01—Abstract
Summary
Summary of the 10-K filed February 5, 2026. Cited figures are marked; the original filing is the authoritative source.
Southwest Airlines Co. reported record full-year 2025 operating revenues of $28.1 billiona (up 2.1% from $27.48 billion in 2024), driven by revenue initiatives including bag fees effective May 28, 2025, and a Chase co-brand agreement amendment.
GAAP operating income rose to $428 millionb from $321 million, while net income fell to $441 million from $465 million, mainly due to lower interest income. Non-GAAP (excluding special items) operating income was $539 million and net income was $512 million, with diluted EPS of $0.93 versus $0.96 a year earlier. Management noted that over 90 percent of GAAP operating income was earned in the fourth quarter, and that the government shutdown in late 2025 weighed on bookings.
Fuel expense fell 9.8% to $5.24 billionc as the average economic fuel cost dropped to $2.41 per gallon from $2.66, and the company terminated its remaining fuel hedges in second quarter 2025. Salaries, wages, and benefits rose 5.9% to $12.96 billion despite a February 2025 workforce reduction of about 1,750 corporate roles. Cash flow from operations was $1.84 billion, capital expenditures were $2.67 billion, and the company returned $2.9 billion to shareholders through $399 million in dividends and $2.6 billion in accelerated share repurchases.
Cash and equivalents fell to $3.23 billiond, and the company stated it maintains investment-grade ratings from all three major agencies. The filing also outlines assigned seating, extra legroom seats, a redesigned boarding model that began January 27, 2026, new international partnerships, and Getaways vacation packages, along with a 2026 net capital spending estimate of $3.0 billion to $3.5 billion.
The company's fleet stood at 803 Boeing 737 aircraft at year-end, with 617 aircraft on order through 2031 under contractual commitments, and it depends on Boeing and the FAA for the timing of 737-7 certification. Labor unions represent about 84 percent of employees, and several contracts become amendable between 2026 and 2029.
02—Key points
Key Highlights
- Record 2025 operating revenues of $28.06 billion, up 2.1% year over year, with passenger revenues reaching an all-time full-year record of $25.5 billion.
- GAAP operating income of $428 million (up from $321 million) and net income of $441 million (down from $465 million); non-GAAP operating income of $539 million, up 17.9%.
- Fuel and oil expense fell 9.8% to $5.24 billion as economic fuel cost declined to $2.41 per gallon; the company closed its fuel hedging program in Q2 2025.
- Salaries, wages, and benefits rose 5.9% to $12.96 billion, and total operating expenses per ASM rose 0.2% to 15.35 cents.
- Returned $2.9 billion to shareholders in 2025 ($399 million in dividends and $2.6 billion in accelerated share repurchases), with an additional $750 million ASR completed in January 2026 and $400 million in a new ASR.
- Ended 2025 with $3.23 billion in cash and cash equivalents and $4.73 billion in total available liquidity; operating cash flow was $1.84 billion versus $462 million in 2024.
- Began assigned seating, extra legroom seats, and a redesigned boarding model on January 27, 2026, supported by a bag-fee policy change and new international partnerships.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2025filed February 5, 2026Financial Statements
FY2025 against FY2024
| Line item | FY2025FY2024 | Change |
|---|---|---|
| Revenue | $28.06B$27.48B | +2.1% |
| Operating Income | $428.00M$321.00M | +33.3% |
| Net Income | $441.00M$465.00M | −5.2% |
| EPS (Basic) | $0.82$0.78 | +5.1% |
| EPS (Diluted) | $0.79$0.76 | +3.9% |
| Shares Outstanding (Basic) | 540.00M598.00M | −9.7% |
| Shares Outstanding (Diluted) | 558.00M643.00M | −13.2% |
05—Questions
Frequently Asked Questions
Why did net income decline in 2025 even though operating income rose?
Net income fell to $441 million from $465 million, primarily because interest income decreased $292 million (58.8%) on lower cash and investment balances and a lower interest rate. The 2024 results also included a $116 million breakage revenue reversal that was excluded from non-GAAP results.
What drove the increase in passenger revenue?
Passenger revenue rose $555 million, or 2.2%, to $25.5 billion, mainly due to bag fee revenue following the May 28, 2025 policy change and a larger share of co-brand credit card benefits classified in passenger revenue after the amended Chase agreement.
How much did fuel costs change and what is the fuel hedging position?
Fuel and oil expense decreased $572 million, or 9.8%, to $5.24 billion, with economic fuel cost at $2.41 per gallon versus $2.66 in 2024. The company terminated its remaining fuel hedge contracts in Q2 2025 and is now fully exposed to fuel price changes; the filing estimates each one-cent change per gallon would affect 2026 fuel expense by about $22 million.
What is the outlook for capital spending and aircraft deliveries?
The company estimates 2026 net capital spending of $3.0 billion to $3.5 billion, based on expected deliveries of 66 Boeing 737-8 aircraft in 2026. Its contractual order book includes 269 firm 737-7 and 196 firm 737-8 aircraft through 2031, and the 737-7 certification timing is determined by the FAA.
What are the main risks to the company's labor costs?
Approximately 84 percent of employees are represented by labor unions, and salaries, wages, and benefits were about 47 percent of operating expenses in 2025. Next amendable dates range from October 2026 to January 2029, and general wage inflation and contract rate increases are expected to continue to pressure the cost structure.
06—Continue