Southwest Airlines (LUV) 25 Jul 242024 Q2 Earnings call transcript

Hello, everyone, and welcome to the Southwest Airlines Second Quarter 2024 Conference Call. I'm Gary, and I'll be moderating today's call, which is being recorded. A replay will be available on southwest.com in the Investor Relations section. [Operator Instructions] Now Julia Landrum, Vice President of Investor Relations, will begin the discussion. Please go ahead, Julia.

much. so you Thank welcome second and call. XXXX to everyone, quarter our earnings Hello, President Romo. Bob am President an and Andrew also this Operating Vice our today overview announced Watterson; strategic initiatives provide CFO, CEO, Executive I performance by will Chief of and the joined and started get will us Bob company's Jordan; and color and with the Tammy strategy morning. Officer; on sheet. our update on the and costs Andrew and cover balance will an provide Tammy revenue will of is Q&A. A other make Transformation the materially that on with EVP future expectations in Green, as Brian our will well us Commercial of differ based from performance, executives room expectations. also forward-looking which we today quick are and as current could statements, actual support to reminder results results, special earnings our that GAAP Also, items called reconciled reference our results out on we will which exclude and to release. non-GAAP press are

and select call this Our are with XXXX you, with press Investor Relations the pleased results quarter that, issued Bob. both to separate were website. And I'm announcing press to second morning on initiatives our turn a release over available release and strategic

you, morning. us and thanks, this Thank everyone, joining Julie, for

better to jump a higher meaningful for then I cover in a to have so in. Southwest implement our on competitive, the our to position today, detail and today, more Airlines earlier cost provide environment. We my morning In changes the announced comments will let's this on lot briefly produce and touch higher right results quarter we business returns plans to

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our experienced operating metric. despite very executed prior systems technology that with improve Our technology team. the we've again, and by purposeful key ran customer able frontline outages, experienced recover will was on as and Beryl global resilience we rate. Investments challenging ability to moved well but cancel from we X to a to advance were redundancy cancel experiencing hangover to core again, and investment we're employees day. XX.X% and operations continue almost earlier as made And had continue. am we factor operation This performance had proud this July of weather. made we for every meant to modernize that the X% evidenced that a following very time investments we Once demonstrating rate day an X Houston further the recover rate in the of high-quality nearly disruptions our very and through a completion from recovered I quickly the the with and are month. in Time issues. as following We value place our improve their near only quickly store X.X% a cancel no operational following Hurricane area

are were operational improve by well the recently service performance where be Class and customer Power, third will Satisfaction J.D. leading as for to service business our and exceptional consecutive was and distinction we cornerstones Economy Reliable of always customer Our continues recognized the model. Customer awarded year.

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opportunities additional our drive plan to leadership focus performance We're to are support, We Officer a including adding on management and also and improvement. expertise quickly to Revenue Chief revenue pricing. working action to hire

that of policies requires to business, operational and and a to will results evaluation are imperative our and of an details of the confidence We Investor evolve These support part continue all revenue to to will transformation capital. where of and ahead produce while are our will cost some deliver completely strategic allocation willingness ongoing evolve plan transformational aligned of changes new making we we the to Board, be system of management staying so further discuss Airlines. have and with of an initiatives, improved that Southwest efficiency, revenue Day, the during values. With true ultimately share on the driver in returns I'll outline commercial long-standing our mind, selfless comprehensive to discipline. we the team of our more deliver improvement. The are long-term management a a opportunities I, Doing some capital

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seats with New beginning early delivered aircraft our RECARO next improved will year. be

possible. to expenditure. configuration, as of must seats a model plan our soon avoid aircraft capital new as realize a For retrofit existing we new value to where working quickly we fleet within this to existing to use large We're the

process will time. Changing to one open to New aircraft and retrofitting of that of require that complex several an seating and to year. The across initiatives of begin is the the of therefore, take that cabin all only seat but configurations FAA change an in at expect the model and a Investor have we which cuts We, will be currently Day. fleet. complete changes, and takes typically aircraft roughly keep should detailed bookings XXX to model beginning make our the assigned retrofit commercial be aspects several transformational certification, months a from to company downtime available fleet mind we then almost be underway can seating minimal next

Officer, of full-time leadership basis. of asked a initiative Commercial Given to the on Green, take changes this I've on the our Chief significance Ryan

effort to our and digital this work Commercial As will other with to knowledge and Ryan steeped and point Ryan experience, report customer directly loyalty the and successfully of EVP transform the this commercial program previously regarding lead along and in Ryan efforts trends initiatives Transformation, to Rewards Rapid led me. is already has will underway. customer led

nearly fund are personal publishing commitment procedures well X excess and than strategic new aimed part my initiatives new a achieving in we of red-eye to an are of and implementing that in years and will value turn reflect combined additional through schedule phase by XXXX through capital. plan driving initiatives shareholder Additionally, will cost deliver ROIC rapidly our rather flying, aircraft comprehensive and which the capacity technologies incorporate in and of us a at with enable CapEx. These commitment ongoing to reductions summer time next today, all transformation

will I want to and again provide and will bring when have on made and a incredible all for And from dedication Andrew of to We employees. and to decisions all you every to single the outlook. other we deliberate already you we but that close, implement of we our that, strategic day. value the Investor plans in provide I the up and for gather that speed recognize them. And place details over I more revenue these Thank work some Day wanted excellence the to before on to full initiatives efforts September, around initiatives keep you late our and update with performance it in the tactical timing turn we've the to

I'm I for lowest industry, continued very quality people focus service and we our a Bob. the operation the our about performance safety, with their have cancellation excited rate you, the Thank proud in coming. strategic am customer trends. running year-to-date initiatives of on strong very also

performance. revenue Moving to

managing curves demand We factor deployed across to as address we booking efforts have experienced challenges load underperformance. in

many experienced revenue booking As selling a result, in curve. ultimately, from too yields early we too the and seats dilution

fundamentally we you new to decision against The our The a of destination evaluate including performance observed different flights, at in options, goal flights. followed management of likely test the a our system. XXXX, of by system. prior an considering prior to XX-month to we of X the compared extensive phases superior manages period new our recall, prior pay and is And was system. results. of is management revenue our pilot implement we superior spring and origin the system note selected our an on customers leg-based As from system consistently especially the best different during transitioned accomplishes will business The our long taking new review customers. revenue modernized the revenue system system The directly curve, produced back willing system. What that revenue just and comprehensive new this between are maximize systems with to basis of system testing differentiation and new the booking leisure what to including to the

However, to we employees estimate of month-long Bob about system straightforward. on was adapting recalibrate the mentioned, our that system got schedules taking in new that have shifts good were is system. the to bookings from outside of AB down from new to we rollout. to The new getting we estimated changing to are Boeing The we superiority flat decisive a the X confidence and not what is place, X% basis. The of built most points of XQ actions that, as headwind this Add while capabilities in to a complicated outlook year-over-year evidenced already system. news the as a testing and third is the quarter already the the we delivery that in experts, conducted. our impact by RASM supporting year-over-year Regardless,

performance. we is this we expertise tailwind once-in-a-generation to revenue a we in and see to optimizing a Adopting management gain starting expect to in successful committed are turnaround implementation, revenue system, a September our performance, system likely noticeable in executing year. As of new a

the see back optimization capacity network in includes management plan addition half In expect to continued performance, our improvement our we to moving to of revenue moderation year. the and the

management. include facilitate actions scheduled actions we oversupply capture. By supply Our expect and as summer, fall to as to quarter, less improvements all target and in demand across periods well winter-based recently well revenue schedules calendar to the demand as quality as fourth capacity geographies our published

with are we decline year-over-year We capacity and X% quarter, X% planning for to year-over-year positive by and seats trips expect fourth growth our down quarter. to roughly RASM be fourth therefore, in

transformational our calibrating incremental pursue our on to a shared management which plan work some revenue opportunities to of urgently performance, to generate financial network. Further, deliberately revenue, improve also tactical will capitalize and to We Bob process, including we opportunities you. continuing optimize have with our

for operational I close, thank hospitality, turn am such it want legendary doing I excellence so to I'll amazing Before I over their people providing and of again appreciative an to our our job contributions. With driving Tammy. that,

Thank you, Andrew, everyone. and hello,

mentioned, Overall, and CASM-X growth. CASM-X I will on as of a fleet half our X% year-over-year second increased driven year an cost market-driven of labor we as well of a growth new is before on continue for from X% full primarily second year-over-year turning CASM-X balance in sheet. to this and cost to the from Bob of year-over-year the The capacity continuation in to basis. increase higher our As moderation year-over-year contracts pressure performance update by year range expect our provide to XXXX X% the quarter

deliberately the delivery drag We overstaffing to pressures are Boeing cost delays. urgently mitigate related including to reported and pursuing from previously opportunities

our quarter levels and off expanded As voluntary programs line earnings fleet. with bring time current in we and call, discussed our labor our on have staffing expenses further first reduce leave to

year hiring, the as again to controlled end We we count to to to levels from X,XXX year-end count XXXX this down critical XXXX. And down roughly be continue head and continue head our attrition with have halted we all for exceed hiring levels. in plan expect

per fuel of Our with price second was quarter in expectations. line our average $X.XX gallon

to protection target are of portfolio continues no prices change roughly provide hedge we add hedge opportunistically protection in to Our our XX% with against a position. to spikes and continuing

and aircraft continue retirements delivery committed Turning -XXX aircraft fleet. our mitigate XXXX and delivery. remain deliveries, plan to for our benefit to to therefore, adjusted lease to earnings in to to report risk delivery prior prudently reduction our internal our exceeds -X planned our fleet expectations XX modernization our We returns planned functions. year. X April -XXX Boeing planning We the our XX for We,

to production. committed longer-term also We and remain ROIC capacity discipline

expectation We quarter decrease expect X% and to our up quarter to full XXXX approximately approximately capacity year-over-year. year for increase X% to capacity approximately third Accordingly, continues fourth capacity be X%.

growth trends XXXX, to on capital. future Looking reach our of to in keep to remain and cost any our at committed plan growth excess financial grow of below we invested returns beyond earning of our right until goal consistently or we long-term macroeconomic capital

prior is spending Our the $X.X $X.X billion expected of XXXX line to below guidance our approximately of in well for and capital $X billion expectations is at which billion, beginning with our the year.

regarding with expect We certain the as basis in are a financial in of the aircraft. and ongoing reduction impact delays discussions we cost compensation, any with to as past damages Boeing financial realized of delivery be

strength balance rating X agencies. Our an is investment-grade by with a obviously all competitive critical sheet rating

continue and second billion of We cash be position in ended $XX versus to as cash $X outstanding a debt. we billion with short-term quarter net investments of

to interest more expense. in million expected still interest a XXXX is scheduled and offset modest debt than $XX the expect for currently, We full income year, repayments XXXX

fund we modernization contract pandemic, undrawn debt business us, levels uncertainty normalizing ratification provide levels to service towards intend labor elevated liquidity to of back including unforeseen considerations largely efforts, much liquidity, With the the total have our insurance start we primarily minimum fleet to maintained revolver. against targeting our and levels behind pre-COVID risk. liquidity bonuses, Following

liquidity, ratings and goals grow returns. financial unchanged: Our sheet, capital long-term earnings, balance ample investment-grade strong credit maintain and a remain margins

XXXX next higher the rates maturities support and refinance year. loans Andrew the industry to of As we start the intend tranche first off partially program or to in to debt said, associated for beginning pay plan repay specifically interest cash the as ratchet least at payroll

committed We our shareholder returns. to of healthy also legacy remain

capital half more share quarter. $XX.X history shareholders shareholders. to weeks we dividend couple $XXX third returning in just than of first since to through We another this and returned billion our our year. through in We dividends We are here repurchases XXXX, proud of and dividends of returned of paid ago a million the

return is our and restore to shareholder returns are our of We ultimately, reviewing levels. capital actively historic policies, to goal

to is of we close, and financial I what want not deliver. reiterate that As I performance can must our reflective

employees as our Southwest to committed executing initiatives the fully remain and with dedication customers. I cost their about capital, restore providing lead performance you, the I mission a steadfast We in remain capital about addressing at our financial storied areas and the to a we our bright less. expect company in our September. as distractions, to will more on remains we our you I Day plans are nothing which and to to industry are will in of improve, our proud to to owning Investor our shareholders, as for management world-class a excess There back satisfied to share these principles. And that, be place we our turn excited valued the strategic both in to allocation need well with returns and have and us plan in Despite plan team. financial to secure As grateful for we of guiding hospitality am and am future this tactical it capital on as invested of over and Julia. employees.

Thank Tammy. our completes prepared you, This remarks.

you and get yourself analysts' would one to please line now many open possible, that as the of necessary. will We a we We question so follow-up, like brief limit for to ask you questions. as if

take the first question. now We will

[Operator The Instructions] Brandon from Oglenski question comes first with Barclays.

announced new decades have the agree, appreciate changes red-eye today, that extra competitors. definitely your been like you'd at But think offered flying. we these for you legroom, product Bob, I

a cabin of the this Why few can now? do wasn't redesign? you ago maybe like a just guess you I So even Why give years into insight with this? that us did timing when

things have demand Brandon, changed. changing mean patterns. lot you Yes, of I I a think

of always some that the out is pandemic. changed have also extent, changing. It preference We coming to customer

the end when. the do time longer right it's At flown debate full. of day, and right the as always can we over are now. Particularly flights thing more to have You

of is that think this. driver large I a

things the if was, thousands sitting, analysis back We customers obvious here. have to lot what pay amongst a you preference preference assigned power. of a surprised I like And work, surprised in is to our to amongst out willing of I was fly where the options And they know when have a a preference, that then, the while preference they're Airlines #X they up premium for. they I'll a XX% those have products, the of that's seat have Tens the XX% understand that of carriers. admit, surprised. favor course, just are cabin. was other leave of One customers surveyed bit reason prefer customers, reported, in extensive at customers we and wasn't more what ended conjoint of Southwest that seating, for defect from they coming of flight, it assigned customers And level seating us. longer to that research I did the

So that there's you not it's to is the you're clear always seating change where our forward ensure for share employees for I'm on to right do time XXX% customers, work share place. our and very for but this other focused. our demand. But words, to lines the pick In that is to at right that now the and the done we've can strong, other time strong right thing in do Day change. we'll The quite our the the of September, in shareholders. it's Investor selling we all that ready XXXX, clearly the new and plan than

levied is what effort externally? the couldn't criticism investors of you on make I even think Are I ago. positions these the But looking it's to Well, These been from and guess, think changes. some Board company being that, you that an have the some things discussed the years appreciate public such your are doing insular been aspect? fill to of culture. I executive here

Yes.

you could more always is think -- perfect. hindsight a I always lot

and on can the here you of decision. that you so forward pace. And and I'm telling with driving change back we're transformational criticize Airlines at focused always a Southwest timing driving forward just look

You the just us not cabin changes. seating announce assigned and today heard the

have critical during not to to outage. outage the published working which I us the is we And which And day allowed tech flying, schedules have on. completion worked red-eye something working systems aggressively operation announce was operational on week could of us on the systems are in on, believe, It's heard about. it's something XX.X% that affected. we tech and systems, last talk been had today. We've operational on we You a the the factor work a, systems, we

driving are pace forward, plan allocation our So and addressing improving fully at addresses capital delivering initiatives, transformative and driving having operational we focused discipline. efficiency on that the a comprehensively company, forward commercial transforming

Baker next The is JPMorgan. with question from Jamie

with assigned agent? aircraft do On single able to a an still seating, you just being envision board

on absolutely, would intent. still the Yes, of and We're specifics. that working be the product some design

to We have the line of cabin. a layout the lot of sight of

line We sight now the have design. the of to a working We're product lot on boarding. of right

credit in Jamie, things that. the is really the manner of like in today, of a survey, customers, for board get that our One an of ordinal that we lot and We order boarding. and we order our calm

known So maintaining the make it customers complexity. but our for, there's Day. at a want lot sense, goal. And way. it that would manner common we're seating. again, sense, obviously, our to whole a assigned that with to thing, the this share focus doing more the be And form things in a of in But we Southwest not boarding pairs do adding love, Investor And on that that

a again, everything, extended you and X/X there will again, in the or curtain at of rest different So and be we're cabin, across this look than of be legroom the the to a ovens. differentiation. we'll will a, But seat different the if so ready but have meals it share the It cabin. won't and seats be not fleet and

way. do exact boarding. the thing Southwest same we'll in so to this applies And And

disclose profits, to commented driving is rapid to wallets this kind like into redemptions people's of know what Perfect. Hawaii of is you've on perspective, credit But from choose in if percent past. don't a overall important how And the trying important that second, and ever getting could I'm like, example, brand that? and just you rewards Hawaii how I something stuff? cards model for Hawaii,

very but think you Jamie, at as let take here. details particularly I'll crack West important, and the the Coast it's franchise, about a Andrew the

I it kind It's high redemption highest but Yes. of top is as the Aruba not that is and our can't off Jamie, for of East Coast my our goes as customers recall high. Aruba. head, actually who want a vacation In Vegas and with kind we [indiscernible] business-centric West, network in the a the leisure that. destination, for in options and of season. under aspirational have West very Phoenix being allows that

So Hawaii is weather in Western Florida important who of to state their franchise and to our U.S. Hawaiian for customer beach geographically destination. the closer are warm

that important it's So a purchase base. for customer is who repeat base customer

rewards have our that wants we have for reflects credit U.S. brand travel multipurpose them network wrap why Western in the who is identifies for their a cards, customers. So and and to someone

fit -- customer there it and make so to mature as of network kind can adjustments point much sure there our to as importance why So many into vacation well doing of we that's time aspirational that one spend adhesion give profitably the destination. it to so that trying of

good I guessed good would've detail. That's one. a the That's nugget. Aruba not

with The from Savi Raymond is next Syth James. question

realizing curious just kind I management sales talk want Just seems talk the issues about like kind a out your of of that there, was on we prices. many was know, prices. But you're seeing still you're sold well. I activity too past too to today that comment management with of of doesn't of at you curious, you've that? some I at on the too sale in details. and if And had come think, seats if low could with in a that that jive fair Bob, you've up fair and kind seem too how to revenue of Ryan, changes the O&D sold you as have interpret about don't kind you It many lot low you doing you I shared should mentioned CNBC, seats revenue lot system,

sold more excuses, the it's Yes. management strong many which the not Boeing unusual it that also summer tuned but also we've are, that's But fewer adapting to period, not to be sell not around The classes. take seats and had, nature, in in And you time by them demand you about noise flights, when changes, have lot lower in peak booking Maybe travel seats you a clearly, and O&D and just scheduled we've which those booking curve, for revenue to help. they take early you're means generally. the adapted. and to with summer had we means of systems complex issues delivery making also higher the obviously have comes going too later to classes. get And booking talking

had we've third-party So -- experts a happening. experts We've help. to had strong what's understand to diagnostic in

fare the side RM more simply into also We clear and right being also from the clear that than on capacity sale. Maybe bit put is have a area complex. because now. that the demand there's little a and than apart is right action also expertise, more system, now. that strong action plan, plan place It's it simply domestic We're adding tearing more senior it's over leadership the

for And about you're going about. I Southwest the second to the Capacity and moderate in trips here. the X% that Airlines, piece of for mean third. about X% got down be up so down sort underneath ourselves was quarter. a in to actions that, fourth We're X-point, be actually taking fourth the in talking of to think, will will what X% quarter. in roughly we're that's It be X% actually I

aggressively capacity working part here. on down our are we So

more RM? to specifically want comment you Andrew, yes, on But

your you the red have which them you pulling directly activity would I means to that always to just fair a is in website that. that distribute think be to consumers, We way sale, say hearing can Bob, I be and do out promotional there often. the we get

promotional you a that of give a discounts depth don't of kind frequency not has In about a sales anything that level meaning. our of the really It's giving. does changed. of would indications So I special sale we're hold any situation, think

sales. look at the you If current

a But we that that our number the attached to of to over to get there there. out So of them way through customers times always have has course to us bad good from website a normal often be promoting business, been that's kind it years. expect and to has

I That's I might fleet of if is the but FA like it, curious approves changing helpful for on the lot I long Day, process just of yours? the how clarification. a just on -- a know whole was large -- seating generally the information -- there's coming plane, to once on kind the the that a doing And at more Investor

-- X got you've maybe Yes, sides X here.

we're to lopo here. it's aircraft You've going next got existing to all so we're But detail We course, the going And as long be then, in there's to line of off capital-efficient seats. it time revealing modified. rapid the with move process. September. which change, a work other way. RECARO more aircraft the It have layout, then training, very done. coming be XXX finish year and much an takes the or it's design roughly XXX or item And in a that to of while will well. But still a the to -- close be obviously, process, new technology, you have pacing a early up do new to we the aircraft, beginning need lines the relatively certification a we'll -- in complex the be even if utilize, modification. Obviously, this through We're to a way fleet don't again,

that is out to tidbit right in only now form. our the the plan have is sell new So there we

then the assigned But to to rolled in fleet. the be aircraft the have move again, mod again, XXX just to beginning approved. XXXX. in And more is come. seating the It in has not complex. fleet through -- we And So

who like to XX% of see of the I'm those passengers change. one

we'll have see to that. So

is question Conor Milius next with The from Research. Cunningham

on the just stuff. sticking premium Maybe

from expecting secured So this aircraft. about amount any adding for you when each mentioned MRO you by think losing not next same layout, on sorry are those XXX doing retiring extra we're then seats you of plane, this. And the premium? Like seats the question on you top years? on the you're of the XXXs the And just if talking why an slots about have over doing on perspective. all XX you curious I'm are

a to a still true on and here. and We're specific values lopos can still do Ryan detail to working and layouts. our this -- want be We way lot of here. add We're Southwest in

not So remainder is away extra you. same We our and to pitch. but cabin, that anything have intent customer-friendly have an we to the change to in want our section, just in attractive from want not in legroom the the the take manner policies of

working So that while, for, I question. The fleet going while a still long the a in through believe, for to be XXXs, they're here. for we're

the sharing it's but financial so There going math none to be just the And on clear we're the are benefit very well, as or few. [indiscernible]. again, that detail

single do to section every makes this want on a customers to we in So that is available and way flight. legroom extra it sense that our

a premium your most think a you ancillary needs. operate that's to I the if Conor, benefits, don't a know or customers' from to it or start overall wrapping to Yes, important their proposition to part, proposition, the seating the value fair, Dallas selling want buy MAX-X board we're seating Denver. and on customer, aircraft, going that you when as consistent across when benefits whether you're They the they is the into serve value with XXX an it go flight

to that important that's most equation your I question So piece of think there. the

try on Okay. on where is like And even unit today, trends now growing below understand In in I'm why to unit table the current down that of environment returns view up demand given the with the right then I inflects how but revenue at back in frame we ramp you trying or then understand that the general? positive. should just context then And to context, economic are? you in X% comment macro down the XXXX, line revenue in all can of that, talking about growth. X% same you're to just growth seats up then why

are And able earn XXXX, exact Yes, obviously, Conor, to still anything on next and was we as commitment, we are the I take our years number. of commitment here. cost wouldn't That so a of over an until capital obviously, you working bet. number

into extra allowing be also So to and all, expenditures going do 'XX, haven't spending time I it red-eye we've incremental want red-eye but overnight. initiatives 'XX to it the flying, the capital number aircraft. going but processes aircraft really allow to That for about 'XX, The buy managing, a announcing the of. that's but today are fund obviously, and and is it, aircraft available, are capacity, And then technology to and without obviously, not us necessarily mean, take if flying incremental also us our customers through will and combination the aggressively. Tied our that having ASMs turn. nearly what we're and buying not CapEx. does but compression us for X sophisticated turn I'm management, picked to turn produces out the proud the we that, talked of not things, XXXX, of those all, which we

is next The from Linenberg Deutsche with Bank. question Mike

Bob, we be in consumer weakness. that you know just mean may was back? segment. may you demand talked But carry how amount you attributable that seeing sort that pushing the And of running higher be a maybe that are do you a of capacity I more other domestically Are what price-sensitive it? it mentioned think sectors. you to who seeing type think and healthy about much I tend would I had than of driving of price also bit earlier to

seeing Mike, it's so to segments specific are thing regards Andrew. customer that We're back, speak. in not to pulling any

going have fluent think I is aspire case. low not lower because we which sometimes people the a assume for to fares, passenger, we're

high fares low have and to want we so And quality.

are As large a very we of high I network, which relatively implies that's more earlier, business customer affluent. which our parts mentioned have contribution,

and capacity And travel so QX. both grow QX in we're faster I seeing, than actually think, business

the then take would that so more create capacity where COVID that the does kind of reasons, off there's frequently spending how part regards and It's I see more demand. and times this choppiness on think well. period economy was leisure off-peak of there. of characteristic with some less much there's a So of just, people you do trips going is year, for leisure That now, that going than to there's of where and

is Mike, Ryan. just -- this

ULCC, peer LCCs set, than bracket with closer specifically, to legacy ULCCs households $XXX,XXX-plus looks it customer it looks incomes a a the or set. industry, there. customer color add like about more peers and talk lot peers Andrew in you -- than that to Just when our the our does -- When you to lot bit to the looks demographically LCC does LCC compares peer base much ULCC more said and of the at little the a base legacy and or how in our like it that look our $XXX,XXX what bracket

helpful. midpoint, capacity. the come And third Very a may just at fourth capacity this to that's last then the look maybe When high XX% you of a Tammy. maintain up for Great. we couple which question, the call quarter, reduction off it, my but at and your able to be for single I get guide on year, X%. CASM on we quarter looking percent we're When we're the at, now of of about digits, were

cost allow sort we're one-timers improvement would So anniversarying sequentially, some there these credits or restatement, various there's of you see items? was Is know but just anything some of a there I in Or contracts there something is a maybe that in there there. these healthy there and inflationary of XXXX? is progression? that to

to really out. And Yes. point no, -- unusual anything there you No, absolutely, Mike. isn't

We of are some anniversarying the contracts.

So on is last $X.XXXX, sure correct is just the clarify some on make the The I numbers. that. numbers year and it's to And bringing we've questions the contributing had, coming just in specific to you numbers to XQ, $X.XXXX that. third $X.XXXX. that for have quarter full year. think, for CASM-X all know certainly I to

model. It's So yes, the mostly sure anniversarying contracts. all you've the numbers got you make got in just your to it. right But

our know -- abnormal to with pressure our you And low this to of down, just at got normal our close to be points be X normal -- you midpoint guide the We've I'm of of sort -- if XX, sure of just kind it QX look would of break -- new Xs. sort labor contracts.

between said, And about and Boeing X that begin points. as Tammy Boeing impacts, overstaffing is you've as impacts to got material. then anniversary So direct you

and later you if that of as a that. tails off can tail begins and want. are the overstaffing mitigating number off we We to that about So talk large

very items extraordinary those you as come it's helpful. off, them. So anniversary Or

Evercore The next ISI. Duane question is Pfennigwerth from with

there the which to ask these margins, Do see silver changes, improvement is that have and wanted to I margins which about have be there a a lagging come that still all but board? path before not area The think things on isolation bells here? product enhancements carriers you and on out reason I bigger only changes versus product the lagging assigned premium your like is you ask will bullet. are in premium you contributor network margin some whistles, seats suggests

there a new a and is we can markets So issue first? that network issue address

implementation Andrew. I of with say Duane, obviously would there it's initiatives. lag the is a the

between which and put will margin on we put I X we and then, keep of it more many in, the So in. actually putting are having now we've of efforts, absolutely would network towards changes aiming improvement. back

the on improvements. shorter year some ones then on duration, set this focused yield saw some ones big throughout is QX and we're good when modest-sized You the still year. there's capacity in And the then

that the raising of limiting system top the the getting QX, You also saw a on but more out is system discussion through management you both about the negative. negative positive of revenue the in saw

help of [indiscernible] they much some as and So as person that the our Google you -- per broaden then customer of don't our our down base. travel advertising have factor. that's into we efforts to gap other us activities entry pre-pandemic. particular, on gap is because load campaigns, road It's load in in see and And new that one customer our little did some Flights a kind find acquisition folks we bit on our a our

to give And so to tailwind efforts those medium term load. the will in short a

the between So work initiatives. intend all those [indiscernible] marketing that the X changes, now we to activities, network of activities they and are go-live and

How flight the how progress I have the many bags take from we'll looking about cost you for ask to And for be of what traditional per a per your carry much and take higher of you per industry? is the And just that. on more rate not bag spirit opportunities, front. comment do rest bags about estimate and versus all you rate cost and from wanted watching be? that at to bag your your perspective, Appreciate a but you bag feel the revenue perspective, Southwest in Bob,

just operation. then right cabin you've believe, bags, to But issue the industry your of the also, an got terms in manage question of that and carry I -- how that standard. we check the come believe We about out get Xx you has bags also Yes. I

to this clear fly I point on real be looking at that not a to mean, as Just we're change free bags policy, policy.

fair Our terms know a part free fly the to Airlines. is cited of people after industry-leading initiatives issue bags schedule, as Southwest choose of you list And is Southwest. #X of in why of what big the and set attracts policies. And customer-friendly customers

So the it's related not and now our the something under consideration seating we products right to as cabin. rethink

less the there to I range. load as that far bags would given individual change that aircraft number or static bags, more flight of people at the XX as can handle cost, is that necessarily or be equipment less in if say the doesn't profile to certain and unload in required volume and cost any or also, airports, as or the give scales having you one Bob, breakpoints but

there's far So as part. a handling cost not the as very

the course, valley. that under of variable the it is burn, the the but fuel with in would be the weight instead true Of if was cabin

the about, around. is too, the move Well, you have bags thing to think

lot and take Investor -- And share this to at our Day. so we'll about we're working a

out a have they today overhead technology aircraft the you're basically and day. during are of be free are processes have because aircraft down down don't the working because overheads that fall bags through slowing haul. free check more to and time utilize then the time to into moved and moved a your take just with slowing, the we We turn because the the And out able effectively issue are into operation to cabin large there

bin. the -- or So into

could I of lot a that and cost just you'll around. then used which of move the time potentially, that mean the from on sure time down under just you've I'm the massive checking aircraft, bin so turn issue and you And flown cabin last-minute be burns into bags aircraft there's a effectively. others, the more

the trade, we look it's do and at a trade. So

as twice And Xx gets more check We just bags carry bags that. other ULCC. closer to many to bags. as add check legacies, on as It's it and one many point twice check about than

to popularity customers So of the policy Southwest the points why I the to goes one that Airlines. of why choose just and indicate reasons think that,

The next Scott Group from with question is Wolfe Research.

about in going of So to the more September, any we just should And quantify directionally, be you're I but way how -- it know then just Is changes CapEx think to thinking hundreds us help premium, this it's millions? extra legacies much you more truly requires. conceptually, -- just you're legroom of sort of that there beyond contemplating like extra hey, just say, to other would not legroom? some need changes like be are the for it

just north products lot generate assigned there, of for September, put around to figure our ancillary and billion $X Scott, yes, opportunity in a boarding, bird early maybe substantially world of like bet. but And we're ballpark and out us. the the extra-legroom is again, just share a going today shy upgraded And Yes, that. just you seating more boarding, to

thing. also, in giving stat that there the little I'm to the kind X/X be roughly configuration in seats you fleet give range, very buying legroom hopefully, CapEx just And directional. you So a a kind that little extra you whole invest not configuration, you maybe of as to the give well. There's can going a ballpark different but of give our a not we're because will of

have adjusting already the more cabin to anyway. about is of a RECARO We other change the some the like. on already buying lot mostly from that really components seat new than coming We're a cabin working customers of it's it cabin. of the stuff So

what we actually little be incremental exactly very But to legroom. the we're attach extra this your related there's want to detail and clear, on maybe the last products defining still point, to CapEx again, So just change. Then around to took foot this. looking for in revenue per a not have where differentiation really have differentiation where solve really huge of a you first huge at view and We class way a to a you cost. really we're square

per we so deal problem. that attack the many how square cabin can and the You in maximizing with that is revenue fees you have foot

clarify, just we like -- have do $X And the number? we'll about a in -- substantially you trying would billion, that -- helpful. we talk number [indiscernible] a when today, boarding I to Meaning is of That's to I'm early net gross or and that north lose theory, that is assume?

That's an incremental.

that to obviously, hurdle. too. if whatever So are -- clear do those as a hurdle billion $X we shy In incremental other words, generating of one, products has

But our no, ready our anything wasn't share the it change. net And not wanted, wanted If #X, financially that But wouldn't again, the we wasn't significantly change. detail. wasn't about be just to we and customers #X, so beneficial making in shareholders. will that #X, be employees what we're what for our it it talk

Sheila from Kahyaoglu Jefferies. is question next with The

want I in different it growth a about red-eye has maybe ask book, from you When look ASMs order at contractual way. XXXX XX plus little the delivered aircraft. aircraft to getting the

growth? that? or neutral? be So how getting net we where accelerate Do should maybe we you Are we the think about retirement? that about in think context the point of to growth at to How below fleet GDP needs do

from initiative balance given our and Yes, Investor Day. our needs. not to clearly, Sheila. of renew have CapEx of We'll Boeing. Yes. order also ample out including have lot lay But book. to of flexibility all flexibility objectives to at book to all out do and the our all ready we fleet. we'll reflow our order ultimately spend of And that that the meet We're yet plans. with we our a

all So details for out we'll you Day. at lay Investor those

on obviously, delayed Boeing plan the with working here late that continue against we're those seen deliveries against we've still deliveries into And settling issues up with and XXXX.

So later again, as that more on well. to share

one maybe them. to by then And Okay. follow on cost

do think With about we cost for additional any or buying, red-eye count impact? how required the head that

Yes.

incrementality, it this. the operating is days. it's those incrementality fuel in the low is day airports the operating arrives while Sheila, for The quite the Obviously, their the still it's of West but and this this Andrew. nature apart on So is East aircraft then during

So your require staffing your both operations. it in, so doesn't ground

now. we have where a situation have ample right We pilots

operate to eye. to not the us pilots does red so additional hire able to be And require

to way next of a base flying for the get employee the base out in kind current of asset it's year. current more So

And Sheila was analyst our final question.

day. you. wraps a up great analyst of I and have call. Thank That portion the everyone today's joining, appreciate

Officer, us ahead, Ladies transition Whitney. today's to and Communications Please Eichinger, call. Ms. gentlemen, now media Chief our portion off. leads we go of Whitney

our Thanks, Gary. Welcome on call to the today. media

can Before for we remind on begin question? everyone instructions your a how taking up Gary, shared you queue to questions, and

question Morning [Operator Alexandra is from Skores Instructions] Our The with Dallas first News.

Can you me? all hear

We can, Allie.

step And from step air feels a historic regard kind very of this with company. wondering Southwest of to other towards like been the going of because this wanted in for if to a I'm for era to new Southwest policy carriers to Yes, kind are a history I the era? So is itself Southwest? changes Is how speak ask, that's we can differentiate a new entering of kind major the that. you today.

about you, the I've we as been here. time kind always and team the plastic We boarding of And company. change to passes, of but this of have Southwest we here been I a strategic made that I change. and it but carefully, will adapt do at thoughtfully and willing always tell lot [indiscernible] at view the do we've we've our transformation think I does a

and making continuing made it are capabilities. you showing see We we talked as our about, in And we've significant investments up. operational

the year taken we've is paperless on going XX The turn cockpit. pieces million mean of completely iPads. a of out I paper

cancels earlier, there through the an Dallas If when are the that turn ramp about is we it technology hurricane talked you and rate X% up allowing much us fly and to more. Baltimore information following core had operate displays and the and of see out no almost stations, investment big really day. came well. I managing in Houston cancel the but much, you'll And other

to tech recover. we saw global hit that And basically ability a the So when you outage the and week, normal ran last day.

They're than the investments tactical. on the change thing the those commercial we transformational in investments So operate is to and And way in resilience more really reliability. space. the going operation our are same

it's been is different and begin goes the and build you our have upgraded more we're today, the larger to are add changes cabin and a -- but back The WiFi, cabin, to coming purposeful to bins approach significantly in power and modern different. reworking and crews. We years our X that announcing digital uniforms seating the

come these If track on much do XX things front. today, your you standby same-day can more much, can maybe months, your digital manage there's even just -- go that bags back you you so to and -- and the

what this not to see Southwest going for more we customers' meet to we be add of change the policies hospitality, fundamental that here, make needs core All with So transformation being said, do to the a as we're best employees our that and customers. sense, of true to Airlines stand efficient in the our transparent industry, capabilities. customer

So we're to better Airlines. to adhere the going make an you but we're to that Southwest going the Southwest, things Southwest make this love, even

this And that some been have they vocal family come about a And and know be the Dallas have that's about in might but and one love implemented. reason new prime about family this then question, policy? to my I've for implemented second anything of sharing Can just you're be with like share why is me. boarding specifics, how concerns been too, folks boarding noticing field rather will I you localized pretty how interested are into passengers not that

I we're Ryan No. mean about can talk and -- this.

for uncertainty in comes question a point and to families are able we going -- would sit through. just together long-haul world, if think uncertainty on expect the you could I worked we as is today's are, still a you the flight that stress and as of . it family, But details there that X,XXX up be a if about as there huge to are carry. especially be a For you're to

because so you better. have And And take sit world, have want stress in that assigned an new an section seats that together to world, the extra going sit you in in you're assurance to you'd away. seating together if even assigned legroom the that

"a close just seating and of going example. I I accomplishing as to am are most process am to, good boarding going because are out that seat". to sit, the the I folks surveyed stress we've for I get But want the to sit. the actually lot where I where what going to so stress say I of And see going comes for Not it am think the to process -- taking am changes from a of

with change. our all love moving earlier out The the assigned that stress that things that of we of about folks to takes So seating process. assigned marry talked the seating, boarding goals to is about

anything? don't add But if want know Ryan to you

No, yes.

there -- moving experience creating along our things think the current that section adapt with friction like open boarding in I points are come by seating family customer had that we've today. to to

give a about to check-in seconds checked Just little XX% customers checked within the almost customers within XX% are goes the in insight window XX-hour of of XX first in the that that, to opening. of into And first up hour.

you and that hit on So the window causes check-in if you're family the anxiety. don't a busy right nose,

anxiety solve And we process so has lot seating points than and to causes current of this like a of want. one just mentioned, open the those at Bob is more is those -- friction introduced this way a

together, customers think police it's the the are families are our on there of in there our tough for up together, see I So that that the is the day open aircraft, you having are board, if get that if family flight last mean going is open at love the attendants flight situation full, aren't seats end manage end and I on an boards up and or to group employees, you the to issue, And the the situation. And seats. boarding change. employees to late, seats end

full. the what looking see the it's is seat for to have because call aircraft people aisle since we and spinners, down going you the up and open spinning hard So

all and stressful obviously that. that's seating So assigned basically the change of eliminates

Singh from Next Rajesh with question Reuters. is

do Elliott and an provide a are you with proxy discussions with can you expect them update your that Bob, compromise a on management threatening fight?

I shown has do. Rajesh, they've us. speculating of Elliott that or But in Most on so Elliot can't any may the personal speak not any with not been Board. or on attacks may conversations leadership willingness to what meaningful public engage in for far,

to so far, willingness on like been love to no feedback. their that. And and So but engage there's -- their hear shareholder, any we part do

of our as out ending returns. that today some company desired part which the XXX% forward for team, on here So leadership plans we focused company -- laid this we're our a on moving financial the transforming and on

done question And my seating. premium it require? of that Bob, will next Have provide will about your calculation is how you revenue much second boost any that an investment earnings and of what year? kind to

Yes.

of Rajesh, initiative have seating overall share more think, at this the fall. opportunity the value to I seating premium on and Day assigned Investor we'll

doing side cost the way. efficient using it a On we're existing seats. the very of in equation, capital We're

the side, value And on then fall. here. a later very share we'll capital a in outlay there's So little have the revenue here

The next question Associated with Koenig the Press. David from is

did curious seating asked questions. gaming But open I'm my the here. much some how Alexandra decision? the follow-up, of in to just system demise of current much How a regard factor the Actually, -- did as in your

shift demise Dave, factor it seating. of But the say terms It's assigned in I seating. of we called didn't analysis. to would it haven't a that the open

in this decision in all right making the it -- to about is data. trying make but not we and emotion, So

what the what extra also you understand A-List you their things seating would benefits about, be status in extensive to or your So know we if surveying for assigned preferences. attached on you of like -- Ryan legroom can have understand how do example. today, your world, as Southwest status And talk noncustomers our value customers to preferred, to then and just and benefits

the on So we turn and just that effort because a seating to proved not. certainly aircraft of we slower, which operational to any, it ton want there of ton understand then assigned worked everything a don't will impacts, that a effort if the

be our as employees, in really was you process, the be some described, we boarding managing know it the stressful customers. about can for particular, for So itself and our change do can it of

that So indirect studied, while an that wasn't that, think is a we see. direct item could that I it be that we benefit

know the encouraging earlier pay very you the the remarks, that And passengers what what to because think by your Is from of that I something kind in is extra don't surprised people And you that -- recently? see And seating. heard surveys. it wanted baseline I have up to was or assigned line? there? of history, were to Bob, which move your more happened polling I to What the had you degree timing

Yes.

and seat desire They shift assigned I time. time And longer, is patterns they space, shift fewer today. shift preferences business short-haul goes share clear, travel are up. fly our managed are over their for with grow flying the corporate trips about preferences the And their Customers they and lot think longer. when think seat. travel an I customers' an over think behavior an been and travelers their taking it's just I time. of importance market in versus to assigned business and -- talked We've a preference open over initiatives

of think here. retail for some at in the in reducing premium, I industry airline with it. And that you so then just the parts -- are experiences. outpaced look cabin into just that you time growth see goes in it spending on revenue the product And nonessential when And ourselves, then main and growth can premium, purchases consumers premium other has economy,

So combination we're it's adapting changing a time preferences and here. of to travel customer changing patterns over that

with Next Washington Post. Aratai from Lori The question is

you what fickle, asked what said, right? of customers change. on their And Sort and just building are David preferences Bob,

everyone worry So change? Because few years to something hot going this that you're back, basic different. were are was now, to a make years you that economy, Do the are legacies what now worried then is a you that this couple going moving right? concept. the wants want people to And of from

think I customers I said No, fickle. are don't

Just kidding. But we... no

sorry Okay, have that. been changing, about I guess. They

mean time. on understand and they change beliefs can I'm with data, hold over over if they do from you. customers your can can a We have that just happening periods kidding you. more move of beliefs. philosophically, But is what in long as I preferences them. And have time, change don't and away company you sometimes you with to

not fundamental And do But have that's we assigned we This over done. decades. the moved to deepest be surveyed far So seating to we assigned as you towards -- -- it to has ever willing is seating. everything you've have airline. periodically the by an challenge got analysis

I several actually many XX-XX. ago, it, think at years years the -- was -- the which was last preference time more looked we

prior it's got -- different out on preferences and is, we're got But are a very too the as generation making years. trying aim that at point not and to got see I travel, a always -- all, mean to very but XX value that their potentially -- got than you've you've to what you're different years at in aim going the customer spend you're you've X you've clear emerge because more different to the call generations generation. working,

And out what we're is the not love I the to legroom, fact about way -- doing implementing don't We're extra way in [indiscernible]. the doing a this. -- We're for way -- sense with that Airlines, we're massage seating. that that. moving and moving with that which worry and is assigned on we're make you it to seats like Southwest I is way. it this doing Southwest. efficient anything So We're we're things not something doing putting have very consistent that We're in or that a in seats doors

comfortable the I'm desires towards will shift moving those not that customer on us. So we're and that customer

guys is have that worked the what of because I sneak one in to yet more very have that readers Do have are, course, mean you going this Can -- for Okay. engaged you folks status? out A-List, we this. in A-List

what work finalizing. of we part That's hard are at

assume to current Now preferred I A-List A-List associated is a with that status think there like customers, benefit boarding safe their it's our level. just

we there be that nature it. with benefits defining a safe speak. as But are we're of there assume details it's associated that seating exact will that benefit, seating to think that I are the the things and

is with Street The Sider from next Journal. The question Wall Alison

question. some is you've as you're learned lessons yet about procedures? ask starting are wanted are implementing that a there at review of internally there had or incidents any But look you thinking safety-related just common just emerging I that changes recently, hasn't Obviously, the themes started. FDA are training or to that any or to the

reiterate is our Andrew And that Ali, talk more detail, take want nothing and time there let, did in just call I to than in just to safety I'll before -- obviously, Yes. important but period.

did improve. a We Administrator, and reinforce FAA to seriously. recent Whittaker, talk to safety is the that it, focused for to very the We personal can speak support and our happened have commitment, understanding really on my take earlier appreciation what week our team doing. about work got can I but we've and Andrew issues. FAA them had this we how commitment

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our We that caught April. further noticed our So actually eye. efforts We us. started involvement some things in from merited

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safety short-term transparency enhanced communication collaboration. -- based and the kind because of is was that about Some that actions today and transparency upon aviation of

going these So out personnel that our of actually led led the on, what's then, to getting course, us about to getting and things which proactively to communicating media. in press more

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on. we clearly we things and see that need issues, saw to clearly we But work

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we ongoing. However, be will the other that started already continue -- work should always process

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that looking say would communications what factor. [indiscernible] new in I at human No. a we're internal is

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about So specific than dynamic this there's demographic. is any more about that

is The Mary with next from Bloomberg question Schlangenstein News.

on the is second Southwest the -- that. solely focus review. that in Or and something I this just incidents some FAA have if on what to a focus? pilots And is follow or else? been all is then training investigation from review. focused question it wanted specific Andrew, on focus just it the that Is focused April was of triggered up pilot back did that what you the reported? the see Was or

training, focus of couple be they there's start flight on and well a pilot will up. operations a is as that items but as finalized There

process. our start what a So the and with particular it's had X this flights eyes, that And handful similarities everything. It's that some regards April we caught in to us had our items. eye let not of caught in

will, days we many, when seeing you too started Really, up FAA us started that, one that's and exercise the our was pilots joint of ASAP. union. the if within we and with that So literally

can What you And you more were? see? problem what the specific on similarities be did

of detail. too much I disclosure. based I is safety into and voluntary go mentioned is collaboration transparency on aviation Well, part won't that's

exchange since [indiscernible] So in in that actors to they saw from individual they that. the did for aviation safety system things self-disclose that

you at what we've see go the not And how things fit these see so has you to together. the liberty what into and there, I'm programs where FAA exactly can it launched all is but launched, can

session question-and-answer our concludes for This media.

thoughts. some back Whitney to closing now So for

everyone. Thanks,

If by available is questions, further group their standing contact our release with you information, all you. along today's at news have communications swamedia.com. any Thank are

here Thank quarter. conference attending. for We'll meet again next concluded. The all has you