Southwest Airlines Co.

Network USA 2009 Conference

 2008 Highlights

• 36th consecutive year of profitability

• Net Income, excluding special items, of $294 million, or
$0.40 per diluted share
• Operating unit revenue increased 7.8% over 2007

Passenger RPM yield increased 9.7%

Load factor declined 1.4 points to 71.2 percent
• Pleased with revenue initiatives underway
• Unit costs, excluding fuel, of 6.64 cents
• Economic fuel price per gallon of $2.32

Cash settlements of $1.3 billion from fuel hedge contract
 Revenue Outlook
January
RPMs -6.4%
ASMs -4.4%
Load Factor -1.4 pts.
• January 2009 passenger unit revenue (PRASM) increased
in the six percent range on a year-over-year basis
• Notable softness in our bookings post-January
• Based on current bookings and revenue trends, outlook
remains cautious
• January’s PRASM growth rate is not expected to continue
into February
• Difficult comparisons for March due to Easter shift
 Capacity Outlook

• Estimated year-over-year capacity

reduction:
• First quarter 2009 - down four to five percent
• Full year 2009 - down in the four percent
range
• Expect to end 2009 with 535 aircraft
• Goal remains to improve profitability and
achieve long-term financial targets
 Strong Balance Sheet

• Investment grade
• Minimal contractual debt obligations in 2009
• Leverage is approximately 45 percent
• Core cash balance of approximately $2 billion
• 366 unencumbered aircraft worth $8 to $9 billion
• Able to withstand “shocks”
• Prepared
 Economic Climate Has Taken Heavy Toll on Jobs
U.S. Passenger Airline Jobs Sank to 392,185 in Nov-08 – Lowest Level Since 1993

470
Thousands of Full-Time Equivalents (FTEs)

Source: U.S. Bureau of Transportation Statistics

460

450

440

430

420

410

400

390

380
Apr

Apr

Apr

Apr

Apr

Apr

Apr
Jul

Jul

Jul

Jul

Jul

Jul

Jul
2003

2004

2005

2006

2007

2008

2009
Oct

Oct

Oct

Oct

Oct

Oct

Oct
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 Industry Contraction Deepening into 2009 on Soft Economy
Percent Change vs. 2007 Reductions in Scheduled Domestic Air Service vs. Same Quarters in 2007

* An available seat mile (ASM) is one seat flown one mile and is the standard unit of capacity in the passenger airline sector
Source: ATA analysis of Innovata schedules as of Jan. 23, 2009

7 www.airlines.org
 10 Largest U.S. Carriers All Cutting More Capacity in 2009
% Change in Scheduled Domestic Available Seat Miles: 1Q09 vs. 1Q08

(Sorted left to right by number of scheduled domestic available seat miles in 1Q09)

Source: Innovata (Jan. 23, 2009)

8 www.airlines.org
 Domestic Flights Cut ≥ 10% at 17 of 30 FAA “Large Hubs”
% Change in Scheduled Domestic Departures: 1Q09 vs. 1Q07

ATL Atlanta, GA DEN Denver, CO IAD Washington-Dulles, VA MCO Orlando, FL PHX Phoenix, AZ
BOS Boston, MA DFW Dallas/Fort Worth, TX IAH Houston-Intercontinental, TX MDW Chicago-Midway, IL SAN San Diego, CA
BWI Baltimore, MD DTW Detroit, MI JFK New York-JFK, NY MIA Miami, FL SEA Seattle/Tacoma, WA
CLT Charlotte-Douglas, NC EWR Newark, NJ LAS Las Vegas, NV MSP Minneapolis/St. Paul, MN SFO San Francisco, CA
CVG Cincinnati, OH/Covington FLL Fort Lauderdale, FL LAX Los Angeles, CA ORD Chicago-O'Hare, IL SLC Salt Lake City, UT
DCA Washington-National, DC HNL Honolulu/Oahu, HI LGA New York-La Guardia, NY PHL Philadelphia, PA TPA Tampa, FL

Sources: Innovata (Jan. 23, 2009) and Federal Aviation Administration

9 www.airlines.org
 Domestic Flights Cut ≥ 10% at 25 of 37 FAA “Medium Hubs”
% Change in Scheduled Domestic Departures: 1Q09 vs. 1Q07

ABQ Albuquerque, NM CLE Cleveland, OH MEM Memphis, TN ONT Ontario, CA RNO Reno, NV STL St. Louis, MO
ANC Anchorage, AK CMH Columbus, OH MHT Manchester, NH ORF Norfolk, VA RSW Fort Myers, FL TUS Tucson, AZ
AUS Austin, TX DAL Dallas-Love, TX MKE Milwaukee, WI PBI West Palm Beach, FL SAT San Antonio, TX
BDL Hartford, CT HOU Houston-Hobby, TX MSY New Orleans, LA PDX Portland, OR SJC San Jose, CA
BNA Nashville, TN IND Indianapolis, IN OAK Oakland, CA PIT Pittsburgh, PA SJU San Juan, PR
BUF Buffalo, NY JAX Jacksonville, FL OGG Kahului/Maui, HI PVD Providence, RI SMF Sacramento, CA
BUR Burbank, CA MCI Kansas City, MO OMA Omaha, NE RDU Raleigh/Durham, NC SNA Orange County, CA

Sources: Innovata (Jan. 23, 2009) and Federal Aviation Administration

10 www.airlines.org
 U.S. Economic Growth to Turn Negative in 2009
Airlines Facing Mighty Revenue Headwinds
% Change in Real U.S. Gross Domestic Product

Sources: Bureau of Economic Analysis and Global Insight U.S. Executive Summary (Jan. 6, 2009)

11 www.airlines.org
 U.S. Carriers Characterized by Comparatively Weak Credit
Standard & Poor’s (S&P) Corporate Credit Ratings as of Oct. 30, 2008

Investment
Grade

BBB-
Speculative

12 www.airlines.org
U.S Airport Rates/Charges Rising per Enplaned Passenger
Up 62.5% Since 1997 When PFCs Included; 49.7% From 2000 to 2007

$20
* All revenue derived from the aeronautical use of the airport, which consists of any activity that involves, makes possible, is required
for the safety of, or is otherwise directly related to the operation of aircraft (e.g., services provided by air carriers related directly and
substantially to the movement of passengers, baggage, mail, and cargo on the airport).
Avg. Airport-Related Cost per Enplanement

$16
$13.91

$3.66
$12

$3.10

$3.50
$3.32
$3.16
$2.88
$9.29

$2.40
$8.56
$2.21

$2.19
$2.21

$8
$1.91

$10.25
$9.79

$9.60
$9.53
$9.29

$9.29
$8.64

$4
$7.09

$7.10
$6.83
$6.65

$0
97 98 99 2000 01 02 03 04 05 06 07 08

Aeronautical Operating Revenue* Avg. Passenger Facility Charge

Sources: Federal Aviation Administration (FAA) Form 127 and Air Carrier Activity Information System
 Creative Finance

 DAL – Terminal Construction

 ISP – Terminal Construction
 PHL – Hammerhead Gates
 LAS – Node 5A
 FLL – Baggage System
 MDW - Privatization
 2009 Plan
 Become more flexible in adapting to
demand
 We remain intensely focused on
maximizing the efficiency and
profitability of each published flight
schedule.
 Reduce ASM’s by 4%
 Remain light on our feet
 New Southwest Cities

 MSP – March 8
 LGA – Second Half 2009
 BOS – Fall 2009
Southwest Airlines Co.

Network USA 2009 Conference