Southwest Airlines' (NYSE: LUV) net income for first quarter 2003 was $24 million, compared to first quarter 2002 net income of $21 million, an increase of 14.3 percent. Diluted net income per share was $.03 in both first quarter 2003 and first quarter 2002. These results were in line with First Call's consensus estimate of $.03 for first quarter 2003.

Total operating revenues for first quarter 2003 increased 7.5 percent to $1.35 billion, compared to $1.26 billion for first quarter 2002. Revenue passenger miles (RPMs) increased 4.8 percent in first quarter 2003, compared to a 5.3 percent increase in available seat miles (ASMs), resulting in a load factor of 62.6 percent versus the first quarter 2002 load factor of 62.9 percent. The passenger revenue yield per RPM increased 2.6 percent to 11.99 cents from 11.69 cents in first quarter 2002. Operating revenue yield per ASM increased 2.1 percent to 7.77 cents from 7.61 cents in first quarter 2002.

Operating expenses per ASM for first quarter 2003 increased 2.6 percent to 7.50 cents from 7.31 cents in first quarter 2002, primarily due to higher labor and jet fuel costs, net of hedging gains. The Company's hedging program resulted in the recognition of approximately $77 million in gains during first quarter 2003, of which $64 million was recorded in "Fuel and oil." The remaining gains are included in "Other (gains) losses, net" in accordance with Statement of Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as amended. Excluding fuel, operating expenses per ASM for first quarter 2003 were 6.30 cents, approximately the same as first quarter 2002.

James F. Parker, Vice Chairman and Chief Executive Officer, stated: "Considering the current financial crisis of the airline industry and the adverse effects world events continue to have on demand for air travel, we are grateful to report a 14.3 percent increase in our first quarter 2003 earnings to $24 million. This earnings performance marks our 48th consecutive quarterly profit, which represents an enormous accomplishment for our Shareholders and Shareholder-Employees.

"Although our financial performance has been exceptional relative to the airline industry as a whole, Southwest, too, has been severely impacted by the lingering effects of the 2001 terrorist attacks and the war in Iraq. Although our revenues were showing signs of recovery during fourth quarter 2002 and into first quarter 2003, those trends were disrupted.

"Since the war began, bookings for second quarter 2003 have softened further. Currently, we expect only modest revenue growth, if any, compared to last year's second quarter revenue of $1.47 billion, which included $36 million in additional revenue related to a reduction in estimated refunds and exchanges included in air traffic liability.

"On the cost side, we were able to mitigate significantly higher energy costs by hedging 100 percent of our first quarter fuel requirements, saving Southwest approximately $77 million pretax in first quarter of 2003. For second quarter 2003, we are 100 percent hedged in the $24 per barrel range. We are 85 percent hedged for the second half of 2003 with caps under $24 per barrel. We remain 80 percent hedged for 2004, with caps approximating $23 per barrel.

"Excluding fuel, we were pleased with our better than expected unit cost performance. Although we continue to face certain cost challenges, our unit cost growth was very modest, partly due to our Employees' disciplined cost reduction efforts. Based on first quarter 2003 costs, we expect modest year over year unit cost growth again in second quarter of 2003.

"The Emergency Wartime Supplemental Appropriations Act ('Act') was recently enacted. Among other items, the legislation includes a $2.3 billion cash reimbursement for security fees remitted to the Transportation Security Administration since the 2001 terrorist attacks. Southwest expects to receive its proportional share during second quarter 2003.

"Although our revenue outlook remains uncertain, our costs remain under control. As a consequence, and barring any unforeseen event, we expect to be profitable in the second quarter of 2003. Given the current disruption in revenue trends, however, and without consideration of funds received pursuant to the Act, it will be difficult to match last year's second quarter profit of $102 million, which included $36 million (pretax) related to a reduction in air traffic liability.

"While many of our competitors have reduced their service due to the war in Iraq, Southwest plans to grow our available seat mile capacity by roughly four percent in 2003. In the course of cautiously growing our fleet, we recently exercised options to acquire four more 737-700s in 2004. This change brings our total firm orders to 25 and options to nine for 2004.

"Although we are not entirely out of the woods, we have, thus far, effectively weathered the post-September 11 industry crisis for one reason -- the People of Southwest Airlines. We have the most dedicated, resilient, and finest group of Employees in the airline industry. Their unity and longterm vision allows us to produce great results in good times so that we can survive even in the worst of times. As a result of our Employees' remarkable efforts and unwavering Southwest Spirit, Southwest was named one of FORTUNE magazine's most admired companies in America and topped the airline category for the seventh consecutive year. Southwest was also recognized again in Business Ethics magazine's listing of '100 Best Corporate Citizens' and HISPANIC magazine's listing of the 2003 Hispanic Corporate 100. I am also pleased that Southwest was named the 'Best Low Cost Airline' at the 2003 Official Airline Guide Airline of the Year awards and selected by Air Transport World magazine as its 'Airline of the Year for 2003. Congratulations to each and every Southwest Employee for these wonderful accomplishments -- you are indeed the very best!"

Net cash provided by operations was $267 million and capital expenditures were $193 million for first quarter 2003. We ended first quarter 2003 with $1.89 billion cash on hand plus our available unsecured revolving credit line of $575 million.

Southwest Airlines will conduct a conference call to discuss its quarterly earnings today at 10:30 a.m. Eastern Time. A live broadcast of the conference call will be available via the World Wide Web at www.southwest.com .

This news release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the plans, intentions, and expectations reflected in or suggested by the forward-looking statements. Additional information concerning the factors which could cause actual results to differ materially from the forward-looking statements are contained in the Company's periodic filings with the Securities and Exchange Commission, including without limitation, the Company's Annual Report on Form 10-K for the year ended 2002. The Company undertakes no obligation to publicly update or revise any forward- looking statements to reflect events or circumstances that may arise after the date of this press release.

SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions except per share amounts)
(unaudited)

			Three months ended March 31,
		2003		2002		Percent Change
OPERATING REVENUES:
Passenger		$1,306		$1,215		7.5
Freight		22		21		4.8
Other		23		21		9.5
Total operating revenues		1,351		1,257		7.5
OPERATING EXPENSES:
Salaries, wages, and benefits		516		462		11.7
Fuel and oil		208		170		22.4
Maintenance materials and repairs		106		97		9.3
Agency commissions		12		14		(14.3)
Aircraft rentals		45		47		(4.3)
Landing fees and other rentals		90		83		8.4
Depreciation		93		85		9.4
Other operating expenses		235		250		(6.0)
Total operating expenses		1,305		1,208		8.0
OPERATING INCOME		46		49		(6.1)
OTHER EXPENSES (INCOME):
Interest expense		26		26		0.0
Capitalized interest		(7)		(4)		75.0
Interest income		(5)		(10)		(50.0)
Other (gains) losses, net		(7)		2		n.a.
Total other expenses (income)		7		14		n.a.
INCOME BEFORE INCOME TAXES		39		35		11.4
PROVISION FOR INCOME TAXES		15		14		7.1
NET INCOME		$24		$21		14.3
NET INCOME PER SHARE:
Basic		$.03		$.03
Diluted		$.03		$.03
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		778		769
Diluted		808		811

SOUTHWEST AIRLINES CO.
COMPARATIVE CONSOLIDATED OPERATING STATISTICS
(unaudited)

			Three months ended March 31,
		2003		2002		Percent Change
Revenue passengers carried		15,077,537		14,463,282		4.2 %
Revenue passenger miles (RPMs) (000s)		10,895,701		10,392,590		4.8 %
Available seat miles (ASMs) (000s)		17,399,132		16,519,957		5.3 %
Load factor		62.6%		62.9%		(0.3)pts.
Average length of passenger haul		723		719		0.6 %
Trips flown		233,087		231,195		0.8 %
Average passenger fare		$86.64		$83.99		3.2 %
Passenger revenue yield per RPM		11.99c		11.69c		2.6 %
Operating revenue yield per ASM		7.77c		7.61c		2.1 %
Operating expenses per ASM		7.50c		7.31c		2.6 %
Operating expenses per ASM, excluding fuel		6.30c		6.28c		0.3 %
Fuel costs per gallon, excluding fuel tax		74.8c		63.3c		18.2 %
Fuel consumed, in gallons (millions)		277		268		3.4 %
Number of Employees at period-end		33,140		32,244		2.8 %
Size of fleet at period-end		377		359		5.0 %

SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)

		March 31 2003 ,		December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents		$1,889		$1,816
Accounts and other receivables		159		174
Inventories of parts and supplies, at cost		95		86
Fuel hedge contracts		97		113
Prepaid expenses and other current assets		36		43
Total current assets		2,276		2,232
Property and equipment, at cost:
Flight equipment		8,110		8,025
Ground property and equipment		1,062		1,042
Deposits on flight equipment purchase contracts		468		389
		9,640		9,456
Less allowance for depreciation		2,906		2,810
		6,734		6,646
Other assets		94		76
		$9,104		$8,954
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$367		$362
Accrued liabilities		514		529
Air traffic liability		535		412
Current maturities of long-term debt		132		131
Total current liabilities		1,548		1,434
Long-term debt less current maturities		1,547		1,553
Deferred income taxes		1,243		1,227
Deferred gains from sale and leaseback of aircraft		180		184
Other deferred liabilities		127		134
Stockholders' equity:
Common stock		778		777
Capital in excess of par value		146		136
Retained earnings		3,476		3,455
Accumulated other comprehensive income		59		54
Total stockholders' equity		4,459		4,422
		$9,104		$8,954

SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)

		Three months ended March 31,
		2003		2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$24		$21
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		93		85
Deferred income taxes		12		14
Amortization of deferred gains on sale and leaseback of aircraft		(4)		(4)
Amortization of scheduled airframe inspections & repairs		12		11
Changes in certain assets and liabilities:
Accounts and other receivables		16		(62)
Other current assets		(1)		17
Accounts payable and accrued liabilities		(7)		(86)
Air traffic liability		123		111
Other		(1)		(14)
Net cash provided by operating activities		267		93
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net		(193)		(109)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt		---		385
Proceeds from trust arrangement		---		59
Proceeds from Employee stock plans		12		20
Payments of long-term debt and capital lease obligations		(6)		(5)
Payment of trust arrangement		---		(123)
Payment of revolving credit facility		---		(475)
Payments of cash dividends		(7)		(7)
Other, net		1		(4)
Net cash used in financing activities		---		(150)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		74		(166)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,815		2,280
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$1,889		$2,114

Southwest Airlines Co. Boeing 737-700 Delivery Schedule
	Prior Schedule Firm Options*					Current Schedule Firm Options*
2003**		17		---		17		---
2004		21		13		25		9
2005		24		18		24		18
2006		22		16		22		16
2007		25		29		25		29
2008		6		45		6		45
2009-2012		---		177		---		177
Total		115		298		119		294

*Includes purchase rights
**Includes two aircraft delivered in first quarter 2003

SOURCE Southwest Airlines Co.