Business Context and Reporting Period
Company: Southwest Airlines Co.
Filing Type: Form 8-K (Current Report)
Date of Report: August 10, 2026
Event: Entry into a new material definitive agreement (revolving credit facility) and termination of a prior credit facility.
Key Financial Metrics and Obligations
- New Facility Size: $2.0 billion five-year revolving credit facility.
- Accordion Feature: Uncommitted option to increase facility size to $3.0 billion.
- Outstanding Balance: $0 as of the filing date.
- Interest Rates: Term SOFR (with 1.00% floor) + 0.875% to 1.625% margin; or Alternate Base Rate + 0.000% to 0.625% margin.
- Maturity Date: August 10, 2031 (subject to up to two one-year extensions).
- Administrative Agents: JPMorgan Chase Bank, N.A. and Citibank, N.A.
Material Changes Versus Prior Period
The Company terminated its previous revolving credit facility dated August 3, 2016 (which would have expired August 4, 2028) to replace it with the new 2026 agreement. This action updates the Company's liquidity structure and lender syndicate.
Guidance, Covenants, and Risks
- Collateral Coverage Test: Requires a lien-free pool of specified aircraft and related assets with an appraised value of at least 1.25 times the total commitment ($2.0 billion).
- Financial Covenant: Requires a Coverage Ratio of 1.25 to 1.00. The Company has a one-time option to reduce this requirement to 0.80 to 1.00 for two consecutive fiscal quarters.
- Events of Default: Standard provisions apply; amounts outstanding may be accelerated upon default.
- Fees: The Company must pay quarterly commitment fees on unutilized portions, administrative fees, and letter of credit fees.
Investor Verification Checklist
- Verify the current appraised value of the Company's lien-free aircraft pool to ensure compliance with the 1.25x collateral coverage test.
- Monitor the Company's Coverage Ratio to ensure it remains above the 1.25 threshold (or 0.80 if the reduction option is exercised).
- Review the full text of the Revolving Credit Agreement (Exhibit 10.1) for specific definitions of "Coverage Ratio" and "Index Debt Rating."
- Confirm the Company's current credit rating to determine the applicable interest rate margin.