2012 SouthweSt AirlineS one report

2012 SouthweSt AirlineS one report

http://www.southwestonereport.com/2012

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BuilDinG luV p. 3

GArY’S MeSSAGe p. 4

FeAture StorieS p. 7 •AirTran Integration •All-NewRapidRewards •FleetModernizationandthe737-800 •GreenFilter

30,000-Foot View p. 18 •Overview •AwardsandAccolades

perForMAnce p. 21•PerformanceData•StrategicPlan•2012Performance•Ten-YearSummary•FinancialManagementApproach

people p. 40•PeopleData•Employees•Customers•Communities•Suppliers•SocialManagementApproach

plAnet p. 71•PlanetData•EnvironmentalImpacts•EnvironmentalConservation•EnvironmentalManagementSystem•WasteManagementandRecycling•EnvironmentalManagementApproach

corporAte GoVernAnce p. 98

GloBAl reportinG initiAtiVe AnD cDp p. 103 •Overview •GRIandCDPIndex •ExternalAssurance

our MiSSion p. 112

contAct uS p. 112

2012 Southwest Airlines One Report // Table of Contents

Welcometothe2012 Southwest Airlines One ReporttM.As part of our commitment to conserve our naturalresources,we’reagainpublishingthe2012OneReportexclusively online at southwest.com/citizenship andhttp://southwest.investorroom.com.Thisyearwehaveintegrated a pop-outmenu that canbe accessedbythebuttonintheupperright-handcorner.Thismenuisavailableonanypageofthisdocument.Allsectionsofthisdocument are accessibleby clicking through thismenuorhereinthetableofcontents.Pleasenotethatthesefeatureswillonlybeavailable ifyouareviewingthisdocument throughAdobeAcrobatProorAdobeAcrobatReader.Youcandownloadeitheratadobe.com.Footnotes throughout the report are available at theendofeachrespectivesection.

http://get.adobe.com/reader

http://www.southwest.com/citizenship

http://southwest.investorroom.com


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Building luVFromourfirstflightsonJune18,1971,SouthwestgaveAmericatheFreedomtoFlybystartinga low-fare revolution. In the 1990s,wewere thefirstairline tohaveawebsiteandsell ticketsonline,makingflyingevenmoreaccessible.Today,morethanfourdecadesafterourfounding,weremainsteadfasttoour purpose of connecting people to what’s important in their lives through friendly, reliable, and low-cost air travel. Asaresult,we’vebecomethe:

• Domestic airline industry leader in Customer Satisfaction1

• Nation’s largest airline,2 carrying more domestic passengers than our competitors

• Record-holder for the longest-running profitability streak in the u.S. airline industry, with an unprecedented string of 40 consecutive years of profitability

Andouraccomplishmentsdon’tstopthere.Since1994,FORTUNE has repeatedly named us to its list of the world’s Most Admired companies,andwe’vemadethetoptenallbuttwoofthoseyears. An amazing feat, considering Southwest didn’t even fly beyond the continental UnitedStatesuntilApril2013.Weareproudtobeoneofthemosthonoredairlinesintheworld,knownforourtriplebottomlineapproachthattakesintoaccountourperformanceandproductivity,theimportanceofourPeopleandthecommunitiesweserve,andourcommitmenttoefficiencyandtheplanet.AsofDec.31,2012,weoperatedmorethan3,700dailyflights,serving97destinationsin41states,theDistrictofColumbia,theCommonwealthofPuertoRico,andsixnear-internationalcountries3 andhadnearly46,000Employees4 systemwide.OnMay2, 2011,wecompleted theacquisitionofAirTranAirwaysandnowoperateAirTranasawhollyownedsubsidiaryofSouthwest.

We’reinthemidstofimplementingabold,five-yearstrategicplantomakeusbetter,stronger,andmorecompetitive.Ourplanincludesfivemajorinitiatives—AirTranIntegration,All-NewRapidRewards frequent flyer program, Fleet Modernization, the 737-800s, and a New ReservationSystemandInternationalCapabilities—whichsupportourPurposeandour Vision to become the World’s Most Loved, Most Flown, and Most Profitable Airline.

2012 Southwest Airlines One Report // Building LUV

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Footnotes1) Fromthe2012yearendU.S.DepartmentofTransportationAirTravelConsumerReportissuedFebruary2013.ToprankingisforSouthwestonly.AirTranrankedthirdin

thesamereport.2)AsmeasuredbythenumberoforiginatingdomesticpassengersboardedandbasedondataavailablefromtheU.S.DepartmentofTransportationasof

Sept.30,2012.3)Near-internationaldestinationsoperatedbyAirTran.4)Basedonactive,full-timeequivalentSouthwestandAirTranEmployeesasofDec.31,2012.


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Gary c. KellyChairmanoftheBoard,President, andChiefExecutiveOfficer

Gary’s MessageTheannual Southwest Airlines One ReportTMcomprehensivelycoversourfinancial,social,andenvironmentalperformance,illustratedthroughourtriplebottomlineofPerformance,People,andPlanet.Forthefourthyear,our2012OneReportadherestotheGlobalReportingInitiative(GRI),aninternationallyrecognizedstandardfortriplebottomlinereporting,andfullycomplieswiththeGRI’sB+applicationlevel.

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2012 Southwest Airlines One Report // Gary’s Message

Gary Kelly at the annual Message to the Field event in Dallas.

2012 Southwest Airlines One Report // Introduction


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To our Stakeholders:F

Theyear2012representedour40thconsecutiveyearofprofit-ability—a remarkable feat unmatched in the U.S. aviationindustry.In2012,weaddedSouthwestAirlinesservicetotwonewstates(GeorgiaandIowa)andsixnewairports.Ouroper-ational performancewas superb, with Southwest achieving83.1 percent ontime performance and recording the bestbaggagehandlinginourhistory.

PerformanceOur2012netincomewas$421million.1Excludingspecialitems,G our2012profits increased26percentyear-over-year to$417million.Our profitswereboostedby anoutstanding recordrevenueperformance.We remain focusedonpreservingourfinancial strength and enhancing Shareholder value. InMay2012, our Board of Directors authorized an increase in ourprevioussharerepurchaseauthorizationto$1billionanda122percent increase in our quarterly dividend.We repaid $578millionindebtandcapitalleaseobligationsduring2012.Asaresult,ourdebt-to-totalcapitalratio(includingaircraftleases)declinedtoapproximately41percentatyearend.Ourcashandshort-term investmentswere a strong$3billion at yearend,andweremaintheonlyinvestment-graderatedU.S.airline.

We’reinthemidstofabold,five-yearstrategicplanthatbeganin2011,which isdesignedtoretainourpositionasAmerica’smostflown2andprofitableairline.Webelieveinourstrategicplan,andIampleasedtoreportonthetremendousprogressmadein2012onourcriticalstrategicinitiatives:

1. AirTran Integration:Weareon trackwithourplan to fullyintegrateAirTranAirwaysintoSouthwestbytheendof2014andachieve$400millioninnet,annualized,pre-taxsynergiesin2013(excludingacquisitionandintegrationexpenses).

2. All-New Rapid Rewards:Thefirst fullcalendaryearofourAll-NewRapid Rewards program exceeded our expecta-tions,withrecordactivityfromexistingMembersandrecordnumbersofnewMembersandcreditcardapplications.

3. Fleet Modernization:Wehaveorderedmore fuel-efficientaircraft,acceleratedthereplacementofourolder737-300sand737-500s,andareretrofittingour737-700sandapor-tionofour-300swithournewEvolveinterior—allofwhichenableustoreduceourunitoperatingcostsaswellasourgreenhousegas(GHG)emissions.

4. 737-800s: Tobettermatchour fleet to longer-haul flyingdestinations,webeganflying-800sinMarch2012andendedtheyearwithatotalof34-800sinourfleet.

5. New Reservation System and International Capabilities:WeselectedAmadeus to implement a reservation system tosupport Southwest’s international service, expected tolaunchin2014.

On the followingpages, in FeatureStories,wehighlight thefirst fourof these fivemajorstrategic initiatives.Thissectionillustratesourintegratedstoriesof2012thatsupportthetriplebottomline.

Collectively,weexpectourstrategicinitiativesandnewrevenuestreams to contribute themajorityof theplanned$1.1 billionyear-over-yearrevenueincreasein2013.Whilethefleetmod-ernizationplansprovide significantgrowthpotential,wedonot plan to grow the fleet until earnings are expected togeneratesufficientreturnsoncapital.Our2013goalremainsa15percentpre-taxreturnoninvestedcapital.

PeopleWith a Warrior Spirit, a Servant’s Heart, and Fun-LUVingAttitude, our nearly 46,000 Employees3 create the uniqueSouthwestCulturethatextendstoournewestAirTranFamilyMembers.OurEmployeesarepassionateaboutourPurposetoconnect people to what’s important in their lives throughfriendly, reliable,and low-costair travel.Wecouldn’tbewhowearewithoutourdedicatedEmployees.

Southwestisthenation’slargestairlineintermsoforiginatingdomestic passengers boarded,2 and, including AirTran, weoperatethelargestfleetofBoeingaircraftintheworld.Thanksto our Employees delivering world-class Customer Serviceeveryday,onceagain,weledthedomesticairlineindustryinCustomer Satisfaction in 2012.4 Southwest has ranked onFORTUNE’sWorld’sMostAdmiredCompanies listeveryyearsince1994,andwewerethrilledtoupholdthatrecordwithourrecentrecognitionin2013astheseventhmostadmiredcom-panyintheworld!

OurCustomerService extends to the communitieswe servethroughourcommitment togivingbackbyvolunteeringourtime and donating tickets and dollars to organizations thatservethoseinneed.In2012,wedonated$20.3millioninmon-etary, in-kind, and ticketdonations toour communities, andourEmployeesvolunteeredmorethan137,000hours.5,*



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PlanetIt’simportanttoustonotonlytakecareofourStakeholders,but also toprotectourPlanet and its natural resources.Weminimizeour impacton the environmentbyusing resourcesresponsibly,conservingfuelandwater,recyclingonboardandon the ground, employing green purchasing practices, andimplementing design and construction practices thatmeetLEED®(LeadershipinEnergyandEnvironmentalDesign)stan-dardsfornewconstructionandbuildingretrofits.

AsfuelisourlargestcostandourlargestcontributortoGHGemissions, our fuel conservation initiatives are crucial. Ourmost recent conservation efforts have centeredonmodern-izationofourfleet—includingnew,moreefficientaircraftandthe new lighter-weight, recyclable Evolve interior for themajorityofourexistingaircraft.Relatedtothis,wecontinuetoincrease the number of electric-powered ground supportequipment(GSE)toreplaceolder,petroleum-poweredGSEinourfleet.

Asaresultofourfleetmodernizationandrelatedfuelconser-vationefforts,ournormalizedGHGemissions,asmeasuredbyvarious intensity ratios, have remained relatively flat or haveshownslightdecreasesdespiteour increase insizeofopera-tionssince2009.

Looking ForwardAswe look to our future in building LUV, our priority is tomaintain the excellence we have built over the past fourdecadeswith our brand, Culture, Customer Service, opera-tionalexcellence,andconsecutiveannualprofits.Iamenthusi-astic about our 2013 plan and believe our transformationeffortswillmakeusbetter, stronger, andmore competitive.And,theoutstandingefforts,commitment,anddedicationofourPeoplegivemeconfidence inour ability to successfullyexecuteourplan.WearecommittedtoourPurpose—tocon-nectpeopletowhat’simportantintheirlivesthroughfriendly,reliable, and low-cost air travel. It is that Purpose that willguide us forwardonour journey in pursuit of ourVision tobecome the World’s Most Loved, Most Flown, and MostProfitableAirline.

Gary c. KellyChairmanoftheBoard,President,andChiefExecutiveOfficerSouthwestAirlinesMay3,2013

Footnotes1) 2012netincomeincludesspecialitems—primarilynoncash,mark-to-market,andotheritemsrequiredforaportionofourfuelhedgeportfolioaswellascostsassociated

withtheacquisitionandintegrationofAirTran.2)AsmeasuredbythenumberoforiginatingdomesticpassengersboardedandbasedondataavailablefromtheU.S.DepartmentofTransportationasofSept.30,2012.3)Basedonactive,full-timeequivalentSouthwestandAirTranEmployeesasofDec.31,2012.4)Fromthe2012yearendU.S.DepartmentofTransportationAirTravelConsumerReportissuedFebruary2013.ToprankingisforSouthwestonly.AirTranrankedthirdinthe

samereport.5)IncludesAirTrandataforcalendaryear2012.* MetricsrevisedasofMay20,2013.EmployeeVolunteerhourswerechangedfrom“morethan118,000”to“morethan137,000.”NumberofticketsgeneratedfromTickets

forTimewaschangedfrom“1,507roundtriptickets”to“1,742roundtriptickets.”


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2012 Southwest Airlines One Report // Feature Stories

AirTran p.8 Integration

Fleet p.12 Modernization andthe737-800

All-New p.10 RapidRewards

GreenFilter p.16

Feature StoriesF

We’re featuring our integrated stories of 2012 that support the triple bottom line and our Vision to become the World’s Most Loved, Most Flown, and Most Profitable Airline.

AtSouthwestAirlines,we’recontinuouslyworkingtobuildonourpastsuccesses,aswefulfillourPurposetoconnectpeopletowhat’simportantintheirlivesthroughfriendly,reliable,andlow-costairtravel.We’reontracktocompletetheintegrationofAirTranAirwaysbytheendof2014.Meanwhile,ourCustomersareenjoyingtheenhancementsofourAll-NewRapidRewardsfrequentflyerprogram.To improvethe Customer Experience, increase fuel efficiency, decrease emissions, reduceoperatingunit costs, and increase revenuepotential,we’remodernizingour fleetwiththeadditionofthe737-800andretrofittingthemajorityofour737fleetwithour new, comfortable, and recyclableEvolve interior—part of ourongoingeffort tooperatewith agreen filter. These initiatives aredesigned to contribute toourgoalofa15percentpre-taxreturnoninvestedcapital.

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WeacquiredAirTranonMay2, 2011,which allowsus toprovideSouthwest’s low-fareservice tomoreCustomers inmoremarkets, creating theopportunity forhundredsofadditionallow-fareitinerariesforthetravelingpublic.Strategically,bothcarriersplaceanemphasisonoutstandingCustomerService;high-quality,low-costoperations;solid,low-farebrands;andstrongEmployeecultures.OurEmployeeshaveworkedhardtofacilitatea thoughtful and smooth integration processwhile providing the same high level ofCustomerServicethatCustomershavecometoexpect.

WehavemadegreatprogressonintegratingAirTranintoSouthwest,andweremainontracktocompletetheintegrationbytheendof2014.SouthwestandAirTranarestrongertogether, andwe can accomplishmore, faster than either couldonourown.Our topdeliverablein2013istoconnectandoptimizetheSouthwestandAirTranroutenetworks.Networkconnectivityisexpectedtosignificantlycontributetoourabilitytoreach$400millioninnet,annualized,pre-taxsynergiesin2013(excludingacquisitionandintegrationexpenses).Ultimately,itisourplanthatourCustomerswillonlyseetheSouthwestlow-farebrandwithonesetofpolicies;single-classconfiguration;onecombinedreservationandticketingsystemandwebsite;andasinglefrequentflyerprogram,RapidRewards®.

HighlightsofAirTranintegrationin2012include:

•HavingthefirstgroupofAirTranEmployeesofficiallyjointheSouthwestFamilyonJan.16

•Beginning Southwest service to Atlanta on Feb. 13, with an initial schedule of 15flightstofivenonstopdestinations

2012 Southwest Airlines One Report // Feature Stories // AirTran Integration

Southwest and Airtran are stronger together and can accomplish more, faster than either could on our own.

FeATURe STORy AirtrAn inteGrAtion

One LUV — AirTran graduates from a Southwest New Hire class.


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2012 Southwest Airlines One Report // Feature Stories // AirTran Integration

•ReceivingourSingleOperatingCertificatefromtheFederalAviationAdministration(FAA)onMarch1,justtenmonthsafterthecloseoftheAirTranacquisition

•Converting11AirTran737-700aircrafttotheSouthwestliveryandEvolveinterior

•ResolvingtheremainingSouthwestandAirTranunionworkgroupseniorityintegra-tionmethodologies

•ConvertingfourAirTrancitiestoSouthwest:Washington,D.C.(Dulles);Seattle;DesMoines,Iowa;andKeyWest,Fla.

•DiscontinuingAirTran serviceat 14 airports identifiedasunsustainable in today’sfuelenvironment

•CompletingtheplannedharmonizationofCustomerpoliciesbetweenthetwocarriers

•IncorporatingallSouthwestandAirTranlocationsintooneenvironmentalmanage-mentsystem

•ExpandingSouthwest’s community outreach toAirTran cities, includingAirTranEmployees’volunteerhoursintheTicketsforTimeprogram

AirTran employees Join Southwest FamilyBytheendof2012,morethan2,100AirTranEmployeestransferredtotheSouthwestFamily.Wenowhave consolidatedHeadquarters functions inDallas and continue to transferEmployeesfromAirTranlocationsinAtlantaandOrlando,Fla.WearewelcomingournewFamilywithopenarms,makingsure theyare informedabout the transferprocessandthebenefitsofworkingatSouthwest.

Combined environmental Management SystemWithourenvironmentalmanagementsystemfullyintegratedtospanallSouthwestandAirTran locations, we are working tomeet our environmental goals systemwide, forexamplehavingzeroviolations.In2012,wealsocompletedtheintegrationofSouthwestand AirTran waste disposal. As AirTran aircraft and locations are transitioned intoSouthwest,eachbeginsfullimplementationofSouthwestsustainabilitypractices.

read more about our environmental initiatives in the planet section.

ForAirTran’sfinancialcontribu-tionstoour2012results,seePerformance.

More than 2,100 AirTran Employees transferred to the Southwest family in 2012.


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2012 Southwest Airlines One Report // Feature Stories // All-New Rapid Rewards

ThefirstfullcalendaryearofourAll-NewRapidRewardsfrequentflyerprogramexceededour expectations.Weacquired recordnumbersof newRapidRewards®Members andcredit card applicationsbybeingmore relevant toourCustomerswith improvedpro-gram features, includingunlimited reward seats, noblackoutdates, points that don’texpire,1pointsearnedforeverydollarspent,andtheoptiontopurchaseadditionalpoints.RapidRewards®Members flewmore flights andonaveragepaidmore for fares, thus,earningmoreRapidRewards®points,in2012.Thenewprogramiswellonitswaytodriv-inghundredsofmillionsinincrementalannualrevenues,netofanyassociatedprogramcosts,by2014.Forthethirdyearinarow,IdeaWorksCompany.comrankedSouthwestashavingthebestRewardSeatAvailabilityofanyU.S.domesticcarrierinits2012WorldwideReportofRewardsAvailability.

ThenewpointsstructurealsofacilitatedcontinuedgrowthinnewRapidRewards®part-nersin2012—ChaseHomeMortgage,ChaseUltimateRewards,e-Miles,Experian,Intuit/TurboTax,andNationalCarRental.Inadditiontobeingrewardedwithflights,SouthwestRapidRewards®creditcardholdershavetheopportunitytoturnpointsintointernationalflights,hotelstays,carrentals,giftcards,andmore.

Designed for RelevanceEnhancementstotheRapidRewards®programoftencomedirectlyfromMemberfeed-back. Toprepare for thedesignof thenewprogram,wecollected insight fromRapidRewards®Members and then took this information into consideration indesigning thenewprogram,soRapidRewards®wouldbemorerelevantandrewardingforourCustomers.

our award-winning, frequent flyer program enhances the Member experience while driving incremental revenues.

FeATURe STORy All-new rApiD rewArDS


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Forinstance,duringthisprocess,wediscoveredasignificantpercentageofMembersintheoldprogramweren’tabletoearnenoughRapidRewards®credittoredeemarewardflight.Withthisinmind,wedesignedthenewprogramtohavepointsthatdon’texpire,somoreMemberscanearnrewardflights.MembersnowalsoearnRapidRewards®pointsbasedonwhattheyspend,ratherthanbasedonasetnumberofpointsperflight.

Throughmonthlye-mailsurveys,socialmedia,anddepartmentsthatinteractdailywithCustomers, we discovered opportunities tomake ourweb site navigation and otherpracticesmoreCustomer-friendly.WelistenedtoourCustomersandhavesinceimprovedintheseareas.

Real Life MomentsOverthesummer,webeganaskingourRapidRewards®Membersforrewardtripphoto-graphsandstories.Wehadaterrificresponsewithmorethan3,000Memberssubmittingtheirvacationphotos.WenarroweddownthephotosbyvalidatingMembers’tripdesti-nations and the corresponding redemption of Rapid Rewards® points. Engaging ourCustomersallowsustosharetheirpassionforSouthwestandprovidegenuineendorse-mentsoftheprogram,aswedidn’tofferanyincentives—otherthantheopportunitytobefeaturedinouradvertisements—toparticipate.InreviewingMembersubmissions,wealso discovered heartfelt stories, which we began featuring in Rapid Rewards®communications.

AsafollowuptoourRapidRewards®“noredtape”advertisingcampaign,infall2012webegan a print and digital advertising campaign that offered proof of the program’sbenefits by featuring realMembers’ vacationphotographs and storiesmadepossiblewiththeirRapidRewards®points.

2012 Southwest Airlines One Report // Feature Stories // All-New Rapid Rewards

read more about how we gain customer Feedback in the people section.


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Webelieveourfleetmodernizationplanprovidessubstantialflexibilitytomanageourfleetneedsinavarietyofeconomic,social,andenvironmentalconditions.Wehaveacquiredandorderedmorefuel-efficientaircraft—737-700sand-800s—andacceleratedreplacementofourolder737Classicand717aircraft,whichenablesustoreduceourunitoperatingcostsaswellasourgreenhousegas(GHG)emissions.WearealsothelaunchcustomeroftheBoeing737MAXaircraft (scheduled fordelivery in 2017),which is evenmore fuelefficientandcosteffectivethanthecurrentgeneration737.Theseaircraftalsowillcontrib-utetotheAirlinesforAmerica(A4A)industry-widegoalsforfuel-efficiencyimprovementsandemissionsreductionsdiscussedinthePlanetsectionunderEnvironmentalConservation. Theincreasedseatingcapacityinthe-800saswellastheEvolveinteriorretrofitsprovidenewrevenueopportunitiesandnewCustomercomfortfeatures.OurfleetmodernizationeffortsenableustocontinuetoappealtoourtriplebottomlineofPerformance,People,andPlanetinthecomingyears,withanestimatedcontributiontopre-taxincomeofmorethan $300 million in 2013, growing to more than $700 million in 2015; CustomerExperienceenhancements;andareducedimpactontheenvironment.Wehavealreadyexperienced improvements in fuelefficiencyasa resultofour fleetmodernizationandanticipatethetrendtocontinue;seeourhistoricfuelefficiencygraphinourEnvironmentalImpactssectionwithinPlanet.

2012 Southwest Airlines One Report // Feature Stories // Fleet Modernization and the 737-800

Modernizing our fleet supports our commitment to the triple bottom line.

FeATURe STORy Fleet MoDerniZAtion AnD the 737-800


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Boeing 737-800sAspart of our fleetmodernizationplans,we received the first of our -800orders inMarch2012andendedtheyearwithatotalof34-800s inour fleet.Comparedtothe-700,the-800providesover20percentmoreseatingcapacitywith175seats;enhancedonboard comfort;more economical longhaul flyingwith lower overall unit costs; andbetterschedulingflexibilityinhigh-demand,slot-controlled,andgate-restrictedmarketsincludingNewYorkLaGuardia (LGA),Newark (EWR), andWashingtonReagan (DCA).The -800’s superior economicsmake servingdestinations likeHawaii,Alaska,Canada,theCaribbean,Mexico,andCentralandSouthAmericamoreattractivetoSouthwest.

In addition to featuringournew, recyclableEvolve interior, ournew -800s include thestylishBoeing Sky interior,which also accommodates the comfort and needs of ourCustomerswith features including a quieter cabin, taller ceilings,moreoverheadbinspace,threelavatories,andimprovedoperationalsecurityfeaturessuchastwooverwingexitsoneachsideoftheaircraft.SustainablefeaturesoftheSkyInteriorincludeenergy-efficientLED readingandceiling lighting,which increase the lighting lifespan ten-fold.Comparedtothesteelbrakesonthe-700,thenewcarbonbrakesonthe-800provideaweightsavingsofmorethan700poundsperaircraft,whichresultsinlessfuelconsump-tionandreducedGHGemissionsforanestimatedemissionsreductionof30poundsofcarbondioxideequivalent(CO2e)per1,000availableseatmiles.

Boeing 737 MAXInDecember2011,weenteredintoanagreementwithBoeingtobethelaunchcustomerofthe737MAXwiththefirstdeliveryexpectedin2017.TheLEAP-1Benginesinthe737MAXareexpectedtoreducefuelburnandcarbondioxideemissionsby10to11percentovertoday’smostfuel-efficient,single-aisleairplane,enablingustoimproveourfuelcostandreduceGHGemissions.Duetoitsfuelefficiency,the737MAXisexpectedtohavethelowestoperatingcosts inthesingle-aislesegmentandanengine/airframecombinationuniquelydesignedtooptimizetheoperatingperformanceofourfleet.

Boeing 737-700sTo replaceourolder, less fuel efficient aircraftprior to the launchof the 737MAX, inadditiontoour-800s,wehavefirmordersandoptionsfor-700aircraft.Theseaircraftare6to7percentmorefuelefficientthanthe737Classicfleet,providingtheopportunitytoimprovefuelburnpriortothe2017expectedlaunchofthe737MAX.

Transition of Boeing 717-200sWeenteredintoanagreementwithDeltaAirLines,Inc.andBoeingCapitalCorp.toleaseorsubleaseall88ofAirTran’sBoeing717-200aircrafttoDelta.TransitioningtheBoeing717fleettoDeltaavoidsaddedcomplexitytoouroperations,asSouthwesthashistoricallyoperated an all-Boeing737 fleet.Deliveries toDelta are expected tobegin inAugust2013 at the rateof approximately three aircraftpermonth. Froma fleetmanagementperspective,weintendtominimizetheimpactofthetransitiononouroperations,asthe717capacity lost isexpectedtobereplacedthroughthecapacitygainedasaresultofnewdeliveriesandextensionoftheretirementdatesofourClassicaircraft.Replacementofthe717aircraftcapacitywith737capacityprovidesrevenueopportunitieswithmoreseatsperaircraft,whilecostingapproximatelythesameamounttoflyonaper-tripbasis.

View our future aircraft delivery schedule.

737-700s—424(61%)

737-500s—20(3%)

737-800s—34(5%)

717-200s—88(13%)

737-300s—128(18%)

Fleet Composition (percentageoffleetasofDec.31,2012)

Total Aircraft:

694


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Evolve: The New Southwest InteriorIn early 2012,wedebutedan important aspectof our fleetmodernizationplan calledEvolve: The New Southwest Interior. Evolve isasleek,newcabin interior thatenhancesCustomer comfort, improves fleet efficiency, and reducesour environmental impact—stayingtruetoourtriplebottomlineofPerformance,People,andPlanet.

During2012,weretrofitted239ofSouthwest’s-700sand11ofAirTran’s-700stofeatureournewEvolveinterior.In2013,weplantocompletetheremainingSouthwest-700sandretrofit78ofour-300aircraftwithEvolve interior.AllnewaircraftwillcomeequippedwithEvolve. TheAirTran -700s that are transitioned to the Southwest livery are alsoexpectedtoberetrofittedwiththeEvolveinterior.

Evolve incorporatesmany cost-saving, environmentally friendly features that put theCustomerExperienceontheforefront.Thenewinteriorincludes:

• Less weight: Thelighter,environmentallyfriendlymaterials,suchastheE-Leatherseatcovers,resultina635-poundlighter-700aircraft.

• Improved fuel burn and reduced emissions:Lessweightmeanslessfuelconsump-tion,lowerfuelcosts,andfewerGHGemissions.

•Reused seat frames:OnourSouthwestexisting -700 fleet,weavoidedspendingapproximately$50million incabin redesigncostsby reusingourB/EAerospaceInnovatorIIseatframes.

•Increased durability:TherecyclablematerialsusedinthenewEvolveinterioralsoincorporatemoredurablefinishes,whichincreasethelifespanofourcabininterior,savingonreplacementcosts.Forinstance,ourcurrentseatshaveafour-yearlife-span,butwiththenewE-Leather,seatlifespanisexpectedtoincrease50percent tosixyears.

•Cost improvement: Including the cost of the newmaterials and installation, theimproveddurability of the redesigned seat coupledwith fuel savings from635poundslessweightperaircraftisexpectedtoresultinongoingannualcostsavings.

•Improved ergonomics:Thecombinationofthelow-profilecushionandfixedwingheadrestimprovesergonomicsbypositioningCustomersdownandbackintotheseat, allowing forbetter lumbar support, armrest alignment, and increasedper-sonalspace.

•Increased under-seat space:Thenewdesignallowsformoreunder-seatroomforcarryonluggageandapprovedpetcarriers.

ForthestorybehindEvolve, pleasevisitsouthwestonereport.com/2011/#!/planet/future-planet andclickon“LUVStory:TheEvolutionofEvolve: The New Southwest Interior.”

Retrofitting our aircraft with the new Evolve interior creates a lighter weight, recyclable cabin.

http://www.southwestonereport.com/2011/#!/planet/future-planet


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• Incremental revenue opportunities:With the sleek, newEvolve seat design,wewereabletoincreasethenumberofseatsonboardthe-700from137to143.Whilethiswasn’tourinitialintentionwhenwesetouttoimprovetheonboardCustomerExperience—additionalseatingcameaboutthroughanevaluationofspaceoptimi-zationthroughoutthecabin—wewereabletocreatehundredsofmillionsinannualincrementalrevenueopportunities.

Basedonour2012flightactivity,itisestimatedthereducedweightsavednearly782,000gallonsoffuelanddecreasedourGHGemissionsbynearly7,700metrictonsofCO2e.AsnotedinGreenFilter,wearecurrentlyresearchingpotentialrecyclingopportunitiesforsomeofthematerialstakenoffourplanesduringtheretrofitprocess.

Retired Aircraft Recycling ProgramIn2012,weretired38aircraft.Whenanownedaircraftisretiredfromservice,wetypicallybreakitdownintoindividualcomponentsforrecycling.Wesendcomponentssuchasthe25,000to28,000poundsofaluminumperaircrafttoaconsignmentvendor,whilewekeepuseablesparepartslikeoxygenbottles,avionics,andlandinggearinourinventorytoavoidhavingtopurchaseadditionalpartsforaircraftmaintenance.Thoseaircraftweleasedwerereturnedtothelessors.ReadmoreaboutourWasteManagementandRecyclinginthePlanetsection.

Next-GenerationBoeing737 Boeing737MAX

-700 -800

Firm Firm Firm

Orders Orders Options Orders Options Total

2013 20 20

2014 5 24 15 44

2015 36 12 48

2016 31 12 43

2017 30 25 4 59

2018 25 28 15 68

2019 33 33

2020 34 34

2021 34 18 52

2022 30 19 49

2023 23 23

2024 23 23

2025 23 23

Through2027 44 44

Total 1272 44 92 1503 150 563

AircrAFt DeliVerY ScheDule (asofDec.31,2012)


p.16

Themindsetofoperatingwithagreenfilter—makingenvironmentallyresponsibledeci-sions—hasbeenchampionedbyourGreenTeamandGreenAmbassadors.OurGreenTeamincludesEmployeesfromeachoperatinggroupwhoworktocollect,share,andimplementourenvironmentallyresponsibleideasandinitiatives.OurGreenAmbassadorsexpandthereachof theGreenTeambypromotingenvironmental stewardship in thecommunitieswherewefly.TheGreenAmbassadorsstartgrassrootseffortsintheircommunities,suchas a recyclingprogram for six-pack rings thatbegan inOrlando, Fla., andhas spreadthroughtheGreenAmbassadornetworktocitiesacrossthecountry.We’vehighlightedprogramsresultingfromourgreenfilterbelow.

A Second Life for Aircraft InteriorAsa resultofmodernizingour fleet,weendedupwithusedcarpet, leather,and foamcushionsfromouroldaircraftinteriorstransitionedin2012.Wedon’twantthesematerialstoendupinalandfill,soweareseekingopportunitiestodonateandrecyclethemin2013.

LIFT CoffeeWhenourPassengersdrinkcoffeeonourflights,theyhaveauniqueopportunitytohelpusgivebacktoothersandourplanet.SinceLIFT’sdebutin2009,wehavedonatedtwocentsforeverypoundofLIFTcoffeeconsumedtofundgreen-energyprojectsincoffeegrowing regions. TheGuatemalaLightProject,which illuminated isolatedvillageswithrenewableenergy,wastheinitialrecipientofthesedonations.StartinginJune2012,webegandirectingthesedonationstogreenenergyprojectsinPeru.ThroughtheLightUptheWorld Foundation our donations are going to help power off-grid villages with

2012 Southwest Airlines One Report // Feature Stories // Green Filter

environmentally responsible decisions simply make good business sense for Southwest.

Moreinformationontheretrofit ofouraircraftcanbefoundin ourFleetModernizationstory.

AdditionalprogramsreceivingcharitabledonationsarediscussedinourCommunitiessectionwithinPeople.

FeATURe STORy Green Filter


p.17

2012 Southwest Airlines One Report // Feature Stories // Green Filter

renewable energy. Through theseprograms,wedonatednearly $10,000 in 2012 andmorethan$32,000collectivelysincetheprogrambegan.

Community GardenFirstplantedin2008,ourvolunteercommunitygarden—ten4-footby20-footraisedbedboxeswithmulchedpathsatourHeadquarters inDallas—isexpanding. In2012,variousgroupswithin Southwest adoptedplantingboxes and helped tend to thegarden. Toparticipatewhile traveling,DallasFlightAttendants collecteddonations topurchase abutterflygarden.

WealsogrewourcommunitypartnershipwiththeTexasMasterGardenersAssociationandnowshareourharvestandcommunitygardeningknowledgewiththePolkRecreationalCenter.Asoneefforttoeducatethecommunityaboutorganicgardening,we’veinvitedseniorstohelpharvestourcropsbenefitingtheirfoodbank.Withoursuccessfulharvestin2012,wewereabletomake14tripswithdonationstothelocalfoodbank.

WealsoarecontinuingourorganicgardeningfocusbyemployingEarth-friendly,water-wisepractices andusing recycled compost. Part of this effort is a communitygardenEmployee educational series,whichwe kicked off in 2012with a lunch-and-learn oncomposting;180EmployeesattendedthecoursetaughtbytheCityofDallas,andeachwenthomewithacompostbin.

Green Bulletin BoardsEducation is a key component of our green commitment. Southwest Employees andGreenAmbassadors atMcCarran InternationalAirport (LAS) in LasVegas created a“GreenandHealthyBoard”andrecentlyexpandedtheprojecttoincludea“ReuseBoard”toeducateEmployeesaboutlivinggreen.

TheGreenandHealthyBoardfeaturesarticlesandeducationalmaterialsontopicsrangingfromtheenvironmentandnonprofitstowhatgreenlabelsandcertificationsmean.TheReuseBoardhelpsEmployeesgogreenbypostingitemstheywouldliketosell,trade,orgiveawayalongwithservicessuchaspetsittingthattheyneedhelpfindingorwouldbewillingtodoforaCoworker.

Community OutreachInadditiontoputtingagreenfilteronbusinessdecisions,partneringwithnonprofitorga-nizations thatwork to promote environmental stewardship and preserve our naturalresourcesisanimportantelementofourenvironmentalcommitment.WearetheofficialairlineoftheStudentConservationAssociation,theNationalWildlifeRefugeAssociation,andtheEarthDayNetwork’sGreenSchoolsprogram.WealsosupportNationalGeographicMissions’BioBlitzevents,whichworktopromote,catalogue,andpreservethebiodiver-sityofnaturalspacesaroundournation.OurEmployees’commitmenttotheplanetrunsdeepthroughvolunteerismintheirlocalcommunitiestohelpcleanupparks,planttrees,andparticipateinbeachclean-upsandotherenvironmentalactivities.Formingstrategicrelationships and giving back with our time, money, and resources strengthens ourcommitmenttotheplanetandtomakingadifference.

Footnotes1) Appliestopointtransactions.Pointsdon’texpireaslongasMemberhasflightorpartnerearningactivityevery

24months.2)Southwesthasflexibilitytosubstitute-800sinlieuof-700firmorders.3)Southwesthastheright,undercertainconditions,includingBoeing’sdecisionto

manufactureaMAX7aircraft,tosubstituteMAX7aircraftinplaceoffutureMAX8deliveries.


p.18

2012 Southwest Airlines One Report // 30,000-Foot View

Awardsand p.20 Accolades

Overview p.1930,000-Foot ViewWe’re proud to be one of the most honored airlines in the world. Our Purpose is to connect people to what’s important in their lives through friendly, reliable, and low-cost air travel.

p.18

Colorado One was added to the Southwest fleet on Aug. 22, 2012.


p.19

2012 Southwest Airlines One Report // 30,000-Foot View // Overview

PriortoDec.31,2012,SouthwestaccouncedthatwewillconvertthefollowingAirTranAirwaysoperationstoSouthwestin2013—Branson,Mo.;Charlotte,N.C.;Flint,Mich.;Rochester,N.Y.;Portland,Maine;Wichita,Kan.;andGrandRapids,Mich.—andlaunchservicetoSanJuan,PuertoRico,inApril2013.

Southwest Airlines System Map (asofDec.31,2012)

Top Ten Airports (numberofdailyflightsasofDec.31,2012)

MDW1.Chicago Midway 196

BWI3.Baltimore-Washington 185

LAS2.LasVegas 189

ATL4.Atlanta 177

PHX5.Phoenix 154

DeN6.Denver 147

MCO8.Orlando 115

HOU7.Houston Hobby 136

DAL9.Dallas LoveField 114

LAX10.Los

Angeles 97

Southwest71% OtherCarriers29%

Market Share1 (top100city-pairmarkets)

Southwest25% OtherCarriers75%

Market Share1 (totaldomesticmarket)

Capacity by Region (asofDec.31,2012)

West33%

PuertoRicoandInternational1%

Northwest3%

Southwest12%

East14%Southeast19%

Midwest18%


p.20

2012 Southwest Airlines One Report // 30,000-Foot View // Awards and Accolades

Industry-Leading AirlineWorld’s Most Admired Companies, #10 in the world in 2012, #7 in the world in 2013FORTUNE

equiTrend® Value Airline Brand of the yearHarrisPoll

U.S. Airlines Top Buzz, #1YouGovBrandIndex

The Brands American Women and Men Desire Most, #1Forbes

The Reputations of the Most Visible Companies, #26HarrisInteractive

U.S. Top 100 Global Reputation Pulse, #51ReputationInstitute

Social Brands Top 100 in Social Media, #64Headstream

Top-Ranked Airline2

AirlineQualityRating

One of the World’s Ten Safest AirlinesAirTransportRatingAgency

Domestic Carrier of the year for CargoAirforwardersAssociation

Air Cargo excellence, up to 199,000 tons category, #1Air Cargo World

Quest for Quality excellence in Air Cargo AwardLogistics Managementmagazine

America’s Top 500 Companies, #252Barron’s

Green LeaderTop U.S. Airlines Score on Commitment to Fighting Global WarmingClimateCounts

FORTUNE 500 Green Power Partners, #403

U.S.EnvironmentalProtectionAgency

Green Rankings of the 500 Largest Publicly Traded Companies in the U.S., #129Newsweek

Recycling Co-Winner for Co-Mingled Recycling ProgramPR News

Partnership for a Sustainable Georgia Bronze-Level Partner2

GeorgiaDepartmentofTransportation

eco-Pioneer of the yearAir Transport World

Positively Outrageous Customer ServiceCustomer Satisfaction, #14

U.S.DepartmentofTransportation

Airline Customer Satisfaction, #2AmericanCustomerSatisfactionIndex

Customer Service ChampionJ.D.Power

Best Online Customer experience in Travel: AirlinesKeynoteCompetitiveResearch

Reward Seat Availability, #1 in the U.S., tied for #1 globallyIdeaWorksCompany.com

Five Most Likable CompaniesLikableMedia

Top Ten Customer Service Companies, Customer Service Hall of Fame, #10MSN Money

Web experience Ratings, #5 out of 159Loyalty Ratings, #16 out of 206Trust Ratings, #19 out of 206experience Ratings, #35 out of 206Customer Service Ratings, #36 out of 174Forgiveness Ratings, #47 out of 206TemkinGroup

One of the Best Places to WorkOne of the Top 50 Best Places to Work, #17 Glassdoor.com

The 40 Best Companies for Leaders, #5Chief Executive magazine

One of the 60 Best Companies for DiversityHispanic Business Magazine

One of the Top 100 Military Friendly employers, #80 in 2012 and #58 in 2013G.I. Jobsmagazine

Most Valuable employers for MilitaryCivilianjobs.com

employer of the yearAirForceReserveCommand

One of America’s Best Adoption-Friendly WorkplacesDaveThomasFoundationforAdoption

Respected in the CommunityNational Conference on Citizenship’s The Civic 50, #20Bloomberg Businessweek,CivicEngagementGroup,PointsofLight, andtheNationalConferenceonCitizenship

Corporate equality Index, Scored 90 out of 100 in 2013HumanRightsCampaign

Diversity Communications Honorable Mention for Second North Texas Diversity SummitPR News

Sheldon and Miriam Adelson Patriot of the year AwardArmedForcesFoundation

Awards and AccoladesAlllistedawardswerereceivedbySouthwestin2012unlessotherwisenoted.

Footnotes1) AsmeasuredbythenumberoforiginatingdomesticpassengersboardedandbasedondataavailablefromtheU.S.DepartmentofTransportationasofSept.30,2012.2)AirTranaward.3)TheU.S.EnvironmentalProtectionAgencyFORTUNE 500GreenPowerPartnershiprankingsareupdatedquarterly.Southwestranked

40thasofOct.4,2012.4)Fromthe2012yearendU.S.DepartmentofTransportationAirTravelConsumerReportissuedFebruary2013.ToprankingisforSouthwest

only.AirTranrankedthirdinthesamereport.


p.21

IN THIS SeCTION (click below to view a section)

p. 22 Performance Data

p. 24 Strategic Plan

p. 29 2012 Performance

p. 34 Ten-year Summary

p. 37 Financial Management Approach

We’re proud to have provided our Shareholders 40 years of consecutive profitability, a record unmatched in the U.S. airline industry.

2012SouthwestAirlines OneReport// PerformanceF

2012wasayearoftremendousprogressinbuildingLUV:

•Recordrevenueperformance

•83.1percentontimeperformance

•Bestbaggagehandlingratioinourhistory

•LedtheairlineindustryinCustomerSatisfaction1

•On track tocompleteAirTranAirways integrationbyend of2014

•Launched Southwest Airlines service toAtlanta; Akron-CantonandDayton,Ohio; andWashington,D.C. (RonaldReaganWashingtonNational)

•LaunchedAirTranservicetoAustin,Texas;OrangeCounty,Calif.;andMexicoCityandCaboSanLucas,Mexico

•DiscontinuedAirTranserviceat14airports

•Introducedthe737-800intoourfleet

•SelectedAmadeusforourinternationalreservationsystem2014implementation

•ReceivedFederalAviationAdministration(FAA)approvaltobegin Southwest service to San Juan, PuertoRico, inApril2013

•ReceivedHouston City Council approval for a five-gateinternational terminal at Houston’s William P. HobbyAirport(HOU)

•52percentsurgeincashflowfromoperations

•Returned$422milliontoShareholdersthroughrepurchas-ing$400millionofcommonstock(approximately46millionshares)anddistributing$22millionindividends


p.22

2012 Southwest Airlines One Report // Performance // Performance Data

(dollars in millions except per share amounts, follows generally accepted accounting principles (GAAP)) 2012 2011 Change

Operatingrevenues $ 17,088 $ 15,658 9.1%

Operatingexpenses $16,465 $14,965 10.0%

Operatingincome $ 623 $ 693 (10.1)%

Operatingmargin 3.6% 4.4% (0.8)pts.

Netincome $ 421 $ 178 136.5%

Netmargin 2.5% 1.1% 1.4pts.

Netincomepershare,basic $ 0.56 $ 0.23 143.5%

Netincomepershare,diluted $ 0.56 $ 0.23 143.5%

Stockholders’equity $ 6,992 $ 6,877 1.7%

Returnonaveragestockholders'equity 6.1% 2.7% 3.4pts.

Stockholders’equitypercommonshareoutstanding $ 9.57 $ 8.90 7.5%

RevenuePassengerscarried 109,346,509 103,973,759 5.2%

RevenuePassengermiles(RPMs)(000s) 102,874,979 97,582,530 5.4%

Availableseatmiles(ASMs)(000s) 128,137,110 120,578,736 6.3%

Passengerloadfactor 80.3% 80.9% (0.6)pts.

PassengerrevenueyieldperRPM 15.64¢ 15.12¢ 3.4%

OperatingrevenueyieldperASM 13.34¢ 12.99¢ 2.7%

OperatingexpensesperASM 12.85¢ 12.41¢ 3.5%

Aircraftinserviceatyearend 694 698 (0.6)%

Full-timeequivalentEmployeesatyearend 45,861 45,392 1.0%

perForMAnce DAtA AlldatapresentedinPerformanceincludesAirTranresultsasofMay2011.

F) Cautionary Statement Regarding Forward-Looking Statements

The2012 Southwest Airlines One Report™containsforward-lookingstatementswithinthemeaningofSection27AoftheSecuritiesActof1933,asamended,andSection21EoftheSecuritiesExchangeActof1934,asamended.Forward-lookingstatementsarebasedon,andincludestatementsabout,theCompany’sestimates,expectations,beliefs,intentions,andstrategiesforthefuture,andarenotguaranteesoffutureperformance.Specificforward-lookingstatementscanbeidentifiedbythefactthattheydonotrelatestrictlytohistoricalorcurrentfactsandinclude,withoutlimitation,statementsrelatedto(i)theCompany’sstrategicplanandinitiatives;(ii)theCompany’sfinancialandoperationalplans,goals,andexpectationsrelatedtoitsstrategicplanandinitiatives,includinganticipatedtimeframesforimplementa-tionofkeyinitiativesandtheirexpectedimpactontheCompany’scompetitiveposition;(iii)theCompany’sfinancialoutlookandprojectedresultsofoperations;(iv)theintegrationofAirTranandtheCompany’srelatedfinancialandoperationalgoalsandexpectations,includinganticipatedintegrationtimeframesandexpectedbenefitsandcostsassociatedwiththeintegration;(v)theCompany’sfleetplans,includingitsfleetmodernizationplans,andrelatedfinancialandoperationalgoalsandexpectations;and(vi)theCompany’snetworkplansandrelatedoperationalandfinancialgoalsandexpectations.Forward-lookingstatementsinvolverisks,uncertainties,assumptions,andotherfactorsthataredifficulttopredictandthatcouldcauseactualresultstovarymateriallyfromthoseexpressedinorindicatedbythem.Factorsinclude,amongothers,(i)theimpactoftheeconomyondemandforairtravelandfluctuationsinconsumerdemandgenerallyfortheCompany’sservices;(ii)theimpactofeconomicconditions,fuelprices,andactionsofcompetitors(includingwithoutlimitationpricing,scheduling,andcapacitydecisionsandconsolidationandallianceactivities)ontheCompany’sbusinessdecisions,plans,andstrategies;(iii)theCompany’sabilitytotimelyandeffectivelyprioritizeitsstrategicinitiativesandrelatedexpenditures;(iv)theCompany’sabilitytotimelyandeffectivelyimplement,transition,andmaintainthenecessaryinfor-mationtechnologysystemsandinfrastructuretosupportitsoperationsandinitiatives;(v)theCompany’sabilitytosuccessfullyintegrateAirTranandrealizetheexpectedsynergiesandotherbenefitsfromtheacquisition;(vi)theCompany’sdependenceonthirdpartieswithrespecttocertainofitsinitiatives;(vii)changesinfuelprices,theimpactofhedgeaccounting,andanychangestotheCompany’sfuelhedgingstrategiesandpositions;(viii)theimpactofgovernmentalandotherregulationrelatedtotheCompany’soperations;and(ix)otherfactors,asdescribedintheCompany’sfilingswiththeSecuritiesandExchangeCommission,includingthedetailedfactorsdiscussedundertheheading“RiskFactors”intheCompany’sAnnualReportonForm10-KforthefiscalyearendedDecember31,2012.


p.23

reconciliAtion oF reporteD AMountS to non-GAAp FinAnciAl MeASureSG (dollars in millions except per share amounts, unaudited) 2012 2011 2010 2009 2008Fuel and oil expense, unhedged $ 5,963 $ 5,580 $ 3,296 $ 2,577 $ 4,819Add/(Deduct):Fuelhedge(gains)lossesincludedin Fuelandoilexpense

157 64 324 467 (1,106)

Fuel and oil expense, as reported $ 6,120 $ 5,644 $ 3,620 $ 3,044 $ 3,713Deduct:Netimpactfromfuelcontracts (32) — (172) (222) (187)Fuel and oil expense, economic $ 6,088 $ 5,644 $ 3,448 $ 2,822 $ 3,526net income, as reported $ 421 $ 178 $ 459 $ 99 $ 178Add/(Deduct):Mark-to-marketimpactfrom fuelcontractssettlinginfutureperiods

(221) 21 (21) (73) (7)

Add/(Deduct):Ineffectivenessfromfuelhedges settlinginfutureperiods

42 33 (11) (97) 106

Add/(Deduct):Othernetimpactoffuelcontractssettling inthecurrentorapriorperiod(excludingreclassifications)

(10) 35 171 184 107

Add/(Deduct):Incometaximpactoffuelcontracts 73 (31) (52) (5) (78)Add:Chargefromvoluntaryearly-outprogram,net2 — — — 35 —Add/(Deduct):Charge(Reversal)fromchangeinIllinois stateincometaxlaw,net

— — — — (12)

Add:Chargeforassetimpairment,net2 — 9 — — —Add:Chargeforacquisitionandintegrationcosts,net2 112 85 4 — —net income, non-GAAp $ 417 $ 330 $ 550 $ 143 $ 294net income per share, diluted, as reported $ 0.56 $ 0.23 $ 0.61 $ 0.13 $ 0.24Add/(Deduct):Netimpactfromfuelcontracts (0.15) 0.07 0.12 0.02 0.17Add/(Deduct):Impactofspecialitems,net2 0.15 0.13 0.01 0.04 (0.01)net income per share, diluted, non-GAAp $ 0.56 $ 0.43 $ 0.74 $ 0.19 $ 0.40return on invested capital (roic), pre-tax:operating income, as reported $ 623 $ 693 $ 988 $ 262 $ 449Add:Netimpactfromfuelcontracts 32 — 172 222 187Add:Chargefromvoluntaryearly-outprogram,net3 — — — 56 —Add:Chargeforassetimpairment,net3 — 14 — — —Add:Chargeforacquisitionandintegrationcosts,net4 183 132 7 — —operating income, non-GAAp 838 839 1,167 540 636Netadjustmentforaircraftleases5 117 129 84 91 67Adjustmentforfuelhedgeaccounting (36) (107) (134) (148) (69)Adjusted operating income, non-GAAp $ 919 $ 861 $ 1,117 $ 483 $ 634Averageinvestedcapital6 $ 12,580 $ 12,439 $ 10,431 $ 9,876 $10,669Equityadjustmentforfuelhedgeaccounting 145 184 434 763 (1,263)Adjusted average invested capital $12,725 $12,623 $10,865 $10,639 $9,406roic, pre-tax7 7% 7% 10% 5% 7%

2012 Southwest Airlines One Report // Performance // Performance Data

G) note regarding use of non-GAAp Financial Measures

TheCompany’sconsolidatedfinancialstatementsarepreparedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStates(GAAP).TheseGAAPfinancialstatementsinclude(i)unrealizednon-cashadjustmentsandreclassifications,whichcanbesignificant,asaresultofaccountingrequirementsandelectionsmadeunderaccountingpronouncementsrelatingtoderivativeinstrumentsandhedging,and(ii)otherchargestheCompanybelievesarenotindicativeofitsongoingoperationalperformance.

Asaresult,theCompanyalsoprovidesfinancialinformationinthisreportthatwasnotpreparedinaccordancewithGAAPandshouldnotbeconsideredasanalternativetotheinformationpreparedinaccord-ancewithGAAP.TheCompanyprovidessupplementalnon-GAAPfinancialinformation,includingresultsthatitreferstoas“economic,”whichtheCompany’smanagementutilizestoevaluateitsongoingfinancialperformanceandwhichtheCompanybelievesprovidesgreatertransparencytoinvestorsassupplementalinformationtoitsGAAPresults.TheCompany’seconomicfinancialresultsdifferfromGAAPresultsinthattheyonlyincludetheactualcashsettlementsfromfuelhedgecontracts—allreflectedwithinFuelandoilexpenseintheperiodofsettlement.Thus,FuelandoilexpenseonaneconomicbasisreflectstheCompany’sactualnetcashoutlaysforfuelduringtheapplicableperiod,inclusiveofsettledfuelderivativecontracts.AnynetpremiumcostspaidrelatedtooptioncontractsarereflectedasacomponentofOther(gains)losses,net,forbothGAAPandnon-GAAP(including“economic”)purposesintheperiodofcontractsettlement.Theseeconomicresultsprovideabettermeasureoftheimpact oftheCompany’sfuelhedgesonitsoperatingperformanceandliquiditysincetheyexcludetheunrealized,non-cashadjustmentsandreclassificationsthatarerecordedinGAAPresultsinaccordancewithaccountingguidancerelatingtoderivativeinstruments,andtheyreflectallcashsettlementsrelatedtofuelderivativecontractswithinFuelandoilexpense.ThisenablestheCompany’smanagement,aswellasinvestors,toconsistentlyassesstheCompany’soperatingperformanceonayear-over-yearorquarter-over-quarterbasisafterconsideringalleffortsinplacetomanagefuelexpense.However,becausethesemeasuresarenotdeterminedinaccordancewithGAAP,themeasuresaresusceptibletovaryingcalculationsandnotallcompaniescalculatethemeasuresinthesamemanner.Asaresult,theaforementionedmeasures,aspresented,maynotbedirectlycomparabletosimilarlytitledmeasurespresentedbyothercompanies.

Furtherinformationon(i)theCompany’sfuelhedgingprogram,(ii)therequirementsandaccountingassociatedwithaccountingforderivativeinstruments,and(iii)thecausesofhedgeineffectivenessand/ormark-to-marketgainsorlossesfromderivativeinstrumentsisincludedintheCompany’sAnnualReportonForm10-KforthefiscalyearendedDecember31,2012,aswellassubsequentquarterlyfilings.

Inadditiontoits“economic”financialmeasures,asdefinedabove,theCompanyhasalsoprovidedothernon-GAAPfinancialmeasuresasaresultofitemsthattheCompanybelievesarenotindicativeofitsongoingoperations.Theseinclude1)2012,2011,and2010charges(beforetheimpactofprofitsharingand/ortaxes)relatedtoexpensesassociatedwiththeCompany’sacquisitionandintegrationofAirTran; 2)a2011charge(beforetheimpactofprofitsharingand/ortaxes)foranassetimpairmentrelatedtotheCompany’sdecisionnottoequipitsClassic(-300/-500)aircraftwithRequiredNavigationPerformance(RNP)capabilities;3)aone-timethirdquarter2009chargeassociatedwithFreedom’09,anearlyretirementoptionofferedtoEmployees;and4)afirstquarter2008adjustmenttotheCompany’sincometaxprovisionduetoachangeinIllinoisstateincometaxlaws.TheCompanybelievesthatevaluationofitsfinancialperformancecomparedtopriorandfutureperiodscanbeenhancedbyapresentationofresultsthatexcludetheimpactoftheseitems.AsaresultoftheCompany’sacquisitionofAirTran,whichclosedonMay2,2011,theCompanyhasincurredandexpectstocontinuetoincursubstantialchargesassociatedwithintegrationofthetwocompanies.WhiletheCompanycannotpredicttheexacttimingoramountsofsuchcharges,itdoesexpecttotreatthesechargesasspecialitemsinitsfuturepresenta-tionofnon-GAAPresults.


p.24

2012 Southwest Airlines One Report // Performance // Strategic Plan

p.24

MajorStrategic p.25 Initiatives

OtherStrategic p.26 Initiatives

Strategic PlanWe are confident in our strategic plan, designed to achieve 15 percent pre-tax return on invested capital.

WeunderstandtheimportanceofprovidinganadequatereturntoourShareholders,whichiswhywehavedevelopedastrategicplancommittedtoreachingourgoalof15percentpre-taxROIC.Ourplancomprisesfivemajorandotherstrategicinitiativesintendedtosignificantlyincreaseourrevenues,reduceourunitcosts,andenhancetheCustomerExperience.Withtheexecutionofourstrategicplanthusfar,wearesupportingourVisionofbecomingtheWorld’sMostLoved,MostFlown,andMostProfitableAirline.

The new Dallas Love Field ticket counter opened on Nov. 1, 2012.


p.25


ForadditionalinformationaboutourROICcalculation,visithttp://southwest. investorroom.com/ financial-statements andclickon“Returnon InvestedCapitalCalculation.

Major Strategic Initiatives

AirTran IntegrationIn2012,wemadesignificantprogressintegratingAirTranintoSouthwest,reachingmanykeyintegrationmilestones,asfurtherdiscussedinourAirTranIntegrationfeaturestory.During2012,weincurred$183millioninpre-taxexpensesassociatedwiththeacquisitionandintegrationofAirTran,bringingtheamountspentsinceacquisitioncloseto$324millionof the expected total acquisition and integration costsof approximately$550million.Our2012resultsbenefitedfrom$142millioninnet,annualized,pre-taxsynergies(exclud-ingacquisitionand integrationexpenses), keepinguson trackwithourplan to realize$400millioninnet,annualized,pre-taxsynergiesin2013andtocompletetheintegrationbytheendof2014.

All-New Rapid RewardsWelaunchedourrevampedRapidRewards® frequent flyerprograminMarch2011,andthefirstfullcalendaryearoftheprogramexceededourexpectations.During2012,ourexistingRapidRewards®Membersflewmoreandonaveragepaidmoreforfares,thus,earningmoreRapidRewards® points. In addition,we saw increases in the numberofRapidRewards®Members,thenumberofSouthwestco-brandedChaseVisacreditcardholders, the number of points sold to business partners, and the number of RapidRewards®pointspurchasedbyMembers.In2012,RapidRewards®produced$180millioninincrementalrevenues,ascomparedto2011,andisexpectedtoproduceanother$80millioninincrementalrevenuesin2013.

Fleet ModernizationWe’re replacingourolder737-300sand737-500swithneweraircraft—includingNext-Generation737and737MAX—whicharelessmaintenanceintensive,morefuelefficient,andlonghaulcapable.Inaddition,wewilltransitionAirTran’s88717-200stoDeltabegin-ningAugust2013.Thiswillnotonlyprovidesubstantialflexibilitytomeetourfleetneedsinavarietyofeconomicconditions,butitalsowillreduceourunitoperatingcostsand

ROIC (pre-tax,non-GAAP)

2009 20082010201120120

3

6

9

12

15%Target

read more about our fleet modernization plans in our Fleet Modernization feature story.

http://southwest.investorroom.com/financial-statements




p.26


greenhousegasemissions.InMarch2012,webeganretrofittingSouthwest737-700swithournew, recyclableEvolve interior,whichprovidesnew revenueopportunitieswith sixadditional seatsandnewCustomercomfort features.WeanticipatecompletingEvolve cabinrefreshesonallSouthwest-700sand78ofour-300sbytheendof2013.AirTranaircraftwillcontinuetoberetrofittedwiththeEvolvecabininterior,asthoseaircraftareconvertedtoSouthwest.Our2012pre-taxincomecontributionfromfleetmodernizationwas$70million,andweanticipatea$300millionpre-taxcontributionin2013.

Boeing 737-800sAsanextensionofourfleetmodernizationplans,wereceivedthefirstofour-800ordersinMarch2012andendedtheyearwithatotalof34-800sinourfleet.Therearemanybenefitstoaddingthe-800toourfleet:over20percentmoreseatingcapacitycomparedto the -700; enhancedonboard comfort;more economical longhaul flyingwith loweroverallunitcosts;betterschedulingflexibilityinhigh-demand,slot-controlled,andgate-restrictedmarkets;anditssuperioreconomicsmakenear-internationaldestinationsmoreattractivetoSouthwest.

New Reservation System and International CapabilitiesReplacingourreservationsystemisamulti-yearinitiativethatisexpectedtobringinter-nationalandenhancedrevenuemanagementcapabilitiesalongwithoperationalbenefits.The firstphasebegan inApril2012whenweentered intoacontractwithAmadeus toimplementan international reservationsystemwith itsAlteareservationssolution.Thisinternationalsolution isexpectedtobe implemented in2014,atwhichtimeweexpectSouthwesttobeabletooperateinternationalflights.Weplantocompletethefulldeploy-mentofournewreservationsystembeyond2014.

Southwest’s First Flight Outside the Continental United StatesIn2012,weobtainednecessaryFAAapprovalstoconductoperationsoutsideofthecon-tinentalUnitedStatesundercertaincircumstances.Asaresult,SouthwestlaunchedourfirstserviceoutsidethecontinentalUnitedStatesbyintroducingSanJuan,PuertoRico,toourroutemapinApril2013.

AirTran provides international service to eight destinations in six countries—Cancun,MexicoCity, andCaboSanLucas inMexico;MontegoBay, Jamaica;Nassau,Bahamas;Oranjestad,Aruba;PuntaCana,DominicanRepublic;andBermuda.

International Terminal at Houston Hobby AirportThanks to the collective effort of ourEmployees, communities, andStakeholders,wesuccessfully petitioned to “FreeHobby” in early 2012.As a result, during the secondquarterof2012,theHoustonCityCouncilapprovedanexpansionplanthatallowsfortheconstructionofafive-gateinternationalterminalwithaU.S.customsfacilityatHouston’sWilliamP.HobbyAirport(HOU).ThisnewterminalwillallowSouthwesttoprovideinter-nationalservicefromfourofthefivegatesafteritsanticipatedcompletionin2015.Wehave agreed to fund the design and construction of this project, which the City ofHoustonestimatedwillcost$156million.

Other Strategic Initiatives

InDecember2012,weannouncednew2013revenueinitiativesintheareasofnetworkopti-mization,revenuemanagement,andancillaryrevenues.Thesenewinitiativesareexpectedtogeneratehundredsofmillionsinincrementalrevenuesin2013comparedto2012.

View our future aircraftdelivery schedule.

read about how our employees, communities, and Stakeholders petitioned to “Free hobby” in our communities section.

Forourmostcurrentfinancialresultsandoutlookandtodownloadour2012Form10-K,visithttp://southwest. investorroom.com.



p.27


Network OptimizationDuring2012,wecontinuedtoaggressivelymanagecapacityandrouteexpansionthroughoptimizationofour flight schedules tobettermatchPassengerdemand.Theseeffortscontributedtohigheryields,strongloadfactors,andimprovedrevenuesduring2012.

Despitethetransitionalstateof theAirTranroutenetwork,ournetworkswerecomple-mentarywithlittlerouteoverlap.Inresponsetohighfuelprices,wediscontinuedservicein14AirTranairportsandredeployedAirTranaircraftinothermarkets.In2012,weaddedSouthwestservicetotwonewstates,GeorgiaandIowa,andsixnewairports:Hartsfield-JacksonAtlantaInternational(ATL),Akron-CantonRegional(CAK),DaytonInternational(DAY), Des Moines International (DSM), KeyWest International (EYW), and RonaldReaganWashingtonNational (DCA).AirTran launchedservicetoAustin,Texas;OrangeCounty,Calif.;andMexicoCityandCaboSanLucas,Mexico.AirTranalsolaunchednewinternationalservicefromDenverandChicago.

To further coordinate Southwest andAirTran flight schedules,we launched tools to allowCustomersofbothairlines tobook flightsoneithercarrierviasouthwest.comor airtran.com.WealsomadesignificantprogresstowardtheApril2013implementationofconnectingcapabilitiesbetweentheSouthwestandAirTranreservationssystemstoallowCustomerstobookconnectingitinerariesbetweenthetwocarriers.

As a component of our new 2013 revenue opportunities, we intend to aggressivelyoptimizethenetworkbytighteningourscheduledaircraftflyinghoursperdayandturntimes.Asaresult,we’rebetterutilizingavailableaircraftduringpeakflyinghours,whichisestimatedtoresultinlessaircraftgroundtimeandincrementalrevenueproductionin2013.

Revenue ManagementWeintendtointroducethefirstphaseofanorigin-anddestination-basedrevenueman-agementsystemin2013,whichisexpectedtogenerateincrementalrevenues.Oncefullyimplemented, the new systemwill allow formore precisemanagement of Customerdemandand inventory, sowe canmanagedemand in termsofwhereourCustomerswanttofly,regardlessofhowtheyrouteorconnect.

Ancillary RevenuesIn2013,weareintroducingseveralnewancillaryrevenueopportunities,including:

• Selling open premium boarding positions at the gate:InJanuary2013,webegansellingopenpremiumboardingpositions,A1throughA15,atthegatetoCustomers45minutespriortodeparturefor$40perflight.ThisdoesnotreplaceourBusinessSelect fare or EarlyBird Check-InTM, but it is simply a creativeway to generaterevenuefromthesaleofavailablepremiumboardingpositions.

• Increasing the EarlyBird Check-In™ price:EarlyBirdCheck-InTMincreasedfrom$10to$12.50perone-wayfareinFebruary2013.

• increasing select baggage charges:OnAirTranflights,thechargeforaCustomer’sfirst checkedbag increased to$25and secondcheckedbag to$35 inFebruary2013.OnSouthwest flights,aCustomercanstill checkup to twobags,up to50poundseach,freeofcharge,butthechargeforathirdorsubsequentcheckedbag,orforanybaginexcessof50pounds,increasedto$75eachinFebruary2013.

• implementing a new policy: Currently, Customerswhodon’t showup for theirscheduledSouthwestflightsretainthefullvaluepaidfortheirticketsandcanreusesuchfundsforuptoayearaftertheoriginalflightdate.In2013,weplantoimple-mentanewpolicytochangeCustomerbehavior inawaythatallowsustoresellemptyseatspriortoflightdeparture.

read more in our Airtran integration story.

http://www.southwest.com

http://www.airtran.com


p.28

Inflight Internet and Live Television Connectivity Asof yearend2012, nearly400ofour aircraft offeredWiFi serviceonboard, and theremainderofour-700swereequippedbytheendoffirstquarter2013.Allofour-800senterservicewith inflight Internetconnectivity.OuragreementwithourWiFiprovider,Row44,allowsustosetthepricingofthisservice,whichasofFeb.1,2013,was$8adayperdevice,upfrom$5perdevice.During2012,webecamethefirstairlineintheworldtoprovideCustomersaccesstolivetelevision,consistingofcertainsportsandnewschannels,for viewingon their personalwirelessdevices. Live television is offered as a separatechargefromWiFi,soCustomersdonothavetopurchaseWiFitopurchaselivetelevision.Weofferlivetelevisionfor$5adayperdevice.Asannouncedin2012,onFeb.1,2013,welaunchedonallWiFi aircraftmoviesondemandandanupgraded televisionpackage,consistingofrecordedmoviesandtelevisionshowsthatarestoredontheonboardserverandstreamedwirelesslytoCustomerdevices.Wesetpricesat$5permovie,andtelevi-sionshowsare includedaspartof the$5televisionpackage,which includesaccesstolivechannels.AirTrancurrentlyoffersGogoinflightInternetconnectivityoneveryflight.Gogoestablishes thecharges forandreceives themajorityof revenueassociatedwiththisinflightInternetconnectivityonAirTran.



p.29

2012 Southwest Airlines One Report // Performance // 2012 Performance

FinancialPosition p.33

Costs p.32

Revenues p.302012 PerformanceOur profits (excluding special items) of $417 million grew 26 percent as compared to 2011.

Thesesolidearningswereachieveddespitesignificanteffortsandcostsrelatedtomajorstrategicinitiatives.For2012,however,theseinitiativescontributedtothe52percentsurgeinourcashflowfromoperationsto$2.1billion.

p.29

Our Business Select offering contributed $93 million in

Passenger revenues in 2012.


p.30

revenuesOur2012operatingrevenueswerearecord$17.1billion,drivenbystrongyields,highloadfactors, and an impressive freight revenueperformance. These strong revenueswereachieveddespitethetransitionalstateoftheAirTranroutenetwork.Whiletherewasmuchchangein2012,significantoptimizationeffortsareplannedin2013forthecombinednet-works.OuroperationalperformanceandourCustomerServicedeliverycontinuedtobeexceptional,especiallyconsideringtheamountofworkinvolvedwithourinitiatives.Ourremarkable2012performanceistrulyatestamenttotheextraordinaryeffortsofourPeople.

Passenger revenueyear-over-yeargrowthwas attributable tohigherPassenger yields(PassengerrevenuesperRPMflown),asweimplementedfareincreasesinanattempttobuffer the impact of higher fuel costs. Passenger revenues also benefited from ourstrategic initiatives, continued optimization of our flight schedule to better matchPassenger demand, and targetedmarketing campaigns aboutwhat differentiates usfromourcompetitors.

Bymaintainingourlow-farebrandandsuperiorCustomerService,CustomerskeepcomingbacktoflySouthwest,contributingtoourcontinueddomesticmarketsharegrowthandlong-standing annual profitability streak. Southwest is theonlymajorU.S. airline thatdoesn’tchargeforfirstandsecondcheckedbagsanddoesn’thaveachangefee.Alsounlikemost of our competitors, Southwestdoes not impose additional fees for itemssuchasseatselection,snacks,curb-sidecheckin,andtelephonereservations.

2012 Southwest Airlines One Report // Performance // 2012 Performance // Revenues

read more about our strategic plan.

read about our network optimization.

Source of Passenger Revenues2012 2011 2010 2009 2008

Internet 80%8 81%8 84% 81% 80%

CustomerSupportandServices 4% 4% 5% 8% 7%

Travelagency 12%9 12%9 9% 8% 10%

Other 4% 3% 2% 3% 3%

0

100

200

300

400

500

600

0

100

200

300

400

500

$600

Net Income (millions of dollars)

2012 2011 2010 2009 2008

GAAP Non-GAAP

Net Income (millionsofdollars)

0

10

20

30

40

50

60

70

80

0

0.20

0.40

0.60

$0.80

Net Income Per Share (diluted)

2012 2011 2010 2009 2008

GAAP Non-GAAP

Net Income Per Share (diluted)


p.31

2012 Southwest Airlines One Report // Performance // 2012 Performance // Revenues

OurBusiness Select Passengers continue to enjoyperks such as priority boarding, ahigherfrequentflyerpointmultiplierthanotherSouthwestfares,priorityticketcounterandsecuritycheckpointaccessinselectairports,andonecomplimentaryadultbeveragecoupon for thedayof travel forCustomersof legaldrinkingage.OurBusinessSelectofferingcontributed$93millioninPassengerrevenuesin2012.

In 2012,we recognizedapproximately$276million in incremental revenue fromDallasLoveField itineraries thatwecouldnotmarketprior to the2006WrightAmendmentcompromise.

Our freight revenues for 2012 increased by a healthy 15 percent compared to 2011,primarilyduetohigheraveragerates.Inaddition,betterdomesticeconomicconditionsresultedinanincreaseinshipments.

Otherrevenuesof$835millionbenefitedfromancillaryrevenuesassociatedwithEarlyBirdCheck-InTM,PetsAreWelcomeonSouthwest(P.A.W.S.),servicechargesforunaccompa-niedminorsandexcessandoverweightbags,andbaggagefeescollectedfromAirTranCustomers.

ThroughourpopularEarlyBirdCheck-In™,Customerscanelecttopayaone-waychargeto receive an early boarding position behind Business Select andA-List Customers.EarlyBirdCheck-In™revenueswere$161millionin2012,significantlyexceedingourinitialexpectationof$100millionannualcontribution.TheEarlyBirdCheck-InTMservicechargeincreasedfrom$10to$12.50perone-wayfareinFebruary2013.

Operating Revenues (perASM)

200820092010201120120

0.03

0.06

0.09

0.12

$0.15

read more about our ancillary revenues.


p.32

CostsA key component of our business strategy continues to be our low-cost structure.Adjustedforstagelength,wehavelowerunitcosts,onaverage,thanvirtuallyallmajordomestic carriers.We remain focusedoncontrollingcosts, sowecanoffer affordablefarestoourCustomersandachieveourprofitabilitygoals.Ourinvestmentsinoureffortstomodernizeourfleetareexpectedtohaveafavorableimpactonourunitcosts.

Fuelandoilexpense remainsour largestcostcategoryat37percentofouroperatingexpensesin2012.Ouraverageeconomicjetfuelcost,includinghedgingactivity,increased2.8percentover2011to$3.28pergallon.Inadditiontoourfuelconservationefforts,westrivetoreducevolatilityinoperatingexpensesthroughourfuelhedgingprogram.

2012 Southwest Airlines One Report // Performance // 2012 Performance // Costs

read more about our Fleet Modernization in the feature story.

read more about how our fuel conservation measures save in our largest cost category.

Costs excluding Fuel and Special Items (perASM)

2009 20082010201120120

0.02

0.04

0.06

$0.08


p.33

Financial PositionOurfinancialpositionremainedstrongwith$3billionincashandshort-terminvestmentsat yearend 2012. At yearend,we also had an $800million fully available, unsecuredrevolvinglineofcredit,andthebookvalueofourunencumberedaircrafttotaledapprox-imately$6.8billionasofyearend2012.

Wegenerated$716millioninfreecashflow10during2012.Throughoursharerepurchasesand increased dividend, we returned $422 million to our Shareholders in 2012.Werepurchased $400million of stock, or approximately 46million shares, bringing thecumulativerepurchaseunderthe$1billionauthorizationto$625million,orapproximately73millionshares.

Wemade$578millionofdebt repayments in2012,which included theprepaymentofapproximately$19millioninDecemberrelatedtoanaircraft-securedloanthatweassumedaspartoftheAirTranacquisition.Ourleverage,includingoffbalancesheetaircraftleases,continuedtodeclineto41percentatyearend.

Asof yearend,we remained theonly investment-grade ratedU.S. airline,with strongliquidity,modestdebt, anda steadfast focusonenhancingShareholder value throughcapitalefficiency.

2012 Southwest Airlines One Report // Performance // 2012 Performance // Financial Position

20082009201020112012

Leverage11

0

10

20

30

40

50%

2009 2008201020112012

Free Cash Flow10 (inmillions)

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

1,000

$1,500


p.34

2012 Southwest Airlines One Report // Performance // Ten-year Summary

Ten-year SummaryThis ten-year summaryoffers a historical look atourPerformanceover thepastdecade, asmeasured through the consolidated financials, ratios, andoperatingstatisticsshown.

p.34


p.35


ten-YeAr SuMMArY (selectedconsolidatedfinancialdata,GAAP)

(dollars in millions, except per share amounts) 2012 2011 2010 2009 2008

Operatingrevenues:

Passenger $16,093 $ 14,754 $ 11,489 $ 9,892 $10,549

Freight 160 139 125 118 145

Other 835 765 490 340 329

Totaloperatingrevenues 17,088 15,658 12,104 10,350 11,023

Operatingexpenses 16,465 14,965 11,116 10,088 10,574

Operatingincome 623 693 988 262 449

Otherexpenses(income),net (62) 370 243 98 171

Incomebeforeincometaxes 685 323 745 164 278

Provisionforincometaxes 264 145 286 65 100

Netincome $ 421 $ 178 $ 459 $ 99 $ 178

Netincomepershare,basic $ .56 $ .23 $ .62 $ .13 $ .24

Netincomepershare,diluted $ .56 $ .23 $ .61 $ .13 $ .24

Cashdividendspercommonshare $ .034512 $ .0180 $ .0180 $ .0180 $ .0180

Totalassets $ 18,596 $18,068 $15,463 $14,269 $14,068

Long-termdebtlesscurrentmaturities $ 2,883 $ 3,107 $ 2,875 $ 3,325 $ 3,498

Stockholders’equity $ 6,992 $ 6,877 $ 6,237 $ 5,454 $ 4,953

consolidated Financial ratios

Returnonaveragetotalassets 2.3% 1.1% 3.1% 0.7% 1.2%

Returnonaveragestockholders’equity 6.1% 2.7% 7.9% 1.9% 3.0%

Operatingmargin 3.6% 4.4% 8.2% 2.5% 4.1%

Netmargin 2.5% 1.1% 3.8% 1.0% 1.6%

consolidated operating Statistics

RevenuePassengerscarried 109,346,509 103,973,759 88,191,322 86,310,229 88,529,234

EnplanedPassengers 133,978,100 127,551,012 106,227,521 101,338,228 101,920,598

RPMs(000s) 102,874,979 97,582,530 78,046,967 74,456,710 73,491,687

ASMs(000s) 128,137,110 120,578,736 98,437,092 98,001,550 103,271,343

Passengerloadfactor 80.3% 80.9% 79.3% 76.0% 71.2%

AveragelengthofPassengerhaul(miles) 941 939 885 863 830

Averagestagelength(miles) 693 679 648 639 636

Aircraftutilization(hoursandminutesperday) 10:55 11:10 10:48 10:50 11:36

Tripsflown 1,361,558 1,317,977 1,114,451 1,125,111 1,191,151

AveragePassengerfare $ 147.17 $ 141.90 $ 130.27 $ 114.61 $ 119.16

PassengerrevenueyieldperRPM 15.64¢ 15.12¢ 14.72¢ 13.29¢ 14.35¢

OperatingrevenueyieldperASM 13.34¢ 12.99¢ 12.30¢ 10.56¢ 10.67¢

OperatingexpensesperASM 12.85¢ 12.41¢ 11.29¢ 10.29¢ 10.24¢

OperatingexpensesperASM,excludingfuel 8.07¢ 7.73¢ 7.61¢ 7.18¢ 6.64¢

Fuelcostpergallon(average) $ 3.30 $ 3.19 $ 2.51 $ 2.12 $ 2.44

Fuelconsumed,ingallons(millions) 1,847 1,764 1,437 1,428 1,511

Full-timeequivalentEmployeesatyearend 45,861 45,392 34,901 34,726 35,499

Aircraftinserviceatyearend13 694 698 548 537 537


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Typewritten Text

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p.36


ten-YeAr SuMMArY (continued) (selectedconsolidatedfinancialdata,GAAP)

(dollars in millions, except per share amounts) 2007 2006 2005 2004 2003

Operatingrevenues:

Passenger $ 9,457 $ 8,750 $ 7,279 $6,280 $ 5,741

Freight 130 134 133 117 94

Other 274 202 172 133 102

Totaloperatingrevenues 9,861 9,086 7,584 6,530 5,937

Operatingexpenses 9,070 8,152 6,859 6,126 5,558

Operatingincome 791 934 725 404 379

Otherexpenses(income),net (267) 144 (54) 65 (225)

Incomebeforeincometaxes 1,058 790 779 339 604

Provisionforincometaxes 413 291 295 124 232

Netincome $ 645 $ 499 $ 484 $ 215 $ 372

Netincomepershare,basic $ .85 $ .63 $ .61 $ .27 $ .48

Netincomepershare,diluted $ .84 $ .61 $ .60 $ .27 $ .46

Cashdividendspercommonshare $ .0180 $ .0180 $ .0180 $ .0180 $ .0180

Totalassets $ 16,772 $ 13,460 $ 14,003 $ 11,137 $ 9,693

Long-termdebtlesscurrentmaturities $ 2,050 $ 1,567 $ 1,394 $ 1,700 $ 1,332

Stockholders’equity $ 6,941 $ 6,449 $ 6,675 $ 5,527 $5,029

consolidated Financial ratios

Returnonaveragetotalassets 4.3% 3.6% 3.9% 2.1% 4.0%

Returnonaveragestockholders’equity 9.6% 7.6% 7.9% 4.1% 7.9%

Operatingmargin 8.0% 10.3% 9.6% 6.2% 6.4%

Netmargin 6.5% 5.5% 6.4% 3.3% 6.3%

consolidated operating Statistics

RevenuePassengerscarried 88,713,472 83,814,823 77,693,875 70,902,773 65,673,945

EnplanedPassengers 101,910,809 96,276,907 88,379,900 81,066,038 74,719,340

RPMs(000s) 72,318,812 67,691,289 60,223,100 53,418,353 47,943,066

ASMs(000s) 99,635,967 92,663,023 85,172,795 76,861,296 71,790,425

Passengerloadfactor 72.6% 73.1% 70.7% 69.5% 66.8%

AveragelengthofPassengerhaul(miles) 815 808 775 753 730

Averagestagelength(miles) 629 622 607 576 558

Aircraftutilization(hoursandminutesperday) 11:41 11:34 11:25 11:20 11:09

Tripsflown 1,160,699 1,092,331 1,028,639 981,591 949,882

AveragePassengerfare $106.60 $104.40 $ 93.68 $ 88.57 $ 87.42

PassengerrevenueyieldperRPM 13.08¢ 12.93¢ 12.09¢ 11.76¢ 11.97¢

OperatingrevenueyieldperASM 9.90¢ 9.81¢ 8.90¢ 8.50¢ 8.27¢

OperatingexpensesperASM 9.10¢ 8.80¢ 8.05¢ 7.97¢ 7.74¢

OperatingexpensesperASM,excludingfuel 6.40¢ 6.34¢ 6.34¢ 6.54¢ 6.47¢

Fuelcostpergallon(average) $ 1.80 $ 1.64 $ 1.13 $ 0.92 $ 0.80

Fuelconsumed,ingallons(millions) 1,489 1,389 1,287 1,201 1,143

Full-timeequivalentEmployeesatyearend 34,378 32,664 31,729 31,011 32,847

Aircraftinserviceatyearend13 520 481 445 417 388


p.37

2012 Southwest Airlines One Report // Performance // Financial Management Approach

Financial Management ApproachWe strive to continuously improve our Performance.

Our formula for success is applying our CoreValueswith our People’sWarriorSpirit,Servant’sHeart,andFun-LUVingAttitude.

p.37


p.38

OurformulaforsuccessisLivingandWorkingtheSouthwestWay.LivingtheSouthwestWay includes showing ourWarrior Spirit, Servant’s Heart, and Fun-LUVingAttitude.WorkingtheSouthwestWayisfocusonSafety,focusonhighCustomerServicedelivery,andfocusonlowcost.And,it’sstillworking.SouthwestistheonlyU.S.airlinethatcanclaim40consecutiveyearsofprofitability.We’veachievedoursuccesswithoutresortingto layoffsorpaycuts.And,Employees’dedicationshows—weconsistentlyholdoneofthetoprankingsinCustomerSatisfaction1andhaverepeatedlybeenrankedasoneofthebestplacestowork.

WecontinueourcommitmenttoofferimpeccableCustomerServiceandlowfares.And,weachievedanannualprofitforourShareholders,despiteanotherannualincreaseinjetfuelcosts. Inanefforttoovercomeincreasingjetfuelcosts,wecontinuedtogrowourrevenue in 2012 through revenuemanagement andoptimizationofour routenetwork,while continuing our focus on value-added products such as Business Select andEarlyBirdCheck-In™.

OurCoreValueshavecontributedtoourpastsuccessandwilltakeusintothefutureasweexecuteourstrategicinitiativestointegrateAirTranintoSouthwest,addBoeing-800stoourfleetaspartofourfleetmodernizationplan,growourRapidRewards®program,andeventually replaceour reservation system.We’repassionate about achieving andsustainingour15percentpre-taxROICgoal.

Weexpectthesuccessfulexecutionofourstrategic initiativestostrengthenourbrandandsolidifyourfundamentalcompetitiveadvantages:lowcosts,lowfares,greatCustomerService,arobustdomesticroutenetwork,andastrongfinancialposition.G

Contributing to the economic Vitality of Our CommunitiesOurPerformanceimpactsmorethanourCompany.Ourlowfaresstimulateeconomiesincitieswherewefly.OurServant’sHeartallowsotherstothrive,andourgreenfilterhelpsprotecttheplanet.

Together,SouthwestandAirTranserved97destinationsbasedonourjointschedulesasofyearend2012.WeexpectourcollectivemarketpresencetogeneratesubstantialsavingsforourCustomersthroughthewell-known“SouthwestEffect”ofinvigoratingcompetitionbyreducingfaresandstimulatingadditionalPassengertrafficinthecitieswherewefly.Weexpect tobringour low fares andFun-LUVingAttitude tomore than 100millionCustomersannually.

Westrivetomakeapositivedifferenceinthecommunitiesweserve.Webelieveincham-pioningthecausesthatmattermosttoourPeople.Weprovidesupport,Leadership,andencouragementtoavarietyofphilanthropiccausesthroughourCommunityAffairsandGrassroots Team, who works directly with local, civic, and charitable organizations.Through our Community Giving Boards, consisting of local Employees from variousworkgroups,weidentifycharitableorganizationstosupportthecommunitieswheretheylive and work. At Southwest, we value empowering others and buildingmeaningfulrelationshipsthroughcommunityoutreachandvolunteerism.Toachievethis,wedonateourtime,tickets,funds,and,mostimportantly,ourLUV.

Webelieveit’sourresponsibilitytoprotectourplanetnowandforfuturegenerations,soweoperatewithagreenfilter—amindsetofmakingenvironmentallyresponsibledecisions.Asgoodenvironmentalstewards,werecycleonboardandinairports.Weareworkingtoimproveenergyandwaterconservationandextendouruseofrenewableenergyatour



p.39

Headquartersandotherfacilities.Intheair,we’reconservingjetfuel,reducingemissions,andusingrecycledandsustainablematerialstofurnishourcabins.Ontheground,wherepossible,we’reusingalternativeandhighlyefficient fuel sources topowerourgroundsupportequipment.Givenpersistentlyhighjetfuelprices,operatingwithagreenfilterisnotonlygoodfortheenvironment;it’salsogoodforourbottomline.

Taking Care of Our OwnAtSouthwest,webelieveintreatingeachotherthewaywewanttobetreated.Wecon-tributetothefinancialwellbeingofourEmployeesbyofferinggenerous401(k)Companymatching contributions and a ProfitSharing Plan.Our University for People providestrainingandcareerdevelopmenttohelpEmployeeslearnandgrow.Wealsoencouragethem to support the local charities close to their heartsby rewarding theirVolunteerefforts.We take time to celebrate and honor our Employees through our Employeerecognition programs, including our annual Volunteers of LUV, President’s Award,WinningSpiritAward,StarsoftheMonth,andKickTails.BytakingcareofourSouthwestFamilyandencouragingourEmployeestogivebackandhelpothers,wecreateaCultureofLUV thatultimatelycontributes toour financial success.Afterall, happyEmployeesequalhappyCustomers,andhappyCustomerskeepflyingSouthwest.

Citizenship at SouthwestFinancialsuccess ismorethanachievingfiscalmetrics.Our long-termfinancialsuccessis,inpart,dependentonourfuturesuccessesrelatedtonon-financialgoalsthatserveasmeasuresofourability toalignoperatingcostswiththetrueenvironmentalandsocialcostsofouractions.During2012,ourCitizenshipCommitteecontinuedtoprioritizeandestablishenvironmentalandsocialgoalsforselectedtargetsandwillworktodefinepro-tocols forcollectingandanalyzingoperationaldata related toeachgoal.We look for-wardtousingfuturedatatostrivetocontinuouslyimproveandreducefutureimpactsontheenvironment.


Footnotes 1) Fromthe2012yearendU.S.DepartmentofTransportationAirTravelConsumerReportissuedFebruary2013.Top

rankingisforSouthwestonly.AirTranrankedthirdinthesamereport.2) Amountsshownnetofprofitsharingandtaxes(seefootnote4forexplanationofprofitsharingonacquisitionand

integrationcharges). 3)Amountsshownnetofprofitsharingimpact. 4)Amounts shown net of profitsharing on acquisition and integration charges incurred throughMarch 31, 2011.We

amended our profitsharing plan during second quarter 2011 to defer the profitsharing impact of acquisition andintegrationcostsincurredfromApril1,2011throughDec.31,2013.Theprofitsharingimpactforthistimeperiodwillberealizedin2014andbeyond.

5)Netadjustmentrelatedtopresumptionthatallaircraftinfleetareowned. 6)Averageinvestedcapitalrepresentsafivequarteraverageofdebt,netpresentvalueofaircraftleases,andequity. 7)Calculatedasadjustedoperatingincome,non-GAAP,dividedbyadjustedaverageinvestedcapital. 8) Includesrevenuesfromsouthwest.com,swabiz.com(Southwest’sbusinesstravelreservationwebpage),and

airtran.com. 9) Includesonlinetravelagencies.10)Southwesthasprovidedfreecashflow,whichisanon-GAAPfinancialmeasure.Webelievefreecashflowisa

meaningfulmeasurebecauseitdemonstratesourabilitytoserviceourdebt,paydividends,andmakeinvestmentstoenhanceShareholdervalue.Althoughfreecashflowiscommonlyusedasameasureofliquidity,definitionsoffreecashflowmaydiffer;therefore,weareprovidinganexplanationofourcalculationforfreecashflow.ForthefiveyearsendedDec.31,2008,2009,2010,2011,and2012,theCompanygenerated$(2,106),$62,$1,068,$417,and$716millioninfreecashflow,respectively,calculatedasoperatingcashflowsof$(1,521),$985,$1,561,$1,385,and$2,064millionlesscapitalexpendituresof$585,$923,$493,$968,and$1,348million,respectively.

11) Leverageiscalculatedascurrentandlong-termdebt(totaldebt)dividedbythesumoftotaldebtandstockhold-ers’equity,includingtheimpactofthenetpresentvalueofaircraftoperatingleaseobligations.

12) Metric revised as of September 26. 2013 from $.345 to $.0345.13) Includes leased aircraft.

read more about how we take care of our own in employees.


p.40


p. 41 People Data

p. 43 employees

p. 50 Customers

p. 55 Communities

p. 60 Suppliers

p. 64 Social Management Approach

Our People are our greatest strength in building LUV and prove that some of our best work is done on the ground, not just in the air.

Ourgreatest strength is ourPeoplewhodeliver compassionate,world-class Customer Service; seek out innovative solutions toenhancetheCustomerExperience;andsharetheirtimeandeffortstomakeapositivedifference.AtSouthwestAirlines,ourEmployeesare passionate about our Purpose to connect People towhat’simportantintheir livesthroughfriendly,reliable,andlow-costairtravel. Our Family is the heart of our Fun-LUVing Culture. OurCustomers return to Southwest not only for our low fares, but alsobecauseofourPeople and theirdedication toprovidinganenjoyabletravelexperiencewithapersonaltouch.OurCustomerServiceextendstothecommunitiesweservethroughourcommit-menttogivingbackbyvolunteeringourtimeanddonatingticketsanddollarstoorganizationsthatservethoseinneed.WithaWarriorSpirit, aServant’sHeart, andaFun-LUVingAttitude,our servicecomesfromtheheart.

2012SouthwestAirlines OneReport// People


p.41

people DAtA AirTranAirwaysdataisexcludedfromPeopledataunlessotherwisestatedasofMay2011.

2012 2011 2010 2009

employees1

Active,full-timeequivalentEmployeesatyearend Nearly 46,000

Morethan45,000

Nearly 35,000

Nearly35,000

employees by Division1,2,3

Flight 19,575;43% 19,619;43% 15,050;43% 15,323;44%

Maintenance 3,208;7% 3,105;7% 2,442;7% 2,466;7%

Ground,Customer,andFleetServices 20,374;44% 20,042;44% 15,096;43% 14,628;42%

Management,Accounting,Marketing,clerical personnel(other)

2,704;6% 2,627;6% 2,313;7% 2,310;7%

Benefits4

ActiveandinactiveEmployeeswhoparticipatein benefitprograms

Morethan 48,000

Morethan40,000

Morethan35,000

Morethan35,000

ContributionstoEmployeebenefitprogramsexcluding 401(k)andProfitSharingplans(accrued)5

Morethan $800million

Morethan$670million

Morethan$590million

Morethan$500million

401(k)savingsplanparticipation Nearly85% 93% 86.5% —

ProfitSharingPlanparticipation AlleligibleEmployees

AlleligibleSouthwestEmployees

AlleligibleEmployees

—

Contributionsto401(k)andProfitSharingplans Morethan $370million

Nearly $314million

Nearly $350million

$203million

training

Pilothours4 300,496 165,000 219,440 199,500

FlightAttendanthours4 177,500 272,3946 112,116 109,450

MaintenanceandSupporthours4 159,000 88,754 59,004 81,633

CustomerSupport&Serviceshours4 175,278 245,179 125,833 106,480

GroundOperationshours 439,635 342,946 253,574 224,779

SafetyandSecurityhours Morethan 520,000

Morethan550,0007

Morethan230,000

—

customers

U.S.DepartmentofTransportation(DOT)Customer Satisfactionrating(consumercomplaints per100,000enplanements)

0.25 0.32 0.27 0.21

ExternalCustomercommendations Nearly 65,000

Morethan65,000

Morethan65,000

Morethan50,000

RatioofexternalCustomercommendationstopersonnel rudenesscomplaints

Nearly7:1 Nearly8:1 Nearly10:1 9:1

2012 Southwest Airlines One Report // People // People Data


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2012 2011 2010 2009

AmericanCustomerSatisfactionIndex(ACSI) 77 81 79 81

Percentageofreportedflightoperationsarrivingontime 83.1 81.3 79.5 83.0

Numberofmishandledbagsreportedper1,000 Passengers

3.08 3.65 3.47 3.43

Passengersdeniedboardingper10,000Passengers 0.84 0.65 1.24 1.29

Numberofincidentsinvolvingtheloss,injury,ordeath ofanimalsduringtransport

0 0 0 0

communities4

Donationrequestsreceivedsystemwide 19,053 17,057 16,678 14,968

Ticketsdonated 44,559 40,807 29,664 25,663

Totalmonetarydonations $ 2,104,871 $ 1,814,077 $ 934,807 $ 554,140

Totalvalueofmonetary,in-kind,andticketdonations $20,273,621 $18,239,850 $12,974,763 $10,939,665

EmployeeVolunteerhours Morethan137,000*

Morethan114,000

Morethan80,000

Morethan45,000

Social Management Approach

Employeesrepresentedbyunions Approximately83%

Approximately82%

Approximately82%

—

Employeehumanrightstraininghours Morethan17,000

Morethan3,700

Morethan5,000

—

Employeestrainedonhumanrights 20.5% 10.1% 10.7% —

Employeesandbusinessassociateswhoacknowledged thecodeofethics8

Morethan 46,000

Morethan 43,000

Morethan37,000

—

2012 Southwest Airlines One Report // People // People Data


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2012 Southwest Airlines One Report // People // employees

Benefits p.44

Training p.45

Engagement p.48 andRecognition

employeesOur dedicated Employees make Southwest one of the world’s most admired companies.

At Southwest, Employees are our greatest asset, so nurturing a Culture thatenergizesandrespectseveryEmployeeisatoppriority.We’reproudofouruniqueCulture andmore than fourdecadesof history,madepossiblebyourdedicatedEmployees,whodomorethandeliverthefriendly,high-qualityCustomerServiceforwhichwe’reknown.

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Ournearly46,000SouthwestFamilyMembers9createinnovativeprogramstoincreaseproductivity andmake theirwork lives easier, generate ideas to trimcosts sowecankeep fares affordable, giveback toour communities and thePlanet, and take time tocelebrateCompanyandpersonalmilestones. It’sLiving theSouthwestWay—aWarriorSpirit,aServant’sHeart,andaFun-LUVingAttitude.

BenefitsSouthwestoffersourEmployeesopportunitiestolivetheirbestlife.Wecanproudlysaythatin2012morethan48,000activeandinactiveSouthwestEmployeesparticipatedinatleastonecomponentofSouthwest’sEmployeebenefitprograms,towhichwecontrib-utedmore than$800millionon an accrual basis, excluding401(k) andProfitSharingplansandshare-basedcompensation.

In2012,inadditiontovacation,paidholidays,andsickleave,weofferedourfull-timeandpart-timeEmployeesthefollowing:10

2012 Southwest Airlines One Report // People // employees // Benefits

•401(k)retirementsavingsplan

•ProfitSharingPlan

•Medicalandprescriptioncoverage

•Mentalhealthchemicaldepen-dancycoverage

•Visioncoverage

•Dentalcoverage

•Adoptionassistance

•Pre-taxcommuterbenefitprogram

•MentalhealthEmployeeassis-tanceprogram

•Lifeinsurance

•Accidentaldeathanddismember-mentinsurance

•Long-termdis-abilityinsurance

•Dependentlifeinsurance

•Dependentcarespendingaccount

•Healthcarespendingaccount

•Employeestockpurchaseplan

•Wellnessprogram

•Flightprivileges

•Otherbenefits

°Healthcare forcommit-tedpartners

°Earlyretireehealthcare

°Flextimeforqualifyingpositions

19,575—43%Flight

20,374—44%Ground,Customer,andFleetServices

3,208—7%Maintenance

2,704—6%Other

Breakdown of employees by Division2,8

Our Employees served nearly 110 million Customers in 2012.


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2012 Southwest Airlines One Report // People // employees // Training

Retirement Planning4

WearehappytodoourparttocontributetotheretirementsavingsofourEmployeesthroughmultipletax-qualifiedsavingsplans.In2012alone,Southwestcontributedmorethan$370milliontoretirementsavingsthrough401(k)CompanymatchingcontributionsandCompanycontributionstoSouthwest’sProfitSharingPlan.

Wehavetremendousparticipationinour401(k)plans,withnearly85percentofeligibleEmployeesparticipatingin2012comparedtothenationalaverageof79.5percent.11Sincetheinceptionofour401(k)plansintheearly1990s,Southwesthascontributedmorethan$2billiontotheseplans,includingnearly$250millionin2012tomatchthefundsEmployeescontributedtotheir401(k)accounts.

AlleligibleSouthwestandAirTranEmployeesparticipateinourProfitSharingPlan,andin2012,Southwestcontributednearly$121million—acontributionequal to3.4percentofeacheligibleEmployee’scompensation.

TrainingAtSouthwest,weofferourEmployeesnotonlythetrainingtheyneedtodotheirjobs,butalsothetrainingtheywanttoadvancetheircareers.WeprovideinternaltrainingprogramsbutalsoencourageEmployeestoattendexternaltrainingandfurtherspecializeintheirrespectivefields.

Weare committed to andprioritize compliancewith the training requirementsof theappropriategoverningorganizationssuchastheFederalAviationAdministration,U.S.DOT, U.S.DepartmentofHomelandSecurity,OccupationalSafetyandHealthAdministration,U.S. Environmental Protection Agency, U.S. Food and Drug Administration, EqualEmploymentOpportunityCommission,and theOfficeofFederalContractCompliancePrograms.WealsoofferavarietyofadditionaltrainingopportunitiestoourEmployees.TheseopportunitiesforcontinueddevelopmentincludeprogramsfocusedonLivingandLeadingtheSouthwestWay.

Southwest offers employees the freedom to learn and grow.

2012 Operational employee Training Hours

300,496 Pilots4

177,500 FlightAttendants4

159,000 Maintenanceand

Support4

175,278 CustomerSupport andServices4

439,635 GroundOperations

Southwest has contributed more than $2 billion to 401(k) retirement plans since their inception.


p.46


Safety and Security Training and OutreachTheSafetyandSecurityofourCustomersandourEmployeesisourtoppriority,whichiswhyitisapartofeverythingwedobothonthegroundandintheairthroughtraining,communication campaigns, and education.We are committed to fostering a strong,sustainableSafetyCulture andproactively seek to identifyworkplace andoperationalrisks,sowecandealwiththeseissuesbeforetheyleadtoinjuries,accidents,orincidents.In2012,SouthwestEmployeesparticipated inmore than520,000hoursofSafetyandSecuritytraining.

Throughout the year, the followingdepartments receive additional job-specific safetyandsecuritytraining:

•Inflight

•FlightOperations

•Maintenance

•GroundOperations

•Provisioning

•Dispatch

WealsoofferFirstAid, cardiopulmonary resuscitation (CPR), andautomatedexternaldefibrillator (AED) training to all interestedEmployees and require this training for allFlightAttendantsandallOperationsSupervisors.

Training DepartmentWearealwayslookingforwaystoenhancethetrainingopportunitiesthatweofferourEmployees. In 2011,webegancentralizingour trainingprograms. In 2012, trainingwasfurthercentralizedandabletoleveragebestpracticesandmaximizeresourcestocreatethebestlearningforallEmployees.A2012highlightwasournewCompanywidetrainingdashboard that pulls data from our LearningManagement System and consolidatestraininghours into a centralized location. Thenew trainingdashboardwill serve as abenchmarkingtoolfortrainingasthedepartmentmovesforwardandgrows.

environmental and Sustainability TrainingOurcommitmenttoprotectingourPlanetisintegraltoouroperations,soweincludethetopicsofenvironmentalstewardshipandsustainabilityinourEmployeetraining.AtandaboveourSupervisorlevel,wehaveenhancedLeadershipcoursestoincludesustainabilitycontent.Inthesecourses,wediscusssustainability,ourfuelusageanditsimpactonourgreenhousegasemissionsandclimatechange,ourinitiativestodecreaseemissions,andourrecyclingprograms.Wealsorequireannualenvironmentaltrainingforalloperationalgroups.Topicscoveredincludestormwaterpollutionprotection,properwastedisposal,airpermittingcompliance,andaircraftdrinkingwatercompliance.Throughthisrecurrenttraining,weteachourEmployeesaboutcurrentenvironmentalpoliciesandregulationsthatmustbefollowedinouroperations.


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Diversity and Inclusion education and OutreachWerecognizethatamultifacetedworkforce—withavarietyofbackgroundsandexperi-ences—makes for amore vibrant and efficient Teamand is an asset toourCompanyCulture. In 2012, theVicePresident ofDiversity and Inclusion, Ellen Torbert, and herdepartmentcontinuedthedevelopmentofamorerobustdiversityandinclusioneducationand outreach program through communication externally and internally, leadershipaccountability, and supplier diversity. This program increases communication to ourEmployees about the profound uniqueness thatmakes Southwest whowe are. ThisprogramisdiscussedfurtherinourSocialManagementApproach.

AtSouthwest,webelievethatamodernanddiverseworkforceiskeytoourcontinuedsuccess.WearecommittedtoprovidingourEmployeesthebesttoolsfortheirdevelop-mentbyengaginginconversationsaboutbestpracticesandtheimportanceofrespectingeachotherintheworkplace.


TolearnmoreaboutourDiversitySummit,visit blogsouthwest.com/video/diversity-summit-2012-how-southwest-joining-conversation.

http://www.blogsouthwest.com/video/diversity-summit-2012-how-southwest-joining-conversation


p.48

engagement and Recognition On a daily basis, our Employees continue to demonstrate a passion for serving ourPassengerswithworld-classCustomerService.This iswhywe feel it’sso important toengageandrecognizeourEmployeesbylisteningtotheirsuggestionsandideasaswellastheirconcernsandrewardingthemforoutstandingextraeffortandawillingnesstosharetheirheartswithoneanotherandourcommunities.

employee SurveyWeconductanEmployeesurveyonabiennialbasis,whichallowsustotakeacollectivepictureofourentireworkforcefromseveralangles.ThesesnapshotsletusknowhowourEmployees feel about working at Southwest. Employees’ candid feedback is criticalbecauseithelpsidentifyareasofstrengthatSouthwestaswellasareaswherewehaveanopportunitytoworktogetherasaTeamtoimprove.

In2012,55percentofSouthwestandAirTranEmployeesparticipatedinthesurveyandprovided feedback regarding their viewsof theCompany. The survey, conductedbyMercer,evaluated15dimensions,andEmployeeswere70percentormorefavorableon11ofthe15dimensions.

2012 Southwest Airlines One Report // People // employees // engagement and Recognition

In 2012, the Southwest Engineering Team was named the Heroes of the Heart, an award that recognizes a behind-the-scenes group who keeps Southwest flying high.


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2012 Southwest Airlines One Report // People // employees // engagement and Recognition

Themainobjectivesofthe2012EmployeesurveyweretogatherEmployeeperceptionsonabroadrangeofwork,environment,andCulturaltopics;assessandidentifycurrentlevelsofthecomponentsofEmployeeengagementandidentifykeydrivers;andgatherinputonwhatittakestobeabestplacetowork.Southwest’sscoresontheengagementcomponents are significantly above the norm on all benchmarked normative items,exceeding thenormbyanaverageof22percentagepoints.All items in theEmployeecommitmentdimension received ratings of at least 88percent favorable, revealing astrongprideintheorganization,connectiontotheorganization’sfinancialperformance,andperceptionofSouthwestasadesirableplacetowork.ThemostfavorablyratediteminthesurveyindicatesthatnearlyallEmployees(97percent)arewillingto“gotheextramile”tohelpserveCustomers.

Our Leaders use this survey as a roadmap for improvement, creating actionplans toaddress areas requiringattention and identifyingoverarching themeswecanworkontogether.Thisfeedbackalsohelpsustomakeimprovementsonourjourneytobeabestplacetowork.

Employee Recognition Programs OurEmployeesareknownforLegendaryCustomerService,operationalexcellence,andworkingefficiently.OurEmployeesgoaboveandbeyondeachandeverydaytoprovideourCustomerswiththebestpossibleflyingexperiencewhilefocusingontrimmingcostssowecanoffer low fares.Theyalsogenerouslydonate their timeandLUV tomakeapositivedifference.WetaketimetocelebrateandrecognizeourEmployeeswhodeliverworld-classCustomerService,operationalexcellence,andawillingnesstoDotheRightThing.OurEmployeerecognitionprogramsinclude:

Recognition Program Reason for Recognition Frequency

VolunteersofLUV IndividualEmployeesandgroupsforcommendablevolunteerism

Annually

ServiceAwards Milestoneyearsofservicefrom10yearsto40years Annually

President’sAward Employeeswhotrulygoaboveandbeyond,nominatedbyCoworkersandselectedbySeniorLeadership

Annually

LivingtheSouthwestWayAward

EmployeewhoembodiestheprinciplesofaWarriorSpirit,aServant’sHeart,andaFun-LUVingAttitude;presentedbyChairmanoftheBoard,President,andChiefExecutiveOfficerGaryKelly

Annually

HeartandSoulAward EmployeewholivesbyTheGoldenRuleandputsothersfirst,presentedbyPresidentEmeritusColleenBarrett

Annually

WinningSpiritAward Employeewhogoesbeyondnormaljobresponsibilities,displaysacan-doattitude,andisLivingtheSouthwestWay;selectedfromEmployeecommendationsbyWinningSpiritCommittee

Quarterly

KickTail EmployeeswhoexhibitSouthwestAirlinesvaluesthroughLivingtheSouthwestWay;awardgivenby fellowEmployees

Ongoing withmonthly,quarterly,andannualdrawingsforcashprizes

HeroesoftheHeart Behind-the-sceneworkgroupwhokeepstheheartofSouthwestAirlinesbeatingstartedbyPresidentEmeritusColleenBarrett

Annually


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2012 Southwest Airlines One Report // People // Customers

Customer p.53 Feedback

BrandStrength p.52CustomersIn 2012, Southwest once again had the lowest ratio of complaints per Customers boarded of all major U.S. carriers, according to the U.S. DOT’s Air Travel Consumer Report.

AtSouthwest,we’rededicatedtodeliveringthehighestqualityofCustomerServicewithasenseofwarmth,friendliness,individualpride,andCompanySpirit.

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Everydaywestrivetokeepoperatingcostslow.WetakeprideinflyingourCustomerstotheir destinations with all of the services and warmth they expect from Southwest.ListeningtoourCustomers’needsandinputmotivatesustotakeactionandenhanceourCustomerServiceandtheCustomerExperience.

2012 Southwest Airlines One Report // People // Customers

Southwest Airlines 0.25

MesaAirlines 0.41

AirTran Airways 0.51

AlaskaAirlines 0.51

DeltaAirlines 0.73

JetBlueAirlines 0.79

SkywestAirlines 0.88

HawaiianAirlines 0.89

FrontierAirlines 1.05

ExpressJetAirlines 1.07

AmericanEagleAirlines1.27

VirginAmerica 1.50

USAirways 1.74

AmericanAirlines 1.80

UnitedAirlines 4.24

Customer Satisfaction12 (consumercomplaintsper100,000enplanements)

we again topped the u.S. Dot’s list for best in customer Satisfaction and maintain the best customer Satisfaction record since the list’s inception.


p.52

Brand StrengthWeregularlymonitorourSouthwestbrandthroughCustomer feedback,andbienniallyweworkwithHall &Partners to conduct an in-depth, independentonline surveyof anationalsampleofairlinefliersfromourkeymarkets,comparingSouthwesttoourcom-petition.Inthemostrecentsurvey,conductedinMayandJune2012,wefaredwell,withthestrongesttop-of-mindbrandrecognitionintheindustry.ThesurveyalsoprovedthatourCustomersareloyal,asflierssurveyedflewSouthwestmorefrequentlyfordomestictravel thananyotherairline.Thesurveyalsofoundthat frequentflyerprogramsareofincreased importance in 2012, andour recent enhancements toRapidRewards®wererecognized.

Wealsoareregularlyrecognizedforourstrongbrand.In2012,representativeawardsandaccoladesforouraward-winningbrandincludedrankingfirstonForbes’2012listoftheBrandsAmericanWomenandMenDesireMost,andonFORTUNE’s2012listofWorld’sMostAdmiredCompanies,werankedthirdamongairlinesandtenthamongallindustries.

Brands American women and Men Desire MostTodetermine themostdesiredbrands,Forbes obtained insight fromneuromarketingfirm,Buyology,andonlinemarketresearchcompany,uSamp.BuyologyanduSampiden-tifiedandevaluatedmore than4,000consumers’ relationshipswithbrandsusing fourkeyparameters—awe,superiority,harmony,andexploration.All220brandsstudiedwerealsomatchedwith anumerical signal strength todetermineconsumers’ connection tothem.Byexamining thestrengthand typesof those relationshipsonbothaconsciousandunconsciouslevel,thetoolsofneuromarketing,Buyologyfoundthatmenandwomen“LUV”Southwest.Weearnedthecovetedtopspotbecauseofwhoweare.

world’s Most Admired companiesToidentifyandranktheWorld’sMostAdmiredCompanies,FORTUNEpartneredwithman-agementconsultingfirmHayGroup.HayGroupsurveysmorethan15,000topexecutivesanddirectorsfromtheFORTUNE1,000,Global500,andothermajornon-U.S.companiestoidentifythecompaniesthatenjoythestrongestreputationswithintheirindustriesandacrossindustries.Rankingstakeintoconsiderationtheabilitytoattractandretaintalentedpeople,qualityofmanagement,socialresponsibilitytothecommunityandtheenviron-ment,innovativeness,qualityofproductsorservices,wiseuseofcorporateassets,financialsoundness, long-terminvestmentvalue,andeffectivenessindoingbusinessglobally. In2012,werankedthirdamongairlinesandtenthamongallindustries.

2012 Southwest Airlines One Report // People // Customers // Brand Strength

View our awards and accolades.

the Southwest brand remains strong.


p.53

Customer FeedbackIn order to enhance theCustomerExperience, ourCustomer Service, andour brandstrength,weengageourCustomers and solicit their feedbackon a regularbasis.Wewant everyCustomer to LUV flyingwithSouthwest, sowe take the time to regularlylistentoCustomers’suggestions,readCustomers’comments,conductsurveysandfocusgroups,solicitfeedbackthoughsocialmediavenues,andtrackindustryresults.WethenusethisCustomerinsighttoimprovetheCustomerExperience.

Customer experience ResearchIn2012,wereleasedanall-newCustomerExperienceSurveyandDashboardtohelpusunderstand our Customers’ travel experiencewith Southwest.We email a survey to16,000Customersthedayfollowingtheirflightandaskthemtoratetheirsatisfactionateachpointofthetravelexperience,includingCheckin,TSASecurity,GateArea,Inflight,Connection,andArrival.ThesurveyalsoasksthelikelihoodtorecommendSouthwesttofriends,family,orcolleagues.ThisisalsoknownastheNetPromoterScore(NPS).

ThenewsurveywillcontinuetomeasurethetravelexperienceandNPSasithasforfiveyears,and itwillnow includeadditionalquestions thatdig farther intoourCustomers’Experiences.ForCustomerswhoarebothpromotersanddetractors,wewilllearnmoreaboutwhytheyfeelastheydo.Inadditiontogainingmoreinsightinthesurvey,ournewdashboardmakesiteasytoanalyzewhicheveraspectsareimportanttoeachCustomer,withactionablestationreports,aswellascutsbytypeoftraveler(businessor leisure),lengthofhaul,andaircrafttype,justtonameafew.

2012 Southwest Airlines One Report // People // Customers // Customer Feedback

we luV to hear from our customers.

Our Social Media Team monitors social media channels around the clock to respond to Customers’ suggestions, comments, and concerns.


p.54

American Customer Satisfaction IndexAtSouthwest,notonlydowehaveourownwaystotrackCustomerSatisfaction,wealsolookatindustrystandardsandthird-partysurveyandstudyresultstogainaholisticviewof theneeds andwantsof ourCustomers.A third-party scoring entity, theAmericanCustomerSatisfaction Index (ACSI)measures the satisfactionof customers across theU.S.economy.TheACSIreportsscoresona0–100scaleandproduces indexesforteneconomicsectors,47industries,morethan225companies,andmorethan200federalandlocalgovernmentservices.TheACSIalsoproducesscoresforthecausesandconse-quencesofcustomersatisfactionandtheirrelationships.AccordingtotheACSI,in2012our score fell 5percent, andwemoved to secondplace amongairlines.Knowing thedeclineoccurredamidouracquisitionofAirTranand,often,mergerscreatepassengerdissatisfactionintheshort-term,wearecommittedtoimprovingasoperationsarecom-binedandconsolidated.

U.S. Department of Transportation Performance MetricsLikeourdomesticpassengerairlinecounterparts,wefilemonthlyreportswiththeU.S.DOTBureauofTransportationStatisticsandotherDOTdepartmentsregardinganumberofperformancestatisticsfromouroperations.Thisincludesinformationregardingnum-berofPassengersflown,fuelconsumed,andontimeperformance.Italsoincludesinfor-mationregardingSouthwestoperationsastheyrelatetotheCustomerExperience.TheseresultshelpusstrivetoprovideourPassengerswiththebestCustomerExperience.

Therearemanyfactorsthatcanimpactperformancenumbers,includingseveraloutsideofourdirectcontrolsuchasweatherandairtrafficcontrolpractices.Whileitistemptingtoonlyidentifythosestatisticsthatreflectmorepositivelyonouroperation,westrivetoincreaseourtransparencyandestablishconsistencywiththeinformationprovidedtoourStakeholders.

ForhowtoofferCustomerfeedback,seethebackcoverofthe2012 Southwest Airlines One ReportTM.

2012 Southwest Airlines One Report // People // Customers // Customer Feedback

Forfurtherinformation,pleaseseetheU.S.DOTAirTravelConsumerReportissuedFebruary2013.

Comparison of 2012 and 2011 Performance Results(compiledintheU.S.DOTAirTravelConsumerReportforspecifiedcalendaryear)

2012 2011

Consumercomplaintsper100,000enplanements 0.2513 0.3214

Percentageofreportedflightoperationsarrivingontime 83.1 81.3

Numberofmishandledbagsreportedper1,000Passengers 3.08 3.65

Passengersdeniedboardingper10,000Passengers 0.84 0.65

Numberofincidentsinvolvingtheloss,injury,ordeathof animalsduringairtransportation

0 0


p.55

2012 Southwest Airlines One Report // People // Communities

Supporting p.56 Othersand OurOwn

LeadingtheWayp.57

CommunitiesWe aspire to make a positive difference in the communities where we fly.

AtSouthwest,wehaveapassionforpeople—apassionthatextendstogivingfromtheheart in the communitieswherewe live andwork.Bringingpeople together,inspiringchange,andmakingapositivedifferenceinpeople’slives—it’sallpartofbeingagoodneighbor.

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Tomaximize our positive impact in our communities, we support national and localnonprofitorganizations,getinvolvedthroughourcommunityprograms,andencourageindividualEmployeesandcommunitymemberstovolunteerandadvocateforthecausestheybelieveinmost.

Weareproud toannounce that in2012, Bloomberg Businessweek—inpartnershipwithCivicEngagementGroup,theNationalConferenceonCitizenship,andPointsofLight—namedSouthwesttoTheCivic50.Werankedinthetop20fordemonstratingastrongcommitmenttocorporatecivicengagementinourmanycommunities.

Supporting Others and Our OwnAtSouthwest,community involvementandsupportingothers, includingourown,havebeenapartofourCulturesincewefirsttookflightmorethanfourdecadesago.Weworkwithcharitableorganizationslargeandsmalltosupporttheminmakingaprofoundandlasting impact in our communities.We support organizations like theAmericanRedCrosstoassistcommunitiesinneed;theRonaldMcDonaldHousetoassistfamiliesfacingseriousillnesses;theNationalLeagueofCitiestostrengthenandpromotecitiesascentersofopportunity,leadership,andgovernance;ourownCommunityGivingBoardstoallowour localEmployeeswhoknowtheneedsof theircommunity tohaveadirect impact;andmanyothers.WeevenhaveourownnonprofittohelpSouthwestEmployeesfacingcatastrophic circumstances. Every Southwest location and Employee is a part of acommunity,andwe’recommittedtohelpingthesecommunitiesthrive.It’sacommitmentdeeplyrootedinourCulturealongwiththebeliefthatwecanuseourassetstobeacata-lystforpositivechange.

2012 Southwest Airlines One Report // People // Communities // Supporting Others and Our Own

ForadditionalinformationaboutTheCivic50,visitbusinessweek.com/interactivereports/civic_50_2012.html.

At Southwest, giving back is at the Heart of our culture.

In 2012, we provided $2.4 million in travel through our Medical Transportation Grant Program.

http://www.businessweek.com/interactivereports/civic_50_2012.html

http://www.businessweek.com/articles/2012-12-07/the-civic-50


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2012 Southwest Airlines One Report // People // Communities // Leading the Way

encouraging PeopleSouthwest recognizes that trueadvancementsandchangeare the resultsof individualefforts.Theseeffortsmaybetheresultofactionsbyasinglepersonorarethecollectiveactionsofpeoplewithacommoninterest.Inrecognitionofthis,weactivelysupportallofouruniqueCustomersandourindividualEmployeesintheirpursuitofpositivelyimpactingtheirowncommunitiesthroughouroutreachprogramssuchasAfricanAmericanOutreach (southwest.com/africanamericanoutreach),AsianAmericanOutreach (southwest.com/asianoutreach, LGBTOutreach (southwest.com/glbtoutreach), andHispanicOutreach(southwest.com/hispanicoutreach).

Make-A-Wish Foundation®Asanationalcausechampionandcorporatesponsor,wedonated$1.2millionintraveltotheMake-A-WishFoundation®in2012.TravelwishesarethenumberonerequestedwishatMake-A-Wish,andwearepleasedthatwewereabletohelpmake625wishescometrueforthesespecialchildren.TofurthersupportMake-A-Wish,JeffLamb,ourExecutiveVicePresident andChief People andAdministrativeOfficer, joined this philanthropicboardin2012.

Medical Transportation Grant ProgramThroughtheSouthwestMedicalTransportationGrantProgram(MTGP),weprovidecom-plimentary,roundtripticketstononprofithospitalsandmedicaltransportationorganiza-tions to assist familieswhoare facing serious illnesses toget the treatment that theyneedevenifitislocatedinanothercity.Participatingnonprofithospitalsandnonprofitmedical transportation organizations eachdetermine how todistribute the tickets topatients and/or caregivers. In 2012,weprovided$2.4million in free transportation tomorethan60hospitalsandorganizationsnationwidethatwereselectedasrecipientsinthe2012MTGP.Tolearnmoreaboutthisprogram,visitsouthwest.com/medicalgrant.

Southwest Airlines employee Catastrophic Assistance CharityWhendisasterstrikes,whetheritaffectshundredsofEmployeesthroughoutaregionorjustone,wetrulytakecareofourown.Throughfundraisersandpayrolldeductions,theSouthwest Airlines Employee Catastrophic Assistance Charity (SWAECAC) allowsEmployeestomaketax-deductibledonationstoacollectiveassistancefund.Thesefundsaredispersed toCoworkerswho applydue to a personal crisis or need. In 2012, ourEmployeescollectivelycontributedatotalofmorethan$1.2milliontoSWAECAC.

Leading the Way

Free HobbyInearly2012,weembarkedonalargeendeavor,coined“FreeHobby.”OuracquisitionofAirTran,recentadditionofthe737-800,andongoingeffortstoaddinternationalcapabili-tiestotheSouthwestreservationsystemputusinapositionwherewecouldexpandourroutesbeyondthecontinentalUnitedStates.Southwestproposed inter nationalserviceoutofWilliamP.HobbyAirport(HOU),whichwillenableservicetoMexico,theCaribbean,andcitiesinCentralandSouthAmericapendingrouteapproval.Ourplanwouldsignifi-cantlysimulatejobs,economicgrowth,andairtravelinthegreaterHoustonarea.

Thiswouldbeachievedbytheconstructionofafive-gateinternationalterminalatHOU.Inadditiontothefivegates,theconceptprovidesforaFederalInspectionServicesfacilitytoaccommodateU.S.CustomsandBorderProtectionservices.

2012 Communities By the Numbers4

19,053 Donationrequestsreceived

$2,104,871Southwesttotalmonetarydonations

137,000+* EmployeeVolunteerhours

44,559 Ticketsdonated

$20,273,621 Southwesttotalvalueofmonetary,in-kind,andticketdonations

http://www.southwest.com/africanamericanoutreach

http://www.southwest.com/asianoutreach

http://www.southwest.com/asianoutreach

http://www.southwest.com/glbtoutreach

http://www.southwest.com/hispanicoutreach

http://www.southwest.com/medicalgrant


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ThisendeavorgaveustheopportunitytoleverageourKeyContactsProgram,whichtrainsEmployeestoengagetheirelectedofficialsonissuesthatmattertousmost.Employeeengagementcameviaphonecalls, letters,petitionsignatures,publicsessionspeakers,communitymeeting speakers, andonsite audience support at local events from localEmployees, includingourownChairmanof theBoard, President, andChiefExecutiveOfficerGaryKelly.

WhileproudofthesupportandLeadershipourEmployeesshowed,wealsoweregratifiedbythesupportofthecommunitiesweserve,whichwereceivedinastoundingnumbers.Wewereabletoobtainsignaturesfrom33,682Stakeholdersfromall50statesforapeti-tion toFreeHobby.Thanks toourEmployees,communities,andStakeholdersworkingtogether,wewere able toobtainHoustonCityCouncil approval andhavebegun theefforttoexpandtheairportforSouthwestinternationalservices.

Military Heroes MonthWithnearly6,000Employeeseithercurrentlyserving intheNationalGuardorMilitaryReservesorwhoareveterans,weareproudtosupportmenandwomen inuniformallyearlongandrecognizeournation’sheroes.WehavenamedNovember“MilitaryHeroesMonth,”whichgivesusanopportunitytofocusoureffortsandmakeaspecialefforttodemonstrateourappreciation for thosewho fight forour freedom. Inour thirdannualMilitaryHeroesMonth,wepartneredwithAMillionThanks,HonorFlight,andtheArmedForcesFoundationtohonorthosewhohaveservedorareserving.

In2012,G.I. JobsmagazineagainnamedSouthwestoneoftheTop100MilitaryFriendlyEmployers®foroureffortstorecruitandretainformerandcurrentmembersofourarmedservices and reserves. In 2012, Southwest received the Armed Forces Foundation’sSheldonandMiriamAdelsonPatriotoftheYearAward.Thepurposeofthisawardisto

Foradditionalinformation aboutFreeHobby,visit southwest.com/freehobby.

CEO Gary Kelly celebrates with Employees after the Houston City Council approved an international terminal at Houston Hobby airport.

http://www.southwest.com/freehobby


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makethepublicawarethatitsrecipientisacompanywhopassionatelysupportstheU.S.military and thosewhoworkeveryday toensure thatourmilitarymembers and theirfamiliesneverhavetogowithout.

Nationwide Volunteerism CampaignsIn spring2012,we challengedall Employees toget involvedwith a local school.Morethan 50 citiesparticipated, and, as a result of this challenge, Employees volunteered2,600hourstoprepareschoolsfortheirstudentsandtobeautifythegrounds.Weaskedeachcitythatparticipatedtosubmitarecapofitsproject,whichwasthenjudgedonthemostcreativeuseofbudget,cityparticipation,andwhatmadetheprojectuniqueandspecial.Thelocationwiththebestprojectreceiveda$500donationandfourroundtripticketstogivetotheschoolandfurtherthepositiveimpactalreadymade.

Infall2012,ourEmployeeshostedaCAN-tasticcontesttoraiseawarenessofpreparednessandencouragevolunteerismduringNationalDisasterPreparednessMonthinSeptember.WiththeimpactofHurricaneSandyinOctober2012,wewereabletoseefirsthandtheimportanceofbeingpreparedinthefaceofdisaster.Weareproudtoannouncethatmorethan350Employees in20citiescollectedanddonated13,734poundsof foodto localfoodbanks,whichwillgenerate 11,195meals benefitingcommunitiesacross thenation.Thegivingbackdidn’tstopthere—hundredsofEmployeesvolunteeredwithfirstresponderorganizationssuchas their foodbankor theAmericanRedCross to learnmoreaboutdisasterpreparedness.

TheEmployeeswhoparticipatedalsocompetedinaCAN-tasticdesigncontest,whichwasjudgedbasedontheoverallcombinationofvolunteerhours,poundsoffoodcollected,andcreativity.Acashdonationtotheirlocalfoodbankwasawardedtothetopthreecities.

Tickets for TimeSouthwestlaunchedtheTicketsforTimeprogramin2010inordertobettersupportourpassionateEmployeeVolunteersinthecommunitieswheretheyliveandwork.Forevery40 hours one ormore of our Employees volunteer for a nonprofit organization, thebenefiting organization is eligible to receive one complimentary, roundtrip ticket onSouthwest.Throughthisprogram,acharitableorganizationcanreceiveuptosixroundtripticketsinacalendaryear.In2012,ourTicketsforTimeprogramgenerated1,742roundtriptickets* for charitable organizations nationwide thanks to our Southwest EmployeeVolunteers.


every year in the spring and fall Southwest holds nation wide volunteerism campaigns for all employees to get involved in their local communities.


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2012 Southwest Airlines One Report // People // Suppliers

p.60

GreenProcurementp.61

SupplierDiversity p.62SuppliersWe value diversity in our suppliers as well as those with a commit-ment to protecting our planet and conserving its natural resources.


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Workingwithoursuppliers isan importantpartofbeingagoodcorporatecitizen.Wepartnerwithoursuppliersnotonlybecauseoftheimpacttheyhaveontheproductsandequipmentweuseintheskies,ontheground,andinouroffices,butalsotheirimpactonourtriplebottomline.Webuildsustainablerelationshipswithoursuppliersthattakeintoaccountdiversity,smallandminority-ownedbusinesses,environmentalaspects,commu-nityinvolvement,humanrights,andthehigheststandardsofethicalconduct.

Green Procurement Attheendof2012,webeganreviewingourexistingprocurementpolicytoaddsectionsongreenprocurementandhumanrights.Weexpandedourexistingprocurementpolicytoincludethesesections,effectivein2013.Thesenewadditionsaddressthefollowing:

•Greenprocurement

°Suppliers comply with applicable environmental legal requirements andregulations.

°Suppliers have knowledgeof the Southwest Environmental Policy,which isnowincludedinourprocurementpolicy.

°SuppliersmaintainanopendialoguewithSouthwestconcerningenvironmentalachievements,trends,andpossibleareasforimprovement.

°Weask thatour suppliersprovideenvironmental-relateddataupon request.Thisincludes:

Useofrecycledmaterialsinthemanufacturingandpackagingofproducts

Current and future activities and/orprograms tohelp reduce impactontheenvironment


Formoreinformationaboutoursupplierprogram,visitsouthwest.com/suppliers.

Toviewourprocurementpolicy,visit southwest.com/assets/pdfs/corporate- commitments/procurement_policy.pdf.

Working with our suppliers is an important part of managing Southwest’s triple bottom line.

http://www.southwest.com/suppliers

http://www.southwest.com/assets/pdfs/corporate-commitments/procurement_policy.pdf


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Documentationofenvironmentalefforts,achievements,andcertifications

Noticesofenvironmentalviolations from federal, state,and local regula-toryagencies

°Ourstandardrequestforinformationencouragessupplierstoconsiderrecycledandrecyclablematerialswhenselectingmaterialsanddesignsolutions.

°Externalauditsofregulatedwastedisposalfacilitiesareperformedperiodicallytovalidateourwasteismanagedincompliancewithalllawsandregulations.

°SouthwestwillgivepreferencetoForestStewardshipCouncil-certifiedpaperwhenpurchasingcertifiedpaperproducts.

•Humanrights

°AllU.S.-basedsupplierscomplywithU.S.federalandstatelawsregardingchildorforcedlabor.

°AllU.S.-basedsupplierscomplywithU.S.federalandstatelawsregardingfree-domofassociationandcollectivebargaining.

Ourongoingdiscussionswithsuppliershaveledtoanincreasinglygreenersupplychain.Forinstance,FedEx,whichhandlesourshippingneeds,worksconstantlytoimprovetheefficiencyof itsvehicleandaircraftfleetsanditsfacilities.Ourcomputersupplier,Dell,provides us with electronics manufactured with at least 10 percent post-consumerrecycledplasticinmanyoftheirenclosuresaswellasinnovative,sustainablepackagingmaterials suchasbamboo,designed tobeeasily recycledor composted. Sourcing forourofficesuppliesthroughOfficeDepothashelpedusgreenourprocurementprocessbyusingminimalpackagingmaterialandpromotinggreenproducts.In2012,morethan33percentofitemsSouthwestsourcedthroughOfficeDepotwererecycledorremanu-factured items.Thesesuppliers’environmentalefforts translate toagreenerandmoreefficientsupplychain.

Supplier Diversity Southwestvaluesdiversityandseekstocreateanenvironmentthatencouragesandsup-portsdiversitybothintheworkplaceandwithinoursupplierbase.OurSupplierDiversityProgramwasdesignedtoenableSouthwest toextendopportunities toqualifiedsmall,disadvantaged,HUBZone,minority,woman,veteranandservice-disabledveteran-ownedbusinesses(diversesuppliers).Itisthegoalofthisprogramtoassistdiversesuppliersintheirdevelopmentascompetitivesuppliersofproductsandservices.

Southwest is committed toprovidingqualitydiverse supplierswith theopportunity tocompete and participate in the procurement process through our Supplier DiversityProgram.Ourprogramconsistsofstepsto:

•Activelyseekthesesuppliers

•Maintainanopenlineofcommunication

•Makeparticipantinformationavailabletointernalpurchasers

•Continuallyencourageourmajorcontractsupplierstoutilizequalifieddiversebusi-nessesasstrategicalliancepartners


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Southwest Headquarters Master PlanAsaresultoftheacquisitionofAirTranandaconsolidationofHeadquartersandMaintenancefunctions,we’veembarkedonwhatwe’recalling theHeadquartersMasterPlan.Thisprojectinvolves:

•Remodelinganddensifyingourexisting,nearly1million-square-footHeadquartersbuilding

•Remodelingourexisting,approximately90,000-square-footMaintenanceandEngi-neeringfacilityandconstructinga113,000-square-footexpansion

•Constructinganew500,000-square-footTrainingandOperationsSupportbuilding

Toofferdiversesuppliersgreateropportunity,wemakeitaprioritytohaveatleastonediversesupplierbidoneveryproposal.Asaresult,in2012alonewithourmajorsuppliersontheHeadquartersMasterPlan,wespentmorethan$5millionwithminority-and/orwoman-ownedbusinessenterprises.Weexpecttheprojecttobecompletedin2015.

Love Field Modernization ProgramTheLoveFieldModernizationProgram(LFMP)grewoutofacollaborativeeffortbetweenSouthwestandtheCityofDallastorestorethehistoryandupdatetheinfrastructureoftheDallas LoveFieldAirport (DAL). The renovation—which first becameopen to thepublicinApril2013andisexpectedtobecompletedin2014—includesa20-gatesharedconcourse, remodeled lobby, new ticketingwing, and expandedbaggage claimarea.Trafficflowaroundtheairportisalsobeingimprovedwithexpandedcurbsidesandroad-waysforpickupanddrop-off.Throughartinstallations,themodernizationoftheterminalshowcasesDallas’cultureandtheuniquehistoryoftheairport.TheLFMPalsofeaturesleading-edge sustainability, as the terminal is being constructed to achieve LEED(LeadershipinEnergyandEnvironmentalDesign)Silvercertificationfornewconstructionandmajor renovationsunder theU.S.GreenBuildingCouncil.Tobolsterminority-andwomen-ownedanddisadvantagedbusiness enterprises (M/W/DBE)participation, theCityofDallasestablishedaM/W/DBEprogramandsetagoalof26percentM/W/DBEparticipation.Notonlyhasthischallenginggoalbeenachieved,butitwasexceededbymore th an 10percent—at yearend2012, approximately 37percentof LFMPcontractswerewithM/W/DBEs.


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2012 Southwest Airlines One Report // People // Social Management Approach

Social Management ApproachWe emulate a Culture of LUV for our Stakeholders, treat our Customers like guests in our home, and give back to the commu-nities we serve.

Weunderstand thepowerful impacts that ourCompany canhaveon the socialsystemswithinwhichweoperate.

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Webuild longstanding relationships not onlywith our Employees, but alsowith ourCustomersandcommunitiesandlookforeveryopportunitytoenhancetheserelationshipsforthebettermentofallinvolved.Wediscloseinformationregardingourinteractionwiththese groups through the following of theGlobal Reporting InitiativeDisclosures onManagementApproach.

Labor Practices and Decent WorkWeencouragecreativityandinnovation,which,inturn,improvesouroperationaleffec-tivenessandCustomerService.Aboveall,weofferEmployeesthesameconcern,respect,andcaring attitudewithin theorganization that theyare expected to share externallywitheveryCustomer.

Labor and employment Law ComplianceSouthwestrecognizesandstrivestoadheretoalllaborandemploymentlawswhereverweoperate,includingthoserespectingfreedomofassociation,privacy,andequalopportu-nity.EmployeesarethebackboneofSouthwest.Therefore,ourapproachtoemploymentandlaborpracticesisacriticalstrategyguidedbyourExecutiveVicePresidentandChiefPeopleandAdministrativeOfficerandourGeneralCounselDepartment,whichincludesasectiondevotedsolelytolaborandemployeerelations.Wearecommittedto:

•SeekingtalentedPeople

•Maintainingpositivelaborrelations

•InvestingintrainingandeducationalopportunitiestoenhanceEmployees’skills



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•Fosteringanatmospherethatpromotesequalopportunity

•ProvidingourEmployeeswithasafeandstableworkenvironment

•Maintainingequalopportunityforlearningandpersonalgrowth

WehaveaclearvisionforourPeople.Wewanttoprotect the jobsecurity,prosperity,andwellbeingof all of ourEmployees.We focusonbringing thebestPeople—with aWarriorSpirit,aServant’sHeart,andaFun-LUVingAttitude—intotheSouthwestFamilywith a competitive compensation and benefits package.We then provide a positiveworkingenvironment,training,andencouragementtohelpthemsucceed.

SafetyOur top priority is to protect the personal Safety of each Southwest Passenger andEmployee.AfterSafety,it’sjobsecurity;beyondthis,wefollowTheGoldenRule,meaningwetreatothersthewaywewanttobetreated,whichiswhyDoingtheRightThingbyourEmployeesandCustomers isso inherenttowhoweareasaCompany.OurSafetyandSecuritycommitmentistofosterandsupportaCulturethatidentifiesriskstotheopera-tionandworkplaceandstrivestoproactivelydealwiththeseissuesbeforetheyleadtoinjuries,accidents,orincidents.WearealsocommittedtoadvancingSouthwest’sCultureofSafetythroughEmployeetrainingandourSafetyandSecurityPromotionsTeam,whoisdedicatedtobuildingSafetyawarenesswithinSouthwest.

OurSafetyandSecuritycommitmentcanbefoundat southwest.com/assets/pdfs/corporate-commitments/safety-commitment-pol.pdf.

Labor RelationsWeareproudofourSouthwestCultureandtherelationshipswebuildwithourEmployees.Webelievecommunication,transparency,andconsistencyarekeystofosteringstrong,long-termrelationships,whichisoneofthereasonswhyin2012weaddedaSeniorVicePresidentof LaborRelations to focuson these relationships andourEmployees.Withapproximately83percentofourEmployeesrepresentedbyunions,westrivetomaintainstablerelationshipswiththeseorganizationsbyhavingopenchannelsofcommunicationandbargainingingoodfaithinallmattersthatinvolveourEmployees.

Diversity and InclusionBuildinganinclusiveenvironmentatSouthwesthasbeenapartofourhistory.Inclusionisabouttheexpandedpotentialofallwhoarewillingtodemonstratetheirabilities.Withinclusion,Employeesfeelvaluedandpartofthedecision-makingprocess.Wehavemanyexamplesthroughoutourhistorywhereindividualshavefeltempoweredtoofferinnova-tivesolutionsfortheCompanyandourCustomers.SomeexamplesofhowencouraginganinclusiveenvironmentcanleadtoEmployeeengagement,higherproductivity,workforceretention, openness to thought, and apositiveworkforce include: ourChiefExecutiveOfficer’sMessagetotheField,coffeetalkswithLeaders,townhalls,thebiennialEmployeesurveys,OnBoardingefforts,theCultureCommittee,theDiversityCouncil,andmore.

AtSouthwest,ourVicePresidentofDiversityandInclusionisresponsibleforprovidingLeadership, vision, andadvocacyaswecontinueourwork to foster an inclusiveworkenvironment.ThisincludescoordinationandLeadershipofoursupplierdiversity,diversityrecruiting,andtrainingeffortsaswellas involvementwiththeDiversityCouncilonourotherMatterofRespectinitiativesandawarenessefforts.

Southwestscored90outof100intheHumanRightsCampaign’s2013CorporateEqualityIndexreleasedinSept.2012.This11thannualreportrankscompaniesbasedonasurveyof 2012 data. The annualCorporate Equality Index serves as a report card for LGBTequalityincorporateAmericaandratesmorethan680businessesacrossthecountryin

http://www.southwest.com/assets/pdfs/corporate-commitments/safety-commitment-pol.pdf


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categoriessuchasnon-discriminationpoliciesandtraining,benefits,employeesupportthroughdiversitycouncils,andmarketingandexternalengagement.

DiversityAtSouthwest,diversityismorethanaword;itisanexpressionofouroperations.AdiverseworkforcekeepsSouthweststrongandinnovative,andwestrivetomirrorthecommuni-tiesweserve.OurPeopleareourgreateststrength,andtheyareanamazinggroupofEmployeesfromdifferentbackgroundsandcountries.Thistranslatestoarichdiversityofideas, knowledge,andactions,whichhasmadeusaconsistentlyprofitableairlineandhashelpedtocreatetheFun-LUVingSouthwestCultureforwhichweareknown.Inclusionbrings ourCompany together, andwe embracedifferent perspectives and celebratethosewhodaretobringtheirbestforward.

Diversity CouncilIn2012,ourDiversityCouncilrefresheditspurposetoalignwithourevolvingEmployees,Customers,communities,andStakeholders.LedbyourVicePresidentofDiversityandInclusion,theDiversityCouncilisshiftingtodevelopintoanadvisorygroupthatprovidescritical expertise todepartments suchasMarketing,Culture, andExternal and InternalCommunicationsandhelpsdriveCompanydecision-making.TheDiversityCouncil’sgoalis tobuild a talented anddiverse LeadershipTeam to leverageEmployees’ strengthseffectivelyandefficiently.

education and TrainingSouthwestisdedicatedtothecontinuededucationandtrainingofitsEmployeesandseeksoutwaystoenhanceEmployeeeducation.

Citizenship GoalsIn 2012, Southwest’sCitizenshipCommittee continuedevaluatingpotential Employee-relatedgoals.Wearedefiningquantitativegoalsanddefiningmeasurementstoassessourprogress.Thesegoalsare:

•EnhanceourCultureofSafetyandSecuritythroughtrainingandeducation

•Value our Employees by fostering a Culture of learning and recognizing theirachievements

•Useour resources responsiblybycontinuingourgreenpurchasingpracticesandincreasingourrecyclingtonnageyearoveryear

•WintheheartsandmindsofCustomersbydeliveringexcellentCustomerServiceandfosteringCustomercommitment

Inthenearfuture,wewillprioritizeandestablishgoalsforselectedEmployeetargetsandwillworktodefineprotocolsforcollectingandanalyzingoperationaldatarelatedtoeachofthese,sowecanusefuturedatatoimproveandmonitorSouthwest’scommitmenttothetriplebottomline.


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Human Rights AtSouthwest,wesupportthepreservationofhumanrightsandareguidedbyfundamen-talprinciplestonotonlycomplywiththelawatalltimes,butalsotoavoidtheappearanceofimproprietyintheactionsofourEmployeesandourbusinesspartners.Wereflecttheseprinciples invariouspoliciesandourconducttowardEmployees,suppliers,Customers,andthecommunitiesweserve.

employeesTofulfillourresponsibilitiestosupportandrespecttheprotectionofhumanrightswithinoursphereofinfluence,wehavecreatedandadheretoCompanypoliciesdefinedbyourExecutiveVicePresidentandChiefPeopleandAdministrativeOfficerandourGeneralCounselDepartment.Thesepoliciesincludeourcommitmentto:

•Prohibitchildandforcedlabor

•Preventanyformofharassment,discrimination,orretaliationintheworkplacebasedon race, color, religion, age, sex, sexual orientation, gender identity, pregnancy,marital status, national origin, disability, veteran status, genetic information, orotherlegallyprotectedstatuses

•RespecttherightofEmployeestoassociatefreely

•RecognizelawfulrightsofEmployeestochooseornotchoosecollectivebargainingrepresentation

Suppliers and Business PartnersSouthwestexpectsoursuppliersandbusinesspartnerstooperateincompliancewithallapplicablelawsandregulations,includinglocalenvironmental,employment,andSafetylaws.Readmoreaboutoursuppliers.

TrainingSouthwestconductstrainingonhumanrightsissuesastheyrelatetoharassment,discrimi-nation,orretaliationforallnewhires.HumanrightstrainingalsoisavailableforexistingEmployeesthroughourCompliant LeadertrainingforLeadersandourharassmentonlinelearningmodule.In2012alone,ourEmployeesdevotedmorethan17,000hourstohumanrights training, and 20.5 percent of Employees completed the training.We provideguidanceforsuchissuestoallEmployeesthroughourGuidelines for Employees,whichcanbe foundonSouthwest’s intranet, alongwithourPolicyConcerningHarassment,SexualHarassment,Discrimination, andRetaliation.All Employees are responsible formaintainingapositiveworkingenvironment—freeofdiscrimination,harassment,retalia-tion,andhostile,threatening,orintimidatingbehavior.WefeelthatfollowingthesepoliciesissimplyDoingtheRightThing.

Ourcompanypoliciescanbe foundathttp://southwest. investorroom.com/bylaws-articles-policies.

OurPolicyonHarassment, SexualHarassment,orDiscriminationcanbefoundathttp://southwest.investorroom.com/bylaws-articles-policies.

http://southwest.investorroom.com/bylaws-articles-policies



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Product ResponsibilityAtSouthwest,ourMission is toprovidethehighestqualityofCustomerServicewithasenseofwarmth,friendliness,individualpride,andCompanySPIRIT.

Customer ServiceAtSouthwest,we recognize the importanceof communicatingopenly, accurately, andresponsiblyaboutourservicetoourCustomers,sotheycanmakeinformedchoices.OurformalCustomerServicepolicies are available toourCustomers throughour commit-mentsavailableatsouthwest.com/html/about-southwest/index.html,clickon“CustomerCommitments.”OurCustomerServiceactionsarefurthercommunicatedtoourCustomersthrough the useof variousmedia channels orCustomerFeedbackopportunities thatallowfortwo-waycommunicationwithourCustomers.

MarketingThereisaprocessinplaceforourGeneralCounselDepartmenttoreviewourmarketingmaterials that reach our Customers to comply with applicable regulatory and legalrequirements.In2012,theU.S.DOTissuedoneconsentorderrelatingtoAirTranadvertis-ing,resultinginafine.

Customer PrivacyIn2012,Southwesthadnofinesfornon-compliancewithapplicablelawsandregulationsconcerningCustomerprivacy.

SocietyOurMission,Vision,Purpose,andCulturepromotesustainingandrespectingourPeopleandourPlanetandguideourcommitment to society.AtSouthwest,weconserveandinnovate,treatothersthewaywewanttobetreated,andstrivetoDotheRightThing.

CommunityWe remain devoted to each and every community that we serve. Our Employees,Customers,andneighborsall contribute to theCultureofSouthwest.Weareproud toofferourcitiesmorethanjustfriendlyandaffordableairservice.Weprovidesupport—frommonetary and in-kinddonations to volunteer efforts that come from the heart.Southwestreachesouttoprovidehelptothoseinneed.

We have two Teams, Community Relations and Giving and Community Affairs andGrassroots, dedicated to the goal tomake a positive difference by championing thecausesthatmattermostinthecommunitiesweserve.Byfocusingonkeyareasofstrategicgivingandbynurturinglong-termrelationshipswithnationalandlocalorganizations,westrengthenourcommitmenttoourcommunities.

Avoiding Corruption and Anti-Competitive BehaviorAtSouthwest,we strive tomaintain accountability and transparencyof our businesspractices to reduce or eliminate corruption.We promote vigorous competition thatbenefits consumersbyproviding lowair fares anda varietyof high-quality air serviceofferingstodestinationsacrosstheUnitedStates.

read about our Mission, Vision, and purpose.

http://www.southwest.com/html/about-southwest/index.html


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Public PolicyWemustcontinuallyadapttonewlawsandregulations.Legislativeandregulatorychangeshave thepotential to limit ouropportunities forgrowth, andgovernmentpolicies andlegislation canhave adeep impactonhowwedobusiness.Wepresentour viewsonthese topics to awide rangeof policymakers andStakeholder groups through tradeassociationsandinteractionswithpublicofficialsatthefederallevelandinthestatesandcommunitiesweserve.

Weparticipate in industry associations such asAirlines forAmerica (A4A) and havedevelopedourownpublicoutreachprograms suchasourKeyContactsProgramandDaysontheHill.Ourinvolvementallowsustogaininsightintocoreissuesfortheairlineindustryasawholeandtoadvocatejointlyforregulationsthatsupportahealthy,com-petitiveindustry.Wealsobenefitfromtheopportunitytosharetechnicalexpertiseandoperational knowledge that leads to better Customer Safety, Service, and overallefficiency.

In2012,theCompanycontributed$2,000directlytopoliticalcampaignsatthestateormunicipal level.NoCompany fundswere used to support political campaigns at thefederallevel.Alsoin2012,A4A,ourindustrytradeassociation,determinedthat$671,021ofthetotalduespaidbytheCompanytoA4Awerenondeductiblelobbyingexpenses.

ComplianceAsaU.S.-basedcompany, it isourpolicytocomplywithallapplicable laws, rules,andregulationsoftheUnitedStatesandtheindividualstatesandmunicipalitiesweserve.Wedo this throughnumerouspolicies andprocedures,which are regularly reviewedandupdatedwhennecessary,andrelatedEmployeecertifications.Inaddition,Employeesinvariousoperationalareasmonitorpendingregulation,soassociatedpoliciesandproce-durescanbemodifiedtomaintaincomplianceasneeded.

Footnotes 1)Basedonactive,full-timeequivalentSouthwestEmployeesasofDec.31forspecifiedcalendaryear.In2012and

2011,full-timeequivalentAirTranEmployeesasofDec.31arealsoincluded. 2)FlightincludesCabinServiceSupport,Inflight,andFlightOperations.Ground,Customer,andFleetServicesinclude

Provisioning,CustomerServices,GroundOperations,andOperationsCoordinationCenter. 3)2011,2010,and2009dataupdatedfromreportednumbersin2011 Southwest Airlines One ReportTMbasedona

changetothedivisionofourEmployeesin2012. 4)IncludesAirTrandataforcalendaryear2012. 5)IncludesSouthwest’scontributionstoEmployeehealthandwelfareplans,workerscompensationinsurance,and

employerpayrolltaxes.6)2011dataupdatedfromreportednumberin2011 Southwest Airlines One Report™duetotheinclusionofAirTran’s

recurrenttraininghourswhendatafromAirTranwasstatedasexcluded.7)2011dataupdatedfromreportednumberin2011 Southwest Airlines One Report™duetoachangeinthedefinition

ofSafetyandSecurityhoursforFlightAttendanttrainingtoonethatincludesonlytrainingmodulesspecifictoSafetyandSecurity.

8)IncludesAirTrandataforcalendaryears2012and2011. 9)Basedonactive,full-timeequivalentSouthwestandAirTranEmployeesasofDec.31,2012.10) Southwestdoesnotofferdefinedbenefitplans.11)BasedontheProfitSharingCouncilofAmerica2011surveyresults.12) Fromthe2012yearendU.S.DOTAirTravelConsumerReportissuedFebruary2013.Topranking

isforSouthwestonly.AirTranrankedthirdinthesamereport.13)LeadingU.S.DOTCustomerSatisfactionrankingoutof15airlinesevaluatedin2012.14) LeadingU.S.DOTCustomerSatisfactionrankingoutof16airlinesevaluatedin2011.* MetricsrevisedasofMay20,2013.EmployeeVolunteerhourswerechangedfrom“morethan

118,000”to“morethan137,000.”NumberofticketsgeneratedfromTicketsforTimewas changedfrom“1,507roundtriptickets”to“1,742roundtriptickets.”


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p. 72 Planet Data

p. 74 environmental Impacts

p. 83 environmental Conservation

p. 87 environmental Management System

p. 90 Waste Management and Recycling

p. 93 environmental Management Approach

We believe it’s our responsibility to protect our planet and its natural resources while remaining true to our low-cost philosophy.

Werefertothismindsetasoperatingwithagreenfilter,whichisanimportantpartofourbuildingLUV.AtSouthwestAirlines,wedoourparttominimizeourimpactontheenvironmentbyoperatingefficiently, collecting and analyzing informationonour impacts,andcontinuouslyimprovingtheactionswetaketomitigatethoseimpacts.Wecontinue to analyzedataonour fuel consumption,emissions,andresourceuseandsupportstrategic initiativesthatwillleadtofurthergreenhousegas(GHG)emissionsreductionsinthefuture.Aspartofourcommitmenttoprotectingourplanet,weuse resources responsibly, conserve fuel and water, recycleonboardandontheground,employgreenpurchasingpractices,andimplementdesignandconstructionpracticesthatmeetLEED®(Leadership inEnergy andEnvironmentalDesign) standards fornewconstructionandbuildingretrofits.

2012SouthwestAirlines OneReport// Planet


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plAnet DAtA AlldatapresentedinPlanetincludesAirTranAirwaysstartingin2012unlessotherwisestated.

20121 20112 2010 2009

environmental impacts

Totalenergyconsumption(megawatt-hours(MWh)) 71,571,555 68,368,9693,4 — —

Jetfuelconsumption(gallons) 1.85billion 1.8billion 1.4billion 1.4billion

Fuelefficiency(availableseatmiles(ASMs)/gallon) 69.4 68.3 68.5 68.6

Naturalgasconsumption(therms) 801,000 827,0003 897,000 —

Intensityratio(therms/Employee) 17 22 — —

Groundsupportequipment(GSE)dieselconsumption(gallons) 1.79million 1.78million 1.75million —

GSEgasolineconsumption(gallons) 944,000 964,000 698,000 —

Electricityconsumption(kilowatt-hours(kWh)) 79million 71million4 72million —

Intensityratio(kWh/Employee) Morethan1,700

Nearly1,900

Morethan2,000

—

Waterconsumption(gallons) 77million 79million 73million —

IntensityRatio(gallons/Employee) Nearly1,700 — — —

Numberofenvironmentalviolationsresultinginfines 1 0 2 3

Totalenvironmentalfines $1,500 None $603 $3,689

Greenhouse Gas inventory

Scope1emissions(metrictonsofcarbondioxide equivalent(CO2e))

18,232,474 17,417,7343 13,930,902 13,838,695

Scope2emissions(metrictonsofCO2e) 46,783 41,8294 43,960 49,512

TotalGHGemissions(metrictonsofCO2e) 18,279,257 17,459,5633,4 13,974,862 13,888,207

Productionactivity(revenuePassengermiles(RPMs)) 102.9billion 97.6billion 78.0billion 74.5billion

Intensityratio(metrictonsCO2e/1,000RPM) 0.18 0.18 0.18 0.19

Productionactivity(ASMs) 128.1billion 120.6billion 98.4billion 98.0billion

Intensityratio(metrictonsCO2e/1,000ASM) 0.14 0.14 0.14 0.14

Productionactivity(revenuetonmiles(RTMs)) 10.4billion 9.9billion 7.9billion 7.6billion

Intensityratio(metrictonsCO2e/1,000RTM) 1.76 1.77 1.77 1.84

environmental conservation

Totalcleaner-burningGSE(piecesofequipment) Morethan1,500

Morethan1,300

Nearly1,100

—

Purchasesofrenewableenergycertificates(kWh) Morethan15.7million

Morethan15.7million

Morethan15.7million

Morethan15million

U.S.EnvironmentalProtectionAgency’s FORTUNE 500GreenPowerPartnersranking

40 37 32 33

environmental Management System

Ozone-depletingsubstancesproducedorimported None None — —

2012 Southwest Airlines One Report // Planet // Planet Data


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20121 20112 2010 2009

waste Management and recycling

Recycledco-mingledwaste(paper,plastic,aluminum, andcardboard)5

Nearly 2,900tons

Nearly2,700tons6

Morethan2,500tons

Morethan1,500tons

Percentincreaseyear-over-yearinrecycledco-mingledwaste Morethan 7percent

Morethan6percent6

Morethan65percent7

—

Recycledindustrialwaste 632tons 515tons 650tons —

Energyrecoveredfromindustrialwaste(Britishthermalunits(Btu))

Morethan8.2billion

Nearly5.8billion

Morethan6billion

5.7billion

Hazardouswastegenerated 22tons 12tons 16tons 13tons

Hazardouswastemanagedthroughbeneficialuse 18tons 10tons 15tons 12tons

Intensityratio(poundsofhazardouswastegenerated/aircraft) 63 44 59 49

2012 Southwest Airlines One Report // Planet // Planet Data


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EnergyUse p.75

Water p.77 Consumption

GHGInventory p.77

Regulatory p.81 Compliance

environmental ImpactsWe voluntarily track our energy and resource use and related emissions to better understand our impact on the environment.

Understandinghowweuseenergyandresourcesallowsustofocusourconservationeffortsontheprogramsthatwillmosteffectivelyreduceourimpactontheplanet.Wegainthisunderstandingthroughbaselineassessmentsandcontinuoustrackingof our energy and resource consumption. Specifically,we have tracked jet fuelconsumptionsinceourinception,addedCompanywideelectricityandnaturalgasconsumptiontracking in2009,andwaterusagetracking in2010.Collectingdataonour energy consumption alsomakes it possible for us to conductour annualgreenhousegas(GHG)inventory.

2012 Southwest Airlines One Report // Planet // environmental Impacts

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Measuring Our environmental Impact: energy UseIn 2011,webegan trackingour energy and fuel usebasedon a single commonunit—MWh—for consistencywithour response to theCDP (formerly theCarbonDisclosureProject).Convertingourconsumptionofvariousenergysourcestoacommonunitallowsustoaddthosenumberstogether forasinglenumberrepresentingouroverallenergyuse. For 2012, our total energy usewas approximately 72millionMWh, compared toapproximately68millionMWhin2011.This increase inenergyusecanbeattributedtoourexpandedoperationswiththeacquisitionofAirTranonMay2,2011.Energyusenum-bersfor2012reflectthefirstfullyearofcombinedoperationsanddatatracking.

Jet Fuel ConsumptionWithjetfuelconsumptioncomprisingthevastmajorityofourresourceuse,trackingtheuseandconservationofthisresourceisessentialtoreducingourimpactontheplanet.In2012,Southwestconsumedapproximately1.85billiongallonsofjetfuel,andourfueleffi-ciencyimprovedtoapproximately69.4ASMspergallon.

ASMsmeasureanairline’spassengercapacity.ASMsarecalculatedbyfirstmultiplyingthenumberofavailableseatsonaflight,occupiedandvacant,bythenumberofmilesflown for thatparticular flight.Thenanairlinecalculates itscollectiveASMsbyaddingeachindividualflight’sASMsforagiventimeperiod.

2012 Southwest Airlines One Report // Planet // environmental Impacts // energy Use

2012 energy Consumption (MWh)8

Total: 71,571,555

71,362,072 Jetfuel

72,575 Diesel

23,150 Naturalgas

34,410 Gasoline

79,348 Electricity


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2012 Southwest Airlines One Report // Planet // environmental Impacts // energy Use

Natural Gas, Diesel, Gasoline, and Other Fuel ConsumptionInadditiontojetfuel,weconsumeseveralothertypesoffuel.Thisincludesnaturalgasconsumption inoffices,hangars,andother facilitiescontrolledbySouthwestand fuelsusedinGSE.In2012,weusedapproximately801,000thermsofnaturalgasin46SouthwestandAirTran-controlledfacilities.Thisequatestoapproximately17thermsperEmployee.9 Thiswasapproximately26,000thermslessthanour2011consumption.Similartopreviousyears,thisreductioncanbepartiallyattributedtoamildwinteraswellascontinuedeffi-ciencies inourbuilding operations.OurGSEfleetconsumedapproximately 1.79milliongallonsofdieselandapproximately944,000gallonsofgasolinein2012.AlimitednumberofGSEalsoconsumedpropane,liquidpetroleumgas,orcompressednaturalgas.Duetothelimitedusageofthesefuels,whichonlyaccountforapproximately2percentoftheGSEfleet,andchallengesassociatedwithmeasuringconsumptionofthesefuels,usagenumbersforthesefuelsarenotactivelytracked.

electricity ConsumptionSouthwest alsomonitors electricity consumption in facilitieswherewe have primaryoperationalcontrolandpayfortheseutilities.Ourtotalelectricityusagein2012,includ-ing76SouthwestandAirTranfacilities,wasapproximately79millionkWh.Thisequatestoapproximately1,700kWhperEmployee.9CurrentdatalimitationsdonotallowustotrackelectricityusageasafunctionofsquarefootageorEmployeesassociatedwiththespecificfacilitiesmeasured.However,weplantocontinuetoevaluatewaystorefineourmonitoringofelectricityconsumptionasafunctionofthesizeofouroperations.

Operational ControlIntrackingourenergyconsumptionandrelatedemissions,weincludethefacilitiesandassetswe control. This includesboth facilities ownedbySouthwest and those underprimarycontrolofSouthwest.Infacilitieswhereweareprimarilyatenantratherthananowner,wedonotcontrol,monitor,orpayforallutilitiesutilized.TheenergyconsumptionnumberslistedhereandutilizedinourGHGinventoryarebaseduponfacilitiesforwhichwehaveprimarycontrolandalsopurchaseutilities.Theutilitiesincludedvarybytenantorleaseagreement,whichiswhythenumberofSouthwest-controlledfacilitiesonwhichwereportvariesbyutilitytype.

Historic Fuel efficiency (ASMs/gallon)

2012 2011 2010 2009 2008 2007 2006 2005 20040

10

40

20

50

70

30

60

80

69.4 68.3 68.5 68.6 68.3 66.9 66.7 66.2 64.0

By improving our fuel efficiency from 2011 to 2012, we saved nearly 29 million gallons of jet fuel—that’s equivalent to approximately 4,500 round trip flights between chicago Midway (MDw) and las Vegas (lAS).


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2012 Southwest Airlines One Report // Planet // environmental Impacts // Water Consumption and GHG Inventory

Measuring Our environmental Impact: Water ConsumptionOurtotalwaterconsumptionin2012,baseduponthe31facilitieswherewepayforwaterusage,was approximately 77milliongallons. This equates to nearly 1,700gallonsperEmployee.9Allofthesefacilitiesreceivewaterfromthelocalmunicipalwatersupply.Thistotaldoesnotincludecannedwaterservedonboardaircraft,whichispurchasedfromabeveragesupplierand,therefore,countedinitsconsumption.Themajorityofourwaterconsumptionisfordomesticuses,suchasrestrooms,byourEmployees.Aportionofourwaterusageisprocesswater—includingcleanupandequipmentandaircraftwashing—atourmaintenancebases.Wealsoconsumewaterforlandscapeirrigationatsomeofourfacilities.Comparedtootherresources,suchasjetfuel,waterisnotconsumedatalevelconsideredtobematerialinSouthwestoperations.

Measuring Our environmental Impact: GHG InventoryAtSouthwest,2012marksourfourthyearoftrackingGHGemissions.WemeasuretheseemissionsbyconductingaGHGinventoryinaccordancewithGlobalReportingInitiative(GRI)guidelines, awell-recognized industry standard. Since2009,ourGHG inventoryshowsan increase inthetotalGHGemissions in tonsofCO2eeachyear,butvery littlechangeinGHGintensityratiosyearoveryear.Theincreaseintotalemissionsin2011and2012isnotsurprisinggivenourexpandedoperationswiththeacquisitionofAirTranonMay2,2011.

Whenthereisasignificantchangeinoperations,itishelpfultolookatGHGemissionsintermsofintensityratios.IntensityratiosareoftenreferredtoasnormalizedenvironmentalimpactdatathatallowaquantificationoftheGHGimpactperunitofphysicalactivityorunitofeconomicoutput.Withintheairlineindustry,parametersthatreflectproductivityincludeRPMs,ASMs,andRTMs.Despitetheincreaseinthesizeofouroperationssince2009,ourintensityratiosbasedontheseparametersremainedapproximatelythesameshowingslightdecreasesintwoofthethreeparameters.

Despite increases in the size of our operations, our GhG intensity ratios have remained the same or decreased.


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Wecontinue to voluntarily trackGHGemissions and strive to reduce future emissionswhile continuing to provide safe, reliable, and affordable air transportation to ourCustomers.Therearenofederal,state,orlocalregulationsrequiringustoconductaGHGinventory.WearevoluntarilydoingsotomeettheGRIguidelinesand,mostimportantly,tobetterunderstandourimpactontheenvironment.WefirstbegantrackingGHGemis-sionsin2009toestablishabaselineuponwhichwecanmeasurefutureperformance.

Inventory DevelopmentOurinventoryevaluatesthesixGHGsrecognizedunderTheGreenhouseGasProtocolascontributingtoclimatechange:

•Carbondioxide(CO2)

•Methane(CH4)

•Nitrousoxide(N2O)

AirTrandata hasbeen incorporated intoour emissions calculations. The calculations of emissions related to jet fuel, diesel, and gasoline includeAirTran data, as do thefacility-relatedemissionscalculations—includingelectricityusage,naturalgasusage,andHVAClosses.

Baseduponthecompletenessandprecisionofthedatausedfortheinventory,weestimate thatthis inventory isaccuratewithin5percent.GHGemissionsfromsomeinsignificantactivities,suchasHVACsystemlosses,areestimatedbasedonanupper-boundassump-tionof theexpected lossesthatwouldoccur fromSouthwest facilities.TheseactivitiesareaverysmallpercentageofouroverallGHGemissions.AllotherGHGemissions,suchasthosefromuseofjetfuelandnaturalgas,arecalculatedfromactualusagerecords.

•Hydrofluorocarbons(HFCs)

•Perfluorocarbons(PFCs)

•Sulfurhexafluoride(SF6)

2012 Southwest Airlines One Report // Planet // environmental Impacts // GHG Inventory

our 2012 GhG inventory follows the world resources institute’s The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard.

Comparison of Key Operating Statistics Related to emissionsMetric 20121 20112 2010 2009

TripsFlown 1,361,558 1,317,977 1,114,451 1,125,111

Fuelconsumed,ingallons(millions)

1,847 1,764 1,437 1,428

TotalGHGemissions (million metric tons CO2e)

18.3 17.5 14.0 13.9

ASMs(000s) 128,137,110 120,578,736 98,437,092 98,001,550

Intensityratio (metric tons CO2e/1,000 ASM)

0.14 0.14 0.14 0.14

RPMs(000s) 102,874,979 97,582,530 78,046,967 74,456,710

Intensityratio (metric tons CO2e/1,000 RPM)

0.18 0.18 0.18 0.19

RTMs(000s) 10,411,609 9,871,458 7,914,603 7,555,942

Intensityratio (metric tons CO2e/1,000 RTM)

1.76 1.77 1.77 1.84


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Organizational BoundariesOrganizationalboundaries—thedegreeofanorganization’scontroloveritsfacilitiesandequipment—determinethetypesofGHGemissionsthatwillbeincludedwithinorexcludedfromtheinventory. Incommercialaviation,themajorityofthefacilitiesoperatedbyanairlineareownedbyothersandleasedbytheairline.InthisGHGinventory,wearetakingthe same operational control approach we have used since 2009—including GHGemissionsfromfacilitiesandassetswecontrol,which includesbothfacilitiesownedbySouthwest and those under the primary control of Southwest. Examples of facilitiesunder our primary control includeHeadquarters facilities, aircraft hangars,CustomerSupportandServicescenters,andotherairportfacilitiessuchasprovisioning,cargo,orGSEmaintenancelocations.Facilitiescontrolledbyairportoperators,suchasterminalssharedbymultipleairlines,havenotbeenincluded.

Operational BoundariesOperationalboundariesidentifythetypesofemissionsourcesthatwillbeincludedintheGHGinventory.GHGemissionsarecategorizedintooperationalboundariestoavoiddoublecounting.Theclassificationsare:

•Scope 1 (direct) emissions originate from sources owned or controlled by theorganization.OurmainsourceofScope1emissions is thecombustionofjetfuel;however,wealsotracktheimpactsofnaturalgascombustion,GSEfuelcombustion,andHVACsystemlosses.

•Scope 2 (indirect) emissions occurfromthegenerationofimportedelectricityorsteamconsumedbytheorganization.

•Scope 3 (other indirect) emissions are the consequences of an organization’sactivitiesbut arise fromGHG sources not ownedor controlledby theorganization.ExamplesoftheseincludeEmployeescommutingtoworkinpersonalvehiclesanddeliveryoffueltoSouthwestlocations.

Aswithourpreviousyears’inventories,wehaveincludedScope1andScope2emissionsinour2012GHGinventory.Scope3emissionsarenotincludedbasedonourfundamentalknowledgethattheyareinsignificantwhencomparedtoourScope1emissionsandthefactthatunderTheGreenhouseGasProtocolreportingofScope3emissionsisoptional.



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GHG emissionsForpreparationofthisinventory,wecollecteddataregardingour:

•Aircraftfuelconsumption

•GSEfuelconsumption

•PurchasedelectricityinSouthwest-controlledfacilities

•Naturalgasconsumptioninoffices,hangars,andotherfacilitiescontrolledbySouthwest

•RefrigerantsemittedfromchillersandairconditioningunitsfromSouthwest-controlled facilities(i.e.HVACsystemlosses)

ThecollecteddatawasconvertedtoGHGemissionsusingindustry-standardfactors.

Insummary,Southwest’s totalGHGemissions for2012wereapproximately 18.3millionmetrictonsofCO2e,withmorethan99percentofthoseemissionscomingfromaircraftfuel combustion. Thiswasmore thanour previous years’ totals,whichwas expectedgiventheincreaseinthesizeofouroperationswiththeacquisitionofAirTranin2011.Yet,evenwiththesignificantchangesinthesizeofouroperations,ourintensityratiosbasedonASMs,RPMs, andRTMs remained approximately the same andhave shown slightdecreases based on RPMs and RTMs due to Southwest’s many efficiencymeasuresdiscussedthroughoutthe2012 Southwest Airlines One ReportTM.


Historical GHG emissions Inventory Summary

Operational Boundary

20121 (metric

tons CO2e)

20112 (metric

tons CO2e)

2010 (metric

tons CO2e)

2009 (metric

tons CO2e)

Aircraftfuelcombustion 18,197,935 17,382,945 13,898,333 13,810,014

Naturalgascombustion 4,330 4,4723 4,842 4,940

GSEfuelcombustion 26,814 26,922 24,332 20,347

HVACsystemlosses 3,395 3,395 3,395 3,394

TotalScope1emissions 18,232,474 17,417,7343 13,930,902 13,838,695

TotalScope2emissions 46,783 41,8294 43,960 49,512

TotalGHGemissions 18,279,257 17,459,5633,4 13,974,862 13,888,207

2012 GHG emissions Inventory Breakdown

Operational Boundary

CO2 (metric

tons CO2e)

CH4 (metric

tons CO2e)

N2O (metric

tons CO2e)

HFCs (metric

tons CO2e)

PFCs (metric

tons CO2e)

SF6 (metric

tons CO2e)

Scope1 18,040,851 10,505 177,723 3,395 — —

Scope210 46,589 15 179 — — —

TotalGHG emissions

18,087,440 10,520 177,902 3,395 — —


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Measuring Our environmental Impact: Regulatory ComplianceMaintainingcompliancewithall local, state,and federalenvironmental lawsandregula-tions is fundamental toourenvironmentalpolicy.Westrivetomeetourannualgoalofzerorecordedenvironmentalviolationsinouroperationsbymaintainingandimprovingourenvironmentalmanagementsystem,followingprocedures,andtrainingourEmployeestomeetourcompliancegoals.

Wealso regularlyconductaudits tomaintainenvironmental compliance.Our standardauditingprotocolreviewsastation’srecordkeeping,permitstatus,andcompliancewithrequirements of regulatory plans such as Storm Water Pollution Prevention Plans(SWPPP)andSpillPrevention,Control,andCountermeasure(SPCC)Plans.Weperformavisual,walk-throughinspectiontoconfirmthatkeycompliancepracticesareenactedineachof the citieswe serve.With the acquisitionofAirTran in 2011,we expandedourauditing program to include all AirTran locations. We track all audit findings andcorrespondingcorrectiveactionindatabases,whichalsoincludeinformationaboutourpermitsandtheirexpirationdatesaswellasthespillhistoryforeachofourlocations.

Fines and SanctionsOneof thewayswecanmeasureour impacton theenvironment isby thenumberofenvironmentalfinesandsanctionswereceive.WeprepareformalreportsforLeadership,inwhichwetrackthe numberofanddollaramountassociatedwithanyenvironmentalviolationswereceive.Ourgoaliszeroenvironmentalviolations.In2012,wefelljustshortof this goal with one violationwith a related fine of $1,500 related to storage tankrequirements.

2012 Southwest Airlines One Report // Planet // environmental Impacts // Regulatory Compliance

yearNumber of Violations

Resulting in Fines Total Fines

2012 1 $1,500

2011 0 None

2010 2 $603

2009 3 $3,689

2008 0 None

A Southwest First Officer conducts a preflight check.


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2012 Southwest Airlines One Report // Planet // environmental Impacts // Regulatory Compliance

SpillsWerecognizethatspillsofchemicals,oils,andfuelscanhaveasignificantimpactonourplanet,sowemakeeveryefforttopreventthem.However,weacknowledgethatdespiteourbest efforts, some spills dohappendue to equipment failureor humanerror.Wetrackourspillsusinganonlinespillreportingform.ThisnotonlymakesitsimpleforourEmployeestoreportaspillinatimelyandaccuratemanner,butitalsoprovidesautomatice-maildistributionto theentireEnvironmentalServicesTeamupon submittal forquickresponseand regulatory agency reportingwhen required. TheEnvironmental ServicesTeamalsocompilesdetailsfromallspillsforusebytheoperatinggroupstodevelopspillprevention strategies.Only twoof the spill incidents in 2012 required reporting to theNationalResponseCenterorothergovernmentalagency.Noneofthespillsweresignifi-cant,andnonerequiredreportinginourfinancialstatementsasaliability.

Noise ReductionWestrivetomitigatenoiseandbeagoodneighborineachofthecommunitiesweserve.Wedothisbyensuringourfleetmeetscurrentaircraftnoisestandardsandouroperationsmeetlocallyestablishedcurfews.Theadditionofwingletstoeligiblemodelsinourfleethasalsoresultedinquieteraircraftoperationsandlessnoiseforsurroundingcommunities.TheaircraftthatmakeupourcurrentfleetarecompliantwitheithertheFederalAviationAdministration’s (FAA)Stage3orStage4 standard. TheBoeing737-700s, 737-800s,and737MAXaircraft,whichwillbeintroducedthroughourfleetmodernizationprogram,willbecompliantwithStage4standards.


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2012 Southwest Airlines One Report // Planet // environmental Conservation

Water p.86 Stewardship

Emissions p.84 Reductions

Electricity p.86 Management

environmental ConservationConservation of natural resources is one of the core elements of our environmental policy.

Byconservingresourcessuchasjetfuel,GSEfuel,andelectricity,wecanminimizetheGHGemissions that result fromouroperationswhile reducingcosts.Wealsorecognizethatwhilewedonotuseasignificantamountofwaterinsupportofouroperations,wecanfindwaystobegoodstewardsofthisresource.

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Southwest’sCommunityGardendonatestonearbyfoodbanks.


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emissions ReductionsAsamemberofAirlinesforAmerica(A4A),wesupporttheA4Aclimatechangecommit-mentandhaveadoptedtheA4A’sindustry-widegoalsforfuelefficiencyandemissionsreductions:

•Continue industry fuel (and,hence,CO2)efficiency improvements, resulting inanaverageannualCO2efficiencyimprovementof1.5percentperyearonanRTMbasisthrough2020

•Cap industry-wideCO2 emissions from2020 (carbon-neutral growth) subject tocriticalaviation infrastructureand technologyadvancesachievedby the industryandgovernment

•Contributetoan industry-widegoalof reducingCO2emissionsby50percentby2050,relativeto2005levels

AtSouthwest,wehaveanumberofemissions-reductionprojectsinplacetolessenourimpactontheplanet, includingstrategicfleetreplacements;refreshingourcabinswithEvolve,ournew lighter-weight, recyclableaircraft interior;andbuilding toLEED®stan-dardsfordesign,construction,andrenovations.WealsoconservefuelwhenoperatingouraircraftandGSEandreduceelectricityconsumptionwhereverpossible.

Fuel ConservationOurEmployeeshaveahistoryofDoingtheRightThing,whichmeanslookingoutforthebottom linebyusing resources responsibly, controlling costs, andworking efficiently.Withfuelcostsbeingoneofthemostsignificantfactorsaffectingourbottomline,ourEmployeesarepassionateaboutfuelconservation.

2012 Southwest Airlines One Report // Planet // environmental Conservation // emissions Reductions


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2012 Southwest Airlines One Report // Planet // environmental Conservation // emissions Reductions

GSE Fuel Conservation ProjectsIn2012,wepurchased17newpiecesofelectricGSEandconverted20beltloadersfromdiesel to electric power. The purchase of new, cleaner-burning diesel equipment toreplaceretiredequipmentcombinedwiththecontinuationofourGSEdiesel-to-electricconversionprogrambrings the total numberof cleaner-burningGSE in the combinedSouthwest andAirTranGSE fleet tomore than 1,500asof yearend2012. In 2010,wemade a commitment to have electric belt loaders and baggage tractors at all new

Overtheyears,ourfuelconservationprogramshavecontributedtothereductionofourfuelconsumptionbyhundredsofmillionsofgallons.Historically,eachdepartmentownedfuelconservationeffortsandworkedwithintheirTeamstofindefficiencies.In2007,weestablished a Fuel Team to formalize our fuel conservation efforts and leverage theknowledgeandexcellentworkbeingdoneindependentlybyourdepartments.TheTeamincludes representatives from Flight Operations, Maintenance, Dispatch, OperationsCoordinationCenter, FuelManagement,GroundOperations,OperationsModeling andResearch, Strategy and Planning, Environmental Services, Finance, Purchasing, and otheroperations and supportdepartments. TheFuel Teamevaluates notonly jet fuelconsumption,butalsogasolineanddieselusage.

TheFuelTeam’sresponsibilitiesinclude:

•Analyzingquestionsrelatedtofuelconsumption,fueldeliverymethods,andalter-nativefuels

•Monitoring,tracking,andensuringthesuccessofapprovedfuelcostimprovementprojects

•Identifying,evaluating,andimplementingnewideastoreducefuelcosts

•Reportingonfuelperformanceagainsttargets

Southwestfuelconservationinitiativesthatarecompletedorinprogressinclude:

•Singleenginetaxi (outandin)

•RequiredNavigationalPerformance(RNP)

•Re-evaluateflight/fuelplanningprocedures

•Weight-savingoppor-tunitiesonaircraft

•Alternatefuels(jet, automotive,anddiesel)

•FreeTradeZonefuel

•737-300winglets

•-700winglets

•3-Daerokits

•Enginewashprogram

•Auto-throttle

•Adjustgroundidlespeed

•Verticalnavigationonclassicfleet

•Gateservices (pre-conditionedair/ 400hertz)

•Revisedauxiliarypowerunitstartfororiginators

•Bestwindroutes (flightplanning)

•Flightplanatcost index(CI)

•Targetedcoldsoak fuelrestrictions

•Adjustvolumeofproductsonboard

•FleetModernization

• Evolveaircraftinterior

•Optimumtake-offflaps

•Departureturn on-course,acceleration

•Economyclimb

•Intermediatelevel-offspeed

•Economycruise

•Economylow-altitudeflights

•CI20

•Aircrafttrimtechnique

•Optimumaltitudeenvelope

•Economydescent

•FlightManagementComputer30normallandingsetting

•Aircraftperformancemonitoring

•Contingencyfuel

•Tankeringprogramupgrades

•GSEconversions toelectric

•GSEidletimerevaluations

our most recent conservation efforts have centered on modernization of our fleet as discussed in our Fleet Modernization story.

Number of Cleaner-Burning GSe in Fleet (piecesofequipment)

2009201020115201210

300

600

900

1,200

1,500


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2012 Southwest Airlines One Report // Planet // environmental Conservation // electricity Management and Water Stewardship

airports added to our FAA operations specifications where Southwest provides thegroundservices.Sincewemadethiscommitment,wehaveenteredthreenewmarketsand added21 cleaner-burningGSE, yielding reductions inboth fuel consumption andGHGemissions.Asaresultoftheseprograms,wehavesteadilyincreasedthenumberofcleaner-burningGSEinourfleeteachyearsincewebegantrackingthismetricin2009.Wesavedmorethan560,000gallonsoffuelin2012andreducedemissionsbyapproxi-mately 5,300metric tonsofCO2e through theuseof electric, rather thanpetroleum-powered,GSE.Wealsorealizedadditionalfuelsavingsandemissionsreductionsin2012fromrepoweringsomeGSEwithnew,cleaner-burningdieselengines.

electricity ManagementInadditiontoefficientoperationofourequipment,wealsoprotectourplanetwiththeefficientoperationofourfacilities.Infacilitiesthatwelease,wearelimitedinthenumberofopportunitiestoretrofitequipment,sowefocusoureffortsonSouthwest-controlledfacilitieswheremoresignificantimpactscanbeachieved.Bytrackingourconsumption;utilizingrenewableenergy;andincorporatingwater-andenergy-efficientpracticesthatmeetLEED®standardsfordesign,construction,andrenovationswhenremodelingorinconstructionofnewfacilities,weareimplementingandmaintainingprojectsthateffec-tivelyreducetheimpactofourresourceconsumption.

In2012,wecontinuedtoauditandtrackourmonthlyutilitybillsandtoprocurerenewableenergycertificatesthroughourenergymanagementconsultant,SummitEnergyServices,Inc.In2012,wealsocontinuedouragreementwithReliantEnergytopurchase30percentrenewableenergy forourDallasandHoustonoperations.Wemetourcommitmentbypurchasingmorethan15.7millionkWhofwindpower intheformofrenewableenergycertificates.Theseelectricityconservationinitiativesareexamplesofhowwearebuildingasustainablefoundationtobothconserveandefficientlyuseelectricity.

Water StewardshipIn2012,wecontinuedtosupportourongoingwaterconservationprojects.TheseinitiativesincludenewirrigationtechniquesandanativelandscapinginitiativeatourHeadquarterstodecreasetheamountofwaterweconsumefromlandscaping.Wesawadropinouroverallwater consumption from 2011 to 2012 that can be attributed in part to theseprojects.Wealso focusonwater stewardship througheducation andoutreach toourEmployeesabouttheimportanceandimpactofintegratingconservationhabitsintotheirlivesatworkandathome.

We were ranked 40th11 on the u.S. environmental protection Agency’s FORTUNE 500 Green power partnership list.


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2012 Southwest Airlines One Report // Planet // environmental Management System

Chemical p.89 Management System

p.87

environmental Management SystemOur environmental management system helps us review and improve our environmental policies and procedures and meet our environmental goals.

AtSouthwest,weuse an environmentalmanagement system (EMS) tomaintaincompliancewith environmental regulations, foster environmental improvement,and minimize costs and risk. Our EMS ensures adequate plans are in place to address potential environmental impacts, track implementation, check planprogress,andreviewforcontinualimprovement.


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OurenvironmentalpolicyisthecornerstoneoftheEMSandisprovidedintheEnvironmental Management Approach section. It requires that all Southwest operating groups andprocessesbeincludedintheEMSandthatwereviewoperationsforpollutionpreventionopportunities andmaintain compliancewith all local, state, and federal environmentallawsandregulations.Thegoalofthisprogramistomaintainzeroenvironmentalviolationsastrackedthroughmonetaryfinesassessed.

Implementation of our EMS includes training and communicatingwith all SouthwestoperatinggroupsandengagingallEmployees.Documentcontrolanddocumentsharingarealsoimportantelementsofeffectiveengagement.ThroughtheEMS,environmentaldocumentsandinformationareavailableonaninternalwebsite,whereEmployeeshaveaccesstostandardized,onlineformsforreportingandemergencyresponse.

AspartofourEMS,wealsotrackandmonitordatarelatedtoourenvironmentalgoalsandVision. Since 2007,we have partneredwith outside firms to provide third-partyassuranceofenvironmentaldataincludedinourannualenvironmentalreports.OurOneReportincludesdataonourgenerationofwasteandconsumptionofjetfuel,naturalgas,GSE fuels,electricity,andwater.Wearecommitted to tracking theuse, recycling,anddisposaloftheseresourcesasawaytomeasurebothourenvironmentalimpactsandtheprogressofourconservationefforts.Basedonthisresourceusedata,wehavecompletedour fourth GHG emissions inventory. External audits of waste disposal facilities are alsoperformed annually to ensureourwaste ismanaged in compliancewith all laws andregulations.

Inadditiontoexternalassurance,wemaintainaninternalauditingprocessforallopera-tionsinordertocheckforcomplianceandcontinualimprovement.WemonitorprogressandcorrectiveandpreventativeactionstakenthroughtheEMSdatabase.

2012 Southwest Airlines One Report // Planet // environmental Management System


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TheEnvironmental ServicesTeamcontinually reviewsourEMSandprovides ideas forimprovementwithGeneralCounsel Leadership oversight.Changes are approved andimplementedonanasneededbasis.

Chemical Management System

AnotherprogramencompassedinourEMSisourchemicalmanagementsystem(CMS).AtSouthwest,wecontinuouslystrivetoensurethesafeuseofchemicalsbyourEmployeeswhenperforming their jobs.Newchemicalsare reviewed forenvironmentalandsafetyimpactsbeforetheyareapprovedforuse.OurChemicalReviewBoardassesseschemicalspriortopurchase,andourCMStrackstheuseofchemicalsinourfacilities.TheChemicalReview Board—which includes Employees from the Safety, Environmental Services,Purchasing,HazardousMaterials, Engineering, andAircraftAppearancedepartments—reviewsallrequestsfornewchemicals,andeachdepartmentrepresentedontheboardmustapprovethechemicalbeforeitcanbepurchased.

Oneofthemostimportantissuessurroundingchemicalmanagementistheuseofozone-depleting substances. Theozone layerprevents harmful ultraviolet light frompassingthroughtheatmosphere,and theuseof thesesubstancescancauseadecrease in thetotalvolumeoftheozonelayer.Theonlyozone-depletingsubstancesSouthwestpresentlyuses are refrigerants found in theHVAC systemsof Southwest-operatedbuildings. In2012,weestimatedthattheuseofthesesubstancesresultedin3,395metrictonsofCO2eemissionsbasedonanupper-boundassumptionoftheexpectedlossesthatwouldoccurfromSouthwest facilities.Wedonotproduceor importozone-depletingsubstances inSouthwestoperations.

2012 Southwest Airlines One Report // Planet // environmental Management System // Chemical Management System


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2012 Southwest Airlines One Report // Planet // Waste Management and Recycling

Co-Mingled p.91 Recycling

IndustrialWaste p.92 Management andRecycling

Waste Management and RecyclingEfficiency means elimination of unnecessary waste, and we take that meaning to heart.

Byidentifyingopportunitiestoreduce,eliminate,orrecoverenergyfromourwastestreams,weimproveourmaterialmanagementefficienciesanddivertasubstantialamountofwastematerial from landfills.Minimizing andeliminatingwaste is notsomethingSouthwesthasundertakenalone.Byworkingwiththeairportsweserve,informingourCustomers, and carefully selectingour suppliers,we achieve effi-ciencyinthemanagementofourwaste.Weworkwithsuppliersthathavethesameenvironmentalvalueswehave.Together,wehaveimplementedactiveprogramstorecyclethematerialsweusebothonandofftheaircrafttoeliminateinefficienciesandexcesswastewherepossible.

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p.91

Co-Mingled Recycling Paper,cardboard,plastic,andaluminumcollectedonboardouraircraftarerecycledthroughourco-mingledrecyclingprogram.Theenvironmentalbenefitsofthisprograminclude:

•Reducingwastevolumetoconservelandfillspace

•Minimizing futureGHGemissions through the contributionof recycledmaterials,whichcanbeusedtomakenewproductswithasmallercarbonfootprint

•Preservingrawmaterialsaswellastheenergyandwaterrequiredforprocessingrawmaterials

•Purchasing renewable energy-fueled equipment such as solar compactorswith co-mingledrecyclingprogramrebates

•Promoting recycling to our Employees and Customers through education toencouragemorerecyclingnotonlyonboardouraircraftandintheofficebutalsoathome

Measuring Our environmental Impact: Co-Mingled Recycling Wetrackourco-mingledrecyclingprogram’ssuccessthroughmonthlyreportscompiledbyRepublicServices.In2012,wedivertednearly2,900tonsofco-mingledwastematerialfromlandfillsasadirectresultofrecycling.Thiswasa7percentincreaseoverour2011quantities,exceedingourgoalofa2.5percentimprovement.Wewillcontinuetostriveforprogressinourrecyclingprogram,andinthenextseveralyearsweaimtocontinuetoincreasethequantityofmaterials recycledonboardouraircraftand inour facilitiesby2.5percentperyearforatotalofa10percentimprovementby2015overour2011levels.

2012 Southwest Airlines One Report // Planet // Waste Management and Recycling // Co-Mingled Recycling

we have diverted more than 9,800 tons of material from landfills since August 2008, which is the equivalent weight of 233 Boeing 737-700 aircraft.15

Recycling Trends12 (tons)

2009132008142010201120120

500

1,000

2,000

1,500

2,500

3,000


p.92

Industrial Waste Management and Recycling

Measuring Our environmental Impact: Industrial MaterialsMaintenanceofouraircraft,GSE,andfacilitiesgeneratesindustrialwastethatcouldbeharmful to our environment if not properly disposedof or recycled. Tominimize ourimpactontheenvironment,wemakeeveryefforttofindbeneficialreuseoptionsfortheindustrialwastewegenerate. In2012,werecycledapproximately632tonsof industrialwaste.Thisincludesbothrecyclinginthetraditionalsense—processingandremanufac-turingmaterials intonewproducts—andburningwastematerials forenergyrecovery—using industrialwaste as a fuel source for non-relatedproductionprocesses such ascementkilns.

Industrialwastewerecycleincludes:

•Antifreezeandaircraftdeicingfluidcapturedfromdefrostingactivities

•Batteriesfromequipment,vehicles,andGSE

•Electronics,includingcomputers,monitors,andprinters

•Fluorescentbulbsandballastsfromfacilitiesandaircraft

•Liquidandsolidpaintwaste

•Off-specificationfuel

•Partswashersolvent

•Scrapmetalincludingcoppercable

•Usedoilandfilters

•Adhesives,sealants,andotheraircraftmaintenancechemicals

In2012,approximately36percent,or230tons,ofthe632tonsofindustrialwastematerialwerecycledduringtheyearwasburnedforenergyrecovery.Werecoveredmorethan8.2billionBtusfrommaterialssuchasusedoil,filters,andliquidandsolidpaintwaste.Thisenergyrecoveryisequivalenttoprovidingelectricityforapproximately188homesforoneyear.

Measuring Our environmental Impact: Hazardous WasteAsmallpercentageofourindustrialwaste,primarilythatresultingfromspecializedaircraftmaintenanceoperations,meetstheregulatorydefinitionofhazardouswaste,triggeringadditional storage, record-keeping, anddisposal requirements. In 2012,wegeneratedapproximately22tonsofhazardouswaste,16whichincludedexpiredorotherwiseunusableaircraftmaintenancematerials suchas sealants andadhesives, paint andpaint-relatedwaste,partswashersolvent,andmetal-treatingwasteandwastewater.

Ofourtotalhazardouswastegeneratedin2012,wemanagedmorethan18tons,ormorethan84percent, throughbeneficial reuse,recycling,orburningforenergyrecovery. In2012,wesawan increase in the total amountofhazardouswastegeneratedbynearly 6tonscomparedto2010levels.ThisincreaseisduetotheadditionofwastefromAirTranoperations.Much likeemissionsor energyuse,wealso trackour year-over-yearwasteminimization efforts in termsof an intensity ratio. This enables us tomonitor perfor-manceandevaluateprogressasa functionof thesizeofouroperations.For2012, thehazardouswaste intensity ratiowas approximately 63 pounds per aircraft17—a slightincreasecomparedto2010.Aswecombineouroperations,wewillworktocontinuetoreducetheamountofhazardouswastewegenerateandmaximizerecyclingorreuseofthiswaste.

2012 Southwest Airlines One Report // Planet // Waste Management and Recycling // Industrial Waste Management and Recycling

Breakdown of Industrial Materials Recycled

35% Usedoil,otherfuels,

andfilters

34% Electronics

22% Batteries

5% Otherindustrial

materials

2% Antifreezeand

aircraftdeicingfluid

1% Liquidandsolidpaintwasteand

othersolvent-basedchemicals

1% Fluorescentbulbs

andballasts

Total Hazardous Waste Generated and Recycled (tons)HazardousWasteNotRecycled Hazardous Waste Recycled

0

10

5

15

20

25

20121 20115 2010 2009 2008

Hazardous Waste Intensity Ratio (poundsperaircraft)

2009 200820102011520121

20

0

40

60

80


p.93

2012 Southwest Airlines One Report // Planet // environmental Management Approach

environmental Management ApproachWe are always searching for ways to strengthen our commitment to the environment.

Southwestrecognizestheimportanceofenvironmentalstewardship.Wedoourparttominimizeourimpactontheenvironmentbyoperatingwithagreenfilter,collect-ing and analyzing information on our impacts, and continuously improving theactionswetaketomitigatethoseimpacts.WediscloseinformationregardingourenvironmentalpolicyandgoalsthroughourGRIDisclosureonManagementApproach.

p.93


p.94


environmental Policy Southwestiscommittedtobeingagoodstewardofourplanet.Wecontinuallylookforopportunitiestostrengthenourenvironmentalprograms.In2012,weupdatedourenvi-ronmentalpolicy to includeouruseofalternative fuelsand renewableenergyand theperformanceofexternalauditsofenvironmentalvendors.Southwesthasalongstandingcommitment to supporting alternative fuels and renewable energy. Similarly, externalauditshavebeenpartofourenvironmentalcomplianceprogramsforthepastfewyears.We have formalized these commitments bymaking them part of our environmentalpolicy.

AllofSouthwest’sLeadersandEmployeesareresponsibleforcarryingoutthispolicyby:

•Complyingwithallenvironmentallawsandregulations

•Strivingtomeetourannualgoalofzeroenvironmentalviolationsinouroperations

•Maintaining our environmentalmanagement system, following procedures, andtrainingourEmployeestomeetourcompliancegoals

•Continuing to improveourperformance regardingour environmental goals andinitiatives

•Auditingouroperationsforenvironmentalcomplianceandimplementingcorrectiveactionswhereneeded

•Auditingourenvironmentalvendorstoensuretheiroperationsarecompliantandtheydemonstrateacommitmenttoenvironmentalstewardship

•ProvidingtransparencyofourenvironmentalperformancetoourStakeholders

our environmental policy is a source for all employees to understand how they can be a part of our culture of global citizenship.

Southwest has more than 1,500 cleaner-burning pieces of GSE.


p.95

•Usingnaturalresourcesefficientlyandusingalternativefuelsandrenewableenergywherepossiblewhilecontinuingtomeetouroperationalrequirements

•Minimizingwasteandpollutionfromouroperationsandpreventingitwherepossible,whileremainingtruetothetriplebottomlineofPerformance,People,andPlanet

Position on Climate ChangeAtSouthwest,wearecommittedtoprotectingourplanetandreducingourcarbonfoot-print. As amember of A4A, we support A4A’s global sectoral approach to aviationclimatechangeundertheInternationalCivilAviationOrganization.Wealsoadvocateforadvancements in critical technology, alternative fuels, air traffic control, energy, andinfrastructuretofurthertheairlineindustry’seffortstoconserveenergyandreduceGHGemissions.WehaveadoptedA4A’sindustry-widegoalsforfuelefficiencyandemissionsreductionsandunderstandthatit’simportantforustocontinuetakingstepstoaddressGHGemissionsfromouroperations.

Overthepastdecade,atSouthwestwehavedoneourparttoreduceGHGemissionsandimprovethefuelefficiencyofourfleetbyinvestingmorethan$400millioninprojectslikewinglets, engineupgrades, enginewashes, useof groundpower at airport gates,controlledgroundidlespeeds,andequippingourfleetwithsatellite-basedRNPtoenableouraircrafttoflymoreefficientroutes.However,thebiggestopportunityforimprovementinemissionsreductionandjetfuelconservationrestswiththefederalgovernment.Thatisbecausetoday’sairtrafficcontrolsystem,whichismaintainedbytheFAA,iswoefullyinefficient.Thecurrentsystemisradar-basedandpreventsairlinesfromusingfullytheadvancedcapabilitiesthatalreadyexistinmodernjetaircraft,suchasSouthwest’sfleetofRNP-equippedBoeing-700and-800aircraft.

TheFAAisworkingtowardcreatingasatellite-basedNextGenerationAirTransportationSystem (NextGen).UntilNextGen is implemented, however, even themost advancedaircraftwillbeforcedtoflyinefficientroutes.TheNextGensystemwillimprovetheenvi-ronmentalperformanceoftheindustryasawholebyallowingaircrafttoflymoredirectlyandefficiently,whichwill leadtomajor reductions inemissions, fuelconsumption,andflightdelays.

InourCDPresponse,wehaveidentifiedrisksthathavethepotentialtocreateoperationalcomplexities.Theserisksaredividedintotwomaincategories—risksdrivenbychangesinphysicalclimateparametersandrisksdrivenbychanges in regulation.Physical risksarethosethatmayarisefromextremeweatherevents,suchastornadosandhurricanes,orsubtlechangesinweatherpatterns,suchaschangesinaveragetemperatureorprecipi-tation.Werecognize thatextremeweathereventsandmodifiedweatherpatternsmayimpactairlineoperations,whichcouldresultinimpactstooperationalandcapitalcostsandontimeperformance.

One initiative thatwehave chosennot toparticipate in is offeringourCustomers theability topurchase carbonoffsets froma thirdparty viaourwebsite.We feel it is theresponsibilityofSouthwest,notourCustomers,toreduceourimpactontheenvironment.IfourCustomerswanttomakeapositivedifferenceforourplanet,weencouragethemtomakeadifferenceintheircommunitiesandtheenvironmentbyvolunteeringtheirtimeandsupportingoneofthecharitableorganizationsorcommunityprojectswesponsor.


“nextGen is an umbrella term for the ongoing, wide-ranging transformation of the national Airspace System. At its most basic level, nextGen represents an evolution from a ground-based system of air traffic control to a satellite-based system of air traffic management. this evolution is vital to meeting future demand and to avoiding gridlock in the sky and at our nation’s airports.”

—FAA


p.96

Goals and Performance Ourgoalshelpusmeasureourefforts to improveourenvironmentalperformance.Wearedevelopingsystemwidecommitmentsrelatedtoenvironmentalperformanceanddis-cussthesethroughoutthisOneReport.

Organizational Responsibility While the environmental responsibility reflected in our formal environmental policy isinherent in the Servant’s Hearts of our Employees, it’s the job of our EnvironmentalServicesDepartmenttoformallydevelopenvironmentalpolicies,programs,andrelatedprocedures.EnvironmentalServicesworksaspartof theGeneralCounselDepartmentandcollaborateswithallofSouthwest’soperatingdepartmentstomaintaincompliancewithlocal,state,andfederalenvironmentalregulationsandmanageriskwhileprotectingourplanetandourbottomline.

In addition to the department formally responsible for environmental compliance,Employeesfromeachoperatinggrouphavejoinedtogethertocollect,share,andimple-mentourenvironmentallyresponsibleideasandinitiatives.TheseEmployeesareknownasourGreenTeam.Similarly, ourGreenAmbassadors expand the reachof theGreenTeam by promoting environmental stewardship in the communities we serve. Thesegroups,dedicatedtopreservingourplanet,collaboratetofosterSouthwest’scomplianceandmitigationof our environmental impacts. Formore informationon thesegroups,readourGreenFilterstory.

Training and Awareness Becauseourcommitmenttoprotectingourplanetisintegraltoouroperations,thetopicsofenvironmental stewardshipandsustainabilityare included inourEmployee training.MoreinformationonourEmployeetrainingcanbefoundinthePeoplesection.


Monitoring, Correction, and Preventative ActionsOurproceduresrelatedtomonitoring,correction,andpreventativeactionsareincorpo-ratedintoourEMS.OurEMSsystemisdiscussedindetailintheEnvironmentalManagement Systemsection.


p.97

Footnotes 1) AirTrandataisincludedunlessotherwisestated. 2)AirTranjetfuel,diesel,andgasolineconsumptiontotalsbeginningMay2,2011,areincludedinSouthwestconsumption

totals.AirTrandataisexcludedfromotherSouthwestdatafor2011unlessotherwisestated. 3)Thisnumberhasbeenrevisedsincethe2011 Southwest Airlines One Report™duetoareviewofnaturalgascon-

sumptionrecordsfor2011. 4)Thisnumberhasbeenrevisedsincethe2011 Southwest Airlines One Report™duetoareviewofelectricityusage

recordsfor2011. 5)AirTrandatanotincluded. 6)Thisnumberhasbeenrevisedsincethe2011 Southwest Airlines One Report™toincluderecyclingdatafromtwo

additionallocationsthatwasnotavailableatthattime. 7)Thisnumberhasbeenrevisedsincethe2011 Southwest Airlines One Report™tomatchthenumberreportedinthe

2010 Southwest Airlines One ReportTM. 8)ConversionstoMWharebasedondefaultdensitiesandheatingvaluesfromtheCDPguidancedocument,“Technical

Note:ConversionoffueldatatoMWh.” 9)Basedonactive,full-timeequivalentSouthwestandAirTranEmployeesasofDec.31,2012.10) GHGemissionsfrompurchasedelectricityinSouthwest-andAirTran-controlledfacilities.11) TheU.S.EnvironmentalProtectionAgencyFORTUNE 500GreenPowerPartnershiprankingsareupdatedquarterly.

Southwestranked40thasofOct.4,2012.12) Thisdataincludesrecyclingofpaper,plastic,aluminum,andcardboardfromaircraftandselectfacilitiesaspartof

theSouthwestco-mingledrecyclingprogram.ExcludesAirTranrecyclingdata.13) Welaunchedouronboardco-mingledrecyclingprograminNovember2009.14) WebegantrackingrecyclingdatainAugust2008.15) BasedonweightofaBoeing-700withoutfuelorpassengers.16) Totaltonsofhazardouswasteincludingthatgeneratedatfacilitiesclassifiedasconditionallyexemptsmall-quantity

generatorsandnotrequiredtobereportedtofederalorstateagencies.17) Sincemostofourhazardouswastegenerationstemsfromaircraftmaintenanceandthenumberofaircraftinour

fleetisagoodgeneralrepresentationofthesizeofouraircraftmaintenanceoperations,ourhazardouswasteintensityratiofor2012isbasedonpoundsofhazardouswastegeneratedatcontrolledfacilitiesdividedbythenumberofaircraftinthefleetasofDec.31,2012,includingaircraftacquiredfromAirTran.



p.98

2012 Southwest Airlines One Report // Corporate Governance

Corporate GovernanceWe believe being a good corporate citizen means operating with the highest standards of ethics and integrity. Quality corporate governance is a necessary foundation for achieving long-term Shareholder, Employee, and Customer value.

p.98


p.99

AtSouthwestAirlines,qualitycorporategovernanceprovidesanecessaryfoundationforourCompany’soperationsandstrategies.Furthermore,webelievebeingagoodcorporatecitizen requires thatweoperatewith thehighest standardsofethicsand integrity.Wecommunicate and apply these standards throughpolicies such asour codeof ethics,insider trading policy, blackout and pre-clearance procedures, and Foreign CorruptPracticesActpolicyandanti-corruptioncomplianceprocedures.

Code of ethicsOurcodeofethicssetsforththeexpectationthatourEmployees,Boardmembers,andcertainbusinessassociatescomplywiththelaw,bothinletterandinspirit,andspecificallyaddressesmatterssuchasconfidentiality, insidertrading,competitionandfairdealing,paymentstogovernmentpersonnel,conflictsof interest,corporateopportunities,safe-guardingofCompanyproperty,andrecordkeeping.

Insider Trading PolicyOur insider tradingpolicyprohibits ourEmployees,Boardmembers, and consultants (aswellas relatedpersons) from(i)purchasingorsellingSouthwestsecuritieswhile inpossessionofmaterialnonpublicinformationaboutourCompany,(ii)purchasingorsell-ingsecuritiesofanothercompanywhileinpossessionofmaterialnonpublicinformationaboutthatcompanythathasbeenacquiredwhile inthecourseofperformingservices


Forfurtherreadingonour corporategovernance,visithttp://southwest.investorroom.com/governance-guidelines.

Toreadourcodeofethics,visit http://southwest.investorroom.com/bylaws-articles-policies.

http://southwest.investorroom.com/governance-guidelines



p.100


for our Company, and (iii) communicatingmaterial nonpublic information about ourCompany (or about other companieswithwhichwedobusiness) tootherswhomaytradebasedontheinformation.

Foreign Corrupt Practices Act Policy and Anti-Corruption Compliance ProceduresOurForeignCorruptPracticesActpolicy and anti-corruption complianceproceduresapply to our Company, Boardmembers, Employees, agents, consultants, and otherbusiness associates and representatives worldwide. They (i) prohibit the making ofimproperpaymentsdirectlyorindirectlytoforeigngovernmentofficials,foreignpoliticalpartiesorofficialsthereof,orcandidatesforforeignpoliticalofficeinordertoobtainorretainbusinessortodirectbusinesstoanypersonand(ii)requireSouthwesttoprepareandmaintain accurate books, records, and accounts and to devise andmaintain anadequatesystemofinternalaccountingcontrols.

Blackout and Pre-Clearance ProceduresOurOfficers,Boardmembers,andselectedEmployeesaresubjecttoquarterlyrestrictionson trading in Southwest securitiesduringperiods surroundingSouthwest’s releaseofquarterly earnings. These same individuals are also required topre-clear all trades inSouthwestsecuritiesandaresubjecttoadditionalrestrictionsontradinginthecaseofmaterialeventsthathavenotbeendisclosedtothepublic.

AcknowledgementsWerequireallEmployeestoannuallycertify receiptandunderstandingofourcodeofethics and insider tradingpolicies. In 2012,more than46,000Southwest andAirTranAirwaysEmployeesandcertain businessassociatescertifiedreceiptofthesematerials.During 2012, we also distributed our Foreign Corrupt Practices Act policy and anti- corruptioncomplianceprocedurestoallCompanyOfficers,SeniorLeadersofalldepart-ments,andselectEmployeesandcontractorswhoareinvolvedwithSouthwest’sfinancialrecordsand/or internationaloperations. In2012,more than4,000 individuals receivedandcompletedacompliancequestionnaireregardingtheForeignCorruptPracticesAct.

Auditing ProceduresWealsoemployrobustauditingprocedurestoanalyzeandmonitorbusinessactivities,whichfurtherenhanceourabilitytomaintainhighethicalstandards.Wecontinuallyreviewour systems toprovide transparencyandaccountability, andweupdateourcorporategovernancepolicieswhenneeded.


p.101


Southwest Leadership AtSouthwest,ourSeniorLeadershipincludesourBoardofDirectors,Officers,andotherSeniorLeaders.OurBoardcurrentlyhastenmembers,allofwhomareconsideredinde-pendentwiththeexceptionofourChairmanoftheBoard.TheBoardhasfivestandingcommitteestohelpitfulfillitsresponsibilities,fourofwhicharecomposedsolelyofinde-pendentmembersof theBoard.AtSouthwest,ourBoardofDirectorsmustmeethighqualificationstandards.

2012 Board of Directors (asofDec.31,2012)David w. BieglerChairman,President,andChiefExecutiveOfficerSouthcrossEnergyPartnersGP,LLC(midstreamnaturalgascompany)RetiredViceChairmanofTXUCorp.AuditCommittee,CompensationCommittee(Chair),andSafetyandComplianceOversightCommittee

J. Veronica BigginsManagingDirectorDiversifiedSearchLLC(executiveandboardsearchfirm)CompensationCommittee

Douglas H. BrooksChairmanoftheBoard,PresidentandChiefExecutiveOfficerBrinkerInternational,Inc.(casualdiningrestaurantcompany)NominatingandCorporateGovernanceCommittee

william h. cunningham, phD (presiding Director)JamesL.BaylessChairforFreeEnterpriseTheUniversityofTexasatAustinRedMcCombsSchoolofBusinessFormerChancellorofTheUniversityofTexasSystemAuditCommittee,NominatingandCorporateGovernanceCommittee(Chair),andExecutiveCommittee

John G. DenisonFormerChairmanoftheBoardGlobalAeroLogisticsInc.(diversifiedpassengerairline)AuditCommittee, Safety andComplianceOversightCommittee (Chair), andExecutiveCommittee

Gary c. Kellychairman of the BoardChairmanoftheBoard,President,andChiefExecutiveOfficerSouthwestAirlinesCo.ExecutiveCommittee(Chair)

nancy B. loefflerConsultantforFrostBankandmemberoftheFrostBankAdvisoryBoardLong-timeadvocateofvolunteerismCompensationCommittee

John t. MontfordPresidentandChiefExecutiveOfficerJTMConsulting,LLCAudit Committee (Chair), Compensation Committee, andNominating and CorporateGovernanceCommittee

Toreadmoreaboutourfive standingcommittees,visit http://southwest.investorroom.com/board-committees.

ToviewalistofourcurrentCompanyOfficers,visit http://southwest.investorroom.com/company-officers.

ToviewacurrentlistofourBoardofDirectors,visithttp://southwest. investorroom.com/board-of-directors.

http://southwest.investorroom.com/company-officers

http://southwest.investorroom.com/board-committees

http://southwest.investorroom.com/board-of-directors

southwest.investorroom.com/board-of-directors


p.102


thomas M. nealonFormerGroupExecutiveVicePresidentJ.C.PenneyCompany,Inc.(retailcompany)NominatingandCorporateGovernanceCommitteeandSafetyandComplianceOversightCommittee

Daniel D. VillanuevaPartnerRusticCanyon/FontisPartners,LP(privateequityfirm)PresidentofTheVillanuevaCompaniesCompensationCommitteeandSafetyandComplianceOversightCommittee

Honorary Designationsherbert D. KelleherChairmanEmeritusSouthwestAirlinesCo.

colleen c. BarrettPresidentEmeritusSouthwestAirlinesCo.


p.103

2012 Southwest Airlines One Report // GRI and CDP

Overview p.104

GRIandCDP p.105 Index

External p.111 Assurance

Global Reporting Initiative and CDPIt’s important to Southwest Airlines that we’re transparent with our Stakeholders, so we use the Global Reporting Initiative (GRI) and CDP—two internationally recognized frameworks for commu-nicating and managing our integrated reporting and data.

p.103


p.104

This is our second year integrating both theGRI and theCDP (formerly theCarbonDisclosureProject) intotheSouthwest Airlines One ReportTM.WhileGRI isaframeworkfor sustainability reporting that allowsorganizations theopportunity tomeasure andreporttheireconomic,social,andenvironmentaleffortsinaconsistentmanner,CDPisaframework that allows respondents to effectivelymanage their environmental risks,focusingongreenhousegas emissions and climate change strategies.Wevoluntarilyreport to both the GRI and the CDP. Both organizations invite reporting on climatechange, andwe at Southwest coordinate frameworks for amore efficient reportingprocess.Usingthisguidance,wepublishacombinedGRIandCDPindexthatdepictsourGRIresponsesalongsidethecorrespondingCDP1responsesforcalendaryear2012.

GRIThe2012 Southwest Airlines One Report™conformstotheprinciplesoutlinedintheGRISustainability Reporting Guidelinesversion3.0(G3)andfullycomplieswiththeGRI’sB+application level. The GRI is a voluntary, internationally recognized framework forsustainabilityreportingthatallowsorganizationstheopportunitytomeasureandreporttheir economic, social, andenvironmental efforts in a consistentmanner.TheGRI alsooffersavarietyofapplication levels that showtheextent towhichG3guidelineshavebeen applied throughout the report andprovideguidanceon howorganizations cancontinuouslyimprovetheirreporting.

AsSouthwest’sfourthOneReport,the2012OneReportillustratesourcontinuedstead-fastfocusonthetriplebottomline—ourPerformance,ourPeople,andourPlanet—whichallowsus tobeAmerica’s Favorite Low-CostAirline. The2012OneReport representsSouthwest’soperationsforcalendaryear2012,unlessotherwisestated,andcoversonlythosebusinessactivitiesforwhichSouthwestgenerallyhascompletecontrolorownership.

2012 Southwest Airlines One Report // GRI and CDP // Overview

LearnmoreabouttheGRIat globalreporting.org.

http://www.globalreporting.org


p.105

Thisreportdoesnotincludefacilitiesprimarilycontrolledbyothers,suchasairportter-minalspaceoroutsourcedorsubcontractedfacilities.

Todevelopthe2012OneReport,weincreasedourscope,boundary,andmeasurementmethodsusedtoincludetheAirTranAirwaysacquisition.In2012,weworkeddiligentlytointegrateAirTrandatawithSouthwestdatawhereavailableandfeasible.AirTrandataisincludedunlessotherwisestated.

CDPThe2012OneReportwillserveasatemplateforrespondingtothe InvestorCDP2013InformationRequest.TheCDPworks to transformtheway theworlddoesbusiness toaddress climate change and protect natural resources through communication andeducation.CompanieswhomeasuretheirenvironmentalriskthroughtheCDPquestion-naire are better able to manage it strategically and compare their risks to others.Organizations thatare transparentanddisclosethis informationare providingdecisionmakerswithaccess toacriticalsourceofglobaldata.Since2009,wehavevoluntarilyrespondedtotheInvestorCDPInformationRequestand,again,inthe2012OneReport,wehave shownourShareholders andotherStakeholdershowourownGRI indexandCDPresponsescorrelate.

GRI and CDP Indexprofile Disclosures page

corresponding cDp Question2

1. Strategy and Analysis

1.1 Statementfromthemostseniordecision-makeroftheorganization.

Gary’sMessage

1.2 Descriptionofkeyimpacts,risks,andopportunities. Gary’sMessage,Performance,Environmental Management Approach

2. organizational profile

2.1 Nameoftheorganization. FrontCover

2.2 Primarybrands,products,and/orservices. Performance, 2012U.S.Securities andExchange Commission Form10-K

2.3 Operationalstructureoftheorganization,includingmaindivisions,operatingcompanies,subsidiaries,andjointventures.

2012U.S.Securities andExchange Commission Form10-K

2.4 Locationoforganization’sheadquarters. OurMissionandContactUs

2.5 Numberofcountrieswheretheorganizationoperates,andnamesofcountrieswitheithermajoroperationsorthatarespecificallyrelevanttothesustainabilityissuescoveredinthereport.

30,000-FootView, BuildingLUV,2012 U.S.Securities andExchange Commission Form10-K

Southwest Airlines 2012 One Report // GRI and CDP // GRI and CDP Index

LearnmoreabouttheCDPat http://cdproject.net.




http://cdproject.net


p.106

profile Disclosures page


2.6 Natureofownershipandlegalform. Corporate Governance

2.7 Marketsserved(includinggeographicbreakdown,sectorsserved,andtypesofcustomers/beneficiaries).

30,000-FootView,BuildingLUV

2.8 Scaleofthereportingorganization. Performance, 2012U.S.Securities andExchange Commission Form10-K

2.9 Significantchangesduringthereportingperiodregardingsize,structure,orownership.

Performance, 2012U.S.SecuritiesandExchange Commission Form10-K

2.10 Awardsreceivedinthereportingperiod. Awardsand Accolades

3. report parameters

3.1 Reportingperiod(e.g.,fiscal/calendaryear)forinformationprovided.

GRIandCDP

3.2 Dateofmostrecentpreviousreport(ifany). GRIandCDP

3.3 Reportingcycle(annual,biennial,etc.). GRIandCDP

3.4 Contactpointforquestionsregardingthereportoritscontents. OurMissionandContactUs

3.5 Processfordefiningreportcontent. GRIandCDP,addressedthrough-outthereport

3.6 Boundaryofthereport(e.g.,countries,divisions,subsidiaries,leasedfacilities,jointventures,suppliers).

GRIandCDP, 30,000-FootView,BuildingLUV

3.7 Stateanyspecificlimitationsonthescopeorboundaryof thereport.

GRIandCDP,addressedthrough-outthereport

3.8 Basisforreportingonjointventures,subsidiaries,leasedfacilities,outsourcedoperations,andotherentitiesthatcansignificantlyaffectcomparabilityfromperiodtoperiodand/orbetweenorganizations.

GRIandCDP,Performance

3.9 Datameasurementtechniquesandthebasesofcalculations,includingassumptionsandtechniquesunderlyingestimationsappliedtothecompilationoftheindicatorsandotherinformationinthereport.Explainanydecisionsnottoapply,ortosubstantiallydivergefrom,theGRIindicatorprotocols.


3.10 Explanationoftheeffectofanyrestatementsofinformationpro-videdinearlierreports,andthereasonsforsuchrestatement.

PeopleData,Planet Data,GHGInventory

3.11 Significantchangesfrompreviousreportingperiodsinthescope,boundary,ormeasurementmethodsappliedinthereport.


3.12 Tableidentifyingthelocationofthestandarddisclosuresin thereport.

GRIandCDPIndex

3.13 Policyand2012practicewithregardtoseekingexternalassuranceforthereport.

ExternalAssurance Q8.6,Q8.6a,Q8.6b,Q8.7,Q8.7a,Q8.7b





p.107

profile Disclosures page


4. Governance, commitments, and engagement

4.1 Governancestructureoftheorganization,includingcommitteesunderthehighestgovernancebodyresponsibleforspecifictasks,suchassettingstrategyororganizationaloversight.

Corporate Governance,2013 ProxyStatement

4.2 Indicatewhetherthechairofthehighestgovernancebodyisalsoanexecutiveofficer.

Corporate Governance

4.3 Fororganizationsthathaveaunitaryboardstructure,statethenumberofmembersofthehighestgovernancebodythatareindependentand/ornon-executivemembers.


4.4 Mechanismsforshareholdersandemployeestoproviderecommendationsordirectiontothehighestgovernancebody.

Corporate Governance,OurMissionandContactUs,Engagement and Recognition,CustomerFeedback,2013Proxy Statement

4.5 Linkagebetweencompensationformembersofthehighestgovernancebody,seniormanagers,andexecutives,andtheorganization’sperformance(includingsocialandenvironmentalperformance).

Engagementand Recognition,2013 ProxyStatement

4.6 Processesinplaceforthehighestgovernancebodytoensureconflictsofinterestareavoided.

Corporate Governance,2013ProxyStatement

4.7 Processfordeterminingthequalificationsandexpertiseofthemembersofthehighestgovernancebodyforguidingtheorgani-zation’sstrategyoneconomic,environmental,andsocialtopics.

CorporateGovernance,2013ProxyStatement

4.8 Internallydevelopedstatementsofmissionorvalues,codesofconduct,andprinciplesrelevanttoeconomic,environmental,andsocialperformanceandthestatusoftheirimplementation.

Financial Management Approach;Social Management Approach;Environmental Management Approach;OurMissionand ContactUs

4.9 Proceduresofthehighestgovernancebodyforoverseeingtheorganization’sidentificationandmanagementofeconomic,environmental,andsocialperformance,includingrelevant risksandopportunities,andadherenceorcompliancewith internationallyagreedstandards,codesofconduct,andprinciples.

Financial Management Approach,Social Management Approach,Environmental Management Approach,2012 U.S.Securities andExchange Commission Form10-K

Q1.1,Q1.1a,Q2.1,Q2.1a,Q2.2,Q2.2a,Q2.3,Q2.3a

4.10 Processesforevaluatingthehighestgovernancebody’sownper-formance,particularlywithrespecttoeconomic,environmental,andsocialperformance.

Corporate Governance,2013 ProxyStatement

4.11 Explanationofwhetherandhowtheprecautionaryapproachorprincipleisaddressedbytheorganization.

Addressedthrough-outthereport

4.12 Externallydevelopedeconomic,environmental,andsocialcharters,principles,orotherinitiativestowhichtheorganizationsubscribesorendorses.












p.108


performance indicators pagecorresponding cDp Question2

4.13 Membershipsinassociations(suchasindustryassociations) and/ornational/internationaladvocacyorganizationsinwhich theorganization:haspositionsingovernancebodies,participatesinprojectsorcommittees,providessubstantivefundingbeyondroutinemembershipdues,orviewsmembershipasstrategic.


4.14 Listofstakeholdergroupsengagedbytheorganization. Addressedthrough-outthereport

4.15 Basisforidentificationandselectionofstakeholderswithwhom toengage.


4.16 Approachestostakeholderengagement,includingfrequencyofengagementbytypeandbystakeholdergroup.

CorporateGovernance,OurMissionandContactUs,EngagementandRecognition,CustomerFeedback,2013ProxyStatement

4.17 Keytopicsandconcernsthathavebeenraisedthroughstakeholderengagementandhowtheorganizationhasrespondedtothosekeytopicsandconcerns,includingthroughitsreporting.


Disclosures on Management Approach (DMAs)

DMAEC Discussmanagementapproachtoperformance,marketpresence,indirecteconomicimpactsastheyrelatetooverallmanagementpolicies,goals,andperformance.

Financial Management Approach

DMAEN Discussmanagementapproachtooverallenvironmentalmetricssuchasmaterials,energy,water,emissions,compliance,andtrans-portastheyrelatetospecificgoals,policy,andperformance.

Environmental Management Approach

DMALA Discussmanagementapproachtoemployment,labor/managementrelations,healthandsafety,trainingandeducation,diversity,andequalopportunityastheyrelatetooverallmanagementpolicies,goals,andperformance.

SocialManagement Approach

DMAHR Discussmanagementapproachtonon-discrimination,collectivebargaining,abolitionofchildlabor,preventionofforcedlabor,complaintsandgrievancepractices,andsecuritypracticesastheyrelatetooverallmanagementpolicies,goals,andperformance.


DMASO Discussmanagementapproachtocommunity,corruption,publicpolicy,anticompetitivebehavior,andcomplianceastheyrelatetooverallmanagementpolicies,goals,andperformance.


DMAPR Discussmanagementapproachtocustomerhealthandsafety,servicelabeling,marketingcommunications,andcustomerprivacyastheyastheyrelatetooverallmanagementpolicies,goals,andperformance.


performance indicators

economic

EC1 Directeconomicvaluegeneratedanddistributed,includingreve-nues,operatingcosts,employeecompensation,donationsandothercommunityinvestments,retainedearnings,andpayments tocapitalprovidersandgovernments.

Performance,Employees,Communities, 2012U.S.SecuritiesandExchangeCommissionForm10-K

EC2 FinancialImplicationsandotherrisksandopportunitiesfortheorganization’sactivitiesduetoclimatechange.

Environmental ManagementApproach

Q5.1,5.1a,5.1b




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EC3 Coverageoftheorganization’sdefinedbenefitplanobligations. Benefits

EC8 Developmentandimpactofinfrastructureinvestmentsandservicesprovidedprimarilyforpublicbenefitthroughcommercial,in-kind,orprobonoengagement.

Communities, PeopleData

environmental

EN3 Directenergyconsumptionbyprimaryenergysource. EnergyUse, GHGInventory,PlanetData Q12.2,Q12.3

EN4 Indirectenergyconsumptionbyprimarysource. EnergyUse, GHGInventory,PlanetData Q12.2

EN5 Energysavedduetoconservationandefficiencyimprovements. Emissions Reductions,Energy Use,PlanetData

EN6 Initiativestoprovideenergy-efficientorrenewableenergybasedproductsandservices,andreductionsinenergyrequirementsasaresultoftheseinitiatives.

Emissions Reductions

Q3.2

EN8 Totalwaterwithdrawalbysource. WaterConsumption,PlanetData

EN16 Totaldirectandindirectgreenhousegasemissionsbyweight. GHGInventory, PlanetData

Q7.1,Q7.2,Q7.3,Q7.4,Q8.1,Q8.2,Q8.3,Q8.5

EN18 Initiativestoreducegreenhousegasemissionsandreductionsachieved.

Emissions Reductions

Q3.3,Q3.3a,Q3.3b,Q3.3c

EN19 Emissionsofozone-depletingsubstancesbyweight. Environmental ManagementSystem

EN23 Totalnumberandvolumeofsignificantspills. Regulatory Compliance

Social: Labor Practices and Decent Work

LA1 Totalworkforcebyemploymenttype,employmentcontract, andregion.

PeopleData,addressedthrough-outthereport

LA3 Benefitsprovidedtofull-timeemployeesthatarenotprovidedtotemporaryorpart-timeemployees,bymajoroperations.

Benefits

LA4 Percentageofemployeescoveredbycollectivebargainingagreements.

SocialManagement Approach, PeopleData

LA10 Averagehoursoftrainingperyearperemployeebyemployeecategory.

Training, PeopleData

Social: human rights

HR3 Totalhoursofemployeetrainingonpoliciesandprocedurescon-cerningaspectsofhumanrightsthatarerelevanttooperations,includingthepercentageofemployeestrained.


HR6 Operationsidentifiedashavingsignificantriskforincidentsofchildlabor,andmeasurestakentocontributetotheeliminationofchildlabor.


HR9 Totalnumberofincidentsofviolationsinvolvingrightsofindigenouspeopleandactionstaken.

NA


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Social: Society

SO2 Percentageandtotalnumberofbusinessunitsanalyzedforrisksrelatedtocorruption.


SO3 Percentageofemployeestrainedinorganization’santi-corruptionpoliciesandprocedures.


SO5 Publicpolicypositionsandparticipationinpublicpolicydevelopmentandlobbying.


SO6 Totalvalueoffinancialandin-kindcontributionstopoliticalparties,politicians,andrelatedinstitutions.


Social: product responsibility

PR5 Practicesrelatedtocustomersatisfaction,includingresultsofsurveysmeasuringcustomersatisfaction.

Customers, Social Management Approach

Footnotes1)CDPresponsesforcalendaryear2012aredueinMay2013,afterthereleaseofthe2012OneReport.2)InvestorCDP2013InformationRequest.


p.1119400 Ward Parkway • Kansas City, Missouri 64114-3319

Tel: 816-333-9400 • Fax: 816-333-3690 • www.burnsmcd.com

May 3, 2013

Southwest Airlines Co. HDQ-1PR 2702 Love Field Drive P.O. Box 36611 Dallas, TX 75235-1611

Burns & McDonnell Engineering Inc. Assurance Statement for 2012 Southwest Airlines One Report™

Southwest Airlines:

Burns & McDonnell Engineering Inc. (Burns & McDonnell) was retained by Southwest Airlines Co. (Southwest) to verify and provide external assurance that the 2012 Southwest Airlines One Report™ (2012 One Report) provides a balanced view of Southwest’s triple bottom line profile for the reporting period and includes accurate data and information in line with the principles outlined in the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines version 3.0. The purpose of this assurance engagement was to:

1. Assure the 2012 results of the Southwest GRI profile disclosures, disclosures on management approach, and performance indicators contained in the 2012 One Report, including both qualitative and quantitative data.

2. Review the 2012 One Report to ensure Southwest has utilized the GRI G3 sustainability reporting framework to achieve a B+ application level.

In addition to the assurance of the GRI profile disclosures, disclosures on management approach and performance indicators, Burns & McDonnell also reviewed and assured additional 2012 material metrics and accomplishments presented in the 2012 One Report with the exception of information presented in Southwest’s Annual Report on Form 10-K for year ended Dec. 31, 2012 and Southwest’s 2013 Proxy Statement. The financial statements included in the 2012 Form 10-K have been audited by the company’s independent auditor.

In order to complete external assurance of the 2012 One Report, Burns & McDonnell independently interviewed Southwest employees; obtained, analyzed and verified data; and conducted independent industry research and benchmarking to substantiate and support the statements contained in the report. The content, structure and presentation of the report were reviewed against the GRI guidelines to ensure conformation, and Burns & McDonnell utilized the AA1000 Assurance Standard 2008 as frame of reference for assuring the report.

This review determined that Southwest has a systematic, documented, evidence-based reporting process in place. The 2012 One Report includes responses to a minimum of 20 performance indicators with at least one from each of the economic, social and environmental categories as well as addresses the required GRI profile disclosures and disclosures on management approach. The 2012 One Report provides a reasonable and balanced presentation of Southwest’s triple bottom line performance.

To the best of our knowledge, we have found that Southwest has satisfactorily applied the GRI sustainability reporting framework. The content provided for the 2012 One Report meets the content and quality requirements of the GRI Sustainability Reporting Guidelines version 3.0 B+ application level.

Sincerely,

Candice Derks, LEED AP, GRI Certified Project Manager, Environmental Group Burns & McDonnell

Southwest Airlines 2012 One Report // GRI and CDP // external Assurance

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Our MissionTheMissionofSouthwestAirlinesisdedicationtothehighestqualityofCustomerServicedeliveredwithasenseofwarmth,friendliness,individualpride,andCompanySpirit.

To Our employeesWe are committed to provide our Employees a stablework environmentwith equalopportunityforlearningandpersonalgrowth.CreativityandinnovationareencouragedforimprovingtheeffectivenessofSouthwest.Aboveall,Employeeswillbeprovidedthesameconcern,respect,andcaringattitudewithintheorganizationthattheyareexpectedtoshareexternallywitheverySouthwestCustomer.

To Our CommunitiesWehaveapassion togiveback from theheart in thecommunitieswherewe liveandwork.Bringingpeople together, inspiring change, andmakingadifference inpeople’slives—it’sallpartofbeingagoodneighbor.Wegivebacktoourcommunitiesnotonlywithourtimeanddonations,butbysupportingglobalandnationalnonprofitorganizations,championingourownSouthwestgivingprograms,andencouragingindividualEmployeesandcommunitymemberstovolunteerandadvocateforthecausestheybelieveinmost.

To Our PlanetWestrivetobeagoodenvironmentalstewardacrossoursystem,andonecomponentofour stewardship is efficiency,which,by its verynature, translates toeliminatingwasteandconservingresources.Usingcost-effectiveandenvironmentallybeneficialoperatingprocedures(includingfacilitiesandequipment)allowsustoreducetheamountofmate-rialsweuseand,whencombinedwithourabilitytoreuseandrecyclematerial,preservesourresources.

To Our StakeholdersSouthwestbelievesinasustainablefuturewheretherewillbeabalanceinourbusinessmodelbetweenShareholders,Employees,Customers,andotherStakeholders. Inordertoprotectourworldforfuturegenerationsandupholdourcommitments,wewillstrivetoleadourindustryinprofitability,efficiencythatconservesnaturalresources,fosteringacreativeandinnovativeworkforce,andgivingbacktothecommunitiesinwhichweliveandwork.

Contact UsSouthwestAirlinesP.O.Box36611Dallas,TX75235-1611214-792-40001-800-I-FLY-SWAsouthwest.com

For investors:SouthwestAirlines InvestorRelations,HDQ-6IRP.O.Box366112702LoveFieldDriveDallas,TX75235214-792-4415http://southwest.investorroom.com

2012 Southwest Airlines One Report // Our Mission and Contact Us

our purpose Connectpeopletowhat’simportantintheirlivesthroughfriendly,reliable,andlow-costairtravel

our VisionTobecomethe World’sMostLoved,MostFlown,and MostProfitableAirline

to offer customer feedback:

•E-mailusthroughourwebsiteat southwest.com/help/customer_service.html.

•ReplytoablogpostonNutsaboutSouthwestat blogsouthwest.com.

•PostamessageonourFacebookwallat facebook.com/Southwest.

•Tweetusattwitter.com/SouthwestAir.

•Writeusat: SouthwestAirlines CustomerRelations P.O.Box36647HDQ-1CR Dallas,TX75235-1611

Forquestionsrelatedtoour2012 Southwest Airlines One Report™,including ourcommitmenttoourPerformance,ourPeople,andourPlanet,please [email protected]. Formoreinformationon ourcitizenshipefforts,visitsouthwest.com/citizenship.

http://southwest.com/citizenship

http://www.southwest.com


http://www.southwest.com/help/customer_service.html

http://blogsouthwest.com

http://www.facebook.com/Southwest

http://www.twitter.com/SouthwestAir

mailto:[email protected]


2012 SouthweSt AirlineS one report

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