Southwest Airlines Company · NYSE:LUV
Southwest Airlines — Cowen 2017 Global Transportation Conference
18 slides from Southwest Airlines's conference presentation, 2017
Slide 1: Cowen 2017 Global Transportation Conference
Southwest's Cowen 2017 Global Transportation Conference Tammy Romo, EvP and CFO /
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
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, an
Slide 3: Competitive differentiators
Competitive differentiators Unmatched profitability record with cost discipline and a strong balance sheet Outstanding Customer Service and Hospitality that drives brand loyalty and recognition Low fares and a point-to-point network that support market leadership and scale
Slide 4: First half 2017 results
First half 2017 results $10.6B $1.1B $1.4B operating revenues net income’ free cash flow? $1.1B returned to Shareholders* $1.84 82.9% $301M diluted earnings profitsharing per share’ load factor accrual Excluding special items. 2Free cash flow is calculated as operating cash flows less capital expend
Slide 5: New reservation system
New reservation system Schedule variation Increased days of inventory Redeyes Improved connection times * O&D Controls * Improved fare flexibility « Ancillary controls Reservation System « IROPS automation & optimization * Mobile enhancements at airport ¢ Standby capability & policy improvements Fou
Slide 6: The evolution of our network
The evolution of our network December 31, | December 31, 1996 2006 Daily departures Market share’ Number of cities? 99 Number of states? 40 Number of countries 10 243 481 735 12% 11% 27.5% > The expansion of our robust network has driven meaningful results 1996 market share based on enplaned passeng
Slide 7: Our network today
Our network today . Top 10 Cities’ : gr fe 1. Chicago (Midway) bial Utiked tage OD 2. Baltimore Y . NT pe 3. Las Vegas ut ; e ° S RAL ee 4. Denver ° hte | © be 5. Dallas Caer ~ e 6. Phoenix d ca 7. Houston (Hobby) ° ° 8. Los Angeles ° A s . Turks & Caicos? 9. Orlando ° Grand Caymah ae 10. Atlanta ‘R
Slide 8: The airline California loves
The airline California loves — Existing routes — New daily routes ——— New weekend routes Note: based on April 2018 base schedule.
Slide 9: The nation's largest domestic airline
The nation’s largest domestic airline LA Basin (LAX, LGB, ONT, SNA, BUR) 29% 10, | 14% DC/BWI Area (BWI, DCA, IAD) 32% Bay Area (OAK, SFO, SJC) 32% 22% | i 15% Source: Data presented herein as measured by the Department of Transportation O&D Survey for the twelve months ended March 31, 2017 based on
Slide 10: Customer Experience builds loyalty and supports a strong brand
Customer Experience builds loyalty and supports a strong brand “It’s a good experience. | feel a sense of Hospitality that other airlines do not have.” Exceptional Inflight Offerings * Live TV * $8 Wi-Fi flat rate per day « Complimentary snacks and beverages _ Rapid Rewards” _ Frequent Flyer Program
Slide 11: Low cost advantage
Low cost advantage (in cents) oo [2] oO — Southwest! 2.00 ——Network? —LCC 1Q 2000 1Q 2017 While the gap to the industry has contracted over the past 10 years, we are committed to preserving a meaningful competitive cost advantage ‘Network airlines: Trans World, American, US Airways, Northwest, Delta
Slide 12: Reducing fuel consumption and improving efficiency
Reducing fuel consumption and improving efficiency through fleet modernization and other fuel initiatives ASMs per gallon 75 5 74 | 73 4 72 - 1 4 70 | 69 | 68 YY % Change 74.4 73.9 2 Fer 5 : 2012 2013 2014 2015 2016 1.5 3.3 15 1.6 07 12
Slide 13: Sustaining a strong financial position
Sustaining a strong financial position Strong balance sheet ¢ $3.2 billion in unrestricted core cash and short- Investment term investments and $1 billion line of credit grade rating by fully undrawn and available agencies * Balance Sheet leverage of just over 30%' Balanced capital deployment * Cash
Slide 14: Industry-leading balance sheet
Industry-leading balance sheet Non-investment grade Investment grade a 1 H H bar tole STANDARD. FitchRatines Upgraded | oD STANDARD FitchRatings wasn, June 2017 x STANDARD Upgraded allegiant Moopy’s | croors to BBB+ in = August 2017 varnerical Sas STANDARD “airiines @ Moopy’s | 2P00Rs FitchRatings S
Slide 15: Returning significant value back to Shareholders
Returning significant value back to Shareholders $2,500 | = Free cash flow = Share repurchases >$7.1 B $2,000 ~ = Dividends Returned to Shareholders? $1,500 $1,000 $500 | $0 3 2011 2012 2013 2014 2015 2016 YTD 2017 In August 2017, Southwest launched a $300 million ASR program and has $1.7 billion re
Slide 16: Only domestic carrier with decades-long history of returning capital
Only domestic carrier with decades-long history of returning capital Southwest» American Airlines ‘¢. $07 $09 $09 (12 te ADELTA $04 $02 $07 $06 $05 (904 S426 84 UNITED® $0.3 $05 $03 $01 $0.1 $03 $12 $26 jetBlue <$01 $01 $01 $02 $04 Aarti EX ie HAQWAnAN El spirit sot so allegiant. US AIRWAYS’ HMM oDi
Slide 17: Non-GAAP Reconciliation
Non-GAAP Reconciliation in millions, except per share amounts Six months ended Twelve months ended Twelve __dune 30,2017 December 31, months ended Net income (loss), as reported $ 1,097 1996 2006 June 30, 2017 Add (Deduct): Mark-to-market impact from Operating income, as reported $ 351 $ 934 $ 3,449
Slide 18: Thank You
Southwest Airlines — Cowen 2017 Global Transportation Conference on 6ix