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COMMITMENTS AND CONTINGENCIES | 12 Months Ended
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Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Commitments The Company has contractual obligations and commitments primarily with regard to future purchases of aircraft, repayment of debt (see Note 7), and lease arrangements (see Note 8). During the year ended December 31, 2022, the Company entered into supplemental agreements with The Boeing Company ("Boeing") to replace the majority of its 2023 -7 firm orders with Boeing 737-8 ("-8") firm orders, among other adjustments to its near-term contractual order book. The Company also had firm orders in place with Boeing for 235 -8 aircraft and 182 -7 aircraft, as well as options for 147 -7 or -8 aircraft, as of December 31, 2022. See Note 17 for further information on the Company's MAX aircraft. Boeing continues to experience delays in fulfilling its commitments with regards to delivery of MAX aircraft to the Company, as a result of both supply chain constraints as well as achieving FAA certification of one of its new aircraft types, the -7, for which Southwest expects to be the launch customer. Therefore, for purposes of the Company’s aircraft order commitments with Boeing, it has assumed that any aircraft that were contractually due but remain undelivered as of December 31, 2022, have been rolled into the Company’s 2023 commitments, until such time as the Company and Boeing either revise the aircraft order book or Boeing is able to catch up on its commitments. Based on the Company's existing agreement with Boeing, capital commitments associated with its firm orders as of December 31, 2022, were: $3.2 billion in 2023 (of which approximately $2.3 billion primarily relates to the existing scheduled 90 MAX aircraft to be delivered in 2023 and $956 million relates to 46 MAX aircraft that were contractually committed for 2022, but were not received), $1.2 billion in 2024, $953 million in 2025, $1.4 billion in 2026, $1.1 billion in 2027, and $5.8 billion thereafter. In addition, subsequent to December 31, 2022, and through February 2, 2023, the Company has exercised 10 -7 options for delivery in 2024, resulting in the Company's 2024 capital commitments increasing to $1.4 billion. William P. Hobby Airport In March 2022, the Company finalized an agreement with the City of Houston, Texas (the "City") which owns William P. Hobby Airport ("Hobby") that is managed and operated by the City's Houston Airport System. Under the agreement, the Company will develop, design, and construct seven new gates in Hobby's West Concourse. Six gates will be for domestic use, with the remaining gate used for international travel, and the gates will include passenger hold rooms, passenger loading bridges, aircraft parking positions, increased baggage handling capacity, and other enabling network items. The project is estimated to be completed in 2025 at a total cost of $250 million. The Company will provide initial funding for the majority of the project, but is expected to be reimbursed for such funding from the City on a monthly basis and therefore would not significantly impact the Company’s liquidity. The City plans to fund these reimbursements utilizing rates and charges collected from current and future Hobby occupants, including the Company. After the project is complete, the Company will have the right to lease six of the additional gates in the West Concourse on a preferential basis in accordance with the terms and conditions for the use of preferential use gates, and use one gate in the West Concourse on a common-use basis. The Company currently believes that due to its control over the associated assets during the construction period, as well as its agreed upon role in overseeing and managing this project, it will be considered the owner of this project for accounting purposes. Amounts expended in 2022 and expected to be expended in 2023 associated with this project are not material. Los Angeles International Airport In October 2017, the Company executed a lease agreement with Los Angeles World Airports ("LAWA") (the "T1.5 Lease"). Under the T1.5 Lease, the Company oversaw and managed the design, development, financing, construction, and commissioning of a passenger processing facility between Terminals 1 and 2 (the "Terminal 1.5 Project"). The Terminal 1.5 Project included ticketing, baggage claim, passenger screening, and a bus gate. Construction on the Terminal 1.5 Project began during third quarter 2017 and was substantially completed at December 31, 2020. The project final cost was approximately $410 million. During second quarter 2021, LAWA repaid the outstanding loan and purchased the remaining completed assets for accounting purposes, at which time the Terminal 1.5 Project right-of-use asset and lease liability of $365 million on the balance sheet were de-recognized in accordance with applicable accounting guidance. This repayment was also reported as a supplemental noncash transaction on the Consolidated Statement of Cash Flows, net of Assets constructed for others additions during the period. Dallas Love Field During 2008, the City of Dallas approved the Love Field Modernization Project ("LFMP"), a project to reconstruct Dallas Love Field with modern, convenient air travel facilities. Pursuant to a Program Development Agreement with the City of Dallas and the Love Field Airport Modernization Corporation (or the "LFAMC," a Texas non-profit "local government corporation" established by the City of Dallas to act on the City of Dallas' behalf to facilitate the development of the LFMP), the Company managed this project. Major construction was effectively completed in 2014. During second quarter 2017, the City of Dallas approved using the remaining bond funds for additional terminal construction projects, which were effectively completed in 2018. Although the City of Dallas received commitments from various sources that helped to fund portions of the LFMP project, including the FAA, the Transportation Security Administration, and the City of Dallas' Aviation Fund, the majority of the funds used were from the issuance of bonds. The Company guaranteed principal and interest payments on bonds issued by the LFAMC, of which only the "Series 2012" bonds remain outstanding. Given the Company’s guarantee associated with the Series 2012 bonds, the remaining debt service amount is considered a minimum lease payment under ASC Topic 842, Leases, and therefore remains a lease liability with a corresponding right-of-use asset within the Company’s Consolidated Balance Sheet. As of December 31, 2022, $70 million of principal remained outstanding associated with the Series 2012 bonds. The net present values of the future principal and interest payments associated with the bonds were $77 million and $89 million as of December 31, 2022 and 2021, respectively, and were reflected as part of the Company's operating lease right–of–use assets and lease obligations in the Consolidated Balance Sheet. Contingencies The Company is from time to time subject to various legal proceedings and claims arising in the ordinary course of business and records a liability for such claims when it is probable that a loss will be incurred and the amount is reasonably estimable. In recent years, the airline industry has experienced an increase in litigation asserting the application of state and local employment laws, particularly in California. On June 30, 2022, the U.S. Supreme Court denied review of the Ninth Circuit’s ruling in Bernstein v. Virgin America, Inc., which held that federal law did not preempt the California state meal-and-rest-break regulations for flight attendants at issue. The Company is a defendant in multiple proceedings asserting wage and hour claims with respect to certain employees who work in, or are based in, California. The Bernstein decision may adversely affect the Company’s defenses in some or all of those proceedings and may give rise to additional litigation in these or other areas previously believed to be preempted by federal law. The Company is currently not able to estimate a range of possible loss. Based on the wide-scale operational disruptions for the Company that led to the cancelation of a significant number of flights between December 21 and December 29, 2022, the Company could be subject to fines and/or penalties resulting from investigations by the Department of Transportation or other government agencies as well as litigation from Customers and Shareholders. See Note 1 for further information. The Company is currently not able to estimate a range of possible loss for such items.

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