# Southwest Airlines (LUV.US)

Canonical: https://gigainvestors.com/s/LUV

Analysis as of: 2026-10-16T07:29:58.989Z. Financial observations: FY1996–FY2025.

Listing currency: USD. Reporting currency: USD.

## Verdict

Not a wonderful business

Quality tests for Buy: not passed (profit record: pass; earnings resilience is evidence only). Published buy qualification: no.

Share price: $40.83 per share; close as of 2026-10-15.

Estimated value: low $18.49 per share, central $20.15 per share, high $22.34 per share. Buy at or below the central value $20.15 per share. Valuation as of 2026-10-16T07:29:58.989Z; scenarios are not confidence intervals.

Expected annual return: 5.7% at the stated quote. About 5.7% a year at today's price (required return 10.0%). required return 10.0% a year (10% floor; US 10-year bond 5.1% + 4 points).

## Checklist

### understandable: fail

- 1 revenue decline in the last 10 years (informational)

- operating margin variation exceeds 0.35

- Financial history: 10 years

- Years with declining revenue: 1

- Years with a net loss: 1

- Operating margin variation: 4.38×

Chart: Operating margin; fiscal year observations.

- FY2016: 0.17×

- FY2017: 0.16×

- FY2018: 0.15×

- FY2019: 0.13×

- FY2020: -0.42×

- FY2021: 0.11×

- FY2022: 0.04×

- FY2023: 0.01×

- FY2024: 0.01×

- FY2025: 0.02×

### moat: fail

- ROIC worst years below threshold (more than 1 bad year allowed)

- Recent gross margin fell 6.8pp below the typical margin (limit 4pp)

- ROIC, median of available years: 15.7%

- ROIC, second-lowest year: 2.3%

- Typical minus recent gross margin: 6.8 pp

- Typical gross margin (annual median): 23.0%

- Recent gross margin (lower of latest and 3-year median): 16.2%

- Years with nonpositive capital: 0

- Capital spending / revenue: 9.3%

- ROIC including acquisitions, ten-year median: 14.0%

Chart: ROIC excluding acquisitions; fiscal year observations.

- FY2016: 33.2%

- FY2017: 37.6%

- FY2018: 29.1%

- FY2019: 26.2%

- FY2020: -44.5%

- FY2021: 20.4%

- FY2022: 10.9%

- FY2023: 2.3%

- FY2024: 2.9%

- FY2025: 3.4%

### economics: fail

- incremental invested capital return below threshold

- Owner earnings / net income, 5-yr: 1.04×

- Cash conversion uses consolidated totals: No

- Owner earnings, five-year total: $3.0B

- Net income, five-year total: $2.9B

- Return on incremental invested capital: -25.7%

- Working capital / revenue, annual change: 0.2 pp

- Working capital / revenue, change between three-year averages: 2.1 pp

- Working capital / revenue, final three-year average: 5.9%

Chart: Annual owner cash / profit; fiscal year observations.

- FY2021: 1.78×

- FY2022: 1.00×

- FY2023: 1.00×

- FY2024: 1.00×

- FY2025: -0.44×

### management: fail

- Historical market-dollar context (not the management verdict): 2016 to 2025 (9 years)

- potential debt-funded buybacks (informational)

- buybacks leaned toward cheaper years (informational)

- ROIC first 3 years vs last 3 years: 33.2% vs 2.9%

- Per-share earnings: 3.55 to 0.73 (three-year endpoint medians)

- per-share value declined or ends nonpositive

- Management verdict uses per-share economic progress: Yes

- Ordinary dilution, 10-year annual growth: -1.8%

- Ordinary dilution, 5-year annual growth: -0.2%

- Market cap gain: -$8.5B

- Cumulative retained earnings: $5.0B

- Diluted shares, 10-year annual growth: -1.8%

- Diluted shares, 5-year annual growth: -0.2%

- $1 test, starting fiscal year: FY2016

- $1 test, ending fiscal year: FY2025

- Per-share value growth: -18.0%

- Per-share value change: -$2.82

- Per-share value, starting three-year median: $3.55

- Per-share value, ending three-year median: $0.73

- Buybacks concentrated in cheaper years (correlation): 0.29

- Average buyback yield: 4.8%

- Buyback history: 8 years

- Debt-funded buybacks: Yes

- Acquisition spending: $5.0M

- Cumulative net income, 10 years: $10B

- ROIC, first three-year median: 33.2%

- ROIC, last three-year median: 2.9%

Chart: Earnings per share; fiscal year observations.

- FY2016: $3.55

- FY2017: $5.78

- FY2018: $4.29

- FY2019: $4.27

- FY2020: -$5.44

- FY2021: $1.60

- FY2022: $0.84

- FY2023: $0.73

- FY2024: $0.72

- FY2025: $0.79

### accounting: pass

- Sloan accruals: -4.8%

- Receivables to sales index (DSRI): 1.01×

- Restructuring years, last five: 0

- Stock compensation / operating cash flow: 0.0%

- Earnings backed by cash: Yes

- Operating cash / earnings: 4.18×

- Accounting red flags: 0

- Goodwill and intangibles / equity: 0.16×

Chart: Sloan accruals; fiscal year observations.

- FY2016: -8.8%

- FY2017: -1.8%

- FY2018: -9.3%

- FY2019: -6.5%

- FY2020: -5.6%

- FY2021: -3.7%

- FY2022: -9.2%

- FY2023: -7.4%

- FY2024: 0.0%

- FY2025: -4.8%

## Holders

- [Harry Burn](https://gigainvestors.com/SSHFX): tracked 13F investor; follow the investor page for holding quarter and amounts.

## Price story

Down 21% since Jun 2026 · "Southwest Airlines (LUV) Is Up 5.7% After Pivot To High-Margin Seat And Add-On Fees" (finance.yahoo.com, Sep 2026) · sales +2.1%

Story as of 2026-10-16T09:59:06.545Z; price observation 2026-10-15.

Price needs cash profits to grow 12.5% a year for ten years

- 2025-04-23: Southwest Airlines drops forecast as US trade war shakes industry ([finance.yahoo.com](https://finance.yahoo.com/news/southwest-airlines-pulls-profit-outlook-204255618.html))

- 2025-12-05: Southwest Cuts 2025 Core Profit Outlook Due to Government Shutdown, Higher Fuel Prices ([finance.yahoo.com](https://finance.yahoo.com/news/southwest-cuts-2025-core-profit-194233650.html))

- 2026-01-29: Southwest Soars Nearly 20% As New Fees For Flyers Lift Guidance ([finance.yahoo.com](https://finance.yahoo.com/m/b3cf54f0-9e5b-3446-b858-c93441a541f5/southwest-soars-nearly-20%25-as.html))

- 2026-06-02: Southwest exec says the free bag and assigned seating overhaul is already paying off ([finance.yahoo.com](https://finance.yahoo.com/markets/stocks/articles/southwest-exec-says-free-bag-222321918.html))

- 2026-07-23: Southwest Airlines shares fall as weak Q3 outlook overshadows earnings beat ([finance.yahoo.com](https://finance.yahoo.com/markets/stocks/articles/southwest-airlines-shares-fall-weak-135200717.html))

- 2026-09-22: Southwest Airlines (LUV) Is Up 5.7% After Pivot To High-Margin Seat And Add-On Fees ([finance.yahoo.com](https://finance.yahoo.com/markets/stocks/articles/southwest-airlines-luv-5-7-151603526.html))

### Sales · FY2024–2025

sales +2.1%; source https://www.sec.gov/Archives/edgar/data/92380/000009238026000004/luv-20251231.htm; observed 2026-02-05.

- FY2016: $20B 

- FY2017: $21B 

- FY2018: $22B 

- FY2019: $22B 

- FY2020: $9.0B 

- FY2021: $16B 

- FY2022: $24B 

- FY2023: $26B 

- FY2024: $27B 

- FY2025: $28B 

### Gross margin · FY2025

gross margin 17.4%; source https://www.sec.gov/Archives/edgar/data/92380/000009238026000004/luv-20251231.htm; observed 2026-02-05.

- FY2016: 30.5% 

- FY2017: 29.5% 

- FY2018: 27.6% 

- FY2019: 26.7% 

- FY2021: 26.1% 

- FY2022: 20.0% 

- FY2023: 16.2% 

- FY2024: 16.2% 

- FY2025: 17.4% 

## Owner memo

Memo as of 2026-10-16T08:06:05.509Z.

### How it makes money

Operates in airlines; annual sales are USD 28.1 billion.

- Source: https://www.sec.gov/Archives/edgar/data/92380/000009238026000004/luv-20251231.htm (filed 2026-02-05); FY2025: revenue 28063000000; grossProfit 4895000000; margin = grossProfit / revenue.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-10-16); LUV.US: Southwest Airlines Co. operates as a passenger airline company that provides scheduled air transportation services in the United States and internationally. It also provides Rapid Rewards loyalty program; SWABIZ, an online booking tool; and inflight entertainment platform that includes movies-on-demand live and on-demand television, flight tracker, and additional curated content, as well as a variety of premium snacks and coffee. In addition, the company offers ancillary services, such as in-flight purchases, baggage fees, EarlyBird Check-In, and upgraded boarding, as well as transportation of pets and unaccompanied minors. As of December 31, 2025, the company operated a total fleet of 803 Boeing 737 aircraft; and served 117 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as ten near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. Southwest Airlines Co. was incorporated in 1967 and is headquartered in Dallas, Texas.

### Why customers stay

Margins ranged from 16.2% to 17.4% during 2023–25; it earns 15.7% on its capital.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2023: grossProfit / revenue = 16.2%.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2024: grossProfit / revenue = 16.2%.

- Source: https://www.sec.gov/Archives/edgar/data/92380/000009238026000004/luv-20251231.htm (filed 2026-02-05); FY2025: grossProfit / revenue = 17.4%.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); 10-year return on capital observations [[2016,0.3319750580046404],[2017,0.37579969115376133],[2018,0.29141538197853845],[2019,0.2617801047120419],[2020,-0.4452281789986708],[2021,0.20398552680664697],[2022,0.10915789414992083],[2023,0.02263096727178866],[2024,0.0286476556193471],[2025,0.034346275632373954]]; median 0.1565717104782839. ROIC follows the displayed moat series; financial companies use return on tangible equity.

### Where the cash goes

Paid dividends in 9 of 10 years; bought back USD 2.5 billion of shares.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2016: growth capex 471094110.46677995; upkeep 1675905889.53322; owner earnings 1789094110.46678. Growth capex / owner earnings = 0.26331432634578966.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2017: growth capex 600074161.2860789; upkeep 1648925838.713921; owner earnings 3057074161.286079. Growth capex / owner earnings = 0.1962903513710096.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2018: growth capex 659714836.5854163; upkeep 1316285163.4145837; owner earnings 2349714836.5854163. Growth capex / owner earnings = 0.2807637872960396.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2019: growth capex 0; upkeep 1027000000; owner earnings 2492000000. Growth capex / owner earnings = 0.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2021: growth capex 0; upkeep 511000000; owner earnings 1738000000. Growth capex / owner earnings = 0.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2022: growth capex 2595000000; upkeep 1351000000; owner earnings 539000000. Growth capex / owner earnings = 4.8144712430426715.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2023: growth capex 1998000000; upkeep 1522000000; owner earnings 465000000. Growth capex / owner earnings = 4.296774193548387.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); FY2024: growth capex 423000000; upkeep 1657000000; owner earnings 465000000. Growth capex / owner earnings = 0.9096774193548387.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); Dividend observations: [[2016,222000000],[2017,274000000],[2018,332000000],[2019,372000000],[2020,188000000],[2021,0],[2022,214000000],[2023,428000000],[2024,430000000],[2025,399000000]]. Zero only counted when supported by a complete cash-flow statement.

- Source: https://www.sec.gov/Archives/edgar/data/92380/000009238026000004/luv-20251231.htm (filed 2026-02-05); FY2025: cash repurchases 2550000000 USD.

### Are managers owners

Insiders own 1% of the company.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-10-16); LUV.US SharesStats.PercentInsiders = 1.01 percentage points; cache date 2026-10-16.

### What could break it

"The Company's business is labor intensive, with most Employees represented by labor unions" (SEC filing, Feb 2026)

- Source: https://www.sec.gov/Archives/edgar/data/92380/000009238026000004/luv-20251231.htm (filed 2026-02-05); The Company's business is labor intensive, with most Employees represented by labor unions

### What the price says

The price assumes cash profits grow 12.5% yearly over ten years.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-05); Ten-year compound average after fade. Initial solved rate 0.1679889658476995. Price 40.83; FX 1; discount 0.1; same standard ten-year fade to terminal 0.03. FY2015 owner earnings/share 2.9663790205506686 → FY2025 -0.3477522640631908. Closing-price date 2026-10-15.

## Monthly share-price history (USD per share)

- 2016-10: $40.05 per share

- 2016-11: $46.61 per share

- 2016-12: $49.84 per share

- 2017-01: $52.31 per share

- 2017-02: $57.80 per share

- 2017-03: $53.76 per share

- 2017-04: $56.22 per share

- 2017-05: $60.09 per share

- 2017-06: $62.14 per share

- 2017-07: $55.51 per share

- 2017-08: $52.14 per share

- 2017-09: $55.98 per share

- 2017-10: $53.86 per share

- 2017-11: $60.67 per share

- 2017-12: $65.45 per share

- 2018-01: $60.80 per share

- 2018-02: $57.84 per share

- 2018-03: $57.28 per share

- 2018-04: $52.83 per share

- 2018-05: $51.08 per share

- 2018-06: $50.88 per share

- 2018-07: $58.16 per share

- 2018-08: $61.30 per share

- 2018-09: $62.45 per share

- 2018-10: $49.10 per share

- 2018-11: $54.61 per share

- 2018-12: $46.48 per share

- 2019-01: $56.76 per share

- 2019-02: $56.04 per share

- 2019-03: $51.91 per share

- 2019-04: $54.23 per share

- 2019-05: $47.60 per share

- 2019-06: $50.78 per share

- 2019-07: $51.53 per share

- 2019-08: $52.32 per share

- 2019-09: $54.01 per share

- 2019-10: $56.13 per share

- 2019-11: $57.64 per share

- 2019-12: $53.98 per share

- 2020-01: $54.98 per share

- 2020-02: $46.19 per share

- 2020-03: $35.61 per share

- 2020-04: $31.25 per share

- 2020-05: $32.10 per share

- 2020-06: $34.18 per share

- 2020-07: $30.89 per share

- 2020-08: $37.58 per share

- 2020-09: $37.50 per share

- 2020-10: $39.53 per share

- 2020-11: $46.34 per share

- 2020-12: $46.61 per share

- 2021-01: $43.94 per share

- 2021-02: $58.13 per share

- 2021-03: $61.06 per share

- 2021-04: $62.78 per share

- 2021-05: $61.46 per share

- 2021-06: $53.09 per share

- 2021-07: $50.52 per share

- 2021-08: $49.78 per share

- 2021-09: $51.43 per share

- 2021-10: $47.28 per share

- 2021-11: $44.40 per share

- 2021-12: $42.84 per share

- 2022-01: $44.76 per share

- 2022-02: $43.80 per share

- 2022-03: $45.80 per share

- 2022-04: $46.72 per share

- 2022-05: $45.86 per share

- 2022-06: $36.12 per share

- 2022-07: $38.12 per share

- 2022-08: $36.70 per share

- 2022-09: $30.84 per share

- 2022-10: $36.35 per share

- 2022-11: $39.91 per share

- 2022-12: $33.67 per share

- 2023-01: $35.77 per share

- 2023-02: $33.58 per share

- 2023-03: $32.54 per share

- 2023-04: $30.29 per share

- 2023-05: $29.87 per share

- 2023-06: $36.21 per share

- 2023-07: $34.16 per share

- 2023-08: $31.60 per share

- 2023-09: $27.07 per share

- 2023-10: $22.23 per share

- 2023-11: $25.57 per share

- 2023-12: $28.88 per share

- 2024-01: $29.89 per share

- 2024-02: $34.27 per share

- 2024-03: $29.19 per share

- 2024-04: $25.94 per share

- 2024-05: $26.84 per share

- 2024-06: $28.61 per share

- 2024-07: $26.94 per share

- 2024-08: $28.92 per share

- 2024-09: $29.63 per share

- 2024-10: $30.58 per share

- 2024-11: $32.36 per share

- 2024-12: $33.62 per share

- 2025-01: $30.71 per share

- 2025-02: $31.06 per share

- 2025-03: $33.58 per share

- 2025-04: $27.96 per share

- 2025-05: $33.38 per share

- 2025-06: $32.44 per share

- 2025-07: $30.93 per share

- 2025-08: $32.90 per share

- 2025-09: $31.91 per share

- 2025-10: $30.30 per share

- 2025-11: $34.81 per share

- 2025-12: $41.33 per share

- 2026-01: $47.52 per share

- 2026-02: $49.26 per share

- 2026-03: $37.57 per share

- 2026-04: $37.92 per share

- 2026-05: $42.95 per share

- 2026-06: $51.42 per share

- 2026-07: $44.97 per share

- 2026-08: $38.53 per share

- 2026-09: $41.64 per share

- 2026-10: $40.65 per share

## Annual estimated value (USD per share)

- FY2016: low $27.12 per share, central $36.79 per share, high $42.41 per share

- FY2017: low $46.54 per share, central $64.45 per share, high $74.88 per share

- FY2018: low $57.75 per share, central $80.07 per share, high $93.07 per share

- FY2019: low $67.24 per share, central $93.17 per share, high $108.27 per share

- FY2020: low $42.00 per share, central $44.59 per share, high $48.02 per share

- FY2021: low $56.13 per share, central $60.43 per share, high $66.16 per share

- FY2022: low $64.73 per share, central $74.89 per share, high $84.25 per share

- FY2023: low $27.20 per share, central $28.59 per share, high $30.44 per share

- FY2024: low $21.04 per share, central $22.19 per share, high $23.72 per share

- FY2025: low $14.58 per share, central $15.93 per share, high $17.73 per share

Historical values use today's bond yield for every fiscal year

Historical values use today's FX rate into trading currency for every fiscal year

Historical values use current restated fundamentals and current commodity classification; they are not point-in-time estimates

## Sources

[Original 10-K filing](https://www.sec.gov/Archives/edgar/data/92380/000009238026000004/luv-20251231.htm); period 2025-12-31, filed 2026-02-05.

Estimates depend on assumptions and are not guarantees or investment advice. Underlying data remains subject to its source licenses; public reading does not grant bulk redistribution rights.