southwest airlines co. second quarter 2011 financial...

Southwest Airlines Co.

Second Quarter 2011 Financial Results

Table of Contents:

2011 Combined Schedules

Schedule A: First and Second Quarter 2011 Selected Combined Financial Information

Schedule B: First and Second Quarter 2011 Reconciliation of Selected Combined

Amounts from Schedule A to Non-GAAP Items

Schedule C: First and Second Quarter 2011 Selected Consolidating Combined Financial

Information

Schedule D: Second Quarter 2011 Selected Consolidating Combined Financial

Information – Detail of Airline Second Quarter 2011 Results and Purchase Accounting

Impact

Schedule E: Second Quarter 2011 Reconciliation of Selected Standalone Amounts from

Schedule D to Non-GAAP Items

Schedule F: Second Quarter 2011 Consolidating Statement of Operations – Detail of

Airline Second Quarter 2011 Results and Purchase Accounting Impact

Schedule G: Second Quarter 2011 Reconciliation of Selected Standalone Amounts from

Schedule F to Non-GAAP Items

Schedule H: First and Second Quarter 2011 Combined Operating Statistics

2010 Combined Schedules

Schedule I: 2010 Quarterly Selected Combined Financial Information

Schedule J: 2010 Quarterly Reconciliation of Selected Combined Amounts from Schedule

I to Non-GAAP Items

Schedule K: First and Second Quarter 2010 Selected Consolidating Combined Financial

Information

Schedule L: Third and Fourth Quarter 2010 Selected Consolidating Combined Financial

Information

Schedule M: 2010 Quarterly Combined Operating Statistics

Supplemental Financial Highlights Package

SCHEDULE A SOUTHWEST AIRLINES CO.

SELECTED COMBINED FINANCIAL INFORMATION (1)

(in millions)

(unaudited)

Three months ended

March 31, June 30,

2011 2011

OPERATING REVENUES:

Passenger $ 3,514 $ 4,113

Freight 31 36

Other 225 258

Total operating revenues 3,770 4,407

OPERATING EXPENSES:

Salaries, wages, and benefits 1,098 1,173

Fuel and oil 1,294 1,631

Maintenance materials and repairs 263 269

Aircraft rentals 107 99

Landing fees and other rentals 242 260

Depreciation and amortization 170 182

Acquisition and integration 22 79

Other operating expenses 489 509

Total operating expenses 3,685 4,202

OPERATING INCOME 85 205

OTHER EXPENSES (INCOME):

Interest expense 59 56

Capitalized interest (3) (3)

Interest income (4) (3)

Other losses (gains), net 28 (125)

Total other expenses (income) 80 (75)

INCOME BEFORE INCOME TAXES $ 5 $ 280

(1) Selected financial information presented in this schedule on a combined basis includes financial results for Southwest and AirTran for

all periods presented, including AirTran for periods prior to the acquisition date. These combined results include the impact of purchase

accounting as of May 2, 2011. AirTran's historical financial information included in the combined presentation has been conformed to

Southwest's financial statement classification where appropriate. See Schedule C for a reconciliation of this combined information to our

historical GAAP reported amounts. See Note Regarding Use of Non-GAAP Financial Measures.

SCHEDULE A

SCHEDULE B

SOUTHWEST AIRLINES CO.

RECONCILIATION OF SELECTED COMBINED AMOUNTS FROM SCHEDULE A TO NON-GAAP ITEMS (1)

(SEE NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES)

(in millions)

(unaudited)

Three months ended

March 31, June 30,

2011 2011

Fuel and oil expense, combined unhedged $ 1,309 $ 1,646

Add/(Deduct): Fuel hedge (gains) losses included in Fuel and oil

expense (15) (15)

Fuel and oil expense, combined as presented in Schedule A (2) $ 1,294 $ 1,631

Add/(Deduct): Net impact from fuel contracts 17 (11)

Fuel and oil expense, combined economic $ 1,311 $ 1,620

Total operating expenses, combined as presented on

Schedule A (2) $ 3,685 $ 4,202


Total operating expenses, combined economic $ 3,702 $ 4,191

Add: Charge for Acquisition and integration costs, net (3) (19) (79)

Total operating expenses, combined non-GAAP $ 3,683 $ 4,112

Operating income, combined as presented on Schedule A (2) $ 85 $ 205

Add/(Deduct): Net impact from fuel contracts (17) 11

Operating income, combined economic $ 68 $ 216

Add: Charge for Acquisition and integration costs, net (3) 19 79

Operating income, combined non-GAAP $ 87 $ 295

Other losses (gains), net, combined as presented on

Schedule A (2) $ 28 $ (125)

Add/(Deduct): Net impact from fuel contracts 7 155

Other losses, net, combined non-GAAP $ 35 $ 30

Income before income taxes, combined as presented on

Schedule A (2) $ 5 $ 280

Add/(Deduct): Net impact from fuel contracts (24) (144)

$ (19) $ 136

Add: Charge for Acquisition and integration costs, net (3) 19 79

Income before income taxes, combined non-GAAP $ - $ 215

(1) Selected combined amounts presented in this schedule include financial results for Southwest and AirTran for all periods presented,

including AirTran for periods prior to the acquisition date. These combined results include the impact of purchase accounting as of May 2,

2011. AirTran's historical financial information included in the combined presentation has been conformed to Southwest's financial

statement classification where appropriate.

(2) See Schedule C for a reconciliation of this combined information to our historical GAAP reported amounts.

(3) Amounts net of profitsharing impact on charges incurred through March 31, 2011. The Company amended its profitsharing plan during

second quarter 2011 to defer the profitsharing impact of integration costs incurred from April 1, 2011 through December 31, 2013. The

profitsharing impact will be realized in 2014 and beyond.

SCHEDULE B

SCHEDULE C SOUTHWEST AIRLINES CO.

SELECTED CONSOLIDATING COMBINED FINANCIAL INFORMATION (1)

(in millions, except per share amounts)

(unaudited)

Three months ended March 31, 2011 Three months ended June 30, 2011

(as reported) (2)

(2)

Southwest

Airlines Co.

(3)

AirTran

(conformed) Combined

Southwest

Airlines Co.

(as reported)

(3)

AirTran Combined

OPERATING REVENUES:

Passenger $ 2,939 $ 575 $ 3,514 $ 3,876 $ 237 $ 4,113

Freight 31 - 31 36 - 36

Other 133 92 225 224 34 258

Total operating revenues 3,103 667 3,770 4,136 271 4,407

OPERATING EXPENSES:

Salaries, wages, and benefits 954 144 1,098 1,125 49 1,173

Fuel and oil 1,038 256 1,294 1,527 104 1,631

Maintenance materials and repairs 199 64 263 246 23 269

Aircraft rentals 46 61 107 79 20 99

Landing fees and other rentals 201 41 242 247 14 260

Depreciation and amortization 155 15 170 176 6 182

Acquisition and integration 17 5 22 58 21 79

Other operating expenses 379 110 489 471 38 509

Total operating expenses 2,989 696 3,685 3,929 275 4,202

OPERATING INCOME (LOSS) 114 (29) 85 207 (4) 205


Interest expense 43 16 59 51 5 56

Capitalized interest (3) - (3) (2) - (3)

Interest income (3) (1) (4) (4) - (3)

Other losses (gains), net 59 (31) 28 (113) (12) (125)

Total other expenses (income) 96 (16) 80 (68) (7) (75)

INCOME (LOSS) BEFORE INCOME

TAXES $ 18 $ (13) $ 5 $ 275 $ 3 $ 280


all periods presented, including AirTran for periods prior to the acquisition date. These combined results include the impact of purchase

accounting as of May 2, 2011. See Note Regarding Use of Non-GAAP Financial Measures.

(2) Results presented for Southwest Airlines Co. represent historical GAAP reported amounts, including the impact of purchase accounting

as of May 2, 2011.

(3) Results presented for AirTran, on a standalone basis, represent periods prior to the acquisition date, conformed to Southwest's financial

statement classification where appropriate.

SCHEDULE C

SCHEDULE D



DETAIL OF AIRLINE SECOND QUARTER 2011 RESULTS AND PURCHASE ACCOUNTING IMPACT

(in millions)

(unaudited)

Three months ended June 30, 2011

Purchase

Southwest (1) AirTran (2) Accounting (3) Combined (4)

OPERATING REVENUES:

Passenger $ 3,413 $ 704 $ (4) $ 4,113

Freight 36 - - 36

Other 151 107 - 258

Total operating revenues 3,600 811 (4) 4,407

OPERATING EXPENSES:

Salaries, wages, and benefits 1,027 146 - 1,173

Fuel and oil 1,310 321 - 1,631

Maintenance materials and repairs 201 68 - 269

Aircraft rentals 45 60 (6) 99

Landing fees and other rentals 217 43 - 260

Depreciation and amortization 160 16 6 182

Acquisition and integration 34 45 - 79

Other operating expenses 406 103 - 509

Total operating expenses 3,400 802 - 4,202

OPERATING INCOME (LOSS) 200 9 (4) 205


Interest expense 44 13 (1) 56

Capitalized interest (2) (1) - (3)

Interest income (3) - - (3)

Other (gains) losses, net (163) 38 - (125)

Total other (income) expenses (124) 50 (1) (75)

INCOME (LOSS) BEFORE INCOME TAXES $ 324 $ (41) $ (3) $ 280

(1) Results presented for Southwest exclude AirTran results for May and June 2011, and exclude the impact of purchase accounting. See

Note Regarding Use of Non-GAAP Financial Measures.

(2) Results presented for AirTran include all three months, before and after the acquisition date, and exclude the impact of purchase

accounting.

(3) Represents the impact of purchase accounting as of May 2, 2011.

(4) See Schedule C for a reconciliation of this combined information to our historical GAAP reported amounts.

SCHEDULE D

SCHEDULE E


RECONCILIATION OF SELECTED STANDALONE AMOUNTS FROM SCHEDULE D TO NON-GAAP ITEMS (1)



(unaudited)


Southwest AirTran

Fuel and oil expense, standalone unhedged $ 1,307 $ 339

Add/(Deduct): Fuel hedge (gains) losses included in Fuel and oil

expense 3 (18)

Fuel and oil expense, standalone as presented on Schedule D (2) $ 1,310 $ 321

Add/(Deduct): Net impact from fuel contracts (11) -

Fuel and oil expense, standalone economic $ 1,299 $ 321

Total operating expenses, standalone as presented on

Schedule D (2) $ 3,400 $ 802

Add/(Deduct): Net impact from fuel contracts (11) -

Total operating expenses, standalone economic $ 3,389 $ 802

Add: Charge for Acquisition and integration costs (3) (34) (45)

Total operating expenses, standalone non-GAAP $ 3,355 $ 757

Operating income, standalone as presented on Schedule D (2) $ 200 $ 9

Add/(Deduct): Net impact from fuel contracts 11 -

Operating income, standalone economic $ 211 $ 9

Add: Charge for Acquisition and integration costs (3) 34 45

Operating income, standalone non-GAAP $ 245 $ 54

Other losses (gains), net, standalone as presented on

Schedule D (2) $ (163) $ 38


Other losses, net, standalone non-GAAP $ 27 $ 3

Income (loss) before income taxes, standalone as presented on

Schedule D (2) $ 324 $ (41)


$ 145 $ (6)


Income before income taxes, standalone non-GAAP $ 179 $ 39

(1) Selected amounts presented in this schedule are standalone non-GAAP financial results for each of Southwest and AirTran. These

standalone results exclude the results of the other airline, and the impact of purchase accounting.

(2) See Schedule D for the detail of standalone airline results and the purchase accounting impact.

(3) No profitsharing impact. The Company amended its profitsharing plan during second quarter 2011 to defer the profitsharing impact of

integration costs incurred from April 1, 2011 through December 31, 2013. The profitsharing impact will be realized in 2014 and beyond.

SCHEDULE E

SCHEDULE F


CONSOLIDATING STATEMENT OF OPERATIONS

DETAIL OF AIRLINE SECOND QUARTER 2011 RESULTS AND PURCHASE ACCOUNTING IMPACT

(in millions)

(unaudited)


Purchase

Southwest (1) AirTran (2) Accounting (3) Consolidated

OPERATING REVENUES:

Passenger $ 3,413 $ 467 $ (4) $ 3,876

Freight 36 - - 36

Other 151 73 - 224

Total operating revenues 3,600 540 (4) 4,136

OPERATING EXPENSES:

Salaries, wages, and benefits 1,027 98 - 1,125

Fuel and oil 1,310 217 - 1,527

Maintenance materials and repairs 201 45 - 246

Aircraft rentals 45 40 (6) 79

Landing fees and other rentals 217 30 - 247


Acquisition and integration 34 24 - 58

Other operating expenses 406 65 - 471

Total operating expenses 3,400 529 - 3,929

OPERATING INCOME (LOSS) 200 11 (4) 207


Interest expense 44 8 (1) 51

Capitalized interest (2) - - (2)

Interest income (3) (1) - (4)

Other (gains) losses, net (163) 50 - (113)

Total other (income) expenses (124) 57 (1) (68)

INCOME (LOSS) BEFORE INCOME TAXES 324 (46) (3) 275

PROVISION FOR INCOME TAXES 135 (19) (2) 114

NET INCOME $ 189 $ (27) $ (1) $ 161

(1) Results presented for Southwest exclude AirTran results for May and June 2011, and exclude the impact of purchase accounting.

(2) Results presented for AirTran include AirTran results for May and June 2011, and exclude the impact of purchase accounting.

(3) Represents the impact of purchase accounting as of May 2, 2011.

SCHEDULE F

SCHEDULE G


RECONCILIATION OF SELECTED STANDALONE AMOUNTS FROM SCHEDULE F TO NON-GAAP

ITEMS (1)



(unaudited)


Southwest AirTran

Fuel and oil expense, standalone unhedged $ 1,307 $ 217 Add/(Deduct): Fuel hedge (gains) losses included in Fuel and oil

expense 3 -

Fuel and oil expense, standalone as presented on Schedule F (2) $ 1,310 $ 217


Fuel and oil expense, standalone economic $ 1,299 $ 216

Total operating expenses, standalone as presented on

Schedule F (2) $ 3,400 $ 529


Total operating expenses, standalone economic $ 3,389 $ 528

(Deduct): Charge for Acquisition and integration costs (3) (34) (24)

Total operating expenses, standalone non-GAAP $ 3,355 $ 504

Operating income, standalone as presented on Schedule F (2) $ 200 $ 11

Add/(Deduct): Net impact from fuel contracts 11 1

Operating income, standalone economic $ 211 $ 12


Operating income, standalone non-GAAP $ 245 $ 36

Other losses (gains), net, standalone as presented on

Schedule F (2) $ (163) $ 50


Other losses, net, standalone non-GAAP $ 27 $ 1

Income (loss) before income taxes, standalone as presented on

Schedule F (2) $ 324 $ (46)


$ 145 $ 4


Income before income taxes, standalone non-GAAP $ 179 $ 28

Net income (loss), standalone as presented on Schedule F (2) $ 189 $ (27)


Income tax impact of fuel contracts 61 18

$ 71 $ 41

Add: Charge for Acquisition and integration costs (3) (4) 34 24

Net income, standalone non-GAAP $ 105 $ 17

(1) Selected amounts presented in this schedule are standalone non-GAAP financial results for Southwest and AirTran

(May and June 2011 only). These standalone results exclude the results of the other airline, and the impact of purchase

accounting. (2) See Schedule F for the detail of standalone airline results and the purchase accounting impact.

(3) No profitsharing impact. The Company amended its profitsharing plan during second quarter 2011 to defer the

profitsharing impact of integration costs incurred from April 1, 2011 through December 31, 2013. The profitsharing impact

will be realized in 2014 and beyond.

(4) Net of taxes.

SCHEDULE G

SCHEDULE H SOUTHWEST AIRLINES CO.

COMBINED OPERATING STATISTICS (1)

(unaudited)

Three months ended

March 31, June 30,

2011 2011

Revenue passengers carried 25,581,395 28,826,013

Enplaned passengers 31,194,252 35,559,232

Revenue passenger miles (RPMs) (000s) 23,715,429 27,646,263

Available seat miles (ASMs) (000s) 30,263,545 33,639,005

Load factor 78.4 % 82.2 %

Average length of passenger haul (miles) 927 959

Average aircraft stage length (miles) 676 691

Trips flown 333,567 362,691

Average passenger fare $ 137.34 $ 142.68

Passenger revenue yield per RPM (cents) 14.81 14.88

RASM (cents) 12.46 13.10

PRASM (cents) 11.61 12.23

CASM (cents) 12.17 12.49

CASM, excluding fuel (cents) 7.89 7.64

CASM, excluding special items (cents) 12.17 12.22

CASM, excluding fuel and special items (cents) 7.83 7.41

Fuel costs per gallon, including fuel tax (unhedged) $ 2.94 $ 3.32

Fuel costs per gallon, including fuel tax $ 2.90 $ 3.29

Fuel costs per gallon, including fuel tax (economic) $ 2.95 $ 3.27

Fuel consumed, in gallons (millions) 445 495

PRASM (Passenger unit revenue) - Passenger revenue yield per ASM

RASM (unit revenue) - Operating revenue yield per ASM

CASM (unit costs) - Operating expenses per ASM

(1) Selected operating statistics presented in this schedule on a combined basis include operations for Southwest and

AirTran for all periods presented, including AirTran for periods prior to the acquisition date. These combined results

include the impact of purchase accounting as of May 2, 2011. AirTran's historical operating statistics included in the

combined presentation have been conformed to Southwest's presentation where appropriate.

SCHEDULE H

SCHEDULE I SOUTHWEST AIRLINES CO.

SELECTED COMBINED FINANCIAL INFORMATION (1)

(in millions)

(unaudited)

Three months ended

March 31, June 30, September 30, December 31,

2010 (2) 2010 (2) 2010 (3) 2010 (3)

OPERATING REVENUES:

Passenger $ 3,010 $ 3,621 $ 3,606 $ 3,492

Freight 30 33 31 32

Other 195 215 223 236

Total operating revenues 3,235 3,869 3,860 3,760

OPERATING EXPENSES:

Salaries, wages, and benefits 995 1,077 1,069 1,091

Fuel and oil 1,008 1,152 1,132 1,156

Maintenance materials and repairs 225 251 254 251

Aircraft rentals 107 106 103 106

Landing fees and other rentals 229 251 250 240


Acquisition and integration costs - - 1 16

Other operating expenses 437 426 462 501

Total operating expenses 3,169 3,432 3,447 3,536

OPERATING INCOME 66 437 413 224


Interest expense 63 65 61 58

Capitalized interest (5) (6) (5) (4)

Interest income (2) (5) (3) (4)

Other losses (gains), net 5 187 (27) (43)

Total other expenses 61 241 26 7

INCOME BEFORE INCOME TAXES $ 5 $ 196 $ 387 $ 217


all periods presented, including AirTran for periods prior to the acquisition date. These combined results exclude the impact of purchase

accounting. AirTran's historical financial information included in the combined presentation has been conformed to Southwest's financial

statement classification where appropriate. See Note Regarding Use of Non-GAAP Financial Measures.

(2) See Schedule I for a reconciliation of this combined information to our historical GAAP reported amounts.

(3) See Schedule J for a reconciliation of this combined information to our historical GAAP reported amounts.

SCHEDULE I

SCHEDULE J


RECONCILIATION OF SELECTED COMBINED AMOUNTS FROM SCHEDULE I TO NON-GAAP ITEMS (1)


(in millions)

(unaudited)

Three Months Ended


2010 2010 2010 2010

Fuel and oil expense, combined unhedged $ 925 $ 1,068 $ 1,044 $ 1,109

Add: Fuel hedge losses included in Fuel and oil

expense 83 84 88 47

Fuel and oil expense, combined as presented in

Schedule G (2) $ 1,008 $ 1,152 $ 1,132 $ 1,156

Add/(Deduct): Net impact from fuel contracts (48) (51) (33) (40)

Fuel and oil expense, combined economic $ 960 $ 1,101 $ 1,099 $ 1,116

Total operating expenses, combined as presented in

Schedule G (2) $ 3,169 $ 3,432 $ 3,447 $ 3,536

Add/(Deduct): Net impact from fuel contracts (48) (51) (33) (40)

Total operating expenses, combined economic $ 3,121 $ 3,381 $ 3,414 $ 3,496

Add: Charge for Acquisition and integration costs,

net (3) - - (1) (14)

Total operating expenses, combined non-GAAP $ 3,121 $ 3,381 $ 3,413 $ 3,482

Operating income, combined as presented in

Schedule G (2) $ 66 $ 437 $ 413 $ 224

Add/(Deduct): Net impact from fuel contracts 48 51 33 40

Operating income, combined economic $ 114 $ 488 $ 446 $ 264


net (3) - - 1 14

Operating income, combined non-GAAP $ 114 $ 488 $ 447 $ 278

Other losses (gains) , net, combined as presented in

Schedule G (2) $ 5 $ 187 $ (27) $ (43)

Add/(Deduct): Net impact from fuel contracts 33 (149) 71 90

Other losses, net, combined non-GAAP $ 38 $ 38 $ 44 $ 47

Income before income taxes, combined as presented

in Schedule G (2) $ 5 $ 196 $ 387 $ 217

Add/(Deduct): Net impact from fuel contracts 15 200 (38) (50)

$ 20 $ 396 $ 349 $ 167


net (3) - - - 14

Income before income taxes, combined non-GAAP $ 20 $ 396 $ 349 $ 181

(1) Selected combined amounts presented in this schedule include financial results for Southwest and AirTran for all periods presented,

including AirTran for periods prior to the acquisition date. These combined results exclude the impact of purchase accounting. AirTran's

historical financial information included in the combined presentation has been conformed to Southwest's financial statement classification

where appropriate. (2) See Schedule K for a reconciliation of this combined information to our historical GAAP reported amounts for the quarters ended March

31, 2010 and June 30, 2010. See Schedule L for a reconciliation of this combined information to our historical GAAP reported amounts for

the quarters ended September 30, 2010 and December 31, 2010.

(3) Amounts net of profitsharing impact.

SCHEDULE J

SCHEDULE K SOUTHWEST AIRLINES CO.


(in millions)

(unaudited)

Three months ended Three months ended

March 31, 2010 June 30, 2010

(as reported) (as reported)

(2)

Southwest

Airlines Co.

(3)

AirTran


(2)

Southwest

Airlines Co.

(3)

AirTran


OPERATING REVENUES:

Passenger $ 2,495 $ 515 $ 3,010 $ 3,016 $ 605 $ 3,621

Freight 30 - 30 33 - 33

Other 105 90 195 119 96 215


OPERATING EXPENSES:

Salaries, wages, and benefits 864 131 995 946 131 1,077

Fuel and oil 821 187 1,008 933 219 1,152







OPERATING INCOME 54 12 66 363 74 437



Capitalized interest (5) - (5) (5) (1) (6)

Interest income (3) 1 (2) (4) (1) (5)

Other losses, net 4 1 5 146 41 187

Total other expenses 37 24 61 179 62 241

INCOME (LOSS) BEFORE

INCOME TAXES $ 17 $ (12) $ 5 $ 184 $ 12 $ 196



accounting. See Note Regarding Use of Non-GAAP Financial Measures.

(2) Results presented for Southwest Airlines Co., on a standalone basis, represent historical GAAP reported amounts.

(3) Results presented for AirTran, on a standalone basis, represent periods prior to the acquisition date, conformed to Southwest's

financial statement classification where appropriate.

SCHEDULE K

SCHEDULE L SOUTHWEST AIRLINES CO.


(in millions)

(unaudited)

Three months ended Three months ended

September 30, 2010 December 31, 2010

(as reported) (as reported)

(2)

Southwest

Airlines Co.

(3)

AirTran


(2)

Southwest

Airlines Co.

(3)

AirTran


OPERATING REVENUES:

Passenger $ 3,032 $ 574 $ 3,606 $ 2,945 $ 547 $ 3,492

Freight 31 - 31 32 - 32

Other 129 94 223 137 99 236


OPERATING EXPENSES:

Salaries, wages, and benefits 938 131 1,069 955 136 1,091

Fuel and oil 926 206 1,132 940 216 1,156





Acquisition and integration 1 - 1 7 9 16



OPERATING INCOME 355 58 413 216 8 224



Capitalized interest (5) - (5) (4) - (4)

Interest income (2) (1) (3) (3) (1) (4)

Other (gains) losses, net (13) (14) (27) (31) (12) (43)

Total other expenses 23 3 26 3 4 7

INCOME BEFORE INCOME

TAXES $ 332 $ 55 $ 387 $ 213 $ 4 $ 217



accounting. See Note Regarding Use of Non-GAAP Financial Measures.

(2) Results presented for Southwest Airlines Co., on a standalone basis, represent historical GAAP reported amounts.

(3) Results presented for AirTran, on a standalone basis, represent periods prior to the acquisition date, conformed to Southwest's

financial statement classification where appropriate.

SCHEDULE L

SCHEDULE M


COMBINED OPERATING STATISTICS (1)

(unaudited)

Three Months Ended


2010 2010 2010 2010

Revenue passengers carried 24,311,072 27,997,507 27,966,582 27,330,796

Enplaned passengers 29,213,514 34,084,746 34,346,991 33,276,264

Revenue passenger miles (RPMs) (000s) 21,542,693 25,403,035 25,938,073 24,713,320

Available seat miles (ASMs) (000s) 28,292,159 31,722,856 31,819,149 30,626,416

Load factor 76.1 % 80.1 % 81.5 % 80.7 %

Average length of passenger haul (miles) 886 907 927 904

Average aircraft stage length (miles) 656 671 674 670

Trips flown 321,790 352,352 352,087 340,597

Average passenger fare $ 123.82 $ 129.33 $ 128.94 $ 127.76

Passenger revenue yield per RPM (cents) 13.97 14.25 13.90 14.13

RASM (cents) 11.43 12.20 12.13 12.27

PRASM (cents) 10.64 11.41 11.33 11.40

CASM (cents) 11.20 10.82 10.83 11.54

CASM, excluding fuel (cents) 7.64 7.19 7.27 7.77

CASM, excluding special items (cents) 11.03 10.66 10.73 11.36

CASM, excluding fuel and special items (cents) 7.64 7.19 7.27 7.72

Fuel costs per gallon, including fuel tax

(unhedged) $ 2.21 $ 2.27 $ 2.21 $ 2.45

Fuel costs per gallon, including fuel tax $ 2.41 $ 2.45 $ 2.39 $ 2.55

Fuel costs per gallon, including fuel tax

(economic) $ 2.29 $ 2.34 $ 2.32 $ 2.46

Fuel consumed, in gallons (millions) 417 469 472 451

PRASM (Passenger unit revenue) - Passenger revenue yield per ASM

RASM (unit revenue) - Operating revenue yield per ASM

CASM (unit costs) - Operating expenses per ASM

(1) Selected operating statistics presented in this schedule on a combined basis include operations for Southwest and AirTran

for all periods presented, including AirTran for periods prior to the acquisition date. These combined results exclude the

impact of purchase accounting. AirTran's historical operating statistics included in the combined presentation have been

conformed to Southwest's presentation where appropriate.

SCHEDULE M

NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP).

These GAAP financial statements include unrealized non-cash adjustments and reclassifications, which can be significant, as a result of

accounting requirements and elections made under accounting pronouncements relating to derivative instruments and hedging.

As a result, the Company also provides financial information on its website that was not prepared in accordance with GAAP and should not be

considered as an alternative to the information prepared in accordance with GAAP. The Company provides supplemental non-GAAP financial

information, including results that it refers to as “economic,” which the Company’s management utilizes to evaluate its ongoing financial

performance and the Company believes provides greater transparency to investors as supplemental information to its GAAP results. The

Company’s economic financial results differ from GAAP results in that they only include the actual cash settlements from fuel hedge contracts--

all reflected within Fuel and oil expense in the period of settlement. Thus, Fuel and oil expense on an economic basis reflects the Company’s

actual net cash outlays for fuel during the applicable period, inclusive of settled fuel derivative contracts. Any net premium costs paid related to

option contracts are reflected as a component of Other (gains) losses, net, for both GAAP and non-GAAP (including economic) purposes in the

period of contract settlement. These economic results provide a better measure of the impact of the Company’s fuel hedges on its operating

performance and liquidity since they exclude the unrealized, non-cash adjustments and reclassifications that are recorded in GAAP results in

accordance with accounting guidance relating to derivative instruments, and they reflect all cash settlements related to fuel derivative contracts

within Fuel and oil expense. This enables the Company’s management, as well as investors, to consistently assess the Company’s operating

performance on a year-over-year or quarter-over-quarter basis after considering all efforts in place to manage fuel expense. However, because

these measures are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies

calculate the measures in the same manner. As a result, the aforementioned measures, as presented, may not be directly comparable to similarly

titled measures presented by other companies.

Further information on (i) the Company’s fuel hedging program, (ii) the requirements and accounting associated with accounting for derivative

instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in the

Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

In addition to its “economic” financial measures, as defined above, the Company has also provided non-GAAP financial measures as a result of

items that the Company believes are not indicative of its ongoing operations. On a combined basis (as discussed below), these include charges

for the three months ended September 30, 2010 of $1 million, the three months ended December 31, 2010 of $16 million, the three months ended

March 31, 2011 of $22 million and the three months ended June 30, 2011 of $79 million (before the impact of profitsharing and/or taxes) related

to expenses associated with the Company’s acquisition and integration of AirTran. The Company believes that evaluation of its financial

performance can be enhanced by a presentation of results that exclude the impact of these items in order to evaluate the results on a comparative

basis with results in prior periods that do not include such items and as a basis for evaluating operating results in future periods. As a result of

the Company’s acquisition of AirTran, which closed on May 2, 2011, the Company has incurred and expects to continue to incur substantial

charges associated with integration of the two companies. While the Company cannot predict the exact timing or amounts of such charges, it

does expect to treat the charges as special items in its future presentation of non-GAAP results.

The Company has also provided other supplemental non-GAAP financial information on a “combined basis.” This supplemental non-GAAP

financial information on a “combined basis” includes specified combined financial results of the Company and AirTran for periods prior to May

2, 2011, as if the acquisition had occurred prior to the beginning of the applicable reporting period, but excludes any impact of purchase

accounting prior to May 2, 2011. AirTran’s historical financial information included in the combined presentation has been conformed to the

Company’s financial statement classification where appropriate. The Company believes that evaluation of its financial performance can be

enhanced by a presentation of combined results in order to evaluate its prior, current or future period results on a more meaningful, consistent

year-over-year basis.

southwest airlines co. second quarter 2011 financial...

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