About Southwest Airlines

Southwest Airlines Co. (Southwest) operates Southwest Airlines, a major passenger airline that provides scheduled air transportation in the United States and near-international markets. As of December 31, 2023, Southwest had a total of 817 Boeing 737 aircraft in its fleet and served 121 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. Route Structure Southwest has historically principally provided ‘point-to-point’ service, rather than the ‘hub-and-spoke’ service provided by most major U.S. airlines. A point-to-point system enables airlines to connect directly to destinations without providing a connecting service. By contrast, the hub-and-spoke system concentrates most of an airline's operations at a limited number of central hub cities and serves most other destinations in the system by providing one-stop or connecting service through a hub. By not concentrating operations exclusively through one or more central transfer points, Southwest's route structure has allowed for more direct nonstop routing than a traditional hub-and-spoke service. While the company does not operate a traditional hub-and-spoke model, in recent years the company has increasingly focused on designing its network around core stations in an effort to provide greater connectivity, and support operational reliability and recoverability. Southwest’s network blends intentional connectivity offered by hub-and-spoke models and point-to-point nonstops, allowing the company to capture nonstop demand and provide reliable one-stop itinerary options. Approximately 73 percent of the company’s Customers flew nonstop during 2023. As of December 31, 2023, Southwest served 805 nonstop city pairs. For 2023, the company’s average aircraft trip stage length was 730 miles, with an average duration of approximately 2.0 hours. Southwest’s unique route network has also enabled it to provide its markets with frequent, conveniently timed flights and low fares. For example, Southwest offers 12 weekday roundtrips between Dallas Love Field and Houston Hobby (and an additional 3 to Houston Bush), 5 weekday roundtrips between Denver and Chicago Midway (and an additional 4 to Chicago O'Hare), 7 weekday roundtrips between Los Angeles International and Las Vegas, 8 weekday round trips between Burbank and Oakland, and 13 weekday roundtrips between Phoenix and Denver. Southwest complements its high-frequency short-haul routes with mid-range and long-haul nonstop service, including flights between Hawaii and California, Las Vegas, and Phoenix, and between markets such as Los Angeles and Nashville, New York LaGuardia and Houston, Los Angeles and Baltimore, Oakland and Houston, and San Diego and Baltimore. The company continually works to optimize its route network and schedule through the adjustment of flights in its existing markets and the addition of new markets and itineraries, while also pruning less profitable flights from its schedule. In 2023, the company focused its efforts towards restoring the depth and breadth of its pre-pandemic network by adding back frequency in existing markets and reconnecting markets that have historically served as points of strength for the network. While the company’s network and aircraft utilization were restored to pre-pandemic levels in late 2023, the network was not fully optimized for post-pandemic travel patterns. The company’s near-term optimization efforts focus on evaluating its short-haul routes as business travel continues to lag pre-pandemic levels, offering the right number of flights at the right times of day, and reducing certain weekday flights to better match capacity to demand. The company’s unique route network allows for these adjustments without structurally disrupting its airports in core markets and other large cities. The company also remains focused on maturing newer markets introduced during the pandemic. The company entered 18 new destinations during 2020 and 2021, expanding its network to new Customer bases, leisure destinations, and geographic regions. These services have created additional regional and international connectivity structured to grow the company’s presence in strategic markets that serve as cornerstones for its network and provide additional options for Customers to reach their final destinations. To further improve international connectivity with its domestic network, the company has announced its plans to shift the bulk of its international service in Fort Lauderdale to Orlando. Further, in October 2023, the company announced its plans to moderate capacity growth in 2024 to better match demand and Customer travel patterns, as well as to absorb its capacity growth from 2023. The company's strategy includes, among other elements, the use of a single aircraft type, the Boeing 737; and the company’s route structure. Southwest's use of a single aircraft type has historically allowed for simplified scheduling, maintenance, flight operations, safety management, and training activities. Southwest's route structure includes service to and from many secondary or downtown airports, such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, Burbank, Manchester, Oakland, San Jose, Providence, and Ft. Lauderdale-Hollywood. These conveniently located airports are typically less congested than other airlines' hub airports, which has contributed to Southwest's ability to achieve high asset utilization because aircraft can be scheduled to minimize the amount of time they are on the ground. The company focuses on minimizing fuel consumption and improving fuel efficiency through fleet modernization and other fuel initiatives. For example, in 2023, the company added 86 Boeing 737 MAX 8 (‘-8’) aircraft to its fleet, with the intention of lowering operating costs, improving potential growth opportunities, restoring the company’s network to pre-pandemic levels, reducing carbon emissions per available seat mile, and further modernizing the company’s fleet with more fuel-efficient aircraft. The company’s fuel efficiency was aided in 2023 through the addition of 86 -8 aircraft to its fleet and by the retirement of 39 of its oldest, least fuel-efficient Boeing 737-700 (‘-700’) aircraft. As of December 31, 2023, the company had 223 -8 aircraft in its fleet. The company is also scheduled to begin receiving the Boeing 737 MAX -7 (‘-7’) in 2024. In fourth quarter 2023, the company entered into supplemental agreements (the ‘Supplements’) to its purchase agreement with The Boeing Company (‘Boeing’) relating to the company’s purchase of -8 and -7 aircraft (collectively, ‘MAX aircraft’). Pursuant to the Supplements, the company amended its order book delivery schedule to better allocate aircraft deliveries for orderly and measured growth, to extend its firm orders through 2031, and to add 108 firm orders and 108 MAX aircraft options. The company retired 39 Boeing -700 aircraft in 2023 and plans for 49 aircraft retirements in 2024. The company held 199 remaining MAX options as of December 31, 2023, in addition to 495 firm orders of MAX aircraft to be delivered through 2031. The company retains significant flexibility to manage its fleet size, including opportunities to accelerate fleet modernization efforts (e.g., through accelerated retirements of the company’s -700 aircraft) if growth opportunities do not materialize. Ancillary Services The company offers ancillary services such as Southwest’s EarlyBird Check-In, Upgraded Boarding, and transportation of pets and unaccompanied minors, in accordance with Southwest’s respective policies. EarlyBird Check-In provides Customers with automatic check-in and an assigned boarding position before general boarding positions become available, thereby improving Customers’ seat selection options (priority boarding privileges are already a benefit of being an ‘A-List’ or ‘A-List Preferred’ tier member under the company’s Rapid Rewards loyalty program). EarlyBird Check-In pricing is based on multiple factors, including the length of the flight and the historical popularity of EarlyBird Check-In on the route. When available, Southwest sells Upgraded Boarding at the airport or on Customer mobile devices, which allows a Customer to pay for an open priority boarding position in the first 15 positions in its ‘A’ boarding group. Southwest’s Pet Policy provides Customers an opportunity to travel with a small cat or dog in the aircraft cabin on domestic flights. Southwest also has an unaccompanied minor travel policy, with pricing to address the administrative costs and the extra care necessary to safely transport these Customers. Rapid Rewards Loyalty Program Southwest’s Rapid Rewards loyalty program enables program members (‘Members’) to earn points for every dollar spent on Southwest base fares, also including purchases paid with LUV Vouchers, gift cards, or flight credit, with no portion of the purchase price paid with Rapid Rewards points. Under the program, Members continue to accumulate points until the time they decide to redeem them. As a result, the program provides Members significant flexibility and options for earning and redeeming rewards. For example, Members can earn more points (and achieve tier status such as A-List, A-List Preferred, or a Companion Pass faster) by purchasing higher fare tickets. Members also have significant flexibility in redeeming points, such as the opportunity to book in advance to take advantage of a lower fare ticket (including many fare sales) requiring fewer points, or by being able to redeem at the last minute, if seats are still available for sale. Members can also earn points through qualifying purchases with Rapid Rewards Partners (which include, for example, car rental agencies, hotels, and restaurants), as well as by using Southwest’s co-branded Chase Visa credit cards. In addition to earning points for revenue flights and qualifying purchases with Rapid Rewards Partners, Members also have the ability to purchase, gift, and transfer points, as well as the ability to donate points to selected charities. Southwest’s Rapid Rewards loyalty program features tier status and Companion Pass programs for the most active Members, including ‘A-List’ and ‘A-List Preferred’ status. A Member who flies 20 qualifying one-way flight segments booked through Southwest or earns 35,000 tier qualifying points per calendar year will qualify for A-List status. A Member who flies 40 qualifying one-way flights booked through Southwest or earns 70,000 tier qualifying points per calendar year will qualify for A-List Preferred status. The Member will maintain A-List or A-List Preferred status for the remainder of the calendar year in which the status is earned and for the entire calendar year immediately following. Both A-List and A-List Preferred Members enjoy benefits, such as priority check-in and security lane access, where available, as well as dedicated phone lines, standby priority, and an earnings bonus on eligible revenue flights (25 percent for A-List and 100 percent for A-List Preferred). In addition, A-List Preferred Members enjoy free inflight satellite internet service on WiFi-enabled aircraft, where available, and up to two complimentary premium drinks per flight on flights traveling 176 miles or more, added directly to their mobile boarding passes. Members who attain A-List or A-List Preferred status receive priority boarding privileges. In addition, the company has announced that, beginning in early 2024, Members will be able to pay for their flights with a combination of cash and Rapid Rewards points—starting with as few as 1,000 points. At launch, bookings paid for with a combination of points plus other forms of eligible payment will not earn Rapid Rewards points, tier qualifying points for A-List or A-List Preferred status, or Companion Pass qualifying points, but will earn tier qualifying segment credits. During 2021, the company added Rapid Rewards Business, giving businesses the ability to earn Rapid Rewards points. By joining Rapid Rewards Business, companies earn Rapid Rewards points that can be applied toward travel on the company’s behalf, while travelers who are Rapid Rewards Members also earn Rapid Rewards points in their personal accounts. Rapid Rewards business accounts generally have the same opportunities and benefits to earn and redeem points as individual Member accounts. Southwest’s Rapid Rewards loyalty program has been designed to drive more revenue by bringing in new Customers, including new Members, as well as new holders of Southwest’s co-branded Chase Visa credit cards; increasing business from existing Customers; and strengthening the company’s Rapid Rewards hotel, rental car, credit card, and other partnerships. Investments in Customer Experience In 2022, the company announced its multi-year plan to modernize and transform the Customer Experience. These enhancements include the company’s plans to bring enhanced WiFi connectivity onboard aircraft; install latest-technology onboard power ports on MAX aircraft to charge personal devices at every seat; offer larger overhead bins on new aircraft deliveries with more space and easier access to carryon items; introduce more entertainment options and a wider variety of refreshments in the cabin; and enable new self-service capabilities to bring elevated ease in doing business with the company, benefiting Employees and Customers. During 2023, the company completed the enhanced WiFi connectivity onboard its aircraft in order to improve WiFi speed, reliability, and bandwidth. Its new -8 aircraft deliveries are equipped with latest-generation, upgraded WiFi hardware, and the company completed its upgrade of the WiFi hardware on its existing fleet. In late 2023, the company also began taking delivery of MAX aircraft with the latest-generation of onboard USB-A and USB-C power ports on every seat, with a space-saving system that maintains legroom. The company is also installing the in-seat power ports onboard its existing MAX fleet. Retrofits for in-seat power have begun and are occurring at a pace of approximately five aircraft per month with a goal of ramping up the pace in 2024, barring any additional supply chain issues. As of December 31, 2023, the company had 17 aircraft with in-seat power. Further, the company’s new -8 aircraft will come equipped with larger overhead bin space, which is expected to result in faster boarding, fewer gate checked bags, and a better Customer experience. As of December 31, 2023, the company had approximately 69 aircraft with larger overhead bins. Southwest has also invested in modernizing its airport spaces by installing new lobby signage, which is expected to facilitate self-service, enhance the overall visual appeal of the lobbies, and make Customers’ travel journey easier. Southwest offers inflight entertainment and connectivity service on WiFi-enabled aircraft. Southwest’s suite of complimentary offerings onboard WiFi-enabled aircraft includes movies-on-demand, messaging, music, live and on-demand television, a flight tracker, and more. These enhanced free inflight entertainment offerings include over 125 free movies-on-demand each month and free app messaging via iMessage or WhatsApp. The television product consists of at least 13 live channels and approximately 70 on-demand recorded episodes from popular television series. The inflight entertainment service allows Customers to enjoy gate-to-gate entertainment directly on their personal wireless devices. While on WiFi-enabled aircraft, Customers can also purchase satellite internet service while A-List Preferred Members and Business Select Customers receive complimentary internet access. Activating internet service gives Customers the ability to stream videos, complete work tasks, and browse social media. Digital Hospitality, Southwest.com, and Direct to Customer Distribution Approach The company primarily offers its fare products directly to Customers through its Internet website, Southwest.com, and the Southwest App. For the year ended December 31, 2023, approximately 82 percent of the company’s Passenger revenues originated from Southwest.com or the Southwest App (including revenues from SWABIZ, the company’s online booking tool designed for business Customers who prefer a self-service and low-cost solution for booking their air travel on Southwest). The company augments its direct to Customer distribution approach by offering a broad suite of digital platforms to support Customers' travel needs, including full featured websites and apps. These digital platforms help Customers book and manage their Southwest air travel and facilitate the purchase of the company’s ancillary products, including Fare Upgrades, EarlyBird Check-In, Upgraded Boarding, vacation packages, rental car reservations, hotel reservations, and travel activities. In addition, the digital platforms provide self-service tools for trip management and Customer support. In 2023, the company activated multiple digital service improvements, including among others, digital standard bag check-in, digital bag tracking, digital baggage claims, same-day self-service flight changes with support for free changes for premium fares and tier members on eligible trips, split booking capability, improved self-service rebooking options, improvements to the flight cancellation experience, improved flight status messaging, digital refund capabilities for cancellations, and return trip e-mail reminders. The company’s digital Help Center, Travel Advisory Center, and trip communications capabilities also underwent optimization to better prepare Customers for using the company’s products and services. The company made improvements to trip messaging channels and activated a robust in-app messaging strategy, all of which now leverage more personalized data for increasing relevant trip communications to better provide airport and Customer specific trip information. The company also continues to explore and pursue generative artificial intelligence (‘AI’) capabilities with a goal to improve Customer service and to drive lower cost while exceeding Customers’ Hospitality expectations. In 2023, the company experienced significantly fewer contact center calls per flight and airport lobby transactions, as well as strong app utilization on the day of travel. These improvements helped reduce contact per trip in 2023 versus 2019. The company’s digital service modernization program is expected to continue to deliver additional enhancements and efficiencies in 2024. The company also continues to improve digital revenue generating capabilities. The company activated a robust suite of optimizations designed to improve product performance for air sales, Upgraded Boarding, EarlyBird Check-In, and other ancillary products, such as Cars, Hotels, and Vacations. In 2023, the company added, among other things, free Inflight Internet benefits for Business Select fares, up to two free drinks for A-List Preferred Customers with digital drink coupons on flights of 176 miles or more, free same-day standby travel for Wanna Get Away fares subject to conditions, nearby airport digital shopping capabilities, an improved digital route map with price points, overnight connection flight options, improved low fare promotion capabilities in the app, improved awareness of Buy Now Pay Later capabilities, a redesigned and improved Special Offers section, an enhanced push messaging marketing strategy, automated Rapid Rewards monthly statements, improved Rapid Rewards marketing content, improvements to account management, and more prominent Southwest Business brand awareness. The company also invested in new technology to support AI-based marketing efforts and more personalized marketing capabilities. Southwest Business Initiatives In addition to improvements in the company’s consumer-direct Southwest.com channel of distribution, the company has taken significant action, including investments in Employees, processes, and technology, in order to grow its corporate travel business with the intention of making it easier for corporate travel Customers and travel management companies to do business with Southwest. The company employs a multi-channel distribution strategy for its corporate business travel, offering the ability for business travelers and travel decision makers to book Southwest fares within all major Global Distribution System platforms via Amadeus, Travelport, and Sabre channels, through third-party partners directly connected to the company’s host reservation system, or through its free corporate online booking tool, SWABIZ. The company utilizes Airlines Reporting Corporation to implement industry standard processes to handle the settlement of tickets booked through Travelport, Amadeus, and Sabre channels. The company also utilizes ATPCO Routehappy to provide detailed product information that supports robust shopping and selling processes in third-party booking channels. In 2023, the company launched Southwest Business Meetings, a new product for its corporate Customers that is designed to make it easier for meeting planners to manage travel on Southwest by streamlining the process to book group travel for meetings and conventions. In 2022, the company launched its new travel portal, Southwest Business Assist. The self-service tool enables corporate travel buyers, travel decision makers, and travel management companies to better manage their business travel on Southwest using dashboards, reports, automated processing of travel benefits, and Customer Service. The on-demand self-service tool provides access to real-time information and reporting. Southwest Business has also continued to invest in and enhance SWABIZ with mobile capabilities. SWABIZ is designed for business Customers who prefer a self-service and low-cost solution for booking their air travel on Southwest. The site also facilitates car and hotel bookings. During 2022, the company invested in SAFFiRE Renewables, LLC (‘SAFFiRE’), a company formed by D3MAX, LLC, as part of a Department of Energy (‘DOE’)-backed project to develop and produce scalable SAF. Funded with a DOE grant matched by the company’s investment, SAFFiRE intends to utilize technology developed by the DOE's National Renewable Energy Laboratory to convert corn stover, a widely available waste feedstock in the United States, into renewable ethanol that then would be upgraded into SAF. During 2023, the company formed Southwest Airlines Renewable Ventures LLC, a wholly owned subsidiary of the company, to manage its investment in SAFFiRE and engage in other similar activities in the support of the company’s SAF goals, initiatives, and strategies. Regulation Specifically, the company and certain of its third-party service providers are subject to the jurisdiction of the Federal Aviation Administration (FAA) with respect to aircraft maintenance and operations, including equipment, ground facilities, dispatch, communications, training, and other matters affecting air safety. The company is subject to any operational changes imposed by the FAA/ATO as they relate to the NextGen program, as well as the day-to-day management of the air traffic control system. The company is subject to various other federal, state, and local laws and regulations relating to health and occupational safety, including Department of Health and Human Services, Centers for Disease Control and Prevention (‘CDC’), Occupational Safety and Health Administration, and Food and Drug Administration regulations. The company, in conjunction with the TSA, participates in TSA PreCheck, a pre-screening initiative that allows passengers deemed low risk by the TSA to move through security checkpoints with greater efficiency and ease when traveling. The company also participates in the TSA Known Crewmember program, which is a risk-based screening system that enables TSA security officers to positively verify the identity and employment status of flight-crew members. The program expedites flight crew member access to sterile areas of airports. The company works collaboratively with the Transportation Security Administration (TSA), foreign national governments, and airports to provide risk-based security measures at international locations served by the company. Environmental Regulation The company is subject to various federal laws and regulations relating to the protection of the environment, including the Clean Air Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation and Liability Act (‘CERCLA’), as well as state and local laws and regulations. These laws and regulations govern aircraft drinking water, emissions, storm water discharges from operations, and the disposal of materials, such as jet fuel, chemicals, hazardous waste, and aircraft deicing fluid. International Regulation The company has obtained the necessary economic authority from the U.S. Department of Transportation (DOT), as well as approvals required by the FAA and applicable foreign government entities, to conduct operations, under certain circumstances, to points outside of the continental United States served by the company. Seasonality The company's business is ordinarily seasonal. Generally, in most markets the company serves, demand for air travel is greater during the summer months, and, therefore, revenues in the airline industry tend to be stronger in the second (April 1 - June 30) and third (July 1 - September 30) quarters of the year than in the first (January 1 - March 31) and fourth (October 1 - December 31) quarters of the year. As a result, in many cases, the company’s results of operations reflect this seasonality. History Southwest Airlines Co. was founded in 1967. The company was incorporated in Texas in 1967.