REVENUE

3 Months Ended

Mar. 31, 2019

Revenue Recognition and Deferred Revenue [Abstract]

Passenger Revenues

The Company’s contracts with its Customers primarily consist of its tickets sold, which are initially deferred as Air traffic liability. Passenger revenue associated with tickets is recognized when the performance obligation to the Customer is satisfied, which is primarily when travel is provided.

Revenue is categorized by revenue source as the Company believes it best depicts the nature, amount, timing, and uncertainty of revenue and cash flow. The following table provides the components of Passenger revenue recognized for the three months ended March 31, 2019 and 2018:



	Three months ended March 31,
(in millions)	2019		2018
Passenger non-loyalty	$	4,043	$	3,948
Passenger loyalty - air transportation	535		491
Passenger ancillary sold separately	167		146
Total passenger revenues	$	4,745	$	4,585

As of March 31, 2019, and December 31, 2018, the components of Air traffic liability, including contract liabilities based on tickets sold, unused funds available to the Customer, and loyalty points available for redemption, net of expected spoilage, within the unaudited Condensed Consolidated Balance Sheet were as follows:



	Balance as of
(in millions)	March 31, 2019		December 31, 2018
Air traffic liability - passenger travel and ancillary passenger services	$	2,843	$	2,059
Air traffic liability - loyalty program	3,171		3,011
Total Air traffic liability	$	6,014	$	5,070

The balance in Air traffic liability – passenger travel and ancillary passenger services also includes unused funds that are available for use by Customers and are not currently associated with a ticket, but represent funds effectively refunded and made available for use to purchase a ticket for a flight that occurs prior to their expiration. These funds are typically created as a result of a prior ticket cancellation or exchange. These performance obligations are expected to have a duration of twelve months or less; therefore, the Company has elected to not disclose the amount of the remaining transaction price and its expected timing of recognition for passenger tickets. Recognition of revenue associated with the Company’s loyalty liability can be difficult to predict, as the number of award seats available to members is not currently restricted and they could choose to redeem their points at any time that a seat is available. The performance obligations classified as a current liability related to the Company’s loyalty program were estimated based on expected redemptions utilizing historical redemption patterns, and forecasted flight availability, fares, and coefficients. The entire balance classified as Air traffic liability – noncurrent relates to loyalty points that were estimated to be redeemed in periods beyond 12 months following the representative balance sheet date. The Company expects the majority of loyalty points to be redeemed within two years. Rollforwards of the Company's Air traffic liability - loyalty program for the three months ended March 31, 2019 and 2018 were as follows (in millions):



	Three months ended March 31,
	2019			2018
Air traffic liability - loyalty program - beginning balance	$	3,011		$	2,667
Amounts deferred associated with points awarded	711			634
Revenue recognized from points redeemed - Passenger	(535		)	(491		)
Revenue recognized from points redeemed - Other	(16		)	(11		)
Air traffic liability - loyalty program - ending balance	$	3,171		$	2,799

Air traffic liability includes consideration received for ticket and loyalty related performance obligations which have not been satisfied as of a given date. Rollforwards of the amounts included in Air traffic liability as of March 31, 2019 and 2018 were as follows (in millions):



	Air traffic liability
Balance at December 31, 2018	$	5,070
Current period sales (passenger travel, ancillary services, flight loyalty, and partner loyalty)	5,704
Revenue from amounts included in contract liability opening balances	(2,008		)
Revenue from current period sales	(2,752		)
Balance at March 31, 2019	$	6,014



	Air traffic liability
Balance at December 31, 2017	$	4,565
Current period sales (passenger travel, ancillary services, flight loyalty, and partner loyalty)	5,407
Revenue from amounts included in contract liability opening balances	(1,831		)
Revenue from current period sales	(2,711		)
Balance at March 31, 2018	$	5,430

The Company has a co-branded credit card agreement (“Agreement”) with Chase Bank USA, N.A. (“Chase”), through which the Company sells loyalty points and certain marketing components, which consist of the use of Southwest Airlines’ brand and access to Rapid Rewards Member lists, licensing and advertising elements, and the use of the Company’s resource team. The Company recognized revenue related to the marketing, advertising, and other travel-related benefits of the revenue associated with various loyalty partner agreements including, but not limited to, the Agreement with Chase, within Other operating revenues. For the three months ended March 31, 2019 and 2018, the Company recognized $319 million and $271 million, respectively.