Southwest Airlines (LUV) 10-K 29 Jan 10 2009 FY Annual report Financial data

Condensed Consolidated Balance

Condensed Consolidated Balance Sheet (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
Current assets
Cash and cash equivalents	$1,114	$1,368
Short-term investments	1,479	435
Accounts and other receivables	169	209
Inventories of parts and supplies, at cost	221	203
Deferred income taxes	291	365
Prepaid expenses and other current assets	84	73
Total current assets	3,358	2,653
Property and equipment, at cost
Flight equipment	13,719	13,722
Ground property and equipment	1,922	1,769
Deposits on flight equipment purchase contracts	247	380
Property and equipment, at cost	15,888	15,871
Less allowance for depreciation and amortization	5,254	4,831
Property and equipment, net	10,634	11,040
Other assets	277	375
Total assets	14,269	14,068
Current liabilities
Accounts payable	746	668
Accrued liabilities	696	1,012
Current maturities of long-term debt	190	163
Air traffic liability	1,044	963
Total current liabilities	2,676	2,806
Long-term debt less current maturities	3,325	3,498
Deferred income taxes	2,207	1,904
Deferred gains from sale and leaseback of aircraft	102	105
Other non-current liabilities	493	802
Stockholders' equity
Common stock	808	808
Capital in excess of par value	1,216	1,215
Treasury stock, at cost	963	1,005
Accumulated other comprehensive loss	(578)	(984)
Retained earnings	4,983	4,919
Total stockholders' equity	5,466	4,953
Total liabilities and stockholders' equity	$14,269	$14,068

Parenthetical Data to the Conde

Parenthetical Data to the Condensed Consolidated Balance Sheet (USD $)
	Dec. 31, 2009	Dec. 31, 2008
Stockholders' equity
Common Stock, Par or Stated Value Per Share	1	1
Common Stock, Shares Authorized	2,000,000,000	2,000,000,000
Common Stock, Shares, Issued	807,611,634	807,611,634
Treasury Stock, Shares	64,820,703	67,619,062

Condensed Consolidated Statemen

Condensed Consolidated Statement of Operations (USD $)
In Millions, except Share data	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
OPERATING REVENUES
Passenger	$9,892	$10,549	$9,457
Freight	118	145	130
Other	340	329	274
Total operating revenues	10,350	11,023	9,861
OPERATING EXPENSES
Salaries, wages, and benefits	(3,468)	(3,340)	(3,213)
Fuel and oil	(3,044)	(3,713)	(2,690)
Maintenance materials and repairs	(719)	(721)	(616)
Aircraft rentals	(186)	(154)	(156)
Landing fees and other rentals	(718)	(662)	(560)
Depreciation and amortization	(616)	(599)	(555)
Other operating expenses	(1,337)	(1,385)	(1,280)
Total operating expenses	10,088	10,574	9,070
OPERATING INCOME	262	449	791
OTHER EXPENSES (INCOME)
Interest expense	(186)	(130)	(119)
Capitalized interest	21	25	50
Interest income	13	26	44
Other (gains) losses, net	54	(92)	292
Total other expenses (income)	(98)	(171)	267
INCOME BEFORE INCOME TAXES	164	278	1,058
PROVISION FOR INCOME TAXES	65	100	413
NET INCOME	$99	$178	$645
NET INCOME PER SHARE, BASIC	0.13	0.24	0.85
NET INCOME PER SHARE, DILUTED	0.13	0.24	0.84
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	741	735	757
Diluted	741	739	768

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $)
In Millions	Common stock	Capital in excess of par value	Retained earnings	Accumulated Other Comprehensive Income	Treasury stock	Total
Beginning Balance at Dec. 31, 2006	$808	$1,142	$4,307	$582	($390)	$6,449
Stock Issued During Period, Value, Employee Stock Ownership Plan			(150)		288	138
Adjustments to Additional Paid in Capital, Tax Effect from Share-based Compensation		28				28
Stock Issued During Period, Value, Share-based Compensation		37				37
Cash Dividends			(14)			(14)
NET INCOME			645			645
Other Comprehensive Income, Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax				636		636
Other Comprehensive Income (Loss), Net of Tax, Period Increase (Decrease)				23		23
Treasury Stock, Value, Acquired, Cost Method					(1,001)	(1,001)
Ending Balance at Dec. 31, 2007	808	1,207	4,788	1,241	(1,103)	6,941
Stock Issued During Period, Value, Employee Stock Ownership Plan			(34)		152	118
Adjustments to Additional Paid in Capital, Tax Effect from Share-based Compensation		(10)				(10)
Stock Issued During Period, Value, Share-based Compensation		18				18
Cash Dividends			(13)			(13)
NET INCOME			178			178
Other Comprehensive Income, Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax				(2,166)		(2,166)
Other Comprehensive Income (Loss), Net of Tax, Period Increase (Decrease)				(59)		(59)
Treasury Stock, Value, Acquired, Cost Method					(54)	(54)
Ending Balance at Dec. 31, 2008	808	1,215	4,919	(984)	(1,005)	4,953
Stock Issued During Period, Value, Employee Stock Ownership Plan			(22)		42	20
Adjustments to Additional Paid in Capital, Tax Effect from Share-based Compensation		(13)				(13)
Stock Issued During Period, Value, Share-based Compensation		14				14
Cash Dividends			(13)			(13)
NET INCOME			99			99
Other Comprehensive Income, Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax				366		366
Other Comprehensive Income (Loss), Net of Tax, Period Increase (Decrease)				40		40
Treasury Stock, Value, Acquired, Cost Method					0	0
Ending Balance at Dec. 31, 2009	$808	$1,216	$4,983	($578)	($963)	$5,466

PARENTHETICAL DATA TO THE CONSO

PARENTHETICAL DATA TO THE CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $)
	1/1/2009 - 12/31/2009	1/1/2008 - 12/31/2008	1/1/2007 - 12/31/2007
Statement of Stockholders' Equity [Abstract]
Dividends, Per Share	0.07	0.07	0.07

1_Condensed Consolidated Statem

Condensed Consolidated Statement of Cash Flow (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$99	$178	$645
Adjustments to reconcile net income (loss) to cash provided by operating activities
Depreciation and amortization	(616)	(599)	(555)
Amortization of deferred gains on sale and leaseback of aircraft	(12)	(12)	(14)
Share-based compensation expense	13	18	37
Deferred income taxes	72	56	328
Excess tax benefits from share-based compensation arrangements	(1)	0	(28)
Cash collateral received from (provided to) fuel derivative counterparties	(90)	(2,240)	1,460
Unrealized loss on fuel derivative instruments	14	206	(353)
Changes in certain assets and liabilities
Accounts and other receivables	40	71	(38)
Other current assets	(27)	(21)	(73)
Accounts payable and accrued liabilities	59	(98)	149
Air traffic liability	81	32	131
Other, net	121	(310)	46
Net cash provided by (used in) operating activities	985	(1,521)	2,845
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net	585	923	1,331
Purchases of short-term investments	6,106	5,886	5,086
Proceeds from sales of short-term investments	5,120	5,831	4,888
Other, net	(2)	0	0
Net cash used in investing activities	(1,569)	(978)	(1,529)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt	455	1,000	500
Proceeds from credit line borrowing	83	491	0
Proceeds from sale leaseback transactions	381	173	0
Proceeds from Employee stock plans	20	117	139
Repurchase of common stock	0	54	1,001
Payments of long-term debt and capital lease obligations	(86)	(55)	(122)
Payments of revolving credit facility	400	0	0
Payment of credit line borrowing	97	0	0
Excess tax benefits from share-based compensation arrangements	1	0	28
Payments of cash dividends	13	13	14
Other, net	(14)	(5)	(23)
Net cash provided by (used in) financing activities	330	1,654	(493)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(254)	(845)	823
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1,368	2,213	1,390
CASH AND CASH EQUIVALENTS AT END OF PERIOD	1,114	1,368	2,213
CASH PAYMENTS FOR
Interest, net of amount capitalized	152	100	63
Income taxes	$5	$71	$94

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Southwest Airlines Co. (the Company) is a major domestic airline that provides point-to-point, low-fare service.The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries.All significant inter-entity balances and transactions have been eliminated.The preparation of financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.Actual results could differ from these estimates. Certain prior period amounts have been reclassified to conform to the current presentation.In theConsolidatedBalance 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 Accounting Standards Codification (ASC) Subtopic 210-20 (originally issued as part of FIN 39-1, Amendment of FASB Interpretation No. 39), which was required to be adopted by the Company effective January 1, 2008.Following the Companys 2008 Form 10-K filing on February 2, 2009, the Company became aware that the requirements of ASC Subtopic 210-20 had not been properly applied to its financial derivative instruments within the financial statements.The Company determined that the effect of this error was not material to its financial statements and disclosures taken as a whole, and decided to apply ASC Subtopic 210-20 prospectively beginning with its first quarter 2009 Form 10-Q.Also, in the Consolidated Statement of Cash Flows for the years ended December 31, 2008, and 2007, the Company has reclassified certain unrealized noncash gains and/or losses recorded on fuel derivative instruments and the cash collateral received from counterparties to its fuel hedging program, in order to conform to the current year presentation.The current presentation now displays these items as separate captions, rather than netting them within other line items as in prior periods.These reclassifications had no impact on net cash flows provided by operations. In preparing the accompanying consolidated financial statements, the Company has reviewed, as determined necessary by the Companys management, events that have occurred after December 31, 2009, up until the issuance of the financial statements, which occurred on January 29, 2010. Cash and cash equivalents Cash in excess of that necessary for operating requirements is invested in short-term, highly liquid, income-producing investments. Investments with maturities of three

RECENT ACCOUNTING DEVELOPMENTS

RECENT ACCOUNTING DEVELOPMENTS
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
RECENT ACCOUNTING DEVELOPMENTS	2. RECENT ACCOUNTING DEVELOPMENTS In June 2009, the Financial Accounting Standards Board (FASB) issued ASC 810 (originally issued as SFAS No. 167, Amendments to FASB Interpretation No. 46(R).Among other items, ASC 810 responds to concerns about the application of certain key provisions of FIN 46(R), including those regarding the transparency of the involvement with variable interest entities.ASC 810 is effective for calendar year companies beginning on January 1, 2010.The Company does not believe the adoption of ASC 810 will have a significant impact on its financial position, results of operations, cash flows, or disclosures. On September 23, 2009, the FASB ratified Emerging Issues Task Force Issue No. 08-1, Revenue Arrangements with Multiple Deliverables (EITF 08-1).EITF 08-1 updates the current guidance pertaining to multiple-element revenue arrangements included in ASC Subtopic 605-25, which originated primarily from EITF 00-21, also titled Revenue Arrangements with Multiple Deliverables.EITF 08-1 will be effective for annual reporting periods beginning January 1, 2011 for calendar-year entities.The Company utilizes the accounting guidance provided in Revenue Arrangements with Multiple Deliverables in the timing of recognition of revenue associated with the sale of frequent flyer credits to business partners.See Note 1.Specifically, the Company applies the residual method, as currently allowed, but which will be prohibited under EITF 08-1.The Company is currently evaluating the impact of EITF 08-1 on its financial position, results of operations, cash flows, and disclosures.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
COMMITMENTS AND CONTINGENCIES	4. COMMITMENTS AND CONTINGENCIES Purchase commitments The Company's contractual purchase commitments primarily consist of scheduled aircraft acquisitions from Boeing.As of December 31, 2009, the Company had the following contractual purchase commitments with Boeing for 737-700 aircraft deliveries: Purchase Firm Options Rights Total Commitment (In millions) 2010 10 - - 10 $ 344 2011 10 7 - 17 450 2012 13 10 - 23 571 2013 19 4 - 23 634 2014 13 7 - 20 509 2015 14 3 - 17 444 2016 12 11 - 23 248 2017 - 17 - 17 - Through 2018 - - 54 54 - Total 91 59 54 204 $ 3,200 The Company has the option, which must be exercised 18 months prior to the contractual delivery date, to substitute 737-600s or 737-800s for the 737-700s. 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.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 claimed breach of fiduciary duty and sought 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 evaluated the Shareholder demands, and, in December 2009, the court approved a settlement submitted by the parties, which was immaterial to the Company.The Company believes the remaining class action lawsuits are immaterial to the Companys financial position and without merit and intends to vigorously defend itself with respect to those lawsuits. The Company is subject to various legal proceedings and claims arising in the ordinary course of business, including, but not limited to, examinations by the IRS.The IRS regularly examines the Companys federal income tax returns and, in the course thereof, proposes adjustments to the Companys federal i

ACCRUED LIABILITIES

ACCRUED LIABILITIES
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
ACCRUED LIABILITIES	5. ACCRUED LIABILITIES (In millions) 2009 2008 Retirement plans (Note 15) $ 32 $ 86 Aircraft rentals 112 118 Vacation pay 190 175 Advances and deposits (Note 10) 32 23 Fuel derivative contracts 32 246 Workers compensation 130 122 Other 168 242 Accrued liabilities $ 696 $ 1,012

REVOLVING CREDIT FACILITY AND S

REVOLVING CREDIT FACILITY AND SHORT TERM-BORROWING
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
REVOLVING CREDIT FACILITY AND SHORT TERM-BORROWING	6. REVOLVING CREDIT FACILITY AND SHORT-TERM BORROWING During May 2009, the Company fully repaid the $400 million it had previously borrowed in 2008 under its former $600 million revolving credit facility.On September 29, 2009, the Company entered into a new $600 million unsecured revolving credit facility expiring in October 2012 and terminated the previous facility which would have expired in August 2010.At the Companys option, interest on the new facility can be calculated on one of several different bases.The new facility also contains a financial covenant requiring a minimum coverage ratio of adjusted pre-tax income to fixed obligations, as defined in the agreement.As of December 31, 2009, the Company was in compliance with this covenant and there were no amounts outstanding under the revolving credit facility. During 2008, as part of the Companys agreement with a counterparty in which it has invested in auction rate security instruments, the Company received a loan that is secured by the auction rate security instruments from that counterparty.The balance of that loan was $75 million at December 31, 2009.See Note 11 for further information on the instruments and the agreement.The loan is callable by the counterparty at any time and was made to the Company at a cost that effectively offsets the interest earned on the auction rate security instruments.The loan is classified as a component of Current maturities of long-term debt in the accompanying Consolidated Balance Sheet.

LONG TERM DEBT

LONG TERM DEBT
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
Long-Term Debt	7. LONG-TERM DEBT (In millions) 2009 2008 Credit line borrowing (Note 6) $ 75 $ 91 Revolving Credit Facility (Note 6) - 400 10.5% Notes due 2011 397 400 Term Loan Agreement due 2020 554 585 French Credit Agreements due 2012 21 26 6.5% Notes due 2012 400 410 5.25% Notes due 2014 373 391 5.75% Notes due 2016 292 300 5.125% Notes due 2017 330 358 French Credit Agreements due 2018 81 87 Term Loan Agreement due 2019 - 6.64% 320 - Term Loan Agreement due 2019 - 6.84% 124 - Pass Through Certificates 450 464 7.375% Debentures due 2027 110 133 Capital leases (Note 8) 25 39 3,552 3,684 Less current maturities 190 163 Less debt discount and issuance costs 37 23 $ 3,325 $ 3,498 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.The Company has 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. 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.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 being repaid via quarterly installments of principal that began 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, also 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 6.64 percent.The Company used the proceeds from the term loan for general corporate purposes, including the repayment of the Companys revolving credit facility. On December 30, 2008, the Company sold $400 million of secured notes due 2011 in a private placement. The notes will mature on December 15, 2011, and bear interest at a fixed rate of 10.5 percent per annum. Interest on the notes is payable semi-annually, beginning June 15, 2009.The notes are secured by a first priority perfected security interest in a specified pool of 17 Boeing 737-700 aircraft granted under a single mortgage.The notes cannot be called by the Company prior to stated maturity.However, they are subject to redemption at par in certain circumstances involving a casualty loss of an aircraft securing the notes.The notes contain convention

LEASES

LEASES
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
LEASES	8. LEASES The Company had nine aircraft classified as capital leases at December 31, 2009.The amounts applicable to these aircraft included in property and equipment were: (In millions) 2009 2008 Flight equipment $ 168 $ 168 Less accumulated depreciation 154 144 $ 14 $ 24 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.The proceeds received from the sale of these aircraft approximated the net book value of the aircraft. On December 23, 2008, the Company entered into a two tranche sale and leaseback transaction with a third party aircraft lessor for the sale and leaseback of ten of the Company's Boeing 737-700 aircraft. Under the first tranche of the transaction, which closed on December 23, 2008, the Company sold five of its Boeing 737-700 aircraft for a total of approximately $173 million and immediately leased the aircraft back for twelve years.The Company closed the second tranche of the transaction, providing for the sale and 16-year leaseback of the remaining five Boeing 737-700 aircraft upon similar terms (including proceeds), in January 2009.These two sale and leaseback transactions resulted in deferred gains of $21 million, which are being 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. Total rental expense for operating leases, both aircraft and other, charged to operations in 2009, 2008, and 2007 was $596 million, $527 million, and $469 million, respectively.The majority of the Company's terminal operations space, as well as 88 aircraft, were under operating leases at December 31, 2009.Future minimum lease payments under capital leases and noncancelable operating leases with initial or remaining terms in excess of one year at December 31, 2009, were: (In millions) Capital leases Operating leases 2010 $ 15

PROJECT EARLY DEPARTURE

PROJECT EARLY DEPARTURE
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
EARLY RETIREMENT OFFERS	9.EARLY RETIREMENT OFFERS On April 16, 2009, the Company announced Freedom 09, a one-time voluntary early retirement 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 was to right-size headcount in conjunction with the Companys decision to reduce its capacity by approximately five percent in 2009, and to 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 for the number of Employees expected to accept the package. A total of 1,404 Employees elected to participate 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.In accordance with accounting guidance for voluntary termination benefits, the Company accrued total costs of approximately $66 million during third quarter 2009 upon acceptance of the retirement offer by Employeesall of which are reflected in salaries, wages, and benefits.Of this amount, approximately $42 million was paid out to Employees who left the Company prior to December 31, 2009, and the remaining $24 million will be paid out in 2010.The Company may need to replace some of the positions with newly hired Employees to meet operational demands; however, the Company expects that many of the positions will not be filled based on the Companys recent capacity reductions. Project Early Departure was a voluntary early retirement program offered in July 2007 to eligible Employees, in which the Company offered a cash bonus of $25,000 plus medical/dental continuation coverage and travel privileges based on eligibility.A total of 608 out of approximately 8,500 eligible Employees elected to participate in the program. The participants last day of work fell between September 30, 2007 and April 30, 2008, based on the operational needs of particular work locations and departments.Project Early Departure resulted in a pre-tax, pre-profitsharing, charge of approximately $25 million during third quarter 2007, all of which had been paid out to participants as of December 31, 2009.

DERIVATIVE AND FINANCIAL INSTRU

DERIVATIVE AND FINANCIAL INSTRUMENTS
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
DERIVATIVE AND FINANCIAL INSTRUMENTS	10.DERIVATIVE AND FINANCIAL INSTRUMENTS 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 consumed during 2009, 2008, and 2007 represented approximately 30 percent, 35 percent, and 30 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 through its fuel hedging program.Because jet fuel is not widely 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), call spreads (which include a purchased call option and a sold call option), and fixed price swap agreements in its portfolio.Generally, when the Company perceives that prices are lower than historical or expected future levels, the Company prefers to use fixed price swap agreements and purchased call options.However, at times when the Company perceives that purchased call options have become too expensive, it may use more collar structures.Although the use of collar structures and swap agreements 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 or swap agreement settles.With the use of purchased call options, the Company cannot be in a liability position at settlement. The Company evaluates its hedge volumes strictly from an economic standpoint and thus does not consider whether the hedges qualified or will qualify for special hedge accounting.The Company defines its economic hedge as the net volume of fuel derivative contracts held, including the impact of positions that have been offset through sold positions, regardless of whether those contracts qualify for hedge accounting.For 2009, the Company had fuel derivatives in place related to approximately 27 percent of its fuel consumption.As of December 31, 2009, the Company had fuel derivative instruments in place to provide coverage on a large portion of its 2010 estimated fuel consumption at varying price levels.The Company had derivative contracts in place for approximately 50 percent of its estimated 2010 fuel consumption at prices beginning in the mid-$70 per barrel range up to approximately $100 per barrel of crude oil.The Company also recently sold some crude oil call options, which decreased its protection to eff

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
FAIR VALUE MEASUREMENTS	11.FAIR VALUE MEASUREMENTS Accounting standards pertaining to fair value measurements establish 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 December 31, 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.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 10 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 the types of derivative contracts it holds.Due to the fact that certain of the inputs used to determine the fair value of option contracts are unobservable (principally implied volatility), the Company has categorized these option contracts as Level 3. The Companys interest rate derivative instruments also consist of OTC swap contracts.The inputs used to determine the fair values of these contracts are obtained in quoted public markets. The Company has consistently applied these valuation techniques in all periods presented. The Companys investments associated with its excess benefit plan consist of mutual funds that ar

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME (LOSS)
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
COMPREHENSIVE INCOME (LOSS)	12.COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes changes in the fair value of certain financial derivative instruments, which qualify for hedge accounting, unrealized gains and losses on certain investments, and adjustments to recognize the funded status of the Companys postretirement obligations.See Note 15 for further information on Employee retirement plans.The differences between Net income and Comprehensive income (loss) for these years are as follows: (In millions) 2009 2008 2007 Net income $ 99 $ 178 $ 645 Unrealized gain (loss) on derivative instruments, net of deferred taxes of $226, ($1,358) and $408 366 (2,166 ) 636 Other, net of deferred taxes of $25, ($38) and $14 40 (59 ) 23 Total other comprehensive income (loss) 406 (2,225 ) 659 Comprehensive income (loss) $ 505 $ (2,047 ) $ 1,304 A rollforward of the amounts included in "Accumulated other comprehensive income (loss)", net of taxes for 2009, 2008, and 2007, is shown below: Fuel Interest Accumulated other hedge rate comprehensive (In millions) derivatives derivatives Other income (loss) Balance at December 31, 2007 $ 1,220 $ - $ 21 $ 1,241 2008 changes in fair value (1,528 ) (46 ) (13 ) (1,587 ) Reclassification to earnings (638 ) - - (638 ) Balance at December 31, 2008 $ (946 ) $ (46 ) $ 8 $ (984 ) 2009 changes in fair value (12 ) 27 13 28 Reclassification to earnings 378 - - 378 Balance at December 31, 2009 $ (580 ) $ (19 ) $ 21 $ (578 )

COMMON STOCK

COMMON STOCK
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
COMMON STOCK	13. COMMON STOCK The Company has one class of capital stock, its common stock.Holders of shares of common stock are entitled to receive dividends when and if declared by the Board of Directors and are entitled to one vote per share on all matters submitted to a vote of the shareholders.At December 31, 2009, the Company had 46 million shares of common stock reserved for issuance pursuant to Employee stock benefit plans (of which 20 million shares had not been granted) through various share-based compensation arrangements.See Note 14. In 2007, the Companys Board of Directors authorized two separate programs for the repurchase of up to a total of $800 million of the Companys common stock$300 million authorized in March 2007, and $500 million authorized in May 2007.Repurchases were made in accordance with applicable securities laws in the open market or in private transactions from time to time, depending on market conditions.These programs, which were completed during third quarter 2007, resulted in the repurchase of a total of approximately 53 million shares. During January 2008, the Companys Board of Directors authorized an additional program for the repurchase of up to $500 million of the Companys Common Stock.Repurchases have been or will be made in accordance with applicable securities laws in the open market or in private transactions from time to time, depending on market conditions. The Company had repurchased 4.4 million shares for a total of $54 million as part of this program through February 15, 2008; however, the Company has not repurchased any additional shares from that date through the date of this filing.The Company does not believeitis prudent torepurchase sharesat the current time considering today's unstable financial markets and volatile fuel prices.

STOCK PLANS

STOCK PLANS
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
STOCK PLANS	14. STOCK PLANS Share-based Compensation The Company has previously awarded share-based compensation pursuant to plans covering the majority of its Employee groups, including plans adopted via collective bargaining, a plan covering the Company's Board of Directors, and plans related to employment contracts with the Chairman Emeritus of the Company. The Company accounts for share-based compensation utilizing the fair value recognition provisions of Share-Based Payment. The Consolidated Statement of Income for the years ended December 31, 2009, 2008, and 2007 reflects share-based compensation cost of $13 million, $18 million, and $37 million, respectively.The total tax benefit recognized in earnings from share-based compensation arrangements for the years ended December 31, 2009, 2008, and 2007, was $1 million, $4 million, and $11 million, respectively. Stock Plans The Company has previously awarded stock options under plans covering Employees subject to collective bargaining agreements (collective bargaining plans) and plans covering Employees not subject to collective bargaining agreements (other Employee plans).None of the collective bargaining plans were required to be approved by shareholders.Options granted to Employees under collective bargaining plans are non-qualified, granted at or above the fair market value of the Companys common stock on the date of grant, and generally have terms ranging from six to twelve years.Neither Executive Officers nor members of the Companys Board of Directors are eligible to participate in any of these collective bargaining plans.Options granted to Employees through other Employee plans are both qualified as incentive stock options under the Internal Revenue Code of 1986 and non-qualified stock options, granted at no less than the fair market value of the Companys common stock on the date of grant, and have ten-year terms.All of the options included under the heading of Other Employee plans have been approved by shareholders, except one plan covering non-management, non-contract Employees, which had options outstanding to purchase 4.5 million shares of the Companys common stock as of December 31, 2009.The Company also has a shareholder-approved plan related to a past employment agreement with its Chairman Emeritus in which 501,000 stock options were outstanding as of December 31, 2009, all of which were fully vested.Although the Company does not have a formal policy, upon option exercise, the Company will typically issue treasury stock, to the extent such shares are available. Vesting terms for the collective bargaining plans differ based on the grant made, and have ranged in length from immediate vesting to vesting periods in accordance with the period covered by the respective collective bargaining agreement.For Other Employee plans, options vest and generally become fully exercisable over three, five, or ten years of continued employment, depending upon the grant type.For grants in any of the Companys plans that are subject to graded vesting over a service period, the Company recognizes expense on a straight-line basis over the requisite service period for the entire award.None of

EMPLOYEE RETIREMENT PLANS

EMPLOYEE RETIREMENT PLANS
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
EMPLOYEE RETIREMENT PLANS	15. EMPLOYEE RETIREMENT PLANS Defined contribution plans The Company has defined contribution plans covering substantially all its Employees.The Southwest Airlines Co. Profit Sharing Plan (Profit Sharing Plan) is a defined contribution plan to which the Company contributes 15 percent of its eligible pre-tax profits, as defined, on an annual basis.No Employee contributions to the Profit Sharing Plan are allowed. The Company also sponsors Employee savings plans under section 401(k) of the Internal Revenue Code, which include Company matching contributions.The 401(k) plans cover substantially all Employees.Contributions under all defined contribution plans are primarily based on Employee compensation and performance of the Company. Company contributions to all defined contribution plans expensed in 2009, 2008, and 2007 were $203 million, $243 million, and $279 million, respectively. Postretirement benefit plans The Company provides postretirement benefits to qualified retirees in the form of medical and dental coverage.Employees must meet minimum levels of service and age requirements as set forth by the Company, or as specified in collective bargaining agreements with specific workgroups.Employees meeting these requirements, as defined, may use accrued unused sick time to pay for medical and dental premiums from the age of retirement until age 65. The following table shows the change in the Companys accumulated postretirement benefit obligation (APBO) for the years ended December 31, 2009 and 2008: (In millions) 2009 2008 APBO at beginning of period $ 101 $ 88 Service cost 10 14 Interest cost 4 5 Benefits paid (2 ) (3 ) Actuarial gain (27 ) (3 ) APBO at end of period $ 86 $ 101 The assumed healthcare cost trend rates have a significant effect on the amounts reported for the Companys plan.A one-percent change in all healthcare cost trend rates used in measuring the APBO at December 31, 2009, would have the following effects: (In millions) 1% increase 1% decrease Increase (decrease) in total service and interest costs $ 1 $ (1 ) Increase (decrease) in the APBO $ 5 $ (5 ) The Companys plans are unfunded, and benefits are paid as they become due.For 2009 and 2008, both benefits paid and Company contributions to the plans were each $3 million.Estimated future benefit payments expected to be paid for each of the next five years are $8 million each in 2010, 2011, and 2012, $9 million in 2013, $10 million in 2014, and $83 million for the next five years thereafter. The Company follows the accounting recognition and disclosure provisions of Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, which requires the Company to recognize the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of its benefit plans in the Consolidated Balance Sheet, with a corresponding adjustment to Accumulated other comprehensive income (loss), net of tax. The following table reconciles the funded status of the plan to

INCOME TAXES

INCOME TAXES
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
INCOME TAXES	16. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.The components of deferred tax assets and liabilities at December 31, 2009 and 2008, are as follows: (In millions) 2009 2008 DEFERRED TAX LIABILITIES: Accelerated depreciation $ 2,893 $ 2,760 Other 40 29 Total deferred tax liabilities 2,933 2,789 DEFERRED TAX ASSETS: Fuel derivative instruments 343 567 Deferred gains from sale and leaseback of aircraft 55 60 Capital and operating leases 38 47 Accrued employee benefits 220 211 Stock-based compensation 86 93 State taxes 70 69 Business partner income 77 81 Net operating losses and credit carrybacks 56 - Other 72 86 Total deferred tax assets 1,017 1,214 Net deferred tax liability $ 1,916 $ 1,575 The provision for income taxes is composed of the following: (In millions) 2009 2008 2007 CURRENT: Federal $ (24 ) $ 23 $ 108 State (1 ) 10 9 Total current (25 ) 33 117 DEFERRED: Federal 79 80 246 State 11 (13 ) 50 Total deferred 90 67 296 $ 65 $ 100 $ 413 The effective tax rate on income before income taxes differed from the federal income tax statutory rate for the following reasons: (In millions) 2009 2008 2007 Tax at statutory U.S. tax rates $ 58 $ 97 $ 370 Nondeductible items 5 10 6 State income taxes, net of federal benefit 6 (2 ) 38 Other, net (4 ) (5 ) (1 ) Total income tax provision $ 65 $ 100 $ 413 No reservesfor uncertain income tax positionshave been recordedbased on the Companys assessment of its tax positions. The Company has identified its federal tax return and its state tax returns in California and Texas as major tax jurisdictions, as defined.The only periods subject to examination for the Companys federal tax returns are the 2008 and 2009 tax years.The periods subject to examination for the Companys state tax returns in California and Texas are years 2005 through 2009.

NET INCOME PER SHARE

NET INCOME PER SHARE
	12 Months Ended Dec. 31, 2009
Notes to Financial Statements [Abstract]
NET INCOME PER SHARE	3. NET INCOME PER SHARE The following table sets forth the computation of net income per share, basic and diluted: (In millions, except per share amounts) 2009 2008 2007 Net income $ 99 $ 178 $ 645 Weighted-average shares outstanding, basic 741 735 757 Dilutive effect of Employee stock options - 4 11 Adjusted weighted-average shares outstanding, diluted 741 739 768 Net income per share, basic $ .13 $ .24 $ .85 Net income per share, diluted $ .13 $ .24 $ .84 The Company has excluded 79 million, 82 million, and 49 million shares from its calculations of net income per share, diluted, in 2009, 2008, and 2007, respectively, as they represent antidilutive stock options for the respective periods presented.

QUARTERLY FINANCIAL DATA

QUARTERLY FINANCIAL DATA
	12 Months Ended Dec. 31, 2009
Schedule to Financial Statements [Abstract]
QUARTERLY FINANCIAL DATA	QUARTERLY FINANCIAL DATA (unaudited) (In millions except per share amounts) THREE MONTHS ENDED March 31 June 30 Sept. 30 Dec. 31 2009 Operating revenues $ 2,357 $ 2,616 $ 2,666 $ 2,712 Operating income (50 ) 123 22 167 Income (loss) before income taxes (107 ) 107 (20 ) 185 Net income (loss) (91 ) 91 (16 ) 116 Net income (loss) per share, basic (.12 ) .12 (.02 ) .16 Net income (loss) per share, diluted (.12 ) .12 (.02 ) .16 March 31 June 30 Sept. 30 Dec. 31 2008 Operating revenues $ 2,530 $ 2,869 $ 2,891 $ 2,734 Operating income 88 205 86 70 Income before income taxes 37 529 (205 ) (83 ) Net income 34 321 (120 ) (56 ) Net income per share, basic .05 .44 (.16 ) (.08 ) Net income per share, diluted .05 .44 (.16 ) (.08 )

Document Information

Document Information
	12 Months Ended Dec. 31, 2009
Document Information [Text Block]
Document Type	10-K
Amendment Flag	false
Document Period End Date	2009-12-31

Entity Information

Entity Information (USD $)
	12 Months Ended Dec. 31, 2009	Jun. 30, 2009
Entity [Text Block]
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
Public Float		$4,984,514,098
Entity Common Stock, Shares Outstanding	0