Raising the Record Revenue Bar, Again

During 2017, Southwest’s annual operating revenues increased to an all-time record $21.2 billion, with record passenger revenues. This exceptional performance includes the impact of the competitive domestic fare environment, approximately $100 million in revenue reduction associated with the unprecedented natural disasters in the summer months, and and approximate $80 million revenue reduction in connection with the transition to a new reservation system. Despite the competitive fare environment resulting in year-over-year decreases in our average passenger fare66) The average amount of passenger revenue per revenue passenger carried. and passenger revenue yield,77) Calculated as passenger revenue divided by RPMs. 12 Also referred to as “yield,” this is the average cost paid by a paying Passenger to fly one mile, which is a measure of revenue production and fares. solid demand for our low fares drove a year-over-year increase in passenger revenues, as well as a strong load factor44) Load factor is RPMs 12 divided by ASMs. 10 of 83.9 percent.

Increased demand for our award-winning Southwest Cargo® service in 2017 led to a year-over-year improvement of 1.2 percent in freight revenue.

Our loyal Customers’ demand for the benefits of Southwest’s Rapid Rewards Program® resulted in strong year-over-year growth in other revenues in 2017. Approximately 70 percent of the year-over-year increase was driven by an increase in revenue associated with Cardmember spend on Southwest’s co-branded Chase® Visa credit card. Additionally, ancillary products performed better in 2017 than in 2016, particularly EarlyBird Check-In®.

Operating revenues per available seat mile (RASM)88) Calculated as operating revenues divided by available seat miles. 10 Also referred to as “operating unit revenues” or “RASM,” this is a measure of operating revenue production based on the total available seat miles flown during a particular period. Year ended 2015 RASM excludes a $172 million one-time special revenue adjustment. Including the special revenue adjustment, RASM would have been 14.11 cents for the year ended 2015. also increased year-over-year, achieving our goal of positive unit revenue growth in 2017.

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