for aircraft leases (1)
|
144
|
|
|
121
|
|
||
Adjustment for fuel hedge accounting
|
(73
|
)
|
|
(35
|
)
|
||
Adjusted Operating Income, non-GAAP
|
$
|
1,649
|
|
|
$
|
1,026
|
|
|
|
|
|
||||
Average invested capital (2)
|
$
|
11,573
|
|
|
$
|
12,261
|
|
Equity adjustment for hedge accounting
|
23
|
|
|
98
|
|
||
Adjusted average invested capital
|
$
|
11,596
|
|
|
$
|
12,359
|
|
|
|
|
|
||||
ROIC, pre-tax
|
14.2
|
%
|
|
8.3
|
%
|
|
|
Three months ended
|
|
|
|||||||
(in millions, except per share amounts)
|
|
March 31,
|
|
|
|||||||
GAAP
|
|
2014
|
|
2013
|
|
Percent Change
|
|||||
Operating income
|
|
$
|
215
|
|
|
$
|
70
|
|
|
207.1
|
%
|
Net income
|
|
$
|
152
|
|
|
$
|
59
|
|
|
157.6
|
%
|
Net income per share, diluted
|
|
$
|
0.22
|
|
|
$
|
0.08
|
|
|
175.0
|
%
|
|
|
|
|
|
|
|
|
|
|
||
Non-GAAP
|
|
|
|
|
|
|
|
||||
Operating income
|
|
$
|
242
|
|
|
$
|
112
|
|
|
116.1
|
%
|
Net income
|
|
$
|
126
|
|
|
$
|
53
|
|
|
137.7
|
%
|
Net income per share, diluted
|
|
$
|
0.18
|
|
|
$
|
0.07
|
|
|
157.1
|
%
|
•
|
At Washington Reagan National Airport, the Company acquired
54
additional slots (for
27
additional daily roundtrip flights). By December 31, 2014, these additional slots are expected to increase Southwest's service at Reagan from
17
daily departures to
44
daily departures, servicing
14
destinations including Chicago (Midway), Dallas (Love Field), New Orleans, Indianapolis, Tampa, Nashville, Houston (Hobby), St. Louis, and Akron-Canton.
|
•
|
At Dallas Love Field, the Company announced it will begin serving
15
new nonstop destinations by the end of
2014
, with an additional
five
new nonstop destinations currently planned to begin service in
2015
. These routes were made possible by the official repeal of the Wright Amendment federal flight restrictions at Love Field, which come to an end on
October 13, 2014
.
|
•
|
At New York LaGuardia Airport, in the wake of the Company's acquisition of
12
additional slots (for
6
additional daily roundtrip flights) announced in fourth quarter 2013, the Company is increasing service between LaGuardia and Nashville, Houston (Hobby), Chicago (Midway), and Akron-Canton beginning in
May 2014
.
|
Period
|
Average percent of estimated fuel consumption covered by fuel derivative contracts at varying WTI/Brent crude oil and Gulf Coast jet fuel-equivalent price levels
|
|
2Q 2014
|
Approx. 15%
|
|
Full Year 2014
|
Approx. 20%
|
|
2015
|
Approx. 50%
|
|
2016
|
Approx. 35%
|
|
2017
|
Approx. 50%
|
|
2018
|
Approx. 5%
|
Year
|
|
Fair value (liability) of fuel derivative contracts at March 31, 2014
|
|
Amount of gains (losses) deferred in AOCI at March 31, 2014 (net of tax)
|
||||
Remainder of 2014
|
|
$
|
24
|
|
|
$
|
10
|
|
2015
|
|
85
|
|
|
(43
|
)
|
||
2016
|
|
96
|
|
|
5
|
|
||
2017
|
|
13
|
|
|
3
|
|
||
Total
|
|
$
|
218
|
|
|
$
|
(25
|
)
|
|
Estimated economic jet fuel price per gallon,
including taxes |
|
Average Brent Crude Oil price per barrel
|
2Q 2014 (2)
|
Full Year 2014 (2)
|
$85
|
$2.35 - $2.40
|
$2.60 - $2.65
|
$95
|
$2.65 - $2.70
|
$2.75 - $2.80
|
Current Market (1)
|
$3.00 - $3.10
|
$3.00 - $3.10
|
$115
|
$3.15 - $3.20
|
$3.15 - $3.20
|
$125
|
$3.40 - $3.45
|
$3.30 - $3.35
|
Estimated Premium Costs (3)
|
$15M - $20M
|
$60M - $70M
|
|
Three months ended March 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Mark-to-market impact from fuel contracts settling in future periods
|
$
|
(55
|
)
|
|
$
|
(61
|
)
|
Ineffectiveness from fuel hedges settling in future periods
|
(13
|
)
|
|
10
|
|
||
Realized ineffectiveness and mark-to-market (gains) or losses
|
(1
|
)
|
|
—
|
|
||
Premium cost of fuel contracts
|
17
|
|
|
5
|
|
||
Other
|
(1
|
)
|
|
—
|
|
||
|
$
|
(53
|
)
|
|
$
|
(46
|
)
|
|
The Boeing Company
737 NG
|
|
|
The Boeing Company
737 MAX
|
|
|
|||||||
|
-700 Firm Orders
|
|
-800 Firm Orders
|
Options
|
Additional -700 A/C
|
|
-7
Firm Orders |
-8
Firm Orders |
|
Options
|
|
Total
|
|
2014
|
—
|
|
33
|
—
|
14
|
|
—
|
—
|
|
—
|
|
47
|
(3)
|
2015
|
—
|
|
19
|
—
|
5
|
|
—
|
—
|
|
—
|
|
24
|
|
2016
|
31
|
|
—
|
12
|
—
|
|
—
|
—
|
|
—
|
|
43
|
|
2017
|
15
|
|
—
|
12
|
—
|
|
—
|
14
|
|
—
|
|
41
|
|
2018
|
10
|
|
—
|
12
|
—
|
|
—
|
13
|
|
—
|
|
35
|
|
2019
|
—
|
|
—
|
—
|
—
|
|
15
|
10
|
|
—
|
|
25
|
|
2020
|
—
|
|
—
|
—
|
—
|
|
14
|
22
|
|
—
|
|
36
|
|
2021
|
—
|
|
—
|
—
|
—
|
|
1
|
33
|
|
18
|
|
52
|
|
2022
|
—
|
|
—
|
—
|
—
|
|
—
|
30
|
|
19
|
|
49
|
|
2023
|
—
|
|
—
|
—
|
—
|
|
—
|
24
|
|
23
|
|
47
|
|
2024
|
—
|
|
—
|
—
|
—
|
|
—
|
24
|
|
23
|
|
47
|
|
2025
|
—
|
|
—
|
—
|
—
|
|
—
|
—
|
|
36
|
|
36
|
|
2026
|
—
|
|
—
|
—
|
—
|
|
—
|
—
|
|
36
|
|
36
|
|
2027
|
—
|
|
—
|
—
|
—
|
|
—
|
—
|
|
36
|
|
36
|
|
Total
|
56
|
(1)
|
52
|
36
|
19
|
|
30
|
170
|
(2)
|
191
|
|
554
|
|
|
|
|
|
Average
|
|
Number
|
|
Number
|
|
Number
|
||||
Type
|
|
Seats
|
|
Age (Yrs)
|
|
of Aircraft
|
|
Owned
|
|
Leased
|
||||
717-200
|
|
117
|
|
13
|
|
|
54
|
|
|
10
|
|
|
44
|
|
737-300
|
|
137 or 143
|
|
20
|
|
|
122
|
|
|
76
|
|
|
46
|
|
737-500
|
|
122
|
|
23
|
|
|
15
|
|
|
9
|
|
|
6
|
|
737-700
|
|
137 or 143
|
|
10
|
|
|
431
|
|
|
382
|
|
|
49
|
|
737-800
|
|
175
|
|
1
|
|
|
54
|
|
|
47
|
|
|
7
|
|
TOTALS
|
|
|
|
|
|
676
|
|
|
524
|
|
|
152
|
|
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
|
|
||||||
January 1, 2014 through
January 31, 2014
|
|
1,000,000
|
|
|
$
|
21.08
|
|
|
1,000,000
|
|
|
$
|
313,777,071
|
|
|
February 1, 2014 through
February 28, 2014
|
|
11,311,382
|
|
(2)
|
$
|
—
|
|
(2)
|
11,311,382
|
|
|
$
|
20,068,782
|
|
(2)
|
March 1, 2014 through
March 31, 2014
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
20,068,782
|
|
|
Total
|
|
12,311,382
|
|
|
|
|
12,311,382
|
|
|
|
|
(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 to a total of $1.0 billion. On May 15, 2013, the Company's Board of Directors further increased the previous share repurchase authorization by an additional $500 million to a total of $1.5 billion. Repurchases are made in accordance with applicable securities laws in open market, private, or accelerated repurchase transactions from time to time, depending on market conditions, and may be discontinued at any time.
|
(2)
|
During February 2014, the Company repurchased 4,418,000 shares of its common stock on the open market at an average price of $21.21 per share. Following these open market repurchases, under the First Quarter ASR Program, the Company paid $200 million and received an initial delivery of 6,893,382 shares during first quarter 2014, representing an estimated 75 percent of the shares to be purchased by the Company under the First Quarter ASR Program based on a price of $21.76 per share, which was the closing price of the Company's common stock on the New York Stock Exchange on February 21, 2014. The specific number of shares that the Company ultimately will repurchase under the First Quarter ASR Program will be determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period to be completed in second quarter 2014. At settlement, under certain circumstances, the third party financial institution may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required to deliver shares of its common stock or may elect to make a cash payment to the third party financial institution.
|
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. 86 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.
|
|
SOUTHWEST AIRLINES CO.
|
|
|
|
|
April 30, 2014
|
By
|
/s/ Tammy Romo
|
|
|
|
|
|
Tammy Romo
|
|
|
Senior Vice President Finance & 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. 86 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.
|
Supplemental Agreement No. 86
|
|
to
|
|
Purchase Agreement No. 1810
|
|
between
|
|
THE BOEING COMPANY
|
|
and
|
|
SOUTHWEST AIRLINES CO.
|
|
Relating to Boeing Model 737-7H4 and 737-8H4 Aircraft
|
P.A. No. 1810
|
SA-86-
1
|
|
THE BOEING COMPANY
|
SOUTHWEST AIRLINES CO.
|
|
|
|
|
By:
/s/ Jeff Solomon
|
By:
/s/ Chris Monroe
|
|
Chris Monroe
|
Its:
Attorney‑In‑Fact
|
Its:
VP, Treasurer
|
P.A. No. 1810
|
SA-86-
2
|
|
|
TABLE OF CONTENTS
|
|
|
|
|
Page
|
SA
|
|
|
Number
|
Number
|
1.
|
Subject Matter of Sale ........................................................................................ 1-1
|
SA-82
|
|
|
|
2.
|
Delivery, Title and Risk of Loss ................................................................................................................ 2-1
|
SA-28
|
|
|
|
3.
|
Price of Aircraft ................................................................................................. 3-1
|
SA-82
|
|
|
|
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
|
|
P.A. No. 1810
|
i
|
|
K/SWA
|
|
SA-86
|
|
TABLE OF CONTENTS
|
|
|
|
SA
|
|
|
Number
|
TABLE
|
|
|
|
|
|
1a
|
Aircraft Information Table - Block 700LUV Aircraft
|
SA-85
|
|
|
|
1b
|
Aircraft Information Table - Block 800LUV Aircraft
|
SA-82
|
|
|
|
1c
|
Aircraft Information Table - Block 800LUV Aircraft
|
SA-86
|
|
(non-ETOPS Configuration)
|
|
EXHIBITS
|
|
|
|
|
|
A-5
|
Aircraft Configuration - Block 700LUV Aircraft
|
SA-75
|
|
|
|
A-6
|
Aircraft Configuration - Block 800LUV Aircraft
|
SA-75
|
|
|
|
A-7
|
Aircraft Configuration - Block 800LUV Aircraft
|
SA-84
|
|
(non-ETOPS Configuration)
|
|
LETTER AGREEMENTS
|
||
|
|
|
1810-1R1
|
Waiver of Aircraft Demonstration Flight
|
SA-75
|
P.A. No. 1810
|
ii
|
|
K/SWA
|
|
SA-86
|
|
TABLE OF CONTENTS
|
|
|
|
SA
|
|
|
Number
|
RESTRICTED LETTER AGREEMENTS
|
||
|
|
|
6-1162-RLL-932R3
|
***
|
SA-75
|
|
|
|
6-1162-RLL-934R5
|
Disclosure of Confidential
Information
|
SA-75
|
|
|
|
|
|
|
6-1162-RLL-941R3
|
Other Matters
|
SA-75
|
|
|
|
|
|
|
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
|
SWA-PA-1810-LA-1001315R3
|
***
|
SA-85
|
|
Attachment A
|
SA-85
|
SWA-PA-1810-LA-1003498 R1
|
***
|
SA-75
|
|
|
|
SWA-PA-1810-LA-1003490R2
|
***
|
SA-82
|
|
|
|
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 B - Option Aircraft Information Table
|
SA-83
|
SWA-PA-1810-LA-1105885R2
|
***
|
SA-84
|
|
|
|
SWA-PA-1810-LA-1105886R1
|
***
|
SA-82
|
|
|
|
|
|
|
SWA-PA-1810-LA-1105887
|
***
|
SA-75
|
|
|
|
P.A. No. 1810
|
iii
|
|
K/SWA
|
|
SA-86
|
|
TABLE OF CONTENTS
|
|
|
|
SA
|
|
|
Number
|
SWA-PA-1810-LA-1105888R4
|
***
|
SA-85
|
|
|
|
SWA-PA-1810-LA-1105889
|
***
|
SA-75
|
|
|
|
SWA-PA-1810/03729-LA-1301169
|
***
|
SA-83
|
|
|
|
SWA-PA-1810-LA-1303010
|
***
|
SA-85
|
Table
|
Title
|
Last Updated under SA
|
Current Status
|
1
|
Aircraft Information Table
|
SA-75
|
Inactive
|
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
|
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
|
P.A. No. 1810
|
iv
|
|
K/SWA
|
|
SA-86
|
|
TABLE OF CONTENTS
|
|
A-4
|
Aircraft Configuration - 737- 700 Block T-W-2b Aircraft
|
SA-66
|
Inactive
|
C.2
|
737-800 Customer Support Variables
|
SA-71
|
Deleted under SA-75
|
D
|
Price Adjustment Due to
Economic Fluctuations - Aircraft Price Adjustment
(July 1992 Base Price)
|
|
Inactive
|
D-1
|
Price Adjustment Due to Economic Fluctuations - Aircraft Price Adjustment
(July 1999 Base Price)
|
SA-13
|
Inactive
|
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
|
SA-1
|
Inactive
|
P.A. No. 1810
|
v
|
|
K/SWA
|
|
SA-86
|
|
TABLE OF CONTENTS
|
|
Letter Agreement
|
Title
|
Last Updated under SA
|
Current Status
|
|
Customer Unique Changes
|
|
|
6-1162-RLL-2037
|
Reconciliation of the Aircraft Basic Price
|
SA-1
|
Inactive
|
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
|
6-1162-NIW-890R1
|
***
|
SA-75
SA-39
|
Inactive
|
6-1162-KJJ-054R2
|
Business Matters
|
SA-75
|
Inactive
|
6-1162-JMG-669R9
|
***
|
SA-75
SA-75
SA-54
|
Inactive
|
SWA-PA-1810-LA- 02710R1
|
***
|
SA-72
|
Inactive
|
P.A. No. 1810
|
vi
|
|
K/SWA
|
|
SA-86
|
Airframe Model/MTOW:
|
737-800
|
174200 pounds
|
|
|
Detail Specification:
|
|
D019A001SWA38P-1 Rev C (3/29/2013)
|
|
|||
Engine Model/Thrust:
|
CFM56-7B27
|
27300 pounds
|
Note 1
|
|
Base Aircraft Price Base Year/Escalation Formula:
|
Jul-11
|
ECI-MFG/CPI
|
||||
Base Aircraft Price:
|
|
***
|
|
|
Engine Price Base Year/Escalation Formula:
|
N/A
|
N/A
|
||||
Special Features:
|
***
|
|
|
|
|
|
|
|
|
||
Add'l Features/Changes
|
***
|
|
|
|
|
|
|
|
|
||
Total Special Features (Exhibit A-7)
|
***
|
|
|
|
|
|
|
|
|||
Sub-Total of Airframe 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:
|
***
|
|
|
|
|
|
|
|
|
|
Escalation
|
Aircraft
|
|
|
Escalation Estimate
|
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
|
|||||||||||||
Delivery
|
Number of
|
Factor
|
Serial
|
Escalation
|
Sub-Block
|
Adv Payment Base
|
At Signing
|
24 Mos.
|
21/18/12/9/6 Mos.
|
Total
|
||||||||||
Date
|
Aircraft
|
(Airframe)
|
Number
|
Forecast
|
Note 2
|
Price Per A/P
|
***
|
***
|
***
|
***
|
||||||||||
Sep-2013
|
3
|
***
|
36933, 36912, 36914
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Nov-2013
|
3
|
***
|
36915, 33939, 42526
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Dec-2013
|
3
|
***
|
36917, 36919, 36731
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Mar-2014
|
2
|
***
|
37004
, 36896
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Apr-2014
|
3
|
***
|
42384, 36894, 36895
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
May-2014
|
3
|
***
|
36897, 42385, 42521
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Jun-2014
|
4
|
***
|
36898, 36905, 42522, 42523
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Jun-2014
|
2
|
***
|
tbd, tbd
|
***
|
OPEX
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Jul-2014
|
1
|
***
|
36,911
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Jul-2014
|
3
|
***
|
tbd, tbd, tbd
|
***
|
OPEX
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Aug-2014
|
6
|
***
|
36907, 42524,35973, 42525, 36935, 42528
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Sep-2014
|
2
|
***
|
42527, 42531
|
***
|
|
***
|
***
|
***
|
***
|
***
|
SWA-PA-01810
|
|
SA-86
|
63879 / 63887 / 64110 / 64111 / 66379
|
Boeing Proprietary
|
Page
1
|
Table 1c to
|
||
Purchase Agreement No. PA-01810
|
||
Aircraft Delivery, Description, Price and Advance Payments
|
||
Block 800LUV Aircraft (non-ETOPS Configuration)
|
|
|
Escalation
|
Aircraft
|
|
|
Escalation Estimate
|
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
|
|||||||||||||
Delivery
|
Number of
|
Factor
|
Serial
|
Escalation
|
Sub-Block
|
Adv Payment Base
|
At Signing
|
24 Mos.
|
21/18/12/9/6 Mos.
|
Total
|
||||||||||
Date
|
Aircraft
|
(Airframe)
|
Number
|
Forecast
|
Note 2
|
Price Per A/P
|
***
|
***
|
***
|
***
|
||||||||||
Oct-2014
|
2
|
***
|
36909, 36920
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Nov-2014
|
1
|
***
|
36971
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Dec-2014
|
2
|
***
|
37037, 37045
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Dec-2014
|
2
|
***
|
42529, 42530
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Jan-2015
|
2
|
***
|
36899, 42535
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Feb-2015
|
3
|
***
|
36901, 36654, 36906
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Mar-2015
|
3
|
***
|
36902, 36936, 36655
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Apr-2015
|
3
|
***
|
36649, 36652, 36656
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
May-2015
|
2
|
***
|
36903, 36657
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Nov-2015
|
3
|
***
|
36937, 36715, 36940
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Dec-2015
|
3
|
***
|
36941, 36734, 35976
|
***
|
|
***
|
***
|
***
|
***
|
***
|
||||||||||
Total:
|
61
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Notes:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
1) ***
|
|
|||||||||||||||||||
|
|
|||||||||||||||||||
2) The sub-block identifier is used to denote applicability of certain business terms as referenced in Letter Agreement SWA-PA-1810-LA-1105888R
4
to the Purchase Agreement.
|
SWA-PA-01810
|
|
SA-86
|
63879 / 63887 / 64110 / 64111 / 66379
|
Boeing Proprietary
|
Page
2
|
|
By:
|
/s/ Gary C. Kelly
|
|
|
Gary C. Kelly
|
|
|
Chief Executive Officer
|
|
By:
|
/s/ Tammy Romo
|
|
|
Tammy Romo
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
By:
|
/s/ Gary C. Kelly
|
|
|
Gary C. Kelly
|
|
|
Chief Executive Officer
|
|
By:
|
/s/ Tammy Romo
|
|
|
Tammy Romo
|
|
|
Chief Financial Officer
|