Southwest Airlines

“Financial Risks •The airline industry is particularly sensitive to changes in economic conditions, and continued or future unfavorable economic conditions or economic uncertainty could negatively affect the Company’s results of operations and require the Company to adjust its business strategies. •The Company's business, strategic plans, and profitability can be significantly affected by the availability of jet fuel, fuel prices, and volatility of fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel. •The Company’s low-cost structure has historically been a competitive advantage, and many factors have and could continue to adversely affect the Company’s ability to control its costs. •Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results.”

Annual report 2025A · The company itself

“Passengers often purchase tickets well in advance of their travel, and the Company may not be able to increase fares, impose fuel surcharges, increase revenues, or decrease other operating costs sufficiently to offset rapid or prolonged fuel price increases. Further, the Company faces the risk that higher fares may drive a decrease in air travel demand generally or a disproportionate decrease in leisure travel due to price sensitivity.”

Annual report 2025A · The company itself

“Table of Contents Concern among consumers of the impacts of climate change may mean some customers choose to fly less frequently or fly on an airline they perceive as operating in a manner that is more sustainable to the climate, and customers may choose to use alternatives to travel, such as virtual meetings and workspaces.”

Annual report 2025A · The company itself

“Southwest’s unique route network has also enabled it to provide its markets with frequent, conveniently timed flights and competitive fares.”

Annual report 2025A · The company itself

“Additionally, most major U.S. airlines offer expanded cabin segmentation fare products, such as “basic economy,” “premium economy,” and “first class” products. To meet Customer preferences and better compete with the major U.S. airlines, the Company has moved to a more segmented approach, offering a basic economy product 32 Table of Contents and a premium economy fare product with extra legroom.”

Annual report 2025A · The company itself

“Advances in computer capabilities, AI-enhanced attacks, social engineering, phishing, cryptography, inadequate facility security, insider threats, or other technological developments may result in a compromise or breach of the Company’s critical operations systems, physical assets, or technology the Company uses to safeguard confidential, personal, or proprietary information. A compromise of the Company’s IT Systems or physical assets, or those of a vendor or service provider, could lead to safety incidents, damage to the Company’s assets, significant remediation costs and liability, regulatory actions, privacy or securities law violations and related fines, loss of contracts, significant and long-lasting reputational harm, or a failure to meet the Company’s contractual obligations.”

Annual report 2025A · The company itself

“The Company is expanding its use of AI and machine-learning. Any failure in the Company’s AI implementation strategy, compliance with regulations, or failure to otherwise manage the risks related to AI technologies effectively could materially adversely affect its operations, reputation, and/or financial position.”

Annual report 2025A · The company itself

“Although the Company believes it diligently evaluates, governs, tests, and deploys AI-related technologies, the Company could face numerous AI-related challenges, such as cybersecurity vulnerabilities, algorithmic biases or errors, evolving regulatory requirements across jurisdictions, and potential competitive disadvantage if the Company’s competitors deploy AI technologies more quickly or more successfully. The complex and evolving regulatory landscape surrounding AI technologies, including regarding violations of intellectual property rights and data privacy concerns, creates additional compliance challenges and potential liability.”

Annual report 2025A · The company itself

“The Company is expanding its use of AI and machine-learning to carry out elements of its business strategy. The implementation of AI technologies also presents significant operational, legal, and competitive risks to the Company.”

Annual report 2025A · The company itself

“Company Initiatives As part of the Company's ongoing modernization efforts, the Company is executing several transformational initiatives designed to elevate the Customer Experience on its flights, improve financial performance, and drive Shareholder value, including: •Assigned and Extra Legroom Seating: On January 27, 2026, Southwest began operating assigned and extra legroom seating to better align with airline passenger preferences.”

Annual report 2025A · The company itself

“Passengers can now choose between a standard seat, a preferred seat near the front of the cabin, or an extra legroom seat with additional pitch. •Redesigned Boarding Model: Southwest evolved its boarding process beginning January 27, 2026, by prioritizing Customers into boarding groups based on seat location, fare bundle, and loyalty program status, beginning with extra legroom seats in boarding groups 1 and 2.”

Annual report 2025A · The company itself

“•Global Airline Partnerships: In 2025, Southwest launched its first partnerships with international carriers to expand its network and connect Customers with more global destinations to generate additional demand for travel across the Southwest network. •Getaways by Southwest™: Southwest launched a new in-house vacation product, Getaways by Southwest (“Getaways”), in August 2025 to offer customizable vacation packages that come with Customer-friendly policies including a generous cancellation policy and flexibility with no change fees. •24-Hour Operations: In 2025, Southwest added 24-hour operation capabilities with the introduction of overnight (i.e., redeye) flights in key markets to maximize aircraft utilization.”

Annual report 2025A · The company itself

“Company Operations Route Structure Southwest primarily provides “point-to-point” service, rather than the “hub-and-spoke” service provided by most major U.S. airlines. A point-to-point system enables airlines to connect directly to destinations without providing connecting service.”

Annual report 2025A · The company itself

“As the domestic travel market has matured and structural changes have reduced the demand for short-haul travel, the Company has increased its proportion of longer-haul flights. Further, the Company introduced 24-hour operation capabilities in 2025 with the commencement of redeye flights.”

Annual report 2025A · The company itself

“Cost Structure General A key component of the Company's business strategy is its focus on cost discipline and charging competitive fares. The Company's low-cost strategy includes, among other elements, the Company's route structure, which includes 4 Table of Contents service to and from many secondary or downtown airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, Burbank, Manchester, Oakland, San Jose, and Providence.”

Annual report 2025A · The company itself

“In both 2024 and 2025, the Company announced plans for, and is in the process of implementing, certain transformational initiatives, such as changing to an assigned seating model, offering extra legroom seating, formalizing partnerships with international carriers to expand its network, offering Getaways by Southwest, introducing 24-hour operations, reducing the turn times between flights, and introducing bag fees for most fare products.”

Annual report 2025A · The company itself

“The Company has also moved to an assigned seating model and now charges bag fees for most fare products.”

Annual report 2025A · The company itself

“The Company’s revenues are sensitive to the actions of other carriers with respect to pricing, routes, loyalty programs, scheduling, capacity, customer service, operational reliability, comfort and amenities, product offerings, cost structure, aircraft fleet, strategic alliances, and code-sharing and similar activities.”

Annual report 2025A · The company itself

“In 2025, the Company increased asset utilization through its introduction of redeye flights and its initiatives to decrease the amount of time it takes to turn an aircraft (the time needed to unload Passengers from an arriving flight and load Passengers on the same aircraft for its subsequent flight).”

Annual report 2025A · The company itself

“The Company intends to expand redeye flights to additional markets in 2026. •Marketing & Distribution Evolution: In order to attract new Customers and reach them where they are performing travel searches today, Southwest expanded into new channels such as Expedia, Priceline, Google Flights, Kayak, and Skyscanner to broaden its Customer base and begin to engage them in its loyalty program.”

Annual report 2025A · The company itself

“The Company must securely handle high volumes of traffic and operational data, which makes it vulnerable to various security risks and interruptions. The Company has experienced material technology system interruptions and delays that have made its websites and operational systems unavailable or slow to respond, which has prevented the Company from efficiently processing Customer transactions or providing services.”

Annual report 2025A · The company itself

“The Company’s IT Systems or those of third-party service providers could be damaged or interrupted by catastrophic events beyond its control such as fires, floods, earthquakes, tornadoes and hurricanes, power loss, computer and telecommunications failures, acts of war or terrorism, computer viruses, malware, ransomware, security breaches, and similar events or disruptions generally beyond the Company’s control. Any of these events could cause system interruptions, delays, and loss of critical data, and could prevent the Company from processing Customer transactions or providing services, which could make the Company’s business and services less attractive and subject the Company to liability.”

Annual report 2025A · The company itself

“The Company is increasingly exposed to cybersecurity attacks and data incidents impacting its IT Systems, or those of the Company’s vendors or service providers. Such cybersecurity incidents or data incidents could have a disruptive and material adverse effect on the Company’s business, financial position, or results of operations.”

Annual report 2025A · The company itself

“These IT Systems are essential for daily operations but are exposed to risks like programming errors, software malfunctions, unauthorized access, accidental leaks of sensitive information, denial of service attacks, ransomware, data corruption, business disruptions, outages, security breaches, computer viruses, data loss, scams, theft, insider threats, and human errors. These IT Systems may be subject to increasingly significant attacks by hackers, cybercriminals, nation-states, insiders, or other third parties.”

Annual report 2025A · The company itself

“Advances in computer capabilities, AI-enhanced attacks, social engineering, phishing, cryptography, inadequate facility security, insider threats, or other technological developments may result in a compromise or breach of the Company’s critical operations systems, physical assets, or technology the Company uses to safeguard confidential, personal, or proprietary information. A compromise of the Company’s IT Systems or physical assets, or those of a vendor or service provider, could lead to safety incidents, damage to the Company’s assets, significant remediation costs and liability, regulatory actions, privacy or securities law violations and related fines, loss of contracts, significant and long-lasting reputational harm, or a failure to meet the Company’s contractual obligations.”

Annual report 2025A · The company itself

“For example, cybersecurity incidents impacting the Company’s IT Systems or those provided by a vendor or service provider could disrupt the Company’s operations and even impact the safe operation of physical assets like aircraft.”

Annual report 2025A · The company itself

“To operate its business, the Company must receive, process, transmit, and store information related to a number of groups—Customers, Employees, contractors, business partners, and other third parties—and the Company’s operations depend upon secure processing, transmission (including over public networks), storage, and retention of that information. As noted above, this subjects the Company to cyber-attacks, which can vary in scope and sophistication, potentially resulting in unauthorized access to its systems or physical assets, data incidents, operational disruptions, and misappropriation of sensitive data.”

Annual report 2025A · The company itself

“A successful breach of the Company’s IT Systems could erode Customer confidence in the Company’s digital platforms, security measures, data protection, resiliency, and services. Beyond operational disruptions, such incidents could result in reputational damage, loss of Customer trust, regulatory investigations and fines, or individual or class action lawsuits, all of which could have a material adverse effect on the Company’s financial condition and results of operations.”

Annual report 2025A · The company itself

“Additionally, telecommunications outages such as the 2025 Newark outages and September 2025 Dallas outages have caused air traffic controllers to lose radar and communications, resulting in ground stops, delays, and cancellations. The continuation of these air traffic control disruptions and constraints or the FAA’s inability to meet staffing needs on a long-term basis may have a material adverse effect on the Company’s operations.”

Annual report 2025A · The company itself

“The Company’s systems and cybersecurity measures require ongoing monitoring and updating as technologies change, and security could be compromised, personal or confidential information could be misappropriated, or system disruptions could occur. The Company may also incur significant costs to modify, upgrade, or enhance its cybersecurity measures to protect and defend against such attacks and breaches.”

Annual report 2025A · The company itself

“Additionally, Southwest's use of a single aircraft type, the Boeing 737, allows for simplified scheduling, maintenance, flight operations, safety management, and training activities.”

Annual report 2025A · The company itself

“Operational Risks The Company is currently dependent on Boeing as the sole manufacturer of the Company's aircraft. If the MAX aircraft were to become unavailable for the Company's operations, or if the Company were to continue to experience prolonged delivery delays of MAX aircraft, the Company's business plans, strategies, and results of operations could be materially and adversely affected.”

Annual report 2025A · The company itself

“The Company operates the -8 out of the MAX family of aircraft and is awaiting delivery of the -7 out of the MAX family of aircraft.”

Annual report 2025A · The company itself

“Boeing no longer manufactures versions of the 737 other than the MAX family of aircraft.”

Annual report 2025A · The company itself

“The Company may not be able to procure aircraft in the future in a timely manner or on favorable commercial terms, which could limit the Company’s growth or negatively affect the Company’s cost structure and competitive position. The Company’s ability to execute its growth, fleet modernization, and strategic and operational plans may be affected by the timely procurement of additional aircraft on commercially favorable terms.”

Annual report 2025A · The company itself

“Introducing a new aircraft manufacturer or fleet type could impose significant operational complexities, regulatory requirements, and costs on the Company. If the Company’s operations, growth, or strategic initiatives were to be dependent upon the introduction of a new aircraft make and model to the Company’s fleet, the Company would need to, among other things, (i) develop and implement new maintenance, operating, and training programs; (ii) procure new simulators, tooling, spares, and facilities; (iii) secure extensive regulatory approvals; (iv) implement new technologies; (v) negotiate new supplier, parts-support, and maintenance arrangements; and (vi) negotiate pay and work rules with certain labor unions. The requirements associated with operating a new aircraft make and model could take an extended period of time to fulfill and would likely impose substantial costs on the Company.”

Annual report 2025A · The company itself

“The Company is currently dependent on a single engine supplier, as well as single suppliers of certain other aircraft parts and equipment; therefore, the Company could be materially adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or equipment from Boeing or other suppliers or adequate maintenance or other support from any of these suppliers at commercially reasonable terms, (ii) if Boeing or other suppliers were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or (iii) in the event of a mechanical or regulatory issue associated with the Company’s aircraft parts or equipment. The Company is dependent on Boeing as its sole supplier for many of its aircraft parts.”

Annual report 2025A · The company itself

“The Company is also dependent on sole or limited suppliers for aircraft engines and certain other aircraft parts, equipment, and services. If Boeing, or other suppliers, were unable or unwilling to timely provide adequate products or support for their products at commercially reasonable terms, were unable to achieve and/or maintain required regulatory certifications or approvals of their parts or equipment, or in the event of a mechanical or regulatory issue associated with engines or other parts or services, the Company’s operations could be materially adversely affected.”

Annual report 2025A · The company itself

“The Company performs substantially all line maintenance on its aircraft and provides ground support services at most of the airports it serves. However, the Company has arrangements with certain aircraft maintenance providers for major component inspections and repairs for its airframes and engines, which comprise the majority of the Company's annual aircraft maintenance costs.”

Annual report 2025A · The company itself

“The FAA promulgates and enforces regulations affecting the airline industry and exercises extensive regulatory oversight of the Company’s operations. For example, in November 2025 during the partial government shutdown, the FAA issued an emergency order mandating an industry-wide reduction in flights at 40 major U.S. airports.”

Annual report 2025A · The company itself

“The FAA from time to time also issues orders or directives relating to the maintenance and operation of aircraft. FAA orders and directives can be issued with little or no notice, and in certain instances, require the temporary grounding of aircraft, such as the FAA’s March 2019 grounding of all Boeing 737 MAX aircraft, and/or the responsive investment of operational and financial resources.”

Annual report 2025A · The company itself

“The issuance of new FAA regulations, regulatory amendments, or orders or directives could result in flight schedule adjustments and groundings or delays in aircraft deliveries, as well as lower operating revenues, operating income, and net income due to a variety of factors, including, among others, (i) lost revenue due to flight cancellations and operational disruptions as a result of a smaller operating aircraft fleet, (ii) the lack of ability to make corresponding reductions in expenses because of the fixed nature of many expenses, and (iii) possible negative effects on Customer confidence and airline choice.”

Annual report 2025A · The company itself

“As discussed under “Business - Regulation,” airlines are also subject to other extensive regulatory requirements. These requirements often impose substantial costs on airlines.”

Annual report 2025A · The company itself

“Similarly, the federal government singularly controls all U.S. airspace, and airlines are dependent on the FAA controlling that airspace in a safe and efficient manner. The current air traffic control system is mainly radar-based, supported in large part by antiquated equipment and technologies, and heavily dependent on skilled personnel.”

Annual report 2025A · The company itself

“The FAA’s protracted transition to modernized air traffic control systems and newer technologies has and may continue to adversely impact airspace capacity and the overall efficiency of the system, resulting in limited opportunities for the Company to grow, longer scheduled flight times, increased delays and cancellations, and increased fuel consumption and aircraft emissions. For example, due to air traffic control staffing challenges, government agencies have had to implement short-term capacity constraints during peak travel periods or adverse weather conditions in certain markets, resulting in delays and disruptions of air traffic.”

Annual report 2025A · The company itself

“The FAA will ultimately determine the timing of the -7 certification and entry into service, and the Company therefore offers no assurances that current estimations and timelines are correct.”

Annual report 2025A · The company itself

“Legal, Regulatory, Compliance, and Reputational Risks •The Company is subject to extensive government regulation that may disrupt or necessitate modifications to the Company’s operations, business plans, and strategies, or increase the Company’s operating costs. •Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company’s growth. •The Company is subject to various environmental requirements and risks; the cost of compliance with more stringent environmental regulations, failure to comply with environmental regulations, or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on the Company’s results of operations. •The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.”

Annual report 2025A · The company itself

“The Company is subject to various environmental requirements and risks, including increased regulation, changing consumer preferences, physical, environmental, and climate risks, and risks associated with climate change; the cost of compliance with more stringent environmental regulations, failure to comply with environmental regulations, or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on the Company’s results of operations.”

Annual report 2025A · The company itself

“The Company is subject to changing federal, state, local, and international laws and regulations relating to the protection of the environment, including those relating to aircraft and ground-based emissions, discharges to water systems, safe drinking water, and the management of hazardous substances and waste materials. In addition, while the Company cannot predict what requirements may be imposed in the future or the timing with respect to the same, federal, state, local, and international legislative and regulatory bodies in recent years have generally increased focus on climate change and reducing GHG, including by requiring disclosure of emissions and climate-related risks, and may continue to do so.”

Annual report 2025A · The company itself

“Future policy, legal, regulatory, or other market developments could require the Company to reduce its emissions, increase its usage of SAF and other forms of lower carbon energy, modify its supply chain practices or aspects of its operations, make capital investments to purchase specific types of equipment or technologies, secure carbon offset credits, disclose or report additional GHG information, or otherwise incur additional costs related to regulatory compliance and climate objectives.”

Annual report 2025A · The company itself

“The Company’s collateral to secure loans, including in the form of aircraft, could lose value as customer demand shifts and economies move to lower-carbon alternatives, which may increase the Company’s financing costs. In addition, major financial institutions have announced GHG emissions reductions targets for their financed activities in the aviation sector, and while these commitments may be in flux, financing restrictions related to emissions reductions targets could impact the Company’s ability to access capital on advantageous terms now or in the future.”

Annual report 2025A · The company itself

“The Company may have binding SAF purchase commitments that extend beyond various incentives currently in place, and the presidential administration may take action to revise, repeal, or otherwise modify existing SAF incentives, which could impact the Company’s operations.”

Annual report 2025A · The company itself

“Extreme weather conditions, including increases in the frequency, severity, or duration of severe weather events (whether or not caused by anthropogenic climate change), can disrupt air travel from time to time, ground planes, damage equipment and increase maintenance costs, cause delays and cancellations or other network disruptions, require implementation of weight limitations due to increased temperatures, increase turbulence-related injuries, cause disruptions in staffing, cause increases in fuel consumption to avoid such weather, disrupt the Company’s supply chains (including fuel, parts, and service provider disruptions), and otherwise adversely affect the Company’s assets, operations, and infrastructure.”

Annual report 2025A · The company itself

“The Company made certain assumptions in developing its strategic plans and initiatives related to, for example, customer demand (in light of changing economic conditions), fuel costs, delivery of aircraft, aircraft certification approval timelines, labor market constraints and related costs, supply chain constraints, inflationary pressures, voluntary or mandatory groundings of aircraft, its network, competition, market consolidation, and other macroeconomic and geopolitical factors.”

Annual report 2025A · The company itself

“The Company's business can be significantly affected by the availability of jet fuel, fuel prices, and volatility of fuel prices and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be affected by fuel availability, price increases, and fuel price volatility. Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented approximately 19 percent of the Company's operating expenses for 2025.”

Annual report 2025A · The company itself

“Proposal or adoption of such obligations could increase the demand for and the costs of the limited supply of SAF currently available and could result in increased costs of fossil jet fuel.”

Annual report 2025A · The company itself

“For example, the Company plans to diversify its sources of jet fuel through increasing the volumes of SAF in its operations. The cost of SAF may be prohibitively expensive without appropriate government support, policies, and incentives (including tax credits).”

Annual report 2025A · The company itself

“Failures or delays in sufficient SAF production and delivery, or ceased operations or bankruptcies of the Company’s counterparties, could inhibit the Company’s ability to meet its stated goals.”

Annual report 2025A · The company itself

“The Company’s unionized workforce makes up approximately 84 percent of its Employees and many have had pay scale increases as a result of contractual rate increases, which has increased the Company’s labor costs.”

Annual report 2025A · The company itself

“The airline business is labor intensive, and for the year ended December 31, 2025, Salaries, wages, and benefits expense represented approximately 47 percent of the Company's operating expenses.”

Annual report 2025A · The company itself

“Employment-related matters (some of which relate to negotiated items) that have impacted the Company’s results of operations include hiring/retention rates, attendance, pay rates, outsourcing, work rules, health care costs, and retirement benefits.”

Annual report 2025A · The company itself

“The Company’s business is labor intensive; therefore, the Company has been, and could in the future be, adversely affected if it were unable to employ and retain appropriate numbers of qualified Employees to maintain its operations. The Company’s success depends on its ability to attract and retain appropriate levels of skilled personnel.”

Annual report 2025A · The company itself

“The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have adversely affected and could continue to adversely affect the Company's ability to control its costs. The Company’s low-cost structure has been one of its primary competitive advantages, as it has generally enabled the Company to offer low fares, drive traffic volume, grow market share, and protect profits.”

Annual report 2025A · The company itself

“The Company’s ability to control labor costs is limited by the terms of its collective-bargaining agreements. These agreements include required work rules and wage‑rate provisions, as well as other negotiated terms, that may restrict the Company’s operational flexibility and result in increased staffing or scheduling inefficiencies, thereby pressuring its cost structure relative to certain competitors.”

Annual report 2025A · The company itself

“Table of Contents The Company’s operations have been, and in the future may again be, materially and adversely disrupted by extreme weather events. An inability to quickly and effectively restore operations following adverse weather, a localized disaster, or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company’s business, results of operations, and financial condition.”

Annual report 2025A · The company itself

“While the Company operates across a diverse geographic footprint, its operations at times have been adversely and materially impacted by severe weather, such as Winter Storm Fern in January 2026, Hurricane Milton in October 2024, and Winter Storm Elliott in December 2022. Depending on location, the Company’s assets and route network have been or could be exposed to ongoing risks arising from a variety of adverse weather conditions or localized natural or manmade disasters such as earthquakes, volcanoes, wildfires (such as the 2023 Maui wildfires and the 2025 Los Angeles wildfires), hurricanes, tropical storms, tornadoes, floods, sea-level rise, severe winter weather, sustained or extreme cold or heat, drought, or other disturbances, actual or threatened.”

Annual report 2025A · The company itself

“•The Company’s operations have been, and in the future may again be, materially and adversely disrupted by extreme weather events. The airline industry is made up of inherently complex systems and is affected by many conditions that are beyond its control.”

Annual report 2025A · The company itself

“In addition, the occurrence of extreme weather events (regardless of cause), such as flooding, acute or prolonged winter storms, tropical storms, and hurricanes, can also disrupt the jet fuel supply chain and affect fuel prices.”

Annual report 2025A · The company itself

“Longer-term changes in weather patterns could adversely impact any of the Company’s destination cities and, as a result, alter Customers’ travel behavior.”

Annual report 2025A · The company itself

“For example, fuel prices can be impacted by geopolitical, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and potential or actual hostilities or other conflicts in oil producing areas or along global trade routes; (ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; (v) imposition of economic sanctions on oil-producing countries or specific industry participants; and (vi) changes in currency exchange rates.”

Annual report 2025A · The company itself

“Terrorist attacks, war, or other hostilities, actual and threatened, have from time to time materially adversely affected the demand for air travel and have necessitated increased safety and security measures and related costs for the Company and the airline industry generally. Safety and security measures can create delays and inconveniences, which in turn can reduce the Company’s competitiveness against surface transportation for short-haul routes and alternatives to transportation such as videoconferencing, business communication platforms, and the Internet.”

Annual report 2025A · The company itself

“Government foreign-relations actions, including tariffs and immigration policies, may also reduce the willingness of non-U.S. persons to travel to or within the United States, including by air.”

Annual report 2025A · The company itself

“Financial Risks •The airline industry is particularly sensitive to changes in economic conditions, and continued or future unfavorable economic conditions or economic uncertainty could negatively affect the Company’s results of operations and require the Company to adjust its business strategies. •The Company's business, strategic plans, and profitability can be significantly affected by the availability of jet fuel, fuel prices, and volatility of fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel. •The Company’s low-cost structure has historically been a competitive advantage, and many factors have and could continue to adversely affect the Company’s ability to control its costs. •Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results.”

Annual report 2025A · The company itself

“As discussed below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company has experienced significant inflationary cost pressure, particularly with respect to Salaries, wages, and benefits 30 Table of Contents expense. The Company’s low-cost structure can also be negatively impacted by costs over which the Company has limited control. These include costs such as fuel, labor (especially union labor), airport, and regulatory compliance costs.”

Annual report 2025A · The company itself

“During unfavorable economic conditions, low fares are often used to stimulate traffic. However, offering low fares typically hampers the ability of airlines to counteract any increases in fuel, labor, and other costs.”

Annual report 2025A · The company itself

“The Company depends heavily on the use of computer systems, hardware, software, technology infrastructure, operational technology, networks, and online sites (collectively, “IT Systems”) to run its ongoing operations and support its strategic objectives. These IT Systems include, among others, the Company’s website and reservation system; mobile application; flight dispatch and tracking systems; flight simulators; check-in kiosks; aircraft maintenance, planning, and record keeping systems; telecommunications systems; flight planning and scheduling systems; crew scheduling systems; human resources systems; and financial planning, management, and accounting systems.”

Annual report 2025A · The company itself

“In the ordinary course of business, the Company’s IT Systems require continuous updates and modifications to support business operations, growth, and changing business strategy or regulatory requirements. These enhancements and upgrades represent significant investments and challenges in terms of costs, human resources, and development of internal controls. Implementation and integration require balancing the introduction of new capabilities with the management of existing systems and present the risk of operational or security inadequacy or interruption.”

Annual report 2025A · The company itself

“The Company is also reliant upon the performance of third parties for timely and effective implementation and support of many of its technology initiatives, to provide required data and information services, and for maintaining adequate information security measures within the services and/or software they deliver, and such third parties are occasionally not timely or adequate in providing the services required by the Company. If any of the Company’s IT Systems or third-party systems were to cease functioning, or if its third-party service providers or data providers were to fail to adequately and timely provide required information or reports, technical support, system maintenance, security, or software upgrades for any of the Company’s existing IT Systems, the Company could experience service interruptions, delays, and loss of critical data, which could harm its operations and result in financial losses and reputational damage.”

Annual report 2025A · The company itself

“Financial Risks •The airline industry is particularly sensitive to changes in economic conditions, and continued or future unfavorable economic conditions or economic uncertainty could negatively affect the Company’s results of operations and require the Company to adjust its business strategies. •The Company's business, strategic plans, and profitability can be significantly affected by the availability of jet fuel, fuel prices, and volatility of fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel. •The Company’s low-cost structure has historically been a competitive advantage, and many factors have and could continue to adversely affect the Company’s ability to control its costs. •Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results.”

Annual report 2025A · The company itself

“The airline industry, which is subject to relatively high fixed costs and highly variable and unpredictable demand, is particularly sensitive to changes in economic conditions, including changes in consumer discretionary spending as a result of inflation, rising interest rates, or other factors. Historically, unfavorable U.S. economic conditions have driven changes in travel patterns and have resulted in reduced spending for both leisure and business travel.”

Annual report 2025A · The company itself

“The performance, reliability, and security of the Company’s IT Systems are critical to the Company’s operations and initiatives. Any failure, disruption, or delay in implementation of the Company’s IT Systems could limit or even curtail its growth, delay strategic initiatives, increase its compliance costs, harm its reputation, or reduce its competitive advantage.”

Annual report 2025A · The company itself

“Information Technology, Cybersecurity, and Data Privacy Risks •The Company is heavily dependent on technology to operate its business; any failure, disruption, breach, or delay in the Company’s information systems or in implementation of necessary changes could materially adversely affect its operations. •The Company is increasingly exposed to cybersecurity attacks and data incidents impacting its IT Systems, and such incidents could have a disruptive and material adverse effect on the Company’s business, financial position, or results of operations. •The Company is expanding its use of AI and machine-learning, and any failure in its related strategy, compliance with regulations, or risk management could materially adversely affect its operations, reputation, and/or financial position.”

Annual report 2025A · The company itself

“As of December 31, 2025, approximately 84 percent of the Company’s Employees were represented for collective-bargaining purposes by labor unions, making the Company particularly exposed in the event of labor-related job actions.”

Annual report 2025A · The company itself

“The cost of fuel can be extremely volatile and unpredictable and is subject to many external factors and market expectations that are beyond the Company’s control. For example, fuel prices can be impacted by geopolitical, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and potential or actual hostilities or other conflicts in oil producing areas or along global trade routes; (ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; (v) imposition of economic sanctions on oil-producing countries or specific industry participants; and (vi) changes in currency exchange rates.”

Annual report 2025A · The company itself

“Information Technology, Cybersecurity, and Data Privacy Risks •The Company is heavily dependent on technology to operate its business; any failure, disruption, breach, or delay in the Company’s information systems or in implementation of necessary changes could materially adversely affect its operations. •The Company is increasingly exposed to cybersecurity attacks and data incidents impacting its IT Systems, and such incidents could have a disruptive and material adverse effect on the Company’s business, financial position, or results of operations. •The Company is expanding its use of AI and machine-learning, and any failure in its related strategy, compliance with regulations, or risk management could materially adversely affect its operations, reputation, and/or financial position.”

Annual report 2025A · The company itself

“Although the Company believes it diligently evaluates, governs, tests, and deploys AI-related technologies, the Company could face numerous AI-related challenges, such as cybersecurity vulnerabilities, algorithmic biases or errors, evolving regulatory requirements across jurisdictions, and potential competitive disadvantage if the Company’s competitors deploy AI technologies more quickly or more successfully. The complex and evolving regulatory landscape surrounding AI technologies, including regarding violations of intellectual property rights and data privacy concerns, creates additional compliance challenges and potential liability.”

Annual report 2025A · The company itself

“The Company has commitments associated with various airport improvement projects, including construction at Houston Hobby International Airport. This project includes the construction of new facilities and the rebuilding or modernization of existing facilities.”

Annual report 2025A · The company itself

“In April 2023, the Company executed a ground lease agreement with Los Angeles World Airports (“LAWA”) at Los Angeles International Airport (LAX) which provides the Company the right to construct a 9-gate concourse (Concourse 0) adjacent to Terminal 1. The Company expects to manage the design, development, financing, construction, and commissioning of the project, and expects to commence construction in 2028 with construction to be completed in 2032.”

Annual report 2025A · The company itself

“Table of Contents Concern among consumers of the impacts of climate change may mean some customers choose to fly less frequently or fly on an airline they perceive as operating in a manner that is more sustainable to the climate, and customers may choose to use alternatives to travel, such as virtual meetings and workspaces.”

Annual report 2025A · The company itself

“Greater development of high-speed rail in markets now served by short-haul flights could provide passengers with lower-carbon alternatives to flying.”

Annual report 2025A · The company itself

“As discussed under “Business - Regulation,” the airline industry is heavily regulated, and the Company’s regulatory compliance costs are subject to potentially significant increases from time to time based on actions by regulatory agencies that are out of the Company’s control.”

Annual report 2025A · The company itself

“Legal, Regulatory, Compliance, and Reputational Risks •The Company is subject to extensive government regulation that may disrupt or necessitate modifications to the Company’s operations, business plans, and strategies, or increase the Company’s operating costs. •Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company’s growth. •The Company is subject to various environmental requirements and risks; the cost of compliance with more stringent environmental regulations, failure to comply with environmental regulations, or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on the Company’s results of operations. •The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand.”

Annual report 2025A · The company itself

“A disruption in refinery production or related service and transportation operations affecting supply could present significant challenges to the Company’s operations and could ultimately cause the cancellation of flights and/or hinder the Company’s ability to provide service to a particular airport.”

Annual report 2025A · The company itself

“Adverse macroeconomic conditions have resulted, and could continue to result, in delays and other performance issues, ceased operations, or even bankruptcies among suppliers, third-party vendors, and service providers.”

Annual report 2025A · The company itself

“Many of the Company’s competitors participate in joint ventures and international alliances, providing for increased financial resources and improved profit margins. Many major U.S. airlines also offer longer-haul, international routes through extensive global networks.”

Annual report 2025A · The company itself

“•The Company’s future results may suffer if it is unable to effectively manage its current and contemplated international operations or Extended Operations. •The Company’s plans to develop commercial relationships with airlines in other parts of the world may not produce the results or returns it expects.”

Annual report 2025A · The company itself

“Additionally, because of airport infrastructure updates and other factors, the Company has experienced increased space rental rates at various airports in its network.”

Annual report 2025A · The company itself

“The Company leases the land and/or structures on a long-term basis for its aircraft maintenance centers (located at Dallas Love Field, Houston Hobby, Phoenix Sky Harbor, Chicago Midway, Hartsfield-Jackson Atlanta International Airport, Denver International Airport, and Orlando International Airport) and its main corporate headquarters building, also located near Dallas Love Field.”

Annual report 2025A · The company itself

“In addition, international flying exposes the Company to certain foreign currency risks to the extent the Company chooses to, or is required to, transact in currencies other than the U.S. dollar.”

Annual report 2025A · The company itself

“For example, fuel prices can be impacted by geopolitical, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and potential or actual hostilities or other conflicts in oil producing areas or along global trade routes; (ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; (v) imposition of economic sanctions on oil-producing countries or specific industry participants; and (vi) changes in currency exchange rates.”

Annual report 2025A · The company itself

“Certain regulators, such as the SEC and various state agencies, as well as nongovernmental organizations and other private actors have filed lawsuits under various securities and consumer protection laws alleging that certain sustainability statements, goals, or standards were misleading, false, or otherwise deceptive. Alternatively, the Company could face criticism from 42 Table of Contents certain “anti-ESG” parties for making environmental or social commitments or pursuing certain environmental or social initiatives that are alleged to be political or polarizing in nature, which could adversely affect the Company’s reputation, business, financial performance, market access, and growth.”

Annual report 2025A · The company itself

“Further, some businesses allow their employees to work remotely and/or restrict non-essential travel for their employees, which has impacted the demand for business air travel. In addition, to the extent business travel demand increases, businesses may require the purchase of less expensive tickets to reduce costs.”

Annual report 2025A · The company itself

“Financial Risks •The airline industry is particularly sensitive to changes in economic conditions, and continued or future unfavorable economic conditions or economic uncertainty could negatively affect the Company’s results of operations and require the Company to adjust its business strategies. •The Company's business, strategic plans, and profitability can be significantly affected by the availability of jet fuel, fuel prices, and volatility of fuel prices, and the Company's operations are subject to disruption in the event of any delayed supply of fuel. •The Company’s low-cost structure has historically been a competitive advantage, and many factors have and could continue to adversely affect the Company’s ability to control its costs. •Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results.”

Annual report 2025A · The company itself

“In second quarter and fourth quarter 2025, the Company entered into supplemental agreements with Boeing relating to its contractual order book for -7 and -8 aircraft. These agreements provide flexibility in support of the Company's growth plans and fleet modernization and include certain confidential credits and other concessions provided to the Company by Boeing.”

Annual report 2025A · The company itself

“The Company is reliant upon third-party vendors and service providers, and the Company’s competitive position is dependent in part on its ability to obtain and maintain commercially reasonable terms with those parties. Disruptions to capital markets, shortages of skilled personnel, supply chain disruptions, increased regulation, geopolitical developments, tariffs, and/or adverse economic conditions could subject certain of the Company’s third-party vendors and service providers to significant financial pressures, which could lead to delays and other performance issues, ceased operations, or even bankruptcies among these third-party vendors and service providers.”

Annual report 2025A · The company itself

“For example, fuel prices can be impacted by geopolitical, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and potential or actual hostilities or other conflicts in oil producing areas or along global trade routes; (ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; (v) imposition of economic sanctions on oil-producing countries or specific industry participants; and (vi) changes in currency exchange rates.”

Annual report 2025A · The company itself

“The Company’s international flights are subject to CBP-mandated procedures, which can affect the Company’s operations, costs, and Customer Experience. The Company has made significant investments in facilities, equipment, and technologies at certain airports in order to improve the Customer Experience and to assist CBP with its inspection and processing duties; however, the Company is not able to predict the impact, if any, that various CBP measures or the lack of CBP resources will have on Company revenues and costs, either in the short-term or the long-term.”

Annual report 2025A · The company itself

“During 2025, the Company focused on expanding its network, announcing service at five new locations beginning in 2026, including Cyril E. King International Airport in St. Thomas; McGhee Tyson Airport in Knoxville, Tennessee; Ted Stevens Anchorage International Airport in Alaska; Charles M. Schulz Sonoma County Airport in Santa Rosa, California; and Princess Juliana International Airport in St. Maarten. Additionally, the Company launched partnerships with six international airlines to provide Customers access to more global destinations.”

Annual report 2025A · The company itself

“In recent years, the Company has increasingly focused on designing its network around core stations in an effort to provide greater connectivity and support operational reliability and recoverability.”

Annual report 2025A · The company itself

“Additionally, to the extent that the Company may seek to achieve its climate goals and obligations through the use of carbon offsets, it may be exposed to increased costs, disclosure requirements, and risks related to third parties associated with the procurement of such offsets.”

Annual report 2025A · The company itself

“Many major U.S. airlines also offer longer-haul, international routes through extensive global networks. In order to compete with these activities and expand its transatlantic and transpacific service offerings, the Company began to enter into international partnerships in 2025.”

Annual report 2025A · The company itself

“For example, fuel prices can be impacted by geopolitical, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and potential or actual hostilities or other conflicts in oil producing areas or along global trade routes; (ii) limitations and/or disruptions in domestic refining or pipeline operations or capacity due to weather, natural disasters, or other factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation, taxes, and marketing; (v) imposition of economic sanctions on oil-producing countries or specific industry participants; and (vi) changes in currency exchange rates.”

Annual report 2025A · The company itself