Results

Southwest Airlines Co.

10/22/2026 | Press release | Distributed by Public on 10/22/2026 14:26

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Relevant comparative operating statistics for the three and nine months ended September 30, 2026 and 2025 are included below. The Company provides these operating statistics because they are commonly used in the airline industry and, as such, allow readers to compare the Company's performance against its results for the prior year period, as well as against the performance of the Company's peers.
Three months ended September 30,
2026 2025 Change
Revenue passengers carried (000s) 33,467 34,581 (3.2) %
Enplaned passengers (000s) 43,310 43,806 (1.1) %
Revenue passenger miles (RPMs) (in millions)(a)
36,214 36,362 (0.4) %
Available seat miles (ASMs) (in millions)(b)
45,393 45,567 (0.4) %
Load factor(c)
79.8 % 79.8 % - pts.
Average length of passenger haul (miles) 1,082 1,051 2.9 %
Average aircraft stage length (miles) 776 784 (1.0) %
Trips flown 357,374 356,952 0.1 %
Seats flown (000s)(d)
57,593 57,643 (0.1) %
Seats per trip(e)
161.2 161.5 (0.2) %
Average passenger fare $ 231.69 $ 182.56 26.9 %
Passenger revenue yield per RPM (cents)(f)
21.41 17.36 23.3 %
Operating revenues per ASM (cents)(g)
18.55 15.25 21.6 %
Passenger revenue per ASM (cents)(h)
17.08 13.85 23.3 %
Operating expenses per ASM (cents)(i)
17.72 15.17 16.8 %
Operating expenses per ASM, excluding fuel (cents) 12.98 12.25 6.0 %
Operating expenses per ASM, excluding special items (cents) 17.56 15.16 15.8 %
Operating expenses per ASM, excluding fuel and special items (cents) 12.82 12.24 4.7 %
Operating expenses per ASM, excluding fuel, profitsharing, and special items (cents) 12.68 12.21 3.8 %
Fuel costs per gallon, including fuel tax (unhedged) $ 3.87 $ 2.33 66.1 %
Fuel costs per gallon, including fuel tax $ 3.92 $ 2.40 63.3 %
Fuel consumed, in gallons (millions) 548 554 (1.1) %
Active full-time equivalent Employees 73,092 72,223 1.2 %
Aircraft at end of period 803 802 0.1 %
Nine months ended September 30,
2026 2025 Change
Revenue passengers carried (000s) 96,973 100,078 (3.1) %
Enplaned passengers (000s) 125,105 125,330 (0.2) %
Revenue passenger miles (RPMs) (in millions)(a)
104,711 103,875 0.8 %
Available seat miles (ASMs) (in millions)(b)
134,535 133,994 0.4 %
Load factor(c)
77.8 % 77.5 % 0.3 pts.
Average length of passenger haul (miles) 1,080 1,038 4.0 %
Average aircraft stage length (miles) 779 781 (0.3) %
Trips flown 1,055,484 1,056,790 (0.1) %
Seats flown (000s)(d)
169,631 170,145 (0.3) %
Seats per trip(e)
160.7 161.0 (0.2) %
Average passenger fare $ 227.81 $ 187.36 21.6 %
Passenger revenue yield per RPM (cents)(f)
21.10 18.05 16.9 %
Operating revenues per ASM (cents)(g)
17.92 15.39 16.4 %
Operating revenues per ASM, excluding special items (cents) 18.13 15.39 17.8 %
Passenger revenue per ASM (cents)(h)
16.42 13.99 17.4 %
Operating expenses per ASM (cents)(i)
17.18 15.36 11.8 %
Operating expenses per ASM, excluding fuel (cents) 12.92 12.45 3.8 %
Operating expenses per ASM, excluding special items (cents) 17.11 15.27 12.0 %
Operating expenses per ASM, excluding fuel and special items (cents) 12.86 12.36 4.0 %
Operating expenses per ASM, excluding fuel, profitsharing, and special items (cents) 12.74 12.34 3.2 %
Fuel costs per gallon, including fuel tax (unhedged) $ 3.50 $ 2.33 50.2 %
Fuel costs per gallon, including fuel tax $ 3.56 $ 2.40 48.3 %
Fuel consumed, in gallons (millions) 1,607 1,624 (1.0) %
Active full-time equivalent Employees 73,092 72,223 1.2 %
Aircraft at end of period 803 802 0.1 %
(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 supply or 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 by dividing seats flown 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" or "CASM," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiency.
Financial Highlights
The Company reports its results in accordance with GAAP. The Company also provides certain non-GAAP financial measures which the Company's management also utilizes to evaluate its ongoing financial performance, and the Company believes provides additional insight to investors as supplemental information to its GAAP results, as noted in the following tables. See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures. Within the financial tables presented, certain columns and rows may not calculate precisely to the reported totals due to the use of rounded numbers.
Three months ended September 30,
(in millions, except per share amounts)
GAAP 2026 2025 % Change
Operating income $ 379 $ 35 n.m.
Net income $ 270 $ 54 n.m.
Net income per share, diluted $ 0.55 $ 0.10 n.m.
Non-GAAP
Operating income $ 452 $ 42 n.m.
Net income $ 328 $ 58 n.m.
Net income per share, diluted $ 0.66 $ 0.11 n.m.
Nine months ended September 30,
(in millions, except per share amounts)
GAAP 2026 2025 % Change
Operating income $ 994 $ 37 n.m.
Net income $ 730 $ 118 n.m.
Net income per share, diluted $ 1.47 $ 0.21 n.m.
Non-GAAP
Operating income $ 1,367 $ 159 n.m.
Net income $ 1,019 $ 211 n.m.
Net income per share, diluted $ 2.05 $ 0.38 n.m.
The Company's Operating income, Net income, and Net income per share, diluted, for the three and nine months ended September 30, 2026, on a GAAP and non-GAAP basis, improved compared with the same prior year period, driven primarily by strong revenue performance, including third quarter record Operating revenue performance and all-time record unit revenues and passenger yield for the three months ended September 30, 2026, partially offset by higher Aircraft fuel and related taxes expense and Salaries, wages, and benefits expense. On a GAAP basis, the Company's results for the nine months ended September 30, 2026, included a reversal of $285 million of breakage revenue recorded in prior years related to a portion of flight credits issued to Customers between July 2022 and December 2025 that have either been redeemed or are expected to be redeemed in future periods. This adjustment was treated as a special item in second quarter 2026 and excluded from the Company's presentation of non-GAAP results. See Note Regarding Use of Non-GAAP Financial Measures and Notes 1 and 5 to the unaudited Condensed Consolidated Financial Statements for further information. Operating expense for the nine months ended September 30, 2025, on a non-GAAP basis, excluded pre-tax charges of $122 million, most notably $62 million related to severance and related professional fees associated with the Company's February 2025 reduction in workforce.
Company Overview
The Company has completed the implementation of its previously announced transformational initiatives, which were planned and designed to attract new Customers and improve both the Company's operational and financial performance. Since the introduction of assigned and extra legroom seating on January 27, 2026, the Company has successfully integrated these offerings into its operations, contributing to improved passenger yields and incremental revenue. Despite significantly higher fuel costs, results reflect strong demand for the Company's enhanced product and continued momentum across the business.
The Company has also continued to enhance its onboard offerings, with improvements such as in-seat power, larger overhead bins, a refreshed cabin design, with new, more comfortable RECARO seats, and upgraded WiFi, with Starlink-equipped aircraft now in service as part of the Company's ongoing fleet-wide rollout. The Company expects to complete the fleet-wide rollout of Starlink in fall 2027. In addition, the Company entered into new strategic partnerships with TAP Air Portugal, which will enable further travel opportunities to Europe with interline connections at the carriers' shared gateway airports in Boston, Los Angeles, Miami, and San Francisco, and with LOT Polish Airlines, which will offer Passengers access to destinations across Europe and the globe through the carriers' shared gateway airports in Los Angeles, Miami, and San Francisco. Since February 13, 2025, the Company has implemented and/or announced strategic partnerships with a total of 11 carriers, through which Customers may book itineraries that connect the Company's vast domestic network to destinations around the world. In spring 2027, the Company plans to enable Members to earn and redeem Rapid Reward points for travel through new international loyalty partners. The program is expected to initially launch with Icelandair, China Airlines, and Etihad Airways.
In third quarter 2026, the Company also paid $176 million to Shareholders through dividends. See "Liquidity and Capital Resources" below for further information.
On October 15, 2026, the Company announced updates to its Rapid Rewards program, including new Milestone rewards, which will enable Members to receive rewards at different points throughout the tier journey, a faster path to tier status for Rapid Rewards Credit Cardmembers, and a new three-tier membership structure of Silver, Gold, and Platinum. Beginning in January 2027, the current A-List tier will become Silver, and the current A-List Preferred tier will become Gold. Platinum status will sit above Silver and Gold, and include unlimited Companion Pass trips. The Company also announced new ways to use Rapid Rewards points. In 2027, Members will be able to redeem points for seat selection on Southwest-operated flights, including extra legroom and preferred seats. Additionally, beginning in November 2026, Members may redeem points for rental cars across all participating car rental partners.
On September 2, 2026, the Company announced plans for its first-ever airport lounge network, the Southwest Icon Lounge™ network, marking the next chapter of the Southwest Airlines travel experience. The Company is partnering with Chase to combine premium amenities, thoughtful and local design, and the warmth of Southwest's culture to create distinctive spaces for Customers. Construction has begun on the first four Southwest lounges at Austin-Bergstrom International Airport, Baltimore/Washington International Thurgood Marshall Airport, Daniel K. Inouye (Honolulu) International Airport, and Nashville International Airport, with at least seven more lounges planned to open over the next several years across high-demand business and leisure markets. The Company currently expects lounges to open in late 2027. In third quarter 2026, the Company and Chase amended the Co-brand Agreement to extend the term of the agreement and add a new, premium, Southwest Rapid Rewards Credit Card issued by Chase, which is expected to launch in 2027 and provide access to the new Southwest lounge network.
On August 10, 2026, Varun Krishna and Jason T. Liberty were appointed as members of the Company's Board of Directors (the "Board") effective immediately. In connection with the appointments and in accordance with the Company's Fifth Amended and Restated Bylaws, the Board increased the size of the Board to 13 members, effective immediately.
On August 3, 2026, the FAA announced the completion of its -7 aircraft certification. Southwest is currently progressing through the FAA's approval process, and expects to be the launch customer. This process includes, among other things, comprehensive training updates, aircraft conformity inspections and documented reviews, scenario exercises, and required validation flights with FAA representatives and inspectors. The Company expects to complete these readiness activities in approximately three to six months, and anticipates taking delivery of its first -7 aircraft in late 2026, with entry into service expected in 2027. However, the timing of the -7 aircraft's entry into service depends on the FAA's issuance of required approvals to the Company, which is outside of the Company's control. The Company therefore offers no assurances that current estimations and timelines are correct.
Material Changes in Results of Operations
Comparison of the three months ended September 30, 2026 and 2025
Three months ended September 30,
Increase (Decrease) Percent change
(in millions) 2026 2025
Passenger $ 7,754 $ 6,313 $ 1,441 22.8 %
Freight 48 42 6 14.3
Other 621 594 27 4.5
Total operating revenues $ 8,422 $ 6,949 $ 1,473 21.2 %
Salaries, wages, and benefits $ 3,542 $ 3,219 $ 323 10.0 %
Aircraft fuel and related taxes 2,152 1,331 821 61.7
Maintenance materials and repairs 303 299 4 1.3
Landing fees and airport rentals 623 548 75 13.7
Depreciation and amortization 398 394 4 1.0
Other operating expenses 1,026 1,123 (97) (8.6)
Total operating expenses $ 8,043 $ 6,914 $ 1,129 16.3 %
Operating Revenues
Total operating revenues for third quarter 2026 increased by $1.5 billion, or 21.2 percent, year-over-year, to achieve a third quarter Company record of $8.4 billion. Passenger revenues for third quarter 2026 increased by $1.4 billion, or 22.8 percent, year-over-year, driven by a higher percentage of Customers choosing more premium fare benefits as a result of the enhanced fare structure, coupled with an increase in new ancillary products implemented by the Company, including bag fee revenues for first and second checked bags for tickets purchased on or after May 28, 2025 and operating assigned and extra legroom seating for travel beginning January 27, 2026, which includes the co-brand impact associated with those initiatives. Other revenues for third quarter 2026 increased by $27 million, or 4.5 percent, year-over-year, driven primarily by new revenue contracts with partners. Third quarter 2026 RASM was 18.55 cents, finishing 21.6 percent higher than third quarter 2025 to achieve an all-time Company record. The unit revenue increase was primarily due to a 23.3 percent increase in yield as a result of broad demand strength and strong Customer engagement with the Company's enhanced product offering, including an increase in ancillary revenues.
Operating Expenses
Operating expenses for third quarter 2026 increased by $1.1 billion, or 16.3 percent, compared with third quarter 2025. Operating expenses, excluding special items, increased $1.1 billion, or 15.4 percent, compared with third quarter 2025. The dollar increase was primarily due to higher Aircraft fuel and related taxes expense and Salaries,
wages, and benefits expense. The following table presents the Company's Operating expenses per ASM for the third quarter of 2026 and 2025, followed by explanations of these changes on both a dollar and unit basis.
Three months ended September 30, Per ASM
change 		Percent
change
(in cents, except for percentages) 2026 2025
Salaries, wages, and benefits 7.80 ¢ 7.08 ¢ 0.72 ¢ 10.2 %
Aircraft fuel and related taxes 4.74 2.92 1.82 62.3
Maintenance materials and repairs 0.67 0.66 0.01 1.5
Landing fees and airport rentals 1.37 1.20 0.17 14.2
Depreciation and amortization 0.88 0.86 0.02 2.3
Other operating expenses 2.26 2.45 (0.19) (7.8)
Total 17.72 ¢ 15.17 ¢ 2.55 ¢ 16.8 %
Operating expenses per ASM for third quarter 2026 increased by 16.8 percent compared with third quarter 2025, primarily due to an increase in Aircraft fuel and related taxes expense and Salaries, wages, and benefits expense. Operating expenses per ASM for third quarter 2026, excluding Aircraft fuel and related taxes expense, profit sharing, and special items (a non-GAAP financial measure), increased 3.8 percent, compared with third quarter 2025, primarily due to wage rate inflation in Salaries, wages, and benefits expense in 2026. See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.
Salaries, wages, and benefits expense for third quarter 2026 increased by $323 million, or 10.0 percent, compared with third quarter 2025. On a per ASM basis, third quarter 2026 Salaries, wages, and benefits expense increased 10.2 percent, compared with third quarter 2025. On a dollar and per ASM basis, the majority of the increase was due to step/pay rate increases and related benefits for the Company's workforce.
Aircraft fuel and related taxes expense for third quarter 2026 increased by $821 million, or 61.7 percent, compared with third quarter 2025. On a per ASM basis, third quarter 2026 Aircraft fuel and related taxes expense increased 62.3 percent. On a dollar and per ASM basis, the increase was primarily attributable to increased jet fuel prices, particularly due to market disruptions and worldwide geopolitical events. The following table provides more information on the Company's fuel costs per gallon, including the impact of fuel hedging net premium expense associated with previously terminated fuel derivative contracts:
Three months ended September 30,
2026 2025
Fuel costs per gallon $ 3.92 $ 2.40
Fuel hedging premium expense (in millions) $ 29 (a) $ 36 (a)
Fuel hedging premium expense per gallon $ 0.05 (a) $ 0.07 (a)
(a) Includes amounts reclassified from AOCI associated with hedges previously terminated. See Notes 3 and 4 to the unaudited Condensed Consolidated Financial Statements for further information on the Company's derivative instruments and AOCI, respectively.
The Company's third quarter 2026 available seat miles per gallon ("fuel efficiency") increased 0.7 percent, year-over-year, with the improvement primarily due to operating more -8 aircraft, the Company's most fuel-efficient aircraft, as a percentage of its fleet. The continued deliveries of MAX aircraft are expected to remain critical to the Company's efforts to modernize its fleet.
Maintenance materials and repairs expense for third quarter 2026 increased by $4 million, or 1.3 percent, compared with third quarter 2025. On a per ASM basis, Maintenance materials and repairs expense increased 1.5 percent compared with third quarter 2025. On a dollar and per ASM basis, the increase was primarily due to an increase in -800 and -8 engine repairs.
Landing fees and airport rentals expense for third quarter 2026 increased by $75 million, or 13.7 percent, compared with third quarter 2025. On a per ASM basis, Landing fees and airport rentals expense increased 14.2 percent, compared with third quarter 2025. On a dollar and per ASM basis, approximately 50 percent of the increase was attributable to an increase in airport rental expense throughout the network driven by the higher rates charged by airports for leased space, approximately 30 percent of the increase was due to higher landing fees throughout the network driven by increased usage of the heavier -8 aircraft as well as higher rates, and the remaining increase was primarily due to receiving fewer favorable settlements and credits from various airports in 2026.
Depreciation and amortization expense for third quarter 2026 increased by $4 million, or 1.0 percent, compared with third quarter 2025. On a per ASM basis, Depreciation and amortization expense increased 2.3 percent compared with third quarter 2025. On a dollar and per ASM basis, this increase was primarily due to new assets acquired and placed into service, including aircraft and technology, mostly offset by a decrease in depreciation as a result of a change in estimated residual value for certain engine assets due to prevailing market conditions.
Other operating expenses for third quarter 2026 decreased by $97 million, or 8.6 percent, compared with third quarter 2025. Included within this line item was aircraft rentals expense in the amounts of $78 million and $76 million for the three-month periods ended September 30, 2026 and 2025, respectively. On a per ASM basis, Other operating expenses decreased 7.8 percent, compared with third quarter 2025. On a dollar and per ASM basis, the decrease was primarily due to $201 million in additional year-over-year gains on sale-leaseback transactions and the disposition of assets, primarily previously retired engines and aircraft, partially offset by a $64 million increase in revenue-related expenses driven by increased credit card transactions and the Company's free inflight WiFi offering. The remainder of the offset was primarily due to various increased flight-driven expenses that were not individually significant.
Non-Operating Expenses (Income)
Interest expense for third quarter 2026 increased by $35 million, or 100.0 percent, compared with third quarter 2025, primarily due to various debt financing transactions executed since third quarter 2025. See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information.
Other gains, net, for third quarter 2026 decreased by $20 million, or 95.2 percent, compared with third quarter 2025, primarily related to impacts from the Company's nonqualified benefit plan obligations driven by volatility in the stock market.
Income Taxes
The Company's effective tax rate was 24.0 percent in third quarter 2026, compared with 21.0 percent in third quarter 2025. The year-over-year increase in the tax rate was primarily due to the impacts of an increase in non-deductible expenses.
Comparison of the nine months ended September 30, 2026 and 2025
Nine months ended September 30,
Increase (Decrease) Percent change
(in millions) 2026 2025
Passenger $ 22,091 $ 18,751 $ 3,340 17.8 %
Freight 141 127 14 11.0
Other 1,872 1,743 129 7.4
Total operating revenues $ 24,104 $ 20,621 $ 3,483 16.9 %
Salaries, wages, and benefits $ 10,338 $ 9,583 $ 755 7.9 %
Aircraft fuel and related taxes 5,723 3,907 1,816 46.5
Maintenance materials and repairs 855 921 (66) (7.2)
Landing fees and airport rentals 1,831 1,638 193 11.8
Depreciation and amortization 1,198 1,189 9 0.8
Other operating expenses 3,166 3,346 (180) (5.4)
Total operating expenses $ 23,110 $ 20,584 $ 2,526 12.3 %
Operating Revenues
Total operating revenues for the first nine months of 2026 increased $3.5 billion, or 16.9 percent, year-over-year, which included a $285 million decrease related to a breakage adjustment, which was treated as a special item and excluded from the Company's presentation of non-GAAP results. See Note Regarding Use of Non-GAAP Financial Measures and see Notes 1 and 5 to the unaudited Condensed Consolidated Financial Statements for further information. Passenger revenues for the nine months ended September 30, 2026, increased by $3.3 billion, or 17.8 percent, compared with the first nine months of 2025, primarily due to a higher percentage of Customers choosing more premium fare benefits as a result of the enhanced fare structure coupled with an increase in new ancillary products implemented by the Company, including bag fee revenues for first and second checked bags for tickets purchased on or after May 28, 2025 and operating assigned and extra legroom seating for travel beginning January 27, 2026, which includes the co-brand impact associated with those initiatives. Other revenues for the first nine months of 2026 increased by $129 million, or 7.4 percent, compared with the first nine months of 2025. On a dollar basis, approximately 50 percent of the increase was driven by higher retail spend on the Company's co-branded credit cards and approximately 50 percent was driven by new revenue contracts with partners. The first nine months of 2026 RASM was $17.92 cents, finishing 16.4 percent higher than the first nine months of 2025. The unit revenue increase was primarily due to a 16.9 percent increase in yield as a result of broad demand strength and strong Customer engagement with the Company's enhanced product offering, including an increase in ancillary revenues. The first nine months of 2026 RASM, excluding special items was 18.13 cents, finishing 17.8 percent higher than the first nine months of 2025. See Reconciliation of Reported Amounts to Non-GAAP Financial Measures and Note Regarding Use of Non-GAAP Financial Measures for further information.
Operating Expenses
Operating expenses for the first nine months of 2026 increased $2.5 billion, or 12.3 percent, compared with the first nine months of 2025. The dollar increase was primarily due to higher Aircraft fuel and related taxes expense and Salaries, wages, and benefits expense. The following table presents the Company's Operating expenses per ASM for the first nine months of 2026 and 2025, followed by explanations of these changes on a dollar and unit basis.
Nine months ended September 30, Per ASM Percent
(in cents, except for percentages) 2026 2025 change change
Salaries, wages, and benefits 7.68 ¢ 7.16 ¢ 0.52 ¢ 7.3 %
Aircraft fuel and related taxes 4.25 2.91 1.34 46.0
Maintenance materials and repairs 0.64 0.69 (0.05) (7.2)
Landing fees and airport rentals 1.36 1.22 0.14 11.5
Depreciation and amortization 0.89 0.89 - -
Other operating expenses 2.35 2.49 (0.14) (5.6)
Total 17.18 ¢ 15.36 ¢ 1.81 ¢ 11.8 %
Operating expenses per ASM for the first nine months of 2026 increased 11.8 percent, compared with the first nine months of 2025, primarily due to an increase in Aircraft fuel and related taxes expense and Salaries, wages, and benefits expense. Operating expenses per ASM for the first nine months of 2026, excluding Aircraft fuel and related taxes expense, profit sharing, and special items (a non-GAAP financial measure), increased 3.2 percent, year-over-year, primarily due to wage rate inflation in Salaries, wages, and benefits expense. See Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.
Salaries, wages, and benefits expense for the first nine months of 2026 increased by $755 million, or 7.9 percent, compared with the first nine months of 2025. On a per ASM basis, Salaries, wages, and benefits expense for the first nine months of 2026 increased 7.3 percent, compared with the first nine months of 2025. On a dollar and per ASM basis, the majority of the increase was due to step/pay rate increases and related benefits for the Company's workforce.
Aircraft fuel and related taxes expense for the first nine months of 2026 increased $1.8 billion, or 46.5 percent, compared with the first nine months of 2025. On a per ASM basis, Aircraft fuel and related taxes expense for the first nine months of 2026 increased 46.0 percent. On a dollar and per ASM basis, the increase was primarily attributable to increased jet fuel prices, particularly due to market disruptions and worldwide geopolitical events. The following table provides more information on the Company's fuel cost per gallon, including the impact of fuel hedging net premium expense associated with previously terminated fuel derivative contracts:
Nine months ended September 30,
2026 2025
Fuel costs per gallon $ 3.56 $ 2.40
Fuel hedging premium expense (in millions) $ 86 (a) $ 110 (a)
Fuel hedging premium expense per gallon $ 0.06 (a) $ 0.07 (a)
(a) Includes amounts reclassified from Accumulated Other Comprehensive Income associated with hedges previously terminated. See Notes 3 and 4 to the unaudited Condensed Consolidated Financial Statements for further information on the Company's derivative instruments and AOCI, respectively.
Maintenance materials and repairs expense for the first nine months of 2026 decreased $66 million, or 7.2 percent, compared with the first nine months of 2025. On a per ASM basis, Maintenance materials and repairs expense decreased 7.2 percent, compared with the first nine months of 2025. On a dollar and per ASM basis, the decrease was primarily due to a $114 million decrease in -700 engine repairs. This decrease was partially offset by a $22 million increase in -8 engine repairs, as well as higher maintenance materials and repair expenses for airframes and engines across the fleet, none of which were individually material.
Landing fees and airport rentals expense for the first nine months of 2026 increased $193 million, or 11.8 percent, compared with the first nine months of 2025. On a per ASM basis, Landing fees and airport rentals expense increased 11.5 percent, compared with the first nine months of 2025. On a dollar and per ASM basis, approximately
55 percent of the increase was attributable to an increase in airport rental expense throughout the network driven by the higher rates charged by airports for leased space, approximately 30 percent of the increase was due to higher landing fees throughout the network driven by increased usage of the heavier -8 aircraft as well as higher rates, and approximately 15 percent of the increase was due to receiving fewer favorable settlements and credits from various airports in 2026.
Depreciation and amortization expense for the first nine months of 2026 increased $9 million, or 0.8 percent, compared with the first nine months of 2025. On a per ASM basis, Depreciation and amortization expense remained flat compared with the first nine months of 2025. On a dollar basis, this increase was primarily due to increased depreciation as a result of new assets acquired and placed into service, including aircraft, technology, and ground equipment, and various other increases that were not individually significant. This increase was mostly offset by a decrease in depreciation as a result of a change in estimated residual value for certain airframe and engine assets due to prevailing market conditions.
Other operating expenses for the first nine months of 2026 decreased $180 million, or 5.4 percent, compared with the first nine months of 2025. Included within this line item was aircraft rentals expense in the amount of $228 million and $243 million for the nine months ended September 30, 2026 and 2025, respectively. On a per ASM basis, Other operating expenses decreased 5.6 percent, compared with the first nine months of 2025. On a dollar and per ASM basis, the decrease was primarily due to (i) $359 million in additional year-over-year gains on sale-leaseback transactions and the disposition of assets, primarily previously retired engines and aircraft and (ii) a $75 million decrease in external consulting services related to non-recurring Company-wide initiatives. This was partially offset by a $172 million increase in revenue-related expenses driven primarily by increased credit card transactions and the Company's free inflight WiFi offering, and a $49 million increase in Employee-related expenses driven by increased redeye flying and inflation in lodging rates in 2026.
Non-Operating Expenses (Income)
Interest expense for the first nine months of 2026 increased $68 million, or 56.7 percent, compared with the first nine months of 2025, primarily due to various debt financing transactions executed since third quarter 2025. See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information.
Interest income for the first nine months of 2026 decreased $82 million, or 47.7 percent, compared with the first nine months of 2025, primarily due to lower average investment balances and a lower average interest rate in the Company's total investment portfolio.
Other gains, net, for the first nine months of 2026 decreased $15 million, or 53.6 percent, compared with the first nine months of 2025, primarily related to impacts from the Company's nonqualified benefit plan obligations driven by volatility in the stock market.
Income Taxes
The Company's effective tax rate was approximately 22.9 percent for the first nine months of 2026, compared with 24.6 percent for the first nine months of 2025. The first nine months 2025 tax rate was higher than the first nine months 2026 due to certain discrete tax items and lower pre-tax book income in 2025, both of which had a disproportionate impact on the 2025 tax rate.
Reconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding special items) (unaudited)
(in millions, except per share amounts and per ASM amounts) (See Note Regarding Use of Non-GAAP Financial Measures for further information)
Three months ended September 30, Percent Nine months ended September 30, Percent
2026 2025 Change 2026 2025 Change
Operating revenues, as reported $ 8,422 $ 6,949 $ 24,104 $ 20,621
(a) Add: Breakage revenue adjustment - - 285 -
Operating revenues, excluding special items $ 8,422 $ 6,949 21.2 $ 24,389 $ 20,621 18.3
Aircraft fuel and related taxes, unhedged $ 2,123 $ 1,295 $ 5,637 $ 3,797
(b) Add: Premium cost of fuel contracts designated as hedges 29 36 86 110
Aircraft fuel and related taxes, as reported $ 2,152 $ 1,331 61.7 $ 5,723 $ 3,907 46.5
Total operating expenses, as reported $ 8,043 $ 6,914 $ 23,110 $ 20,584
Deduct: Impairment of long-lived assets (30) - (30) (8)
Deduct: Litigation accruals (13) - (13) (19)
Deduct: Transformation costs - (7) - (33)
(c) Deduct: Severance and related costs (30) - (45) (62)
Total operating expenses, excluding special items $ 7,970 $ 6,907 15.4 $ 23,022 $ 20,462 12.5
Deduct: Aircraft fuel and related taxes expense, as reported (2,152) (1,331) (5,723) (3,907)
Operating expenses, excluding Aircraft fuel and related taxes expense and special items $ 5,818 $ 5,576 4.3 $ 17,299 $ 16,555 4.5
Deduct: Profit-sharing expense (62) (11) (165) (26)
Operating expenses, excluding Aircraft fuel and related taxes expense, special items, and profit sharing $ 5,756 $ 5,565 3.4 $ 17,134 $ 16,529 3.7
Operating income, as reported $ 379 $ 35 $ 994 $ 37
(a) Add: Breakage revenue adjustment - - 285 -
Add: Impairment of long-lived assets 30 - 30 8
Add: Litigation accruals 13 - 13 19
Add: Transformation costs - 7 - 33
(c) Add: Severance and related costs 30 - 45 62
Operating income, excluding special items $ 452 $ 42 976.2 $ 1,367 $ 159 759.7
Total operating revenues, as reported $ 8,422 $ 6,949 $ 24,104 $ 20,621
Operating margin, as reported 4.5 % 0.5 % 4.0 pts. 4.1 % 0.2 % 3.9 pts.
Add: Impact of special items 0.9 % 0.1 % 1.5 % 0.6 %
Operating margin, excluding special items 5.4 % 0.6 % 4.8 pts. 5.6 % 0.8 % 4.8 pts.
Income before income taxes, as reported $ 355 $ 68 $ 946 $ 155
(a) Add: Breakage revenue adjustment - - 285 -
Add: Impairment of long-lived assets 30 - 30 8
Add: Litigation accruals 13 - 13 19
Add: Transformation costs - 7 - 33
(c) Add: Severance and related costs 30 - 45 62
Three months ended September 30, Percent Nine months ended September 30, Percent
2026 2025 Change 2026 2025 Change
Income before income taxes, excluding special items $ 428 $ 75 470.7 $ 1,320 $ 277 376.5
Provision for income taxes, as reported $ 85 $ 14 $ 216 $ 37
(d) Add: Net income tax impact of special items 16 3 85 29
Provision for income taxes, net, excluding special items $ 101 $ 17 494.1 $ 301 $ 66 356.1
Net income, as reported $ 270 $ 54 $ 730 $ 118
(a) Add: Breakage revenue adjustment - - 285 -
Add: Litigation accruals 13 - 13 19
Add: Transformation costs - 7 - 33
(c) Add: Severance and related costs 30 - 45 62
Add: Impairment of long-lived assets 30 - 30 8
(d) Deduct: Net income tax impact of special items (16) (3) (85) (29)
Net income, excluding special items $ 328 $ 58 465.5 $ 1,019 $ 211 382.9
Total operating revenues, as reported $ 8,422 $ 6,949 $ 24,104 $ 20,621
Net margin, as reported 3.2 % 0.8 % 2.4 pts. 3.0 % 0.6 % 2.4 pts.
Add: Impact of special items 0.9 % 0.1 % 1.5 % 0.6 %
(d) Deduct: Net income tax impact of special items (0.2) % - % (0.3) % (0.1) %
Net margin, excluding special items 3.9 % 0.8 % 3.1 pts. 4.2 % 1.0 % 3.2 pts.
Net income per share, diluted, as reported $ 0.55 $ 0.10 $ 1.47 $ 0.21
Add: Impact of special items 0.15 0.02 0.75 0.22
(d) Deduct: Net income tax impact of special items (0.04) (0.01) (0.17) (0.05)
Net income per share, diluted, excluding special items $ 0.66 $ 0.11 500.0 $ 2.05 $ 0.38 439.5
Operating revenues per ASM (cents), as reported 18.55 ¢ 15.25 ¢ 17.92 ¢ 15.39 ¢
Add: Impact of special items - - 0.21 -
Operating revenues per ASM, excluding special items (cents) 18.55 ¢ 15.25 ¢ 21.6 18.13 ¢ 15.39 ¢ 17.8
Operating expenses per ASM (cents) 17.72 ¢ 15.17 ¢ 17.18 ¢ 15.36 ¢
Deduct: Impact of special items (0.16) (0.02) (0.07) (0.09)
Deduct: Aircraft fuel and related taxes expense divided by ASMs (4.74) (2.92) (4.25) (2.91)
Deduct: Profit-sharing expense divided by ASMs (0.14) (0.02) (0.12) (0.02)
Operating expenses per ASM, excluding Aircraft fuel and related taxes expense, special items, and profit sharing (cents) 12.68 ¢ 12.21 ¢ 3.8 12.74 ¢ 12.34 ¢ 3.2
(a) Represents a change in breakage revenue estimate related to non-expiring flight credits the Company issued to Passengers between July 2022 and December 2025. Due to higher-than-projected Customer redemptions of these non-expiring flight credits, along with updated projections of future redemptions, the Company has revised its estimates with regards to the remaining non-expiring flight credits that remain available for redemption. See Notes 1 and 5 to the unaudited Condensed Consolidated Financial Statements.
(b) Includes amounts reclassified from AOCI associated with hedges previously terminated. See Note 3 to the unaudited Condensed Consolidated Financial Statements for further information.
(c) Represents Employee severance and other related payments resulting from corporate workforce reductions.
(d) Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item.
Non-GAAP Return on Invested Capital (ROIC) (in millions) (unaudited)
Twelve months ended Twelve months ended
September 30, 2026 September 30, 2025
Operating income, as reported $ 1,384 $ 315
Breakage revenue adjustment 285 116
Severance and related costs 45 62
Voluntary Employee programs - 5
Net impact from fuel contracts - (25)
Professional advisory fees - 18
Transformation costs - 37
DOT settlement (11) -
Litigation accruals 13 19
Impairments 30 8
Operating income, non-GAAP $ 1,747 $ 555
Net adjustment for aircraft leases (a) 214 201
Adjusted operating income, non-GAAP (A) $ 1,961 $ 756
Non-GAAP tax rate (B) 22.7 % (d) 22.4 % (e)
Net operating profit after-tax, NOPAT (A* (1-B) = C) $ 1,516 $ 587
Debt, including finance leases (b) $ 5,244 $ 5,921
Equity (b) 7,409 9,181
Net present value of aircraft operating leases (b) 814 977
Average invested capital $ 13,467 $ 16,079
Equity adjustment for hedge accounting (c) (8) 32
Adjusted average invested capital (D) $ 13,459 $ 16,111
Non-GAAP ROIC, pre-tax (A/D) 14.6 % 4.7 %
Non-GAAP ROIC, after-tax (C/D) 11.3 % 3.6 %
(a) Net adjustment to reflect all aircraft in fleet as owned (i.e., the impact of eliminating aircraft rent expense and replacing with estimated depreciation expense for those same aircraft). The Company makes this adjustment to enhance comparability to other entities that have different capital structures by utilizing alternative financing decisions.
(b) Calculated as an average of the five most recent quarter end balances or remaining obligations. The Net present value of aircraft operating leases represents the assumption that all aircraft in the Company's fleet are owned, as it reflects the remaining contractual commitments discounted at the Company's estimated incremental borrowing rate as of the time each individual lease was signed.
(c) The Equity adjustment in the denominator adjusts for the cumulative impacts, in Accumulated other comprehensive income and Retained earnings, of gains and/or losses that will settle in future periods, including those associated with the Company's terminated fuel hedges. The prior period impact of these gains and/or losses is reflected in the Net impact from fuel contracts in the numerator.
(d) The GAAP twelve month rolling tax rate as of September 30, 2026, was 22.2 percent, and the Non-GAAP twelve month rolling tax rate was 22.7 percent. See Note Regarding Use of Non-GAAP Financial Measures for additional information.
(e) The GAAP twelve month rolling tax rate as of September 30, 2025, was 21.8 percent, and the Non-GAAP twelve month rolling tax rate was 22.4 percent. See Note Regarding Use of Non-GAAP Financial Measures for additional information.
Note Regarding Use of Non-GAAP Financial Measures
The Company's unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP. These GAAP financial statements include (i) unrealized noncash reclassifications, as a result of accounting requirements and elections previously made under accounting pronouncements relating to derivative instruments and hedging and (ii) other charges and benefits the Company considers unusual and/or infrequent in nature and thus may make comparisons to its prior or future performance difficult.
Accordingly, the Company also provides financial information in this filing that was not prepared in accordance with GAAP and should not be considered as a substitute for the information prepared in accordance with GAAP. The Company provides supplemental non-GAAP financial information (also referred to as "excluding special items"). Management believes special items can distort the trends associated with the Company's ongoing performance. Therefore, management utilizes non-GAAP financial measures to evaluate the Company's financial performance, anticipate future operating results, and assess trends without the impact of items that can vary significantly from period to period. The following measures are often provided, excluding special items, and are utilized by the Company's management, analysts, and investors to enhance comparability of year-over-year results, as well as to industry trends: Operating revenues, non-GAAP; Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Aircraft fuel and related taxes expense; Operating expenses, non-GAAP excluding Aircraft fuel and related taxes expense and profit sharing; Operating income, non-GAAP; Adjusted Operating income, non-GAAP; Income before income taxes, non-GAAP; Provision for income taxes, net, non-GAAP; Net income, non-GAAP; Net income per share, diluted, non-GAAP; Operating revenues per ASM, non-GAAP (cents); Operating expenses per ASM, non-GAAP, excluding Aircraft fuel and related taxes expense and profit sharing (cents); Return on invested capital, non-GAAP; adjusted operating margin; and adjusted net margin.
For the periods presented, special items include:
1.Charges associated with tentative and/or actual litigation settlements;
2.Expenses associated with professional advisory fees related to the Company's implementation of its comprehensive transformational plan;
3.Charges associated with Employee severance and other related payments resulting from corporate workforce reductions;
4.Reversal of breakage revenue recorded in prior years related to a portion of non-expiring flight credits issued to Customers that have either been redeemed or are expected to be redeemed in future periods;
5.Non-cash impairment charges to remove certain assets no longer in use that are not related to the direct operations of the Company from the unaudited Condensed Consolidated Balance Sheet;
6.Expenses associated with incremental professional advisory fees related to activist investor activities, which were not budgeted by the Company or associated with the ongoing operation of the airline;
7.Incremental expense associated with a voluntary separation program that allowed eligible Employees the opportunity to voluntarily separate from the Company in exchange for severance, medical/dental coverage for a specified period of time, and travel privileges based on years of service; and
8.A credit received from the Department of Transportation ("DOT") regarding a settlement reached for the Company's December 2022 operational disruption in light of the Company significantly improving its on-time performance and completion factor through the Company's investment in its Network Operations Control.
The Company has also provided its calculation of return on invested capital ("ROIC"), which is a measure of financial performance used by management to evaluate its investment returns on capital. ROIC is not a substitute for financial results as reported in accordance with GAAP and should not be utilized in place of such GAAP results. Return on invested capital is not a measure defined by GAAP. It is calculated by the Company, in part, using non-GAAP financial measures, which include charges or benefits that are deemed "special items." As noted above, the Company believes "special items" make it difficult to compare to prior periods, anticipated future periods, or industry trends since these items cannot be reliably predicted or estimated. The Company believes non-GAAP ROIC is a meaningful measure because it quantifies the Company's effectiveness in generating returns relative to the capital it has invested in its business. Although ROIC is commonly used as a measure of capital efficiency, definitions of return on invested capital differ; therefore, the Company is providing an explanation of its calculation
for non-GAAP return on invested capital in the accompanying reconciliation in order to allow investors to compare and contrast its calculation to the calculations provided by other companies.
Liquidity and Capital Resources
Net cash provided by operating activities was $513 million for the three months ended September 30, 2026, compared with $287 million provided by operating activities in the same prior year period. Net cash provided by operating activities was $2.5 billion for the nine months ended September 30, 2026 compared with $1.5 billion provided by operating activities in the same prior year period. Historically, operating cash inflows are primarily derived from selling tickets for future flights and providing air transportation to Customers. The vast majority of tickets are purchased prior to the day on which travel is provided and, in some cases, several months before the anticipated travel date. Operating cash outflows are related to the recurring expenses of airline operations. The operating cash flows for the nine months ended September 30, 2026, were largely impacted by the Company's net results (as adjusted for noncash items), a $97 million profit-sharing contribution related to 2025 results pursuant to the Company's Retirement Savings Plan, a $1.1 billion increase in Air traffic liability driven by seasonal bookings for future travel, and gains of $272 million and $118 million on the sale of property and equipment and sale-leaseback transactions, respectively. The operating cash flows for the nine months ended September 30, 2025, were largely impacted by the Company's net results (as adjusted for noncash items), a $103 million profit-sharing contribution related to 2024 results pursuant to the Company's Retirement Savings Plan, and a $117 million decrease in Air traffic liability driven by a decrease in flight points earned and more flight credits redeemed by Customers. Net cash provided by operating activities is primarily used to finance capital expenditures, repay debt, provide Shareholder returns, and provide working capital.
Net cash used in investing activities totaled $509 million during the three months ended September 30, 2026, compared with $428 million used in investing activities in the same prior year period. Net cash used in investing activities totaled $1.5 billion during the nine months ended September 30, 2026, compared with $687 million used in investing activities in the same prior year period. Investing activities in both years included Capital expenditures, as well as proceeds from the sale of various capital assets, and the prior year also included changes in the balance of the Company's short-term and noncurrent investments. During the nine months ended September 30, 2026, gross Capital expenditures were $2.5 billion, and the Company had $735 million proceeds from sales of property and equipment, as well as $212 million raised from sale-leaseback transactions (See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information on the sale-leaseback transactions), compared with $1.9 billion gross Capital expenditures, and $108 million proceeds from sales of property and equipment in the same prior year period. Capital expenditures increased, year-over-year, largely due to an increase in progress and delivery payment balances for scheduled future aircraft deliveries during the nine months ended September 30, 2026, compared with the same prior year period. Proceeds from sales increased, year-over-year, due to the timing and volume of various aircraft and engine sales in the nine months ended September 30, 2026, compared with September 30, 2025.
The Company expects its 2026 net capital spending to be between $2.5 billion and $2.75 billion, which includes the impact of proceeds from sales of assets and sale-leaseback transactions.
Net cash used in financing activities was $171 million during the three months ended September 30, 2026, compared with $432 million used in financing activities for the same prior year period. Net cash used in financing activities was $554 million during the nine months ended September 30, 2026, compared with $5.5 billion used in financing activities for the same prior year period. During the nine months ended September 30, 2026, the Company paid $357 million in cash dividends to Shareholders related to the first, second, and third quarter 2026 and fourth quarter 2025 declarations. Additionally, the Company expended $1.25 billion to repurchase the Company's outstanding common stock through accelerated share repurchase programs (each, an "ASR") and open market share repurchases during the nine months ended September 30, 2026. The repurchases of common stock amounts in the unaudited Consolidated Statement of Cash Flows may differ from the unaudited Consolidated Statement of Stockholder's Equity due to the timing of excise taxes incurred and subsequent payment on share repurchases, net of issuances. During the nine months ended September 30, 2026, the Company entered into the Term Loan Credit Agreement with a third-party bank, providing for the $500 million senior secured Term Loan Credit Facility that was drawn in full on March 11, 2026. On May 19, 2026, the Company executed an upsize of the Term Loan Facility for $1 billion of incremental term loan commitments. The commitments are secured by a grant of a security interest
in certain aircraft and related assets with a minimum collateral coverage ratio requirement. The Term Loan Facility matures in full on March 11, 2029. Additionally, the Company prepaid the $426 million outstanding balance of the note associated with the PSP3 Payroll Support Program in April 2026. See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information. The Company may engage in early debt repurchases from time to time at its discretion; however, no other potential early future repurchases are included in the Company's Current maturities of long-term debt unless otherwise disclosed as of September 30, 2026. During the nine months ended September 30, 2025, the Company paid $399 million in cash dividends to Shareholders related to the first, second, and third quarter 2025 and fourth quarter 2024 declarations. Additionally, the Company expended $2.5 billion to repurchase the Company's outstanding common stock through ASRs and repaid both the Convertible Notes and the PSP1 Payroll Support Program loan in the amounts of $1.6 billion and $976 million, respectively.
On July 23, 2025, the Board approved a $2.0 billion share repurchase authorization of the Company's common stock. During the nine months ended September 30, 2026, the Company repurchased 28,429,822 shares of its common stock, all of which occurred during the first quarter of 2026. The Company did not repurchase any shares during the second or third quarter of 2026. As of September 30, 2026, approximately $450 million remained available under the Company's share repurchase authorization. See Part II, Item 2 for further information on the Company's share repurchases. These purchases were recorded as treasury share repurchases for purposes of calculating earnings per share. Subject to certain conditions, repurchases may be made in accordance with applicable securities laws in open market or private, including accelerated repurchase transactions from time to time, depending on market conditions.
The Company is a "well-known seasoned issuer" and currently has an effective shelf registration statement registering an indeterminate amount of debt and equity securities for future sales. The Company intends to use the proceeds from any future securities sales off this shelf registration statement for general corporate purposes.
On August 10, 2026, the Company entered into a new $2.0 billion Credit Agreement and terminated its previous amended and restated revolving credit facility. The Credit Agreement matures on August 10, 2031 and includes an uncommitted accordion feature that permits the Company to increase the size of the facility to $3.0 billion, subject to, among other things, obtaining additional lender commitments. For the nine months ended September 30, 2026 and 2025, there were no amounts outstanding under the Credit Agreement or the previous amended and restated revolving credit facility, respectively. See Note 10 to the unaudited Condensed Consolidated Financial Statements for further information.
As of September 30, 2026, the Company carried a working capital deficit of approximately $7.2 billion, in which its current liabilities exceed its current assets. This is common within the airline industry and is primarily due to the nature of the Air traffic liability account, which is related to advance ticket sales, unused flight credits available to Customers, and loyalty deferred revenue, which are performance obligations for future Customer flights, do not require future settlement in cash, and are mostly nonrefundable. See Note 5 to the unaudited Condensed Consolidated Financial Statements for further information.
The Company believes it has various options available to meet its capital and operating commitments, including unrestricted cash of $3.6 billion as of September 30, 2026, and anticipated future internally generated funds from operations. The Company continues to have a large base of unencumbered aircraft and other related assets with a net book value of approximately $15.8 billion. The Company regularly evaluates its capital structure to efficiently manage financial risks, liquidity access, and cost of capital. The Company may consider, from time to time, additional financing arrangements, including secured or unsecured debt, as appropriate. In addition, the Company continues to maintain investment-grade credit ratings by all three major credit agencies (Moody's, S&P Global, and Fitch).
The Company's contractual order book with Boeing for MAX aircraft extends through 2031. The Company regularly engages in discussions with its airframe and engine suppliers regarding its near-term and long-term fleet needs and order book adjustments. As of October 22, 2026, for the years 2026 through 2031, the Company has firm
orders with Boeing for 487 MAX aircraft (240 -7s and 247 -8s), less 46 -8 aircraft received as of October 21, 2026, and 130 MAX options (-7s or -8s). The -7 received FAA certification in August 2026; however, the timing and quantity of future aircraft deliveries remain subject to Boeing's production capability and other factors. The contractual order book as of October 22, 2026, does not include the impact of delivery delays and is subject to change based on ongoing discussions with Boeing. See Note 9 to the unaudited Condensed Consolidated Financial Statements for further information.
The following table details information on the aircraft in the Company's fleet as of September 30, 2026:
Average
Age (Yrs) 		Number
of Aircraft 		Number
Owned 		Number
Leased
Type Seats
737-700 137 20 271 255 16
737-800 175 11 189 140 49
737-8 175 3 343 310 33
Totals 11 803 705 98
Critical Accounting Policies and Estimates
For information regarding the Company's Critical Accounting Policies and Estimates, see the "Critical Accounting Policies and Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). Forward-looking statements are based on, and include statements about, the Company's estimates, expectations, beliefs, intentions, and strategies for the future, and the assumptions underlying these forward-looking statements. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, statements related to the following:
•the Company's estimated fuel costs and fuel efficiency and the assumptions underlying the Company's fuel-related expectations and estimates;
•the Company's expectations with respect to fleet transactions;
•the Company's expectations with respect to share repurchases;
•the Company's expectations regarding passenger demand, revenue management and breakage estimates, revenue trends, and bookings;
•the Company's focus areas, goals, opportunities, and initiatives, including with respect to the Company's transformational initiatives and strong Customer engagement with the Company's enhanced product offering;
•the Company's plans and expectations with respect to the Company's delivery of WiFi and Starlink-equipped aircraft, the Southwest lounge network, airline partnerships, cabin design and seating, and the Company's Co-brand Agreement with Chase;
•the Company's plans and expectations with respect to improving financial performance, Shareholder returns, capital structure, capital allocation, capital deployment, infrastructure investments, debt repurchases, and additional financing arrangements, including secured or unsecured debt;
•the Company's fleet plans and expectations, including with respect to fleet modernization, fleet retrofits, fleet utilization, flexibility, fleet strategy and extracting value from the fleet and the fleet order book, and expected fleet deliveries and retirements, and underlying expectations and dependencies;
•the Company's network plans and expectations;
•the Company's labor plans and expectations;
•the Company's financial expectations, targets and goals, including with respect to leverage, liquidity, balance sheet goals, and cost discipline;
•the Company's short-term and long-term financial and operational goals;
•the Company's cash flow expectations and capital spending guidance, in particular with respect to aircraft capital expenditures and underlying aircraft delivery expectations;
•the Company's expectations with respect to its ability to meet its ongoing capital and operating commitments, including underlying assumptions and factors that could impact this ability;
•the Company's assessment of financial and market risks; and
•the Company's plans and expectations related to legal and regulatory proceedings.
While management believes these forward-looking statements are reasonable as and when made, forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed in or indicated by the Company's forward-looking statements or from historical experience or the Company's present expectations. Factors that could cause these differences include, among others:
•the impact of fuel price changes, fuel price volatility, and fuel availability on the Company's business plans and results of operations, including with respect to fuel price increases and supply chain constraints related to geopolitical conflict;
•the impact of geopolitical conflict, consumer perception, consumer uncertainties with respect to government shutdowns or trade policies (including the imposition of tariffs), economic conditions, banking conditions, fears or actual outbreaks of diseases, extreme or severe weather and natural disasters, actions of competitors (including, without limitation, pricing, scheduling, capacity, and network decisions, and consolidation and alliance activities), socio-demographic trends, and other factors beyond the Company's control on consumer behavior and the Company's results of operations and business decisions, plans, strategies, and results;
•the Company's ability to timely and effectively implement, transition, operate, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives;
•the impact of governmental regulations and other governmental actions, including with respect to government shutdowns, as well as the Company's ability to obtain any required governmental approvals, on the Company's plans, strategies, financial results, and operations;
•the Company's dependence on Boeing, Boeing's suppliers, and the FAA with respect to the Company's fleet plans and deliveries, capacity and operational plans, and other operational plans, strategies, and goals;
•consumer behavior and response with respect to the Company's commercial products and policies;
•the impact of labor and hiring matters on the Company's business decisions, plans, strategies, and results;
•the Company's dependence on other third parties, in particular with respect to its technology plans, its plans and expectations related to operational excellence and reliability, revenue management, online travel agencies, fuel supply, maintenance, environmental sustainability, Global Distribution Systems, and the impact on the Company's operations and results of operations of any third party delays or non-performance;
•the Company's ability to obtain and maintain adequate infrastructure and equipment to support its operations and initiatives;
•the Company's dependence on its workforce, including its ability to employ and retain sufficient numbers of qualified Employees to effectively and efficiently maintain its operations;
•the impact of fears or actual acts of terrorism or war, political instability, cyber-attacks, and other factors beyond the Company's control on the Company's plans, financial results, operations, and ability to adequately insure against risks;
•the cost and effects of the actions of activist shareholders; and
•other factors as set forth in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the detailed factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Caution should be taken not to place undue reliance on the Company's forward-looking statements, which represent the Company's views only as of the date this report is filed. The Company undertakes no obligation to update
publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Southwest Airlines Co. published this content on October 22, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 22, 2026 at 20:29 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]