Southwest Airlines (LUV) risk factors, FY2025 10-K

Southwest Airlines's FY2025 10-K, filed Feb 05, 2026, lists 27 risk factors in 3 groups. Against the prior year's 23: 6 new, 2 dropped, 15 substantially reworded.

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Risk factors listed
273 groups
New this year
6vs 23 last year
Dropped
2since the prior 10-K
Substantially reworded
15of those kept
Section length
13k wordsItem 1A

What the changes say

  • Southwest Airlines added new risks regarding aircraft procurement constraints, AI implementation, and anti-ESG pressure.
  • The airline noted ongoing inflationary cost pressures and labor constraints, including a 2025 workforce reduction.
  • Strategic shifts include introducing assigned seating, extra legroom, and bag fees.

What changed since the prior 10-K

New

  • NewOperational Risks

    The Company may not be able to procure aircraft in the future in a timely manner or on favorable commercial terms, which could limit the Company’s growth or negatively affect the Company’s cost structure and competitive position

    The Company may face difficulties procuring aircraft in a timely manner or on favorable terms due to industry demand, manufacturer backlogs, or supply chain constraints.

  • NewOperational Risks

    Introducing a new aircraft manufacturer or fleet type could impose significant operational complexities, regulatory requirements, and costs on the Company

    Introducing a new aircraft manufacturer or fleet type would impose significant operational complexities, regulatory hurdles, and costs.

  • NewOperational Risks

    to optimally adjust capacity. The inability to recruit and retain skilled personnel or the unexpected loss of key skilled personnel could continue to adversely affect the Company’s operations

    The Company is dependent on a single engine supplier, Boeing, and sole suppliers for certain other aircraft parts and equipment.

  • NewOperational Risks

    The Company is expanding its use of AI and machine-learning. Any failure in the Company’s AI implementation strategy, compliance with regulations, or failure to otherwise manage the risks related to AI technologies effectively could materially adversely affect its operations, reputation, and/or financial position

    Expanding the use of AI and machine learning introduces operational, legal, cybersecurity, and compliance risks.

  • NewLegal, Regulatory, Compliance, and Reputational Risks

    certain “anti-ESG” parties for making environmental or social commitments or pursuing certain environmental or social initiatives that are alleged to be political or polarizing in nature, which could adversely affect the Company’s reputation, business, financial performance, market access, and growth

    The Company faces potential litigation and public criticism from anti-ESG parties regarding environmental and social commitments.

  • NewLegal, Regulatory, Compliance, and Reputational Risks

    The Company’s Bylaws further provide that, as permitted by the TBOC, no shareholder (as defined by the TBOC) may institute or maintain a derivative proceeding unless that shareholder beneficially owns at least three (3) percent of the outstanding shares of the Company

    Bylaws now require shareholders instituting derivative proceedings to beneficially own at least three percent of the Company's outstanding shares.

Dropped

  • DroppedFinancial Risks

    has experienced significant inflationary cost pressure, particularly with respect to Salaries, wages, and benefits expense

  • DroppedOperational Risks

    limit or even curtail its growth, delay strategic initiatives, increase its compliance costs, harm its reputation, or reduce its competitive advantage

Reworded

  • 92% rewrittenLegal, Regulatory, Compliance, and Reputational Risks

    The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand

    Updated to include risks from the perception of failure to meet sustainability goals and potential modifications to those aspirational goals.

  • 92% rewrittenOperational Risks

    The Company is heavily dependent on technology to operate its business and continues to implement substantial changes to its information systems; any failure, disruption, breach, or delay in the Company’s information systems or in implementation of necessary changes could materially adversely affect its operations

    Streamlined language regarding heavy dependence on IT systems and the impact of changes or disruptions.

  • 92% rewrittenFinancial Risks

    The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have adversely affected and could continue to adversely affect the Company's ability to control its costs

    Added specific mention of inflationary cost pressures on salaries, wages, benefits, and union labor.

  • 82% rewrittenOperational Risks

    The Company’s business is labor intensive; therefore, the Company has been, and could in the future be, adversely affected if it were unable to employ and retain appropriate numbers of qualified Employees to maintain its operations

    Updated to reflect a voluntary separation program in 2024 and a workforce reduction implemented in 2025.

  • 70% rewrittenLegal, Regulatory, Compliance, and Reputational Risks

    The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise

    Expanded to note that brand failure can directly affect business performance, market access, and growth.

    Was: The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise, including with respect to the Company's voluntary or mandatory ESG-related goals and disclosures

  • 58% rewrittenFinancial Risks

    The Company’s business, operating results, and financial condition could be adversely impacted if it is unable to effectively execute its strategic plans

    Updated strategic initiatives to include introducing bag fees for most fare products alongside assigned seating and extra legroom.

    Was: The Company's results of operations could be adversely impacted if it is unable to effectively execute its strategic plans

  • 57% rewrittenOperational Risks

    Information Technology, Cybersecurity, and Data Privacy Risks

    Added risks related to the expansion of AI and machine-learning into technology infrastructure.

  • 49% rewrittenLegal, Regulatory, Compliance, and Reputational Risks

    Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth

    Retained substantially similar focus on airport capacity constraints and FAA airspace control.

  • 45% rewrittenLegal, Regulatory, Compliance, and Reputational Risks

    The Company’s plans to develop commercial relationships with airlines in other parts of the world may not produce the results or returns it expects

  • 42% rewrittenLegal, Regulatory, Compliance, and Reputational Risks

    In connection with any activist campaign, the Company may choose to initiate, or may become subject to, litigation, which could serve as a further distraction to the Board, management, and Employees and require the Company to incur significant additional costs

  • 39% rewrittenOperational Risks

    The Company's business is labor intensive, with most Employees represented by labor unions; therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives

  • 34% rewrittenFinancial Risks

    The airline industry is intensely competitive

  • 22% rewrittenLegal, Regulatory, Compliance, and Reputational Risks

    The Company is subject to extensive government regulation that may disrupt or necessitate modifications to the Company’s operations, business plans, and strategies, increase the Company’s operating costs, or otherwise limit the Company’s ability to conduct business

  • 21% rewrittenOperational Risks

    Interruptions or disruptions in service at one of the Company’s core stations have had, and could in the future have, a material adverse impact on its operations

  • 20% rewrittenFinancial Risks

    Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results

All 27 risk factors

Headings as the filing states them, in filing order.

Operational Risks

  1. 01Information Technology, Cybersecurity, and Data Privacy Risks57% rewritten
  2. 06The Company may not be able to procure aircraft in the future in a timely manner or on favorable commercial terms, which could limit the Company’s growth or negatively affect the Company’s cost structure and competitive positionNew
  3. 07Introducing a new aircraft manufacturer or fleet type could impose significant operational complexities, regulatory requirements, and costs on the CompanyNew
  4. 08The Company's business is labor intensive, with most Employees represented by labor unions; therefore, the Company could be materially adversely affected in the event of conflict with its Employees or its Employees' representatives39% rewritten
  5. 09The Company’s business is labor intensive; therefore, the Company has been, and could in the future be, adversely affected if it were unable to employ and retain appropriate numbers of qualified Employees to maintain its operations82% rewritten
  6. 10to optimally adjust capacity. The inability to recruit and retain skilled personnel or the unexpected loss of key skilled personnel could continue to adversely affect the Company’s operationsNew
  7. 11The airline industry has faced on-going security concerns and related cost burdens; further threatened or actual terrorist attacks, war, or other hostilities, even if not made directly on the airline industry, could significantly harm the airline industry and the Company's operations
  8. 12Interruptions or disruptions in service at one of the Company’s core stations have had, and could in the future have, a material adverse impact on its operations21% rewritten
  9. 13The airline industry is made up of inherently complex systems and is affected by many conditions that are beyond its control, which can impact the Company's business strategies and results of operations
  10. 14The Company is heavily dependent on technology to operate its business and continues to implement substantial changes to its information systems; any failure, disruption, breach, or delay in the Company’s information systems or in implementation of necessary changes could materially adversely affect its operations92% rewritten
  11. 15The Company is expanding its use of AI and machine-learning. Any failure in the Company’s AI implementation strategy, compliance with regulations, or failure to otherwise manage the risks related to AI technologies effectively could materially adversely affect its operations, reputation, and/or financial positionNew

Financial Risks

  1. 02The Company's low-cost structure has historically been one of its primary competitive advantages, and many factors have adversely affected and could continue to adversely affect the Company's ability to control its costs92% rewritten
  2. 03Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results20% rewritten
  3. 04The Company’s business, operating results, and financial condition could be adversely impacted if it is unable to effectively execute its strategic plans58% rewritten
  4. 05The airline industry is intensely competitive34% rewritten

Legal, Regulatory, Compliance, and Reputational Risks

  1. 16The Company is subject to extensive government regulation that may disrupt or necessitate modifications to the Company’s operations, business plans, and strategies, increase the Company’s operating costs, or otherwise limit the Company’s ability to conduct business22% rewritten
  2. 17Airport capacity constraints and air traffic control inefficiencies have limited and could continue to limit the Company's growth49% rewritten
  3. 18The Company is subject to risks related to its sustainability goals and disclosures, which may affect stakeholder sentiment and the Company’s reputation and brand92% rewritten
  4. 19certain “anti-ESG” parties for making environmental or social commitments or pursuing certain environmental or social initiatives that are alleged to be political or polarizing in nature, which could adversely affect the Company’s reputation, business, financial performance, market access, and growthNew
  5. 20The Company’s future results may suffer if it is unable to effectively manage its current and contemplated international operations or Extended Operations (“ETOPS”)
  6. 21The Company’s plans to develop commercial relationships with airlines in other parts of the world may not produce the results or returns it expects45% rewritten
  7. 22The Company is currently subject to regulatory actions and pending litigation, and if judgment, penalties, or fines were to be rendered against the Company, such judgment, penalties, or fines could adversely affect the Company's operating results
  8. 23Conflicting federal, state, and local laws and regulations may impose additional requirements and restrictions on the Company’s operations, which could increase the Company’s operating costs, result in service disruptions, and increase litigation risk
  9. 24The Company’s reputation and brand could be harmed if it were to experience significant negative publicity through social media or otherwise70% rewritten
  10. 25The Company’s business has been, and could in the future be, negatively affected as a result of actions of activist shareholders, and such activism could adversely affect the strategic direction and business results of the Company
  11. 26In connection with any activist campaign, the Company may choose to initiate, or may become subject to, litigation, which could serve as a further distraction to the Board, management, and Employees and require the Company to incur significant additional costs42% rewritten
  12. 27The Company’s Bylaws further provide that, as permitted by the TBOC, no shareholder (as defined by the TBOC) may institute or maintain a derivative proceeding unless that shareholder beneficially owns at least three (3) percent of the outstanding shares of the CompanyNew

Other Southwest Airlines 10-Ks

  • FY2024 10-K risk factors
    23 risks

    Southwest Airlines faces significant risks from high labor costs, fuel price volatility, union negotiations, and ongoing technological dependencies.

    Filed Feb 07, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.