SOUTHWEST AIRLINES CO
For the period ended Sep 30, 2026. Filed Oct 22, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Oct 22, 2026
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4. Comprehensive Income
- COMPREHENSIVE INCOME
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co.Notes to Condensed Consolidated Financial Statements(unaudited) |
|---|
Comprehensive income includes changes in the fair value of certain financial derivative instruments that qualified for hedge accounting and actuarial gains/losses arising from the Company’s postretirement benefit obligation. The Company terminated its remaining portfolio of fuel hedging contracts during second quarter 2025, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio and program. See Note 3. The differences between Net income and Comprehensive income for the three and nine months ended September 30, 2026 and 2025 were as follows:
| Three months ended September 30, | ||
|---|---|---|
| (in millions) | 2026 | 2025 |
| NET INCOME | $270 | $54 |
| Unrealized loss on fuel derivative instruments, net of deferred taxes of $7 and $8 | 22(a) | 28(a) |
| Other, net of deferred taxes of $2 and $1 | 8 | 1 |
| Total other comprehensive income | $30 | $29 |
| COMPREHENSIVE INCOME | $300 | $83 |
(a) Includes reclassification adjustments from AOCI into Aircraft fuel and related taxes expense associated with hedges previously terminated.
| Nine months ended September 30, | ||
|---|---|---|
| (in millions) | 2026 | 2025 |
| NET INCOME | $730 | $118 |
| Unrealized loss on fuel derivative instruments, net of deferred taxes of $20 and $5 | 66(a) | 15(a) |
| Other, net of deferred taxes of $3 and $1 | 10 | 4 |
| Total other comprehensive income | $76 | $19 |
| COMPREHENSIVE INCOME | $806 | $137 |
(a) Includes reclassification adjustments from AOCI into Aircraft fuel and related taxes expense associated with hedges previously terminated.
A rollforward of the amounts included in AOCI, net of taxes, is shown below for the three and nine months ended September 30, 2026:
| (in millions) | Fuel derivatives | Defined benefit plan items | Other | Deferred tax impact | Accumulated other comprehensive income (loss) |
|---|---|---|---|---|---|
| Balance at June 30, 2026 | $(79) | $106 | $1 | $(6) | $22 |
| Changes in fair value | — | — | 9 | (2) | 7 |
| Reclassification to earnings | 29 | — | 1 | (7) | 23 |
| Balance at September 30, 2026 | $(50) | $106 | $11 | $(15) | $51 |
| (in millions) | Fuel derivatives | Defined benefit plan items | Other | Deferred tax impact | Accumulated other comprehensive income (loss) |
|---|---|---|---|---|---|
| Balance at December 31, 2025 | $(137) | $106 | $(1) | $8 | $(24) |
| Changes in fair value | — | — | 9 | (2) | 7 |
| Reclassification to earnings | 86 | — | 4(a) | (21) | 69 |
| Balance at September 30, 2026 | $(50) | $106 | $11 | $(15) | $51 |
| Notes to Condensed Consolidated Financial Statements | Southwest Airlines Co.Notes to Condensed Consolidated Financial Statements(unaudited) |
|---|
The following tables illustrate the significant amounts reclassified out of each component of AOCI for the three and nine months ended September 30, 2026:
| Three months ended September 30, 2026 | ||
|---|---|---|
| (in millions) | Amounts reclassified from AOCI | Affected line item in the unaudited Condensed Consolidated Statement of Comprehensive Income |
| AOCI components | ||
| Unrealized loss on fuel derivative instruments | $29 | Aircraft fuel and related taxes |
| 7 | Less: Tax expense | |
| $22 | Net of tax | |
| Other | $2 | Other operating expenses |
| (1) | Interest expense | |
| — | Less: Tax expense | |
| $1 | Net of tax | |
| Total reclassifications for the period | $23 | Net of tax |
| Nine months ended September 30, 2026 | ||
|---|---|---|
| (in millions) | Amounts reclassified from AOCI | Affected line item in the unaudited Condensed Consolidated Statement of Comprehensive Income |
| AOCI components | ||
| Unrealized loss on fuel derivative instruments | $86 | Aircraft fuel and related taxes |
| 20 | Less: Tax expense | |
| $66 | Net of tax | |
| Other | $5 | Other operating expenses |
| (1) | Interest expense | |
| 1 | Less: Tax expense | |
| $3 | Net of tax | |
| Total reclassifications for the period | $69 | Net of tax |
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