<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
September 30, 1996 OR
____TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
________ TO ________
Commission file No. 1-7259
SOUTHWEST AIRLINES CO.
(Exact name of registrant as specified in its charter)
TEXAS 74-1563240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 36611, Dallas, Texas 75235-1611
(Address of principal executive offices) (Zip Code)
(214) 792-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of Common Stock outstanding as of the close
of business on November 6, 1996:
145,031,619
<PAGE>
SOUTHWEST AIRLINES CO.
FORM 10-Q
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Southwest Airlines Co.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $594,030 $317,363
Accounts receivable 84,299 79,781
Inventories of parts and supplies 52,397 41,032
Deferred income taxes 11,531 10,476
Prepaid expenses and other
current assets 31,697 24,484
Total current assets 773,954 473,136
Property and equipment:
Flight equipment 3,270,289 3,024,702
Ground property and equipment 507,355 435,822
Deposits on flight equipment
purchase contracts 217,461 323,864
3,995,105 3,784,388
Less allowance for depreciation 1,152,884 1,005,081
2,842,221 2,779,307
Other assets 3,340 3,679
$3,619,515 $3,256,122
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $133,144 $116,530
Accrued liabilities 369,504 349,419
Air traffic liability 206,083 131,156
Current maturities of long-term debt 12,183 13,516
Total current liabilities 720,914 610,621
Long-term debt less current maturities 652,246 661,010
Deferred income taxes 332,053 281,650
Deferred gains from sale and leaseback
of aircraft 280,165 245,154
Other deferred liabilities 19,106 30,369
Stockholders' equity:
Common stock 144,985 144,033
Capital in excess of par value 175,064 162,704
Retained earnings 1,294,982 1,120,581
Total stockholders' equity 1,615,031 1,427,318
$3,619,515 $3,256,122
</TABLE>
See accompanying notes.
<PAGE>
Southwest Airlines Co.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Operating revenues: <C> <C> <C> <C>
Passenger $855,719 $735,275 $2,473,142 $2,042,378
Freight 19,677 16,160 58,668 47,165
Other 16,096 13,540 42,519 34,636
Total operating
revenues 891,492 764,975 2,574,329 2,124,179
Operating expenses:
Salaries, wages, and
benefits 254,798 223,585 750,241 644,415
Fuel and oil 126,239 92,034 345,757 264,090
Maintenance materials
and repairs 70,565 55,729 199,598 159,982
Agency commissions 37,098 31,623 106,500 92,368
Aircraft rentals 47,960 44,229 138,879 124,709
Landing fees and other
rentals 49,158 41,803 140,003 121,779
Depreciation 46,171 38,826 136,295 114,382
Other operating expenses 156,569 123,048 454,522 361,522
Total operating
expenses 788,558 650,877 2,271,795 1,883,247
Operating income 102,934 114,098 302,534 240,932
Other expenses (income):
Interest expense 14,717 15,038 44,642 43,811
Capitalized interest (5,009) (8,255) (17,731) (25,155)
Interest income (7,480) (6,849) (16,878) (14,259)
Nonoperating losses
(gains), net 463 (51) (2,504) 1,485
Total other expenses 2,691 (117) 7,529 5,882
Income before income taxes 100,243 114,215 295,005 235,050
Provision for income taxes 39,385 46,498 115,828 95,783
Net income $60,858 $67,717 $179,177 $139,267
Weighted average common
and common equivalent
shares outstanding 150,808 151,647 152,295 148,509
Net income per common and
common equivalent share $.40 $.45 $1.18 $.94
</TABLE>
See accompanying notes.
<PAGE>
Southwest Airlines Co.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net cash provided by
operating activities $82,033 $49,720 $445,924 $347,923
Investing activities:
Net purchases of property
and equipment (161,503) (213,855) (495,250) (572,141)
Financing activities:
Issuance of long-term debt - - - 98,811
Payment of long-term debt
and capital lease
obligations (3,047) (2,731) (11,103) (7,758)
Payment of cash
dividends (1,595) (1,438) (6,216) (5,741)
Proceeds from aircraft sale
and leaseback
transactions 198,000 130,000 330,000 321,650
Proceeds from Employee
stock plans 1,857 3,163 13,312 8,475
Net cash provided by
financing activities 195,215 128,994 325,993 415,437
Net increase (decrease) in
cash and cash
equivalents 115,745 (35,141) 276,667 191,219
Cash and cash equivalents at
beginning of period 478,285 400,898 317,363 174,538
Cash and cash equivalents at
end of period $594,030 $365,757 $594,030 $365,757
Cash payments for:
Interest, net of amount
capitalized $17,276 $14,270 $35,220 $25,381
Income taxes $36,556 $44,449 $58,447 $52,276
</TABLE>
See accompanying notes.
<PAGE>
SOUTHWEST AIRLINES CO.
Notes to Condensed Consolidated Financial Statements
1. Basis of presentation - The accompanying unaudited
condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. The condensed consolidated financial statements
for the interim periods ended September 30, 1996 and 1995 include
all adjustments (which include only normal recurring adjustments)
which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods. Operating
results for the three and nine month periods ended September 30,
1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Southwest Airlines Co. annual
report on Form 10-K for the year ended December 31, 1995.
2. Dividends - During the three month periods ended
September 30, 1996, June 30, 1996, and March 31, 1996, dividends
of $.011 per share were declared on the 144,956,331, 144,715,343,
and 144,452,894 shares of common stock then outstanding,
respectively. During the three month periods ended September 30,
1995, June 30, 1995, and March 31, 1995, dividends of $.01 per
share were declared on the 143,840,928, 143,648,993, and
143,411,223 shares of common stock then outstanding,
respectively.
3. Leases - During third quarter 1996, the Company
completed transactions for the sale and leaseback of six new
Boeing 737 aircraft. The lease terms, which require periodic
lease payments through May 2021, increased the Company's
commitments for operating leases by $355.7 million.
4. Common stock - Effective July 18, 1996, the Company
amended and restated its Common Stock Rights Agreement dated July
14, 1986 (the Agreement). The principal purpose of the amendment
and restatement was to extend the Agreement by 10 years. For
further information regarding the Agreement, refer to footnote 8
to the consolidated financial statements included in the
Southwest Airlines Co. annual report on Form 10-K for the year
ended December 31, 1995.
5. Reclassifications - Certain prior year amounts have
been reclassified for comparison purposes.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Comparative Consolidated Operating Statistics
Relevant operating statistics for the three and nine month
periods ended September 30, 1996 and 1995 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue passengers
carried 12,846,516 11,682,228 36,826,493 33,299,341
Revenue passenger miles
(RPMs) (000s) 7,333,497 6,252,006 19,979,952 17,450,334
Available seat miles
(ASMs) (000s) 10,479,825 9,216,522 30,286,698 26,663,719
Load factor 70.0% 67.8% 66.0% 65.4%
Average length of
passenger haul 571 535 543 524
Trips flown 191,979 174,312 558,788 508,107
Average passenger fare $66.61 $62.94 $67.16 $61.33
Passenger revenue yield
per RPM $.1167 $.1176 $.1238 $.1170
Operating revenue yield
per ASM $.0851 $.0830 $.0850 $.0797
Operating expenses per ASM $.0752 $.0706 $.0750 $.0706
Average fuel cost per gallon $.6615 $.5460 $.6279 $.5404
Number of employees at
period-end 23,066 19,748 23,066 19,748
Size of fleet at period-end 241 219 241 219
</TABLE>
Material Changes in Results of Operations
Consolidated net income for the three months ended
September 30, 1996 was $60.9 million ($.40 per share) compared
with $67.7 million ($.45 per share) earned in third quarter 1995.
Consolidated operating revenues increased 16.5 percent for
the third quarter of 1996 and 21.2 percent for the nine months
ended September 30, 1996, as compared to the corresponding
periods of the prior year, primarily as a result of a 16.4
percent and 21.1 percent increase, respectively, in consolidated
passenger revenues. The increase in passenger revenues resulted
from a 17.3 percent and 14.5 percent increase in revenue
passenger miles (RPMs) for the three and nine month periods ended
September 30, 1996, respectively, coupled with a 5.8 percent and
9.5 percent increase in average passenger fare over these same
periods.
Available seat miles (ASMs) increased 13.7 percent and 13.6
percent in third quarter 1996 and the nine month period ended
September 30, 1996, respectively, resulting in load factors of
70.0 percent and 66.0 percent for these same periods. The
increase in ASMs resulted primarily from the addition of 22
aircraft since third quarter 1995.
The reimposition of the ten percent federal excise tax
negatively impacted revenues in third quarter 1996. The ticket
tax was reinstated on August 27, 1996 and is currently expected
to expire again on December 31, 1996.
In celebration of the Company's 25th Anniversary, Southwest
launched a fare sale in July for travel between August 19 and
October 31, 1996. The sale was extremely popular and resulted in
record advance bookings, with more than four and a half million
seats sold. Although July and early August load factors and
revenues were negatively impacted by the telephone line
congestion experienced during our sale, the load factor for the
month of September 1996 was positively impacted, up 9.5 points
over September 1995's performance. The October load factor of
72.2 percent also compared favorably to last year's load factor
of 60.0 percent. Although passenger revenue yield per RPM for
the month of October was down due to the fare sale, passenger
revenue per ASM increased compared to October 1995. Thus far,
November and December traffic and bookings also look strong. (The
immediately preceding sentence is a forward-looking statement
which involves uncertainties that could result in actual results
differing materially from expected results. Some significant
factors include, but may not be limited to, competitive pressure
such as fare sales and capacity changes by other carriers,
general economic conditions, and variations in advanced booking
trends.)
Consolidated freight revenues increased 21.8 percent in the
third quarter of 1996 and 24.4 percent for the nine months ended
September 30, 1996 as compared to the same periods of the prior
year, primarily due to increased capacity, as well as an increase
in United States mail services. Other revenues increased 18.9
percent in the third quarter 1996 and 22.8 percent for the nine
months ended September 30, 1996, primarily due to increased
charter revenue.
Operating expenses per ASM increased 6.5 percent and 6.2
percent for the three months and nine months ended September 30,
1996, respectively, primarily due to significantly higher jet
fuel prices; the 4.3 cent per gallon federal jet fuel tax
implemented October 1, 1995; and higher aircraft maintenance
costs. Excluding jet fuel costs and related taxes, operating
expenses per ASM for the three and nine month periods ended
September 30, 1996, were up 3.0 percent and 3.5 percent,
respectively.
Unit costs are expected to increase in fourth quarter 1996
versus fourth quarter 1995 primarily due to higher jet fuel
prices and higher advertising costs from our recent expansion
into Providence, Rhode Island, the upcoming expansion into
Jacksonville, Florida, and our launch of the "Freedom"
advertising campaign. (The immediately preceding sentence is a
forward-looking statement which involves uncertainties that could
result in actual results differing materially from expected
results. Such uncertainties include, but may not be limited to,
the largely unpredictable levels of fuel prices.)
Southwest Airlines Co.
Consolidated Operating Expenses per ASM
(in cents except percent change)
<TABLE>
<CAPTION>
Three months ended
September 30,
Increase Percent
1996 1995 (decrease) change
<S> <C> <C> <C> <C>
Salaries, wages, and benefits 2.17 2.12 .05 2.4
Profitsharing and Employee
savings plans .26 .30 (.04) (13.3)
Fuel and oil 1.20 1.00 .20 20.0
Maintenance materials
and repairs .68 .61 .07 11.5
Agency commissions .35 .34 .01 2.9
Aircraft rentals .46 .48 (.02) (4.2)
Landing fees and other rentals .47 .45 .02 4.4
Depreciation .44 .42 .02 4.8
Other operating expenses 1.49 1.34 .15 11.2
Total 7.52 7.06 .46 6.5
</TABLE>
<TABLE>
Nine months ended
September 30,
Increase Percent
1996 1995 (decrease) change
<S> <C> <C> <C> <C>
Salaries, wages, and benefits 2.22 2.18 .04 1.8
Profitsharing and Employee
savings plans .26 .24 .02 8.3
Fuel and oil 1.14 .99 .15 15.2
Maintenance materials
and repairs .66 .60 .06 10.0
Agency commissions .35 .35 - -
Aircraft rentals .46 .47 (.01) (2.1)
Landing fees and other rentals .46 .45 .01 2.2
Depreciation .45 .43 .02 4.7
Other operating expenses 1.50 1.35 .15 11.1
Total 7.50 7.06 .44 6.2
</TABLE>
Salaries, wages, and benefits per ASM increased 2.4 percent
and 1.8 percent for the three and nine month periods ended
September 30, 1996, respectively, as compared to the same periods
of the prior year, primarily due to an increase in Reservation
Sales Agent wages.
The Company's flight attendants are subject to an agreement
with the Transport Workers Union of America, AFL-CIO (TWU), which
became amendable May 31, 1996. Southwest is currently in
negotiations with TWU to amend the contract.
Profitsharing and Employee savings plans expense per ASM
decreased 13.3 percent for the three months ended September
30,1996 and increased 8.3 percent for the nine months ended
September 30, 1996, respectively, as compared to the same periods
of the prior year based on the profitability of the corresponding
period.
Fuel and oil expense per ASM increased 20.0 percent and 15.2
percent in third quarter 1996 and the nine month period then
ended due to higher jet fuel prices. The average price paid for
jet fuel in the three and nine month periods ended September 30,
1996 was $.6615 and $.6279 per gallon, respectively, compared to
$.5460 and $.5404 for the corresponding periods in 1995. Since
the end of third quarter 1996, fuel prices have averaged
approximately $.73 per gallon.
Maintenance materials and repairs per ASM increased 11.5
percent and 10.0 percent for the three and nine month periods
ended September 30, 1996, respectively, as compared to the
corresponding periods of 1995, primarily as a result of higher
engine overhaul costs and increased scheduled airframe
inspections during 1996.
Agency commissions per ASM increased by 2.9 percent for the
third quarter 1996 and remained unchanged for the nine months
ended September 30, 1996. Management believes that the third
quarter 1996 increase is due to an increase in the use of travel
agents in July as a result of telephone line congestion during
the fare sale.
Aircraft rentals per ASM decreased 4.2 percent and 2.1
percent for the three and nine month periods ended September 30,
1996, compared to the corresponding periods of 1995. The
decrease was primarily due to a lower percentage of the aircraft
fleet being leased.
Landing fees and other rentals per ASM increased 4.4 percent
and 2.2 percent for the three and nine month periods ended
September 30, 1996, respectively, compared to the corresponding
periods of 1995 primarily due to increases in landing fee rates.
Management expects fourth quarter 1996 increases to appear high
due to a $4.9 million airport credit received in fourth quarter
1995.
Depreciation expense per ASM increased 4.8 percent for third
quarter 1996 and 4.7 percent for the nine months ended September
30, 1996 as compared to the same periods of 1995 due to owned
aircraft representing a higher percentage of the total fleet.
Other operating expenses per ASM increased 11.2 percent and
11.1 percent for the three and nine month periods ended September
30, 1996, respectively. These increases were primarily due to
the 4.3 cent per gallon jet fuel tax as well as increased
advertising costs resulting from the October 1996 expansion into
Providence, Rhode Island.
Other expenses (income) for the three months and nine months
ended September 30, 1996 included interest expense, capitalized
interest, interest income, and nonoperating gains and losses.
Interest expense increased in the first nine months of 1996 as
compared to the first nine months of 1995 due to the March 1995
issuance of $100 million of 8 percent senior unsecured Notes due
March 2005. Capitalized interest decreased for the nine month
period ended September 30, 1996 as a result of certain amendments
to aircraft purchase contracts during third quarter 1995 that
affected the timing of payments. Interest income increased for
the three and nine months ended September 30, 1996 due to higher
invested cash balances.
Material Changes in Financial Condition
Net cash provided by operating activities was $82.0 million
for the three months ended September 30, 1996. During third
quarter 1996, the Company generated $198.0 million from the
sale/leaseback of six Boeing 737 aircraft. During the twelve
months ended September 30, 1996, cash of $554.4 million was
provided from operations. This cash was primarily used to
finance aircraft-related expenditures and provide working
capital.
For the twelve months ended September 30, 1996, net capital
expenditures were $651.8 million, which were primarily for the
purchase of 22 new 737-300 aircraft and progress payments for
future aircraft deliveries.
The Company opened service to Providence, Rhode Island on
October 27, 1996 and recently announced expansion to
Jacksonville, Florida beginning January 1997.
In September 1996, the Company's Board of Directors
reaffirmed a 1990 authorization for the Company to purchase
shares of its common stock from time-to-time on the open market.
The authorization reaffirmed the purchase of up to 2,500,000
shares. No shares have been purchased pursuant to this authority
since 1990.
The Company's contractual commitments at September 30, 1996
consist primarily of scheduled aircraft acquisitions. Five 737-
300s are scheduled for delivery in fourth quarter 1996 and 15 in
1997. Four 737-700s are scheduled for delivery in 1997, 16 in
1998, 16 in 1999, 15 in 2000, and 12 in 2001. In addition, the
Company has options to purchase up to sixty-seven 737-700s during
1998-2004. The Company has the option, which must be exercised
two years prior to the contractual delivery date, to substitute
737-600s or 737-800s for the 737-700s delivered subsequent to
1999. Aggregate funding needed for these commitments is
approximately $2,220.7 million at September 30, 1996 due as
follows: $89.8 million in 1996; $564.1 million in 1997; $444.5
million in 1998; $548.9 million in 1999; $348.7 million in 2000;
and $224.7 million in 2001.
The Company has various options available to meet its
capital and operating commitments, including cash on hand at
September 30, 1996 of $594.0 million, internally generated funds,
and a revolving credit line with a group of banks of up to $460
million (none of which had been drawn at September 30, 1996). In
addition, the Company will also consider various borrowing or
leasing options to maximize earnings and supplement cash
requirements.
The Company currently has outstanding shelf registrations
for the issuance of $114.4 million public debt securities which
it currently intends to utilize for aircraft financings in 1997.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has received examination reports from
the Internal Revenue Service proposing certain
adjustments to Southwest's income tax returns for 1987
through 1991. The adjustments relate to certain types
of aircraft financings consummated by Southwest, as
well as other members of the aviation industry, during
that time period. Southwest intends to vigorously
protest the adjustments made with which it does not
agree. The industry's difference with the IRS involves
complex issues of law and fact which are likely to take
a substantial period of time to resolve. Management
believes that final resolution of such protest will not
have a materially adverse effect upon the results of
operations of Southwest. This forward-looking
statement is based on management's current
understanding of the relevant law and facts; it is
subject to various contingencies including the views of
legal counsel, changes in the IRS' position, the
potential cost and risk associated with litigation and
the actions of the IRS, judges and juries.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(11.1) Computation of Earnings Per Share
(27) Financial Data Schedule
b) Reports on Form 8-K
The following report on Form 8-K was
filed during the quarter:
Form 8-K dated September 17, 1996 was filed
for the purpose of filing certain exhibits in
connection with, and incorporated by references
into Southwest Airlines Co. Registration Statement
on Form S-3 (File No. 33-59113), as declared
effective on May 9, 1995, relating to Pass Through
Certificates, Series 1996-A.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SOUTHWEST AIRLINES CO.
<TABLE>
<S> <C>
November 13, 1996 /s/ Gary C. Kelly
Date Gary C. Kelly
Vice President - Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
(11.1) Computation of Earnings Per Share
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 594,030
<SECURITIES> 0
<RECEIVABLES> 84,299
<ALLOWANCES> 0
<INVENTORY> 52,397
<CURRENT-ASSETS> 773,954
<PP&E> 3,995,105
<DEPRECIATION> 1,152,884
<TOTAL-ASSETS> 3,619,515
<CURRENT-LIABILITIES> 720,914
<BONDS> 0
0
0
<COMMON> 144,985
<OTHER-SE> 1,470,046
<TOTAL-LIABILITY-AND-EQUITY> 3,619,515
<SALES> 0
<TOTAL-REVENUES> 2,574,329
<CGS> 0
<TOTAL-COSTS> 2,271,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,642
<INCOME-PRETAX> 295,005
<INCOME-TAX> 115,828
<INCOME-CONTINUING> 179,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179,177
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.17
</TABLE>
EXHIBIT (11.1)
Page 1 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Three Months Ended September 30, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 144,928,794 144,928,794
Shares issuable upon exercise of
outstanding stock options
(treasury stock method) 5,879,425 5,878,891
Weighted average common and common
equivalent shares 150,808,219 150,807,685
Earnings for per share computations $60,858,000 $60,858,000
Earnings per common and common
equivalent share $0.40 $0.40
</TABLE>
<PAGE>
EXHIBIT (11.1)
Page 2 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Three Months Ended September 30, 1995
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 143,791,540 143,791,540
Shares issuable upon exercise of
outstanding stock options
(treasury stock method) 7,855,352 7,856,359
Weighted average common and common
equivalent shares 151,646,892 151,647,899
Earnings for per share computations $67,717,000 $67,717,000
Earnings per common and common
equivalent share $0.45 $0.45
</TABLE>
<PAGE>
EXHIBIT (11.1)
Page 3 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Equivalent shares outstanding at March 31, 1996 152,402,780 153,449,020
Equivalent shares outstanding at June 30, 1996 153,675,411 153,675,437
Equivalent shares outstanding at September 30, 1996 150,808,219 150,807,685
456,886,410 457,932,142
Average number of equivalent shares outstanding 152,295,470 152,644,047
Earnings for per share computations $179,177,000 $179,177,000
Earnings per common and common equivalent share $1.18 $1.17
</TABLE>
<PAGE>
EXHIBIT (11.1)
Page 4 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Nine Months Ended September 30, 1995
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Equivalent shares outstanding at March 31, 1995 146,532,231 146,532,231
Equivalent shares outstanding at June 30, 1995 147,347,541 147,466,666
Equivalent shares outstanding at September 30, 1995 151,646,892 151,647,899
445,526,664 445,646,796
Average number of equivalent shares outstanding 148,508,888 148,548,932
Earnings for per share computations $139,267,000 $139,267,000
Earnings per common and common equivalent share $0.94 $0.94
</TABLE>
