Southwest sees ROIC of 15% or greater, well above WACC in 2027

The company’s three-year financial plan is expected to support its long-term targets for sustainable profitability: Approximately $4B in cumulative incremental run rate EBIT contribution in 2027; ROIC of 15% or greater, well above WACC in 2027. Key elements of Southwest’s financial plan include: The Company’s multi-year plan is expected to deliver an estimated $500 million run rate of cost savings in 2027, by minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and improving corporate efficiency. Southwest is pursuing opportunities to monetize the value of its fleet order book and drive a significant fleet modernization, with the goal of achieving an average fleet age of just five years in 2031. The Company’s fleet strategy is expected to reduce average aircraft capital expenditures to approximately $500 million through 2027. Southwest is balancing its capital allocation priorities to minimize capital expenditures on aircraft, continue investing in infrastructure that optimizes operations, and manage debt to preserve the airline’s investment-grade balance sheet, all while returning capital to Shareholders through dividends and share repurchases. The Board of Directors today approved a $2.5 billion share repurchase program, reflecting the Board’s confidence in the strategic plan and new revenue-generating initiatives, and in management’s ability to execute. Southwest is focusing on operational efficiencies to mitigate cost pressures and modernize processes. These efforts are signed to fund nearly all new capacity growth over the next three years without incremental aircraft capital deployment: In February 2025, Southwest expects to begin offering redeye flying in key markets to maximize aircraft utilization. The airline is aiming to further reduce the time it takes to turn an aircraft, which is intended to increase its aircraft productivity, while making day-to-day processes easier for Employees.