SOUTHWEST AIRLINES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

October 27, 2020 at 09:52 am EDT

Relevant comparative operating statistics for the three and nine months ended
September 30, 2020 and 2019 are included below. The Company provides these
operating statistics because they are commonly used in the airline industry and,
as such, allow readers to compare the Company's performance against its results
for the prior year period, as well as against the performance of the Company's
peers.
                                                               Three months ended September 30,
                                                                 2020                      2019                    Change
Revenue passengers carried (000s)                                  11,621                  33,538                 (65.3) %
Enplaned passengers (000s)                                         15,064                  41,098                 (63.3) %
Revenue passenger miles (RPMs) (in millions)(a)                    11,888                  32,889                 (63.9) %
Available seat miles (ASMs) (in millions)(b)                       26,464                  39,379                 (32.8) %
Load factor(c)                                                       44.9   %                83.5  %              (38.6)   pts.
Average length of passenger haul (miles)                            1,023                     981                   4.3  %
Average aircraft stage length (miles)                                 736                     737                  (0.1) %
Trips flown                                                       231,105                 348,237                 (33.6) %
Seats flown (000s)(d)                                              35,491                  52,441                 (32.3) %
Seats per trip(e)                                                   153.6                   150.6                   2.0  %
Average passenger fare                                    $        125.07              $   155.95                 (19.8) %
Passenger revenue yield per RPM (cents)(f)                          12.23                   15.90                 (23.1) %
Operating revenues per ASM (cents)(g)                                6.78                   14.32                 (52.7) %
Passenger revenue per ASM (cents)(h)                                 5.49                   13.28                 (58.7) %
Operating expenses per ASM (cents)(i)                               12.11                   12.24                  (1.1) %
Operating expenses per ASM, excluding fuel (cents)                  10.67                    9.47                  12.7  %
Operating expenses per ASM, excluding fuel and
profitsharing (cents)                                               10.67                    9.11                  17.1  %
Fuel costs per gallon, including fuel tax                 $          1.18              $     2.07                 (43.0) %

Fuel costs per gallon, including fuel tax, economic $ 1.23

$     2.07                 (40.6) %
Fuel consumed, in gallons (millions)                                  320                     524                 (38.9) %
Active fulltime equivalent Employees                               57,931          (j)     60,590                  (4.4) %
Aircraft at end of period                                             734      (k)(l)         752    (k)           (2.4) %



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                                                           Nine months

ended September 30,


                                                            2020                       2019                     Change
Revenue passengers carried (000s)                             41,622                   99,758                 (58.3) %
Enplaned passengers (000s)                                    51,833                  121,480                 (57.3) %
Revenue passenger miles (RPMs) (in
millions)(a)                                                  41,437                   98,121                 (57.8) %
Available seat miles (ASMs) (in millions)(b)                  79,701                  117,250                 (32.0) %
Load factor(c)                                                  52.0   %                 83.7  %              (31.7)   pts.
Average length of passenger haul (miles)                         996                      984                   1.2  %
Average aircraft stage length (miles)                            740                      746                  (0.8) %
Trips flown                                                  696,586                1,022,311                 (31.9) %
Seats flown (000s)(d)                                        106,271                  154,312                 (31.1) %
Seats per trip(e)                                              152.6                    150.9                   1.1  %
Average passenger fare                               $        144.22              $    154.99                  (6.9) %
Passenger revenue yield per RPM (cents)(f)                     14.49                    15.76                  (8.1) %
Operating revenues per ASM (cents)(g)                           8.83                    14.24                 (38.0) %
Passenger revenue per ASM (cents)(h)                            7.53                    13.19                 (42.9) %
Operating expenses per ASM (cents)(i)                          12.15                    12.29                  (1.1) %
Operating expenses per ASM, excluding fuel
(cents)                                                        10.26                     9.52                   7.8  %
Operating expenses per ASM, excluding fuel and
profitsharing (cents)                                          10.26                     9.18                  11.8  %
Fuel costs per gallon, including fuel tax            $          1.52              $      2.09                 (27.3) %
Fuel costs per gallon, including fuel tax,           $          1.56
economic                                                                          $      2.09                 (25.4) %
Fuel consumed, in gallons (millions)                             985                    1,550                 (36.5) %
Active fulltime equivalent Employees                          57,931          (j)      60,590                  (4.4) %
Aircraft at end of period                                        734      (k)(l)          752    (k)           (2.4) %



(a) A revenue passenger mile is one paying passenger flown one mile. Also
referred to as "traffic," which is a measure of demand for a given period.
(b) An available seat mile is one seat (empty or full) flown one mile. Also
referred to as "capacity," which is a measure of the space available to carry
passengers in a given period.
(c) Revenue passenger miles divided by available seat miles.
(d) Seats flown is calculated using total number of seats available by aircraft
type multiplied by the total trips flown by the same aircraft type during a
particular period.
(e) Seats per trip is calculated by dividing seats flown by trips flown.
(f) Calculated as passenger revenue divided by revenue passenger miles. Also
referred to as "yield," this is the average cost paid by a paying passenger to
fly one mile, which is a measure of revenue production and fares.
(g) Calculated as operating revenues divided by available seat miles. Also
referred to as "operating unit revenues," or "RASM," this is a measure of
operating revenue production based on the total available seat miles flown
during a particular period.
(h) Calculated as passenger revenue divided by available seat miles. Also
referred to as "passenger unit revenues," this is a measure of passenger revenue
production based on the total available seat miles flown during a particular
period.
(i) Calculated as operating expenses divided by available seat miles. Also
referred to as "unit costs," "cost per available seat mile," or "CASM" this is
the average cost to fly an aircraft seat (empty or full) one mile, which is a
measure of cost efficiencies.
(j) Included 10,684 Employees participating in the Extended Emergency Time Off
program as of September 30, 2020. See Note 2 to the unaudited Condensed
Consolidated Financial Statements for further information.
(k) Included 34 Boeing MAX 737 aircraft in long-term storage. See Note 12 to the
unaudited Condensed Consolidated Financial Statements for further information.
(l) Included 70 Boeing 737 Next Generation aircraft removed from active fleet
and placed in long-term storage as of September 30, 2020.

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Financial Overview

As a result of concerns related to the COVID-19 pandemic, the Company began to
see a negative impact on bookings for future travel in late February 2020, which
quickly accelerated during the remainder of first quarter and continued
throughout second and third quarters. See Note 2 to the unaudited Condensed
Consolidated Financial Statements for further information.

The Company recorded third quarter and year-to-date GAAP and non-GAAP results
for 2020 and 2019 as noted in the following tables. See Note Regarding Use of
Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to
Non-GAAP Financial Measures for additional detail regarding non-GAAP financial
measures.
Three months ended Nine months ended
(in millions, except per share
amounts) September 30, September 30,
GAAP 2020 2019 Percent Change 2020 2019 Percent Change
Operating income (loss) $ (1,411) $ 819 n.m. $ (2,648) $ 2,292 n.m.
Net income (loss) $ (1,157) $ 659 n.m. $ (2,166) $ 1,787 n.m.
Net income (loss) per share,
diluted $ (1.96) $ 1.23 n.m. $ (3.89) $ 3.29 n.m.

Non-GAAP
Operating income (loss) $ (1,577) $ 819 n.m. $ (3,841) $ 2,292 n.m.
Net income (loss) $ (1,173) $ 659 n.m. $ (2,751) $ 1,787 n.m.
Net income (loss) per share,
diluted $ (1.99) $ 1.23 n.m. $ (4.95) $ 3.29 n.m.

The significant decrease in both GAAP and non-GAAP Net income (loss), as well as
Operating income (loss) and non-GAAP Operating income (loss), year-over-year,
for both the quarter and year-to-date periods noted above, was primarily due to
the negative impacts of the COVID-19 pandemic on passenger demand and bookings.
These impacts combined to result in a 68.2 percent decrease in Operating
revenues in third quarter 2020, and a 57.9 percent decrease in Operating
revenues for the nine months ended September 30, 2020. See below and Note 2 to
the unaudited Condensed Consolidated Financial Statements for further
information.

While the Company has historically provided its calculation of non-GAAP return
on invested capital ("ROIC") as a measure of financial performance used by
management to quantify the Company's effectiveness in generating returns
relative to the capital invested in the business, the Company has chosen not to
present ROIC in this Form 10-Q and does not expect to present it again until and
if the operating environment normalizes sufficiently to return the Company to
operating income instead of operating loss. The COVID-19 pandemic has materially
and adversely affected passenger demand and bookings, thereby materially and
adversely affecting operating income and cash flows from operations. As a
result, management ceased focus on ROIC and instead has focused on bolstering
the Company's liquidity through cost reductions, financings, sale-leaseback
transactions, and securities offerings. In this environment, management believes
ROIC is not a meaningful measure of financial performance, nor is it being used
by management to evaluate the business in the current environment. See Liquidity
and Capital Resources for a discussion of the Company's liquidity.

COVID-19 Pandemic



See Notes 2 and 8 to the unaudited Condensed Consolidated Financial Statements
for further information on the significant impacts to the Company's operations,
financial performance, and liquidity from the COVID-19 pandemic.

Since March 2020, the Company has experienced significant year-over-year negative impacts to passenger demand and bookings due to the COVID-19 pandemic. As previously disclosed, the Company was encouraged by


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improvements in May and June 2020 leisure passenger traffic trends, compared
with March and April 2020; however, the improving trends in revenue and bookings
stalled in early July 2020, and remained depressed for the remainder of the
month, due to the rise in COVID-19 cases. In August and September 2020, the
Company experienced modest improvements in close-in leisure passenger demand and
bookings, compared with July 2020. Thus far, the Company continues to experience
modest improvements in close-in leisure passenger demand in October 2020 and
bookings for November 2020. The following table presents selected preliminary
estimates of operating revenue, load factor, and capacity for October and
November 2020.

                                         October 2020            November

2020


Operating revenue year-over-year        Down 65% to 70%         Down 60% to 65%
Previous estimation                     Down 65% to 75%               (a)
Load factor                               50% to 55%              50% to 55%
Previous estimation                       45% to 55%                  (a)
Capacity year-over-year                    Down ~45%               Down ~35%
Previous estimation                     Down 40% to 45%         Down 35% to 40%

(a) No previous estimation provided.



The Company estimates its December 2020 capacity to decrease in the range of 40
to 45 percent, year-over-year. The Company estimates its fourth quarter 2020
capacity to decrease approximately 40 percent, year-over-year.

Excluding Fuel and oil expense, special items, and prior year profitsharing
expense, fourth quarter 2020 operating expenses are expected to decrease in the
range of 20 to 25 percent, year-over-year, representing a sequential improvement
compared with the Company's third quarter 2020 operating expenses year-over-year
decrease in operating expenses, primarily due to lower capacity and higher cost
savings driven by its voluntary separation and extended leave programs. See Note
2 to the unaudited Condensed Consolidated Financial Statements for further
description of these programs. The year-over-year projections do not reflect the
potential impact of Fuel and oil expense, special items, and profitsharing
expense in both years because the Company cannot reliably predict or estimate
these items or expenses or their impact to its financial statements in future
periods, especially considering the significant volatility of the Fuel and oil
expense line item. Accordingly the Company believes a reconciliation of non-GAAP
financial measures to the equivalent GAAP financial measures for projected
results is not meaningful or available without unreasonable effort.

In response to the far-reaching impacts of the COVID-19 pandemic, the Company
has taken significant measures to enhance and expand upon its already generous
and flexible ticketing policies, and to support the well-being of both its
Employees and passengers on a daily basis. These have included, but are not
limited to the following:

•Travel funds created because of a flight cancellation between March 1, 2020 and
September 7, 2020, will now expire September 7, 2022.
•Travel funds that would otherwise have expired between March 1, 2020 and
September 7, 2020, will now expire September 7, 2022.
•Rapid Rewards® loyalty program members who have travel funds that were set to
expire, or funds that were created between March 1, 2020 and September 7, 2020,
have the option to convert those travel funds into Rapid Rewards points at the
same rate as they are able to purchase a ticket with points today, through
December 15, 2020.
•All Rapid Rewards loyalty program members' qualifying progress on April 1, 2020
received a "boost" of 15,000 tier qualifying points and 10 flight credits toward
A-List and A-List Preferred status, and 25,000 Companion Pass qualifying points
and 25 flight credits toward Companion Pass status.
•All current A-List and A-List Preferred tier status members on April 1, 2020
earned status has been extended through December 31, 2021.
•Companion pass members earned status on April 1, 2020 has been extended through
June 30, 2021.
•Enhanced aircraft cleaning procedures have been applied since March 4, 2020.
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•Procedures and protocol have been implemented with the requirement that
Employees and Customers (age two or over) must wear masks or face coverings.
•Measures to support physical distancing, including messaging to Customers and
Employees, and modified boarding procedures, have been implemented.
•The number of seats available for sale on each flight has been limited to allow
for the middle seat to remain open through November 2020.
•A Customer health declaration, which must be acknowledged prior to travel, has
been implemented.
•An Employee health declaration, which all Employees are expected to
acknowledge, has been implemented.
•The Company continues to offer the ability to work remotely to most of the
Company's office and clerical Employees, including the vast majority of its more
than 6,000 Employees at the Company's headquarters campus in Dallas, Texas.

The Company continues to communicate with its entire workforce on the employment
of best practices and Centers for Disease Control and Prevention guidelines in
the current environment while at work, especially considering that a large
portion of its Employees come into direct contact with Customers on a daily
basis. On October 22, 2020, the Company announced that it will resume selling
all available seats for travel beginning December 1, 2020.

As detailed in Note 2 to the unaudited Condensed Consolidated Financial
Statements, in connection with the major negative impact of COVID-19 on air
carriers, the Company has been receiving significant financial assistance from
the U.S. Department of Treasury (the "Treasury") pursuant to the Payroll Support
Program established pursuant to the Coronavirus Aid, Relief, and Economic
Security Act (the "CARES Act" or the "Act"). Amounts received under the Payroll
Support Program were approximately $3.4 billion and were utilized to directly
offset payroll expenses incurred by the Company, including specified benefits,
between April 2020 and September 2020. Of this total, $2.4 billion consists of a
grant that does not require repayment. Approximately $2.3 billion of the direct
payroll support of $2.4 billion was allocated on a pro-rata basis as a
contra-expense line item in the unaudited Condensed Consolidated Statement of
Comprehensive Income (Loss) between second and third quarters of 2020, with the
remaining $40 million allocated to the value of warrants issued from the Company
to the Treasury.

In accordance with restrictions contained in the CARES Act, and except as
permitted or required under the Payroll Support Program, the Company did not (1)
conduct involuntary terminations or furloughs or (2) reduce the salaries, wages,
or benefits of any Employee, in each case between the date of the Payroll
Support Program agreement and September 30, 2020.

During second quarter 2020, the Company introduced Voluntary Separation Program
2020 and the Extended Emergency Time Off ("Extended ETO") program with the goal
of aligning staffing to reduced flight schedules and to avoid involuntary
furloughs and layoffs to the extent possible. Approximately 15,200 Employees, or
25 percent of the Company's workforce, are participating in one of these
voluntary programs: approximately 4,200 elected Voluntary Separation Program
2020, and approximately 11,000 are participating in the Extended ETO program.
Employees had until July 15, 2020, to elect to participate in these voluntary
programs. In accordance with applicable accounting guidance, the Company accrued
a charge of $307 million in second quarter 2020 and $485 million in third
quarter 2020 related to the special termination benefits for Employees who had
accepted the Company's offer to participate in Voluntary Separation Program
2020, which will be reduced as program benefits are paid. The Company also
accrued a charge of $613 million in third quarter 2020 related to special
benefits for Employees who had accepted the Company's offer to participate in
its Extended ETO program. This program will allow the Company to reduce its
fixed cost structure in the near-term, while maintaining the ability to adjust
to a recovery in travel demand. If all voluntary program requests are granted,
the total potential voluntary program costs could be up to approximately $1.7
billion; however, the Company did not accrue approximately $300 million of
estimated voluntary program costs beyond February 2022, or approximately 18
months, based on the uncertainty of its future capacity levels and required
staffing. Based primarily on third quarter 2020 cash payments made of
approximately $195 million, the remaining accrual balance related to Voluntary
Separation Program 2020 and Extended ETO was $1.2 billion as of September 30,
2020. See Note 10 to the unaudited Condensed Consolidated Financial Statements
for further information. As a result of these voluntary programs, the Company's
salaries, wages, and benefits costs were lowered by $143 million in third
quarter 2020. In addition, the Company expects the
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cost savings from these programs to be approximately $400 million in fourth
quarter 2020 and approximately $1.1 billion in 2021, with Voluntary Separation
Program 2020 run-rate cost savings of approximately $500 million in 2022 and
beyond. If there are no Employees recalled early from the Extended ETO program,
the net present value of the program through 2025 exceeds $2 billion. These
voluntary programs are expected to allow the Company to significantly reduce its
labor costs and cash burn immediately, while preserving jobs and maintaining the
flexibility to more quickly adjust to a recovery in travel demand. See Note 2 to
the unaudited Condensed Consolidated Financial Statements for further
information.

As the pandemic and its devastating effects on the industry continue, the
Company continues to urge federal leaders to pass an economic relief package
that includes a clean, six-month extension of the CARES Act Payroll Support
Program to further protect jobs and crucial air travel to communities across the
Nation. Based on the risk that such a stimulus package may not occur, the
Company has communicated its intent to implement temporary pay rate reductions
to its non-contract Employees and has begun negotiations with its Union Leaders
to reach agreement on reasonable, temporary concessions for union contract
Employees beginning January 1, 2021, in return for no layoffs or furloughs
through the end of 2021, barring unforeseen and catastrophic changes to its
business. These pay reductions and concessionary efforts would represent cost
savings of at least $500 million beginning in 2021. In the event that the
Company is unable to reach agreement on temporary concessions with Unions, it
plans to-as a last resort-furlough Employees in early 2021. If the federal
government extends the much-needed Payroll Support Program for the airline
industry, the Company intends to discontinue or reverse these pay reduction and
concessionary efforts through 2021.

Company Overview



The Company ended third quarter 2020 with 734 aircraft in its fleet. In response
to capacity reductions due to the effects of the COVID-19 pandemic, the Company
currently has approximately 100 aircraft in long-term storage, including the
Company's 34 Boeing 737 MAX 8 aircraft that were grounded as of March 13, 2019,
to comply with the FAA's emergency order issued for all U.S. airlines to ground
all MAX aircraft, and is managing 50 to 150 aircraft in short-term parking to
provide greater flexibility to adapt to the seasonal demand patterns of the
fourth quarter. See Note 2 to the unaudited Condensed Consolidated Financial
Statements for further information on the effects of the COVID-19 pandemic. The
Company has not received any MAX aircraft deliveries since February 2019, and
Boeing is not currently delivering new MAX aircraft. See Note 12 to the
unaudited Condensed Consolidated Financial Statements for further information.
The Company returned two leased Boeing 737-700 aircraft and retired one owned
737-700 aircraft during third quarter 2020. The Company expects to return three
leased 737-700 aircraft during fourth quarter 2020.

Upon a rescission of the FAA order to ground the MAX fleet, the Company will
work closely with Boeing and the FAA to safely reintroduce the 34 MAX 8 aircraft
currently in its fleet into service and estimates it will take the Company
several months to comply with applicable FAA requirements, including all
necessary Pilot simulator training. Regulatory approval of MAX return to service
is subject to Boeing's ongoing work with the FAA, who will determine the timing
of MAX return to service. The MAX will likely remain out of the Company's
published flight schedules until at least second quarter 2021. See Note 12 to
the unaudited Condensed Consolidated Financial Statements for further
information. The Company offers no assurances that current estimations and
timelines are correct. Any changes to current estimations could result in
further delays in MAX aircraft deliveries, additional flight schedule
adjustments and reductions beyond 2020, and additional financial damages.

As previously disclosed, the Company has an interim agreement with Boeing to
take no more than 48 MAX aircraft through December 31, 2021. The timeline and
quantity of deliveries through 2021 is not yet finalized. The Company will
continue discussions with Boeing to restructure its aircraft order book and make
any further adjustments to the delivery schedule as circumstances related to the
MAX groundings and COVID-19 pandemic evolve. The Company also has flexibility
with its retirement plans of Boeing 737-700 aircraft, and continues to plan for
multiple scenarios for its fleet and capacity plans. The FAA's timetables and
directives will determine the timing of MAX return to service, and the timing of
future aircraft deliveries is subject to change. The Company offers no
assurances that current estimations and timelines are correct.
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The Company has published its flight schedule through April 11, 2021. The
Company previously announced its intention to begin service to both Miami
International Airport and Palm Springs International Airport, on November 15,
2020, as well as new service that will commence on December 19, 2020, to both
Montrose Regional Airport (Telluride and Crested Butte) and Yampa Valley
Regional Airport (Steamboat Springs). The addition of these airports is intended
to further strengthen the Company's route system in Florida, California, and
Colorado. The Company also recently announced its intention to begin service to
Chicago O'Hare International Airport, and return to Houston's George Bush
Intercontinental Airport, in first half 2021, which will complement existing
service in both cities and reinforce the Company's long-standing commitment to
both metropolitan areas. On October 22, 2020, the Company announced its
intention to add service in first half 2021 to Colorado Springs Municipal
Airport, Savannah/Hilton Head International Airport in Georgia, and a return to
Jackson-Medgar Wiley Evers International Airport in Mississippi. The Company is
leveraging additional airports in cornerstone cities where its Customer base is
large, along with adding easier access to popular leisure-oriented destinations
from across the Company's domestic-focused network. These additional service
points on the Company's map are low-risk opportunities it can provide Customers
now, all the while better positioning the Company as travel demand rebounds.

As previously reported, the Company suspended international operations in first
quarter 2020, and resumed service to Mexico and the Caribbean via Cancun, San
Jose del Cabo/Los Cabos, Montego Bay, and Nassau on July 1, 2020, and Puerto
Vallarta, Mexico on October 8, 2020. In response to new local restrictions by
the Bahamian government, the Company temporarily suspended operations to Nassau
effective July 22, 2020. Service to the Company's other international
destinations is expected to resume pending the easing of government
restrictions, including resumed service to Punta Cana, Dominican Republic, and
Aruba on November 4, 2020, as well as Havana, Cuba on December 6, 2020.

Material Changes in Results of Operations

Comparison of three months ended September 30, 2020 and September 30, 2019

Operating Revenues



Total operating revenues for third quarter 2020 decreased by $3.8 billion, or
68.2 percent, year-over-year, to $1.8 billion, due primarily to the sharp
decline in passenger demand and bookings, as well as capacity reductions,
resulting from the COVID-19 pandemic. Third quarter 2020 RASM was 6.78 cents,
and decreased 52.7 percent, compared with third quarter 2019, primarily driven
by a year-over-year Load factor decrease of 38.6 points, and a year-over-year
passenger revenue yield decrease of 23.1 percent.

Passenger revenues for third quarter 2020 decreased by $3.8 billion, or 72.2
percent, year-over-year. On a unit basis, Passenger revenues decreased 58.7
percent, year-over-year. The decrease in Passenger revenues on both a dollar and
unit basis was primarily due to the impact of the COVID-19 pandemic, which
resulted in significant reductions in capacity and a sharp decline in passenger
demand and bookings.

Freight revenues for third quarter 2020 decreased by $1 million, or 2.4 percent, compared with third quarter 2019, primarily due to reduced demand.



Other revenues for third quarter 2020 decreased by $69 million, or 18.8 percent,
compared with third quarter 2019. The decrease was primarily due to a decrease
in income from business partners, including Chase Bank USA, N.A. ("Chase") and
the impact on spend on the Company's co-brand card, driven by the decline in
consumer spending due to economic uncertainty and widespread restrictions
related to the COVID-19 pandemic.

Operating Expenses



Operating expenses for third quarter 2020 decreased by $1.6 billion, or 33.5
percent, compared with third quarter 2019, while capacity decreased 32.8 percent
versus the same prior year period. Historically, except for changes in
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the price of fuel, changes in Operating expenses for airlines have been largely
driven by changes in capacity, or ASMs. However, the Company's Operating
expenses are largely fixed once flight schedules are published, and the Company
has experienced significant ASM reductions as a result of flight schedule
adjustments related to the COVID-19 pandemic. Flight schedule adjustments are
expected to drive unit cost pressure for the duration of the COVID-19 pandemic,
excluding any impacts associated with grants received under the CARES Act or
other legislation. See "Company Overview" above and Notes 2 and 12 to the
unaudited Condensed Consolidated Financial Statements for further information.
The following table presents the Company's Operating expenses per ASM for the
third quarter of 2020 and 2019, followed by explanations of these changes on a
per ASM basis and dollar basis:
                                             Three months ended September 30,                                        Per ASM           Percent
(in cents, except for percentages)            2020                      2019                                         change            change
Salaries, wages, and benefits                      6.34  ¢                   5.08  ¢              1.26  ¢                 24.8  %
Payroll support and voluntary
Employee programs, net                            (0.57)                        -                (0.57)                      n.m.
Fuel and oil                                       1.44                      2.77                (1.33)                  (48.0)
Maintenance materials and repairs                  0.70                      0.80                (0.10)                  (12.5)
Landing fees and airport rentals                   1.16                      0.88                 0.28                    31.8
Depreciation and amortization                      1.19                      0.78                 0.41                    52.6
Other operating expenses, net                      1.85                      1.93                (0.08)                   (4.1)
Total                                             12.11  ¢                  12.24  ¢             (0.13) ¢                 (1.1) %



Operating expenses per ASM for third quarter 2020 decreased by 1.1 percent,
compared with third quarter 2019. The year-over-year unit cost decrease in third
quarter 2020 was primarily driven by decreases in market jet fuel prices,
coupled with the funding received through the Payroll Support Program, net of an
accrual made for Employees that elected to participate in Voluntary Separation
Program 2020 or Extended ETO, partially offset by significant capacity
reductions as a result of the COVID-19 pandemic. See Note 2 to the unaudited
Condensed Consolidated Financial Statements for further information. Operating
expenses per ASM for third quarter 2020, excluding Fuel and oil expense, special
items, and profitsharing (a non-GAAP financial measure), increased 23.4 percent,
compared with third quarter 2019. See Note Regarding Use of Non-GAAP Financial
Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial
Measures for additional detail regarding non-GAAP financial measures. The
majority of the year-over-year unit cost increase in third quarter 2020 was
driven by lower capacity as a result of significant capacity reductions due to
the COVID-19 pandemic.

Salaries, wages, and benefits expense for third quarter 2020 decreased by $324
million, or 16.2 percent, compared with third quarter 2019. On a per ASM basis,
third quarter 2020 Salaries, wages, and benefits expense increased 24.8 percent,
compared with third quarter 2019, as the dollar decrease was more than offset by
the 32.8 percent decrease in capacity. On a dollar basis, the decrease was
primarily the result of no profitsharing expense accrual in third quarter 2020
due to the Company's net loss, compared with a profitsharing accrual of $144
million in third quarter 2019. Excluding profitsharing in both years, the
decrease was driven by lower salaries, wages, and benefits expense, as a result
of Voluntary Separation Program 2020, Extended ETO, and other time off programs
offered by the Company.

Payroll support and voluntary Employee programs, net for third quarter 2020 was
a net decrease to expense of $149 million, compared with no amounts for third
quarter 2019. On a per ASM basis, third quarter 2020 Payroll support and
voluntary Employee programs, net was a net reduction of 0.57 cents. During third
quarter 2020, the Company recognized $1.2 billion of Payroll Support Program
proceeds as part of the CARES Act, a $485 million accrual related to the cost
associated with Voluntary Separation Program 2020, and a $613 million accrual
related to the cost associated with the Extended ETO elections made and accepted
prior to September 30, 2020. See Note 2 to the unaudited Condensed Consolidated
Financial Statements for further information.

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Fuel and oil expense for third quarter 2020 decreased by $711 million, or 65.2
percent, compared with third quarter 2019. On a per ASM basis, third quarter
2020 Fuel and oil expense decreased 48.0 percent, due to lower market jet fuel
prices. On a dollar basis, the majority of the decrease was attributable to a
significant decrease in fuel gallons consumed, and the remainder of the decrease
was due to lower market jet fuel prices. The Company's average economic jet fuel
cost per gallon decreased 40.6 percent, year-over-year, to $1.23 for third
quarter 2020, from $2.07 for third quarter 2019. See Note Regarding Use of
Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to
Non-GAAP Financial Measures for additional detail regarding non-GAAP financial
measures. These figures include $.08 per gallon in premium expense with no cash
settlements from fuel derivative contracts in third quarter 2020, compared with
$.04 per gallon in premium expense with no cash settlements from fuel derivative
contracts in third quarter 2019. The market decline in fuel prices reduced the
Company's third quarter 2020 Fuel and oil expense by approximately $257 million
compared to its original third quarter 2020 fuel projection in January 2020. The
Company continued to operate fewer of its oldest, least fuel-efficient Boeing
737-700 aircraft as a result of capacity reductions due to the COVID-19 pandemic
which, combined with lower Load factors, resulted in a year-over-year
improvement of 10.0 percent in ASMs per gallons ("fuel efficiency") in third
quarter 2020. The Company currently estimates a fourth quarter 2020
year-over-year fuel efficiency improvement similar to the year-over-year
improvement experienced in third quarter 2020, driven by the continued operation
of fewer of its 737-700 aircraft as a result of capacity reductions due to the
pandemic.

As of October 15, 2020, on an economic basis, the Company had derivative contracts in place related to expected future fuel consumption as follows:


              Period               Maximum fuel hedged (gallons in millions) (a)(b)

        Remainder of 2020                                325
               2021                                     1,283
               2022                                     1,220
           Beyond 2022                                   667


(a) The Company's hedge position includes prices at which the Company considers
"catastrophic" coverage. The maximum gallons provided are not indicative of the
Company's hedge coverage at every price, but represent the highest level of
coverage at a single price. See Note 4 to the unaudited Condensed Consolidated
Financial Statements for further information.
(b) The Company holds derivative contracts at various Brent crude oil, West
Texas Intermediate ("WTI") crude oil, and Heating oil price levels to provide
protection against energy market price fluctuations. These gallons that are
covered by derivative contracts represent the maximum number of gallons hedged
for each respective period, which may be at different strike prices and at
strike prices materially higher than the current market prices. The volume of
gallons covered by derivative contracts that ultimately get exercised in any
given period may vary significantly from the volumes provided, as market prices
and the Company's fuel consumption fluctuates.

As a result of applying hedge accounting in prior periods, the Company has
amounts in Accumulated other comprehensive income (loss) ("AOCI") that will be
recognized in earnings in future periods when the underlying fuel derivative
contracts settle. The following table displays the Company's estimated fair
value of remaining fuel derivative contracts (not considering the impact of the
cash collateral provided to or received from counterparties-see Note 4 to the
unaudited Condensed Consolidated Financial Statements for further information),
as well as the amount of deferred losses in AOCI at September 30, 2020, and the
expected future periods in which these items are expected to settle and/or be
recognized in earnings (in millions):

                                    Fair value of fuel derivative          Amount of losses deferred in
                                      contracts at September 30,            AOCI at September 30, 2020
Year                                             2020                              (net of tax)
Remainder of 2020                   $                         -           $                       (12)
2021                                                         11                                   (56)
2022                                                         58                                   (35)
Beyond 2022                                                  40                                   (13)
Total                               $                       109           $                      (116)



                                       46


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Assuming no changes to the Company's current fuel derivative portfolio, but
including all previous hedge activity for fuel derivatives that have not yet
settled, and considering only the expected net cash receipts related to hedges
that will settle, the Company is providing the below sensitivity table
for fourth quarter 2020 jet fuel prices at different crude oil assumptions as of
October 15, 2020, and for expected premium costs associated with settling
contracts.
                                                Estimated economic fuel price per gallon,
                                              including taxes and fuel hedging premiums (d)
   Average Brent Crude Oil                               Fourth Quarter 2020 (c)
      price per barrel
             $20                                               $.85 - $.95
             $30                                              $1.00 - $1.10
     Current Market (a)                                       $1.20 - $1.30
             $50                                              $1.40 - $1.50
             $60                                              $1.55 - $1.65
             $70                                              $1.75 - $1.85
   Estimated fuel hedging
 premium expense per gallon
             (b)                                                   $.09
 Estimated premium costs (b)                                   $24 million


(a) Brent crude oil average market price as of October 15, 2020, was
approximately $43 per barrel for fourth quarter 2020.
(b) Fuel hedging premium expense per gallon is included in the Company's
estimated economic fuel price per gallon estimates above.
(c) Based on the Company's existing fuel derivative contracts and market prices
as of October 15, 2020, fourth quarter 2020 GAAP and economic fuel costs are
estimated to be in the $1.20 to $1.30 per gallon range, including fuel hedging
premium expense of approximately $24 million, or $.09 per gallon, and no cash
settlements from fuel derivative contracts. See Note Regarding Use of Non-GAAP
Financial Measures.
(d) The Company's current fuel derivative contracts contain a combination of
instruments based in WTI and Brent crude oil; however, the economic fuel price
per gallon sensitivities provided, assume the relationship between Brent crude
oil and refined products based on market prices as of October 15, 2020.

Maintenance materials and repairs expense for third quarter 2020 decreased by
$128 million, or 40.9 percent, compared with third quarter 2019. On a per ASM
basis, Maintenance materials and repairs expense decreased 12.5 percent, as the
dollar decrease was largely offset by the 32.8 percent decrease in capacity in
response to the COVID-19 pandemic. On a dollar basis, approximately 50 percent
of the decrease was due to lower engine maintenance expense due to decreased
flight hours, approximately 25 percent of the decrease was due to the timing of
regular airframe maintenance checks, and the majority of the remainder of the
decrease was due to reduced operations and placing a portion of the fleet in
storage.

Landing fees and airport rentals expense for third quarter 2020 decreased by $37
million, or 10.7 percent, compared with third quarter 2019. On a per ASM basis,
Landing fees and airport rentals expense increased 31.8 percent, compared with
third quarter 2019, as the dollar decrease was more than offset by the 32.8
percent decrease in capacity in response to the COVID-19 pandemic. On a dollar
basis, the majority of the decrease was due to a reduced number of Trips flown
in third quarter 2020 as a result of the COVID-19 pandemic.

Depreciation and amortization expense for third quarter 2020 increased by $7
million, or 2.3 percent, compared with third quarter 2019. On a per ASM basis,
Depreciation and amortization expense increased by 52.6 percent, compared with
third quarter 2019, primarily as a result of the 32.8 percent decrease in
capacity in response to the COVID-19 pandemic. On a dollar basis, the increase
was primarily associated with the deployment of new technology assets.

Other operating expenses, net for third quarter 2020 decreased by $274 million,
or 36.0 percent, compared with third quarter 2019. On a per ASM basis, Other
operating expenses, net decreased 4.1 percent, compared with third quarter 2019,
primarily as a result of the 32.8 percent decrease in capacity in response to
the COVID-19 pandemic. On a dollar basis, approximately 35 percent of the
decrease was due to lower credit card fees driven by a severe
                                       47
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reduction in revenues associated with the COVID-19 pandemic, and the majority of the remainder of the decrease was from various cost savings as a result of supporting a reduced operation and other efforts to reduce discretionary spend.

Other

Other expenses (income) include interest expense, capitalized interest, interest income, and other gains and losses.



Interest expense for third quarter 2020 increased by $81 million, or 270.0
percent, compared with third quarter 2019, primarily due to higher debt
balances. For further information on the Company's debt transactions in third
quarter 2020, see Note 8 to the unaudited Condensed Consolidated Financial
Statements. Based on current debt outstanding and current market interest rates,
the Company currently expects fourth quarter 2020 interest expense to be
approximately $113 million.

Capitalized interest for third quarter 2020 increased by $1 million, or 10.0 percent, compared with third quarter 2019, primarily due to interest on technology projects.

Interest income for third quarter 2020 decreased by $19 million, or 82.6 percent, compared with third quarter 2019, due to lower interest rates, partially offset by higher cash balances.



Other (gains) losses, net, primarily includes amounts recorded as a result of
the Company's hedging activities. See Note 4 to the unaudited Condensed
Consolidated Financial Statements for further information on the Company's
hedging activities. The following table displays the components of Other (gains)
losses, net, for the three months ended September 30, 2020 and 2019:
                                                                    Three months ended September 30,
(in millions)                                                          2020                      2019

Mark-to-market impact from fuel contracts settling in current and future periods

                                            $                23          $           -
Premium cost of fuel contracts not designated as hedges                        11                      -
Mark-to-market impact from interest rate swap agreements                       (1)                     -
Other                                                                           2                      3
                                                              $                35          $           3



Income Taxes

The Company's effective tax rate was approximately 25.0 percent in third quarter
2020, compared with 19.5 percent in third quarter 2019. The higher third quarter
tax rate was a result of the impact of the Company's current forecasted full
year 2020 net loss, which would allow the Company to carry back such losses to
claim tax refunds against taxes paid related to the tax years 2015 through 2019,
some of which were at higher rates than the current year. The Company currently
estimates its annual 2020 effective tax rate to be in the range of 24 to 26
percent.

Comparison of nine months ended September 30, 2020 and September 30, 2019

Operating Revenues



Passenger revenues for the nine months ended September 30, 2020, decreased by
$9.5 billion, or 61.2 percent, compared with the first nine months of 2019. On a
unit basis, Passenger revenues decreased 42.9 percent, year-over-year. The
decreases in Passenger revenues on both a dollar and unit basis were primarily
due to the impact of the COVID-19 pandemic, which resulted in unprecedented
levels of close-in trip cancellations in March 2020, and significant reductions
in capacity and a sharp decline in passenger demand and bookings during the nine
months ended September 30, 2020.

                                       48
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Freight revenues for the nine months ended September 30, 2020, decreased by $11
million, or 8.5 percent, compared with the nine months ended September 30, 2019,
primarily due to fewer trips flown, coupled with worldwide supply chain
disruptions which reduced cargo demand.

Other revenues for the nine months ended September 30, 2020, decreased by $193
million, or 17.4 percent, year-over-year. The decrease was primarily due to a
decrease in income from business partners, including Chase and the impact on
spend on the Company's co-brand card, driven by the decline in consumer spending
due to economic uncertainty and widespread restrictions related to the COVID-19
pandemic.

Operating Expenses

Operating expenses for the nine months ended September 30, 2020, decreased by
$4.7 billion, or 32.8 percent, compared with the first nine months of 2019,
while capacity decreased 32.0 percent over the same prior year period.
Historically, except for changes in the price of fuel, changes in Operating
expenses for airlines have been largely driven by changes in capacity, or ASMs.
However, the Company's operating expenses are largely fixed once flight
schedules are published, and the Company has experienced significant ASM
reductions as a result of flight schedule adjustments related to the COVID-19
pandemic. Flight cancellations are expected to drive unit cost pressure for the
duration of the COVID-19 pandemic, excluding any impacts associated with grants
received under the CARES Act or other legislation. The following table presents
the Company's Operating expenses per ASM for the first nine months of 2020 and
2019, followed by explanations of these changes on a per ASM basis and dollar
basis:
                                                 Nine months ended September 30,                                         Per ASM          Percent
(in cents, except for percentages)                2020                      2019                   change                change
Salaries, wages, and benefits                          6.58  ¢                   5.16  ¢               1.42  ¢               27.5  %
Payroll support and voluntary Employee
programs, net                                         (1.17)                        -                 (1.17)                    n.m.
Fuel and oil                                           1.89                      2.77                 (0.88)                (31.8)
Maintenance materials and repairs                      0.75                      0.78                 (0.03)                 (3.8)
Landing fees and airport rentals                       1.16                      0.88                  0.28                  31.8
Depreciation and amortization                          1.18                      0.77                  0.41                  53.2

Other operating expenses, net                          1.76                      1.93                 (0.17)                 (8.8)
Total                                                 12.15  ¢                  12.29  ¢              (0.14) ¢               (1.1) %



Operating expenses per ASM for the first nine months of 2020 decreased by 1.1
percent, compared with the first nine months of 2019. The majority of the
year-over-year unit cost decrease in the first nine months of 2020 was driven by
the funding received through the Payroll Support Program, net of an accrual made
for Employees that elected to participate in Voluntary Separation Program 2020
or Extended ETO programs, coupled with decreases in market jet fuel prices,
partially offset by significant capacity reductions as a result of the COVID-19
pandemic. See Note 2 to the unaudited Condensed Consolidated Financial
Statements for further information. Operating expenses per ASM for the first
nine months of 2020, excluding Fuel and oil expense, special items, and
profitsharing (a non-GAAP financial measure), increased 27.6 percent,
year-over-year. See Note Regarding Use of Non-GAAP Financial Measures and the
Reconciliation of Reported Amounts to Non-GAAP Financial Measures for additional
detail regarding non-GAAP financial measures. The majority of the year-over-year
unit cost increase for the first nine months of 2020 was driven by lower
capacity as a result of significant capacity reductions due to the COVID-19
pandemic.

Salaries, wages, and benefits expense for the first nine months of 2020
decreased by $801 million, or 13.2 percent, compared with the first nine months
of 2019. On a per ASM basis, Salaries, wages, and benefits expense for the first
nine months of 2020 increased 27.5 percent, compared with the first nine months
of 2019, as the dollar decrease was more than offset by the 32.0 percent
decrease in capacity. On a dollar basis, the decrease was primarily the result
of no profitsharing expense accrual for the first nine months of 2020 due to the
Company's net loss, compared with a profitsharing accrual of $403 million for
the first nine months of 2019. Excluding profitsharing in both years, the
                                       49
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decrease was driven by lower salaries, wages, and benefits expense, as a result
of Voluntary Separation Program 2020, Extended ETO, and other time off programs
offered by the Company.

Payroll support and voluntary Employee programs, net for the first nine months
of 2020 was a net decrease to expense of $933 million, compared with no amounts
for the first nine months of 2019. On a per ASM basis, Payroll support and
voluntary Employee programs, net for the first nine months of 2020 was a net
reduction of 1.17 cents. The Company recognized a $2.3 billion allocation of
Payroll Support Program proceeds in the first nine months of 2020 as part of the
CARES Act and recognized $792 million and $613 million in cost associated with
the Voluntary Separation Program 2020 and Extended ETO elections, respectively.
See Note 2 to the unaudited Condensed Consolidated Financial Statements for
further information.

Fuel and oil expense for the first nine months of 2020 decreased by $1.7
billion, or 53.5 percent, compared with the first nine months of 2019. On a per
ASM basis, Fuel and oil expense for the first nine months of 2020 decreased 31.8
percent, due to lower market jet fuel prices. On a dollar basis, the majority of
the decrease was attributable to a significant decrease in fuel gallons
consumed, and the remainder of the decrease was due to lower market jet fuel
prices. The Company's average economic jet fuel cost per gallon decreased 25.4
percent, year-over-year, to $1.56 for the first nine months of 2020, from $2.09
for the first nine months of 2019. See Note Regarding Use of Non-GAAP Financial
Measures and the Reconciliation of Reported Amounts to Non-GAAP Financial
Measures for additional detail regarding non-GAAP financial measures. These
figures include $.07 per gallon in premium expense with no cash settlements from
fuel derivative contracts for the first nine months of 2020, compared with $.05
per gallon in premium expense and $.03 per gallon in favorable cash settlements
from fuel derivative contracts for the first nine months of 2019. The Company
continued to operate fewer of its oldest, least fuel-efficient Boeing 737-700
aircraft as a result of capacity reductions due to the COVID-19 pandemic, which,
combined with lower Load factors, resulted in a year-over-year improvement of
7.0 percent in fuel efficiency in the first nine months of 2020.

Maintenance materials and repairs expense for the first nine months of 2020
decreased by $319 million, or 34.8 percent, compared with the first nine months
of 2019. On a per ASM basis, Maintenance materials and repairs expense decreased
3.8 percent, compared with the first nine months of 2019, as the dollar
decreases were largely offset by the 32.0 percent decrease in capacity. On a
dollar basis, approximately 55 percent of the decrease was due to lower engine
maintenance expense due to decreased flight hours, approximately 25 percent was
due to the timing of regular airframe maintenance checks, and the remainder of
the decrease was due to reduced operations and placing a portion of the fleet in
storage.

Landing fees and airport rentals expense for the first nine months of 2020
decreased by $114 million, or 11.0 percent, compared with the first nine months
of 2019. On a per ASM basis, Landing fees and airport rentals expense increased
31.8 percent, compared with the first nine months of 2019, as the dollar
decrease was more than offset by the 32.0 percent decrease in capacity. On a
dollar basis, the majority of the decrease was due to reduced number of Trips
flown in the first nine months of 2020 as a result of the COVID-19 pandemic.

Depreciation and amortization expense for the first nine months of 2020
increased by $34 million, or 3.8 percent, compared with the first nine months of
2019. On a per ASM basis, Depreciation and amortization expense increased 53.2
percent, compared with the first nine months of 2019, primarily as a result of
the 32.0 percent decrease in capacity in response to the COVID-19 pandemic. On a
dollar basis, the majority of the increase was associated with the deployment of
new technology assets.

Other operating expenses, net for the first nine months of 2020 decreased by
$855 million, or 37.8 percent, compared with the first nine months of 2019. On a
per ASM basis, Other operating expenses, net decreased 8.8 percent, compared
with the first nine months of 2019. On both a dollar and per ASM basis, the
majority of the decreases were due to $222 million gains from the sale-leaseback
of 20 aircraft to third parties in two separate transactions in second quarter
2020. The gains from the sale-leaseback transactions were considered special
items and thus excluded from the Company's non-GAAP results. See Note Regarding
Use of Non-GAAP Financial Measures and the Reconciliation of Reported Amounts to
Non-GAAP Financial Measures for additional detail
                                       50
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regarding non-GAAP financial measures. See Note 8 to the Company's unaudited
Condensed Consolidated Financial Statements for further information. Excluding
these special items, on a per ASM basis, Other operating expenses increased as
the dollar decrease was more than offset by the 32.0 percent decrease in
capacity in response to the COVID-19 pandemic. On a dollar basis, approximately
40 percent of the decrease was due to lower credit card fees driven by a severe
reduction in revenues associated with the COVID-19 pandemic, and the majority of
the remainder of the decrease was from various cost savings as a result of
supporting a reduced operation and efforts to reduce discretionary spend.

Other

Other expenses (income) include interest expense, capitalized interest, interest income, and other gains and losses.



Interest expense for the first nine months of 2020 increased by $145 million, or
161.1 percent, compared with the first nine months of 2019, primarily due to
higher debt balances in the first nine months of 2020, and a $9 million
write-off of remaining unamortized costs from the Company's 364-day term loan
entered into in first quarter 2020 and repaid in full during second quarter
2020. For further information on the Company's debt transactions in the first
nine months of 2020, see Note 8 to the unaudited Condensed Consolidated
Financial Statements.

Capitalized interest for the first nine months of 2020 decreased by $4 million,
or 14.8 percent, compared with the first nine months of 2019, primarily due to
Boeing's halt of production of the Company's undelivered MAX aircraft through
May 2020. This decrease was partially offset by interest on technology projects.

Interest income for the first nine months of 2020 decreased by $40 million, or
57.1 percent, compared with the first nine months of 2019, due to lower interest
rates, partially offset by higher cash balances.

Other (gains) losses, net, primarily includes amounts recorded as a result of
the Company's hedging activities. See Note 4 to the unaudited Condensed
Consolidated Financial Statements for further information on the Company's
hedging activities. The following table displays the components of Other (gains)
losses, net, for the nine months ended September 30, 2020 and 2019:
                                                                     Nine months ended September 30,
(in millions)                                                           2020                     2019

Mark-to-market impact from fuel contracts settling in current and future periods

                                             $                40          $          -
Premium cost of fuel contracts not designated as hedges                         22                     -
Mark-to-market impact from interest rate swap agreements                        28                     -
Other                                                                            5                     8
                                                               $                95          $          8



Income Taxes

The Company's effective tax rate was approximately 25.9 percent for the first
nine months of 2020, compared with 22.0 percent for the first nine months of
2019. The higher tax rate for the first nine months of 2020 was a result of the
impact of the Company's current forecasted full year 2020 net loss, which would
allow the Company to carry back such losses to claim tax refunds against taxes
paid related to the tax years 2015 through 2019, some of which were at higher
rates than the current year.

                                       51
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Reconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding
special items) (unaudited)
(in millions, except per share amounts and per ASM amounts)
                                                Three months ended September
                                                            30,                                        Percent         Nine months ended September 30,            Percent
                                                   2020               2019            Change            2020                2019              Change

Fuel and oil expense, unhedged                 $      372          $ 1,070                           $  1,472          $     3,214
Add: Premium cost of fuel contracts designated
as hedges                                              13               20                                 51                   75
Deduct: Fuel hedge gains included in Fuel and
oil expense, net                                       (6)               -                                (16)                 (47)
Fuel and oil expense, as reported              $      379          $ 1,090                           $  1,507          $     3,242
Add: Contracts settling in the current period,
but for which losses were reclassified from
AOCI (a)                                                6                -                                 16                    -
Add: Premium cost of fuel contracts not
designated as hedges                                   11                -                                 22                    -
Fuel and oil expense, excluding special items
(economic)                                     $      396          $ 1,090           (63.7)%         $  1,545          $     3,242           (52.3)%

Total operating expenses, as reported $ 3,204 $ 4,820

                         $  9,683          $    14,406

Add: Payroll support and voluntary Employee
programs, net                                         149                -                                933                    -
Add: Contracts settling in the current period,
but for which losses were reclassified from
AOCI (a)                                                6                -                                 16                    -
Add: Premium cost of fuel contracts not
designated as hedges                                   11                -                                 22                    -

Add: Gain from aircraft sale-leaseback
transactions                                            -                -                                222                    -

Total operating expenses, excluding special
items                                          $    3,370          $ 4,820           (30.1)%         $ 10,876          $    14,406           (24.5)%

Operating income (loss), as reported           $   (1,411)         $   819                           $ (2,648)         $     2,292

Deduct: Payroll support and voluntary Employee
programs, net                                        (149)               -                               (933)                   -
Deduct: Contracts settling in the current
period, but for which losses were reclassified
from AOCI (a)                                          (6)               -                                (16)                   -
Deduct: Premium cost of fuel contracts not
designated as hedges                                  (11)               -                                (22)                   -

Deduct: Gain from aircraft sale-leaseback
transactions                                            -                -                               (222)                   -

Operating income (loss), excluding special
items                                          $   (1,577)         $   819             n.m.          $ (3,841)         $     2,292             n.m.

Other (gains) losses, net, as reported $ 35 $ 3

                         $     95          $         8
Deduct: Mark-to-market impact from fuel
contracts settling in current and future
periods (a)                                           (23)               -                                (40)                   -

Deduct: Premium cost of fuel contracts not
designated as hedges                                  (11)               -                                (22)                   -
Add (Deduct): Mark-to-market impact from
interest rate swap agreements                           1                -                                (28)                   -
Other (gains) losses, net, excluding special
items                                          $        2          $     3           (33.3)%         $      5          $         8           (37.5)%

Income (loss) before income taxes, as reported $ (1,542) $ 819

                         $ (2,925)         $     2,291
Deduct: Payroll support and voluntary Employee
programs, net                                        (149)               -                               (933)                   -
Deduct: Contracts settling in the current
period, but for which losses were reclassified
from AOCI (a)                                          (6)               -                                (16)                   -
Deduct: Gain from aircraft sale-leaseback
transactions                                            -                -                               (222)                   -
Add: Mark-to-market impact from fuel contracts
settling in current and future periods (a)             23                -                                 40                    -
Add (Deduct): Mark-to-market impact from
interest rate swap agreements                          (1)               -                                 28                    -
Income (loss) before income taxes, excluding
special items                                  $   (1,675)         $   819             n.m.          $ (4,028)         $     2,291             n.m.

Provision for income taxes, as reported $ (385) $ 160

                         $   (759)         $       504
Deduct: Net income (loss) tax impact of fuel
and special items, excluding GAAP to Non-GAAP
tax rate difference (b)                               (41)               -                               (350)                   -
Deduct: GAAP to Non-GAAP tax rate difference
(c)                                                   (76)               -                               (168)                   -
Provision for income taxes, net, excluding
special items                                  $     (502)         $   160             n.m.          $ (1,277)         $       504             n.m.


                                       52


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Net income (loss), as reported                $ (1,157)         $  659                          $ (2,166)         $ 1,787
Deduct: Payroll support and voluntary
Employee programs, net                            (149)              -                              (933)               -
Deduct: Contracts settling in the current
period, but for which losses were
reclassified from AOCI (a)                          (6)              -                               (16)               -
Add: Mark-to-market impact from fuel
contracts settling in current and future
periods (a)                                         23               -                                40                -

Deduct: Gain from aircraft sale-leaseback
transactions                                         -               -                              (222)               -

Add (Deduct): Mark-to-market impact from
interest rate swap agreements                       (1)              -                                28                -
Add: Net income (loss) tax impact of special
items, excluding GAAP to Non-GAAP tax rate
difference (b)                                      41               -                               350                -
Add: GAAP to Non-GAAP tax rate difference (c)       76               -                               168                -

Net income (loss), excluding special items $ (1,173) $ 659

       n.m.          $ (2,751)         $ 1,787            n.m.

Net income (loss) per share, diluted, as
reported                                      $  (1.96)         $ 1.23                          $  (3.89)         $  3.29
Deduct: Impact of special items                  (0.22)              -                             (1.96)               -
Deduct: Net impact of net income (loss) above
from fuel contracts divided by dilutive
shares                                           (0.01)              -                             (0.03)               -

Add: Net income (loss) tax impact of special
items, excluding GAAP to Non-GAAP tax rate
difference (b)                                    0.07               -                              0.63                -
Add: GAAP to Non-GAAP tax rate difference (c)     0.13               -                              0.30                -
Net income (loss) per share, diluted,
excluding special items                       $  (1.99)         $ 1.23            n.m.          $  (4.95)         $  3.29            n.m.

Operating expenses per ASM (cents)               12.11  ¢        12.24  ¢                          12.15  ¢         12.29  ¢
Add: Impact of special items                      0.57               -                              1.45                -

Deduct: Fuel and oil expense divided by ASMs (1.44) (2.77)

                        (1.89)           (2.77)

Deduct: Profitsharing expense divided by ASMs        -           (0.36)                                -            (0.34)
Operating expenses per ASM, excluding Fuel
and oil expense, profitsharing, and special
items (cents)                                    11.24  ¢         9.11  ¢         23.4%            11.71  ¢          9.18  ¢         27.6%


(a) See Note 4 to the unaudited Condensed Consolidated Financial Statements for
further information.
(b) Tax amounts for each individual special item are calculated at the Company's
effective rate for the applicable period and totaled in this line item.
(c) Adjustment related to GAAP and Non-GAAP tax rate differences, primarily due
to the Payroll Support Program being excluded as a special item, and reflects
the anticipated benefit of carrying back full year 2020 projected net losses to
claim tax refunds against previous cash taxes paid relating to tax years 2015
through 2019, some of which were at higher rates than the current year.

                                       53
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Note Regarding Use of Non-GAAP Financial Measures



The Company's unaudited Condensed Consolidated Financial Statements are prepared
in accordance with accounting principles generally accepted in the United States
("GAAP"). These GAAP financial statements may include (i) unrealized noncash
adjustments and reclassifications, which can be significant, as a result of
accounting requirements and elections made under accounting pronouncements
relating to derivative instruments and hedging and (ii) other charges and
benefits the Company believes are unusual and/or infrequent in nature and thus
may make comparisons to its prior or future performance difficult.

As a result, the Company also provides financial information in this filing that
was not prepared in accordance with GAAP and should not be considered as an
alternative to the information prepared in accordance with GAAP. The Company
provides supplemental non-GAAP financial information (also referred to as
"excluding special items"), including results that it refers to as "economic,"
which the Company's management utilizes to evaluate its ongoing financial
performance and the Company believes provides additional insight to investors as
supplemental information to its GAAP results. The non-GAAP measures provided
that relate to the Company's performance on an economic fuel cost basis include
Fuel and oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating
income (loss), non-GAAP; Other (gains) losses, net, non-GAAP; Income (loss)
before income taxes, non-GAAP; Provision for income taxes, net, non-GAAP; Net
income (loss), non-GAAP; Net income (loss) per share, diluted, non-GAAP; and
Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and
profitsharing (cents). The Company's economic Fuel and oil expense results
differ from GAAP results in that they only include the actual cash settlements
from fuel hedge contracts - all reflected within Fuel and oil expense in the
period of settlement. Thus, Fuel and oil expense on an economic basis has
historically been utilized by the Company, as well as some of the other airlines
that utilize fuel hedging, as it reflects the Company's actual net cash outlays
for fuel during the applicable period, inclusive of settled fuel derivative
contracts. Any net premium costs paid related to option contracts that are
designated as hedges are reflected as a component of Fuel and oil expense, for
both GAAP and non-GAAP (including economic) purposes in the period of contract
settlement. The Company believes these economic results provide further insight
into the impact of the Company's fuel hedges on its operating performance and
liquidity since they exclude the unrealized, noncash adjustments and
reclassifications that are recorded in GAAP results in accordance with
accounting guidance relating to derivative instruments, and they reflect all
cash settlements related to fuel derivative contracts within Fuel and oil
expense. This enables the Company's management, as well as investors and
analysts, to consistently assess the Company's operating performance on a
year-over-year or quarter-over-quarter basis after considering all efforts in
place to manage fuel expense. However, because these measures are not determined
in accordance with GAAP, such measures are susceptible to varying calculations,
and not all companies calculate the measures in the same manner. As a result,
the aforementioned measures, as presented, may not be directly comparable to
similarly titled measures presented by other companies.

Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Note 4 to the unaudited Condensed Consolidated Financial Statements.



The Company's GAAP results in the applicable periods may include other charges
or benefits that are also deemed "special items," that the Company believes make
its results difficult to compare to prior periods, anticipated future periods,
or industry trends. Financial measures identified as non-GAAP (or as excluding
special items) have been adjusted to exclude special items. Special items
include:
1.Proceeds related to the Payroll Support Program under the CARES Act, which
were used to pay Employee salaries, wages, and benefits;
2.Accrued charges related to the special termination benefits upon Employees
accepting Voluntary Separation Program 2020 or Extended ETO as of September 30,
2020;
3.Gains associated with the sale-leaseback of ten Boeing 737-800 aircraft and
ten Boeing 737 MAX 8 aircraft to third parties; and
                                       54
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4.Unrealized losses related to twelve forward-starting interest rate swap agreements. During the first nine months of 2020, the interest rate swap agreements, which were related to twelve 737 MAX 8 aircraft leases (with deliveries originally scheduled between June 2020 and September 2020), were de-designated due to the scheduled delivery range no longer being probable, resulting in the mark-to-market changes being recorded to earnings.



Because management believes special items can distort the trends associated with
the Company's ongoing performance as an airline, the Company believes that
evaluation of its financial performance can be enhanced by a supplemental
presentation of results that exclude the impact of special items in order to
enhance consistency and comparativeness with results in prior periods that do
not include such items and as a basis for evaluating operating results in future
periods. The following measures are often provided, excluding special items, and
utilized by the Company's management, analysts, and investors to enhance
comparability of year-over-year results, as well as to industry trends: Fuel and
oil expense, non-GAAP; Total operating expenses, non-GAAP; Operating income
(loss), non-GAAP; Other (gains) losses, net, non-GAAP; Income (loss) before
income taxes, non-GAAP; Provision for income taxes, net, non-GAAP; Net income
(loss), non-GAAP; Net income (loss) per share, diluted, non-GAAP; and Operating
expenses per ASM, non-GAAP, excluding Fuel and oil expense and profitsharing
(cents).

The Company has also utilized and provided average cash burn and average daily
core cash burn. Average cash burn is a non-GAAP financial measure. Cash burn is
a supplemental measure that most U.S. airlines began providing in 2020 to
measure liquidity in light of the negative financial effects of the pandemic.
For the three months ended September 30, 2020, average daily core cash burn was
approximately $16 million, calculated as Loss before income taxes, non-GAAP, of
$1.7 billion (as provided in the above Non-GAAP reconciliation), adjusted for
Depreciation and amortization expense of $315 million; Capital expenditures of
$89 million; and adjusted amortizing debt service payments of approximately
$59 million; divided by 92 days in the period. The Company utilizes average
daily core cash burn to monitor the performance of its core business as a proxy
for its ability to achieve sustainable cash and profit break-even results.

Given that the Company's cash burn calculation is derived from Loss before
income taxes, non-GAAP, the Company excludes the following items in its
calculation of average core cash burn: financing transactions; Payroll Support
Program proceeds; Supplier proceeds; voluntary separation and Extended ETO
program payments; and other changes in working capital. Cash burn methodology
varies by airline, and the Company's third quarter 2020 average daily core cash
burn of $16 million may differ materially by utilizing cash burn calculations
that adjust for changes in working capital. Utilizing an alternative cash burn
approach, which adjusts for changes in working capital-including changes in Air
traffic liability and cash payments for voluntary separation and Extended ETO
programs, among other items-the Company's third quarter 2020 daily cash burn was
also approximately $16 million.

While the Company has historically provided its calculation of non-GAAP return
on invested capital ("ROIC") as a measure of financial performance used by
management to quantify the Company's effectiveness in generating returns
relative to the capital invested in the business, the Company has chosen not to
present ROIC in this Form 10-Q and does not expect to present it again until and
if the operating environment normalizes sufficiently to return the Company to
operating income instead of operating loss. The COVID-19 pandemic has materially
and adversely affected passenger demand and bookings, thereby materially and
adversely affecting operating income and cash flows from operations. As a
result, management ceased focus on ROIC and instead has focused on bolstering
the Company's liquidity through cost reductions, financings, sale-leaseback
transactions, and securities offerings. In this environment, management believes
ROIC is not a meaningful measure of financial performance, nor is it being used
by management to evaluate the business in the current environment. See Liquidity
and Capital Resources for a discussion of the Company's liquidity.

                                       55
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Liquidity and Capital Resources



The enormous impact of the COVID-19 pandemic on the U.S. travel industry created
an urgent liquidity crisis for the entire airline industry, including the
Company. However, due to the Company's low balance sheet leverage, large base of
unencumbered assets, and investment-grade credit ratings, the Company was able
to quickly access additional liquidity during the first nine months of 2020, as
Customer cancellations spiked and sales and revenues dropped while the Company
continued to experience significant fixed operating expenses. See Note 2 and
Note 8 to the unaudited Condensed Consolidated Financial Statements for further
information regarding the impact of the COVID-19 pandemic, as well as the
transactions completed and assistance obtained under the CARES Act. Much
uncertainty remains about the time it will take for air travel demand to
recover, and the Company continues to assess its immediate and near-term
liquidity needs. The Company also continues to assess various sources and
options including public and private financings to bolster its liquidity and
believes that, given current market conditions, it has opportunities to do so.

Net cash used in operating activities was $1.1 billion for the three months
ended September 30, 2020, compared with $1.1 billion provided by operating
activities in the same prior year period. For the nine months ended September
30, 2020, net cash used in operating activities was $531 million, compared with
$3.2 billion provided by operating activities in the nine months ended
September 30, 2019. The operating cash flows for the nine months ended
September 30, 2020, were affected primarily by the Company's Net loss (as
adjusted for noncash items), and a $65 million decrease in Accounts payable and
accrued expenses due to the Company's $667 million profitsharing distribution to
Employees for 2019, a significant decline in amounts payable for passenger
excise taxes and segment fees as a result of the decline in passenger ticket
sales, and the suspension of collection of certain ticket taxes as dictated by
the CARES Act. These were partially offset by $2.4 billion in Payroll Support
Program grant proceeds received as part of the CARES Act, of which approximately
$2.3 billion of this direct payroll support were used to offset eligible costs
and thus included in operating activities, with the remaining $40 million
allocated to the value of warrants issued and thus included in financing
activities, and the $1.2 billion associated with the Company's Voluntary
Separation Program 2020 and Extended ETO plans, which represents the amounts
accrued, net of amounts reduced during the nine months ended September 30, 2020.
These net decreases in operating activities were partially offset by a
$1.6 billion increase in Air traffic liability. The increase in Air traffic
liability was due to ticket sales in January and February 2020 for future travel
that have not been flown, as a result of the COVID-19 pandemic, and growth in
Rapid Rewards points earned due to multiple bonus point offers throughout the
first nine months of 2020. For the nine months ended September 30, 2019, in
addition to the Company's Net income (as adjusted for noncash items), there was
an $897 million increase in Air traffic liability as a result of bookings for
future travel and sales of loyalty points to business partners. Net cash
provided by operating activities is primarily used to finance capital
expenditures, repay debt, and provide working capital. Historically, the Company
has also used net cash provided by operations to fund stock repurchases and pay
dividends; however these shareholder return activities have been suspended due
to restrictions associated with the CARES Act. See Note 2 to the unaudited
Condensed Consolidated Financial Statements for further information.

Net cash used in investing activities was $434 million during the three months
ended September 30, 2020, compared with $359 million used in investing
activities in the same prior year period. Net cash used in investing activities
totaled $107 million during the nine months ended September 30, 2020, compared
with $447 million used in the same prior year period. Investing activities in
both years included Capital expenditures, and changes in the balance of the
Company's short-term and noncurrent investments. The Company also raised
$815 million from the sale-leaseback of 20 aircraft (see Note 8 to the unaudited
Condensed Consolidated Financial Statements for more details on the
sale-leaseback transactions) and received $428 million of Supplier proceeds
during the nine months ended September 30, 2020, which the Company considers an
offset to its aircraft capital expenditures. See Note 12 to the unaudited
Condensed Consolidated Financial Statements for further information. During the
nine months ended September 30, 2020, Capital expenditures were $425 million,
compared with $766 million in the same prior year period, the majority of which
included ongoing technology projects, airport and other facility construction
projects, and progress payments related to new aircraft to be delivered to the
Company for both periods. Capital expenditures decreased, year-over-year,
largely due to a decrease in technology project expenditures, progress payments,
and several projects being placed into service since September 30, 2019. The
                                       56
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Company has more than offset its originally planned annual 2020 capital spending
of approximately $1.4 billion to $1.5 billion, primarily due to its fleet
delivery expectations with Boeing, with its receipt of proceeds from
sale-leaseback transactions, supplier proceeds, and the cancellation or deferral
of the majority of its capital investment projects originally planned for 2020.
In light of the current environment, the Company and Boeing agreed to an
arrangement requiring the Company to take delivery of no more than 48 aircraft
through December 31, 2021. The Company will continue discussions with Boeing to
restructure its aircraft order book, and make any further adjustments to the
delivery schedule and its capital expenditures as circumstances related to the
MAX groundings and COVID-19 pandemic evolve. See Notes 2 and 12 to the unaudited
Condensed Consolidated Financial Statements for further information.

Net cash provided by financing activities was $1.2 billion during the three
months ended September 30, 2020, compared with $690 million used in financing
activities for the same prior year period. Net cash provided by financing
activities was $10.2 billion during the nine months ended September 30, 2020,
compared with $2.1 billion used in financing activities for the same prior year
period. During the nine months ended September 30, 2020, the Company borrowed
$13.6 billion, through various transactions, as explained in detail in Notes 2
and 8 to the unaudited Condensed Consolidated Financial Statements. These
financings were partially offset by the repayment in second quarter 2020 of all
$3.7 billion borrowed under the Company's Amended and Restated 364-Day Credit
Agreement and full repayment of the $1.0 billion drawn under the Company's
Amended and Restated Revolving Credit Agreement. See Note 8 to the unaudited
Condensed Consolidated Financial Statements for further information on the
Company's debt agreements. In the first nine months of 2020, the Company also
repurchased $451 million of its outstanding common stock, paid $188 million in
cash dividends to Shareholders, and repaid $295 million in debt and finance
lease obligations. The Company expects to repay approximately $543 million in
debt and finance lease obligations during the remainder of 2020. During the nine
months ended September 30, 2019, the Company repurchased $1.45 billion of its
outstanding common stock, paid $372 million in cash dividends to Shareholders,
and repaid $245 million in debt and finance lease obligations.

Since March, the Company has reduced annual 2020 spending by approximately
$8 billion, compared with original plans. Average daily core cash burn was
approximately $16 million in third quarter 2020, compared with second quarter
2020 average core cash burn of $23 million per day. The Company's average core
cash burn in October is currently estimated to be approximately $12 million per
day, and in fourth quarter 2020 is currently estimated to be approximately $11
million per day, driven primarily by continued modest improvements in close-in
leisure demand and booking trends, as well as cost savings from voluntary
Employee leave programs. Cash burn is a supplemental measure that most U.S.
airlines began providing in 2020 to measure liquidity in light of the negative
financial effects of the pandemic. Average core cash burn is calculated as Loss
before income taxes, non-GAAP, adjusted for Depreciation and amortization
expense; Capital expenditures; and adjusted amortizing debt service payments;
divided by 92 days in the period. The Company utilizes average daily core cash
burn to monitor the performance of its core business as a proxy for its ability
to achieve sustainable cash and break-even earnings results. Average core cash
burn projections do not reflect the potential impact of special items because
the Company cannot reliably predict or estimate those items or their impact to
its financial statements in future periods. Accordingly, the Company believes a
reconciliation of non-GAAP financial measures to the equivalent GAAP financial
measures for projected results is not meaningful or available without
unreasonable effort. See Note Regarding Use of Non-GAAP Financial Measures and
the Reconciliation of Reported Amounts to Non-GAAP Financial Measures for
additional detail regarding non-GAAP financial measures.

Given that the Company's cash burn calculation is derived from Loss before
income taxes, non-GAAP, the Company excludes the following items in its
calculation of average core cash burn: financing transactions; Payroll Support
Program proceeds; Supplier proceeds; voluntary separation and Extended ETO
program payments; and other changes in working capital. Cash burn methodology
varies by airline, and the Company's third quarter 2020 average daily core cash
burn of $16 million may differ materially by utilizing cash burn calculations
that adjust for changes in working capital. Utilizing an alternative cash burn
approach, which adjusts for changes in working capital-including changes in Air
traffic liability and cash payments for voluntary separation and Extended ETO
programs, among other items-the Company's third quarter 2020 daily cash burn was
also approximately $16 million.
                                       57
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As a result of the significant actions taken by the Company to bolster liquidity
and its belief that it can secure additional financing at favorable terms, if
needed, the Company decided not to participate in the separate secured loan
program established under the CARES Act with respect to a potential loan with an
estimated principal amount of approximately $2.8 billion.

The Company is a "well-known seasoned issuer" and has an effective shelf
registration statement registering an indeterminate amount of debt and equity
securities for future sales. The Company currently intends to use the proceeds
from any future securities sales off this shelf registration statement for
general corporate purposes.

The Company has access to $1.0 billion under its Amended and Restated Revolving
Credit Agreement. The Amended and Restated Revolving Credit Agreement has an
accordion feature that would allow the Company, subject to, among other things,
the procurement of incremental commitments, to increase the size of the facility
to $1.5 billion. Interest on the facility is based on the Company's credit
ratings at the time of borrowing. At the Company's current ratings, the interest
cost would be LIBOR plus a spread of 200.0 basis points. The facility contains a
financial covenant requiring a minimum coverage ratio of adjusted pre-tax income
to fixed obligations, as defined. However, the Company has a holiday on meeting
this financial covenant through March 31, 2021. The facility also contains a
financial covenant to maintain unrestricted cash and cash equivalents of
$2.5 billion at all times under the Amended and Restated Revolving Credit
Agreement; the Company was compliant with this requirement as of September 30,
2020. There were no amounts outstanding under the Amended and Restated Revolving
Credit Agreement as of September 30, 2020.

On March 17, 2020, Moody's downgraded the Company's credit ratings to "Baa1"
from "A3." On March 18, 2020, Standard & Poor's downgraded the Company's credit
ratings to "BBB" from "BBB+." On April 10, 2020, Fitch downgraded the Company's
credit ratings to "BBB+" from "A-." The downgrades of the Company's
investment-grade ratings were based on the Company's increased level of credit
risk as a result of the financial impacts of the COVID-19 pandemic. See Note 2
to the unaudited Condensed Consolidated Financial Statements for further
information on the impacts of the COVID-19 pandemic.

Although not the case at September 30, 2020, due to the Company's recent
significant financing activities, the Company has historically carried a working
capital deficit, in which its current liabilities exceed its current assets.
This is common within the airline industry and is primarily due to the nature of
the Air traffic liability account, which is related to advance ticket sales,
unused funds available to Customers, and loyalty deferred revenue, which are
performance obligations for future Customer flights, do not require future
settlement in cash, and are mostly nonrefundable. See Note 6 to the unaudited
Condensed Consolidated Financial Statements for further information. The Company
has various options available to meet its capital and operating commitments,
including unrestricted cash and short-term investments of $14.6 billion as of
September 30, 2020, and anticipated future internally generated funds from
operations. However, the COVID-19 pandemic continues to evolve and could have a
material adverse impact on the Company's ability to meet its capital and
operating commitments. See Note 2 to the unaudited Condensed Consolidated
Financial Statements for further information on the impacts of the COVID-19
pandemic. The Company will continue to consider various financing options to
maximize liquidity and supplement cash requirements, as necessary.

Contractual Obligations and Contingent Liabilities and Commitments



As previously disclosed, the Company has an agreement with Boeing to take
delivery of no more than 48 MAX aircraft through December 31, 2021. While the
Company and Boeing continue discussions to restructure the Company's aircraft
order book, the delivery schedule below reflects existing contractual
commitments. In addition to the firm deliveries from Boeing, the Company has
existing agreements with various third parties to lease 16 MAX aircraft. The
Company will continue collaborating with Boeing to review its aircraft order
book and make any further adjustments to the delivery schedule as circumstances
related to the MAX groundings and COVID-19 pandemic evolve. The Company offers
no assurances that current estimations and timelines are correct.

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As of September 30, 2020, the Company had firm deliveries and options for Boeing 737 MAX 7 and 737 MAX 8 aircraft as follows:


                                                    The Boeing Company
                                 MAX 7              MAX 8
                              Firm Orders        Firm Orders                  MAX 8 Options             Additional MAX 8s               Total
2020-2021                             7                100                             -                          16                       123     (a)(b)
2022                                  -                 27                            14                           -                        41
2023                                 12                 22                            23                           -                        57
2024                                 11                 30                            23                           -                        64
2025                                  -                 40                            36                           -                        76
2026                                  -                  -                            19                           -                        19

                                     30                219          (c)              115                          16          (d)          380

(a) 2020-2021 Contractual Detail


                                                                       The Boeing Company
                                                               MAX 7                       MAX 8
                                                            Firm Orders                 Firm Orders             Additional MAX 8s             Total
2019 Contractual Deliveries                                        7                           20                        13                      40
2020 Contractual Deliveries                                        -                           35                         3                      38
2021 Contractual Deliveries                                        -                           45                         -                      45
2020-2021 Contractual Total                                        7                          100                        16                     123


The 2020-2021 combined contractual total includes 40 contractual aircraft that
the Company expected to be delivered in 2019, but were not received due to the
MAX groundings, and up to 38 contractual aircraft previously expected in 2020.
The Company is in discussions with Boeing to restructure its delivery schedule
for the MAX aircraft and both parties have agreed to an interim arrangement that
the Company will take no more than 48 MAX deliveries through the end of 2021,
instead of the 123 shown above.

(b) Includes one contractual aircraft delivery that shifted from 2019 to 2021.
(c) The Company has flexibility to substitute 737 MAX 7 in lieu of 737 MAX 8
firm orders, upon written advance notification as stated in the contract.
(d) To be acquired in leases from various third parties.

Based on the Company's existing commitment contract with Boeing as reflected in
the delivery schedule above, in which the Company has shifted its 2019 and
year-to-date 2020 obligations into future periods, the Company's capital
commitments associated with its firm orders are as follows: $2.8 billion
combined for remaining 2020 and 2021 (of which $1.7 billion is contractually
related to 2021), $1.2 billion in 2022, $1.6 billion in 2023, $1.9 billion in
2024, and $1.5 billion thereafter. However, based on the interim arrangement
with Boeing that the Company will take no more than 48 MAX aircraft through
December 31, 2021, as noted above, the Company's combined commitments for the
remaining portion of 2020 and full year 2021 would be a total of no more than $1
billion. The Company's aircraft spending will continue to be impacted by the
status of the grounding of the MAX aircraft, as all MAX deliveries are suspended
until the FAA order is rescinded. The Company is in discussions with Boeing to
refresh its order book and the timeline of future deliveries is uncertain.

For aircraft commitments with Boeing, the Company is required to make cash
deposits toward the purchase of aircraft in advance. These deposits are
classified as Deposits on flight equipment purchase contracts in the unaudited
Condensed Consolidated Balance Sheet until the aircraft is delivered, at which
time deposits previously made are deducted from the final purchase price of the
aircraft and are reclassified as Flight equipment.

The Company returned two leased Boeing 737-700 aircraft and retired one owned
Boeing 737-700 aircraft during third quarter 2020, and expects to return three
leased Boeing 737-700 aircraft during fourth quarter 2020.

                                       59
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The following table details information on the aircraft in the Company's fleet as of September 30, 2020:


                            Average          Number            Number      Number
   Type         Seats      Age (Yrs)      of Aircraft          Owned       Leased
  737-700        143          16              493         (a)  390         103
  737-800        175           5              207              190          17
 737 MAX 8       175           2               34         (b)   21          13
  Totals                      12              734              601         133


(a) Included 70 Boeing 737 Next Generation aircraft removed from active fleet
and placed in long-term storage as of September 30, 2020.
(b) All 34 of the Company's MAX 8 aircraft were grounded as of March 13, 2019,
to comply with an FAA emergency order issued for all U.S. airlines to ground all
MAX aircraft. See Note 12 to the unaudited Condensed Consolidated Financial
Statements for further information.
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Cautionary Statement Regarding Forward-Looking Statements



This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are based on, and include
statements about, the Company's estimates, expectations, beliefs, intentions,
and strategies for the future, and the assumptions underlying these
forward-looking statements. Specific forward-looking statements can be
identified by the fact that they do not relate strictly to historical or current
facts and include, without limitation, statements related to the following:

•the Company's financial outlook, projections, and expectations, including
underlying assumptions and estimates, in particular related to the anticipated
impact of the COVID-19 pandemic;
•the Company's capacity plans and expectations, including underlying assumptions
and estimates, in particular related to the anticipated impacts of the COVID-19
pandemic on demand and bookings;
•the Company's goals and expectations with respect to its Voluntary Separation
Program 2020 and Extended ETO program;
•the Company's plans, estimates, expectations, and assumptions related to the
return of the 737 MAX to service and related fleet planning assumptions,
including with respect to the Company's fleet order book and delivery schedule
and fleet retirement plans;
•the Company's network plans and related expected benefits;
•the Company's expected flight schedule adjustments and the related impact on
the Company's results of operations;
•the Company's plans, expectations, and estimates related to fuel costs and the
Company's related management of risk associated with changing jet fuel prices,
including the assumptions underlying the estimates;
•the Company's expectations with respect to capital expenditures, daily cash
burn, and liquidity, including its ability to meet its ongoing capital,
operating, and other obligations, and the Company's anticipated needs for, and
sources of, funds;
•the Company's assessment of market risks; and
•the Company's plans and expectations related to legal and regulatory
proceedings.

While management believes these forward-looking statements are reasonable as and
when made, forward-looking statements are not guarantees of future performance
and involve risks and uncertainties that are difficult to predict. Therefore,
actual results may differ materially from what is expressed in or indicated by
the Company's forward-looking statements or from historical experience or the
Company's present expectations. Factors that could cause these differences
include, among others:

•the extent of the COVID-19 pandemic, including the duration, spread, severity,
and any recurrence of the COVID-19 pandemic; the duration and scope of related
government orders and restrictions; the duration and scope of the Company's
related self-imposed restrictions to address customer and employee health
concerns; the extent of the impact of the COVID-19 pandemic on overall demand
for air travel and the Company's related business plans and decisions; any
negative impact of the COVID-19 pandemic on the Company's ability to retain key
Employees; and any negative impact of the COVID-19 pandemic on the Company's
access to capital;
•the impact of economic conditions, governmental actions, extreme or severe
weather and natural disasters, fears of terrorism or war, actions of
competitors, fuel prices, consumer perception, and other factors beyond the
Company's control, on consumer behavior and the Company's results of operations
and business decisions, plans, strategies, and results;
•the impact of labor matters on the Company's results of operations, business
decisions, plans, and strategies;
                                       61
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•the impact of the Company's obligations and restrictions related to its
participation in the U.S. Treasury's Payroll Support Program, including
restrictions and obligations associated with its loan from, and warrants issued
to, the U.S. Treasury; and any related negative impact on the Company' ability
to retain key Employees;
•the Company's ability to obtain additional payroll support or other financing
from the U.S. Treasury and the impact of any related additional restrictions on
the manner in which the Company operates its business;
•the enactment or adoption of future laws, statutes, and regulations and
interpretations or enforcement of current and future laws, statutes, and
regulations that affect the terms or application of the Payroll Support Program
documents and that may have a material adverse effect on the Company;
•the Company's dependence on Boeing and the FAA with respect to the timing of
the return of the 737 MAX to service and any related changes to the Company's
operational and financial assumptions and decisions;
•the Company's dependence on Boeing with respect to the Company's fleet order
book and delivery schedule;
•the Company's dependence on other third parties for products and services, and
the impact on the Company's operations and results of operations of any third
party delays or non-performance;
•the impact of fuel price changes, fuel price volatility, volatility of
commodities used by the Company for hedging jet fuel, and any changes to the
Company's fuel hedging strategies and positions, on the Company's business plans
and results of operations; and
•other factors as set forth in the Company's filings with the Securities and
Exchange Commission, including the detailed factors discussed under the heading
"Risk Factors" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2019, and in this Quarterly Report on Form 10-Q for the quarter
ended September 30, 2020.

Caution should be taken not to place undue reliance on the Company's
forward-looking statements, which represent the Company's views only as of the
date this report is filed. The Company undertakes no obligation to update
publicly or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.

                                       62

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JetBlue Plane's Near-Collision With Southwest Plane at Washington Airport Faces FAA Probe	Apr. 19	MT
Wall St slips as dour earnings, chip stocks weigh	Apr. 17	RE
Wall St set for higher open on megacaps boost; earnings, Fed comments on tap	Apr. 17	RE
Futures inch up on megacap support; earnings, Fed comments on tap	Apr. 17	RE
Southwest Expects Only Half of Boeing Deliveries This Year	Apr. 15	MT
Overreacting much?	Apr. 12
Southwest Expects Only Half of Boeing Deliveries This Year	Apr. 12	MT
Boeing crisis: Southwest may face lack of jets	Apr. 12	RE
Southwest's expected 2024 Boeing jet deliveries keep shrinking, sources say	Apr. 11	RE
SOUTHWEST AIRLINES EXPECTS TO RECEIVE ROUGHLY 20 JETS…	Apr. 11	RE
Boeing focused on 'trust building' in Latin America after global CEO shake-up	Apr. 11	RE
Southwest Airlines Flight Lost Engine Cover Due to Maintenance Issue, Regulator Says	Apr. 11	MT
NTSB says Southwest engine cover loss caused by maintenance issue	Apr. 10	RE
Boeing March, First-Quarter Deliveries Drop Year Over Year	Apr. 09	MT
Susquehanna Cuts Price Target on Southwest Airlines to $27 From $30, Maintains Neutral Rating	Apr. 09	MT
News Highlights : Top Company News of the Day - Tuesday at 1 AM ET	Apr. 09	DJ
Airlines struggle with lack of planes as summer travel set to hit record levels	Apr. 09	RE
News Highlights : Top Company News of the Day - Monday at 5 PM ET	Apr. 08	DJ
News Highlights : Top Company News of the Day - Monday at 7 PM ET	Apr. 08	DJ
News Highlights : Top Company News of the Day - Monday at 3 PM ET	Apr. 08	DJ
News Highlights : Top Company News of the Day - Monday at 1 PM ET	Apr. 08	DJ
Top Midday Stories: Taiwan Semiconductor to Get $6.6 billion in US subsidies; Tesla to unveil 'Robotaxi'; Blackstone Acquires AIR Communities; FAA to Investigate Boeing Incident; Spirit Airlines to Defer Airbus Deliveries; JPMorgan Says COO 'Immediately Ready' to Lead; Microsoft to Open AI Hub in London; Walmart-backed Ibotta Selling 2.5 Million Shares in IPO	Apr. 08	MT
News Highlights : Top Company News of the Day - Monday at 11 AM ET	Apr. 08	DJ
Trending : FAA Investigates Loss of Engine Cover on Southwest Flight	Apr. 08	DJ
FAA to Probe Loss of Engine Cover on Southwest Airlines Boeing Jet -- Update	Apr. 08	DJ

	1st Jan change	Capi.
SOUTHWEST AIRLINES CO.	+2.94%	17.79B
AMERICAN AIRLINES GROUP INC.	+5.82%	9.51B
JUNEYAO AIRLINES CO., LTD	+2.67%	3.75B
EXCHANGE INCOME CORPORATION	+2.08%	1.59B
FRONTIER GROUP HOLDINGS, INC.	+30.22%	1.59B
VIETNAM AIRLINES	+35.10%	1.44B
AEGEAN AIRLINES S.A.	+8.38%	1.18B
ALLEGIANT TRAVEL COMPANY	-24.69%	1.1B
CHINA EXPRESS AIRLINES CO.,LTD	-23.95%	955M
SPICEJET LIMITED	+4.35%	582M

Southwest Airlines Co.

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US8447411088

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SOUTHWEST AIRLINES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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