01—Abstract
Summary
Summary of the 10-K filed February 7, 2025. Cited figures are marked; the original filing is the authoritative source.
Southwest Airlines Co. reported record full-year 2024 operating revenues of $27.5 billiona, up 5.3 percent from $26.1 billion in 2023, driven by continued demand strength, record ancillary revenue, and record passengers carried.
Operating income was $321 millionb on a GAAP basis, up from $224 million, while net income was flat at $465 million, or $0.76 per diluted share. On a non-GAAP basis, excluding special items, operating income fell to $457 million from $893 million and net income fell to $597 million from $980 million. Results were pressured by a 9.8 percent increase in salaries, wages, and benefits to $12.24 billion, reflecting ratified labor contracts, partly offset by a 6.5 percent decline in fuel and oil expense to $5.81 billion as jet fuel prices fell.
The company is in the middle of a transformation plan, "Southwest. Even Better.", that includes assigned seating (sales expected in the second half of 2025), premium seating, a redesigned boarding model, international airline partnerships beginning with Icelandair, a new Getaways vacation product, and redeye flights starting February 13, 2025. Management's 2025 outlook projects operating margin excluding special items of 3 to 5 percent and a 2027 target of at least 10 percent, along with a 2027 target of return on invested capital of at least 15 percent.
Operating cash flow fell sharply to $462 millionc in 2024 from $3.2 billion in 2023, largely due to approximately $1.9 billion in labor ratification bonuses paid during the year. Total available liquidity was $9.7 billion at year-end, and the company retained investment-grade ratings from all three major agencies. The company also disclosed a $1.9 billion investment by Elliott Investment Management, a cooperation agreement that reshaped the Board, the termination of its shareholder rights plan, and the planned departures of Chief Financial Officer Tammy Romo and Chief Administration Officer Linda B.
Rutherford effective April 1, 2025. Pending litigation includes a DOJ capacity-related inquiry, a USERRA class action, securities and derivative suits tied to the December 2022 operational disruption, and an ERISA class action filed January 28, 2025.
02—Key points
Key Highlights
- Record full-year 2024 operating revenues of $27.5 billion, up 5.3 percent from $26.1 billion in 2023; passenger revenue reached $25.0 billion, an all-time Company record.
- GAAP operating income rose to $321 million from $224 million, but non-GAAP operating income fell to $457 million from $893 million, and non-GAAP net income fell to $597 million from $980 million.
- Salaries, wages, and benefits rose 9.8 percent to $12.24 billion and became the largest operating cost category, while fuel and oil expense fell 6.5 percent to $5.81 billion.
- Operating cash flow dropped to $462 million from $3.2 billion, reflecting approximately $1.9 billion in pilot, flight attendant, and ramp labor ratification bonuses.
- 2025 guidance projects an operating margin excluding special items of 3 to 5 percent, with 2027 targets of at least 10 percent operating margin and return on invested capital of at least 15 percent.
- Elliott Investment Management invested approximately $1.9 billion for an approximate 11 percent economic interest, leading to a cooperation agreement, Board changes, and termination of the shareholder rights plan.
- The CFO and Chief Administration Officer are resigning effective April 1, 2025, and the company plans a fleet monetization strategy with 35 sale-leaseback transactions raising $871 million in December 2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2024filed February 7, 2025Financial Statements
FY2024 against FY2023
| Line item | FY2024FY2023 | Change |
|---|---|---|
| Revenue | $27.48B$26.09B | +5.3% |
| Operating Income | $321.00M$224.00M | +43.3% |
| Net Income | $465.00M$465.00M | 0.0% |
| EPS (Basic) | $0.78$0.78 | 0.0% |
| EPS (Diluted) | $0.76$0.76 | 0.0% |
| Shares Outstanding (Basic) | 598.00M595.00M | +0.5% |
| Shares Outstanding (Diluted) | 643.00M640.00M | +0.5% |
05—Questions
Frequently Asked Questions
Why did net income stay flat while operating revenue grew?
GAAP net income was $465 million in both 2024 and 2023. Revenue grew 5.3 percent, but operating expenses rose 5.0 percent, led by a 9.8 percent increase in salaries, wages, and benefits. Fuel and oil expense fell 6.5 percent, which offset part of the labor cost increase. The 2024 GAAP results included a $116 million reversal of prior breakage revenue, which was excluded from non-GAAP results.
What are the main sources of cash flow pressure in 2024?
Net cash provided by operating activities was $462 million, compared with $3.2 billion in 2023. The filing attributes this mainly to approximately $1.9 billion in bonuses paid upon ratification of labor contracts with SWAPA, TWU 556, and TWU 555, and a $123 million outflow for the purchase of fuel derivative instruments. Capital expenditures fell to $2.1 billion from $3.5 billion.
What does the company expect for 2025?
For the first quarter of 2025, the company estimates RASM will rise 5 to 7 percent year over year, CASM-X will rise 7 to 9 percent, and capacity will fall 2 to 3 percent. For full year 2025, it estimates operating margin excluding special items of 3 to 5 percent and capacity growth of 1 to 2 percent. It plans to retire approximately 51 aircraft in 2025 and expects to end the year with roughly 790 aircraft.
What are the key risks related to aircraft deliveries?
The company depends on Boeing as its sole manufacturer of its aircraft and has experienced delivery delays. The -7 model's delivery schedule depends on FAA certification, which the FAA will ultimately determine. The company planned 38 -8 deliveries in 2025 as a planning assumption, which differs from its contractual order book, and it has 496 firm MAX orders outstanding as of January 30, 2025.
What are the major pending legal matters?
The filing describes several pending matters, including a DOJ Civil Investigative Demand and related consumer antitrust litigation over capacity, a USERRA class action with a trial date of September 11, 2025, and securities class actions and derivative suits tied to the December 2022 operational disruption. A putative ERISA class action was filed on January 28, 2025. The company states that management does not expect these matters to have a material adverse effect, though an adverse outcome could be material.
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