Stifel 2017 Transportation & Logistics Conference Tammy Romo, EVP and CFO

Stifel 2017 Transportation & Logistics Conference Tammy Romo, EVP and CFO

Cautionary Statement Regarding Forward-Looking Statements This presentation 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 goals, strategies, expectations, opportunities, and outlook, and its projected results of operations, including factors expected to impact the Company s results of operations; (ii) the Company s expectations and goals with respect to returning value to Shareholders; (iii) the Company s plans and expectations with respect to its new reservation system and other technology initiatives, and the Company s related multi-faceted financial and operational expectations and opportunities; and (iv) the Company s vision. 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 demand for the Company s services and other changes in consumer behavior; (ii) the impact of economic conditions, fuel prices, actions of competitors (including, without limitation, pricing, scheduling, and capacity decisions and consolidation and alliance activities), governmental actions, and other factors beyond the Company s control, on the Company s business decisions, plans, and strategies; (iii) the Company s dependence on third parties, in particular with respect to its technology plans; (iv) 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; (v) the impact of labor matters on the Company s business decisions, plans, strategies, and costs; and (vi) 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 December 31, 2016. 2

Competitive differentiators Unmatched profitability record with cost discipline and a strong balance sheet Outstanding Customer Service and Hospitality that drives brand loyalty and recognition The best People and Culture in the industry Low fares and a point-to-point network that support market leadership and scale Reliable, efficient operations 3

An outstanding year!

Sustaining a strong financial position Strong balance sheet Investment grade rating by all three agencies $3.3 billion in unrestricted core cash and shortterm investments and $1 billion line of credit fully undrawn and available Balance Sheet leverage of 32.5% 1 Balanced capital deployment Returned nearly $2.0 billion to Shareholders in 2016 Cash flow from operations of $4.3 billion Capital spending of $2.0 billion Debt repayments of $523 million Debt issuances of $515 million Southwest is focused on preserving a strong balance sheet and healthy cash flows while returning significant value to Shareholders 1 Includes off balance sheet aircraft leases. Note: Information presented is for the year ended December 31, 2016. 5

Significant returns to Shareholders $700 Total Cumulative Return - Dollars $600 $500 $400 $300 $200 Southwest NYSE Arca Airline S&P 500 $100 $0 2011 2012 2013 2014 2015 2016 6

Low cost advantage 14.00 12.00 10.00 (in cents) 8.00 6.00 4.00 2.00 Southwest Network - 1Q 2000 3Q 2016 LCC 2 1 While the gap to the industry has contracted over the past 10 years, we are committed to preserving a meaningful competitive cost advantage Source: DOT form 41 and T100 data, through September 30, 2016. Stage-length adjusted for Southwest s average stage-length, represents domestic mainline. 1 Network airlines: AA, AQ, DL, HP (post-aa merger), NW, TW, UA, US 2 LCC airlines: B6, VX, G4, NK, F9, HP (pre-aa merger), FL (pre-wn merger) 7

Customer Experience builds loyalty It s a good experience. I feel a sense of Hospitality that other airlines do not have. Rapid Rewards Frequent Flyer Program 100% seat availability 1 No blackout dates Points don t expire 2 Exceptional Inflight Offerings Live TV $8 Wi-Fi flat rate per day Complimentary snacks and beverages 1 Members are able to redeem their points for every available seat 2 Must have points earning activity during the most recent 24 months 8

Consistently loved and recognized brand 75% 70% 65% 60% Net Promoter Score 2015 2016 Awards in 2016 InsideFlyer s 2016 Airline Program of the Year for Rapid Rewards Best Airline (Domestic) and Best Loyalty Credit Card in MONEY Magazine s Best in Travel Awards Air Forwarders Association s Domestic Carrier of the Year Ranked among top Airline Rewards Programs by U.S News & World Report Named in the Top 10 of FORTUNE S World s Most Admired Companies 9

With Transfarency, we say YES! to our Customers 10

Culture of celebration & appreciation Mission to our Employees We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer. 11

Our network in 1996 Source: EDW DOT Traffic December 1996 12

By 2006 Source: EDW DOT Traffic December 2006 13

and today Source: Diio schedules December 2016 14

The evolution of our network 1996 2006 2016 Daily departures >2,100 >3,200 >3,900 Market share 1 11% 18% 24% Number of cities 49 63 101 Number of states 2 24 32 40 Number of countries 1 1 9 Fleet 243 481 723 ROIC 3 12% 11% 30% The expansion of our robust network has driven meaningful results 1 1996 market share based on enplaned passengers; 2006 and 2016 market share based on revenue passengers. 2 2006 includes 32 states and the District of Columbia; 2016 includes 40 states, the District of Columbia, and the Commonwealth of Puerto Rico. 3 Before taxes and excluding special items. 15

The nation s largest domestic airline LA Basin (LAX, LGB, ONT, SNA, BUR) 30% 20% 14% DC/BWI Area (BWI, DCA, IAD) 32% 25% 17% Bay Area (OAK, SFO, SJC) 32% 22% 15% Phoenix 41% 34% 10% Denver 37% 26% 14% Las Vegas 37% 11% 10% Market share 24% of total domestic market share Market leader in 25 of the top 50 U.S. metro areas 1,2 67% market share in Southwest Airlines top 100 O&D city pairs Serve (offer itineraries for sale) 95 of the top 100 domestic O&D city pairs (including co-terminal airports 3 ) LUV OA #1 OA #2 Source: Data presented herein as measured by the Department of Transportation O&D Survey for the twelve months ended September 30th, 2016 based on domestic originating passengers boarded. O&D stands for Origin and Destination. 1 Metro Areas: An area around a city that includes multiple major airports. 2 In terms of domestic passenger traffic. 3 Co-terminal: Airports that share a common city or region; for example Newark, LaGuardia and JFK are considered co-terminals to one another. 16

Focus on Reliability Ontime Performance Baggage Delivery Rate 82% 4.0 81% 3.5 80% 3.0 79% 2.5 78% 2015 2016 2.0 2015 2016 With record passengers in 2016, improvements in OTP and baggage delivery rate were notable operational achievements 17

Operational initiatives Winter Storms Hercules 2014 Thor 2015 Jonas 2016 Ontime Performance 29.4% 60.8% 72.7% Bags Mishandled per 1,000 Customers 11.60 4.10 2.69 Customers Delayed Over Two Hours 156,762 28,270 6,584 120+ Minute Tarmac Events 41 5 1 18

Single reservation system in May 2017! O&D Controls Improved fare flexibility Ancillary controls Schedule variation Increased days of inventory Redeyes Improved connection times New Reservation System IROPS automation & optimization Mobile enhancements at airport Standby capability & policy improvements Electronic Miscellaneous Documents (EMDs) for ancillary services Interline & codeshare Foreign currency Foreign point of sale New distribution capabilities 19

Purpose Connect People to what s important in their lives through friendly, reliable, and low-cost air travel. Vision To become the world s most loved, most flown, and most profitable airline. 20

Non-GAAP Reconciliation Twelve months ended December 31, 2016 2006 1996 Operating income, as reported $ 3,760 $ 934 $ 351 Union contract bonuses 356 - - Net impact from fuel contracts (202) 41 - Asset impariment 21 - - Lease termination expense 22 - - Operating income, non-gaap $ 3,957 $ 975 $ 351 Net adjustment for aircraft leases 1 111 72 84 Adjustment for fuel hedge accounting (152) (52) - Adjusted Operating income, non-gaap $ 3,916 $ 995 $ 435 Average invested capital 2 $ 12,152 $ 9,667 $ 3,674 Equity adjustment for hedge accounting 886 (897) - Adjusted average invested capital $ 13,038 $ 8,770 $ 3,674 ROIC, pre-tax 30% 11% 12% 1 Net adjustment related to presumption that all aircraft in fleet are owned (i.e., the impact of eliminating aircraft rent expense and replacing with estimated depreciation expense for those same aircraft). 2 Average Invested Capital is an average of the five most recent quarter end balances of debt, net present value of aircraft leases, and equity adjusted for hedge accounting. Year ended December 31, 2016 Net income (loss), as reported $ 2,244 Add: Union contract bonuses 356 Add (Deduct): Mark-to-market impact from fuel contracts settling in future periods 9 Add (Deduct): Ineffectiveness from fuel hedges settling in future periods (11) Add (Deduct): Other net impact of fuel contracts settling in the current or a prior period (excluding reclassifications) (197) Add: Lease termination expense 22 Add (Deduct): Income tax impact of fuel and special items 1 (74) Net income, non-gaap $ 2,370 1 Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item. 21

Thank you 22