Southwest Airlines Co.

Technology infrastructure · Disaster recovery and business continuity

Any of these events could cause system interruptions, delays, and loss of critical data, and could prevent the Company from processing Customer transactions or providing services, which could make the Company's business and services less attractive and subject the Company to liability.

Digital transformation and innovation · Technology implementation and upgrades

In the ordinary course of business, the Company's IT Systems require continuous updates and modifications to support business operations, growth, and changing business strategy or regulatory requirements. Implementation and integration require balancing the introduction of new capabilities with the management of existing systems and present the risk of operational or security inadequacy or interruption.

Cybersecurity and data protection · Insider threats and access controls

These IT Systems may be subject to increasingly significant attacks by hackers, cybercriminals, nation-states, insiders, or other third parties. Advances in computer capabilities, AI-enhanced attacks, social engineering, phishing, cryptography, inadequate facility security, insider threats, or other technological developments may result in a compromise or breach of the Company's critical operations systems.

Strategic execution · Geographic expansion and market entry

The Company's future results may suffer if it is unable to effectively manage its current and contemplated international operations or Extended Operations ('ETOPS'). International flying requires the Company to modify certain processes, as the airport environment can be dramatically different in certain international locations.

Customer and revenue · Changing customer preferences and behavior

Concern among consumers of the impacts of climate change may mean some customers choose to fly less frequently or fly on an airline they perceive as operating in a manner that is more sustainable to the climate, and customers may choose to use alternatives to travel, such as virtual meetings and workspaces.

Market position and competition · Disruptive competitors and new market entrants

The Company's primary competitors include other major domestic airlines, as well as regional and new entrant airlines, public charter operators, surface transportation, and alternatives to transportation such as videoconferencing, business communication platforms, and the Internet.

Natural and catastrophic events · Terrorism and security threats

The 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.

Geopolitical and trade · International conflicts and tensions

Fuel prices can be impacted by geopolitical, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and potential or actual hostilities or other conflicts in oil producing areas or along global trade routes.

Natural and catastrophic events · Natural disasters and extreme weather

The Company's operations have been, and in the future may again be, materially and adversely disrupted by extreme weather events. Extreme weather conditions, including increases in the frequency, severity, or duration of severe weather events (whether or not caused by anthropogenic climate change), can disrupt air travel from time to time, ground planes, damage equipment and increase maintenance costs, cause delays and cancellations or other network disruptions.

Natural and catastrophic events · Climate change and environmental impact

The Company is subject to various environmental requirements and risks, including increased regulation, changing consumer preferences, physical, environmental, and climate risks, and risks associated with climate change; the cost of compliance with more stringent environmental regulations, failure to comply with environmental regulations, or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on the Company's results of operations.

Geopolitical and trade · Trade policies tariffs and sanctions

Fuel prices can be impacted by geopolitical, environmental (including those related to climate change), and economic factors, such as (i) dependency on foreign imports of crude oil and potential or actual hostilities or other conflicts in oil producing areas or along global trade routes; (ii) imposition of economic sanctions on oil-producing countries or specific industry participants.

Human capital and workforce · Talent acquisition and retention

The Company's success depends on its ability to attract and retain appropriate levels of skilled personnel. Staffing-related challenges, particularly any unpredictability in required staffing levels, could continue to occur in certain areas and limit the Company's ability 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.

Core operations · Capacity utilization and efficiency

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

Supply chain and procurement · Raw material availability and cost volatility

The Company's business can be significantly affected by the availability of jet fuel, fuel prices, and volatility of fuel prices and the Company's operations are subject to disruption in the event of any delayed supply of fuel; therefore, the Company's strategic plans and future profitability are likely to be affected by fuel availability, price increases, and fuel price volatility.

Legal and litigation · Litigation and legal proceedings

The 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.

Data and privacy · Data protection and privacy laws

To operate its business, the Company must receive, process, transmit, and store information related to a number of groups—Customers, Employees, contractors, business partners, and other third parties—and the Company's operations depend upon secure processing, transmission (including over public networks), storage, and retention of that information.

International and currency · Foreign exchange and currency exposure

International flying exposes the Company to certain foreign currency risks to the extent the Company chooses to, or is required to, transact in currencies other than the U.S. dollar.

International and currency · International operations and emerging markets

The Company's operations in non-U.S. jurisdictions may subject the Company to the laws of those jurisdictions rather than, or in addition to, U.S. laws. Laws in some jurisdictions differ in significant respects from those in the United States, and these differences can affect the Company's ability to react to changes in its business.

Corporate governance · Shareholder rights and activism

The Company has adopted certain provisions in its Bylaws that could increase costs to bring a claim, discourage claims, limit the ability of the Company's Shareholders to bring a claim, or limit the ability of the Company's Shareholders to bring a claim in a judicial forum viewed by the Shareholders as more favorable for disputes with the Company or the Company's directors, officers, or other Employees.

Reputation and brand · Social media and digital reputation

The Company operates in a public-facing industry with significant exposure to social media, and failure to maintain the Company's reputation or brand could adversely affect its business, financial performance, market access, and growth. Negative publicity, whether or not justified, can spread rapidly through social media.