Q(A): Why is it necessary for the risk factors to be included in the Annual Reports?

Q(B): State accurately and fully the one Risk Factor from the 17 listed down below that you think carries the greatest risk for the company and do explain why you think that your answer is very correct.

Risk Factors of the Southwest Airlines:

1.The Company is currently dependent on Boeing as the sole manufacturer of the Company's

aircraft. Further prolonged grounding by the FAA of the Boeing 737 MAX aircraft could

materially and adversely affect the Company's business plans, strategies, and results of

operations.

The Boeing 737 MAX aircraft are crucial to the Company's growth plans and fleet modernization

initiatives. On March 13, 2019, the FAA issued an emergency order for all U.S. airlines to ground the

MAX aircraft, including the 34 MAX aircraft in the Company's fleet. The MAX aircraft remains

grounded and, based on continued uncertainty around the timing of the MAX return to service, the

Company has removed the MAX from its flight schedule through June 6, 2020, and will likely further

extend MAX-related flight schedule adjustments. Further, MAX deliveries have remained suspended

following the MAX groundings, and Boeing is not currently manufacturing new MAX aircraft. The

Company does not know whether, on what conditions, or when the MAX groundings will

end. Regulatory approval of MAX return to service is subject to Boeing's ongoing work with the FAA,

who will determine the timing of MAX return to service.

The MAX groundings adversely affected operating results for the year ended December 31, 2019, and

could have a material, adverse effect on the Company's operating results in future periods. A continued

prolonged extension or permanent grounding of the MAX aircraft would require additional flight

schedule adjustments and result in further delays in aircraft deliveries, as well as lower operating

revenues, operating income, and net income due to a variety of factors, including, among others,

(i) lost revenue due to flight cancellations and disruptions as a result of a smaller operating aircraft

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fleet, (ii) the lack of ability to make corresponding reductions in expenses because of the fixed nature

of many expenses, and (iii) possible negative effects on Customer confidence and airline choice.

Boeing no longer manufactures versions of the 737 other than the 737 MAX family of aircraft. If the

737 MAX aircraft were to remain unavailable for the Company's flight operations, the Company's

growth would be restricted unless and until it could procure and operate other types of aircraft from

Boeing or another manufacturer, seller, or lessor, and the Company's operations would be materially

adversely affected. In particular, if the Company's growth were to be dependent upon the introduction

of a new aircraft make and model to the Company's fleet, the Company would need to, among other

things, (i) develop and implement new maintenance, operating, and training programs, (ii) secure

extensive regulatory approvals, and (iii) implement new technologies. The requirements associated

with operating a new aircraft make and model could take an extended period of time to fulfill and

would likely impose substantial costs on the Company. A shift away from a single fleet type could also

add complexity to the Company's operations, present operational and compliance risks, and materially

increase the Company's costs. Any of these events would have a material, adverse effect on the

Company's business, operating results, and financial condition. The Company could also be materially

adversely affected if the pricing or operational attributes of its aircraft were to become less

competitive.

Further, even upon a rescission of the FAA order to ground the MAX aircraft, the Company will

continue to be reliant on Boeing to provide necessary resources and support to return the MAX to

service. Boeing has recommended that pilots receive special flight simulator training before operating

the MAX aircraft, although the FAA is ultimately responsible for establishing the training requirements

for operating the MAX. Special simulator training would further delay the MAX return to service. In

addition, following the MAX return to service, the Company could face significant operational

challenges in efficiently taking delivery of a large number of MAX aircraft from Boeing and

reintroducing the MAX aircraft into the Company's network in a controlled and steady manner.

2.The airline industry is particularly sensitive to changes in economic conditions; in the event of

unfavorable economic conditions or economic uncertainty, the Company's results of operations

could be negatively affected, which could require the Company to adjust its business strategies.

The airline industry, which is subject to relatively high fixed costs and highly variable and

unpredictable demand, is particularly sensitive to changes in economic conditions. Historically,

unfavorable U.S. economic conditions have driven changes in travel patterns and have resulted in

reduced spending for both leisure and business travel. For some consumers, leisure travel is a

discretionary expense, and short-haul travelers, in particular, have the option to replace air travel with

surface travel. Businesses are able to forego air travel by using communication alternatives such as

videoconferencing and the Internet or may be more likely to purchase less expensive tickets to reduce

costs, which can result in a decrease in average revenue per seat. Unfavorable economic conditions,

when low fares are often used to stimulate traffic, have also historically hampered the ability of airlines

to raise fares to counteract any increases in fuel, labor, and other costs. Although the U.S. economy has

experienced modest growth over the course of the past several years, any continuing or future U.S. or

global economic uncertainty could negatively affect the Company's results of operations and could

cause the Company to adjust its business strategies. Further, because expenses of a flight do not vary

significantly with the number of passengers carried, a relatively small change in the number of

passengers can have a disproportionate effect on an airline's operating and financial results. Therefore,

any general reduction in airline passenger traffic could adversely affect the Company's results of

operations.

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3.The Company's business can be significantly impacted by high and/or volatile 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 impacted by the

Company's ability to effectively address fuel price increases and fuel price volatility and

availability.

Airlines are inherently dependent upon energy to operate, and jet fuel and oil represented

approximately 22 percent of the Company's operating expenses for 2019. As discussed above under

"Business - Cost Structure," the cost of fuel can be extremely volatile and unpredictable, and even a

small change in market fuel prices can significantly affect profitability. Furthermore, volatility in fuel

prices can be due to many external factors that are beyond the Company's control. For example, fuel

prices can be impacted by political, environmental, and economic factors, such as (i) dependency on

foreign imports of crude oil and the potential for hostilities or other conflicts in oil producing areas;

(ii) disruptions in domestic refining or pipeline capacity due to weather, natural disasters, or other

factors; (iii) worldwide demand for fuel, particularly in developing countries, which can result in

inflated energy prices; (iv) changes in U.S. governmental policies on fuel production, transportation,

taxes, and marketing; and (v) changes in currency exchange rates.

The Company's ability to effectively address fuel price increases could be limited by factors such as its

historical low-fare reputation, the portion of its Customer base that purchases travel for leisure

purposes, the competitive nature of the airline industry generally, and the risk that higher fares will

drive a decrease in demand. The Company attempts to manage its risk associated with volatile jet fuel

prices by utilizing over-the-counter fuel derivative instruments to hedge a portion of its future jet fuel

purchases. However, energy prices can fluctuate significantly in a relatively short amount of time.

Because the Company uses a variety of different derivative instruments at different price points, the

Company is subject to the risk that the fuel derivatives it uses will not provide adequate protection

against significant increases in fuel prices and in some cases could in fact result in hedging losses, and

the Company effectively paying higher than market prices for fuel, thus creating additional volatility in

the Company's earnings. The Company is also subject to the risk that cash collateral may be required

to be posted to fuel hedge counterparties, which could have a significant impact on the Company's

financial position and liquidity.

In addition, the Company is subject to the risk that its fuel derivatives will no longer qualify for hedge

accounting under applicable accounting standards, which can DOES additional earnings volatility.

Adjustments in the Company's overall fuel hedging strategy, as well as the ability of the commodities

used in fuel hedging to qualify for special hedge accounting, could continue to affect the Company's

results of operations. In addition, there can be no assurance that the Company will be able to costeffectively

hedge against increases in fuel prices. See Note 2 to the Consolidated Financial Statements

for information on changes in applicable standards for hedge accounting.

The Company's fuel hedging arrangements and the various potential impacts of hedge accounting on

the Company's financial position, cash flows, and results of operations are discussed in more detail

under "Management's Discussion and Analysis of Financial Condition and Results of Operations,"

"Quantitative and Qualitative Disclosures About Market Risk," and in Note 1 and Note 10 to the

Consolidated Financial Statements.

The Company is also reliant upon the readily available supply and timely delivery of jet fuel to the

airports that it serves. A disruption in that supply could present significant challenges to the

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Company's operations and could ultimately cause the cancellation of flights and/or the inability of the

Company to provide service to a particular airport.

4.The Company's low-cost structure has historically been one of its primary competitive

advantages, and many factors have affected and could continue to affect the Company's ability

to control its costs.

The Company's low-cost structure has historically been one of its primary competitive advantages, as

it has enabled it to offer low fares, drive traffic volume, grow market share, and protect profits. The

Company's low-cost position has become even more significant with the increased presence of ULCCs

and changes to the fare offerings of other carriers, as discussed above; however, it has become

increasingly difficult for the Company to improve upon its industry cost position. For example, labor

and fuel costs, as well as other costs such as airport costs and regulatory compliance costs, can

negatively affect the Company's ability to control its costs. Furthermore, the Company has limited

control over many of these costs.

Jet fuel and oil constituted approximately 22 percent of the Company's operating expenses during

2019, and the Company's ability to control the cost of fuel is subject to the external factors discussed

in the third Risk Factor above.

Salaries, wages, and benefits constituted approximately 43 percent of the Company's operating

expenses during 2019. The Company's ability to control labor costs is limited by the terms of its

collective-bargaining agreements, and increased labor costs have negatively impacted the Company's

low-cost competitive position. As discussed further under "Management's Discussion and Analysis of

Financial Condition and Results of Operations," the Company's unionized workforce, which makes up

approximately 83 percent of its Employees, has had pay scale increases as a result of contractual rate

increases, which has put pressure on the Company's labor costs. Additionally, as indicated above under

"Business - Employees," the majority of Southwest's unionized Employee work groups, including its

Pilots; Flight Attendants; Customer Service Agents, Customer Representatives, and Source of Support

Representatives; Aircraft Appearance Technicians; Dispatchers; Flight Crew Training Instructors; and

Meteorologists, are in unions currently in negotiations for labor agreements or have labor agreements

that become amendable in 2020, which could result in additional pressure on the Company's low-cost

structure.

As discussed above under "Business - Regulation," the airline industry is heavily regulated, and the

Company's regulatory compliance costs are subject to potentially significant increases from time to

time based on actions by regulatory agencies that are out of the Company's control. Additionally,

because of airport infrastructure updates and other factors, the Company has experienced increased

space rental rates at various airports in its network. Further, the Company cannot control decisions by

other airlines to reduce their capacity. When this occurs, certain fixed airport costs are allocated among

a fewer number of total flights, which can result in increased landing fees and other costs for the

Company.

The Company is reliant upon third party vendors and service providers, and the Company's low-cost

advantage is dependent in part on its ability to obtain and maintain commercially reasonable terms with

those parties. Disruptions to capital markets, shortages of skilled personnel, geopolitical developments,

and/or adverse economic conditions could subject certain of the Company's third party vendors and

service providers to significant financial pressures which could lead to performance problems, ceased

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operations, or bankruptcies among these third party vendors and service providers. If a third party

vendor or service provider is unable to fulfill its commitments to the Company, the Company may be

unable to replace that third party vendor or service provider in a short period of time, or at competitive

terms, which could have a material adverse effect on the Company's results of operations.

As discussed above under "Business - Insurance," the Company carries insurance of types customary

in the airline industry. Although the Company has been able to purchase aviation, property, liability,

and professional insurance via the commercial insurance marketplace, available commercial insurance

could be more expensive in the future and/or have material differences in coverage than insurance that

has historically been provided and may not be adequate to protect against the Company's risk of loss

from future events, including acts of terrorism. Further, available cyber-security insurance with regards

to data protection and business interruption could be more expensive in the future and/or have material

differences in coverage than insurance that has historically been provided and may not be adequate to

protect the Company's risk of loss. With respect to any insurance claims, policy coverages and claims

are subject to acceptance by the many insurers involved and may require arbitration and/or mediation

to effectively settle the claims over prolonged periods of time. In addition, an accident or other incident

involving Southwest aircraft could result in costs in excess of its related insurance coverage, which

costs could be substantial. Any aircraft accident or other incident, even if fully insured, could also have

a material adverse effect on the public's perception of the Company, which could harm its reputation

and business.

The Company cannot guarantee it will be able to maintain or improve upon its current level of low-cost

advantage over many of its airline competitors. ULCCs, which have increased capacity in the

Company's markets, have surpassed the Company's cost advantage. When competitors grow their

fleets and expand their networks, they are potentially able to better control costs per available seat

mile. In addition, like Southwest, some competitors have added a significant number of new and

different aircraft to their fleets, which could potentially decrease their operating costs through better

fuel efficiencies and lower maintenance costs. Further, some of the Company's competitors have

launched multi-year cost savings efforts to meet specific financial and growth targets. Common efforts

include fleet transformation to gain fuel efficiencies, fleet simplification, and increasing the number of

seats per trip through seat retrofits and the use of larger aircraft.

As discussed below under "Management's Discussion and Analysis of Financial Condition and Results

of Operations," the Company experienced significant unit cost pressure in 2019 following the MAX

groundings. Historically, except for changes in the price of fuel, changes in operating expenses for

airlines have been largely driven by changes in capacity. However, the Company's operating expenses

are largely fixed once flight schedules are published; and the Company experienced lower than

expected capacity during 2019 due to the MAX groundings. Throughout the duration of the MAX

groundings, the Company has made schedule adjustments and canceled flights based on guidance from

Boeing estimating the timing of MAX return to service. Further changes to guidance relating to the

expected duration of the MAX groundings could require the Company to make additional schedule

adjustments and drive additional unit cost pressure and negatively affect fuel efficiency. The Company

offers no assurances that current estimations and timelines related to the MAX groundings are correct.

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5.The Company is increasingly dependent on technology to operate its business and continues to

implement substantial changes to its information systems; any failure, disruption, breach, or

delay in implementation of the Company's information systems could materially adversely affect

its operations.

The Company is increasingly dependent on the use of complex technology and systems to run its

ongoing operations and support its strategic objectives. These technologies and systems include,

among others, the Company's website and reservation system, flight dispatch and tracking systems,

flight simulators, check-in kiosks, maintenance record keeping management systems,

telecommunications systems, flight planning and scheduling systems, crew scheduling systems, and

financial planning, management, and accounting systems. The performance, reliability, and security of

the Company's technology infrastructure and supporting systems are critical to the Company's

operations and initiatives.

Implementation and integration of complex systems and technology present significant challenges in

terms of costs, human resources, and development of effective internal controls. Implementation and

integration require a balancing between the introduction of new capabilities and the managing of

existing systems, and present the risk of operational or security inadequacy or interruption, which

could materially affect the Company's ability to effectively operate its business and/or could

negatively impact the Company's results of operations.

The Company is also reliant upon the performance of its third party vendors for timely and effective

implementation and support of many of its technology initiatives and for maintaining adequate

information security measures. If any of the Company's significant technologies or automated systems

were to cease functioning, or if its third party vendor service providers were to fail to adequately and

timely provide technical support, system maintenance, or software upgrades for any of the Company's

existing systems, the Company could experience service interruptions, delays, and loss of critical data,

which could harm its operations, and result in financial losses and reputational damage.

In the ordinary course of business, the Company's systems will continue to require modification and

refinements to address growth and changing business requirements. In addition, the Company's

systems may require modification to enable the Company to comply with changing regulatory

requirements. Modifications and refinements to the Company's systems have been and are expected to

continue to be expensive to implement and can divert management's attention from other matters. In

addition, the Company's operations could be adversely affected, or the Company could face imposition

of regulatory penalties, if it were unable to timely or effectively modify its systems as necessary or

appropriately balance the introduction of new capabilities with the management of existing systems.

The Company has experienced system interruptions and delays that have made its websites and

operational systems unavailable or slow to respond, which has prevented the Company from efficiently

processing Customer transactions or providing services. Any future system interruptions or delays

could reduce the Company's operating revenues and the attractiveness of its services, as well as

increase the Company's costs.

The Company's technologies and systems and functions could be damaged or interrupted by

catastrophic events beyond its control such as fires, floods, earthquakes, tornadoes and hurricanes,

power loss, computer and telecommunications failures, acts of war or terrorism, computer viruses,

security breaches, and similar events or disruptions. Any of these events could cause system

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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. Any of these events could damage the Company's

reputation and be expensive to remedy.

6.The Company's business is labor intensive; therefore, the Company could be adversely affected

if it were unable to maintain satisfactory relations with its Employees or its Employees'

Representatives.

The airline business is labor intensive. Salaries, wages, and benefits represented approximately

43 percent of the Company's operating expenses for the year ended December 31, 2019. In addition, as

of December 31, 2019, approximately 83 percent of the Company's Employees were represented for

collective bargaining purposes by labor unions, making the Company particularly exposed in the event

of labor-related job actions. Employment-related matters (some of which relate to negotiated items)

that have impacted, and continue to impact, the Company's results of operations include hiring/

retention rates, pay rates, outsourcing, work rules, health care costs, and retirement benefits.

7.The Company is currently dependent on a single engine supplier, as well as single suppliers of

certain other aircraft parts and equipment; therefore, the Company could be materially

adversely affected (i) if it were unable to obtain timely or sufficient delivery of aircraft parts or

equipment from Boeing or other suppliers or adequate maintenance or other support from any

of these suppliers, or (ii) in the event of a mechanical or regulatory issue associated with the

Company's aircraft parts or equipment.

The Company is dependent on Boeing as its sole supplier for many of its aircraft parts. The Company

is also dependent on sole or limited suppliers for aircraft engines and certain other aircraft parts,

equipment, and services. If Boeing, or other suppliers, were unable or unwilling to timely provide

adequate products or support for their products, or in the event of a mechanical or regulatory issue

associated with engines or other parts, the Company's operations could be materially adversely

affected. The Company could also be materially adversely affected if the pricing or operational

attributes of its aircraft equipment were to become less competitive.

8.Developing and expanding data security and privacy requirements could increase the

Company's operating costs, and any failure of the Company to maintain the security of certain

Customer, Employee, and business-related information could result in damage to the

Company's reputation and could be costly to remediate.

The Company must receive information related to its Customers and Employees in order to run its

business, and the Company's operations depend upon secure retention and the secure transmission of

information over public networks, including information permitting cashless payments. This

information is subject to the continually evolving risk of intrusion, tampering, and theft. Although the

Company maintains systems to prevent or defend against these risks, these systems require ongoing

monitoring and updating as technologies change, and security could be compromised, personal or

confidential information could be misappropriated, or system disruptions could occur. In the ordinary

course of its business, the Company also provides certain confidential, proprietary, and personal

information to third parties. While the Company seeks to obtain assurances that these third parties will

protect this information, there is a risk the security of data held by third parties could be breached. A

compromise of the Company's security systems could adversely affect the Company's reputation and

30

disrupt its operations and could also result in litigation against the Company or the imposition of

penalties. In addition, it could be costly to remediate. Although the Company has not experienced

cyber incidents that are individually, or in the aggregate, material, the Company has experienced

cyber-attacks in the past, which have thus far been mitigated by preventative, detective, and responsive

measures put in place by the Company.

In addition, in response to these types of threats, there has been heightened legislative and regulatory

focus on data privacy and security in the United States and elsewhere. As a result, the Company must

monitor a growing and fast-evolving set of legal requirements in this area. This regulatory environment

is increasingly challenging and may present material obligations and risks to the Company's business,

including significantly expanded compliance burdens, costs, and enforcement risks.

The Company has a dedicated cyber-security team and program that focuses on current and emerging

data security matters. The Company continues to assess and invest in the growing needs of the cybersecurity

team through the allocation of skilled personnel, ongoing training, and support of the adoption

and implementation of technologies coupled with cyber-security risk management frameworks.

The Company carries a cyber-security insurance policy with regards to data protection and business

interruption associated with both security breaches from malicious parties and from certain system

failures. However, available cyber-security insurance with regards to data protection and business

interruption could be more expensive in the future and/or have material differences in coverage than

insurance that has historically been provided and may not be adequate to protect the Company's risk of

loss.

9.The Company's results of operations could be adversely impacted if it is unable to effectively

execute its strategic plans.

The Company is reliant on the success of its revenue strategies and other strategic plans and initiatives

to grow and to help offset increasing costs. The timely and effective execution of the Company's

strategic plans could be negatively affected by (i) the Company's ability to timely and effectively

implement, transition, and maintain related information technology systems and infrastructure; (ii) the

Company's ability to effectively balance its investment of incremental operating expenses and capital

expenditures related to its strategies against the need to effectively control costs; and (iii) as discussed

further above, the Company's dependence on third parties with respect to the execution of its strategic

plans.

10.The airline industry has faced on-going security concerns and related cost burdens; further

threatened or actual terrorist attacks, or other hostilities, even if not made directly on the airline

industry, could significantly harm the airline industry and the Company's operations.

Terrorist attacks or other crimes and hostilities, actual and threatened, have from time to time

materially adversely affected the demand for air travel and also have resulted in increased safety and

security costs for the Company and the airline industry generally. Safety and security measures create

delays and inconveniences and can, in particular, reduce the Company's competitiveness against

surface transportation for short-haul routes. Additional terrorist attacks or other hostilities, even if not

made directly on the airline industry, or the fear of such attacks or other hostilities (including elevated

national threat warnings, government travel warnings to certain destinations, travel restrictions, or

selective cancellation or redirection of flights due to terror threats) would likely have a further

significant negative impact on the Company and the airline industry.

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11.The Company is subject to extensive FAA regulation, which may materially and adversely affect

the Company's business plans, strategies, and results of operations.

The FAA promulgates and enforces regulations affecting the airline industry, and exercises extensive

regulatory oversight of the Company's operations. The FAA from time to time also issues orders or

directives relating to the maintenance and operation of aircraft that require significant expenditures or

operational restrictions. FAA orders and directives can be issued with little or no notice, and in certain

instances, require the temporary grounding of aircraft. Recently, the Company reviewed a draft report

from the Office of Inspector General (OIG) for the DOT regarding its audit of the FAA's oversight of

the Company. The Company strongly disagrees with many of the draft statements and conclusions in

the report and is not aware of any action the FAA might take against the Company arising from the

OIG's audit of the FAA; however, the issuance of new FAA regulations, regulatory amendments, or

orders or directives could result in flight schedule adjustments and groundings or delays in aircraft

deliveries, as well as lower operating revenues, operating income, and net income due to a variety of

factors, including, among others, (i) lost revenue due to flight cancellations and disruptions as a result

of a smaller operating aircraft fleet, (ii) the lack of ability to make corresponding reductions in

expenses because of the fixed nature of many expenses, and (iii) possible negative effects on Customer

confidence and airline choice. Government regulation affecting the Company is discussed in more

detail in the below risk factor and above under "Business - Regulation."

12.Airport capacity constraints and air traffic control inefficiencies have limited and could

continue to limit the Company's growth; changes in or additional governmental regulation

could increase the Company's operating costs or otherwise limit the Company's ability to

conduct business.

Almost all commercial service airports are owned and/or operated by units of local or state

governments. Airlines are largely dependent on these governmental entities to provide adequate airport

facilities and capacity at an affordable cost. In order to operate efficiently, as well as to add service in

current and new markets, the Company must be able to maintain and/or obtain space and facilities at

desirable airports with adequate infrastructure. As airports become more congested, space, facility, and

infrastructure constraints may prevent the Company from maintaining existing service and/or

implementing new service in a commercially viable manner.

Similarly, the federal government singularly controls all U.S. airspace, and airlines are dependent on

the FAA controlling that airspace in a safe and efficient manner. The current air traffic control system

is mainly radar-based, supported in large part by antiquated equipment and technologies, and heavily

dependent on skilled personnel. The FAA's protracted transition to a satellite-based air traffic control

system, as well as the implementation of policies and standards that account for the precision of

GPS-supported aircraft technologies, could continue to adversely impact airspace capacity and the

overall efficiency of the system, resulting in limited opportunities for the Company to grow, longer

scheduled flight times, increased delays and cancellations, and increased fuel consumption and aircraft

emissions. The current air traffic control system faces challenges in supporting the growing demand for

U.S. air travel and may not be able to effectively keep pace with future air traffic growth. The

continuation of these air traffic control constraints or the FAA's inability to meet staffing needs on a

long-term basis may have a material adverse effect on the Company's operations.

As discussed above under "Business - Regulation," airlines are also subject to other extensive

regulatory requirements. These requirements often impose substantial costs on airlines. The

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Company's strategic plans and results of operations could be negatively affected by changes in law and

future actions taken by domestic and foreign governmental agencies having jurisdiction over its

operations, including, but not limited to:

increases in airport rates and charges;

limitations on airport gate capacity or use of other airport facilities such as the annual

reallocation of capacity at John Wayne Airport in Orange County, California, which has

caused the Company to reduce service at that airport in each of the last several years;

limitations on route authorities;

actions and decisions that create difficulties in obtaining access at slot-controlled airports (a

"slot" is the right of an air carrier, pursuant to regulations of the FAA, to operate a takeoff or

landing at a specific time at certain airports);

actions and decisions that create difficulties in obtaining operating permits and approvals;

changes to environmental regulations;

new or increased taxes or fees;

changes to laws that affect the services that can be offered by airlines in particular markets

and at particular airports;

restrictions on competitive practices;

changes in laws that increase costs for safety, security, compliance, or other Customer

Service standards;

changes in laws that may limit the Company's ability to enter into fuel derivative contracts to

hedge against increases in fuel prices;

changes in laws that may limit or regulate the Company's ability to promote the Company's

business or fares;

airspace closures or restrictions;

grounding of commercial air traffic by the FAA; and

the adoption of more restrictive locally-imposed noise regulations.

13.The airline industry is affected by many conditions that are beyond its control, which can impact

the Company's business strategies and results of operations.

In addition to the unpredictable economic conditions and fuel costs discussed above, the Company,

like the airline industry in general, is affected by conditions that are largely unforeseeable and outside

of its control, including, among others:

adverse weather and natural disasters such as the weather-related disruptions in fourth

quarter 2019, which resulted in approximately 2,100 canceled flights;

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changes in consumer preferences, perceptions, spending patterns, or demographic trends

(including, without limitation, changes in travel patterns due to government shutdowns or

sequestration);

actual or potential disruptions in the air traffic control system (including, for example, as a

result of inadequate FAA staffing levels due to government shutdowns or sequestration);

actual or perceived delays at various airports resulting from government shutdowns

(including, for example, longer wait-times at TSA checkpoints due to inadequate TSA

staffing levels);

changes in the competitive environment due to industry consolidation, industry bankruptcies,

and other factors;

delays in deliveries of new aircraft (including, without limitation, due to FAA groundings of

certain aircraft types or due to the closure of the FAA's aircraft registry during government

shutdowns);

outbreaks of disease; and

actual or threatened war, terrorist attacks, government travel warnings to certain destinations,

travel restrictions, and political instability.

14.The airline industry is intensely competitive.

As discussed in more detail above under "Business - Competition," the airline industry is intensely

competitive. The Company's primary competitors include other major domestic airlines, as well as

regional and new entrant airlines, surface transportation, and alternatives to transportation such as

videoconferencing and the Internet. The Company's revenues are sensitive to the actions of other carriers

with respect to pricing, routes, loyalty programs, scheduling, capacity, customer service, operational

reliability, comfort and amenities, cost structure, aircraft fleet, and code-sharing and similar activities.

15.The Company's future results will suffer if it does not effectively manage its expanded

international operations and/or Extended Operations ("ETOPS").

The Company's international flight offerings are subject to CBP-mandated procedures, which can affect

the Company's operations, costs, and Customer experience. The Company has made, and is continuing to

make, significant investments in facilities, equipment, and technologies at certain airports in order to

improve the Customer experience and to assist CBP with its inspection and processing duties; however,

the Company is not able to predict the impact, if any, that various CBP measures or the lack of CBP

resources will have on Company revenues and costs, either in the short-term or the long-term.

International flying requires the Company to modify certain processes, as the airport environment is

dramatically different in certain international locations with respect to, among other things,

common-use ticket counters and gate areas, local operating requirements, and cultural preferences.

Certain international routes served by the Company are also subject to specific aircraft equipage

requirements and unique consumer behavior. Route-specific equipage requirements and unique

consumer behavior, together or individually, may (i) restrict the Company's flexibility when

scheduling and routing aircraft and crews, (ii) require the Company to modify its policies or

procedures, and (iii) impact the Company's operational performance, costs, and Customer Experience.

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In addition, 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. To the extent

the Company seeks to serve additional international destinations in the future, or to renew its authority

to serve certain routes, it may be required to obtain necessary authority from the DOT and/or approvals

from the FAA, as well as any applicable foreign government entity.

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, and its rights or ability to enforce rights may be different than would be

expected under U.S. laws. Furthermore, enforcement of laws in some jurisdictions can be inconsistent

and unpredictable, which can affect both the Company's ability to enforce its rights and to undertake

activities that it believes are beneficial to its business. As a result, the Company's ability to generate

revenue and its expenses in non-U.S. jurisdictions may differ from what would be expected if U.S.

laws governed these operations. Although the Company has policies and procedures in place that are

designed to promote compliance with the laws of the jurisdictions in which it operates, a violation by

the Company's Employees, contractors, or agents or other intermediaries could nonetheless occur. Any

violation (or alleged or perceived violation), even if prohibited by the Company's policies, could have

an adverse effect on the Company's reputation and/or its results of operations.

In first quarter 2019, the Company began service to Hawaii after receiving approval from the FAA for

ETOPS, a regulatory requirement to operate between the U.S. mainland and the Hawaiian Islands. The

Company is subject to additional, ongoing, ETOPS-specific regulatory and procedural requirements,

which present operational and compliance risks to the Company's business, including costs associated

therewith.

16.The Company is currently subject to pending litigation, and if judgment were to be rendered

against the Company in the litigation, such judgment could adversely affect the Company's

operating results.

As discussed below under "Legal Proceedings," the Company is subject to pending litigation.

Regardless of merit, these litigation matters and any potential future claims against the Company may

be both time consuming and disruptive to the Company's operations and cause significant expense and

diversion of management attention. Should the Company fail to prevail in these or other matters, the

Company may be faced with significant monetary damages or injunctive relief that could materially

adversely affect its business and might materially affect its financial condition and operating results.

17.acThe Company's reputation and brand could be harmed if it were to experience significant

negative publicity, including through social media.

The Company operates in a public-facing industry with significant exposure to social media. Negative

publicity, whether or not justified, can spread rapidly through social media. To the extent that the

Company is unable to respond timely and appropriately to negative publicity, the Company's

reputation and brand can be harmed. Damage to the Company's overall reputation and brand could

have a negative impact on its financial results.