A continued improvement in air travel demand throughout the year resulted in cash flow from operations of approximately $1.6 billion.

2010 ONE REPORT  >  performance  >  2010 Performance  >  Financial Position

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We uphold our strong financial position by managing in the good times to be prepared for the bad times.

Financial PositionF

Southwest Airlines maintained a healthy financial position in 2010, ending the year with approximately $3.5 billion in unrestricted cash and short-term investments; a $600 million fully available revolving line of credit; unencumbered assets valued at more than $6 billion; leverage of approximately 40 percent, including aircraft lease obligations; and an investment-grade credit rating. A continued improvement in air travel demand throughout the year resulted in cash flow from operations of approximately $1.6 billion. During 2010, we repaid $155 million in debt and capital lease obligations and $44 million from credit line borrowings. We also carefully managed capital spending and kept our capital expenditures to under $500 million.

In 2011, we expect our capital spending to be in the $800 million to $900 million range, and we have approximately $500 million in debt maturities. We plan to fund these obligations and the acquisition of AirTran Airways with cash on hand and we currently do not have any near-term borrowing needs.

Learn more about the AirTran Airways acquisition >

Our ability to uphold our strong financial position allows us to remain well-prepared for the many threats that face our challenging industry, including volatile energy prices, recession, and brutal competition. We continue to live by the same mantra from our first four decades—manage in the good times to be prepared for the bad times. Our healthy cash position and modest debt also allows us to remain well-prepared for opportunities.

Cautionary Statement Regarding Forward-Looking Statements

The 2010 Southwest Airlines One Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on, and include statements about, the Company’s estimates, expectations, beliefs, intentions, and strategies for the future, and are not guarantees of future performance. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, statements related to (i) the Company’s financial outlook; (ii) its growth plans and expectations, including fleet and network plans; (iii) its strategic initiatives and the expected impact of the initiatives on its results of operations and its customer experience, offerings, and benefits; and (iv) its expectations related to its acquisition of AirTran Holdings, Inc. (“AirTran”), including the anticipated benefits of the acquisition. Forward-looking statements involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors include, among others, (i) changes in the price of aircraft fuel, the impact of hedge accounting, and any changes to the Company’s fuel hedging strategies and positions; (ii) the impact of the economy on demand for air travel and fluctuations in consumer demand generally for the Company’s services; (iii) the impact of fuel prices and economic conditions on the Company’s overall business plan and strategies; (iv) the Company’s ability to successfully integrate AirTran’s business and realize the expected synergies from the acquisition; (v) actions of competitors, including without limitation pricing, scheduling, and capacity decisions, and consolidation and alliance activities; (vi) the Company’s ability to timely and effectively implement, transition, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives; (vii) the Company’s dependence on third parties to assist with implementation of certain of its initiatives; (viii) the impact of governmental regulations on the Company’s operations; and (ix) other factors, as described in the Company’s filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2010.