Condensed Consolidated Balance
| Condensed Consolidated Balance Sheet (USD $) | ||
| In Millions | Jun. 30, 2009
| Dec. 31, 2008
|
| Current assets | ||
| Cash and cash equivalents | $946 | $1,368 |
| Short-term investments | 1,252 | 435 |
| Accounts and Other Receivables | 237 | 209 |
| Inventories of parts and supplies, at cost | 200 | 203 |
| Deferred income taxes | 365 | 365 |
| Prepaid expenses and other current assets | 94 | 73 |
| Total current assets | 3,094 | 2,653 |
| Property and equipment, at cost | ||
| Flight equipment | 13,690 | 13,722 |
| Ground property and equipment | 1,849 | 1,769 |
| Deposits on flight equipment purchase contracts | 204 | 380 |
| Property and equipment, at cost | 15,743 | 15,871 |
| Less allowance for depreciation and amortization | 5,082 | 4,831 |
| Property and equipment, net | 10,661 | 11,040 |
| Other assets | 272 | 375 |
| Total assets | 14,027 | 14,068 |
| Current liabilities | ||
| Accounts payable | 732 | 668 |
| Accrued liabilities | 1,024 | 1,012 |
| Current maturities of long-term debt | 105 | 163 |
| Air traffic liability | 1,207 | 963 |
| Total current liabilities | 3,068 | 2,806 |
| Long-term debt less current maturities | 3,278 | 3,498 |
| Deferred income taxes | 1,924 | 1,904 |
| Deferred gains from sale and leaseback of aircraft | 128 | 105 |
| Other deferred liabilities | 481 | 802 |
| Stockholders' equity | ||
| Common stock | 808 | 808 |
| Capital in excess of par value | 1,223 | 1,215 |
| Treasury stock, at cost | (986) | (1,005) |
| Accumulated other comprehensive loss | (797) | (984) |
| Retained earnings | 4,900 | 4,919 |
| Total stockholders' equity | 5,148 | 4,953 |
| Total liabilities and stockholders' equity | $14,027 | $14,068 |
Condensed Consolidated Statemen
| Condensed Consolidated Statement of Operations (USD $) | ||||
| In Millions, except Share data | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
| OPERATING REVENUES | ||||
| Passenger | $2,506 | $2,747 | $4,758 | $5,161 |
| Freight | 29 | 37 | 58 | 71 |
| Other | 81 | 85 | 156 | 167 |
| Total operating revenues | 2,616 | 2,869 | 4,972 | 5,399 |
| OPERATING EXPENSES | ||||
| Salaries, wages, and benefits | 863 | 839 | 1,699 | 1,639 |
| Fuel and oil | 726 | 945 | 1,423 | 1,745 |
| Maintenance materials and repairs | 190 | 191 | 373 | 333 |
| Aircraft rentals | 47 | 38 | 93 | 76 |
| Landing fees and other rentals | 179 | 159 | 345 | 330 |
| Depreciation and amortization | 150 | 148 | 300 | 293 |
| Other operating expenses | 338 | 344 | 666 | 690 |
| Total operating expenses | 2,493 | 2,664 | 4,899 | 5,106 |
| OPERATING INCOME (LOSS) | 123 | 205 | 73 | 293 |
| OTHER EXPENSES (INCOME) | ||||
| Interest expense | 47 | 32 | 92 | 60 |
| Capitalized interest | (5) | (6) | (11) | (14) |
| Interest income | (3) | (5) | (8) | (12) |
| Other (gains) losses, net | (23) | (345) | 0 | (307) |
| Total other expenses (income) | 16 | (324) | 73 | (273) |
| INCOME (LOSS) BEFORE INCOME TAXES | 107 | 529 | 0 | 566 |
| PROVISION (BENEFIT) FOR INCOME TAXES | 16 | 208 | 0 | 211 |
| NET INCOME (LOSS) | $91 | $321 | $0 | $355 |
| NET INCOME (LOSS) PER SHARE, BASIC | 0.12 | 0.44 | 0 | 0.48 |
| NET INCOME (LOSS) PER SHARE, DILUTED | 0.12 | 0.44 | 0 | 0.48 |
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
| Basic | 741 | 732 | 741 | 733 |
| Diluted | 741 | 737 | 741 | 736 |
1_Condensed Consolidated Statem
| Condensed Consolidated Statement of Cash Flow (USD $) | ||||
| In Millions | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net Income (Loss) | $91 | $321 | $0 | $355 |
| Adjustments to reconcile net income (loss) to cash provided by operating activities | ||||
| Depreciation and amortization | 150 | 148 | 300 | 293 |
| Amortization of deferred gains on sale and leaseback of aircraft | (4) | (3) | (7) | (6) |
| Share-based compensation expense | 3 | 5 | 6 | 9 |
| Deferred income taxes | 16 | 135 | (5) | 129 |
| Excess tax benefits from share-based compensation arrangements | (5) | 3 | (1) | 3 |
| Cash collateral received from (provided to) fuel derivative counterparties | (125) | 1,865 | (185) | 2,435 |
| Unrealized loss (gain) on fuel derivative instruments | (3) | (324) | 67 | (290) |
| Changes in certain assets and liabilities | ||||
| Accounts and other receivables | (6) | (97) | (28) | (167) |
| Other current assets | (28) | (37) | (18) | (50) |
| Accounts payable and accrued liabilities | 104 | 286 | 104 | 333 |
| Air traffic liability | (43) | 105 | 244 | 372 |
| Other, net | (15) | (71) | (57) | (116) |
| Net cash provided by operating activities | 135 | 2,336 | 420 | 3,300 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Purchases of property and equipment, net | (187) | (223) | (272) | (587) |
| Purchases of short-term investments | (1,394) | (2,226) | (3,090) | (3,447) |
| Proceeds from sales of short-term investments | 1,203 | 1,185 | 2,347 | 2,645 |
| Other, net | 1 | 0 | 1 | 0 |
| Net cash used in investing activities | (377) | (1,264) | (1,014) | (1,389) |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Issuance of Long-term debt | 332 | 600 | 332 | 600 |
| Proceeds from sale and leaseback transactions | 208 | 0 | 381 | 0 |
| Proceeds from Employee stock plans | 4 | 17 | 8 | 27 |
| Repurchase of common stock | 0 | 0 | 0 | (54) |
| Payments of long-term debt and capital lease obligations | (7) | (6) | (41) | (25) |
| Payment of revolving credit facility | (400) | 0 | (400) | 0 |
| Payment of credit line borrowing | (91) | 0 | (91) | 0 |
| Excess tax benefits from share-based compensation arrangements | 5 | (3) | 1 | (3) |
| Payments of cash dividends | (3) | (3) | (10) | (10) |
| Other, net | (5) | (6) | (8) | (6) |
| Net cash provided by (used in) financing activities | 43 | 599 | 172 | 529 |
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (199) | 1,671 | (422) | 2,440 |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,145 | 2,982 | 1,368 | 2,213 |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 946 | 4,653 | 946 | 4,653 |
| CASH PAYMENTS FOR | ||||
| Interest, net of amount capitalized | 42 | 16 | 78 | 41 |
| Income taxes | $3 | $7 | $4 | $13 |
BASIS OF PRESENTATION
| BASIS OF PRESENTATION | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| BASIS OF PRESENTATION | 1.BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Southwest Airlines Co. (Company or Southwest) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.The unaudited condensed consolidated financial statements for the interim periods ended June 30, 2009 and 2008, include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods.This includes all normal and recurring adjustments, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.Financial results for the Company, and airlines in general, are seasonal in nature.Historically, the Companys revenues, as well as its overall financial performance, are better in its second and third fiscal quarters than in its first and fourth fiscal quarters.However, as a result of significant fluctuations in revenues and the price of jet fuel in some periods, the nature of the Companys fuel hedging program, the periodic volatility of commodities used by the Company for hedging jet fuel, and the accounting requirements of Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), the Company has experienced, and may continue to experience significant volatility in its results in certain fiscal periods.See Note 5 for further information. Operating results for the three months and six months ended June 30, 2009, are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.For further information, refer to the consolidated financial statements and footnotes thereto included in the Southwest Airlines Co. Annual Report on Form 10-K for the year ended December 31, 2008. Certain prior period amounts have been reclassified to conform to the current presentation.In theunaudited Condensed ConsolidatedBalance Sheet as of December 31, 2008,the Company's cash collateral deposits related to fuel derivatives that have been provided to a counterparty have been adjusted to show a net presentationagainst the fair value of the Company's fuel derivative instruments.The entire portion of cash collateral deposits as of December 31, 2008, $240 million, has been reclassified to reduce Other deferred liabilities.In the Companys 2008 Form 10-K filing, these cash collateral deposits were presented gross and all were included as an increase to Prepaid expenses and other current assets.This change in presentation was made in order to comply with the requirements of Financial Accounting Standards Board (FASB) Staff Position FIN 39-1 (FIN 39-1), which was required to be adopted by the Company effective January 1, 2008.Following the Companys 2008 Form 10-K filing on February 2, 2 |
RESTATEMENT OF PREVIOUSLY ISSUE
| RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS | |
| 9 Months Ended
Sep. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS | 2.RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS The Company has determined that its previously issued unaudited interim condensed consolidated financial statements for the three and six month periods ended June 30, 2009, contained an error with respect to one rule within SFAS 133.Specifically, to facilitate the implementation of new hedge accounting software, in April 2009, existing hedging instruments were de-designated and re-designated as new hedges.Included in the re-designation, however, were certain derivative instruments that were in a net written option position that did not qualify as hedges according to SFAS 133.As a result, the Company is restating its financial statements for the three and six month periods ended June 30, 2009.The following table illustrates the correction as it is associated with certain line items in the financial statements (in millions, except per share amounts): Condensed Consolidated Balance Sheet (unaudited) June 30, 2009 As reported Adjustment Restated Accrued liabilities 1,029 (5 ) 1,024 Total current liabilities 3,073 (5 ) 3,068 Deferred income taxes 1,921 3 1,924 Retained earnings 4,863 37 4,900 Accumulated other comprehensive loss (762 ) (35 ) (797 ) Total stockholders' equity 5,146 2 5,148 Condensed Consolidated Statement of Operations (unaudited) Three months ended June 30, 2009 As reported Adjustment Restated Other (gains) losses, net 34 (57 ) (23 ) Total other expenses (income) 73 (57 ) 16 INCOME (LOSS) BEFORE INCOME TAXES 50 57 107 PROVISION (BENEFIT) FOR INCOME TAXES (4 ) 20 16 NET INCOME (LOSS) 54 37 91 NET INCOME (LOSS) PER SHARE, BASIC 0.07 0.05 0.12 NET INCOME (LOSS) PER SHARE, DILUTED 0.07 0.05 0.12 Condensed Consolidated Statement of Operations (unaudited) Six months ended June 30, 2009 As reported Adjustment Restated Other (gains) losses, net 57 (57 ) - Total other expenses (income) 130 (57 ) 73 INCOME (LOSS) BEFORE INCOME TAXES (57 ) 57 - PROVISION (BENEFIT) FOR INCOME TAXES (20 ) 20 - NET INCOME (LOSS) (37 ) 37 - NET INCOME (LOSS) PER SHARE, BASIC (0.05 ) 0.05 - NET INCOME (LOSS) PER SHARE, DILUTED (0.05 ) 0.05 - |
NEW ACCOUNTING PRONOUNCEMENTS
| NEW ACCOUNTING PRONOUNCEMENTS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| NEW ACCOUNTING PRONOUNCEMENTS | 3.NEW ACCOUNTING PRONOUNCEMENTS On April 9, 2009, the Financial Accounting Standards Board (FASB) issued Staff Position SFAS 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1 and APB 28-1).FSP 107-1 amends FASB Statement No. 107, Disclosures about Fair Values of Financial Instruments, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements.APB 28-1 amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements.FSP 107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009 and the Company has adopted them in second quarter 2009.See Note 11. On April 9, 2009, the FASB issued Staff Position SFAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4).FSP 157-4 provides additional guidance in estimating fair value under statement No. 157, Fair Value Measurements (SFAS 157), when the volume and level of transaction activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability.FSP 157-4 also provides additional guidance on circumstances that may indicate a transaction is not orderly.FSP 157-4 is effective for interim periods ending after June 15, 2009, and the Company has adopted its provisions during second quarter 2009.FSP 157-4 did not have a significant impact on the Companys financial position, results of operations, cash flows, or disclosures for second quarter 2009. On April 9, 2009, the FASB issued Staff Position SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP 115-2).FSP 115-2 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments.FSP 115-2 is effective for interim periods ending after June 15, 2009, and the Company has adopted its provisions for second quarter 2009.FSP 115-2 did not have a significant impact on the Companys financial position, results of operations, cash flows, or disclosures for second quarter 2009. In May 2009, the FASB issued statement No. 165, Subsequent Events(SFAS 165). SFAS 165 modifies the definition of what qualifies as a subsequent eventthose events or transactions that occur following the balance sheet date, but before the financial statements are issued, or are available to be issuedand requires companies to disclose the date through which it has evaluated subsequent events and the basis for determining that date.The Company adopted the provisions of SFAS 165 for second quarter 2009, in accordance with the effective date.See Note 1. In June 2009, the FASB issued statement No. 167, Amendments to FASB Interpretation No. 46(R)(SFAS 167).Among other items, SFAS 167 responds to concerns about the application of certain key provisions of FIN 46(R), including those regarding the transparency of the in |
NET INCOME
| NET INCOME (LOSS) PER SHARE | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| NET INCOME (LOSS) PER SHARE | 4.NET INCOME (LOSS) PER SHARE-RESTATED The following table sets forth the computation of basic and diluted net income (loss) per share (in millions except per share amounts): Three months ended June 30, Six months ended June 30, 2009 2008 2009 2008 (As restated) (As restated) NUMERATOR: Net income (loss) $ 91 $ 321 $ - $ 355 DENOMINATOR: Weighted-average shares outstanding, basic 741 732 741 733 Dilutive effect of Employee stock options - 5 - 3 Adjusted weighted-average shares outstanding, diluted 741 737 741 736 NET INCOME (LOSS) PER SHARE: Basic $ .12 $ .44 $ - $ .48 Diluted $ .12 $ .44 $ - $ .48 The Company has excluded 79 million and 56 million shares, respectively, from its calculations of net income per share, diluted, for the three months ended June 30, 2009 and 2008, and has excluded 79 million and 72 million shares, respectively, from its calculations of net income per share, diluted, for the six months ended June 30, 2009 and 2008, as they represent antidilutive stock options for the respective periods presented. |
FINANCIAL DERIVATIVE INSTRUMENT
| FINANCIAL DERIVATIVE INSTRUMENTS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| FINANCIAL DERIVATIVE INSTRUMENTS | 5.FINANCIAL DERIVATIVE INSTRUMENTS-RESTATED Fuel Contracts Airline operators are inherently dependent upon energy to operate and, therefore, are impacted by changes in jet fuel prices.Jet fuel and oil (including related taxes) consumed during the three months ended June 30, 2009 and 2008, represented approximately 29 percent and 35 percent of the Companys operating expenses, respectively. The Companys operating expenses have been extremely volatile in recent years due to dramatic increases and declines in energy prices.The Company endeavors to acquire jet fuel at the lowest possible cost and to reduce volatility in operating expenses.Because jet fuel is not traded on an organized futures exchange, there are limited opportunities to hedge directly in jet fuel.However, the Company has found that financial derivative instruments in other commodities, such as crude oil, and refined products such as heating oil and unleaded gasoline, can be useful in decreasing its exposure to jet fuel price volatility.The Company does not purchase or hold any derivative financial instruments for trading purposes. The Company has used financial derivative instruments for both short-term and long-term time frames, and typically uses a mixture of purchased call options, collar structures (which include both a purchased call option and a sold put option), and fixed price swap agreements in its portfolio.Generally, when prices are lower, the Company prefers to use fixed price swap agreements and purchased call options.However, when prices are higher, the Company uses more collar structures due to the high cost of purchased call options and the increased risk associated with fixed price swaps.Although the use of collar structures can reduce the overall cost of hedging, these instruments carry more risk than purchased call options in that the Company could end up in a liability position when the collar structure settles.With the use of purchased call options, the Company cannot be in a liability position at settlement. The following table provides information about the Companys volume of fuel hedging for the first half of 2009, and its portfolio as of June 30, 2009, for future periods.These hedge volumes are presented strictly from an economic standpoint and thus do not reflect whether the hedges qualified or will qualify for special hedge accounting as defined in SFAS 133.The Company defines its economic hedge as the total volume of fuel derivative contracts held, including the net impact of positions that have been effectively settled through offsetting positions, regardless of whether those contracts qualify for hedge accounting as defined in SFAS 133. Fuel hedged as Approximate % of June 30, 2009 of jet fuel Period (by year) (gallons in millions) consumption 2009 518 37 % * 2010 653 47 % * 2011 211 15 % * 2012 93 7 % * 2013 98 7 % * Period (by quarter for 2009) First quarter 2009 15 4 % Second quarter 2009 185 50 % Third quarter 2009 144 40 % * Fourth quarter |
COMPREHENSIVE INCOME
| COMPREHENSIVE INCOME (LOSS) | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| COMPREHENSIVE INCOME (LOSS) | 6.COMPREHENSIVE INCOME (LOSS)-RESTATED Comprehensive income (loss) includes changes in the fair value of certain financial derivative instruments, which qualify for hedge accounting, and unrealized gains and losses on certain investments.The differences between net income (loss) and comprehensive income (loss) for the three and six months ended June 30, 2009 and 2008, were as follows: Three months ended June 30, (In millions) 2009 2008 (As restated) Net income $ 91 $ 321 Unrealized gain on derivative instruments, net of deferred taxes of $64 and $753 103 1,209 Other, net of deferred taxes of $14 and ($1) 22 (2 ) Total other comprehensive income 125 1,207 Comprehensive income $ 216 $ 1,528 Six months ended June 30, (In millions) 2009 2008 (As restated) Net income $ - $ 355 Unrealized gain on derivative instruments, net of deferred taxes of $100 and $904 161 1,469 Other, net of deferred taxes of $16 and ($7) 26 (11 ) Total other comprehensive income (loss) 187 1,458 Comprehensive income $ 187 $ 1,813 A rollforward of the amounts included in AOCI, net of taxes, is shown below for the three and six months ended June 30, 2009: Accumulated Fuel other hedge comprehensive (In millions) derivatives Other income (loss) (As restated) (As restated) Balance at March 31, 2009 $ (888 ) $ (34 ) $ (922 ) Second quarter 2009 changes in value 7 22 29 Reclassification to earnings 96 96 Balance at June 30, 2009 $ (785 ) $ (12 ) $ (797 ) Accumulated Fuel other hedge comprehensive (In millions) derivatives Other income (loss) (As restated) (As restated) Balance at December 31, 2008 $ (946 ) $ (38 ) $ (984 ) 2009 changes in value (45 ) 26 (19 ) Reclassification to earnings 206 - 206 Balance at June 30, 2009 $ (785 ) $ (12 ) $ (797 ) |
ACCRUED LIABILITIES
| ACCRUED LIABILITIES | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| ACCRUED LIABILITIES | 7.ACCRUED LIABILITIES-RESTATED June 30, December 31, (In millions) 2009 2008 (As restated) Retirement plans $ 97 $ 86 Aircraft rentals 109 118 Vacation pay 181 175 Advances and deposits 14 23 Fuel derivative contracts 120 246 Deferred income taxes 133 36 Workers compensation 124 122 Other 246 206 Accrued liabilities $ 1,024 $ 1,012 |
POSTRETIREMENT BENEFITS
| POSTRETIREMENT BENEFITS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| POSTRETIREMENT BENEFITS | 8.POSTRETIREMENT BENEFITS The following table sets forth the Companys periodic postretirement benefit cost for each of the interim periods identified: Three months ended June 30, (In millions) 2009 2008 Service cost $ 4 $ 4 Interest cost 1 1 Amortization of prior service cost 1 1 Recognized actuarial gain (1 ) (1 ) Net periodic postretirement benefit cost $ 5 $ 5 Six months ended June 30, (In millions) 2009 2008 Service cost $ 7 $ 7 Interest cost 2 2 Amortization of prior service cost 1 1 Recognized actuarial gain (1 ) (1 ) Net periodic postretirement benefit cost $ 9 $ 9 |
FINANCING TRANSACTIONS
| FINANCING TRANSACTIONS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| FINANCING TRANSACTIONS | 9.FINANCING TRANSACTIONS On April 29, 2009, the Company entered into a term loan agreement providing for loans to the Company aggregating up to $332 million, to be secured by mortgages on 14 of the Companys 737-700 aircraft.On May 6, 2009, the Company borrowed the full $332 million and secured the loan with the requisite 14 aircraft mortgages.The loan matures on May 6, 2019, and is repayable quarterly in installments of principal beginning August 6, 2009.The loan bears interest at the LIBO Rate (as defined in the term loan agreement) plus 3.30 percent, and interest is payable quarterly, beginning August 6, 2009.Concurrent with its entry into the term loan agreement, the Company entered into an interest rate swap agreement that effectively fixes the interest rate on the term loan for its entire term at 6.315 percent.The Company used the proceeds from the term loan for general corporate purposes, including the repayment of the Companys revolving credit facility. During May 2009, the Company fully repaid the $400 million it had previously borrowed in 2008 under its available $600 million revolving credit facility.Therefore, as of June 30, 2009, the entire $600 million of the Companys revolving credit facility was available for borrowing. |
COMMITMENTS AND CONTINGENCIES
| COMMITMENTS AND CONTINGENCIES | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| CONTINGENCIES | 10.COMMITMENTS AND CONTINGENCIES During the first quarter and early second quarter of 2008, the Company was named as a defendant in two putative class actions on behalf of persons who purchased air travel from the Company while the Company was allegedly in violation of FAA safety regulations. Claims alleged by the plaintiffs in these two putative class actions include breach of contract, breach of warranty, fraud/misrepresentation, unjust enrichment, and negligent and reckless operation of an aircraft.The Company believes that the class action lawsuits are without merit and intends to vigorously defenditself.Also in connection with this incident, during the first quarter and early second quarter of 2008, the Company received four letters from Shareholders demanding the Company commence an action on behalf of the Company against members of its Board of Directors and any other allegedly culpable parties for damages resulting from an alleged breach of fiduciary duties owed by them to the Company.In August 2008, Carbon County Employees Retirement System and Mark Cristello filed a related Shareholder derivative action in Texas state court naming certain directors and officers of the Company as individual defendants and the Company as a nominal defendant.The derivative action claims breach of fiduciary duty and seeks recovery by the Company of alleged monetary damages sustained as a result of the purported breach of fiduciary duty, as well as costs of the action.A Special Committee appointed by the Independent Directors of the Company has been evaluating the Shareholder demands. The Company is from time to time subject to various other legal proceedings and claims arising in the ordinary course of business, including, but not limited to, examinations by the Internal Revenue Service (IRS). The Company's management does not expect that the outcome in any of its currently ongoing legal proceedings or the outcome of any proposed adjustments presented to date by the IRS, individually or collectively, will have a material adverse effect on the Company's financial condition, results of operations, or cash flow. During 2008, the City of Dallas approved the Love Field Modernization Program, an estimated $519 million project to reconstruct Dallas Love Field with modern, convenient air travel facilities.Pursuant to a Program Development Agreement with the City of Dallas, the Company is managing this project, and initial construction is expected to commence during late 2009, with completion scheduled for October 2014.Bonds are expected to be issued at a later date by the Love Field Airport Modernization Corporation (a local government corporation under Texas law formed by the City of Dallas) that will provide funding for this project, with repayment of the bonds being made through recurring ground rents, fees, and other revenues collected by the airport. |
FAIR VALUE MEASUREMENTS
| FAIR VALUE MEASUREMENTS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| FAIR VALUE MEASUREMENTS | 11.FAIR VALUE MEASUREMENTS-RESTATED The Company adopted SFAS 157 as of January 1, 2008.SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of June 30, 2009, the Company held certain items that are required to be measured at fair value on a recurring basis.These included cash equivalents, short-term investments, certain noncurrent investments, interest rate derivative contracts, fuel derivative contracts, and available-for-sale securities.Cash equivalents consist of short-term, highly liquid, income-producing investments, all of which have maturities of 90 days or less, including money market funds, U.S. Government obligations, and obligations of U.S. Government backed agencies.Short-term investments consist of short-term, highly liquid, income-producing investments, which have maturities of greater than 90 days but less than one year, including U.S. Government obligations, obligations of U.S. Government backed agencies, and certain auction rate securities.Derivative instruments are related to the Companys fuel hedging program and interest rate hedges.Noncurrent investments consist of certain auction rate securities, primarily those collateralized by student loan portfolios, which are guaranteed by the U.S. Government.Other available-for-sale securities primarily consist of investments associated with the Companys Excess Benefit Plan. The Companys fuel derivative instruments consist of over-the-counter (OTC) contracts, which are not traded on a public exchange.These contracts include both swaps as well as different types of option contracts.See Note 5 for further information on the Companys derivative instruments and hedging activities.The fair values of swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets.Therefore, the Company has categorized these swap contracts as Level 2.The Company determines the value of option contracts utilizing a standard option pricing model based on inputs that are either readily available in public markets, can be derived from information available in publicly quoted markets, or are quoted by financial institutions that trade these contracts.In situations where the Company obtains inputs via quotes from financial institutions, it verifies the reasonableness of these quotes via similar quotes from another financial institution as of each date for which financial statements are prepared.The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values.The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for t |
DIVIDENDS
| DIVIDENDS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| DIVIDENDS | 12.DIVIDENDS During the three month periods ended March 31 and June 30, 2009, dividends of $.0045 per share were declared on the 740 million shares and 741 million shares of Common Stock then outstanding, respectively.During the three month periods ended March 31 and June 30, 2008, dividends of $.0045 per share were declared on the 731 million shares and 733 million shares of Common Stock then outstanding, respectively. |
EARLY RETIREMENT OFFER
| EARLY RETIREMENT OFFER | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| EARLY RETIREMENT OFFER | 13.EARLY RETIREMENT OFFER On April 16, 2009, the Company announced Freedom 09, a one-time voluntary early out program offered to eligible Employees, in which the Company offered cash bonuses, medical/dental coverage for a specified period of time, and travel privileges based on work group and years of service.The purpose of this voluntary initiative and other initiatives is to right-size headcount in conjunction with the Companys current plans to reduce its capacity by five percent in 2009, and to help reduce costs.Virtually all of the Companys Employees hired before March 31, 2008 were eligible to participate in the program.Participants last day of work will fall between July 31, 2009 and April 15, 2010, as assigned by the Company based on the operational needs of particular work locations and departments, determined on an individual-by-individual basis.The Company did not have a target or expectation for the number of Employees expected to accept the package. Employees electing to participate in Freedom 09 were required to notify the Company of their election by June 19, 2009.However, Employees had until July 16, 2009 to rescind their election and remain with the Company.Following the deadline to rescind such election, a total of 1,404 Employees have remained as participants in Freedom 09, consisting of the following breakdown among workgroups:439 from Customer Support and Services, 464 from Ground Operations and Provisioning, 113 Flight Attendants, 20 Pilots, 91 from Maintenance, and 277 Managerial and Administrative Employees.The Company expects the total cost incurred for Freedom 09 to be approximately $70 million, which will be expensed during third quarter 2009.The Company may need to replace a small number of the positions with newly hired Employees to meet operational demands; however, the Company expects that most of the positions will not be filled based on the Companys recent capacity reductions. |
SALE AND LEASEBACK TRANSACTIONS
| SALE AND LEASEBACK TRANSACTIONS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| SALE AND LEASEBACK TRANSACTIONS | 14.SALE AND LEASEBACK TRANSACTIONS On April 2, 2009, the Company closed the first tranche of a two tranche sale and leaseback transaction with a third party aircraft lessor for the sale and leaseback of six of the Company's Boeing 737-700 aircraft.In the first tranche, the Company sold three of its Boeing 737-700 aircraft for approximately $105 million and immediately leased the aircraft back for approximately 12 years.On May 19, 2009, the Company sold an additional three of its Boeing 737-700 aircraft for approximately the same amount and upon similar terms as in the first tranche.These two sale and leaseback transactions resulted in deferred gains of $20 million, which will be amortized over the terms of the leases. All of the leases from these sale-leasebacks are accounted for as operating leases.Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft.Payments under the lease agreements will be reset every six months based on changes in the six-month LIBO rate. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. Upon a termination of the lease upon a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party. |
SUBSEQUENT EVENTS
| SUBSEQUENT EVENTS | |
| 6 Months Ended
Jun. 30, 2009 | |
| Notes to Financial Statements [Abstract] | |
| SUBSEQUENT EVENTS | 15.SUBSEQUENT EVENTS On July 1, 2009, the Company entered into a term loan agreement providing for loans to the Company aggregating up to $124 million, to be secured by mortgages on five of the Companys 737-700 aircraft.Subsequently, the Company borrowed the full $124 million and secured this loan with the requisite five aircraft mortgages.The loan matures on July 1, 2019, and is repayable semi-annually in installments of principal beginning January 1, 2010.The loan bears interest at a fixed rate of 6.84 percent, and interest is payable semi-annually, beginning January 1, 2010.The Company used the proceeds from the term loan for general corporate purposes. |
Document Information
| Document Information | |
| 6 Months Ended
Jun. 30, 2009 | |
| Document Information [Line Items] | |
| Document Type | 10-Q |
| Amendment Flag | true |
| Amendment Description | EXPLANATORY NOTE This Amendment No. 1 on Form 10-Q/A (Amendment) amends and restates Southwest Airlines Co.s (Company or Southwest) Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009, originally filed on July 23, 2009 (Original Filing). As disclosed in the Companys Form 8-K dated October 15, 2009, on October 14, 2009, the Company determined that its unaudited interim condensed consolidated financial statements for the three and six month periods ended June 30, 2009, contained an error with respect to one rule within Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, (SFAS 133) as amended. Specifically, to facilitate the implementation of new hedge accounting software, in April 2009, existing hedging instruments were de-designated and re-designated as new hedges.Included in the re-designation, however, were certain derivative instruments that were in a net written option position that did not qualify as hedges according to SFAS 133. The result of this error was that a portion of the increase in fair value of these derivatives was deferred as part of Accumulated Other Comprehensive Loss (AOCI), when in fact those increases should have been recognized in earnings in the second quarter 2009.Recognizing these increases in earnings results in an increase in GAAP Net income of $37 million for second quarter 2009.The net increase in fair value related to these instruments, totaling $57 million, before taxes, during second quarter 2009, relates entirely to unrealized changes in fair value as substantially all of the instruments will not settle until periods subsequent to 2009.Since the Company classifies these unrealized noncash changes in fair value as a component of Other (gains) losses, net in the unaudited Condensed Consolidated Statement of Operations, this error had no impact on the Companys operating income for the three or six month periods ended June 30, 2009, nor did it impact the Company's net cash flows for the same periods of 2009. The impact on the Company's unaudited Condensed Consolidated Balance Sheet is a decrease (debit) to AOCI of $35 million, an increase to Retained earnings of $37 million, a decrease to Accrued liabilities of $5 million, and an increase to Deferred income taxes of $3 million as of June 30, 2009. This error had no impact on any financial statements prior to those issued for second quarter 2009.In light of this error, the Companys financial statements and other financial information included in the Original Filing for second quarter 2009 are being restated in this Amendment. The Companys Original Filing is amended and restated in its entirety as set forth below.Unless specified, and except for updated disclosure regarding the final accounting treatment for the Companys early retirement offer in Note 13 to the unaudited condensed consolidated financial statements, the disclosures provided in this document have not been updated for events occurring after the Original Filing or to modify or update those disclosures affected by subsequent events. Therefore, this Amendment should be read in conjunction with the Companys |
| Document Period End Date | 2009-06-30 |
Entity Information
| Entity Information (USD $) | |
| 6 Months Ended
Jun. 30, 2009 | |
| Entity Information [Line Items] | |
| Entity Registrant Name | Southwest Airlines Co. |
| Entity Central Index Key | 0000092380 |
| Current Fiscal Year End Date | --12-31 |
| Entity Well-known Seasoned Issuer | Yes |
| Entity Voluntary Filers | No |
| Entity Current Reporting Status | Yes |
| Entity Filer Category | Large Accelerated Filer |
| Entity Public Float | $4,984,514,098 |
| Entity Common Stock, Shares Outstanding | 741,447,409 |