Southwest Airlines Co. (LUV)

A prospectus supplement dated 26 October 2026 set the terms of a $1.25 billion sale of notes, $600 million due 2029 at 5.750 percent and $650 million due 2031 at 6.000 percent 3. The company expects to use the proceeds for general corporate purposes, including repaying $300 million of 3.000 percent notes due 15 November 2026 3.

The borrowing follows third-quarter 2026 results released on 21 October 2026: operating revenue of $8.4 billion, up 21.2 percent and a third-quarter record, and net income of $270 million, or $0.55 a share 1. The company credits strong demand for its enhanced product, which now includes assigned seats and bag fees 12.

Fuel was the drag 1. The third-quarter fuel bill rose $821 million from a year earlier, at $3.92 a gallon against an assumed $3.70 to $3.75 1. For the fourth quarter the company guides to adjusted earnings of $0.55 to $0.80 a share, and for 2026 to $2.60 to $2.85 1.

Chief executive Bob Jordan said the company plans to share a multi-year financial framework at a Capital Markets Day in New York City on 2 March 2027 1. Open questions are fuel, assumed near $4.55 a gallon for the fourth quarter, and the first delivery of the Boeing 737-7 52.

Southwest began service on 18 June 1971 with three Boeing 737 aircraft serving Dallas, Houston and San Antonio 4. Instead of routing passengers through a few big hub airports, it flew point to point, and it built its name on frequent flights and low fares 4.

The independent chair's letter in the 2026 proxy statement lists the AirTran Airways acquisition, international service and the repeal of the Wright Amendment among changes since he joined the board in 2010 6.

The pandemic broke the pattern 7. Operating revenue fell 59.7 percent in 2020 because load factors and yields were far below normal, and cost cuts of 33.9 percent could not offset the loss, since much of an airline's cost is fixed 7.

Recovery came fast 8. In 2021 the company received $2.7 billion of federal payroll support, and in 2022 operating revenue rose 50.8 percent to an annual record on strong leisure demand and higher yields 8.

Then came the December 2022 meltdown 8. Winter weather led Southwest to cancel more than 16,700 flights from 21 to 31 December, and the company put the pre-tax cost near $800 million, with a fourth-quarter net loss of $220 million 8.

On 18 December 2023 the Transportation Department ordered a $140 million civil penalty, by far its largest for consumer protection, NPR reported 10. That came on top of $600 million Southwest had already paid in refunds and reimbursements 10.

Investor pressure followed 9. In June 2024 Elliott Investment Management told the board it had invested about $1.9 billion, roughly 11 percent economic interest, and pushed for changes 9. On 23 October 2024 the company signed a cooperation agreement that added five Elliott-nominated directors 9.

The Dallas Morning News reported that Gary Kelly, the longtime chief executive and executive chairman, retired early on 1 November, and Bob Jordan kept his job 14. The company also set multi-year financial targets at an investor day in September 2024 9.

In 2025 Southwest cut about 1,750 roles, roughly 15 percent of corporate positions, in February 4. On 11 March it announced that checked bags would no longer be free from 28 May, ending a perk it had offered since it began flying, the Associated Press reported 11.

Revenue reached $28.06 billion in 2025, up 2.1 percent, with a record $25.5 billion from passengers, driven by bag fees 4. Net income was $441 million, down from $465 million in 2024 4.

Assigned seating and extra legroom seating began on 27 January 2026, and the first nine months of 2026 brought operating income of $994 million 41.

Passenger flying and fares

Southwest runs scheduled passenger flights, mostly point to point, across the United States and near-international markets 4. At the end of 2025 it flew to 117 destinations in 42 states, the District of Columbia, Puerto Rico and ten near-international countries 4.

Passenger revenue is the core 4. In 2025 it was $25.5 billion: $20.4 billion of ticket revenue, $3.26 billion from award flights and $1.8 billion of fees and extras sold separately 4.

The extras line is growing fast because of the new bag fees and seat sales 2. It reached $898 million in the third quarter of 2026, up from $612 million a year before 2.

Fares come in four bundles: Basic, Choice, Choice Preferred and Choice Extra 4. Assigned seats are included in all of them for travel since 27 January 2026 4. Two free checked bags go to Choice Extra buyers and A-List Preferred members 4.

Freight is small 4. Cargo and freight revenue was $171 million in 2025, against $175 million in 2024 4. Other revenue, which includes the loyalty program, was $2.36 billion in 2025 4.

Rapid Rewards and the Chase card

Rapid Rewards is the loyalty program, and loyalty revenue from the Chase co-brand card agreement was $563 million in the third quarter of 2026 2. Chase pays for points and use of the Southwest brand 2.

On 15 October 2026 the company announced a Platinum tier above Silver and Gold, a faster route to status for card members, and point redemption for car rentals from November 2026 2.

The seat, the bag and the cabin

Open seating ended on 27 January 2026 4. Boarding moved to eight groups based on seat, fare and status, and passengers can pay for preferred seats, extra legroom and earlier boarding 12.

To make room for the extra-legroom rows, the 737-700 fleet was retrofitted from 143 seats to 137 by January 2026 4. Starlink wifi is going onto every aircraft, with the fleet finished in fall 2027, the company says 1.

Fleet, plants and spending

The airline ended the third quarter of 2026 with 803 aircraft, having received 20 Boeing 737-8 jets and retired 20 older ones in the quarter 1. All 803 are Boeing 737 aircraft, the company reported for the end of 2025 4.

Aircraft maintenance centers sit at Dallas Love Field, Houston Hobby, Phoenix, Chicago Midway, Atlanta, Denver and Orlando, and a 129,000 square foot facility at Baltimore-Washington opened in the second quarter of 2025 4.

People and governance

At the end of 2025 Southwest had 72,790 active full-time-equivalent employees, and about 84 percent of employees were represented by unions 4. Pilots are represented by SWAPA and flight attendants by TWU Local 556 4.

Bob Jordan is president and chief executive and vice chairman of the board 6. Douglas Brooks, a former Brinker International chief executive, is the independent chair 6.

On 10 August 2026 the board added Varun Krishna and Jason Liberty and grew to 13 members 2.

Rivals

The majority of domestic airline service is provided by Southwest and American, Delta and United 4. Fourteen passenger airlines meet the government's $1 billion revenue test for a major airline 4.

Open problems and cases

Class actions filed from 2015 allege that Southwest and three rivals colluded to limit capacity 4. The Justice Department sent a demand for capacity information on 30 June 2015, which Southwest says it is answering 4.

Two securities class actions filed in January and March 2023 claim the company misled investors about its technology and risk of large flight disruptions 2.

The umbrella, in words

Brands: Southwest Airlines, the Rapid Rewards program, Getaways by Southwest vacation packages launched in August 2025, and the planned Southwest Icon Lounge network 42.

Subsidiaries named in Exhibit 21 of the latest 10-K are AirTran Airways, Inc., AirTran Holdings, LLC, Southwest Jet Fuel Co., Triple Crown Assurance Co. and Southwest Airlines India Private Limited 16.

The India unit, formed in November 2025 in Hyderabad, is a Global Innovation Center that moves some business functions from outside vendors to employees 4.

Agreed ties: the Chase co-brand card agreement, extended in the third quarter of 2026, and interline partnerships with a total of 11 carriers since 13 February 2025 2.

Land and property: the company leases its main headquarters near Dallas Love Field and owns two more headquarters buildings across the street, on land it owns 4. It holds a ground lease for a nine-gate Concourse 0 at Los Angeles 4.

Control: the 2026 proxy lists owners of over five percent of the stock as of 28 February 2026 6. They are Vanguard at 13.3 percent, PRIMECAP 10.0, Elliott 9.3, State Street 8.3, Franklin 8.2 and BlackRock 6.7 6.

Those reports carry their own dates: Elliott's amendment was filed 23 February 2026, Franklin's 29 January 2026, and Vanguard's, BlackRock's and State Street's in January and February 2024 6.

A later Elliott amendment, filed 3 April 2026, lists sales of 2,205,000 shares on 26 February 2026 and 1,700,000 on 3 March 2026 17.

Elliott had an economic interest of 16 percent in September 2025 and 13.1 percent in December 2025, Cranky Flier reported, including swaps without votes 15.

Guidance comes first 1. For the fourth quarter of 2026 the company expects adjusted earnings of $0.55 to $0.80 a share, unit revenue up 19 to 21 percent and capacity up 3 to 4 percent 1. For 2026 it expects adjusted earnings of $2.60 to $2.85 1.

Its guidance rests on the forward fuel curve as of 15 October 2026 and assumes the current fare environment and demand trends remain broadly intact 1. It now expects full-year 2026 capacity growth of about 1.2 percent, down from about 1.5 percent 1.

The company expects 67 Boeing 737-8 and 737-7 deliveries and plans to retire about 60 aircraft in 2026, with net capital spending of $2.5 billion to $2.75 billion 1. It expects the fourth-quarter unit cost to carry a 1.0 point headwind from removing six seats from each 737-700 1.

The first Boeing 737-7 is expected in late 2026, with entry into service in 2027, once the FAA approves Southwest's readiness 2. The FAA certified the aircraft on 3 August 2026, and Boeing's release did not give a handover date 13.

As of 22 October 2026 the company had firm orders for 487 MAX aircraft, 240 737-7s and 247 737-8s, less 46 737-8s already received, plus 130 options 2. It exercised three more 737-7 options for 2028 deliveries after the quarter 2.

Construction has begun on the first four Southwest Icon Lounges, at Austin, Baltimore-Washington, Honolulu and Nashville, and at least seven more are planned over the next several years 2. The company expects the lounges to open in late 2027 2.

A premium Southwest Rapid Rewards credit card from Chase, which gives access to the lounges, is expected to launch in 2027 2. In January 2027 A-List becomes Silver and A-List Preferred becomes Gold, and in spring 2027 members are to earn points with Icelandair, China Airlines and Etihad Airways 2.

The airport projects in the 10-K run further out 4. Houston Hobby construction is expected to finish in 2027, and a new nine-gate concourse at Los Angeles is expected to start in 2028 and end in 2032 4.

On money, $450 million remains under the $2.0 billion share repurchase authorization, and the company has not repurchased shares in the second or third quarter of 2026 12. It pays dividends, $176 million in the third quarter 1.

Labor is a calendar item: the material specialists' contract with the Teamsters becomes amendable in October 2026, the flight crew training instructors' in January 2027 and the dispatchers' in June 2027 4.