þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the fiscal year ended December 31, 2018
|
|
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)
|
|
Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
Common Stock ($1.00 par value)
|
|
New York Stock Exchange
|
Large accelerated filer
þ
|
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
|
Smaller reporting company
¨
|
|
|
Emerging growth company
¨
|
|
|
|
|
|
PART I
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
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||
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PART II
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
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||
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||
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||
|
||
Item 7A.
|
||
Item 8.
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||
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||
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||
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||
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||
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||
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
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||
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|
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PART III
|
|
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
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PART IV
|
|
Item 15.
|
||
Item 16.
|
|
|
Item 1.
|
Business
|
Year
|
|
Cost
(Millions)
|
|
Average
Cost Per
Gallon
|
|
Percentage of
Operating
Expenses
|
|||||
2003
|
|
$
|
920
|
|
|
$
|
0.80
|
|
|
16.5
|
%
|
2004
|
|
$
|
1,106
|
|
|
$
|
0.92
|
|
|
18.1
|
%
|
2005
|
|
$
|
1,470
|
|
|
$
|
1.13
|
|
|
21.4
|
%
|
2006
|
|
$
|
2,284
|
|
|
$
|
1.64
|
|
|
28.0
|
%
|
2007
|
|
$
|
2,690
|
|
|
$
|
1.80
|
|
|
29.7
|
%
|
2008
|
|
$
|
3,713
|
|
|
$
|
2.44
|
|
|
35.1
|
%
|
2009*
|
|
$
|
3,193
|
|
|
$
|
2.22
|
|
|
31.2
|
%
|
2010*
|
|
$
|
3,755
|
|
|
$
|
2.61
|
|
|
33.4
|
%
|
2011*
|
|
$
|
5,751
|
|
|
$
|
3.25
|
|
|
38.2
|
%
|
2012*
|
|
$
|
6,156
|
|
|
$
|
3.32
|
|
|
37.3
|
%
|
2013*
|
|
$
|
5,823
|
|
|
$
|
3.19
|
|
|
35.3
|
%
|
2014*
|
|
$
|
5,355
|
|
|
$
|
2.97
|
|
|
32.6
|
%
|
2015*
|
|
$
|
3,740
|
|
|
$
|
1.96
|
|
|
23.6
|
%
|
2016*
|
|
$
|
3,801
|
|
|
$
|
1.90
|
|
|
22.7
|
%
|
2017*
|
|
$
|
4,076
|
|
|
$
|
1.99
|
|
|
23.0
|
%
|
2018
|
|
$
|
4,616
|
|
|
$
|
2.20
|
|
|
24.6
|
%
|
First Quarter 2018
|
|
$
|
1,018
|
|
|
$
|
2.07
|
|
|
23.5
|
%
|
Second Quarter 2018
|
|
$
|
1,202
|
|
|
$
|
2.21
|
|
|
25.2
|
%
|
Third Quarter 2018
|
|
$
|
1,205
|
|
|
$
|
2.24
|
|
|
25.2
|
%
|
Fourth Quarter 2018
|
|
$
|
1,192
|
|
|
$
|
2.25
|
|
|
24.4
|
%
|
|
|
Year ended December 31,
|
||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
Available seat miles per fuel gallon consumed
|
|
76.3
|
|
75.2
|
|
74.4
|
|
73.9
|
|
72.8
|
•
|
"Wanna Get Away" fares are generally the lowest fares and are typically subject to advance purchase requirements. They are nonrefundable, but, subject to Southwest's No Show Policy, funds may be applied to future travel on Southwest. Wanna Get Away fares earn six Rapid Rewards
®
points, under Southwest's Rapid Rewards loyalty program, for each dollar spent on the base fare. The Company's loyalty program is discussed below under "Rapid Rewards Loyalty Program."
|
•
|
"Anytime" fares are, subject to Southwest's No Show Policy, refundable if canceled, or funds may be applied towards future travel on Southwest. If this fare is purchased with nonrefundable funds, then the flight will be nonrefundable if canceled. Anytime fares earn 10 Rapid Rewards points for each dollar spent on the base fare.
|
•
|
"Business Select" fares are, subject to Southwest's No Show Policy, refundable if canceled, or funds may be applied towards future travel on Southwest. If this fare is purchased with nonrefundable funds, then the flight will be nonrefundable if canceled. Business Select fares also include additional perks such as priority boarding with a boarding position in the first 15 boarding positions within boarding group "A," 12 Rapid Rewards points per dollar spent on the base fare - the highest loyalty point multiplier of all Southwest fare products, "Fly By
®
" priority security and/or ticket counter access in participating airports, and one complimentary premium beverage coupon for the day of travel (Customers must be of legal drinking age to drink alcoholic beverages).
|
•
|
the DOT has been directed to begin a rulemaking to re-define permissible "service animals" on commercial aircraft, including considering whether to adopt the same definition of "service animal" contained in the Department of Justice rules implementing the Americans with Disabilities Act, in order to reduce the likelihood of passengers falsely claiming that their pets are service animals;
|
•
|
the DOT has been given the authority to impose triple the maximum fines for damages to passengers' wheelchairs or other mobility aids, as well as for injury to passengers with disabilities;
|
•
|
the DOT has been directed to implement a rulemaking to require air carriers to promptly provide a refund for any ancillary fee paid for services a passenger does not receive; and
|
•
|
the Reauthorization Act makes it an unfair and deceptive practice to involuntarily deplane a revenue passenger onboard an aircraft if that passenger is traveling on a confirmed reservation and is checked-in for the relevant flight prior to the applicable check-in deadline.
|
•
|
installation of blended winglets, which reduce drag and increase fuel efficiency, on all aircraft in the Company's fleet;
|
•
|
upgrading of the Company's 737-800 fleet with designed, split scimitar winglets;
|
•
|
periodic engine washes;
|
•
|
use of electric ground power for aircraft air and power at the gate and for ground support equipment at select locations;
|
•
|
deployment of auto-throttle and vertical navigation to maintain optimum cruising speeds;
|
•
|
implementation of engine start procedures to support the Company's single engine taxi procedures;
|
•
|
adjustment of the timing of auxiliary power unit starts on originating flights to reduce auxiliary power unit usage;
|
•
|
implementation of fuel planning initiatives to safely reduce loading of excess fuel;
|
•
|
aircraft cabin interior retrofitting to reduce weight;
|
•
|
reduction of aircraft engine idle speed while on the ground, which also increases engine life;
|
•
|
galley refreshes with dry goods weight reduction;
|
•
|
Company-optimized routes (flying the best wind routes to take advantage of tailwinds or to minimize headwinds);
|
•
|
improvements in flight planning algorithms to better match the Company's aircraft flight management system and thereby enabling the Company to fly at the most efficient altitudes;
|
•
|
substitution of Pilot and Flight Attendant flight bags with lighter Electronic Flight Bag tablets; and
|
•
|
implementation of Real Time Descent Winds (automatic uplinking of up-to-date wind data to the aircraft, allowing crews to time the descent to minimize thrust inputs).
|
Employee Group
|
Approximate Number of Employees
|
Representatives
|
Status of Agreement
|
Southwest Pilots
|
9,100
|
Southwest Airlines Pilots' Association ("SWAPA")
|
Amendable September 2020
|
Southwest Flight Attendants
|
15,200
|
Transportation Workers of America, AFL-CIO, Local 556 ("TWU 556")
|
In negotiations
|
Southwest Ramp, Operations, Provisioning, Freight Agents
|
13,400
|
Transportation Workers of America, AFL-CIO, Local 555 ("TWU 555")
|
Amendable February 2021
|
Southwest Customer Service Agents, Customer Representatives, and Source of Support Representatives
|
7,400
|
International Association of Machinists and Aerospace Workers, AFL-CIO ("IAM 142")
|
In negotiations
|
Southwest Material Specialists (formerly known as Stock Clerks)
|
300
|
International Brotherhood of Teamsters, Local 19 ("IBT 19")
|
In negotiations. The Company reached a tentative agreement with IBT 19 in January 2019. If ratified by the Company's Material Specialists, the contract will become amendable in 2024.
|
Southwest Mechanics
|
2,400
|
Aircraft Mechanics Fraternal Association ("AMFA")
|
In negotiations
|
Southwest Aircraft Appearance Technicians
|
200
|
AMFA
|
Amendable November 2020
|
Southwest Facilities Maintenance Technicians
|
40
|
AMFA
|
Amendable November 2022
|
Southwest Dispatchers
|
300
|
Transportation Workers of America, AFL-CIO, Local 550 ("TWU 550")
|
Amendable June 2019
|
Southwest Flight Simulator Technicians
|
50
|
International Brotherhood of Teamsters ("IBT")
|
Amendable May 2019. The Company reached a tentative agreement with IBT in February 2019. If ratified by the Company's Flight Simulator Technicians, the contract will become amendable in 2024.
|
Southwest Flight Crew Training Instructors
|
130
|
Transportation Workers of America, AFL-CIO, Local 557 ("TWU 557")
|
Amendable January 2020
|
Southwest Meteorologists
|
10
|
TWU 550
|
Amendable June 2019
|
•
|
increases in airport rates and charges;
|
•
|
limitations on airport gate capacity or use of other airport facilities such as the 2016 and 2017 reallocation of slots at John Wayne Airport in Orange County, California, which caused the Company to reduce service at that airport;
|
•
|
limitations on route authorities;
|
•
|
actions and decisions that create difficulties in obtaining access at slot-controlled airports;
|
•
|
actions and decisions that create difficulties in obtaining operating permits and approvals;
|
•
|
changes to environmental regulations;
|
•
|
new or increased taxes or fees;
|
•
|
changes to laws that affect the services that can be offered by airlines in particular markets and at particular airports;
|
•
|
restrictions on competitive practices;
|
•
|
changes in laws that increase costs for safety, security, compliance, or other Customer Service standards;
|
•
|
changes in laws that may limit the Company's ability to enter into fuel derivative contracts to hedge against increases in fuel prices;
|
•
|
changes in laws that may limit or regulate the Company's ability to promote the Company’s business or fares; and
|
•
|
the adoption of more restrictive locally-imposed noise regulations.
|
•
|
adverse weather and natural disasters such as the weather-related disruptions in third quarter 2018, which resulted in approximately 2,200 canceled flights;
|
•
|
changes in consumer preferences, perceptions, spending patterns, or demographic trends (including, without limitation, changes in travel patterns due to government shutdowns or sequestration);
|
•
|
actual or potential disruptions in the air traffic control system (including, for example, as a result of inadequate FAA staffing levels due to government shutdowns or sequestration);
|
•
|
actual or perceived delays at various airports resulting from government shutdowns (including, for example, longer wait-times at TSA checkpoints due to inadequate TSA staffing levels);
|
•
|
changes in the competitive environment due to industry consolidation, industry bankruptcies, and other factors;
|
•
|
delays in deliveries of new aircraft (including, without limitation, due to the closure of the FAA's aircraft registry during government shutdowns);
|
•
|
outbreaks of disease; and
|
•
|
actual or threatened war, terrorist attacks, government travel warnings to certain destinations, travel restrictions, and political instability.
|
Type
|
|
Seats
|
|
Average
Age
(Yrs)
|
|
Number of
Aircraft
|
|
Number
Owned (a)
|
|
Number
Leased
|
||||
737-700
|
|
143
|
|
15
|
|
|
512
|
|
|
396
|
|
|
116
|
|
737-800
|
|
175
|
|
3
|
|
|
207
|
|
|
200
|
|
|
7
|
|
737 MAX 8
|
|
175
|
|
1
|
|
|
31
|
|
|
31
|
|
|
—
|
|
Totals
|
|
|
|
11
|
|
|
750
|
|
|
627
|
|
|
123
|
|
(a)
|
As discussed further in Note
6
to the Consolidated Financial Statements, 169 of the Company's aircraft were pledged as collateral as of
December 31, 2018
, for secured borrowings and/or in the case that the Company has obligations related to its fuel derivative instruments with counterparties that exceed certain thresholds.
|
Item 4.
|
Mine Safety Disclosures
|
Name
|
Position
|
Age
|
Gary C. Kelly
|
Chairman of the Board & Chief Executive Officer
|
63
|
Thomas M. Nealon
|
President
|
57
|
Michael G. Van de Ven
|
Chief Operating Officer
|
57
|
Robert E. Jordan
|
Executive Vice President Corporate Services
|
58
|
Tammy Romo
|
Executive Vice President & Chief Financial Officer
|
56
|
Mark R. Shaw
|
Executive Vice President & Chief Legal & Regulatory Officer
|
56
|
Andrew M. Watterson
|
Executive Vice President & Chief Revenue Officer
|
52
|
Gregory D. Wells
|
Executive Vice President Daily Operations
|
60
|
|
|
12/31/2013
|
|
12/31/2014
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2017
|
|
12/31/2018
|
||||||||||||
Southwest Airlines Co.
|
|
$
|
100
|
|
|
$
|
226
|
|
|
$
|
232
|
|
|
$
|
271
|
|
|
$
|
359
|
|
|
$
|
257
|
|
S&P 500
|
|
$
|
100
|
|
|
$
|
114
|
|
|
$
|
115
|
|
|
$
|
129
|
|
|
$
|
157
|
|
|
$
|
150
|
|
NYSE ARCA Airline
|
|
$
|
100
|
|
|
$
|
150
|
|
|
$
|
127
|
|
|
$
|
164
|
|
|
$
|
174
|
|
|
$
|
137
|
|
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
|
|
||||||
October 1, 2018 through
October 31, 2018
|
|
1,848,814
|
|
|
$
|
—
|
|
(2)(3)
|
1,848,814
|
|
|
$
|
1,350,032,588
|
|
|
November 1, 2018 through
November 30, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,350,032,588
|
|
|
December 1, 2018 through
December 31, 2018
|
|
9,835,633
|
|
|
$
|
—
|
|
(3)
|
9,835,633
|
|
|
$
|
1,350,032,588
|
|
|
Total
|
|
11,684,447
|
|
|
|
|
11,684,447
|
|
|
|
|
(1)
|
On
May 17, 2017
, the Company's Board of Directors authorized the repurchase of up to
$2.0 billion
of the Company's common stock. On
May 16, 2018
, the Company’s Board of Directors authorized the repurchase of up to an additional
$2.0 billion
of the Company’s common stock in a new share repurchase authorization, upon the completion of the May 2017 share repurchase authorization. Repurchases are made in accordance with applicable securities laws in open market or private, including accelerated, repurchase transactions from time to time, depending on market conditions, and may be discontinued at any time.
|
(2)
|
Under an accelerated share repurchase program entered into by the Company with a third party financial institution in third quarter 2018 (the "Third Quarter 2018 ASR Program"), the Company paid
$500 million
and received an initial delivery of
6,349,325
shares during August 2018, representing an estimated 75 percent of the shares to be purchased by the Company under the Third Quarter 2018 ASR Program based on a volume-weighted average price of
$59.0614
per share of the Company’s common stock on the New York Stock Exchange during a calculation period between August 1, 2018 and August 22, 2018. Final settlement of the Third Quarter 2018 ASR Program occurred in October 2018 and was determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed in October 2018. Upon settlement, the third party financial institution delivered
1,848,814
additional shares of the Company’s common stock to the Company. In total, the average purchase price per share for the
8,198,139
shares repurchased under the Third Quarter 2018 ASR Program, upon completion of the Third Quarter 2018 ASR Program in October 2018, was
$60.9895.
|
(3)
|
Under an accelerated share repurchase program entered into by the Company with a third party financial institution in fourth quarter 2018 (the "Fourth Quarter 2018 ASR Program"), the Company paid
$500 million
in October 2018 and received an initial delivery of
7,827,176
shares during December 2018, representing an estimated 75 percent of the shares to be purchased by the Company under the Fourth Quarter 2018 ASR Program based on a price of
$47.91
per share, which was the closing price of the Company’s common stock on the New York Stock Exchange on October 29, 2018. The third party financial institution delivered an additional 1,472,253 shares to the Company in further partial settlements of the Fourth Quarter 2018 ASR Program in December 2018, which was determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during calculation periods completed in December 2018. Final settlement of the Fourth Quarter 2018 ASR Program occurred in December 2018 and was determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed in December 2018. Upon settlement, the third party financial institution delivered
536,204
additional shares of the Company’s common stock to the Company. In total, the average purchase price per share for the
9,835,633
shares repurchased under the Fourth Quarter 2018 ASR Program, upon completion of the Fourth Quarter 2018 ASR Program in December 2018, was
$50.8356
.
|
|
|
Year ended December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
As Recast
|
|
As Recast
|
|
As Recast (k)
|
|
As Recast (k)
|
||||||||||
Financial Data (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating revenues
|
|
$
|
21,965
|
|
|
$
|
21,146
|
|
|
$
|
20,289
|
|
|
$
|
19,820
|
|
|
$
|
18,605
|
|
Operating expenses
|
|
18,759
|
|
|
17,739
|
|
|
16,767
|
|
|
15,821
|
|
|
16,437
|
|
|||||
Operating income
|
|
3,206
|
|
|
3,407
|
|
|
3,522
|
|
|
3,999
|
|
|
2,168
|
|
|||||
Other expenses (income) net
|
|
42
|
|
|
142
|
|
|
72
|
|
|
520
|
|
|
352
|
|
|||||
Income before taxes
|
|
3,164
|
|
|
3,265
|
|
|
3,450
|
|
|
3,479
|
|
|
1,816
|
|
|||||
Provision for income taxes
|
|
699
|
|
|
(92
|
)
|
|
1,267
|
|
|
1,298
|
|
|
680
|
|
|||||
Net income
|
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
$
|
2,183
|
|
|
$
|
2,181
|
|
|
$
|
1,136
|
|
Net income per share, basic
|
|
$
|
4.30
|
|
|
$
|
5.58
|
|
|
$
|
3.48
|
|
|
$
|
3.30
|
|
|
$
|
1.65
|
|
Net income per share, diluted
|
|
$
|
4.29
|
|
|
$
|
5.57
|
|
|
$
|
3.45
|
|
|
$
|
3.27
|
|
|
$
|
1.64
|
|
Cash dividends per common share
|
|
$
|
0.6050
|
|
|
$
|
0.4750
|
|
|
$
|
0.3750
|
|
|
$
|
0.2850
|
|
|
$
|
0.2200
|
|
Total assets at period-end
|
|
$
|
26,243
|
|
|
$
|
25,110
|
|
|
$
|
23,286
|
|
|
$
|
21,312
|
|
|
$
|
19,723
|
|
Long-term obligations at period-end
|
|
$
|
2,771
|
|
|
$
|
3,320
|
|
|
$
|
2,821
|
|
|
$
|
2,541
|
|
|
$
|
2,434
|
|
Stockholders’ equity at period-end
|
|
$
|
9,853
|
|
|
$
|
9,641
|
|
|
$
|
7,784
|
|
|
$
|
7,358
|
|
|
$
|
6,775
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue passengers carried
|
|
134,890,243
|
|
|
130,256,190
|
|
|
124,719,765
|
|
|
118,171,211
|
|
|
110,496,912
|
|
|||||
Enplaned passengers
|
|
163,605,833
|
|
|
157,677,218
|
|
|
151,740,357
|
|
|
144,574,882
|
|
|
135,767,188
|
|
|||||
Revenue passenger miles (RPMs) (000s) (a)
|
|
133,322,322
|
|
|
129,041,420
|
|
|
124,797,986
|
|
|
117,499,879
|
|
|
108,035,133
|
|
|||||
Available seat miles (ASMs) (000s) (b)
|
|
159,795,153
|
|
|
153,811,072
|
|
|
148,522,051
|
|
|
140,501,409
|
|
|
131,003,957
|
|
|||||
Load factor (c)
|
|
83.4
|
%
|
|
83.9
|
%
|
|
84.0
|
%
|
|
83.6
|
%
|
|
82.5
|
%
|
|||||
Average length of passenger haul (miles)
|
|
988
|
|
|
991
|
|
|
1,001
|
|
|
994
|
|
|
978
|
|
|||||
Average aircraft stage length (miles)
|
|
757
|
|
|
754
|
|
|
760
|
|
|
750
|
|
|
721
|
|
|||||
Trips flown
|
|
1,375,030
|
|
|
1,347,893
|
|
|
1,311,149
|
|
|
1,267,358
|
|
|
1,255,502
|
|
|||||
Seats flown (d)
|
|
207,223,050
|
|
|
200,878,967
|
|
|
193,167,695
|
|
|
184,955,094
|
|
|
179,733,055
|
|
|||||
Seats per trip (e)
|
|
150.70
|
|
|
149.03
|
|
|
147.33
|
|
|
145.94
|
|
|
143.16
|
|
|||||
Average passenger fare
|
|
$
|
151.64
|
|
|
$
|
151.73
|
|
|
$
|
152.89
|
|
|
$
|
154.85
|
|
|
$
|
159.80
|
|
Passenger revenue yield per RPM (cents) (f)
|
|
15.34
|
|
|
15.32
|
|
|
15.28
|
|
|
15.57
|
|
|
16.34
|
|
|||||
Operating revenue per ASM (cents) (g)(j)
|
|
13.75
|
|
|
13.75
|
|
|
13.66
|
|
|
13.98
|
|
|
14.20
|
|
|||||
Passenger revenue per ASM (cents) (h)
|
|
12.80
|
|
|
12.85
|
|
|
12.84
|
|
|
13.02
|
|
|
13.48
|
|
|||||
Operating expenses per ASM (cents) (i)
|
|
11.74
|
|
|
11.53
|
|
|
11.29
|
|
|
11.26
|
|
|
12.55
|
|
|||||
Operating expenses per ASM, excluding fuel (cents)
|
|
8.85
|
|
|
8.88
|
|
|
8.73
|
|
|
8.60
|
|
|
8.46
|
|
|||||
Operating expenses per ASM, excluding fuel and profitsharing (cents)
|
|
8.51
|
|
|
8.53
|
|
|
8.34
|
|
|
8.16
|
|
|
8.19
|
|
|||||
Fuel costs per gallon, including fuel tax
|
|
$
|
2.20
|
|
|
$
|
1.99
|
|
|
$
|
1.90
|
|
|
$
|
1.96
|
|
|
$
|
2.97
|
|
Fuel costs per gallon, including fuel tax, economic
|
|
$
|
2.20
|
|
|
$
|
2.06
|
|
|
$
|
2.00
|
|
|
$
|
2.13
|
|
|
$
|
2.95
|
|
Fuel consumed, in gallons (millions)
|
|
2,094
|
|
|
2,045
|
|
|
1,996
|
|
|
1,901
|
|
|
1,801
|
|
|||||
Active fulltime equivalent Employees
|
|
58,803
|
|
|
56,110
|
|
|
53,536
|
|
|
49,583
|
|
|
46,278
|
|
|||||
Aircraft at end of period
|
|
750
|
|
|
706
|
|
|
723
|
|
|
704
|
|
|
665
|
|
(a)
|
A revenue passenger mile is one paying passenger flown one mile. Also referred to as "traffic," which is a measure of demand for a given period.
|
(b)
|
An available seat mile is one seat (empty or full) flown one mile. Also referred to as "capacity," which is a measure of the space available to carry passengers in a given period.
|
(c)
|
Revenue passenger miles divided by available seat miles.
|
(d)
|
Seats flown is calculated using total number of seats available by aircraft type multiplied by the total trips flown by the same aircraft type during a particular period.
|
(e)
|
Seats per trip is calculated using seats flown divided by trips flown.
|
(f)
|
Calculated as passenger revenue divided by revenue passenger miles. Also referred to as "yield," this is the average cost paid by a paying passenger to fly one mile, which is a measure of revenue production and fares.
|
(g)
|
Calculated as operating revenues divided by available seat miles. Also referred to as "operating unit revenues" or "RASM," this is a measure of operating revenue production based on the total available seat miles flown during a particular period.
|
(h)
|
Calculated as passenger revenue divided by available seat miles. Also referred to as "passenger unit revenues," this is a measure of passenger revenue production based on the total available seat miles flown during a particular period.
|
(i)
|
Calculated as operating expenses divided by available seat miles. Also referred to as "unit costs" or "cost per available seat mile," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies.
|
(j)
|
Year ended 2015 RASM excludes a $172 million one-time special revenue adjustment in July 2015 as a result of the Company's amendment of its co-branded credit card agreement with Chase Bank USA, N.A. and the resulting required change in accounting methodology. Including the special revenue adjustment, RASM would have been 14.11 cents for the year ended 2015.
|
(k)
|
The Company has chosen to not recast 2015 and 2014 results for the New Revenue Standard, as permitted. Therefore, 2015 and 2014 only reflect recast results for the New Retirement Standard and the New Hedging Standard.
|
|
|
Year ended
|
|
|
||||||
|
|
December 31,
|
|
|
||||||
(in millions, except per share amounts)
|
|
2018
|
|
2017
|
|
Percent Change
|
||||
GAAP
|
|
|
|
As Recast
|
|
|||||
Operating income
|
|
$
|
3,206
|
|
|
$
|
3,407
|
|
|
(5.9)
|
Net income
|
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
(26.6)
|
Net income per share, diluted
|
|
$
|
4.29
|
|
|
$
|
5.57
|
|
|
(23.0)
|
|
|
|
|
|
|
|
|
|
||
Non-GAAP
|
|
|
|
|
|
|
||||
Operating income
|
|
$
|
3,167
|
|
|
$
|
3,347
|
|
|
(5.4)
|
Net income
|
|
$
|
2,435
|
|
|
$
|
2,116
|
|
|
15.1
|
Net income per share, diluted
|
|
$
|
4.24
|
|
|
$
|
3.51
|
|
|
20.8
|
|
Year ended December 31,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Per ASM
|
|
Percent
|
|||||||
(in cents, except for percentages)
|
|
|
As Recast
|
|
change
|
|
change
|
|||||||
Salaries, wages, and benefits
|
|
4.79
|
¢
|
|
|
4.74
|
¢
|
|
|
0.05
|
¢
|
|
1.1
|
%
|
Fuel and oil
|
2.89
|
|
|
2.65
|
|
|
0.24
|
|
|
9.1
|
|
|||
Maintenance materials and repairs
|
0.69
|
|
|
0.65
|
|
|
0.04
|
|
|
6.2
|
|
|||
Landing fees and airport rentals
|
0.83
|
|
|
0.84
|
|
|
(0.01
|
)
|
|
(1.2
|
)
|
|||
Depreciation and amortization
|
0.75
|
|
|
0.79
|
|
|
(0.04
|
)
|
|
(5.1
|
)
|
|||
Other operating expenses
|
1.79
|
|
|
1.86
|
|
|
(0.07
|
)
|
|
(3.8
|
)
|
|||
Total
|
|
11.74
|
¢
|
|
|
11.53
|
¢
|
|
|
0.21
|
¢
|
|
1.8
|
%
|
Employee Group
|
Approximate Number of Employees
|
Representatives
|
Amendable Date
|
Southwest Flight Attendants
|
15,200
|
Transportation Workers of America, AFL-CIO, Local 556 ("TWU 556")
|
November 2018
|
Southwest Customer Service Agents, Customer Representatives, and Source of Support Representatives
|
7,400
|
International Association of Machinists and Aerospace Workers, AFL-CIO ("IAM 142")
|
December 2018
|
Southwest Material Specialists (formerly known as Stock Clerks)
|
300
|
International Brotherhood of Teamsters, Local 19 ("IBT 19")
|
August 2013. The Company reached a tentative agreement with IBT 19 in January 2019. If ratified by the Company's Material Specialists, the contract will become amendable in 2024.
|
Southwest Mechanics
|
2,400
|
Aircraft Mechanics Fraternal Association ("AMFA")
|
August 2012
|
Southwest Flight Simulator Technicians
|
50
|
International Brotherhood of Teamsters ("IBT")
|
May 2019. The Company reached a tentative agreement with IBT in February 2019. If ratified by the Company's Flight Simulator Technicians, the contract will become amendable in 2024.
|
Period
|
Maximum percent of estimated fuel consumption covered by fuel derivative contracts at varying West Texas Intermediate/Brent Crude Oil, Heating Oil, and Gulf Coast Jet Fuel-equivalent price levels (a)
|
||||
2019
|
70%
|
||||
2020
|
53%
|
||||
2021
|
25%
|
||||
Beyond 2021
|
less than 5%
|
Year
|
|
Fair value of fuel
derivative contracts
at December 31, 2018
|
|
Amount of losses deferred
in AOCI at December 31,
2018 (net of tax)
|
||||
2019
|
|
$
|
43
|
|
|
$
|
(36
|
)
|
2020
|
|
65
|
|
|
(6
|
)
|
||
2021
|
|
26
|
|
|
(1
|
)
|
||
2022
|
|
4
|
|
|
—
|
|
||
Total
|
|
$
|
138
|
|
|
$
|
(43
|
)
|
|
Estimated economic fuel price per gallon, including taxes and fuel hedging premiums (e)
|
|||
Average Brent Crude Oil
price per barrel
|
First Quarter 2019 (c)
|
Full Year 2019 (d)
|
||
$50
|
$1.75 - $1.80
|
$1.65 - $1.75
|
||
$55
|
$1.85 - $1.90
|
$1.80 - $1.90
|
||
Current Market (a)
|
$2.00 - $2.05
|
$2.00 - $2.10
|
||
$70
|
$2.15 - $2.20
|
$2.20 - $2.30
|
||
$80
|
$2.25 - $2.30
|
$2.35 - $2.45
|
||
$90
|
$2.30 - $2.35
|
$2.50 - $2.60
|
||
Estimated fuel hedging premium expense per gallon (b)
|
$0.06
|
$0.04
|
|
Year ended December 31,
|
|||||||
(in millions)
|
2018
|
|
2017
|
|
||||
|
|
|
As Recast
|
|
||||
Mark-to-market impact from fuel contracts settling in future periods
|
$
|
—
|
|
|
$
|
69
|
|
|
Ineffectiveness from fuel hedges settling in future periods (a)
|
—
|
|
|
31
|
|
|
||
Realized ineffectiveness and mark-to-market (gains) or losses (a)
|
—
|
|
|
6
|
|
|
||
Other
|
18
|
|
|
6
|
|
(b)
|
||
|
$
|
18
|
|
|
$
|
112
|
|
|
|
Year ended December 31,
|
|
|
|
|
|||||||||
|
2017
|
|
2016
|
|
Per ASM
|
|
Percent
|
|||||||
(in cents, except for percentages)
|
As Recast
|
|
As Recast
|
|
change
|
|
change
|
|||||||
Salaries, wages, and benefits
|
|
4.74
|
¢
|
|
|
4.57
|
¢
|
|
|
0.17
|
¢
|
|
3.7
|
%
|
Fuel and oil
|
2.65
|
|
|
2.56
|
|
|
0.09
|
|
|
3.5
|
|
|||
Maintenance materials and repairs
|
0.65
|
|
|
0.70
|
|
|
(0.05
|
)
|
|
(7.1
|
)
|
|||
Landing fees and airport rentals
|
0.84
|
|
|
0.82
|
|
|
0.02
|
|
|
2.4
|
|
|||
Depreciation and amortization
|
0.79
|
|
|
0.82
|
|
|
(0.03
|
)
|
|
(3.7
|
)
|
|||
Other operating expenses
|
1.86
|
|
|
1.82
|
|
|
0.04
|
|
|
2.2
|
|
|||
Total
|
|
11.53
|
¢
|
|
|
11.29
|
¢
|
|
|
0.24
|
¢
|
|
2.1
|
%
|
|
Year ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
|
As Recast
|
|
As Recast
|
||||
Mark-to-market impact from fuel contracts settling in future periods
|
$
|
69
|
|
|
$
|
9
|
|
Ineffectiveness from fuel hedges settling in future periods (a)
|
31
|
|
|
(11
|
)
|
||
Realized ineffectiveness and mark-to-market (gains) or losses (a)
|
6
|
|
|
5
|
|
||
Other (b)
|
6
|
|
|
18
|
|
||
|
$
|
112
|
|
|
$
|
21
|
|
|
Year ended December 31,
|
|
|
|||||||
|
2018
|
|
2017
|
|
Percent
|
|||||
|
|
|
As Recast
|
|
Change
|
|||||
Fuel and oil expense, unhedged
|
$
|
4,649
|
|
|
$
|
3,524
|
|
|
|
|
Premium cost of fuel contracts
|
135
|
|
|
136
|
|
|
|
|||
Add (Deduct): Fuel hedge (gains) losses included in Fuel and oil expense, net
|
(168
|
)
|
|
416
|
|
|
|
|||
Fuel and oil expense, as reported
|
$
|
4,616
|
|
|
$
|
4,076
|
|
|
|
|
Add: Net impact from fuel contracts
|
14
|
|
|
156
|
|
|
|
|||
Fuel and oil expense, excluding special items (economic)
|
$
|
4,630
|
|
|
$
|
4,232
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|||||
Total operating expenses, as reported
|
$
|
18,759
|
|
|
$
|
17,739
|
|
|
|
|
Add: Reclassification between Fuel and oil and Other (gains) losses, net,
associated with current period settled contracts
|
—
|
|
|
6
|
|
|
|
|||
Add: Contracts settling in the current period, but for which gains and/or (losses)
have been recognized in a prior period (a)
|
14
|
|
|
150
|
|
|
|
|||
Deduct: Lease termination expense
|
—
|
|
|
(33
|
)
|
|
|
|||
Deduct: Aircraft grounding charge
|
—
|
|
|
(63
|
)
|
|
|
|||
Add: Gain on sale of grounded aircraft
|
25
|
|
|
—
|
|
|
|
|||
Total operating expenses, excluding special items
|
$
|
18,798
|
|
|
$
|
17,799
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|||||
Operating income, as reported
|
$
|
3,206
|
|
|
$
|
3,407
|
|
|
|
|
Deduct: Reclassification between Fuel and oil and Other (gains) losses, net,
associated with current period settled contracts
|
—
|
|
|
(6
|
)
|
|
|
|||
Deduct: Contracts settling in the current period, but for which gains and/or (losses)
have been recognized in a prior period (a)
|
(14
|
)
|
|
(150
|
)
|
|
|
|||
Add: Lease termination expense
|
—
|
|
|
33
|
|
|
|
|||
Add: Aircraft grounding charge
|
—
|
|
|
63
|
|
|
|
|||
Deduct: Gain on sale of grounded aircraft
|
(25
|
)
|
|
—
|
|
|
|
|||
Operating income, excluding special items
|
$
|
3,167
|
|
|
$
|
3,347
|
|
|
(5.4
|
)%
|
|
|
|
|
|
|
|||||
Provision (benefit) for income taxes, as reported
|
$
|
699
|
|
|
$
|
(92
|
)
|
|
|
|
Add (Deduct): Net income tax impact of special items, excluding Tax reform
impact (b)
|
(9
|
)
|
|
17
|
|
|
|
|||
Add: Tax reform impact (c)
|
—
|
|
|
1,270
|
|
|
|
|||
Provision for income taxes, excluding special items
|
$
|
690
|
|
|
$
|
1,195
|
|
|
(42.3
|
)%
|
|
|
|
|
|
|
|||||
Net income, as reported
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
|
|
Add: Mark-to-market impact from fuel contracts settling in future periods
|
—
|
|
|
69
|
|
|
|
|||
Add: Ineffectiveness from fuel hedges settling in future periods
|
—
|
|
|
31
|
|
|
|
|||
Deduct: Other net impact of fuel contracts settling in the current or a prior period
(excluding reclassifications)
|
(14
|
)
|
|
(150
|
)
|
|
|
|||
Add: Lease termination expense
|
—
|
|
|
33
|
|
|
|
|||
Add: Aircraft grounding charge
|
—
|
|
|
63
|
|
|
|
|||
Deduct: Gain on sale of grounded aircraft
|
(25
|
)
|
|
—
|
|
|
|
|||
Add (Deduct): Net income tax impact of special items, excluding Tax reform impact (b)
|
9
|
|
|
(17
|
)
|
|
|
|||
Deduct: Tax reform impact (c)
|
—
|
|
|
(1,270
|
)
|
|
|
|||
Net income, excluding special items
|
$
|
2,435
|
|
|
$
|
2,116
|
|
|
15.1
|
%
|
|
Year ended December 31,
|
|
|
|||||||
|
2018
|
|
2017
|
|
Percent
|
|||||
|
|
|
As Recast
|
|
Change
|
|||||
Net income per share, diluted, as reported
|
$
|
4.29
|
|
|
$
|
5.57
|
|
|
|
|
Deduct: Net impact to net income above from fuel contracts divided by
dilutive shares
|
(0.02
|
)
|
|
(0.08
|
)
|
|
|
|||
Add (Deduct): Impact of special items
|
(0.04
|
)
|
|
0.16
|
|
|
|
|||
Add (Deduct): Net income tax impact of special items, excluding Tax reform
impact (b)
|
0.01
|
|
|
(0.03
|
)
|
|
|
|||
Deduct: Tax reform impact (c)
|
—
|
|
|
(2.11
|
)
|
|
|
|||
Net income per share, diluted, excluding special items
|
$
|
4.24
|
|
|
$
|
3.51
|
|
|
20.8
|
%
|
|
|
|
|
|
|
|||||
Operating expenses per ASM (cents)
|
|
11.74
|
¢
|
|
|
11.53
|
¢
|
|
|
|
Deduct: Fuel and oil expense divided by ASMs
|
(2.89
|
)
|
|
(2.65
|
)
|
|
|
|||
Deduct: Profitsharing expense divided by ASMs
|
(0.34
|
)
|
|
(0.35
|
)
|
|
|
|||
Add (Deduct): Impact of special items
|
0.02
|
|
|
(0.06
|
)
|
|
|
|||
Operating expenses per ASM, excluding profitsharing, Fuel and oil expense, and special items (cents)
|
|
8.53
|
¢
|
|
|
8.47
|
¢
|
|
0.7
|
%
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
December 31, 2016
|
|
||||||
Operating income, as reported
|
$
|
3,206
|
|
|
$
|
3,407
|
|
|
$
|
3,522
|
|
|
Contract ratification bonuses
|
—
|
|
|
—
|
|
|
356
|
|
|
|||
Net impact from fuel contracts
|
(14
|
)
|
|
(156
|
)
|
|
(201
|
)
|
|
|||
Asset impairment
|
—
|
|
|
—
|
|
|
21
|
|
|
|||
Lease termination expense
|
—
|
|
|
33
|
|
|
22
|
|
|
|||
Aircraft grounding charge
|
—
|
|
|
63
|
|
|
—
|
|
|
|||
Gain on sale of grounded aircraft
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
|||
Operating income, non-GAAP
|
3,167
|
|
|
3,347
|
|
|
3,720
|
|
|
|||
Net adjustment for aircraft leases (a)
|
99
|
|
|
110
|
|
|
110
|
|
|
|||
Adjusted operating income, non-GAAP (A)
|
$
|
3,266
|
|
|
$
|
3,457
|
|
|
$
|
3,830
|
|
|
|
|
|
|
|
|
|
||||||
Non-GAAP tax rate (B)
|
22.1
|
%
|
(d)
|
36.1
|
%
|
(e)
|
36.7
|
%
|
(f)
|
|||
|
|
|
|
|
|
|
||||||
Net operating profit after-tax, NOPAT (A* (1-B) = C)
|
$
|
2,545
|
|
|
$
|
2,210
|
|
|
$
|
2,424
|
|
|
|
|
|
|
|
|
|
||||||
Debt, including capital leases (b)
|
$
|
3,521
|
|
|
$
|
3,259
|
|
|
$
|
3,304
|
|
|
Equity (b)
|
9,853
|
|
|
8,194
|
|
|
7,195
|
|
|
|||
Net present value of aircraft operating leases (b)
|
584
|
|
|
785
|
|
|
1,015
|
|
|
|||
Average invested capital
|
$
|
13,958
|
|
|
$
|
12,238
|
|
|
$
|
11,514
|
|
|
Equity adjustment for hedge accounting (c)
|
(144
|
)
|
|
296
|
|
|
886
|
|
|
|||
Adjusted average invested capital (D)
|
$
|
13,814
|
|
|
$
|
12,534
|
|
|
$
|
12,400
|
|
|
|
|
|
|
|
|
|
||||||
Non-GAAP ROIC, pre-tax (A/D)
|
23.6
|
%
|
|
27.6
|
%
|
|
30.9
|
%
|
|
|||
|
|
|
|
|
|
|
||||||
Non-GAAP ROIC, after tax (C/D)
|
18.4
|
%
|
|
17.6
|
%
|
|
19.5
|
%
|
|
1.
|
Contract ratification bonuses recorded for certain workgroups. As the bonuses would only be paid at ratification of the associated tentative agreement and would not represent an ongoing expense to the Company, management believes its results for the associated periods are more usefully compared if the impacts of ratification bonus amounts are excluded from results. Generally, union contract agreements cover a specified three- to five- year period, although such contracts officially never expire, and the agreed upon terms remain in place until a revised agreement is reached, which can be several years following the amendable date;
|
2.
|
A noncash impairment charge related to leased slots at Newark Liberty International Airport as a result of the FAA announcement in April 2016 that this airport was being changed to a Level 2 schedule-facilitated airport from its previous designation as Level 3;
|
3.
|
Lease termination costs recorded as a result of the Company acquiring 13 of its Boeing 737-300 aircraft off operating leases as part of the Company’s strategic effort to remove its Classic aircraft from operations on or before September 29, 2017, in the most economically advantageous manner possible. The Company had not budgeted for these early lease termination costs, as they were subject to negotiations being concluded with the third party lessors. The Company recorded the fair value of the aircraft acquired off operating leases, as well as any associated remaining obligations to the balance sheet as debt;
|
4.
|
An Aircraft grounding charge recorded in third quarter 2017, as a result of the Company grounding its remaining Boeing 737-300 aircraft on September 29, 2017. The loss was a result of the remaining net lease payments due and certain lease return requirements that could have to be performed on these leased aircraft prior to their return to the lessors as of the cease-use date. The Company had not budgeted for the lease return requirements, as they were subject to negotiation with third party lessors;
|
5.
|
A gain recognized in first quarter 2018, associated with the sale of 39 owned Boeing 737-300 aircraft and a number of spare engines to a third party. These aircraft were previously retired as part of the Company's exit of its Classic fleet. The gain was not anticipated, and the Company associates it with the grounding charge recorded in third quarter 2017; and
|
6.
|
An adjustment to Provision for income taxes related to the Tax Cuts and Jobs Act legislation enacted in December 2017, which resulted in a re-measurement of the Company's deferred tax assets and liabilities at the new federal corporate tax rate of 21 percent. This adjustment was a non-cash item and was treated as a special item.
|
Share repurchases (in millions)
|
|
Shares received
|
|
Cash paid
|
||
First Quarter 2018 Accelerated Share Repurchase Program
|
|
8.73
|
|
$
|
500
|
|
Second Quarter 2018 Accelerated Share Repurchase Program
|
|
9.69
|
|
500
|
|
|
Third Quarter 2018 Accelerated Share Repurchase Program
|
|
8.20
|
|
500
|
|
|
Fourth Quarter 2018 Accelerated Share Repurchase Program
|
|
9.84
|
|
500
|
|
|
Total
|
|
36.46
|
|
$
|
2,000
|
|
|
|
Obligations by period (in millions)
|
||||||||||||||||||
Contractual obligations
|
|
2019
|
|
2020 - 2021
|
|
2022 - 2023
|
|
Thereafter
|
|
Total
|
||||||||||
Long-term debt (a)
|
|
$
|
506
|
|
|
$
|
821
|
|
|
$
|
414
|
|
|
$
|
797
|
|
|
$
|
2,538
|
|
Interest commitments - fixed (b)
|
|
64
|
|
|
95
|
|
|
66
|
|
|
94
|
|
|
319
|
|
|||||
Interest commitments - floating (c)
|
|
37
|
|
|
30
|
|
|
9
|
|
|
8
|
|
|
84
|
|
|||||
Facility construction commitments (d)
|
|
70
|
|
|
141
|
|
|
135
|
|
|
168
|
|
|
514
|
|
|||||
Facility operating lease commitments
|
|
36
|
|
|
65
|
|
|
31
|
|
|
42
|
|
|
174
|
|
|||||
Aircraft operating lease commitments (e)
|
|
220
|
|
|
417
|
|
|
263
|
|
|
431
|
|
|
1,331
|
|
|||||
Aircraft capital lease commitments (f)
|
|
111
|
|
|
214
|
|
|
197
|
|
|
335
|
|
|
857
|
|
|||||
Aircraft purchase commitments (g)
|
|
924
|
|
|
3,042
|
|
|
2,798
|
|
|
3,444
|
|
|
10,208
|
|
|||||
Other commitments
|
|
144
|
|
|
188
|
|
|
115
|
|
|
325
|
|
|
772
|
|
|||||
Total contractual obligations
|
|
$
|
2,112
|
|
|
$
|
5,013
|
|
|
$
|
4,028
|
|
|
$
|
5,644
|
|
|
$
|
16,797
|
|
(a)
|
Includes principal only. See Note
6
to the Consolidated Financial Statements.
|
(b)
|
Related to fixed-rate debt (either at issuance or through swaps) only.
|
(c)
|
Interest obligations associated with floating-rate debt (either at issuance or through swaps) is estimated utilizing forward interest rate curves as of
December 31, 2018
, and can be subject to significant fluctuation.
|
(d)
|
Includes some lease payments that are considered variable which have a related construction obligation. See Note
4
to the Consolidated Financial Statements.
|
(e)
|
Includes the impact of the B717 lease/sublease transaction entered into in
2012
. See Note
7
to the Consolidated Financial Statements.
|
(f)
|
Includes principal and interest on capital leases.
|
(g)
|
Firm orders from Boeing.
|
|
|
Estimated useful life
|
|
Estimated
residual value
|
Airframes and engines
|
|
25 years
|
|
15 percent
|
Spare aircraft engines
|
|
25 years
|
|
20 percent
|
Aircraft parts
|
|
Fleet life
|
|
4 percent
|
Assets constructed for others (a)
|
|
5 to 30 years
|
|
17 to 75 percent
|
Ground property and equipment
|
|
5 to 30 years
|
|
0 to 10 percent
|
•
|
Allocation of Passenger Revenue
- Revenues from Passengers, related to travel, who also earn Rapid Rewards Points have been allocated between flight (recognized as revenue when transportation is provided) and Rapid Rewards Points (deferred until points are redeemed or spoil) based on each obligation’s relative standalone selling price. The Company utilizes historical earning patterns to assist in this allocation.
|
•
|
Fair Value of Rapid Rewards Points
- Determined from the base fare value of tickets which were purchased using prior point redemptions for travel and other products and services, which the Company believes to be indicative of the fair value of points as perceived by Customers and representative of the value of each point at the time of redemption. The Company’s booking site allows a Customer to toggle between fares utilizing either cash or point redemptions, which provides the Customer with an approximation of the equivalent value of their points. The value can differ, however, based on demand, the amount of time prior to the flight, and other factors. The fare mix during the period measured represents a constraint, which could result in the assumptions above changing at the measurement date, as fare classes can have different coefficients used to determine the total loyalty points needed to purchase an award ticket. The mixture of these fare classes could cause the fair value per point to increase or decrease.
|
|
|
Principal
amount
(in millions)
|
|
Effective
fixed rate
|
|
Final
maturity
|
|
Underlying collateral
|
|||
Term Loan Agreement
|
|
$
|
23
|
|
|
6.315
|
%
|
|
5/6/2019
|
|
14 specified Boeing 737-700 aircraft
|
Term Loan Agreement
|
|
10
|
|
|
4.84
|
%
|
|
7/1/2019
|
|
4 specified Boeing 737-700 aircraft
|
|
Term Loan Agreement
|
|
187
|
|
|
5.223
|
%
|
|
5/9/2020
|
|
21 specified Boeing 737-700 aircraft
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
|
|
|
As Recast
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,854
|
|
|
$
|
1,495
|
|
Short-term investments
|
1,835
|
|
|
1,778
|
|
||
Accounts and other receivables
|
568
|
|
|
662
|
|
||
Inventories of parts and supplies, at cost
|
461
|
|
|
420
|
|
||
Prepaid expenses and other current assets
|
310
|
|
|
460
|
|
||
Total current assets
|
5,028
|
|
|
4,815
|
|
||
|
|
|
|
||||
Property and equipment, at cost:
|
|
|
|
|
|
||
Flight equipment
|
21,753
|
|
|
21,368
|
|
||
Ground property and equipment
|
4,960
|
|
|
4,399
|
|
||
Deposits on flight equipment purchase contracts
|
775
|
|
|
919
|
|
||
Assets constructed for others
|
1,768
|
|
|
1,543
|
|
||
|
29,256
|
|
|
28,229
|
|
||
Less allowance for depreciation and amortization
|
9,731
|
|
|
9,690
|
|
||
|
19,525
|
|
|
18,539
|
|
||
Goodwill
|
970
|
|
|
970
|
|
||
Other assets
|
720
|
|
|
786
|
|
||
|
$
|
26,243
|
|
|
$
|
25,110
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
1,416
|
|
|
$
|
1,320
|
|
Accrued liabilities
|
1,749
|
|
|
1,700
|
|
||
Air traffic liability
|
4,134
|
|
|
3,495
|
|
||
Current maturities of long-term debt
|
606
|
|
|
348
|
|
||
Total current liabilities
|
7,905
|
|
|
6,863
|
|
||
|
|
|
|
||||
Long-term debt less current maturities
|
2,771
|
|
|
3,320
|
|
||
Air traffic liability - noncurrent
|
936
|
|
|
1,070
|
|
||
Deferred income taxes
|
2,427
|
|
|
2,119
|
|
||
Construction obligation
|
1,701
|
|
|
1,390
|
|
||
Other noncurrent liabilities
|
650
|
|
|
707
|
|
||
Stockholders' equity:
|
|
|
|
|
|
||
Common stock, $1.00 par value: 2,000,000,000 shares authorized;
807,611,634 shares issued in 2018 and 2017
|
808
|
|
|
808
|
|
||
Capital in excess of par value
|
1,510
|
|
|
1,451
|
|
||
Retained earnings
|
15,967
|
|
|
13,832
|
|
||
Accumulated other comprehensive income
|
20
|
|
|
12
|
|
||
Treasury stock, at cost: 255,008,275 and 219,060,856 shares
in 2018 and 2017 respectively
|
(8,452
|
)
|
|
(6,462
|
)
|
||
Total stockholders' equity
|
9,853
|
|
|
9,641
|
|
||
|
$
|
26,243
|
|
|
$
|
25,110
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
As Recast
|
|
As Recast
|
||||||
OPERATING REVENUES:
|
|
|
|
|
|
||||||
Passenger
|
$
|
20,455
|
|
|
$
|
19,763
|
|
|
$
|
19,068
|
|
Freight
|
175
|
|
|
173
|
|
|
171
|
|
|||
Other
|
1,335
|
|
|
1,210
|
|
|
1,050
|
|
|||
Total operating revenues
|
21,965
|
|
|
21,146
|
|
|
20,289
|
|
|||
|
|
|
|
|
|
||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||
Salaries, wages, and benefits
|
7,649
|
|
|
7,305
|
|
|
6,786
|
|
|||
Fuel and oil
|
4,616
|
|
|
4,076
|
|
|
3,801
|
|
|||
Maintenance materials and repairs
|
1,107
|
|
|
1,001
|
|
|
1,045
|
|
|||
Landing fees and airport rentals
|
1,334
|
|
|
1,292
|
|
|
1,211
|
|
|||
Depreciation and amortization
|
1,201
|
|
|
1,218
|
|
|
1,221
|
|
|||
Other operating expenses
|
2,852
|
|
|
2,847
|
|
|
2,703
|
|
|||
Total operating expenses
|
18,759
|
|
|
17,739
|
|
|
16,767
|
|
|||
|
|
|
|
|
|
||||||
OPERATING INCOME
|
3,206
|
|
|
3,407
|
|
|
3,522
|
|
|||
|
|
|
|
|
|
||||||
OTHER EXPENSES (INCOME):
|
|
|
|
|
|
|
|
||||
Interest expense
|
131
|
|
|
114
|
|
|
122
|
|
|||
Capitalized interest
|
(38
|
)
|
|
(49
|
)
|
|
(47
|
)
|
|||
Interest income
|
(69
|
)
|
|
(35
|
)
|
|
(24
|
)
|
|||
Other (gains) losses, net
|
18
|
|
|
112
|
|
|
21
|
|
|||
Total other expenses (income)
|
42
|
|
|
142
|
|
|
72
|
|
|||
|
|
|
|
|
|
||||||
INCOME BEFORE INCOME TAXES
|
3,164
|
|
|
3,265
|
|
|
3,450
|
|
|||
PROVISION (BENEFIT) FOR INCOME TAXES
|
699
|
|
|
(92
|
)
|
|
1,267
|
|
|||
NET INCOME
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
$
|
2,183
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
As Recast
|
|
As Recast
|
||||||
NET INCOME
|
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
$
|
2,183
|
|
Unrealized gain (loss) on fuel derivative instruments, net of
deferred taxes of ($7), $185, and $432
|
|
(26
|
)
|
|
317
|
|
|
735
|
|
|||
Unrealized gain on interest rate derivative instruments, net of
deferred taxes of $1, $4, and $5
|
|
6
|
|
|
7
|
|
|
7
|
|
|||
Unrealized gain (loss) on defined benefit plan items, net of deferred
taxes of $15, $2, and ($13)
|
|
52
|
|
|
3
|
|
|
(23
|
)
|
|||
Other, net of deferred taxes of ($2), $5, and $5
|
|
(6
|
)
|
|
8
|
|
|
9
|
|
|||
OTHER COMPREHENSIVE INCOME
|
|
$
|
26
|
|
|
$
|
335
|
|
|
$
|
728
|
|
COMPREHENSIVE INCOME
|
|
$
|
2,491
|
|
|
$
|
3,692
|
|
|
$
|
2,911
|
|
|
|
Year ended December 31, 2018, 2017, and 2016
|
||||||||||||||||||||||
|
|
Common
Stock
|
|
Capital in
excess of
par value
|
|
Retained
earnings
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Treasury
stock
|
|
Total
|
||||||||||||
Balance at December 31, 2015 (as reported)
|
|
$
|
808
|
|
|
$
|
1,374
|
|
|
$
|
9,409
|
|
|
$
|
(1,051
|
)
|
|
$
|
(3,182
|
)
|
|
$
|
7,358
|
|
Cumulative effect of new accounting standards (see Note 2)
|
|
—
|
|
|
—
|
|
|
(596
|
)
|
|
—
|
|
|
—
|
|
|
(596
|
)
|
||||||
Balance at December 31, 2015 (as recast)
|
|
$
|
808
|
|
|
$
|
1,374
|
|
|
$
|
8,813
|
|
|
$
|
(1,051
|
)
|
|
$
|
(3,182
|
)
|
|
$
|
6,762
|
|
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,750
|
)
|
|
(1,750
|
)
|
||||||
Issuance of common and treasury stock pursuant to Employee stock plans
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
20
|
|
||||||
Conversion of 5.25% senior notes to common stock
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
48
|
|
|
43
|
|
||||||
Share-based compensation
|
|
—
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
||||||
Cash dividends, $.3750 per share
|
|
—
|
|
|
—
|
|
|
(235
|
)
|
|
—
|
|
|
—
|
|
|
(235
|
)
|
||||||
Comprehensive income
|
|
—
|
|
|
—
|
|
|
2,183
|
|
|
728
|
|
|
—
|
|
|
2,911
|
|
||||||
Balance at December 31, 2016 as recast
|
|
$
|
808
|
|
|
$
|
1,410
|
|
|
$
|
10,761
|
|
|
$
|
(323
|
)
|
|
$
|
(4,872
|
)
|
|
$
|
7,784
|
|
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,600
|
)
|
|
(1,600
|
)
|
||||||
Issuance of common and treasury stock pursuant to Employee stock plans
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
14
|
|
||||||
Share-based compensation
|
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
||||||
Cash dividends, $.4750 per share
|
|
—
|
|
|
—
|
|
|
(286
|
)
|
|
—
|
|
|
—
|
|
|
(286
|
)
|
||||||
Comprehensive income
|
|
—
|
|
|
—
|
|
|
3,357
|
|
|
335
|
|
|
—
|
|
|
3,692
|
|
||||||
Balance at December 31, 2017 as recast
|
|
$
|
808
|
|
|
$
|
1,451
|
|
|
$
|
13,832
|
|
|
$
|
12
|
|
|
$
|
(6,462
|
)
|
|
$
|
9,641
|
|
Cumulative effect of new accounting standards (see Note 2)
|
|
—
|
|
|
—
|
|
|
18
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
||||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,000
|
)
|
|
(2,000
|
)
|
||||||
Issuance of common and treasury stock pursuant to Employee stock plans
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
23
|
|
||||||
Share-based compensation
|
|
—
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
||||||
Cash dividends, $.6050 per share
|
|
—
|
|
|
—
|
|
|
(348
|
)
|
|
—
|
|
|
—
|
|
|
(348
|
)
|
||||||
Comprehensive income
|
|
—
|
|
|
—
|
|
|
2,465
|
|
|
26
|
|
|
—
|
|
|
2,491
|
|
||||||
Balance at December 31, 2018
|
|
$
|
808
|
|
|
$
|
1,510
|
|
|
$
|
15,967
|
|
|
$
|
20
|
|
|
$
|
(8,452
|
)
|
|
$
|
9,853
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
As Recast
|
|
As Recast
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
||||||
Net income
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
$
|
2,183
|
|
Adjustments to reconcile net income to cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
||||
Depreciation and amortization
|
1,201
|
|
|
1,218
|
|
|
1,221
|
|
|||
Loss on asset impairment
|
—
|
|
|
—
|
|
|
21
|
|
|||
Aircraft grounding charge
|
—
|
|
|
63
|
|
|
—
|
|
|||
Unrealized/realized gains on fuel derivative instruments
|
(14
|
)
|
|
(50
|
)
|
|
(200
|
)
|
|||
Deferred income taxes
|
301
|
|
|
(1,066
|
)
|
|
419
|
|
|||
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
||||
Accounts and other receivables
|
117
|
|
|
(102
|
)
|
|
(50
|
)
|
|||
Other assets
|
(227
|
)
|
|
(262
|
)
|
|
(119
|
)
|
|||
Accounts payable and accrued liabilities
|
545
|
|
|
233
|
|
|
221
|
|
|||
Air traffic liability
|
506
|
|
|
343
|
|
|
227
|
|
|||
Cash collateral received from (provided to) derivative counterparties
|
(15
|
)
|
|
316
|
|
|
535
|
|
|||
Other, net
|
14
|
|
|
(121
|
)
|
|
(165
|
)
|
|||
Net cash provided by operating activities
|
4,893
|
|
|
3,929
|
|
|
4,293
|
|
|||
|
|
|
|
|
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||||||
Capital expenditures
|
(1,922
|
)
|
|
(2,123
|
)
|
|
(2,038
|
)
|
|||
Assets constructed for others
|
(54
|
)
|
|
(126
|
)
|
|
(109
|
)
|
|||
Purchases of short-term investments
|
(2,409
|
)
|
|
(2,380
|
)
|
|
(2,388
|
)
|
|||
Proceeds from sales of short-term and other investments
|
2,342
|
|
|
2,221
|
|
|
2,263
|
|
|||
Other, net
|
5
|
|
|
—
|
|
|
—
|
|
|||
Net cash used in investing activities
|
(2,038
|
)
|
|
(2,408
|
)
|
|
(2,272
|
)
|
|||
|
|
|
|
|
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||||||
Proceeds from issuance of long-term debt
|
—
|
|
|
600
|
|
|
515
|
|
|||
Proceeds from Employee stock plans
|
35
|
|
|
29
|
|
|
29
|
|
|||
Reimbursement for assets constructed for others
|
170
|
|
|
126
|
|
|
107
|
|
|||
Payments of long-term debt and capital lease obligations
|
(342
|
)
|
|
(592
|
)
|
|
(523
|
)
|
|||
Payments of convertible debt
|
—
|
|
|
—
|
|
|
(68
|
)
|
|||
Payments of cash dividends
|
(332
|
)
|
|
(274
|
)
|
|
(222
|
)
|
|||
Repayment of construction obligation
|
(30
|
)
|
|
(10
|
)
|
|
(9
|
)
|
|||
Repurchase of common stock
|
(2,000
|
)
|
|
(1,600
|
)
|
|
(1,750
|
)
|
|||
Other, net
|
3
|
|
|
15
|
|
|
(3
|
)
|
|||
Net cash used in financing activities
|
(2,496
|
)
|
|
(1,706
|
)
|
|
(1,924
|
)
|
|||
|
|
|
|
|
|
|
|
|
|||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
359
|
|
|
(185
|
)
|
|
97
|
|
|||
|
|
|
|
|
|
||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,495
|
|
|
1,680
|
|
|
1,583
|
|
|||
|
|
|
|
|
|
||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
1,854
|
|
|
$
|
1,495
|
|
|
$
|
1,680
|
|
|
|
|
|
|
|
||||||
CASH PAYMENTS FOR:
|
|
|
|
|
|
||||||
Interest, net of amount capitalized
|
$
|
107
|
|
|
$
|
81
|
|
|
$
|
100
|
|
Income taxes
|
$
|
327
|
|
|
$
|
992
|
|
|
$
|
902
|
|
|
|
|
|
|
|
||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
|
|
|
|
|
|
||||||
Flight equipment acquired through the assumption of debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20
|
|
Flight equipment under capital leases
|
$
|
32
|
|
|
$
|
233
|
|
|
$
|
307
|
|
Assets constructed for others
|
$
|
171
|
|
|
$
|
197
|
|
|
$
|
196
|
|
(in millions, except per share amounts)
|
Year ended December 31, 2017
|
Year ended December 31, 2016
|
||||
Depreciation and amortization expense
|
$
|
21
|
|
$
|
123
|
|
Net income *
|
$
|
(19
|
)
|
$
|
(66
|
)
|
Net income per basic share
|
$
|
(0.03
|
)
|
$
|
(0.11
|
)
|
Net income per diluted share
|
$
|
(0.03
|
)
|
$
|
(0.10
|
)
|
|
|
|
Year ended December 31, 2018
|
|
Year ended December 31, 2017
|
||||||||||||
(in millions)
|
Weighted-average useful life (in years)
|
|
Gross carrying
amount
|
|
Accumulated
amortization
|
|
Gross carrying amount
|
|
Accumulated Amortization
|
||||||||
Customer relationships/marketing agreements
|
10
|
|
$
|
27
|
|
|
$
|
25
|
|
|
$
|
27
|
|
|
$
|
23
|
|
Owned domestic slots (a)
|
Indefinite
|
|
295
|
|
|
n/a
|
|
|
295
|
|
|
n/a
|
|
||||
Gate leasehold rights (a)
|
15
|
|
180
|
|
|
78
|
|
|
180
|
|
|
66
|
|
||||
Total
|
14
|
|
$
|
502
|
|
|
$
|
103
|
|
|
$
|
502
|
|
|
$
|
89
|
|
|
Balance as of December 31, 2017
|
||||||||||
(in millions)
|
As Reported
|
|
New Revenue Standard
|
|
As Recast
|
||||||
Accrued liabilities
|
$
|
1,777
|
|
|
$
|
(77
|
)
|
|
$
|
1,700
|
|
Air traffic liability
|
3,460
|
|
|
35
|
|
|
3,495
|
|
|||
Air traffic liability - noncurrent
|
—
|
|
|
1,070
|
|
|
1,070
|
|
|||
Deferred income taxes
|
2,358
|
|
|
(239
|
)
|
|
2,119
|
|
|||
Retained earnings
|
14,621
|
|
|
(789
|
)
|
|
13,832
|
|
|
Year ended December 31, 2017
|
||||||||||||||||||
(in millions), except per share amounts
|
As Reported
|
|
New Revenue Standard
|
|
New Retirement Standard
|
|
New Hedging Standard
|
|
As Recast
|
||||||||||
Passenger revenue
|
$
|
19,141
|
|
|
$
|
622
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,763
|
|
Other revenue
|
1,857
|
|
|
(647
|
)
|
|
—
|
|
|
—
|
|
|
1,210
|
|
|||||
Salaries, wages, and benefits
|
7,319
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
7,305
|
|
|||||
Fuel and oil expense
|
3,940
|
|
|
—
|
|
|
—
|
|
|
136
|
|
|
4,076
|
|
|||||
Other operating expenses
|
2,886
|
|
|
(39
|
)
|
|
—
|
|
|
—
|
|
|
2,847
|
|
|||||
Other (gains) losses, net
|
234
|
|
|
—
|
|
|
14
|
|
|
(136
|
)
|
|
112
|
|
|||||
Provision for income taxes
|
(237
|
)
|
|
145
|
|
|
—
|
|
|
—
|
|
|
(92
|
)
|
|||||
Net income
|
3,488
|
|
|
(131
|
)
|
|
—
|
|
|
—
|
|
|
3,357
|
|
|||||
Net income per share, basic
|
5.80
|
|
|
(0.22
|
)
|
|
—
|
|
|
—
|
|
|
5.58
|
|
|||||
Net income per share, diluted
|
5.79
|
|
|
(0.22
|
)
|
|
—
|
|
|
—
|
|
|
5.57
|
|
|
Year ended December 31, 2016
|
||||||||||||||||||
(in millions), except per share amounts
|
As Reported
|
|
New Revenue Standard
|
|
New Retirement Standard
|
|
New Hedging Standard
|
|
As Recast
|
||||||||||
Passenger revenue
|
$
|
18,594
|
|
|
$
|
474
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,068
|
|
Other revenue
|
1,660
|
|
|
(610
|
)
|
|
—
|
|
|
—
|
|
|
1,050
|
|
|||||
Salaries, wages, and benefits
|
6,798
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
6,786
|
|
|||||
Fuel and oil expense
|
3,647
|
|
|
—
|
|
|
—
|
|
|
154
|
|
|
3,801
|
|
|||||
Other operating expenses
|
2,743
|
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|
2,703
|
|
|||||
Other (gains) losses, net
|
162
|
|
|
—
|
|
|
12
|
|
|
(154
|
)
|
|
21
|
|
|||||
Provision for income taxes
|
1,303
|
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
1,267
|
|
|||||
Net income
|
2,244
|
|
|
(60
|
)
|
|
—
|
|
|
—
|
|
|
2,183
|
|
|||||
Net income per share, basic
|
3.58
|
|
|
(0.10
|
)
|
|
—
|
|
|
—
|
|
|
3.48
|
|
|||||
Net income per share, diluted
|
3.55
|
|
|
(0.10
|
)
|
|
—
|
|
|
—
|
|
|
3.45
|
|
|
Year ended December 31, 2017
|
||||||||||
(in millions)
|
As Reported
|
|
New Revenue Standard
|
|
As Recast
|
||||||
Net income
|
$
|
3,488
|
|
|
$
|
(131
|
)
|
|
$
|
3,357
|
|
Deferred income taxes
|
(1,212
|
)
|
|
145
|
|
|
(1,066
|
)
|
|||
Changes in certain assets and liabilities
|
227
|
|
|
(14
|
)
|
|
212
|
|
|||
Net cash provided by operating activities
|
3,929
|
|
|
—
|
|
|
3,929
|
|
|
Year ended December 31, 2016
|
||||||||||
(in millions)
|
As Reported
|
|
New Revenue Standard
|
|
As Recast
|
||||||
Net income
|
$
|
2,244
|
|
|
$
|
(60
|
)
|
|
$
|
2,183
|
|
Deferred income taxes
|
455
|
|
|
(36
|
)
|
|
419
|
|
|||
Changes in certain assets and liabilities
|
182
|
|
|
96
|
|
|
279
|
|
|||
Net cash provided by operating activities
|
4,293
|
|
|
—
|
|
|
4,293
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
As Recast
|
|
As Recast
|
||||||
NUMERATOR:
|
|
|
|
|
|
||||||
Net income
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
$
|
2,183
|
|
Incremental income effect of
interest on 5.25% convertible notes
|
—
|
|
|
—
|
|
|
2
|
|
|||
Net income after assumed conversion
|
$
|
2,465
|
|
|
$
|
3,357
|
|
|
$
|
2,185
|
|
|
|
|
|
|
|
||||||
DENOMINATOR:
|
|
|
|
|
|
|
|
||||
Weighted-average shares outstanding, basic
|
573
|
|
|
601
|
|
|
627
|
|
|||
Dilutive effect of Employee stock options and
restricted stock units
|
1
|
|
|
2
|
|
|
1
|
|
|||
Dilutive effect of 5.25% convertible notes
|
—
|
|
|
—
|
|
|
5
|
|
|||
Adjusted weighted-average shares outstanding, diluted
|
574
|
|
|
603
|
|
|
633
|
|
|||
|
|
|
|
|
|
||||||
NET INCOME PER SHARE:
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
4.30
|
|
|
$
|
5.58
|
|
|
$
|
3.48
|
|
Diluted
|
$
|
4.29
|
|
|
$
|
5.57
|
|
|
$
|
3.45
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||
(in millions)
|
|
ACFO
|
ACFO,
Net (a)
|
Construction Obligation (b)
|
|
ACFO
|
ACFO,
Net (a)
|
Construction Obligation (b)
|
||||||||||||
FLL Terminal
|
|
$
|
313
|
|
$
|
304
|
|
$
|
308
|
|
|
$
|
258
|
|
$
|
256
|
|
$
|
258
|
|
LAX Terminal 1
|
|
485
|
|
459
|
|
476
|
|
|
433
|
|
417
|
|
433
|
|
||||||
LAX Terminal 1.5
|
(c)
|
99
|
|
99
|
|
99
|
|
|
31
|
|
31
|
|
31
|
|
||||||
LFMP - Terminal
|
|
545
|
|
460
|
|
502
|
|
|
543
|
|
474
|
|
516
|
|
||||||
LFMP - Parking Garage
|
|
200
|
|
200
|
|
200
|
|
|
152
|
|
152
|
|
152
|
|
||||||
HOU International Terminal
|
(d)
|
126
|
|
115
|
|
116
|
|
|
126
|
|
118
|
|
—
|
|
||||||
|
|
$
|
1,768
|
|
$
|
1,637
|
|
$
|
1,701
|
|
|
$
|
1,543
|
|
$
|
1,448
|
|
$
|
1,390
|
|
|
Year ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
As Recast
|
|
As Recast
|
||||||
Passenger non-loyalty
|
$
|
17,506
|
|
|
$
|
16,934
|
|
|
$
|
16,534
|
|
Passenger loyalty - air transportation
|
2,307
|
|
|
2,263
|
|
|
1,997
|
|
|||
Passenger ancillary sold separately
|
642
|
|
|
566
|
|
|
537
|
|
|||
Total passenger revenues
|
$
|
20,455
|
|
|
$
|
19,763
|
|
|
$
|
19,068
|
|
•
|
Allocation of Passenger Revenue
- Revenues from Passengers, related to travel, who also earn Rapid Rewards Points have been allocated between flight (recognized as revenue when transportation is provided) and Rapid Rewards Points (deferred until points are redeemed or spoil) based on each obligation’s relative standalone selling price. The Company utilizes historical earning patterns to assist in this allocation.
|
•
|
Fair Value of Rapid Rewards Points
- Determined from the base fare value of tickets which were purchased using prior point redemptions for travel and other products and services, which the Company believes to be indicative of the fair value of points as perceived by Customers and representative of the value of each point at the time of redemption. The Company’s booking site allows a Customer to toggle between fares utilizing either cash or point redemptions, which provides the Customer with an approximation of the equivalent value of their points. The value can differ, however, based on demand, the amount of time prior to the flight, and other factors. The fare mix during the period measured represents a constraint, which could result in the assumptions above changing at the measurement date, as fare classes can have different coefficients used to determine the total loyalty points needed to purchase an award ticket. The mixture of these fare classes and changes in the coefficients used by the Company could cause the fair value per point to increase or decrease.
|
•
|
Tickets and Rapid Rewards Points
- When a flight occurs, the related performance obligation is satisfied and the related value provided by the Customer, whether from purchased tickets or Rapid Rewards Points, is recognized as revenue.
|
•
|
Loyalty points redeemed for goods and/or services other than travel
- Rapid Rewards Members have the option to redeem points for goods and services offered through a third party vendor, who acts as principal. The performance obligation related to the purchase of these goods and services is satisfied when the good and/or service is delivered to the Customer.
|
•
|
Marketing Royalties
- As part of its Agreement with Chase, Southwest provides certain deliverables, including use of the Southwest Airlines’ brand, access to Rapid Rewards Member lists, advertising elements, and the Company’s resource team. These performance obligations are satisfied each month that the Agreement is active.
|
|
Balance as of
|
||||||
(in millions)
|
December 31, 2018
|
|
December 31, 2017
|
||||
Air traffic liability - passenger travel and ancillary passenger services
|
$
|
2,059
|
|
|
$
|
1,898
|
|
Air traffic liability - loyalty program
|
3,011
|
|
|
2,667
|
|
||
Total Air traffic liability
|
$
|
5,070
|
|
|
$
|
4,565
|
|
|
Year ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
Air traffic liability - loyalty program - beginning balance
|
$
|
2,667
|
|
|
$
|
2,485
|
|
Amounts deferred associated with points awarded
|
2,717
|
|
|
2,485
|
|
||
Revenue recognized from points redeemed - Passenger
|
(2,307
|
)
|
|
(2,263
|
)
|
||
Revenue recognized from points redeemed - Other
|
(66
|
)
|
|
(40
|
)
|
||
Air traffic liability - loyalty program - ending balance
|
$
|
3,011
|
|
|
$
|
2,667
|
|
|
Air traffic liability
|
||
Balance at December 31, 2017
|
$
|
4,565
|
|
Current period sales (passenger travel, ancillary services, flight loyalty, and partner loyalty)
|
21,026
|
|
|
Revenue from amounts included in contract liability opening balances
|
(3,479
|
)
|
|
Revenue from current period sales
|
(17,042
|
)
|
|
Balance at December 31, 2018
|
$
|
5,070
|
|
|
Air traffic liability
|
||
Balance at December 31, 2016
|
$
|
4,221
|
|
Current period sales (passenger travel, ancillary services, flight loyalty, and partner loyalty)
|
20,146
|
|
|
Revenue from amounts included in contract liability opening balances
|
(3,099
|
)
|
|
Revenue from current period sales
|
(16,703
|
)
|
|
Balance at December 31, 2017
|
$
|
4,565
|
|
(in millions)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
French Credit Agreements due June 2018 - 2.54%
|
|
$
|
—
|
|
|
$
|
1
|
|
Fixed-rate 737 Aircraft Notes payable through January 2018 - 7.03%
|
|
—
|
|
|
3
|
|
||
2.75% Notes due November 2019
|
|
300
|
|
|
300
|
|
||
Term Loan Agreement payable through May 2019 - 6.315%
|
|
23
|
|
|
66
|
|
||
Term Loan Agreement payable through July 2019 - 4.84%
|
|
10
|
|
|
19
|
|
||
2.65% Notes due 2020
|
|
492
|
|
|
491
|
|
||
Term Loan Agreement payable through 2020 - 5.223%
|
|
187
|
|
|
237
|
|
||
737 Aircraft Notes payable through 2020
|
|
67
|
|
|
155
|
|
||
2.75% Notes due 2022
|
|
300
|
|
|
300
|
|
||
Pass Through Certificates due 2022 - 6.24%
|
|
250
|
|
|
294
|
|
||
Term Loan Agreement payable through 2026 - 3.88%
|
|
197
|
|
|
215
|
|
||
3.00% Notes due 2026
|
|
300
|
|
|
300
|
|
||
3.45% Notes due 2027
|
|
300
|
|
|
300
|
|
||
7.375% Debentures due 2027
|
|
125
|
|
|
127
|
|
||
Capital leases
|
|
845
|
|
|
885
|
|
||
|
|
$
|
3,396
|
|
|
$
|
3,693
|
|
Less current maturities
|
|
606
|
|
|
348
|
|
||
Less debt discount and issuance costs
|
|
19
|
|
|
25
|
|
||
|
|
$
|
2,771
|
|
|
$
|
3,320
|
|
(in millions)
|
|
2018
|
|
2017
|
||||
Flight equipment
|
|
$
|
1,329
|
|
|
$
|
1,207
|
|
Less: accumulated amortization
|
|
304
|
|
|
172
|
|
||
|
|
$
|
1,025
|
|
|
$
|
1,035
|
|
(in millions)
|
|
Capital
leases
|
|
Operating
leases
|
|
Subleases
|
|
Operating
leases, net
|
||||||||
2019
|
|
$
|
111
|
|
|
$
|
348
|
|
|
$
|
(92
|
)
|
|
$
|
256
|
|
2020
|
|
109
|
|
|
357
|
|
|
(78
|
)
|
|
279
|
|
||||
2021
|
|
105
|
|
|
244
|
|
|
(41
|
)
|
|
203
|
|
||||
2022
|
|
100
|
|
|
172
|
|
|
(17
|
)
|
|
155
|
|
||||
2023
|
|
97
|
|
|
146
|
|
|
(7
|
)
|
|
139
|
|
||||
Thereafter
|
|
335
|
|
|
474
|
|
|
(1
|
)
|
|
473
|
|
||||
Total minimum lease payments
|
|
$
|
857
|
|
|
$
|
1,741
|
|
|
$
|
(236
|
)
|
|
$
|
1,505
|
|
Less amount representing interest
|
|
126
|
|
|
|
|
|
|
|
|||||||
Present value of minimum lease payments (a)
|
|
731
|
|
|
|
|
|
|
|
|||||||
Less current portion
|
|
85
|
|
|
|
|
|
|
|
|||||||
Long-term portion
|
|
$
|
646
|
|
|
|
|
|
|
|
|
|
All Restricted Stock Units
|
|||||
|
|
Units (000)
|
|
Wtd. Average
Fair Value
(per share)
|
|||
Outstanding December 31, 2015
|
|
1,485
|
|
|
$
|
30.17
|
|
Granted
|
|
675
|
|
(a)
|
37.29
|
|
|
Vested
|
|
(665
|
)
|
|
23.29
|
|
|
Surrendered
|
|
(56
|
)
|
|
36.29
|
|
|
Outstanding December 31, 2016
|
|
1,439
|
|
|
36.52
|
|
|
Granted
|
|
717
|
|
(b)
|
52.73
|
|
|
Vested
|
|
(806
|
)
|
|
30.23
|
|
|
Surrendered
|
|
(56
|
)
|
|
43.86
|
|
|
Outstanding December 31, 2017, Unvested
|
|
1,294
|
|
|
45.32
|
|
|
Granted
|
|
782
|
|
(c)
|
60.80
|
|
|
Vested
|
|
(670
|
)
|
|
45.11
|
|
|
Surrendered
|
|
(64
|
)
|
|
47.05
|
|
|
Outstanding December 31, 2018, Unvested
|
|
1,342
|
|
|
52.56
|
|
Employee Stock Purchase Plan
|
|||||||||||
|
|
|
|
|
|
(a)
|
|||||
|
|
Total number
|
|
|
|
Weighted-average
|
|||||
|
|
of shares
|
|
Average
|
|
fair value of each
|
|||||
|
|
purchased
|
|
price paid
|
|
purchase right
|
|||||
Period
|
|
(in thousands)
|
|
per share
|
|
under the ESPP
|
|||||
As of December 31, 2016
|
|
622
|
|
|
$
|
36.57
|
|
|
$
|
4.06
|
|
As of December 31, 2017
|
|
544
|
|
|
$
|
50.13
|
|
|
$
|
5.57
|
|
As of December 31, 2018
|
|
661
|
|
|
$
|
50.73
|
|
|
$
|
5.64
|
|
|
|
Maximum fuel hedged as of
|
|
|
|
|
|
December 31, 2018
|
|
Derivative underlying commodity type as of
|
|
Period (by year)
|
|
(gallons in millions) (a)
|
|
December 31, 2018
|
|
2019
|
|
1,519
|
|
|
WTI crude and Brent crude oil
|
2020
|
|
1,207
|
|
|
WTI crude and Brent crude oil
|
2021
|
|
466
|
|
|
WTI crude and Brent crude oil
|
2022
|
|
88
|
|
|
WTI crude oil
|
|
|
|
|
Asset derivatives
|
|
Liability derivatives
|
||||||||||||
|
|
Balance Sheet
|
|
Fair value at
|
|
Fair value at
|
|
Fair value at
|
|
Fair value at
|
||||||||
(in millions)
|
|
location
|
|
12/31/2018
|
|
12/31/2017
|
|
12/31/2018
|
|
12/31/2017
|
||||||||
Derivatives designated as hedges (a)
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fuel derivative contracts (gross)
|
|
Prepaid expenses and other current assets
|
|
$
|
43
|
|
|
$
|
112
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Fuel derivative contracts (gross)
|
|
Other assets
|
|
95
|
|
|
136
|
|
|
—
|
|
|
—
|
|
||||
Interest rate derivative contracts
|
|
Accrued liabilities
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Interest rate derivative contracts
|
|
Other noncurrent liabilities
|
|
—
|
|
|
—
|
|
|
12
|
|
|
20
|
|
||||
Total derivatives designated as hedges
|
|
$
|
138
|
|
|
$
|
248
|
|
|
$
|
14
|
|
|
$
|
20
|
|
||
Derivatives not designated as hedges (a)
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fuel derivative contracts (gross)
|
|
Prepaid expenses and other current assets
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
35
|
|
Interest rate derivative contracts
|
|
Accrued liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Interest rate derivative contracts
|
|
Other noncurrent liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total derivatives not designated as hedges
|
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
37
|
|
Total derivatives
|
|
|
|
$
|
138
|
|
|
$
|
283
|
|
|
$
|
14
|
|
|
$
|
57
|
|
Balance Sheet location of hedged item
|
|
Carrying amount of the hedged liabilities
|
|
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities (a)
|
||||||||||||
|
|
December 31,
|
|
December 31,
|
||||||||||||
(in millions)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Long-term debt less current maturities
|
|
$
|
791
|
|
|
$
|
791
|
|
|
$
|
11
|
|
|
$
|
12
|
|
|
|
Balance Sheet
|
|
December 31,
|
|
December 31,
|
||||
(in millions)
|
|
location
|
|
2018
|
|
2017
|
||||
Cash collateral deposits held from counterparties for fuel contracts - current
|
|
Offset against Prepaid expenses and other current assets
|
|
$
|
—
|
|
|
$
|
15
|
|
Due to third parties for fuel contracts
|
|
Accounts payable
|
|
—
|
|
|
29
|
|
||
Receivable from third parties for fuel contracts
|
|
Accounts and other receivables
|
|
2
|
|
|
—
|
|
|
Counterparty (CP)
|
|
|
||||||||||||||||||||||||||||
(in millions)
|
A
|
|
B
|
|
C
|
|
D
|
|
E
|
|
F
|
|
Other
(a)
|
|
Total
|
||||||||||||||||
Fair value of fuel derivatives
|
$
|
38
|
|
|
$
|
23
|
|
|
$
|
43
|
|
|
$
|
12
|
|
|
$
|
5
|
|
|
$
|
10
|
|
|
$
|
7
|
|
|
$
|
138
|
|
Cash collateral held from CP
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Aircraft collateral pledged to CP
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Letters of credit (LC)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Option to substitute LC for aircraft
|
(200) to (600)(b)
|
|
N/A
|
|
(150) to (550)(c)
|
|
(150) to (550)(c)
|
|
N/A
|
|
N/A
|
|
|
|
|
||||||||||||||||
Option to substitute LC for cash
|
N/A
|
|
N/A
|
|
(75) to (150) or >(550)(c)
|
|
(125) to (150) or >(550)(d)
|
|
(d)
|
|
N/A
|
|
|
|
|
||||||||||||||||
If credit rating is investment
grade, fair value of fuel
derivative level at which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash is provided to CP
|
(50) to (200) or >(600)
|
|
>(50)
|
|
(75) to (150) or >(550)(e)
|
|
(125) to (150) or >(550)(e)
|
|
>(125)
|
|
>(70)(e)
|
|
|
|
|
||||||||||||||||
Cash is received from CP
|
>50(e)
|
|
>150(e)
|
|
>250(e)
|
|
>125(e)
|
|
>100(e)
|
|
>70(e)
|
|
|
|
|
||||||||||||||||
Aircraft or cash can be pledged to
CP as collateral
|
(200) to (600)(f)
|
|
N/A
|
|
(150) to (550)(c)
|
|
(150) to (550)(c)
|
|
N/A
|
|
N/A
|
|
|
|
|
||||||||||||||||
If credit rating is non-investment
grade, fair value of fuel derivative
level at which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash is provided to CP
|
(0) to (200) or >(600)
|
|
(g)
|
|
(0) to (150) or >(550)
|
|
(0) to (150) or >(550)
|
|
(g)
|
|
(g)
|
|
|
|
|
||||||||||||||||
Cash is received from CP
|
(g)
|
|
(g)
|
|
(g)
|
|
(g)
|
|
(g)
|
|
(g)
|
|
|
|
|
||||||||||||||||
Aircraft or cash can be pledged to
CP as collateral
|
(200) to (600)
|
|
N/A
|
|
(150) to (550)
|
|
(150) to (550)
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
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, 2018
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets
|
|
(in millions)
|
||||||||||||||
Cash equivalents
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents (a)
|
|
$
|
1,392
|
|
|
$
|
1,392
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
|
454
|
|
|
—
|
|
|
454
|
|
|
—
|
|
||||
Certificates of deposit
|
|
8
|
|
|
—
|
|
|
8
|
|
|
—
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Treasury bills
|
|
1,582
|
|
|
1,582
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
|
228
|
|
|
—
|
|
|
228
|
|
|
—
|
|
||||
Time deposits
|
|
25
|
|
|
—
|
|
|
25
|
|
|
—
|
|
||||
Fuel derivatives:
|
|
|
|
|
|
|
|
|
||||||||
Option contracts (b)
|
|
138
|
|
|
—
|
|
|
—
|
|
|
138
|
|
||||
Other available-for-sale securities
|
|
127
|
|
|
127
|
|
|
—
|
|
|
—
|
|
||||
Total assets
|
|
$
|
3,954
|
|
|
$
|
3,101
|
|
|
$
|
715
|
|
|
$
|
138
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Interest rate derivatives (see Note 10)
|
|
(14
|
)
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
Quantitative information about Level 3 fair value measurements
|
||||
|
Valuation technique
|
Unobservable input
|
Period (by year)
|
Range
|
Fuel derivatives
|
Option model
|
Implied volatility
|
2019
|
29-49%
|
|
|
|
2020
|
22-31%
|
|
|
|
2021
|
19-24%
|
|
|
|
2022
|
20-21%
|
(in millions)
|
Carrying value
|
|
Estimated fair value
|
|
Fair value level hierarchy
|
||||
2.75% Notes due November 2019
|
$
|
300
|
|
|
$
|
299
|
|
|
Level 2
|
Term Loan Agreement payable through May 2019 - 6.315%
|
23
|
|
|
23
|
|
|
Level 3
|
||
Term Loan Agreement payable through July 2019 - 4.84%
|
10
|
|
|
10
|
|
|
Level 3
|
||
2.65% Notes due 2020
|
492
|
|
|
486
|
|
|
Level 2
|
||
Term Loan Agreement payable through 2020 - 5.223%
|
187
|
|
|
187
|
|
|
Level 3
|
||
737 Aircraft Notes payable through 2020
|
67
|
|
|
67
|
|
|
Level 3
|
||
2.75% Notes due 2022
|
300
|
|
|
293
|
|
|
Level 2
|
||
Pass Through Certificates due 2022 - 6.24%
|
250
|
|
|
263
|
|
|
Level 2
|
||
Term Loan Agreement payable through 2026 - 3.88%
|
197
|
|
|
197
|
|
|
Level 3
|
||
3.00% Notes due 2026
|
300
|
|
|
279
|
|
|
Level 2
|
||
3.45% Notes due 2027
|
300
|
|
|
286
|
|
|
Level 2
|
||
7.375% Debentures due 2027
|
125
|
|
|
146
|
|
|
Level 2
|
(in millions)
|
Fuel derivatives
|
|
Interest rate derivatives
|
|
Defined benefit plan items
|
|
Other
|
|
Deferred tax impact
|
|
Accumulated other
comprehensive income (loss) |
||||||||||||
Balance at December 31, 2016
|
$
|
(499
|
)
|
|
$
|
(18
|
)
|
|
$
|
(14
|
)
|
|
$
|
20
|
|
|
$
|
188
|
|
|
$
|
(323
|
)
|
Changes in fair value
|
(50
|
)
|
|
—
|
|
|
5
|
|
|
13
|
|
|
11
|
|
|
(21
|
)
|
||||||
Reclassification to earnings
|
552
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
(207
|
)
|
|
356
|
|
||||||
Balance at December 31, 2017
|
$
|
3
|
|
|
$
|
(7
|
)
|
|
$
|
(9
|
)
|
|
$
|
33
|
|
|
$
|
(8
|
)
|
|
$
|
12
|
|
ASU 2017-12 adoption adjustment (a)
|
(26
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
(20
|
)
|
||||||
ASU 2018-02 stranded AOCI adoption adjustment (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||||
Changes in fair value
|
—
|
|
|
1
|
|
|
67
|
|
|
(8
|
)
|
|
(14
|
)
|
|
46
|
|
||||||
Reclassification to earnings
|
(33
|
)
|
|
6
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
(20
|
)
|
||||||
Balance at December 31, 2018
|
$
|
(56
|
)
|
|
$
|
—
|
|
|
$
|
58
|
|
|
$
|
25
|
|
|
$
|
(7
|
)
|
|
$
|
20
|
|
Year ended December 31, 2018
|
||||||
(in millions)
|
|
Amounts reclassified from AOCI
|
|
Affected line item in the Consolidated Statement of Comprehensive Income
|
||
AOCI components
|
|
|
||||
Unrealized gain on fuel derivative instruments
|
|
$
|
(33
|
)
|
|
Fuel and oil expense
|
|
|
(8
|
)
|
|
Less: Tax expense
|
|
|
|
$
|
(25
|
)
|
|
Net of tax
|
Unrealized loss on interest rate derivative instruments
|
|
$
|
6
|
|
|
Interest expense
|
|
|
1
|
|
|
Less: Tax expense
|
|
|
|
$
|
5
|
|
|
Net of tax
|
|
|
|
|
|
||
Total reclassifications for the period
|
|
$
|
(20
|
)
|
|
Net of tax
|
(in millions)
|
|
2018
|
|
2017
|
||||
APBO at beginning of period
|
|
$
|
275
|
|
|
$
|
256
|
|
Service cost
|
|
18
|
|
|
18
|
|
||
Interest cost
|
|
9
|
|
|
11
|
|
||
Benefits paid
|
|
(5
|
)
|
|
(8
|
)
|
||
Actuarial gain
|
|
(69
|
)
|
|
(2
|
)
|
||
Plan amendments
|
|
4
|
|
|
—
|
|
||
APBO at end of period
|
|
$
|
232
|
|
|
$
|
275
|
|
(in millions)
|
|
2018
|
|
2017
|
||||
Funded status
|
|
$
|
(232
|
)
|
|
$
|
(275
|
)
|
Unrecognized net actuarial (gain) loss
|
|
(64
|
)
|
|
5
|
|
||
Unrecognized prior service cost
|
|
5
|
|
|
4
|
|
||
Accumulated other comprehensive income (loss)
|
|
59
|
|
|
(9
|
)
|
||
Cost recognized on Consolidated Balance Sheet
|
|
$
|
(232
|
)
|
|
$
|
(275
|
)
|
(in millions)
|
|
2018
|
|
2017
|
|
2016
|
||||||
Service cost
|
|
$
|
18
|
|
|
$
|
18
|
|
|
$
|
13
|
|
Interest cost
|
|
9
|
|
|
11
|
|
|
9
|
|
|||
Amortization of prior service cost
|
|
3
|
|
|
3
|
|
|
3
|
|
|||
Net periodic postretirement benefit cost
|
|
$
|
30
|
|
|
$
|
32
|
|
|
$
|
25
|
|
|
|
2018
|
|
2017
|
|
2016
|
|||
Weighted-average discount rate
|
|
4.35
|
%
|
|
3.65
|
%
|
|
4.25
|
%
|
Assumed healthcare cost trend rate (a)
|
|
7.13
|
%
|
|
7.08
|
%
|
|
7.08
|
%
|
(a)
|
The assumed healthcare cost trend rate is assumed to be
7.13%
for
2019
, then decline gradually to
5.19%
by
2027
and remain level thereafter.
|
|
|
2018
|
|
2017
|
||||
(in millions)
|
|
|
|
As Recast
|
||||
DEFERRED TAX LIABILITIES:
|
|
|
|
|
||||
Accelerated depreciation
|
|
$
|
3,395
|
|
|
$
|
3,123
|
|
Other
|
|
92
|
|
|
83
|
|
||
Total deferred tax liabilities
|
|
3,487
|
|
|
3,206
|
|
||
DEFERRED TAX ASSETS:
|
|
|
|
|
||||
Construction obligation
|
|
355
|
|
|
318
|
|
||
Accrued employee benefits
|
|
329
|
|
|
301
|
|
||
Rapid rewards loyalty liability
|
|
267
|
|
|
338
|
|
||
Other
|
|
109
|
|
|
130
|
|
||
Total deferred tax assets
|
|
1,060
|
|
|
1,087
|
|
||
Net deferred tax liability
|
|
$
|
2,427
|
|
|
$
|
2,119
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
(in millions)
|
|
|
|
As Recast
|
|
As Recast
|
||||||
CURRENT:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
338
|
|
|
$
|
904
|
|
|
$
|
778
|
|
State
|
|
60
|
|
|
72
|
|
|
69
|
|
|||
Total current
|
|
398
|
|
|
976
|
|
|
847
|
|
|||
DEFERRED:
|
|
|
|
|
|
|
||||||
Federal
|
|
299
|
|
|
200
|
|
|
393
|
|
|||
State
|
|
2
|
|
|
2
|
|
|
27
|
|
|||
Change in federal statutory tax rate
|
|
—
|
|
|
(1,270
|
)
|
|
—
|
|
|||
Total deferred
|
|
301
|
|
|
(1,068
|
)
|
|
420
|
|
|||
|
|
$
|
699
|
|
|
$
|
(92
|
)
|
|
$
|
1,267
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
(in millions)
|
|
|
|
As Recast
|
|
As Recast
|
||||||
Tax at statutory U.S. tax rates
|
|
$
|
664
|
|
|
$
|
1,143
|
|
|
$
|
1,208
|
|
State income taxes, net of federal benefit
|
|
49
|
|
|
50
|
|
|
62
|
|
|||
Change in federal statutory tax rate
|
|
—
|
|
|
(1,270
|
)
|
|
—
|
|
|||
Other, net
|
|
(14
|
)
|
|
(15
|
)
|
|
(3
|
)
|
|||
Total income tax provision (benefit)
|
|
$
|
699
|
|
|
$
|
(92
|
)
|
|
$
|
1,267
|
|
(in millions)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Derivative contracts
|
|
$
|
95
|
|
|
$
|
136
|
|
Intangible assets, net
|
|
400
|
|
|
413
|
|
||
Capital lease receivable
|
|
61
|
|
|
76
|
|
||
Other
|
|
164
|
|
|
161
|
|
||
Other assets
|
|
$
|
720
|
|
|
$
|
786
|
|
(in millions)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Accounts payable trade
|
|
$
|
263
|
|
|
$
|
186
|
|
Salaries payable
|
|
216
|
|
|
201
|
|
||
Taxes payable
|
|
220
|
|
|
203
|
|
||
Aircraft maintenance payable
|
|
69
|
|
|
38
|
|
||
Fuel payable
|
|
122
|
|
|
123
|
|
||
Other payable
|
|
526
|
|
|
569
|
|
||
Accounts payable
|
|
$
|
1,416
|
|
|
$
|
1,320
|
|
(in millions)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Profitsharing and savings plans
|
|
$
|
580
|
|
|
$
|
579
|
|
Aircraft and other lease related obligations
|
|
37
|
|
|
40
|
|
||
Permanently grounded aircraft liability
|
|
—
|
|
|
34
|
|
||
Vacation pay
|
|
403
|
|
|
365
|
|
||
Health
|
|
107
|
|
|
100
|
|
||
Workers compensation
|
|
166
|
|
|
172
|
|
||
Property and income taxes
|
|
68
|
|
|
57
|
|
||
Other
|
|
388
|
|
|
353
|
|
||
Accrued liabilities
|
|
$
|
1,749
|
|
|
$
|
1,700
|
|
(in millions)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Postretirement obligation
|
|
$
|
232
|
|
|
$
|
275
|
|
Non-current lease-related obligations
|
|
48
|
|
|
85
|
|
||
Permanently grounded aircraft liability
|
|
—
|
|
|
13
|
|
||
Other deferred compensation
|
|
247
|
|
|
237
|
|
||
Derivative contracts
|
|
12
|
|
|
21
|
|
||
Other
|
|
111
|
|
|
76
|
|
||
Other noncurrent liabilities
|
|
$
|
650
|
|
|
$
|
707
|
|
|
|
Three months ended
|
|
||||||||||||||
(in millions except per share amounts)
|
|
March 31
|
|
June 30
|
|
Sept. 30
|
|
Dec. 31
|
|
||||||||
2018
|
|
|
|
|
|
|
|
|
|
||||||||
Operating revenues
|
|
$
|
4,944
|
|
|
$
|
5,742
|
|
|
$
|
5,575
|
|
|
$
|
5,704
|
|
|
Operating income
|
|
616
|
|
|
972
|
|
|
798
|
|
|
820
|
|
|
||||
Income before income taxes
|
|
602
|
|
|
960
|
|
|
786
|
|
|
817
|
|
|
||||
Net income
|
|
463
|
|
|
733
|
|
|
615
|
|
|
654
|
|
|
||||
Net income per share, basic
|
|
0.79
|
|
|
1.27
|
|
|
1.08
|
|
|
1.17
|
|
|
||||
Net income per share, diluted
|
|
0.79
|
|
|
1.27
|
|
|
1.08
|
|
|
1.17
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
March 31
|
|
June 30
|
|
Sept. 30
|
|
Dec. 31
|
|
||||||||
|
|
As Recast
|
|
As Recast
|
|
As Recast
|
|
As Recast
|
|
||||||||
2017
|
|
|
|
|
|
|
|
|
|
||||||||
Operating revenues
|
|
$
|
4,854
|
|
|
$
|
5,731
|
|
|
$
|
5,303
|
|
|
$
|
5,258
|
|
|
Operating income
|
|
606
|
|
|
1,215
|
|
|
845
|
|
|
741
|
|
|
||||
Income before income taxes
|
|
532
|
|
|
1,165
|
|
|
832
|
|
|
736
|
|
|
||||
Net income
|
|
339
|
|
|
743
|
|
|
528
|
|
|
1,747
|
|
(a)
|
||||
Net income per share, basic
|
|
0.55
|
|
|
1.23
|
|
|
0.88
|
|
|
2.95
|
|
(a)
|
||||
Net income per share, diluted
|
|
0.55
|
|
|
1.23
|
|
|
0.88
|
|
|
2.94
|
|
(a)
|
Plan Category
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants, and
Rights
(a)
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and
Rights
(b)
|
|
|
Number of Securities Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))
(c)
|
|
|||||||
Equity Compensation Plans Approved by Security Holders
|
|
1,359,313
|
|
(1
|
)
|
|
$
|
6.75
|
|
(2
|
)
|
|
29,130,404
|
|
(3
|
)
|
Equity Compensation Plans not Approved by Security Holders
|
|
2,100
|
|
|
|
$
|
9.43
|
|
|
|
—
|
|
|
|||
Total
|
|
1,361,413
|
|
|
|
$
|
6.75
|
|
(2
|
)
|
|
29,130,404
|
|
|
(1)
|
Includes
17,383
shares of common stock issuable upon exercise of outstanding stock options and
1,341,930
restricted share units settleable in shares of the Company’s common stock.
|
(2)
|
The weighted-average exercise price does not take into account the restricted share units discussed in footnote (1) above because the restricted share units do not have an exercise price upon vesting.
|
(3)
|
Of these shares, (i)
8,169,202
shares remained available for issuance under the Company’s tax-qualified employee stock purchase plan; and (ii)
20,961,202
shares remained available for issuance under the Company’s 2007 Equity Incentive Plan in connection with the exercise of stock options and stock appreciation rights, the settlement of awards of restricted stock, restricted stock units, and phantom shares, and the grant of unrestricted shares of common stock; however, no more than
1,183,299
shares remain available for grant in connection with awards of unrestricted shares of common stock, stock-settled phantom shares, and awards to non-Employee members of the Board. These shares are in addition to the shares reserved for issuance pursuant to outstanding awards included in column (a).
|
|
|
|
21
|
|
|
|
|
|
23
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32
|
|
|
|
|
|
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 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)
|
Management contract or compensatory plan or arrangement.
|
(3)
|
This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
|
|
SOUTHWEST AIRLINES CO.
|
|
|
|
|
February 5, 2019
|
By
|
/s/ Tammy Romo
|
|
|
|
|
|
Tammy Romo
|
|
|
Executive Vice President & Chief Financial Officer
|
|
|
(On behalf of the Registrant and in
|
|
|
her capacity as Principal Financial
|
|
|
and Accounting Officer)
|
Signature
|
|
Title
|
/s/ GARY C. KELLY
|
|
Chairman of the Board & Chief Executive Officer (Principal Executive Officer)
|
Gary C. Kelly
|
|
|
|
|
|
/s/ TAMMY ROMO
|
|
Executive Vice President & Chief Financial Officer (Principal Financial & Accounting Officer)
|
Tammy Romo
|
|
|
|
|
|
/s/ RON RICKS
|
|
Vice Chairman of the Board
|
Ron Ricks
|
|
|
|
|
|
/s/ DAVID W. BIEGLER
|
|
Director
|
David W. Biegler
|
|
|
|
|
|
/s/ J. VERONICA BIGGINS
|
|
Director
|
J. Veronica Biggins
|
|
|
|
|
|
|
|
Director
|
Douglas H. Brooks
|
|
|
|
|
|
/s/ WILLIAM H. CUNNINGHAM
|
|
Director
|
William H. Cunningham
|
|
|
|
|
|
/s/ JOHN G. DENISON
|
|
Director
|
John G. Denison
|
|
|
|
|
|
/s/ THOMAS W. GILLIGAN
|
|
Director
|
Thomas W. Gilligan
|
|
|
|
|
|
/s/ GRACE D. LIEBLEIN
|
|
Director
|
Grace D. Lieblein
|
|
|
|
|
|
/s/ NANCY B. LOEFFLER
|
|
Director
|
Nancy B. Loeffler
|
|
|
|
|
|
/s/ JOHN T. MONTFORD
|
|
Director
|
John T. Montford
|
|
|
|
|
The Boeing Company
|
|
P. O. Box 3707
|
|
|
Seattle, WA 98124-2207
|
|
|
|
Subject:
|
***
|
Reference:
|
A)
Purchase Agreement No. PA-03729 (
Purchase Agreement
) between The Boeing Company (
Boeing
) and Southwest Airlines Co. (
Customer
) relating to Model 737-8 aircraft (
Aircraft
)
|
1.
|
***
|
2.
|
***
|
3.
|
***
|
4.
|
Assignment.
|
SWA-PA-03729-LA-1808800
|
|
|
***
|
|
LA Page 1
|
|
BOEING PROPRIETARY
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Confidentiality.
|
THE BOEING COMPANY
|
||
|
|
|
By
|
/s/ Kyle Kersavage
|
|
|
|
|
Its
|
Attorney‑In‑Fact
|
|
|
||
ACCEPTED AND AGREED TO this
|
||
|
|
|
Date:
|
December 10, 2018
|
|
|
||
SOUTHWEST AIRLINES CO.
|
||
|
|
|
By
|
/s/ Chris Monroe
|
|
|
|
|
Its
|
SVP Finance and Treasurer
|
|
|
|
SWA-PA-03729-LA-1808800
|
|
|
***
|
|
LA Page 2
|
|
BOEING PROPRIETARY
|
|
|
|
|
Name
|
|
State or Other Jurisdiction of Incorporation
or Organization
|
|
|
|
AirTran Airways 717 Leasing Corporation
|
|
Delaware
|
AirTran Airways, Inc.
|
|
Delaware
|
AirTran Holdings, LLC
|
|
Texas
|
AirTran Risk Management, Inc.
|
|
Delaware
|
Southwest Jet Fuel Co.
|
|
Texas
|
Triple Crown Insurance Co., Ltd.
|
|
Bermuda
|
|
By:
|
/s/ Gary C. Kelly
|
|
|
Gary C. Kelly
|
|
|
Chairman of the Board & Chief Executive Officer
(Principal Executive Officer)
|
|
By:
|
/s/ Tammy Romo
|
|
|
Tammy Romo
|
|
|
Executive Vice President & Chief Financial Officer
(Principal Financial & Accounting 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
|
|
|
Chairman of the Board & Chief Executive Officer
(Principal Executive Officer)
|
|
By:
|
/s/ Tammy Romo
|
|
|
Tammy Romo
|
|
|
Executive Vice President & Chief Financial Officer
(Principal Financial & Accounting Officer)
|