<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
June 30, 1997 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 August 11, 1997:
146,002,861
<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>
June 30, 1997 December 31, 1996
<S>
ASSETS
Current assets: <C> <C>
Cash and cash equivalents $577,784 $581,841
Accounts receivable 88,384 73,440
Inventories of parts and supplies 49,931 51,094
Deferred income taxes 12,079 11,560
Prepaid expenses and other current
assets 31,022 33,055
Total current assets 759,200 750,990
Property and equipment:
Flight equipment 3,706,460 3,435,304
Ground property and equipment 556,540 523,958
Deposits on flight equipment
purchase contracts 274,401 198,366
4,537,401 4,157,628
Less allowance for depreciation 1,264,820 1,188,405
3,272,581 2,969,223
Other assets 4,202 3,266
$4,035,983 $3,723,479
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $142,340 $214,232
Accrued liabilities 435,535 368,625
Air traffic liability 179,304 158,098
Income taxes payable 37,736 -
Current maturities of long-term debt 116,947 12,327
Other current liabilities 3,614 12,122
Total current liabilities 915,476 765,404
Long-term debt less current maturities 636,927 650,226
Deferred income taxes 385,156 349,987
Deferred gains from sale and leaseback
of aircraft 265,814 274,891
Other deferred liabilities 35,887 34,659
Stockholders' equity:
Common stock 145,708 145,112
Capital in excess of par value 188,041 181,650
Retained earnings 1,462,974 1,321,550
Total stockholders' equity 1,796,723 1,648,312
$4,035,983 $3,723,479
</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 Six months ended
June 30, June 30,
<S> 1997 1996 1997 1996
Operating revenues: <C> <C> <C> <C>
Passenger $911,681 $876,322 $1,760,787 $1,617,422
Freight 22,383 20,011 43,737 38,991
Other 22,828 13,975 39,463 26,424
Total operating revenues 956,892 910,308 1,843,987 1,682,837
Operating expenses:
Salaries, wages, and benefits 282,637 258,078 548,431 495,443
Fuel and oil 117,561 115,652 251,636 219,519
Maintenance materials and repairs 56,020 66,834 113,258 129,033
Agency commissions 40,584 37,576 77,676 69,402
Aircraft rentals 50,466 45,922 100,848 90,919
Landing fees and other rentals 51,477 45,401 100,488 90,844
Depreciation 47,509 46,111 95,895 90,125
Other operating expenses 154,231 152,528 312,145 297,953
Total operating expenses 800,485 768,102 1,600,377 1,483,238
Operating income 156,407 142,206 243,610 199,599
Other expenses (income):
Interest expense 16,219 15,022 31,444 29,924
Capitalized interest (4,317) (5,817) (8,739) (12,721)
Interest income (9,533) (5,345) (17,495) (9,398)
Nonoperating losses (gains), net 215 (1,643) 1,176 (2,966)
Total other expenses 2,584 2,217 6,386 4,839
Income before income taxes 153,823 139,989 237,224 194,760
Provision for income taxes 59,991 54,673 92,518 76,443
Net income $93,832 $85,316 $144,706 $118,317
Weighted average common and common
equivalent shares outstanding 152,249 153,675 151,349 153,039
Net income per common and
common equivalent share $.62 $.56 $.96 $.77
</TABLE>
See accompanying notes.
<PAGE>
Southwest Airlines Co.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net cash provided by operating
activites $220,604 $222,176 $314,115 $363,891
Investing activities:
Net purchases of property and
equipment (296,624) (201,393) (412,474) (333,747)
Financing activities:
Issuance of long-term debt - - 98,764 -
Payment of long-term debt and
capital lease obligations (1,628) (1,498) (6,572) (8,056)
Payment of cash dividends (1,682) (1,592) (4,877) (4,621)
Proceeds from aircraft sale and
leaseback transactions - 132,000 - 132,000
Proceeds from Employee stock plans 4,702 3,912 6,987 11,455
Net cash provided by financing
activities 1,392 132,822 94,302 130,778
Net increase (decrease) in cash and
cash equivalents (74,628) 153,605 (4,057) 160,922
Cash and cash equivalents at
beginning of period 652,412 324,680 581,841 317,363
Cash and cash equivalents at
end of period $577,784 $478,285 $577,784 $478,285
Cash payments for:
Interest, net of amount
capitalized $1,779 $510 $22,606 $17,944
Income taxes $12,910 $21,495 $13,125 $21,891
</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 of Southwest Airlines
Co. (Company) 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 June 30, 1997 and 1996 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 six month periods ended June 30, 1997 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1997. 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, 1996.
2. Dividends - During the three month periods ended June
30, 1997 and March 31, 1997, $.01155 per share in dividends were
declared on the 145,643,837 and 145,335,143 shares of common
stock then outstanding. During the three month periods ended
June 30, 1996 and March 31, 1996, $.011 per share in dividends
were declared on the 144,715,343 and 144,452,894 shares of common
stock then outstanding.
3. Long-term debt - During February 1997, the Company
issued $100 million of senior unsecured 7 3/8 percent Debentures
due March 1, 2027. Interest on the Debentures is payable semi-
annually on March 1 and September 1, commencing September 1,
1997. The Debentures may be redeemed, at the option of the
Company, in whole at any time or in part from time to time, at a
redemption price equal to the greater of the principal amount of
the Debentures plus accrued interest at the date of redemption or
the sum of the present values of the remaining scheduled payments
of principal of the Debentures and interest thereon discounted to
the date of redemption plus accrued interest at the date of
redemption.
<PAGE>
4. Recently issued accounting standard - In February 1997,
the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted for
interim and annual periods ending after December 15, 1997. At
that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be
excluded. Basic earnings per share for the three and six month
periods ended June 30, 1997 would be $.64 and $.99, respectively
and for the three and six month periods ended June 30, 1996 would
be $.59 and $.82, respectively. Diluted earnings per share for
the three and six month periods ended June 30, 1997 would be $.62
and $.96, respectively and for the three and six month periods
ended June 30, 1996 would be $.56 and $.77, respectively.
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 six month
periods ended June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Three months ended
June 30,
1997 1996 Change
<S> <C> <C> <C>
Revenue passengers carried 12,722,360 12,574,740 1.2%
Revenue passenger miles
(RPMs) (000s) 7,014,502 6,809,336 3.0%
Available seat miles
(ASMs) (000s) 10,981,206 10,165,470 8.0%
Load factor 63.9% 67.0% (3.1)pts.
Average length of
passenger haul 551 542 1.7%
Trips flown 196,006 187,704 4.4%
Average passenger fare $71.66 $69.69 2.8%
Passenger revenue yield
per RPM $.1300 $.1287 1.0%
Operating revenue yield
per ASM $.0871 $.0895 (2.7)%
Operating expenses per ASM $.0729 $.0756 (3.6)%
Average fuel cost per gallon $.6017 $.6280 (4.2)%
Number of employees at
period-end 23,777 21,907 8.5%
Size of fleet at period-
end 252 237 6.3%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996 Change
<S> <C> <C> <C>
Revenue passengers carried 24,768,544 23,979,977 3.3%
Revenue passenger miles
(RPMs) (000s) 13,547,548 12,646,455 7.1%
Available seat miles
(ASMs) (000s) 21,498,841 19,806,873 8.5%
Load factor 63.0% 63.8% (0.8)pts.
Average length of
passenger haul 547 527 3.8%
Trips flown 386,211 366,809 5.3%
Average passenger fare $71.09 $67.45 5.4%
Passenger revenue yield
per RPM $.1300 $.1279 1.6%
Operating revenue yield
per ASM $.0858 $.0850 0.9%
Operating expenses per ASM $.0744 $.0749 (0.7)%
Average fuel cost per gallon $.6570 $.6101 7.7%
Number of employees at
period-end 23,777 21,907 8.5%
Size of fleet at period-
end 252 237 6.3%
</TABLE>
<PAGE>
Material Changes in Results of Operations
Consolidated net income for the three months ended June 30,
1997 was $93.8 million ($.62 per share) compared with $85.3
million ($.56 per share) earned in second quarter 1996.
Consolidated operating revenues increased 5.1 percent for
the second quarter of 1997 and 9.6 percent for the six months
ended June 30, 1997 as compared to the corresponding periods of
the prior year, primarily as a result of a 4.0 percent and 8.9
percent increase, respectively, in consolidated passenger
revenues. The increase in passenger revenues resulted from 3.0
percent and 7.1 percent increases in revenue passenger miles
(RPMs) for the three and six month periods ended June 30, 1997,
respectively, coupled with 1.0 percent and 1.6 percent increases
in passenger revenue yield per RPM over these same periods.
While RPMs increased 3.0 percent in second quarter 1997 and
7.1 percent in the six month period ended June 30, 1997,
available seat miles (ASMs) increased 8.0 percent and 8.5 percent
for these same periods. This resulted in load factors of 63.9
percent and 63.0 percent for the three months and six months
ended June 30, 1997, respectively, compared with 67.0 percent and
63.8 percent for the corresponding periods of the prior year.
The increase in ASMs resulted primarily from the net addition of
15 aircraft since second quarter 1996.
The load factor for July 1997 was 66.8 percent, compared to
July 1996 load factor of 68.1 percent. Although load factor
trends are improving, management does not expect the third
quarter 1997 load factor will match third quarter 1996. Load
factors in third quarter 1996 were high due to heavy promotional
activities. Additionally, the March 1997 reimposition of the ten
percent federal excise tax may adversely impact revenue growth
during third quarter 1997 versus third quarter 1996, which was
not subject to federal excise tax until August 27, 1996. (The
immediately preceding three sentences are forward-looking
statements which involve 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
<PAGE>
advance booking trends.) In spite of these factors, however,
early July RPM yield trends are strong.
In August 1997, the Taxpayer Relief Act of 1997 was enacted,
which included, among other things, a revision, phased in over
five years, of the current ten percent federal excise tax on
domestic tickets to (ultimately) an excise tax of 7.5 percent and
a fee of $3.00 per passenger segment. Effective October 1, 1997
through September 30, 1998, the current ten percent tax rate will
be reduced to nine percent of the ticket price for amounts paid
for transportation beginning on or after October 1, 1997 and a
new $1.00 flight segment tax will be imposed. From October 1,
1998 to September 30, 1999, the tax rate decreases to eight
percent and the segment tax increases to $2.00. Beginning
October 1, 1999, the tax rate will change to 7.5 percent of the
ticket price. However, the segment tax will increase to $2.25
from October 1, 1999 to December 31, 1999; $2.50 during 2000;
$2.75 during 2001; and $3.00 per segment during 2002. Thereafter,
the $3.00 segment tax will be indexed to changes in the Consumer
Price Index (CPI). The legislation also includes a new tax on the
sale of frequent flier miles, raises the international departure
fee, and institutes a new international arrival fee. Management
estimates these changes may increase Southwest's tax burden by
$30 to $35 million in 1998. The Company is currently considering
various alternatives to attempt to offset the impact of these
changes to future years' operating results. (The immediately
preceding two sentences are forward-looking statements which
involve uncertainties that could result in actual results
differing materially from expected results. Some significant
factors include, but may not be limited to, regulations
implementing the tax, competitors' response to the tax, and the
ability to pass through the tax in the form of fare increases.)
Consolidated freight revenues increased 11.9 percent in the
second quarter of 1997 and 12.2 percent for the six months ended
June 30, 1997 as compared to the same periods of the prior year,
primarily due to increased capacity and an increase in United
States mail revenue. Other revenues increased 63.3 percent in
the second quarter 1997 and 49.3 percent for the six months ended
June 30, 1997, primarily due to increased charter activity as
well as increased revenues from the sale of frequent flyer
credits to participating partners in the Rapid Rewards program.
<PAGE>
Operating expenses per ASM decreased 3.6 percent for the
three months ended June 30, 1997 and remained relatively
unchanged for the six months ended June 30, 1997. The second
quarter decrease is primarily due to lower aircraft engine repair
costs, lower jet fuel prices, lower advertising spending, and
significant results from numerous Companywide cost reduction
efforts. Excluding jet fuel costs and related taxes, operating
expenses per ASM for the three and six month periods ended June
30, 1997, were down 3.2 percent and 1.6 percent, respectively.
Southwest Airlines Co.
Consolidated Operating Expenses per ASM
(in cents except percent change)
<TABLE>
<CAPTION>
Three months ended
June 30,
Increase Percent
1997 1996 (decrease) change
<S> <C> <C> <C> <C>
Salaries, wages, and benefits 2.24 2.21 .03 1.4
Profitsharing and Employee
savings plans .34 .33 .01 3.0
Fuel and oil 1.07 1.14 <.07> <6.1>
Maintenance materials
and repairs .51 .66 <.15> <22.7>
Agency commissions .37 .37 - -
Aircraft rentals .46 .45 .01 2.2
Landing fees and other rentals .47 .45 .02 4.4
Depreciation .43 .45 <.02> <4.4>
Other operating expenses 1.40 1.50 <.10> <6.7>
Total 7.29 7.56 < .27> < 3.6>
</TABLE>
<TABLE>
<CAPTION>
Six months ended
June 30,
Increase Percent
1997 1996 (decrease) change
<S> <C> <C> <C> <C>
Salaries, wages, and benefits 2.26 2.24 .02 0.9
Profitsharing and Employee
savings plans .29 .26 .03 11.5
Fuel and oil 1.17 1.11 .06 5.4
Maintenance materials
and repairs .53 .65 <.12> <18.5>
Agency commissions .36 .35 .01 2.9
Aircraft rentals .47 .46 .01 2.2
Landing fees and other rentals .47 .46 .01 2.2
Depreciation .45 .46 <.01> <2.2>
Other operating expenses 1.44 1.50 <.06> <4.0>
Total 7.44 7.49 < .05> < 0.7>
</TABLE>
<PAGE>
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
increased 3.0 percent and 11.5 percent for the three and six
month periods ended June 30, 1997, respectively, as compared to
the corresponding periods of the prior year primarily due to
higher earnings available for profitsharing in 1997.
Fuel and oil expense per ASM decreased 6.1 percent in second
quarter 1997 due to lower jet fuel prices. The average price
paid for jet fuel in the three month period ended June 30, 1997
was $.6017 per gallon compared to $.6280 for the same period in
1996. Fuel and oil expense per ASM increased 5.4 percent in the
six month period ended June 30, 1997 due to higher average jet
<PAGE>
fuel prices during first quarter 1997. The average price paid
for jet fuel in the six month period ended June 30, 1997 was
$.6570 per gallon compared to $.6101 for the same period in 1996.
The average price paid for jet fuel in July 1997 was $.5726 per
gallon.
Maintenance materials and repairs per ASM decreased 22.7
percent and 18.5 percent for the three and six month periods
ended June 30, 1997, respectively, as compared to the
corresponding periods of 1996, primarily as a result of fewer
aircraft engine repairs.
On August 1, 1997, the Company signed a ten year engine
maintenance contract with General Electric Engine Services, Inc.
(General Electric). Under the terms of the contract, Southwest
will pay General Electric a rate per flight hour in exchange for
General Electric performing substantially all engine maintenance
for the CFM56-3 engines on the 737-300 and 737-500 aircraft.
Agency commissions per ASM remained unchanged for second
quarter 1997 and increased 2.9 percent for the six months ended
June 30, 1997 as compared to the same periods in 1996. The
increase is primarily due to a corresponding increase in the
proportion of travel agency revenues to total revenues.
Aircraft rentals per ASM increased 2.2 percent for the three
and six months periods ended June 30, 1997 primarily due to the
sale-leaseback of four aircraft late in second quarter 1996 and
six aircraft in third quarter 1996.
Landing fees and other rentals increased 4.4 percent for
second quarter 1997 and 2.2 percent for the six months ended June
30, 1997 as compared to the same periods of 1996 primarily due to
increased landing fee rates, increased space rental rates, and
airport terminal expansion.
Depreciation expense per ASM decreased 4.4 percent for
second quarter 1997 and 2.2 percent for the six months ended June
30, 1997 as compared to the same periods of 1996 primarily due to
the sale-leasebacks of aircraft late in second quarter 1996 and
in third quarter 1996.
Other operating expenses per ASM decreased 6.7 percent and
4.0 percent for the three and six month periods ended June 30,
1997, respectively. These decreases were primarily due to lower
<PAGE>
advertising spending, lower insurance rates, and significant
results from numerous Companywide cost reduction efforts.
Other expenses (income) for the three and six month periods
ended June 30, 1996, included interest expense, capitalized
interest, interest income, and nonoperating gains and losses.
Interest expense increased in the first half of 1997 as compared
to the first half of 1996 due to the February 1997 issuance of
$100 million of senior unsecured 7 3/8 percent Debentures due
March 1, 2027. Capitalized interest decreased for the three and
six month periods ended June 30, 1997, as a result of certain
amendments to aircraft purchase contracts that deferred the
timing of payments. Interest income increased for the three and
six months ended June 30, 1997 due to higher invested cash
balances.
Material Changes in Financial Condition
Net cash provided by operating activities was $220.6 million
for the three months ended June 30, 1997 and $565.5 million for
the twelve months ended June 30, 1997. This cash was primarily
used to finance aircraft-related capital expenditures and provide
working capital.
For the twelve months ended June 30, 1997, net capital
expenditures were $756.2 million, which were primarily for the
purchase of 18 new 737-300 aircraft, of which two were
subsequently sold and leased back, and progress payments for
future aircraft deliveries.
The Company opened service to Jacksonville, Florida on
January 15, 1997, and opened service to Jackson, Mississippi on
August 9, 1997.
As of March 31, 1997, the Company had authority from its
Board of Directors to purchase 2,500,000 shares of its common
stock from time to time on the open market. No shares have been
purchased since 1990.
The Company's contractual commitments at June 30, 1997
consist primarily of scheduled aircraft acquisitions. Six 737-
300s are scheduled for delivery in the remainder of 1997. Four
737-700s are scheduled for delivery in 1997, 21 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.
<PAGE>
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 was approximately
$1,757.7 million at June 30, 1997 due as follows: $200.3 million
in 1997; $532.7 million in 1998; $502.3 million in 1999; $318.1
million in 2000; and $204.3 million in 2001.
The Company has various options available to meet its
capital and operating commitments, including cash on hand at June
30, 1997 of $577.8 million, internally generated funds, and a
revolving credit line with a group of banks of up to $475 million
(none of which had been drawn at June 30, 1997). 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 $414.4 million public debt securities which
it currently intends to substantially utilize for aircraft
financings during the remainder of 1997, 1998, and 1999.
<PAGE>
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
The Company's Annual Meeting of Shareholders was held
on May 15, 1997. At the meeting the following
matters were voted on by security holders:
1. 86,743,538 shares of stock were voted against a
shareholder proposal requesting that the Company
rotate the site of its annual shareholders
<PAGE>
meeting, 6,126,110 were voted for the proposal,
1,346,580 abstained, and there were 31,405,599
broker non-votes.
2. 80,604,193 shares of stock were voted against a
proposal requiring publication of certain equal
employment opportunity information, 10,652,177
were voted in favor of the proposal, 2,969,658
abstained, and there were 31,395,799 broker non-
votes.
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
There were no Reports on Form 8-K during the
quarter.
<PAGE>
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>
August 13, 1997 /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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 577,784
<SECURITIES> 0
<RECEIVABLES> 88,384
<ALLOWANCES> 0
<INVENTORY> 49,931
<CURRENT-ASSETS> 759,200
<PP&E> 4,537,401
<DEPRECIATION> 1,264,820
<TOTAL-ASSETS> 4,035,983
<CURRENT-LIABILITIES> 915,476
<BONDS> 0
0
0
<COMMON> 145,708
<OTHER-SE> 1,651,015
<TOTAL-LIABILITY-AND-EQUITY> 4,035,983
<SALES> 0
<TOTAL-REVENUES> 1,843,987
<CGS> 0
<TOTAL-COSTS> 1,600,377
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,444
<INCOME-PRETAX> 237,224
<INCOME-TAX> 92,518
<INCOME-CONTINUING> 144,706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,706
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.96
</TABLE>
EXHIBIT (11.1)
Page 1 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Three Months Ended June 30, 1997
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 145,592,516 145,592,516
Shares issuable upon exercise of outstanding
stock options (treasury stock method) 6,656,122 6,866,656
Weighted average common and common
equivalent shares 152,248,638 152,459,172
Earnings for per share computations $93,832,000 $93,832,000
Earnings per common and common
equivalent share $0.62 $0.62
</TABLE>
<PAGE>
EXHIBIT (11.1)
Page 2 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Three Months Ended June 30, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 144,705,676 144,705,676
Shares issuable upon exercise of outstanding
stock options (treasury stock method) 8,969,735 8,969,761
Weighted average common and common
equivalent shares 153,675,411 153,675,437
Earnings for per share computations $85,316,000 $85,316,000
Earnings per common and common
equivalent share $0.56 $0.56
</TABLE>
<PAGE>
EXHIBIT (11.1)
Page 3 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Six Months Ended June 30, 1997
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 145,453,969 145,453,969
Shares issuable upon exercise of outstanding
stock options (treasury stock method) 5,895,093 6,000,983
Weighted average common and common
equivalent shares 151,349,062 151,454,952
Earnings for per share computations $141,706,000 $144,706,000
Earnings per common and common
equivalent share $0.96 $0.96
</TABLE>
<PAGE>
EXHIBIT (11.1)
Page 4 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 144,510,625 144,510,625
Shares issuable upon exercise of outstanding
stock options (treasury stock method) 8,528,471 9,051,604
Weighted average common and common
equivalent shares 153,039,096 153,562,229
Earnings for per share computations $118,317,000 $118,317,000
Earnings per common and common
equivalent share $0.77 $0.77
</TABLE>
