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LUV, Southwest Airlines Co.

Airlines capital-intensive Cyclical

Southwest is the original low-cost domestic airline. It flies point to point rather than through hubs, runs a single family of Boeing narrow-body jets to keep training, parts, and scheduling simple and cheap, and sells a plain coach product with no traditional first-class cabin. It earns its keep moving large numbers of travelers at low cost.

Southwest commenced service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio.

Southwest evolved its boarding process beginning January 27, 2026, by prioritizing Customers into boarding groups based on seat location, fare bundle, and loyalty program status, beginning with extra legroom seats in boarding groups 1 and 2 .

Latest annual: FY2025 10-K

LUV · Southwest Airlines Co.

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$28.1B

+2.1% YoY · 25% 5-yr CAGR

Vital signs · TTM, with 5-yr average

Revenue $28.9B 5-yr avg $24.2B

Operating margin 3.4% 5-yr avg 3.7%

ROIC 6% 5-yr avg 6%

Owner-earnings margin 3% 5-yr avg 5%

Free cash flow margin −1% 5-yr avg 0%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

Situation: Cyclical. Margins collapse and recover repeatedly across the record; a single year, good or bad, misstates the through-cycle earning power.
What moves the needle: In a business where the seat is a commodity and fuel and labor answer to no one carrier, Southwest's whole claim is the cost side: the one-fleet discipline and point-to-point design that let it price under the legacies and still earn a return. That edge is not fixed in stone. Wages tend to drift toward the industry over time, a single-type fleet ties its fate to one planemaker's troubles, and rivals have long studied and copied the low-cost playbook, while the capital hunger and cyclicality of flying weigh on everyone alike. The honest question is whether the cost gap stays wide enough to matter, or has been chipped toward the pack, and the record below is where that shows.
Is it a good business?: Return on capital has sat near the cost of capital (median 11%). By owner earnings: roughly 11% of revenue reaches owners as cash, though it swings. The cycle and the balance sheet decide this one; the worst year tells more than the median, and the rest is in the 10-K.

Drafted from the company's filings and reviewed by hand; every number is shown in full in the sections below.

The record

Ten years of arithmetic, read across the cycle.

The record, 2016–2025

realized figures from each filing · older years to the left

2016’16	2017’17	2018’18	2019’19	2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
											Income statement
$20.3B	$21.1B	$22.0B	$22.4B	$9.0B	$15.8B	$23.8B	$26.1B	$27.5B	$28.1B	$28.9B	RevenueRevenue
$3.5B	$3.4B	$3.2B	$3.0B	($3.8B)	$1.7B	$1.0B	$224M	$321M	$428M	$981M	Operating incomeOp. inc.
17.4%	16.1%	14.6%	13.2%	−42.2%	10.9%	4.3%	0.9%	1.2%	1.5%	3.4%	Operating marginOp. mgn
$2.2B	$3.4B	$2.5B	$2.3B	($3.1B)	$977M	$539M	$465M	$465M	$441M	$817M	Net incomeNet inc.
37%	-3%	22%	22%	—	26%	26%	27%	22%	22%	21%	Effective tax rateTax rate
											Cash flow & returns
$4.3B	$3.9B	$4.9B	$4.0B	($1.1B)	$2.3B	$3.8B	$3.2B	$462M	$1.8B	$2.4B	Operating cash flowOp. cash
$1.2B	$1.2B	$1.2B	$1.2B	$1.3B	$1.3B	$1.4B	$1.5B	$1.7B	$1.6B	$1.6B	DepreciationDeprec.
$889M	($646M)	$1.2B	$468M	$692M	$73M	$1.9B	$1.2B	($1.7B)	($159M)	$8M	Working capital & otherWC & other
$2.0B	$2.1B	$1.9B	$1.0B	$515M	$505M	$3.9B	$3.5B	$2.1B	$2.7B	$2.8B	CapexCapex
10.0%	10.0%	8.8%	4.6%	5.7%	3.2%	16.5%	13.5%	7.5%	9.5%	9.6%	Capex / revenueCapex/rev
$3.1B	$2.7B	$3.7B	$3.0B	($1.6B)	$1.8B	$2.4B	$1.6B	($1.6B)	$282M	$838M	Owner earningsOwner earn.
15.1%	12.8%	16.8%	13.2%	−18.1%	11.5%	10.2%	6.3%	−5.8%	1.0%	2.9%	Owner earnings marginOE mgn
$2.3B	$1.8B	$3.0B	$3.0B	($1.6B)	$1.8B	($134M)	($356M)	($1.6B)	($831M)	($376M)	Free cash flowFCF
11.1%	8.5%	13.5%	13.2%	−18.1%	11.5%	−0.6%	−1.4%	−5.8%	−3.0%	−1.3%	Free cash flow marginFCF mgn
$222M	$274M	$332M	$372M	$188M	$0	$0	$428M	$430M	$399M	$385M	Dividends paidDiv. paid
$1.8B	$1.6B	$2.0B	$2.0B	$451M	$0	$0	$0	$250M	$2.5B	—	BuybacksBuybacks
23%	29%	22%	23%	-37%	15%	8%	2%	3%	3%	6%	ROICROIC
28%	35%	25%	23%	-35%	9%	5%	4%	4%	6%	12%	Return on equityROE
25%	32%	22%	20%	−37%	9%	5%	0%	0%	1%	6%	Retained to equityRetained/eq
											Balance sheet
$3.3B	$3.3B	$3.7B	$4.1B	$13.3B	$15.5B	$12.3B	$11.5B	$8.7B	$3.2B	$3.4B	Cash & investmentsCash+inv
—	—	—	—	—	—	—	—	$47M	$98M	$171M	ReceivablesReceiv.
$1.2B	$1.3B	$1.4B	$1.6B	$931M	$1.3B	$2.0B	$1.9B	$1.8B	$2.0B	$2.1B	Accounts payablePayables
—	—	—	—	—	—	—	—	($1.8B)	($1.9B)	($1.9B)	Operating working capitalOper. WC
$4.5B	$4.8B	$5.0B	$6.0B	$15.2B	$18.0B	$14.8B	$14.0B	$11.3B	$5.6B	$6.0B	Current assetsCur. assets
$6.8B	$6.9B	$7.9B	$9.0B	$7.5B	$9.2B	$10.4B	$12.3B	$12.3B	$10.9B	$12.5B	Current liabilitiesCur. liab.
0.7×	0.7×	0.6×	0.7×	2.0×	2.0×	1.4×	1.1×	0.9×	0.5×	0.5×	Current ratioCurr. ratio
$970M	$970M	$970M	$970M	$970M	$970M	$970M	$970M	$970M	$970M	$970M	GoodwillGoodwill
$23.3B	$25.1B	$26.2B	$25.9B	$34.6B	$36.3B	$35.4B	$36.5B	$33.8B	$29.1B	$29.4B	Total assetsAssets
$3.4B	$3.7B	$3.4B	$2.7B	$10.4B	$10.8B	$8.1B	$8.0B	$6.7B	$4.9B	$10.4B	Total debtDebt
$105M	$420M	($293M)	($1.4B)	($3.0B)	($4.7B)	($4.2B)	($3.5B)	($2.0B)	$1.7B	$7.0B	Net debt / (cash)Net debt
28.9×	29.9×	24.5×	25.1×	—	—	3.0×	0.9×	1.3×	2.6×	5.6×	Interest coverageInt. cov.
$7.8B	$9.6B	$9.9B	$9.8B	$8.9B	$10.4B	$10.7B	$10.5B	$10.3B	$8.0B	$6.9B	Shareholders’ equityEquity
											Per share
633M	603M	574M	539M	565M	609M	642M	640M	643M	558M	503M	Shares out (diluted)Shares
$32.05	$35.07	$38.27	$41.61	$16.01	$25.93	$37.09	$40.77	$42.74	$50.29	$57.42	Revenue / shareRev/sh
$3.45	$5.57	$4.29	$4.27	$-5.44	$1.60	$0.84	$0.73	$0.72	$0.79	$1.62	EPS (diluted)EPS
$4.85	$4.50	$6.43	$5.49	$-2.91	$2.98	$3.80	$2.57	$-2.48	$0.51	$1.67	Owner earnings / shareOE/sh
$3.56	$3.00	$5.18	$5.49	$-2.91	$2.98	$-0.21	$-0.56	$-2.48	$-1.49	$-0.75	Free cash flow / shareFCF/sh
$0.35	$0.45	$0.58	$0.69	$0.33	$0.00	$0.00	$0.67	$0.67	$0.72	$0.77	Dividends / shareDiv/sh
$3.22	$3.52	$3.35	$1.91	$0.91	$0.83	$6.11	$5.50	$3.19	$4.79	$5.52	Cap. spending / shareCapex/sh
$12.30	$15.99	$17.17	$18.24	$15.71	$17.10	$16.65	$16.43	$16.10	$14.30	$13.67	Book value / shareBVPS

Per-share growththe realized rate an owner's share compounded

	9-yr	5-yr
Revenue / share	+5.1%/yr	+25.7%/yr
Owner earnings / share	−22.2%/yr	—
EPS	−15.1%/yr	—
Dividends / share	+8.2%/yr	+16.5%/yr
Capital spending / share	+4.5%/yr	+39.4%/yr
Book value / share	+1.7%/yr	−1.9%/yr

The record, charted

FY2016–2025

Each measure over its full record; the current point and the worst year marked.

Share count

558Mpeak FY2024

ROIC

3%low FY2020

Net debt ÷ owner earnings

6.0×peak FY2025

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

$282Mowner earningsvs.$441Mnet incomelow FY2020

Where the cash went

ReinvestBuybacksDividendsAcquisitionsRetained

Each year's operating cash, by what management did with it: the mix, and how it drifts.

FY2016FY2025

Owner-earnings bridge

FY2021–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business earned $282M of owner earnings, the operating cash left after the $1.6B it takes just to hold its position. It put $1.1B more into growth; free cash flow, after that spending, was ($831M).

Reported net income$441M

Owner earnings$282M · 1% of revenue

	FY2025	FY2024	FY2023	FY2022	FY2021
Reported net income	$441M	$465M	$465M	$539M	$977M
Depreciation & amortizationnon-cash charge added back	+$1.6B	+$1.7B	+$1.5B	+$1.4B	+$1.3B
Working capital & othertiming of cash in and out, other non-cash items	−$159M	−$1.7B	+$1.2B	+$1.9B	+$73M
Cash from operations	$1.8B	$462M	$3.2B	$3.8B	$2.3B
Maintenance capital expenditurethe spending needed just to hold position and volume	−$1.6B	−$2.1B	−$1.5B	−$1.4B	−$505M
Owner earnings	$282M	($1.6B)	$1.6B	$2.4B	$1.8B
Growth capital expenditurediscretionary; spent to get bigger, not to stand still	−$1.1B	—	−$2.0B	−$2.6B	—
Free cash flow	($831M)	($1.6B)	($356M)	($134M)	$1.8B
Owner-earnings marginowner earnings ÷ revenue	1%	-6%	6%	10%	12%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the maintenance capital it must spend to hold its position (here about $1.6B, roughly its depreciation, the rate its assets wear out). The other $1.1B of its capital spending is growth it chose, not upkeep it owed; charged only with the maintenance it must do, the business earns well more than the year's free cash flow shows.

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? 2.6×

Adequate

Operating income $428M ÷ interest expense $167M

What this means
Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.
How heavy is the debt, net of cash? $7.2B · 16.7× operating profit

Heavy net debt

Cash $3.2B − debt $10.4B

What this means
Netting $3.2B of cash and short-term investments against $10.4B of debt leaves $7.2B owed, about 16.7× a year's operating profit (24.3× on the gross debt, before the cash). It also holds $40M in longer-dated marketable securities; counting those, it sits at $7.1B of net debt. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? —

Not enough data

What this means
The filing data didn't include the inputs for this check.

Is it a good business?

Return on invested capital 8%

Solid through the cycle

10-yr median, range -37%–29%; 2% latest = NOPAT $335M ÷ invested capital $15.1B

Industry peers: median 8%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran 2% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin 10%

Solid through the cycle

10-yr median margin, range -18%–17%; latest $282M = operating cash $1.8B − maintenance capex $1.6B

Industry peers: median 9%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 1% of revenue this year, a 10% median across 10 years. It chose to put $1.1B more into growth, so free cash flow this year was ($831M) — the gap is investment, not weakness. Treating stock comp as the real expense it is (less $13M of SBC) leaves $269M.
Are earnings backed by cash? 4.18×

Cash-backed

Cash from ops $1.8B ÷ net income $441M

In the filing’s words The filing leans on adjusted, non-GAAP earnings, but the GAAP profit is itself cash-backed — the adjustments are not papering over a cash shortfall here.

What this means
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

Where do the earnings go? 1046%

Returned more than it generated

Dividends + buybacks $2.9B ÷ Owner Earnings $282M

What this means
The company returned more than it generated: against $282M of Owner Earnings, $2.9B (1046%) went back to shareholders, $399M dividends, $2.5B buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Net of $13M stock comp, the real buyback was about $2.5B. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.
Investing or harvesting? 1.71×

Expanding

Capex $2.7B ÷ depreciation $1.6B

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 1 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Pass

Revenue ≥ $2B · $28.1B

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Miss

Current ratio ≥ 2× · 0.52×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Miss

Debt ≤ working capital · $10.4B vs ($5.3B) WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Near

A profit every year (10-yr record) · 1 loss year

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Miss

Uninterrupted dividends · 8 of 10 yrs

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth Miss

Earnings +33% over the record · −83%

What this means
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $0.93/share (latest year $0.90), the averaged base the calculator's gate runs on, and book value is $16.33/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 9 of 10

What this means
Lost money in 1 year(s), look at what happened there before trusting the average.
Return on capital ≥ 15% 4 of 10 yrs

What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
Operating margin 16% → 1% (3-yr avg ends)

What this means
Through the cycle the operating margin slipped — about 16% early to 1% lately, median 4% — competition or costs are biting in.
Reinvestment, incremental ROIC returns capital

What this means
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
Worst year 2020 · −42.2% op. margin

What this means
Operations went underwater in 2020, understand why before trusting the good years.
Share count −1.4%/yr

What this means
The share count is shrinking, buybacks are quietly growing your slice of the business.
Dividend record rising

What this means
Paid and raised the dividend across the record, the continuity Graham prized.
How management talks about it Promotional

What this means
The returns have faded, yet the filing reaches for a promoter’s vocabulary — world-class, best-in-class, disruptive — more than an owner’s. When the words sell harder than the results deliver, the gap is the thing to weigh.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing Named as a competitive risk

Its FY2025 10-K names artificial intelligence as a competitive threat.

“The implementation of AI technologies also presents significant operational, legal, and competitive risks to the Company.”

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat, and the company is using it that way.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$6.0B

Cash & short-term investments$3.3B
Receivables$171M
Other current assets$2.5B

Current liabilities$12.5B

Debt due within a year$259M
Accounts payable$2.1B
Other current liabilities$10.1B

Current ratio0.48×all current assets ÷ what's due · Graham looked for 2×

Quick ratio0.48×stricter: inventory excluded

Cash ratio0.27×strictest: cash alone against what's due

Working capital($6.5B)the cushion left after near-term bills

Its current ratio is below 1, which usually reads as strain; here it is likely structural strength. What it owes in the near term is money to suppliers and customers (payables and deferred revenue), not to lenders, so the balance sheet is funded by operating float, the way Costco's and Amazon's are. The low ratio can be the edge, not the risk; the cash-conversion cycle and the debt due above say which.

Debt due this year vs. cash$259M due · $3.3B cash covered by cash on hand, no refinancing forced · both figures from the Mar 31, 2026 balance sheet

Revenue, latest quarter vs. a year ago+12.8%the freshest read on whether the business is still growing

Current ratio, recent quarters0.9× → 0.5×

Deeper floors

Tangible book value$5.6Bequity stripped of goodwill & intangibles

Debt incl. operating leases$6.2B$1.0B of it operating leases; with finance leases, “total fixed claims” below reaches $11.5B (annual-report basis)

Deferred revenue$8.3Bcustomer cash collected before delivery; operating float

From the company's latest filing.

Debt maturity

the debt note, SEC EDGAR →

Not how much it owes, but when it falls due, and against what. The ladder the company files, beside cash on hand and a year's owner earnings.

'26$321M

'27$2.1B

'28$766M

'29$11M

'30$504M

later$1.2B

Bars scaled to the largest single year; “later” is everything due after 2030, shown apart since it dwarfs the years.

Due in the next 12 months$321Mthe first rung: what must be repaid or rolled over within the year

Within two years$2.5Bthe near wall, the part most exposed to today’s credit conditions

Biggest single year$2.1Bin 2027the lumpiest maturity, where a refinancing, if needed, is largest

Total scheduled principal$4.9Bevery year plus what lies beyond, as the footnote totals it

Against what the business has and earns

Cash & short-term investments, Mar 31, 2026$3.3B

One year of owner earnings (FY2025)$282M

Together, against $321M due next year11.2×

Cash on hand as of Mar 31, 2026 plus a year’s owner earnings comes to $3.6B against the $321M due in the twelve months after the Dec 31, 2025 schedule: 11 times it.

Maturity schedule extracted from the company’s Dec 31, 2025 annual report and reconciled to the total the table states.

Lease obligations

the lease note, SEC EDGAR →

Debt by another name. What the business owes on the property, aircraft, stores and equipment it rents rather than owns is a fixed claim due on a schedule; added back to the debt, it is the true leverage. That ladder, operating and finance leases together, and what it adds to the debt on the page above.

Operating leasesFinance leases

'26$372M

'27$272M

'28$196M

'29$153M

'30$90M

later$245M

Lease payments by year, scaled to the largest; “later” is everything beyond year five, shown apart. These are the contractual cash payments, before the interest the filing imputes back out to the balance-sheet liability.

Due in the next 12 months$372Ma fixed cash payment, owed whether or not the business has a good year

Total lease payments$1.3Bevery year plus the tail, undiscounted: the full cash the leases will take

On the balance sheet$1.2Bthe present value of those payments, the recognised lease liability

True leverage: debt plus leases

On-balance-sheet debt$10.4B

Lease obligations (present value)$1.2B

Total fixed claims on the business$11.5B

Counting the leases the way Buffett does, the fixed claims on this business come to $11.5B, of which the leases are 10%. The lease wall above and the debt schedule together are the calendar of what must be paid, and when.

Lease ladder read from the ASC 842 tags in the company’s Dec 31, 2025 annual report and reconciled: the yearly buckets sum to the undiscounted total, which less the imputed interest equals the balance-sheet liability; a ladder that doesn’t tie out is withheld.

How the cash was used, 2016–2025

Over the record, the business generated $27.6B of operating cash; how management split it reads as a reinvestor, most operating cash is plowed back into the business.

Reinvested$20.3B · 74%
Dividends$2.6B · 10%
Buybacks$10.6B · 38%

Returned to owners$13.2B
86% of the owner earnings the business produced over the span, $2.6B as dividends and $10.6B as buybacks.
Source of funding−$6.0B
Reinvestment and shareholder returns ran $6.0B beyond the operating cash the business generated, so the gap was financed off the balance sheet: debt rose from $3.4B to $10.4B.
Average price paid for buybacks—
Buybacks ran $10.6B over the span, but the filings don't tag the share count needed to deduce the average price paid.
Net change in share count−20.5%
The diluted count fell from 633M to 503M, so the buybacks outran the stock issued to staff.
Dividend record$0.72/sh
Paid in 8 of the years on record, the per-share dividend growing about 8% a year. It was cut at least once along the way.

Buybacks are gross of stock issued to staff; the share-count line above is the net of that, the figure that decides whether owners gained. The average price paid blends a year of purchases (and any accelerated repurchase), so it is close, not exact. The record of where the cash went and on what terms.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.

Fiscal year	Chief executive	Pay, as filed	“Actually paid”	Owner earnings
2021	Gary C. Kelly	$5.8M	$6.0M	$1.8B
2022	Gary C. Kelly	$5.1M	$4.2M	$2.4B
2022	Robert E. Jordan	$5.3M	$4.8M	$2.4B
2023	Robert E. Jordan	$9.3M	$8.5M	$1.6B
2024	Robert E. Jordan	$10.6M	$9.3M	($1.6B)
2025	Robert E. Jordan	$16.6M	$21.9M	$282M

Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Owner earnings are the whole business's, from the record above, for the same fiscal years.

Insider ownership<1%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
Stock-based compensation$13M
The slice of the business handed to employees in shares this year, 0% of revenue, equal to 3% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Inverting the record

Invert: instead of why Southwest Airlines Co. is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2016–2025.

2 of the 5 tests turned up something to look into; the other 3 came back clean.

Look hereIs it less profitable than it was?0.5% vs 14.9%
The owner-earnings margin averaged 14.9% early in the record and 0.5% across the last three years, and the latest year has not recovered. Ask the filing whether that is a structural drift or a cyclical trough — price, mix, cost, or a competitor — and whether it is permanent.
Look hereDid debt outgrow the business?$3.4B → $10.4B
Debt rose from $3.4B to $10.4B while owner earnings went from about $3.2B to $111M — about 1.1 years of owner earnings in debt then, about 94 now: measured against what the business earns, the balance sheet carries more debt than it did. Debt raised for buybacks or deals rather than growth is the kind that bites in a downturn.

And these came back clean

Did the share count rise anyway?
Did reported profit become cash?
Are "one-time" charges a yearly habit?

Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.

What an owner would ask, FY2025

read the 10-K →

Which reported numbers are a judgment call?
Management names Revenue recognition as critical estimates
each rests partly on management's judgment; the filing's note sets out the assumptionsverify →

The questions the record and the charts do not answer on their own; each carries the figure and the place to look.

Peers, Airlines

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
FDXFedEx Corporation	$87.9B	77%	6.4%	10%	3%
DALDelta Air Lines Inc.	$63.4B	—	9.6%	16%	9%
UALUnited Airlines Holdings	$59.1B	—	7.9%	12%	9%
AALAmerican Airlines Group	$54.6B	—	5.3%	8%	2%
LUVSouthwest Airlines Co.	$28.1B	—	7.6%	11%	11%
ALKAlaska Air	$14.2B	—	6.3%	7%	10%
JBLUJetBlue Airways Corporation	$9.1B	—	-1.9%	-2%	4%
SKYWSkyWest Inc.	$4.1B	12%	11.3%	6%	22%
Group median	—	—	7.0%	9%	9%

The price

What a price has to assume.

What the price implies

reverse-DCF

Type today's close and see the owner-earnings growth you'd have to believe to justify it, beside what Southwest Airlines Co. has delivered.

Southwest Airlines Co.’s latest year shows negative owner earnings, the mark of a build-out: total capital spending outruns the cash the business throws off today. So the tool opens on the steady-state base (maintenance capex in place of the build-out spend), the cash it would earn at rest; clear the toggle below to read the latest year exactly as reported.

Today’s price $

Through the cycle, Southwest Airlines Co. earns about $3.1B on its 10.9% median owner-earnings margin. This year’s 1.0% margin runs below that; the reported figure may understate a lean year. Normalize, below, values the price on that through-cycle figure rather than the latest year.

Base Normalize · through-cycle ($3.1B) Net of stock comp (−$13M) Steady-state · maintenance capex ($840M)

—

The assumptions Required return 9% Years of high growth 10 Terminal growth 2.5%

9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.

Enter a price above to run it.

Implied by the price—

Owner-earnings growth, delivered—

Owner-earnings yield—

P/E (3-yr earnings ’23–’25)—

P/B—

Graham’s price gate—

Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.

Against a high-grade bond: Graham’s yardstick bond yield%

Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.

Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.

Free cash flow ($376M) on 489M shares outstanding, per the 10-Q cover, as of 2026-04-22; net debt $7.0B. The base opens on the steady-state figure (the latest year is negative on total capex mid-build-out); clear Steady-state to use the year as filed. Net of stock comp treats option pay as the expense it is. Capex ($2.8B) runs well above depreciation ($1.6B), so this is a build-out; Steady-state swaps total capex for maintenance (≈ depreciation), lifting the base to about $840M, the cash it would throw off if it stopped expanding. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.

Weigh LUV against another business →

The owners of LUV: the meeting and the votes →

Cite: Owner Scorecard, "Southwest Airlines Co. (LUV), the owner's record," https://ownerscorecard.com/c/LUV, data as of 2026-07-09.

Manual order: ← LUNR its page in the Manual LVS →

Industry order: ← LTM the Airlines chapter RJET →