SOUTHWEST AIRLINES COLUV
SOUTHWEST AIRLINES CO Revenue Disclosure
REVENUE
Passenger Revenues
The Company’s contracts with its Customers primarily consist of its tickets sold, which are initially deferred as Air traffic liability. Passenger revenue associated with tickets is recognized when the performance obligation to the Customer is satisfied, which is primarily when travel is provided.
Revenue is categorized by revenue source as the Company believes it best depicts the nature, amount, timing, and uncertainty of revenue and cash flow. The following table provides the components of Passenger revenue recognized for the years ended December 31, 2025, 2024, and 2023:
| Year ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Passenger non-loyalty | $ | 20,441 | $ | 20,467 | $ | 19,073 | |||||||||||
| Passenger loyalty - air transportation | 3,259 | 3,484 | 3,639 | ||||||||||||||
| Passenger ancillary sold separately | 1,835 | 1,029 | 925 | ||||||||||||||
| Total passenger revenues | $ | 25,535 | $ | 24,980 | $ | 23,637 | |||||||||||
Passenger non-loyalty includes all revenues recognized from Passengers for flights purchased primarily with credit card. Passenger loyalty - air transportation primarily consists of the revenue associated with award flights taken by loyalty program Members upon redemption of loyalty points. Passenger ancillary sold separately includes any revenue associated with ancillary fees charged separately, such as in-flight purchases, baggage fees, EarlyBird Check-In®, and Upgraded Boarding.
In order to determine the value of each loyalty point in a flight transaction, certain assumptions must be made at the time of measurement, which include the following:
•Allocation of Passenger Revenue - Revenues from Passengers, related to travel, who also earn Rapid Rewards points have been allocated between flight (recognized as revenue when transportation is provided) and loyalty (deferred until points are redeemed) based on each obligation’s relative stand-alone selling price. The Company utilizes historical earning patterns to assist in this allocation.
•Fair Value of Rapid Rewards Points - Determined from the base fare value of tickets which were purchased using prior point redemptions for travel and other products and services, which the Company believes to be indicative of the fair value of points as perceived by Customers and representative of the value of each point at the time of redemption. The Company’s booking site allows a Customer to toggle between fares utilizing either cash (or equivalent) or point redemptions, which provides the Customer with an approximation of the equivalent value of their points. The value can differ, however, based on demand, the amount of time prior to the flight, and other factors. The mix of fare classes during the period measured represents a constraint, which could result in the assumptions above changing at the measurement date, as fare classes can have different coefficients used to determine the total loyalty points needed to purchase an award ticket. The mixture of these fare classes and changes in the coefficients used by the Company could cause the fair value per point to fluctuate.
The Company allocates consideration received to performance obligations based on the relative fair value of those obligations. The Company maintains a decades-long relationship with and has a co-branded credit card agreement (“Co-brand Agreement”) with Chase, through which the Company sells loyalty points and certain marketing components, which consist of the use of the Southwest Airlines brand and access to Rapid Rewards Member lists, licensing and advertising elements, the use of the Company’s resource team, and other airline benefits. In 2025, the Company and Chase amended the Co-brand Agreement—in the first quarter to extend the term of the agreement and add enhanced airline benefits for Cardmembers associated with the Company's planned assigned seating and premium seating initiative, and again in the second quarter to add benefits to Cardmembers related to the Company's changes in its checked bag policy that went into effect on May 28, 2025. For each change to the Co-brand Agreement, the Company estimated the selling prices and volumes over the term of the Co-brand Agreement in order to determine the allocation of proceeds to each of the three performance obligations identified in the Co-brand Agreement, which have been characterized as a transportation component, a marketing component, and an airline benefits component. The allocations utilized are reviewed to determine if adjustment is necessary any time there is a modification to the Co-brand Agreement. The Company records Passenger revenue related to loyalty point redemptions for air travel when the travel is delivered, the marketing elements are recognized as Other revenue when the performance obligations related to those services are satisfied, which is generally the same period consideration is received from Chase, and the airline benefits are recognized primarily within Passenger revenue when those performance obligations are satisfied. As a result of the 2025 amendments to the Co-brand Agreement, a larger portion of the Company’s co-brand credit card benefits from Chase are now being classified within Passenger revenues.
For points that are expected to remain unused, the Company recognizes breakage in proportion to the pattern of points used by the Customer, which approximates the average period over which the population of Rapid Reward Members redeem their points. The Company utilizes historical behavioral data to develop a predictive statistical model to analyze the amount of expected breakage for points sold to business partners and earned through flight. The Company continues to evaluate expected breakage annually and applies appropriate adjustments in the fourth quarter of each year, or other times, if significant changes in Customer behavior are detected. Changes to breakage estimates impact revenue recognition prospectively. Due to the size of the Company’s liability for loyalty benefits, changes in Customer behavior and/or expected future redemption patterns could result in significant variations in Passenger revenue.
As performance obligations to Customers are satisfied, the related revenue is recognized. The events that result in revenue recognition that are associated with performance obligations identified as a part of the Rapid Rewards loyalty program are as follows:
•Tickets and Rapid Rewards Points - When a flight occurs, the related performance obligation is satisfied and the related value provided by the Customer, whether from purchased tickets, Rapid Rewards points, or a combination thereof, is recognized as Passenger revenue.
•Loyalty Points Redeemed for Goods and/or Services Other Than Travel - Rapid Rewards Members have the option to redeem points for goods and services offered through a third-party vendor, who acts as principal. The performance obligation related to the purchase of these goods and services is satisfied when the good and/or service is delivered to the Customer as a component of Other revenue.
•Marketing Royalties - As part of its Co-brand Agreement with Chase, Southwest provides certain deliverables, including use of the Southwest Airlines’ brand, access to Rapid Rewards Member lists, advertising elements, and the Company’s resource team. These performance obligations are satisfied each month that the Co-brand Agreement is active and are recognized as a component of Other revenue.
•Travel-Related Services - Travel-related services are primarily composed of services performed in conjunction with a passenger’s flight, including checked baggage, seat, and other on-board benefits. The Company recognizes Passenger revenue for these services when the related transportation service is provided.
As of the years ended December 31, 2025 and 2024, the components of Air traffic liability, including contract liabilities based on tickets sold and unused flight credits available to the Customer, both of which are net of recorded breakage, and loyalty points available for redemption, within the Consolidated Balance Sheet were as follows:
| Balance as of | |||||||||||
| (in millions) | December 31, 2025 | December 31, 2024 | |||||||||
| Air traffic liability - passenger travel and ancillary passenger services | $ | 2,830 | $ | 3,393 | |||||||
| Air traffic liability - loyalty program | 4,334 | 4,849 | |||||||||
| Total Air traffic liability | $ | 7,164 | $ | 8,242 | |||||||
The balance in Air traffic liability - passenger travel and ancillary passenger services also includes flight credits not currently associated with a ticket that can be applied by Customers towards the purchase of future travel. These flight credits are typically created as a result of a prior ticket cancellation or exchange, and are reflected net of associated breakage. Rollforwards of the Company's Air traffic liability - loyalty program for the years ended December 31, 2025 and 2024 were as follows (in millions):
| Year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Air traffic liability - loyalty program - beginning balance | $ | 4,849 | $ | 4,916 | |||||||
| Amounts deferred associated with points awarded | 2,862 | 3,532 | |||||||||
| Revenue recognized from points redeemed - Passenger | (3,259) | (3,484) | |||||||||
| Revenue recognized from points redeemed - Other | (118) | (115) | |||||||||
| Air traffic liability - loyalty program - ending balance | $ | 4,334 | $ | 4,849 | |||||||
Air traffic liability includes consideration received for ticket and loyalty related performance obligations which have not been satisfied as of a given date. Rollforwards of the amounts included in Air traffic liability as of December 31, 2025 and 2024 were as follows (in millions):
| Year ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Air traffic liability - beginning balance | $ | 8,242 | $ | 8,279 | |||||||
| Current period sales (a) | 24,187 | 25,057 | |||||||||
| Revenue from amounts included in contract liability opening balances | (5,212) | (5,082) | |||||||||
| Revenue from current period sales | (20,053) | (20,012) | |||||||||
| Air traffic liability - ending balance | $ | 7,164 | $ | 8,242 | |||||||
(a)Current period sales include passenger travel, ancillary services, flight loyalty, and partner loyalty
On July 28, 2022, the Company announced that all existing Customer flight credits as of that date, as well as any future flight credits issued, no longer expire and will thus remain redeemable by Customers. The Company’s balance of existing Customer flight credits as of the modification date was approximately $1.9 billion, including a portion of the extended flight credits issued during the early portion of the COVID-19 pandemic. The Company determined a $116 million reversal of a portion of prior breakage revenue was warranted for the twelve months ended December 31, 2024. This was due to continued redemptions for flight credits issued prior to the modification date during 2024 as well as projected redemptions at that time. This change in breakage revenue, and the corresponding impact to passenger revenue, is considered a change in estimate (see Note 1 for further information).
On May 28, 2025, the Company implemented a change to its flight credit policy. Flight credits created from reservations booked and ticketed or voluntarily changed on or after May 28, 2025, will have a specified expiration date of one year or less, depending on the type of fare purchased. Flight credits issued between July 28, 2022, and May 28, 2025, including any future issuances associated with bookings made prior to the policy change on May 28, 2025, do not have an expiration date. The Company also began to issue vacation travel credits for cancelled bookings resulting from the launch of the new Getaways by Southwest™ ("Getaways") product, and these credits will have an 18-month expiration period from original booking date. As the Company believes that a portion of Customer travel credits (both flight credits and Getaways travel credits) issued will not be redeemed, it estimates and records breakage associated with such amounts.
The amount of Customer flight credits represents approximately 5 percent and 8 percent of the total Air traffic liability balance as of December 31, 2025, and December 31, 2024, respectively.
Recognition of revenue associated with the Company’s loyalty liability can be difficult to predict, as the number of award seats available to Members is not currently restricted and Members could choose to redeem their points at any time that a seat is available. The performance obligations classified as a current liability related to the Company’s loyalty program were estimated based on expected redemptions utilizing historical redemption patterns, and forecasted flight availability and fares. The entire balance classified as Air traffic liability-noncurrent relates to loyalty points that were estimated to be redeemed in periods beyond the twelve months following the representative balance sheet date. Based on historical experience as well as current forecasted redemptions, the Company expects the majority of loyalty points to be redeemed within approximately one year of the date the points are issued. The
Company's policy change on flight credit expirations for any reservations booked and ticketed or voluntarily changed on or after May 28, 2025, will generally have satisfied the performance obligation duration of twelve months or less. For all other flight credits created under the prior policy, the Company currently does not expect the amount of flight credits that will be redeemed beyond twelve months to be material as a percentage of the Air traffic liability as of the financial statement date.
All performance obligations related to freight services sold are completed within twelve months or less; therefore, the Company has elected to not disclose the amount of the remaining transaction price and its expected timing of recognition for freight shipments.
Other revenues primarily consist of marketing royalties associated with the Company’s co-brand Chase® Visa credit card program, but also include commissions and advertising associated with Southwest.com. All amounts classified as Other revenues are paid monthly, coinciding with the Company fulfilling its deliverables; therefore, the Company has elected to not disclose the amount of the remaining transaction price and its expected timing of recognition for such services provided.
The Company recognized revenue related to the marketing, advertising, and other travel-related benefits of the cash flows associated with various loyalty partner agreements including, but not limited to, the Co-brand Agreement with Chase, the majority of which is within Other operating revenues. For the years ended December 31, 2025, 2024, and 2023 the Company recognized $2.6 billion, $2.2 billion, and $2.1 billion, respectively. The increase in revenue recognized in 2025 was primarily driven by immediate recognition of a larger portion of revenues (and thus lower revenue deferred) associated with the Company's aforementioned co-brand agreement with Chase from 2025 modifications to the agreement, which has also resulted in a lower balance in Air traffic liability as of December 31, 2025, as compared to the prior year.
The Company is also required to collect certain taxes and fees from Customers on behalf of government agencies and remit these back to the applicable governmental entity on a periodic basis. These taxes and fees include foreign and U.S. federal transportation taxes, federal security charges, and airport passenger facility charges. These items are collected from Customers at the time they purchase their tickets, are excluded from the contract transaction price, and are therefore not included in Passenger revenue. The Company records a liability upon collection from the Customer and relieves the liability when payments are remitted to the applicable governmental agencies.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 5, 2026 | Showing above |
| 2024 | Feb 7, 2025 | |
| 2023 | Feb 6, 2024 | |
| 2022 | Feb 7, 2023 | |
| 2021 | Feb 7, 2022 | |
| 2020 | Feb 8, 2021 | |
| 2019 | Feb 4, 2020 | |
| 2018 | Feb 5, 2019 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.