Q4 2024 Southwest Airlines Co Earnings Call

January 30, 2025

Being recorded.

A replay will be available on southwest Dot com in the Investor Relations section.

After today's remarks, there is an opportunity to ask questions to queue up for an opportunity to ask a question Press Star then one.

To withdraw your question. The command is Star then two.

Speaker Change: Now Julia Landrum, Vice President of Investor Relations will begin the discussion. Please go ahead Julia.

Julia Landrum: Thank you Hello, everyone and welcome to the Southwest Airlines fourth quarter 2024 earnings call.

In the name of the law, hold your children, and hand them in to state court, Impeachment will not be forgiven. dampen the sweat that is in their heads, behold them, and make them booties like a young goat.

Speaker Change: Im joined today by our President and CEO and Vice Chairman of the Board Bob Jordan.

Speaker Change: Chief Operating officer, Andrew Watterson, Executive Vice President and Chief Transformation Officer, Brian Greene, and executive Vice President and CFO Tammy Romo.

Speaker Change: Bob will start us off by providing a high level update on the fourth quarter and full year 2020 for performance as well as a strategic update on our southwest even better plan.

Speaker Change: He will then turn it over to Andrew to discuss our revenue momentum and our industry leading operational performance.

Speaker Change: Brian will provide a progress update on our portfolio of strategic initiatives highlighting key milestones achieved.

Speaker Change: We will follow to walk through cost performance and outlook. She will also discuss our fleet strategy and cover balance sheet and capital allocation.

Bob Jordan: Bob will wrap up with a few comments after which we will move to Q&A.

Bob Jordan: As a reminder, we will make forward looking statements, which are based on current expectations of future performance, our actual results could differ materially from expectations.

Bob Jordan: Also we will reference non-GAAP results, which exclude special items and are called out and reconciled to GAAP results in our earnings press release.

Bob Jordan: A press release with fourth quarter 2024 results and a supplemental presentation that includes our updated initiatives scorecard for both issued this morning and are available on our Investor Relations website.

Bob Jordan: And now I'm pleased to turn the call over to you Bob.

Bob Jordan: Julian.

Julian: Before we jump into our results I wanted to take a moment upfront to acknowledge the tragic accident in the Reagan DCA Airport last night.

Julian: Our Hearts go out to all those loved ones, who are among the passengers and the crew and we also extend our sympathies to our friends at American Airlines and their subsidiary PSA Airlines as they processes event themselves. Finally, I want to thank the first responders, who worked tirelessly throughout the night, while we're all competitors we are <unk>.

Julian: One airline community and we will do everything that we can to support our friends at American and PSA.

Julian: Now turning to the business 2024 was a foundational year for US we further invested in the operation we finalized our open labor contracts and we laid out a comprehensive plan our southwest even better plan. The plan, which is the most transformational in the history of the company includes initiatives to boost our efficiency and lower costs, including the ability to fly.

Julian: Red eyes and to turn our aircraft faster. It also significantly improves our customer experience and expand what we offer customers by introducing things like partnerships and an all new vacations product all of which enhance the rapid rewards in the co brand ecosystem. Ultimately the plan provides a path to financial prosperity, which we believe will open exciting growth opportunities ahead.

Julian: Yeah.

Julian: We are already seeing the benefits of the work we did last year and the plan is well underway I am very pleased with the momentum we're carrying into 2025 as a result of that effort starting with the operation. We saw improvements in nearly every key metric demonstrating success from our multi year investments. In fact, we finished the year with an industry leading completion.

Julian: Factor and just last week, we were recognized by the Wall Street Journal as one of the top two U S carriers, who have and I quote separated themselves from the pack. We finished with a mere one point gap to first place a gap that we will work very hard to overcome in 2025. We also finished the year with strong.

Julian: Year over year unit revenue improvement unit revenues for the fourth quarter came in 8% higher than fourth quarter 2023, well above the improved expectations. We provided in early December nominally fourth quarter. RASM was also 7% higher sequentially relative to the third quarter RASM and that is five points ahead.

Speaker Change: Thank you Julian before we jump into our results I wanted to take a moment upfront to acknowledge the tragic accident near Reagan DCA Airport last night, our Hearts go out to all those loved ones, who are among the passengers and the crew.

Julian: Of the historical third quarter to fourth quarter trend the very hard work of our teams helped drive this acceleration as they executed tactical improvements. In addition to improvement from tactical actions, we experienced benefits from a constructive industry backdrop, driven by continued demand strength and capacity moderation.

Speaker Change: And we also extend our sympathies to our friends at American Airlines and their subsidiary PSA Airlines as they processes event themselves. Finally, I want to thank the first responders, who worked tirelessly throughout the night and while we are all competitors. We are one airline community and we will do everything that we can to support our friends at American N.

Julian: We're making great progress with our strategic initiative portfolio, our fleet monetization strategy in our capital allocation plan. The team will walk through the details to provide you with execution proof points and sharing how we are hitting key milestones.

Speaker Change: S a.

Speaker Change: Now turning to the business 2024 was a foundational year for US we further invested in the operation we finalized our open labor contracts and we laid out a comprehensive plan our southwest even better plan. The plan, which is the most transformational in the history of the company includes initiatives to boost our efficiency and lower costs, including the ability to fly.

Julian: I see improvement in our pace of execution and the focus on driving speed and agility will continue and while we're focused on execution and we will keep a pulse on trends and be open minded as we consider ways to continually improve the business.

Speaker Change: Red eyes, and in turn our aircraft faster and also significantly improves our customer experience and expands what we offer customers by introducing things like partnerships and in all due vacations product all of which enhance the rapid rewards in the co brand ecosystem. Ultimately the plan provides a path to financial prosperity, which we believe will open exciting growth opportunities.

Julian: Moving to our cost performance, we're experiencing above normal unit cost inflation, most notably and market driven wage rates airport costs in health care, we outlined a multi year $500 million cost plan back in Investor day to help mitigate cost inflation and become more efficient and we will be relentless in pursuit of in <unk>.

Speaker Change: We are already seeing the benefits of the work we did last year and the plan is well underway I am very pleased with the momentum we're carrying into 2025 and as a result of that effort starting with the operation. We saw improvements in nearly every key metric demonstrating success from our multi year investments. In fact, we finished the year with an industry leading completion.

Julian: Pursuing cost takeout, while we haven't yet shared the cadence of how the $500 million comes online the focus will be on achieving that rate as quickly as possible. We are committed to the efficiency work, including corporate overhead.

Julian: The fact is corporate overhead has grown at a faster rate than the rest of the airline as we staffed up for initiatives, we must be the leader in terms of efficiency and Youll see us being aggressive as we work to become a leaner and more agile organization.

Speaker Change: Factor and just last week, we were recognized by the Wall Street Journal as one of the top two U S carriers, who have and I quote separated themselves from the pack. We finished with a mere one point gap. The first place a gap that we will work very hard to overcome in 2025. We also finished the year with strong.

Julian: Our imperative in 2025 is to deliver improved financial results and build further momentum to hit the milestones required to deliver on our 2026 and 2027 Investor day targets and we're committed to transparency and routine updates.

Speaker Change: Year over year unit revenue improvement unit revenues for the fourth quarter came in 8% higher than fourth quarter 2023, well above the improved expectations. We provided in early December nominally fourth quarter. RASM was also 7% higher sequentially relative to the third quarter RASM and that is five points ahead.

Julian: Debuted a scorecard last quarter and we updated it again this morning detailing our progress and it is available on our Investor Relations website.

Julian: For the core business initiatives, we continued to deliver to expect to deliver at or exceed the $1 billion 2025, EBIT contribution target, which excludes any benefit from fleet transactions.

Speaker Change: Of the historical third quarter to fourth quarter trend.

Speaker Change: Very hard work of our teams helped drive this acceleration as they executed tactical improvements. In addition to improvement from tactical actions, we experienced benefits from a constructive industry backdrop, driven by continued demand strength and capacity moderation, we're making great progress with our strategic initiative portfolio our fleet.

Julian: Now moving to the fleet there is a lot going on at Boeing I was just there last week visiting with the leadership team and walking the factory floor.

Julian: Have clearly been hard at work and I was pleased with the progress that I saw everyone was engaged and focused and while they still have much work to do there appear to be on a good path and we are feeling more optimistic regardless, we think it's prudent to hedge our bets. We are now planning with a conservative 38 delivery assumption.

Speaker Change: Monetization strategy in our capital allocation plan the team will walk through the details to provide you with execution proof points and sharing how we are hitting key milestones, while I see improvement in our pace of execution and the focus on driving speed and agility will continue.

Julian: For 2025 to Derisk the operation, we conservatively adjusted our plans back in March of 2024, and we've not had to republish the schedule sense. So we're doing the same thing this year, that's very different from our contractual number which for 2025 is now 136, we arent going to get.

Speaker Change: And while we were focused on execution, we will keep a pulse on trans and be open minded as we consider ways to continually improve the business.

Speaker Change: Moving to our cost performance, we are experiencing above normal unit cost inflation, most notably and market driven wage rates airport costs in health care, we outlined a multi year $500 million cost plan back in Investor day to help mitigate cost inflation and become more efficient and we will be relentless in boots.

Speaker Change: 136 aircraft, but we believe Boeing is on pace to exceed 38 this year and over the next couple of years that there will be an opportunity to do plenty of transactions as Boeing ramps up their production Tammy is going to go into a lot more detail, but my point is that the opportunity is large and despite the question of fleet timing we see.

Speaker Change: Pursuing cost takeout, while we haven't yet shared the cadence of how the $500 million comes online the focus will be on achieving that rate as quickly as possible. We are committed to the efficiency work, including corporate overhead. The fact is corporate overhead has grown at a faster rate than the rest of the airline as we staffed up for initiatives.

Aim to deliver the $1 5 billion of targeted total 2025 incremental EBIT from our Investor day initiatives portfolio, we're seeing our tactical actions yield benefits faster than planned and expect to hit all key milestones for our strategic initiatives as a wrap up we're at a great position to capitalize on our momentum.

Speaker Change: So we must be the leader in terms of efficiency and you'll see us being aggressive as we work to become a leaner and more agile organization.

Speaker Change: Our imperative in 2025 is to deliver improved financial results and build further momentum to hit the milestones required to deliver on our 2026 and 2027 Investor day targets and we're committed to transparency and routine updates.

Speaker Change: And continue making progress towards our goals, we have a comprehensive plan a detailed set of initiatives and constructive industry backdrop, and we are executing with urgency and purpose, we will not let up for even a moment as we move forward and deliver the southwest even better plan I want to thank our employees for their dedication and.

Speaker Change: Debuted a scorecard last quarter and we updated it again this morning detailing our progress and it is available on our Investor Relations website.

Speaker Change: And for the excellent operation they have been running despite away, but winter weather is just truly exceptional.

Speaker Change: For the core business initiatives, we continued to deliver to expect to deliver at or exceed the $1 billion 2025, EBIT contribution target, which excludes any benefit from fleet transactions.

Speaker Change: And I will now turn it over to Andrew to cover the operations in tactical and HD performance in more detail Andrew.

Andrew: Thank you Bob.

Speaker Change: Want to start by thanking our frontline employees for all their hard work and for helping southwest of an outstanding year operationally.

Speaker Change: Now moving to the fleet there is a lot going on at Boeing I was just there last week visiting with the leadership team and walking the factory floor. They have clearly been hard at work and I was pleased with the progress that I saw everyone was engaged and focused and while they still have much work to do they appear to be on a good path and we are fueling more.

Speaker Change: As Bob mentioned last week, we were recognized for the Wall Street Journal's 2024 annual airline rankings moving up to a very close second place this year taking into consideration seven key metrics among.

Speaker Change: Among them nine major U S Airlines, we were the leader in completion factor.

Speaker Change: We're optimistic regardless, we think it's prudent to hedge our bets. We are now planning with a conservative 38 delivery assumption for 2025 to Derisk. The operation we conservatively adjusted our plans back in March of 2024, and we've not had to republish the schedule sense. So we're doing this.

Speaker Change: Less than 1% of flights canceled during the year.

Speaker Change: We also had the lowest rate of tarmac delays and the fewest Iot customer submissions.

Speaker Change: And we didn't come in below fourth in any category.

Speaker Change: Which is a testament to both our people and investments in the operation.

Speaker Change: Same thing this year, that's very different from our contractual number which for 2025 is now 136, we arent going to get 136 aircraft, but we believe Boeing is on pace to exceed 38 this year and over the next couple of years that there will be an opportunity to do plenty of transactions as Boeing ramps up there.

Speaker Change: Turning to our revenue performance. We are pleased with how we finished 2020 for our fourth quarter RASM was up 8% year over year, which exceeded our prior guidance range of up five 5% to 7%.

Speaker Change: In fact, we saw a nice trend in year over year RASM growth as we closed out 2024, as we realized tailwind both from our internal initiatives and capacity adjustments as well as the benefits of a healthy industry backdrop.

Speaker Change: Duction Tammy is going to go into a lot more detail, but my point is that the opportunity is large and despite the question of lead timing, we still aim to deliver the $1 5 billion of targeted total 2025 incremental EBIT from our Investor day initiatives portfolio, we're seeing our tactical actions yield benefits faster than <unk>.

Speaker Change: While there was noteworthy pressure from supply demand imbalance in the first half of 2024, we saw a pivot to capacity moderation across the industry with continued healthy demand in the latter part of the year.

Speaker Change: And as you know, we took deliberate steps to recalibrate and better optimize our revenue management systems and processes.

Speaker Change: Planned and expect to hit all key milestones for our strategic initiatives as a wrap up we're in a great position to capitalize on our momentum and continue making progress towards our goals. We have a comprehensive plan a detailed set of initiatives and constructive industry backdrop, and we are executing with urgency and purpose we will.

<unk> of that work is materializing faster than expected.

Speaker Change: As we shared at Investor day, the revenue management initiatives as comprehensive and is supported by a range of capabilities and investment activities.

Speaker Change: For example, we reorganized the revenue management team to manage demand for customer art center areas, rather than managing demand for individual flights.

Speaker Change: Not led up for even a moment as we move forward and deliver the southwest even better plan I want to thank our employees for their dedication and commitment and for the excellent operation they've been running despite away, but winter weather is just truly exceptional.

Speaker Change: This change aligns our teams more closely to our system.

Speaker Change: On the tool side, we invested in improving our ability to predict demand patterns, both by booking window and by flight.

Speaker Change: And I will now turn it over to Andrew to cover the operations and tactical initially performance in more detail Andrew.

We've also launched new proprietary dashboard to help our team to better optimize the revenue performance of our highest demand seats.

Andrew: Thank you Bob I want to start by thanking our frontline employees for all their hard work and for helping southwest had an outstanding year operationally.

Speaker Change: We are seeing yield benefits from our RM advancement efforts across the board.

Speaker Change: Those flights with greater than 90% load factor are seeing the strongest quarter in performance as a result of better management of the booking curve.

Andrew: As Bob mentioned last week, we were recognized in the Wall Street Journal's 2024 annual airline rankings moving up to a very close second places here taking into consideration seven key metrics among.

Speaker Change: Our flights with less than 90% load factor also seeing sequential improvements as we better optimize fairs further out in the booking curve.

Andrew: Among them nine major U S Airlines, we were the leader in completion factor.

As we look into 2025, we will keep the same intensity and focus on delivering value for our tactical initiatives.

Andrew: Less than 1% of flights canceled during the year.

Andrew: We also had the lowest rate of tarmac delays and the fewest D O T customer submissions.

Speaker Change: While also remaining committed to closely managing capacity.

Speaker Change: We've made a lot of progress improving yield in the fourth quarter and our focus now is on maintaining yield performance as we work to close the load factor gap.

Andrew: And we didn't come in below fourth in any category.

Andrew: Which is a testament to both our people and investments in the operation.

Speaker Change: We expect current demand strength to continue in 2025.

Andrew: Yes.

Andrew: Turning to our revenue performance. We are pleased with how we finished 2020 for our fourth quarter RASM was up 8% year over year, which exceeded our prior guidance range of up five 5% to 7%.

Speaker Change: And our first quarter RASM is projected to be up in the range of 5% to 7% year over year.

Speaker Change: As the year progresses, we expect positive year over year RASM growth driven by tactical initiatives.

Andrew: In fact, we saw a nice trend in year over year RASM growth as we closed out 2024, as we realized tailwind both from our internal initiatives and capacity adjustments as well as the benefits of a healthy industry backdrop.

Speaker Change: In the second quarter, we expect to see benefits from the next phase of our network realignment.

Speaker Change: This includes the reductions to Atlanta, and Oakland or previously discussed with that capacity being redeployed to point to strength like Nashville and sacramental.

Andrew: While there was noteworthy pressure from supply demand imbalance in the first half of 2024, we saw a pivot to capacity moderation across the industry with continued healthy demand in the latter part of the year.

Speaker Change: We also expect to see revenue contribution from partnerships giveaways and loyalty initiatives, most notably in the fourth quarter.

Speaker Change: So while we were pleased with our progress we are far from satisfied we have a plan and we will be urgent and deliberate in our execution.

Andrew: And as you know, we took deliberate steps to recalibrate and better optimize our revenue management systems and processes.

Andrew: <unk> of that work is materializing faster than expected.

Speaker Change: As I close I want to thank our people for running a great operation and delivering unparalleled southwest hospitality.

Andrew: As we shared at Investor day, the revenue management initiatives as comprehensive and is supported by a range of capabilities and investment activities for.

Speaker Change: And with that I will turn it over to Ryan to go over the progress of our strategic initiatives.

Ryan: Thanks, Andrew as Bob mentioned I'm going to provide you with updates on our strategic initiatives as we continue to execute against our southwest even better plan.

Andrew: For example, we reorganized the revenue management team to manage demand for customer art center areas, rather than managing demand friend, who has real flights.

Andrew: This change aligns our teams more closely to our system.

Ryan: Earlier this month, we signed our first commercial agreement with Iceland Air making them, our first partner carrier and starting February 13th we will begin connecting customers and bags crossing the Atlantic on Iceland air into the southwest network at our Baltimore station.

Andrew: On the tool side, we invested in improving our ability to predict demand patterns, both by booking window and by flight.

Andrew: We've also launched new proprietary dashboards to help our team to better optimize the revenue performance of our highest demand seats.

Ryan: This is an important milestone in our plan to expand how and where our customers can travel we will continue to evolve this partnership and plan to also connect Iceland air into our network and Denver and Nashville later, this year, which provides even more connection opportunities through shared gateways.

Andrew: We are seeing yield benefits from our RM advancement efforts across the board.

Andrew: Those flights with greater than 90% load factor are seeing the strongest quarter in performance as a result of better management of the booking curve.

Andrew: And our flights with less than 90% load factor also seeing sequential improvements as we better optimize fairs further out in the booking curve.

Ryan: Also earlier this month, we received our Io certification for successfully completing the IATA operational safety audit.

Andrew: As we look into 2025, we will keep the same intensity and focus on delivering value for our tactical initiatives.

Ryan: This serves as the industry benchmark and safety auditing and we are proud of this achievement that reaffirms our commitment to the highest safety standards. It is also an important milestone in our transformation journey as it sets the stage for future growth through additional airline partnerships.

Andrew: While also remaining committed to closely managing capacity.

Andrew: We've made a lot of progress improving yield in the fourth quarter and our focus now is on maintaining yield performance as we work to close the load factor gap.

Andrew: We expect current demand strength to continue in 2025.

Ryan: We continue to pursue partnership agreements with other global carriers and still plan to announce at least one additional partner carrier later this year.

Andrew: And our first quarter RASM is projected to be up in the range of 5% to 7% year over year.

Ryan: Our getaways by southwest product is also expected to launch later this year and we are excited to announce today that we will add MGM resorts international to our list of partners in Las Vegas. This represents a large milestone from one of our focus markets for getaways by southwest and along with our existing partners. There. This will give us access to.

Andrew: As the year progresses, we expect positive year over year RASM growth driven by tactical initiatives.

Andrew: In the second quarter, we expect to see benefits from the next phase of our network realignment.

Andrew: This includes the reductions to Atlanta, and Oakland or previously discussed with that capacity being redeployed to points of strength like Nashville in Sacramento.

Ryan: A substantial portion of the hotel inventory in Las Vegas with more partners to come.

Andrew: We also expect to see revenue contribution from partnerships getaways and loyalty initiatives, most notably in the fourth quarter.

Ryan: We continue to make progress and move forward on our assigned and premium seating product.

Andrew: So while we were pleased with our progress we are far from satisfied we have a plan and we will be urgent and deliberate in our execution.

Ryan: And continue to expect to meet the financial targets and timelines, we communicated at Investor day to begin selling seat assignments in the second half of this year and operate flights with assigned and premium seating in the first half of next year as.

Andrew: As I close I want to thank our people for running a great operation and delivering unparalleled southwest hospitality.

Ryan: As we finalize our cabin layout and work towards FAA certification, we plan to begin retrofitting aircraft mid year, starting with our larger dash 800 aircraft with the smaller seven hundreds to follow later in the year.

Andrew: And with that I will turn it over to Ryan to go over the progress of our strategic initiatives.

Ryan: Thanks, Andrew as Bob mentioned I'm going to provide you with updates on our strategic initiatives as we continue to execute against our southwest even better plan.

Ryan: By beginning retrofits mid year. It allows us to meet our planned operating date. It minimizes the amount of time, we have a mixed fleet and it keeps the 700 aircraft flying with their current seat count for more of this year.

Ryan: We believe our tech ops facilities employees and vendors are well equipped to update our entire fleet within our timeline.

Speaker Change: Technology development is also going well our technology employees and vendors are hard at work coding the necessary technological changes and will soon begin a rigorous testing phase before we begin selling assigned seats.

Speaker Change: Another key milestone reached just this month as our amended co brand agreement with Chase as we've discussed before we needed to update our agreement to provide our card members with new benefits related to our assigned and premium seating products.

Ryan: Also earlier this month, we received our Io certification for successfully completing the IATA operational safety audit.

Ryan: This serves as the industry benchmark and safety auditing and we are proud of this achievement that reaffirms our commitment to the highest safety standards. It's also an important milestone in our transformation journey as it sets the stage for future growth through additional airline partnerships.

Speaker Change: Have more information to share on the details of those benefits soon but we're excited to get these new card products into the market. As we are confident customers will value. These benefits and they will drive co brand card acquisitions in the future.

Ryan: We continue to pursue partnership agreements with other global carriers and still plan to announce at least one additional partner carrier later this year.

Speaker Change: This agreement supports the multi year financial targets, we announced at Investor Day.

Speaker Change: Within the operation, we continue to focus on efficiency and modernization by reducing the time it takes to turn an aircraft and increasing our aircraft productivity, we've made meaningful progress toward our goal of removing paper based processes from the day to day operation and a digitized crew paperwork.

Speaker Change: Our November 2024 schedule was the first that implemented a five minute reduction in turn times in 12 of our stations and I'm happy to report that it's working as planned with no operational impact.

Ryan: A substantial portion of the hotel inventory in Las Vegas with more partners to come.

Ryan: We continue to make progress and move forward on our assigned and premium seating product.

Speaker Change: Later this quarter, we plan to introduce a digital communication tool that will allow pilots flight attendants and operations agents to chat live with each other while they are working the turn while they're working to turn the aircraft between flights further enhancing our efficiency. We continue to expect our turn time initiative to create the equivalent of roughly <unk> <unk>.

Ryan: As we finalize our cabin layout and work towards FAA certification, we plan to begin retrofitting aircraft mid year, starting with our larger dash 800 aircraft with a smaller seven hundreds to follow later in the year.

Three aircrafts by the end of November this year, while we are already a leader in turn time. We are confident this will further our competitive advantage in the day to day operation.

Ryan: By beginning retrofits mid year. It allows us to meet our planned operating date, if minimizes the amount of time, we have a mixed fleet and it keeps the 700 aircraft flying with their current seat count for more of this year.

Speaker Change: In addition to reducing turn time, we will also launch Red eye flying in five key markets next month with the first flights arriving on Valentine's day. This.

Speaker Change: This will ramp up to a total of 33 Redeye markets in the June 2025 base schedule, including Hawaii routes and we're pleased with how red eye flights or booking today with nearly 75% of passengers on a connecting itineraries either before or after the redeye flight.

Ryan: We believe our tech ops facilities employees and vendors are well equipped to update our entire fleet within our timeline.

Ryan: Technology development is also going well our technology employees and vendors are hard at work coding the necessary technological changes and will soon begin a rigorous testing phase before we begin selling assigned seats.

Speaker Change: Red eye flights capitalize on peak seasonality and maximize network connectivity, while generating incremental load factor and remember that our turn and redeye initiatives aid our modest capacity growth plans for this year of up 1% to 2% year over year.

Ryan: Another key milestone reached just this month as our amended co brand agreement with Chase as we've discussed before we needed to update our agreement to provide our card members with new benefits related to our assigned and premium seating products.

Speaker Change: And finally, I am pleased to share that our service modernization efforts to drive operational efficiencies and improved experience for employees and customers are also paying off as a result of the digital capabilities. We've provided our customers to enable them to self serve we've seen call volumes decrease even further than what was assumed in our plans.

Ryan: More information to share on the details of those benefits soon but we're excited to get these new card products into the market. As we are confident customers will value. These benefits and they will drive co brand card acquisitions in the future.

Ryan: This agreement supports the multi year financial targets, we announced at Investor Day.

Speaker Change: These digital enhancements have enabled a significant increase in efficiency within our call Center.

Ryan: Within the operation, we continue to focus on efficiency and modernization by reducing the time it takes to turn an aircraft and increasing our aircraft productivity, we've made meaningful progress toward our goal of removing paper based processes from the day to day operation and a digitized crew paperwork.

Speaker Change: As you can see we are working hard and making continued progress on our transformational plan.

Speaker Change: We are committed to continued execution and delivering on our southwest even better plan.

Speaker Change: And I want to thank the hard work of our incredible people, who are making this happen.

Ryan: Our November 2024 schedule was the first that implemented a five minute reduction in turn times in 12 of our stations and I'm happy to report that it's working as planned with no operational impact.

Speaker Change: That I will turn it over to Tammy.

Speaker Change: Ryan and Hello, everyone I am pleased by the level of execution, Ryan just covered and the realization of early benefits are mark Bartlett, even better plan as we laid out our plan for banks that roadmap to transform southwest and importantly to restore our financial prosperity and drive sustainable shareholder value.

Ryan: Later this quarter, we plan to introduce a digital communication tool that will allow pilots flight attendants and operations agents to chat live with each other while they are working to turn while they're working to turn the aircraft between flights further enhancing our efficiency. We continue to expect our turn time initiative to create the equivalent of roughly <unk> <unk>.

Speaker Change: While we have more work ahead to hit our multiyear financial target our fourth quarter performance exceeded expectation and we ended the year with improved year over year margin in the fourth quarter.

Ryan: Three aircrafts by the end of November this year, while we are already a leader in turn time. We are confident this will further our competitive advantage in the day to day operation.

Speaker Change: This improvement has already been covered so I'll pick up with color on our cost performance and we'll close with a few comments on the balance sheet and an update on capital allocation, including or insight on our fleet monetization strategy.

Ryan: In addition to reducing turn time, we will also launch Red eye flying in five key markets next month with the first flights arriving on Valentine's day.

Ryan: This will ramp up to a total of 33 Redeye markets in the June 2025 base schedule, including Hawaii routes and we're pleased with how red eye flights or booking today with nearly 75% of passengers on a connecting itineraries either before or after the redeye flight.

Speaker Change: Our fourth quarter 2020 for CASM ex increased 11, 1% year over year and full year 2020 for CASM ex increase seven 8% year over year, both inclusive of $892 million gain from a sale leaseback transaction in fourth quarter 2024.

Ryan: Red eye flights capitalize on peak seasonality and maximize network connectivity, while generating incremental load factor and remember that our turn and redeye initiatives aid our modest capacity growth plans for this year of up 1% to 2% year over year.

Speaker Change: The year over year increase was primarily the result of elevated operating expenses associated with inflationary pressures, including contractual market driven wage rate increases and.

Ryan: And finally, I am pleased to share that our service modernization efforts to drive operational efficiencies and improved experience for employees and customers are also paying off as a result of the digital capabilities. We've provided our customers to enable them to self serve we've seen call volumes decrease even further than what was assumed in our plans.

Speaker Change: In fourth quarter, specifically a decline in capacity growth resulted in additional unit cost pressure.

Speaker Change: Our urgently working towards implementing the 500 million cost initiatives announced at Investor Day in September with an intense focus on exceeding that number and accelerating as much of the benefit this year as possible.

Ryan: These digital enhancements have enabled a significant increase in efficiency within our call Center.

Speaker Change: Our efforts are focused on mitigating cost inflation by minimizing hiring optimizing scheduling efficiency capitalizing on supply chain opportunities and aggressively in Caribbean corporate overhead.

Ryan: As you can see we are working hard and making continued progress on our transformational plan we.

Ryan: We are committed to continued execution and delivering on our southwest even better plan.

Speaker Change: Looking forward. We currently expect this quarter CASM ex to increase in the range of 7% to 9% year over year.

Ryan: And I want to thank the hard work of our incredible people, who are making this happen.

Ryan: That I will turn it over to Tammy.

Speaker Change: Primarily by the continuation of general inflationary pressures from wage and work will headwinds from labor contract ratified last year and also from continued capacity moderation effort.

Tammy: Ryan and Hello, everyone I am pleased by the level of execution, Ryan just covered and the realization early benefits are mark Bartlett, even better plan.

Speaker Change: We laid out our plan for bankers roadmap to transform southwest and importantly to restore our financial prosperity and drive sustainable shareholder value.

Speaker Change: As 2025 progresses, our year over year unit cost inflation is expected to ease as we lap.

Speaker Change: While we have more work ahead.

Speaker Change: Labor contract anniversary employee initiative, driven capacity growth and aggressively pursued benefits from our cost initiatives.

Speaker Change: Multi year financial target.

Speaker Change: This quarter performance exceeded expectation and we ended the year with improved year over year margin in the fourth quarter.

Speaker Change: Our cabin retrofit efforts associated with our premium seating initiatives are expected to result in approximately $150 million in incremental cost.

This improvement has already been covered.

Speaker Change: I'll pick up with color on our cost performance and we'll close with a few comments on the balance sheet and an update on capital allocation, including or insight on our fleet monetization strategy.

Speaker Change: Primarily in the second half of the year.

Speaker Change: But these will be one time and will not carry forward into 2026.

Speaker Change: Taking all of these variables into account excluding potential gains from any future sale.

Speaker Change: Our fourth quarter 2024, CASM, Max increased 11, 1% year over year and full year 2020 for CASM ex increased seven 8% year over year.

Speaker Change: Sell sell leaseback transactions, we expect to exit 2025 with fourth quarter year over year, CASM X growth in the low single digits.

Speaker Change: Inclusive of $892 million gain.

Speaker Change: That lease back transaction in fourth quarter 2024.

Speaker Change: Moving to fleet as we highlighted in third quarter earnings we filed a prudent planning of our conservative fleet delivery expectations payoff.

Speaker Change: The year over year increase was primarily the result of elevated operating expenses associated with deflationary pressures.

Speaker Change: Routing contractual market driven wage rate increases.

Speaker Change: As a reminder, we enter 2020 for expecting to receive 79 Boeing aircraft delivery in March following informed US we would receive 46 after going through a detailed process, we conservatively adjusted or plan to 'twenty deliveries to reduce the risk of further operational impact.

Speaker Change: Fourth quarter, specifically the decline in capacity growth resulted in additional unit cost pressure. We are urgently working to work implementing the $500 million cost initiatives announced at Investor day in September with an intense focus on exceeding that number and accelerating as much of a benefit this year.

Speaker Change: Note that 2024 with a total of 22 delivery essentially in line with our internal estimation.

Speaker Change: As possible.

Speaker Change: Now in terms of how we are thinking about managing our fleet. This year, we have a modest capacity plan of one 2% year over year growth and that growth is fully funded by our efficiency initiatives.

Speaker Change: Looking forward. We currently expect this quarter CASM ex to increase in the range of 7% to 9% year over year.

Speaker Change: This sets us up to reduce our total aircraft count by year end.

Speaker Change: However, we still want as many deliveries as possible to modernize their fleet and reach our goal I think all dash seven dash eight fleet in 2031.

Speaker Change: Primarily by the continuation of general inflationary pressures from wage embark will headwinds from labor contract ratified last year and also from continued capacity moderation effort.

Speaker Change: So that again, we are planning to retire 51 aircraft. This year and in addition, we are contemplating the sale of an additional 10 dash 800 Mg.

Speaker Change: As 2025 progressive our year over year unit cost inflation is expected to ease as we lap.

Speaker Change: Labor contract anniversary employee initiative, driven capacity growth and aggressively pristine benefits from our cost initiatives.

Speaker Change: To support this we need 38 deliveries for Boeing However, as Bob shared all incremental deliveries beyond 38 offer an opportunity to accelerate the execution of our fleet monetization strategy.

Speaker Change: Our cabin retrofit efforts associated with our premium seating initiatives are expected to result in approximately $150 million in incremental cost.

Speaker Change: I will remind you that we view our fleet monetization strategy as incremental to the base business improvement.

Speaker Change: Primarily in the second half of the year.

Speaker Change: But these will be one time, and we will not carry forward into 2022.

Speaker Change: This strategy is highly idiosyncratic opportunities to monetize our fleet.

Taking all these variables into account excluding potential gains from any future sale.

Speaker Change: Polio sales and sale leasebacks to fund fleet monetization and support shareholder return.

Speaker Change: Sell sell leaseback transactions, we expect to exit 2025 with fourth quarter year over year CASM ex spread in the low single digits.

Speaker Change: So fleet opportunity is uniquely available to southwest as a result of the following factors.

Speaker Change: One current industry aircraft supply constraint, which are driven by OEM challenges, creating strong demand in the secondary market.

Speaker Change: Moving to fleet as we highlighted in our third quarter earnings we filed a prudent planning of our conservative fleet delivery expectations payout.

Speaker Change: The embedded value in our dash eight from Boeing compensation, and favorable pricing, which creates a meaningful value gap relative to the strong secondary market.

Speaker Change: As a reminder, we enter 2020 for expecting to receive 79 Boeing aircraft deliveries in March selling you form that we would receive 46 after going through a detailed process. We conservatively adjusted our planned 20 deliveries to reduce the risk of further operational impact.

Speaker Change: And three access to aircraft provided by our contractual order book, which is beyond the needs of our modest capacity plan.

Speaker Change: As a reminder, the 1% to 2% growth over the next three year does not require additional aircrafts as it is funded by efficiency initiatives.

Speaker Change: Note that 2024 with a total of 22 delivery essentially in line with our internal estimation.

Speaker Change: Now in terms of how we're thinking about managing our fleet. This year, we have a modest capacity plan of one 2% year over year grant and that growth is fully funded by our efficiency initiatives.

Speaker Change: Now of course, the Dash 800, and dash eight aircraft by different roles in our fleet strategy initiatives.

Ill start with the Dash 800.

Speaker Change: These are mid life aircraft that currently have highly favorable market valuation.

Speaker Change: This sets us up to reduce our total aircraft count by year end.

Speaker Change: Current market setup, and our order book economics combined to create an opportunity to replace the Metlife dash eight hundreds with new dash eight.

Speaker Change: However.

Speaker Change: All want as many deliveries as possible to modernize our fleet and reach our goal I think all dash seven dash eight fleet in 2031.

Speaker Change: This creates value for southwest and we plan to realize the lower maintenance and fuel costs.

Speaker Change: So that again, we are planning to retire 51 aircraft. This year and in addition, we are contemplating the sale of an additional 10 dash 800 Mg.

Speaker Change: Enhanced customer experience and better reliability associated with dash eight aircraft.

Speaker Change: All with reduced capital spending.

Speaker Change: With the dash eight aircrafts the opportunity to realize value comes from the ability to sell excess aircraft in our order book and pull forward the significant embedded value that comes from favorable pricing and the current market value.

Speaker Change: To support this we need 38 deliveries from Boeing However, as Bob shared office.

Speaker Change: Total deliveries beyond 38 offer an opportunity to accelerate the execution of our fleet monetization strategy.

Speaker Change: However to be able to fully execute this strategy, we must receive sufficient deliveries from Boeing.

Speaker Change: I will remind you that we view our fleet monetization strategy as incremental to the base business improvement.

Speaker Change: We are feeling very good about where Boeing is had we will want to gain confidence in their production capabilities before we move forward with sales.

Speaker Change: This strategy is highly idiosyncratic opportunities to monetize our fleet portfolio sale leaseback monetization and support shareholder return.

Speaker Change: So you can understand that our strong preference is to execute Phil the dash 800 sales facilitate capitalization rate modernization and for the dash eight the opportunity is to harvest significant embedded value.

Speaker Change: <unk> opportunity is uniquely available to southwest as a result of the following factors.

One current industry aircraft supply constraint, which are driven by OEM challenges, creating strong demand in the secondary market.

Speaker Change: Will however be opportunistic with sale leaseback and pursue them as a mechanism for an orderly exit of the dash eight hundreds from our fleet.

Speaker Change: Shane.

Speaker Change: Embedded value in our dash eight from Boeing compensation, and favorable pricing, which creates a meaningful value gap relative to the strong secondary market.

Speaker Change: Now that we have completed our first transaction you have a better idea of the economics of the dash 800 sell leaseback.

Speaker Change: Sell leasebacks allow us to lock in the certainty in today's strong secondary pricing, while simultaneously bridging our operation and so we are confident that we will receive our contractual replacement dash seven dash eights from Boeing.

Speaker Change: And three access to aircraft provided by our contractual order book, which is beyond the needs of our modest capacity plan.

Speaker Change: As a reminder, the lack of 2% growth over the next three year does not require additional aircrafts as it is funded by efficiency initiatives.

Speaker Change: Essentially the sale leasebacks are functioning as forward sale and again, we will pursue them opportunistically only where it makes financial sense. While also taking into account overall fleet modernization bowl financing needs and capital allocation consideration.

Speaker Change: Now of course, the Dash 800, and dash eight aircraft by different roles in our fleet strategy initiatives.

I'll start with the Dash 800.

Speaker Change: These are mid life aircraft that currently have highly favorable market valuation.

Speaker Change: Moving to Capex full year 2024, gross capital expenditures for $2 1 billion in line with previous guidance.

Speaker Change: The current market setup, and our order book economics combined to create an opportunity to replace the Metlife dash eight hundreds with new dash eight.

Speaker Change: Including proceeds of $871 million from the sale leaseback transaction in fourth quarter 2020 for full year 2024, net capital expenditures were $1 2 billion.

Speaker Change: This creates value for southwest and we plan to realize the lower maintenance and fuel costs.

Speaker Change: <unk> customer experience and better reliability associated with dash eight aircraft.

Speaker Change: We currently expect 2025 gross capital spending to be in the range of $2 5 billion to $3 billion. This includes approximately <unk>, one 2 billion in aircraft capital spending and $1 6 billion and non aircraft capital spending.

Speaker Change: With reduced capital spending.

Speaker Change: And again, there is an opportunity to lower net capital spending from our fleet monetization strategy.

Speaker Change: Over to be able to fully execute this strategy, we must receive sufficient deliveries from Boeing.

Speaker Change: As we look to the future we remain committed to maintaining a strong balance sheet and are proud to have an investment grade rating by all three rating agencies.

Speaker Change: While we are feeling very good about where Boeing is had we will want to gain confidence in their production capability before we move forward with sales.

Speaker Change: We also remain committed to providing significantly turns where shareholders through dividends and share repurchases and 2024, we returned $680 million consisting of $430 million dividend and $250 million of share repurchases to our shareholders.

Speaker Change: So you can understand that our strong preference is to execute Perl fee dash 800 sales facilitate capitalization rate modernization and for the dash eight the opportunity is to harvest significant embedded value.

Speaker Change: We will however be opportunistic with sale lease back and see them as a mechanism for an orderly exit of the dash eight hundreds from our fleet.

Speaker Change: The $250 million ASR was the first repurchase program of $2 5 billion share repurchase authorization announced at our September Investor Day.

Speaker Change: Now that we have completed our first transaction you have a better idea of the economics of the dash 800 sell leaseback.

Speaker Change: The company continues to plan for the launch of an additional $750 million ASR program later this quarter.

Speaker Change: Sound leasebacks allow us to lock in the certainty in today's strong secondary pricing, while simultaneously, bringing our operation until we are confident that we will receive our contractual replacement dash seven dash eights from Bali <unk>.

Speaker Change: Assuming performance trends continue as expected we plan to complete repurchases of the remaining $1 5 billion available under our share repurchase authorization in 2025.

Speaker Change: Essentially the sale leasebacks are functioning as forward sale and again, we will pursue them opportunistically only where it makes financial sense.

Speaker Change: Before I hand, it back to Bob I want to send out L. U Z love to myself with family and to all of you in the investment community for your support income rotary over the past 33 plus year.

Speaker Change: Also take into account overall fleet modernization, Paul financing needs and capital allocation consideration.

Speaker Change: Moving to Capex full year 2024, gross capital expenditures for $2 1 billion in line with previous guidance.

Speaker Change: With that I will turn it back to Bob.

Bob Jordan: Thank you Tammy as we wrap up I want to emphasize a few points first the team is intensely focused on meeting and exceeding our targeted performance improvement trajectory second our core business initiatives are performing ahead of expectations outlined only four months ago, and we expect to deliver or exceed the $1 billion 2025 EBIT.

Speaker Change: Including proceeds of $871 million from the sale leaseback transaction in fourth quarter 2020 for full year 2024, net capital expenditures were $1 2 billion.

Speaker Change: We currently expect 2025 gross capital spending to be in the range of $2 5 billion to $3 billion.

Bob Jordan: <unk> target this excludes the benefit from any fleet transactions. Nonetheless, our goal remains to deliver $1 5 billion of targeted total 2025 incremental EBIT.

Speaker Change: This includes approximately 112 billion in aircraft capital spending and $1 6 billion and non aircraft capital spending.

Bob Jordan: Third we are taking a hard look at our cost structure, our cost performance, including in the first quarter is not where we want it to be we are taking immediate actions to accelerate as much of the $500 million of targeted cost savings into 2025 as possible.

Speaker Change: And again, there is an opportunity to lower net capital spending from our fleet monetization strategy.

Speaker Change: As we look to the future we remain committed to maintaining a strong balance sheet and are proud to have an investment grade rating by all three rating agencies.

Bob Jordan: And we will report on our progress as we go finally, we have tremendous confidence in the plan and are excited about the future of southwest we plan to repurchase two in a quarter billion dollars of stock this year or approximately 12% of our market cap at current prices.

Speaker Change: We also remain committed to providing significant returns to our shareholders through dividends and share repurchases.

Speaker Change: And 2024, we returned $680 million, consisting of $430 million dividend and $250 million of share repurchases to our shareholders.

Bob Jordan: We expect this to be very accretive for our investors as we work to deliver our southwest even better plan, including our Northstar goal to achieve after tax rose R. O IC of at least 50% in 2027 and the pace of those share repurchases do not depend on the progress of our fleet monetization strategy.

Speaker Change: The $250 million ASR was the first repurchase program of the $2 5 billion share repurchase authorization announced at our September Investor Day.

Bob Jordan: <unk>.

Speaker Change: The company continues to plan for the launch of an additional $750 million ASR program later this quarter.

Bob Jordan: Now before I turn it to Q&A I want to say a few words about Tammy.

Bob Jordan: As you all know Tammy will be retiring as our CFO at the end of this quarter after 33 years with the company.

Speaker Change: Assuming performance trends continue as expected we plan to complete repurchases of the remaining $1 5 billion available under our share repurchase authorization in 2025.

Bob Jordan: She has served in many roles and has the distinction of serving as our first head of Investor Relations. She has been our chief financial officer since 2012 over the years. She has led us through times of great prosperity that provided for lucrative shareholder returns. She is an innovative leader who was instrumental in the success of countless endeavors.

Speaker Change: Before I hand, it back to Bob I want to send out al you leave blood to myself with family and to all of you in the investment community for your support income rotary over the past 33 plus year.

Speaker Change: She leaves southwest with a fortress balance sheet investment grade rated by all three credit agencies, and Tammy is a humble generous and inspirational leader she's a tireless mentor and as such leaves a strong legacy and you won't find a nicer kinder and tougher person.

Bob: With that I will turn it back to Bob.

Bob: Thank you Tammy as we wrap up I want to emphasize a few points first the team is intensely focused on meeting and exceeding our targeted performance improvement trajectory second our core business initiatives are performing ahead of expectations outlined only four months ago, and we expect to deliver or exceed the $1 billion 2025 EBIT contribution.

Bob Jordan: So I'd like to thank Jamie for her deeper commitment to our employees and the investment community and our shareholders and Tammy. Congrats on all you have accomplished thank you for your leadership and more importantly, your friendship you will be missed.

Bob: This excludes the benefit from any fleet transactions. Nonetheless, our goal remains to deliver $1 5 billion of targeted total 2025 incremental EBIT.

Julia Landrum: And on that note I will pass it back to Julia to start our Q&A.

Julia Landrum: Thank you, Bob and congratulations Tammy <unk>.

Bob: Third we are taking a hard look at our cost structure, our cost performance, including in the first quarter is not where we want it to be we are taking immediate actions to accelerate as much of the $500 million of targeted cost savings into 2025 as possible.

Julia Landrum: <unk> you too.

Speaker Change: This concludes my prepared remarks, we will now open the line for analyst questions, we'd like to get to as many of you as possible. So we ask that you. Please limit yourself to one question and a brief follow up if required we will now take the first question.

Bob: And we will report on our progress as we go finally, we have tremendous confidence in the plan and are excited about the future of southwest we plan to repurchase two in a quarter billion dollars of stock this year or approximately 12% of our market cap at current prices.

Speaker Change: Thank you Julia again to ask a question Press Star then one to withdraw your interest press Star then two.

Speaker Change: If you were on a speakerphone today, please pickup your handset before pressing the keys.

Bob: We expect this to be very accretive for our investors as we work to deliver our southwest even better plan, including our Northstar goal to achieve after tax rose R. O IC of at least 50% in 2027 and the pace of those share repurchases do not depend on the progress of our fleet monetization strategy.

Speaker Change: The first question comes from Savi <unk> with Raymond James. Please go ahead.

Savi <unk>: Hey, good morning.

Speaker Change: And if I had my Etame congratulations on the pending retirement in one of your competitors once told me.

Speaker Change: That's kind of part one of your competitive friends when told me that.

Speaker Change: Southwest balance sheet is.

Bob: <unk>.

Speaker Change: <unk> something on another planet in terms of relative position I know that doesn't happened accidentally so congrats.

Speaker Change: Now before I turn it to Q&A I want to say a few words about Tammy.

Speaker Change: As you all know Tammy will be retiring as our CFO at the end of this quarter after 33 years with the company.

Speaker Change: If I might for my first question and maybe to Tammy.

She has served in many roles and has the distinction of serving as our first head of Investor Relations. She has been our chief financial officer since 2012 over the years. She has led us through times of great prosperity that provided for lucrative shareholder returns. She is an innovative leader who was instrumental in the success of countless endeavors.

Speaker Change: Unit costs.

Speaker Change: Here in the first quarter it is moderating by about three points.

Speaker Change: Or maybe closer to <unk>. If you consider that you don't have the sale leaseback gain in the quarter.

Speaker Change: And in your opening remarks, you talked about like a one half point headwind in the second half from the cabin retrofits. So given all the moving parts I was hoping you could talk a little bit about the cadence of unit cost growth for the rest of the year end and just to clarify is that low single digit exit rate what type of capacity growth that exit rate is on.

Speaker Change: She leaves southwest with a fortress balance sheet investment grade rated by all three credit agencies, and Tammy is a humble generous and inspirational leader she's a tireless mentor and essentially has a strong legacy and you won't find a nicer kinder and tougher person anywhere.

Speaker Change: Yes, no. Thank you first of all thank you for your kind words savvy and.

Speaker Change: It's been it's really been a pleasure and you are wonderful. Thank you.

Speaker Change: So I'd like to thank Jamie for her deep commitment to our employees the investment community and our shareholders and Tammy Congrats on all you have accomplished thank you for your leadership and more importantly, your friendship you will be missed.

Speaker Change: Aye.

Speaker Change: Just to give you a little bit of color on just the bridge for the.

Speaker Change: Five to seven points.

Speaker Change: And on that note I will pass it back to Julia to start our Q&A.

Speaker Change: Our midpoint of our guidance in the first quarter to the low signal digit exit rate in the fourth quarter.

Julia: Thank you Bob and congratulations Kathy.

Speaker Change: <unk> you too.

Speaker Change: This completes our prepared remarks, we will now open the line for analyst questions, we'd like to get to as many of you as possible. So we ask that you. Please limit yourself to one question and a brief follow up if required.

Speaker Change: It's really coming from a couple of different buckets, we have call. It three to four points from turn and Redeye initiatives.

So a big chunk of that's coming from just capacity from the capacity. So hopefully that helps answer your question there it's probably.

Speaker Change: We will now take the first question.

Speaker Change: Thank you Julia again to ask a question Press Star then one to withdraw your interest press Star then two.

Speaker Change: Three points, if I had to peg that and another point just from absorbing the overstaffing that we've discussed and.

Speaker Change: If you were on a speaker phone today, please pick up your handset before pressing the keys.

Speaker Change: The first question comes from Savi <unk> with Raymond James. Please go ahead.

Speaker Change: In previous calls and then Theres. Another two to three point that is split fairly evenly between the lapping impact from labor contracts that were ratified last year.

Speaker Change: Hey, good morning.

Speaker Change: And if I had my Etame congratulations on the pending retirement and one of your competitors once told me.

Speaker Change: And just.

Speaker Change: Just overall benefits from the cost plan initiatives kicking in so.

Speaker Change: That's kind of part one of your competitor friends and told me that a.

Speaker Change: Southwest balance sheet is.

Speaker Change: As.

Speaker Change: <unk> something on another planet and Joseph relative position I know that doesn't happened accidentally so so congrats.

Bob Jordan: Bob and I, both talked about in our remarks.

Bob Jordan: Very focused on our cost reduction efforts and those will of course ramp up as we go through the year. So.

Speaker Change: If I might for my first question and maybe to Tammy.

Speaker Change: Unit costs.

Speaker Change: Here in the first quarter it is moderating by about three points.

Bob Jordan: We're feeling good as we sit here today about the exit rate and while some of that is coming from capacity.

Speaker Change: Or maybe closer to five if you consider that you don't have the sale leaseback gain in the quarter.

Speaker Change: And in your opening remarks, you talk about like a one half point headwind in the second half from the cabin retrofits.

Bob Jordan: It's also coming from just an incredible amount of work.

Bob Jordan: From the team.

Speaker Change: Given all the moving parts I was hoping you could talk a little bit about the cadence of unit cost growth for the rest of the year and just to clarify if that low single digit exit rate what type of capacity growth that exit rate is on.

Bob Jordan: That's helpful and maybe just following up on that.

Bob Jordan: So from a timing perspective that was kind of redeye initiatives I'm guessing they kind of kick in in earnest in the second and third quarter. So is it kind of fairly consistent than the rest of the quarters because in the second half you do have that.

Yes, no. Thank you first of all thank you for your kind words, Bobby and.

Bob Jordan: Kind of step up in cabin retrofits.

Speaker Change: It's been it's really been a pleasure and you are wonderful. Thank you.

Bob Jordan: Yeah, so it ramps up with the biggest impact hitting in the fourth quarter.

I am just to give you a little bit of color on just the bridge for the five to seven points from Ahmed.

Speaker Change: Okay understood. Thank you.

Duane: The next question is from Duane <unk> with Evercore ISI. Please go ahead.

Duane: Okay.

Speaker Change: Our midpoint of our guidance in the first quarter to the low signal digit exit rate in the fourth quarter.

Okay. Thanks.

Duane: Jamie.

Duane: <unk>. Good luck on the next phase of your career I know youre going to Miss always fun.

Speaker Change: It's really coming from a couple of different buckets.

Speaker Change: I'm going to Miss you too.

Duane: So.

Speaker Change: We have call it three to four points from turn in Red eye initiatives.

Duane: Look I wanted to ask you maybe a longer term question Theres a lot of symmetry right now between the industry backdrop and the Renaissance that kicked off in 2012.

Speaker Change: So a big chunk of that is coming from just capacity from the capacity. So hopefully that helps answer your question there is probably.

Duane: And southwest was really a big part of that Renaissance and as we go back and look at that period.

Speaker Change: Three points, if I had to peg that and another point just from absorbing the overstaffing that we've discussed in.

Duane: You really had a multi year period of margin expansion RASM growth over CASM growth, not a quarter or two where timing shifts here and there, but but a multi year period of margin expansion.

Speaker Change: In previous calls and then there is another two to three point that is split fairly evenly between the lapping impacts from labor contracts that were ratified last year.

Speaker Change: Now some of that was macro growth and benign fuel prices, but really CASM growth for southwest was modest. Despite the fact that capacity growth was also modest and fairly tight over a multiyear period. So my question is sorry with for the long winded, leading from a unit cost perspective, do you see the potential.

Speaker Change: And just.

Speaker Change: Just overall benefits from the cost plan initiatives kicking in so.

Speaker Change: As.

Bob: Bob and I, both talked about in our remarks.

Bob: Very focused on our cost reduction efforts and those are all of course ramp up as we go through the years. So.

Speaker Change: <unk> to enter a similar multi year period, where you get modest unit cost growth on modest capacity growth.

Speaker Change: Or does better CASM really depend upon getting back to a period of higher growth.

Bob: We're feeling good as we sit here today about the exit rate.

Speaker Change: Yeah, Duane it's Bob I'll take a shot and then Jamie can chime in I think the.

Bob: And while some of that is coming from capacity.

Speaker Change: We're not ready to guide 2006, and 2007 CASM X, but.

Bob: It's also coming from just an incredible amount of work.

Speaker Change: The exit rate for 2005.

Bob: From the team.

Bob: That's helpful. Maybe just following up on that.

Speaker Change: At least gives you some indication of what we're striving for maybe a reasonable we're striving for.

Bob: So from a timing perspective that was kind of red eye initiatives I'm guessing they kind of kick in in earnest in the second and third quarter.

Speaker Change: Over the course of the rest of the planned 2697, so not unreasonable that we can have CASM in that low single digit.

Bob: Is it kind of fairly consistent than the rest of the quarters because in the second half you do have that.

Speaker Change: Range.

Speaker Change: And.

Bob: Kind of step up in cabin retrofits.

Speaker Change: And.

Speaker Change: Obviously, we have labor rates surety with contracts closed out we really don't have any overs openers of magnitude of 27.

Bob: Yeah, so it ramps up with the biggest impact hitting in the fourth quarter.

Bob: Understood. Thank you.

Speaker Change: Yes, I think thats absolutely.

Duane: The next question is from Duane <unk> with Evercore ISI. Please go ahead.

Speaker Change: It is absolutely.

Speaker Change: Doable.

Speaker Change: Thanks, and then maybe just for my follow up.

Duane: Hey, thanks.

Duane: Jamie.

Speaker Change: Certification process for your new seating configuration can you can you give us an update there what have you learned since last quarter or since Investor day.

Speaker Change: <unk>. Good luck on the next phase of your career I know youre going to Miss always fun.

Speaker Change: I'm going to Miss you too.

Speaker Change: Yes.

Speaker Change: And when does this really start in earnest.

Speaker Change: So.

Speaker Change: Look I wanted to ask you maybe a longer term question Theres a lot of symmetry right now between the industry backdrop and the Renaissance that kicked off in 2012.

Duane: Hey, Duane.

Speaker Change: Yeah.

Speaker Change: We finalized really our cabin layouts, which allows us to finish up weight in balance certification with the FAA and get our STC certification will get the weight and balance certification.

Speaker Change: In southwest was really a big part of that Renaissance and as we go back and look at that period.

Speaker Change: Certification, we're planning for that of course, it's dependent on FAA timelines, but we're pretty confident we'll get that here in the first quarter and then the STC.

Speaker Change: You really had a multi year period of margin expansion RASM growth over CASM growth, not a quarter or two or timing shifts here and there, but but but a multi year period of margin expansion.

Speaker Change: Certification in the second and then that will we can begin retrofits following at.

Speaker Change: Now some of that was macro growth and benign fuel prices, but really.

Speaker Change: At that point.

Speaker Change: That goes along with Tami is note on the retrofit costs being in the second half of the year, we will get the retrofits started here mid year, and then that will ramp.

Speaker Change: CASM growth for southwest was modest despite the fact that capacity growth was also modest and fairly tight over a multiyear period. So my question is sorry for the long winded, leading from a unit cost perspective, do you see the potential to enter a similar multiyear period, where you get modest unit cost growth on modest.

Speaker Change: Through the remainder of the year and we're confident that we've got the <unk>.

Speaker Change: The vendors in place our employees are in place.

Speaker Change: To get the fleet retrofit before we get to our operating day.

Speaker Change: Capacity growth.

Speaker Change: Thank you.

Speaker Change: Or does better CASM really depend upon getting back to a period of higher growth.

Speaker Change: The next question comes from excuse me. The next question is from Mike Lindenberg with Deutsche Bank. Please go ahead.

Speaker Change: Yeah, Duane it's Bob I'll take a shot and then Jamie can chime in I think.

Mike Lindenberg: Yeah, Hey, good morning, everyone and I Echo.

Speaker Change: We're not ready to guide 2006, and 2007 CASM X, but.

Mike Lindenberg: Echo the comments of what everybody has said about Tami, Tim it's been a lot of fun and I think I've been there for the majority of those 33 years. So.

Speaker Change: The exit rate for 2005.

Speaker Change: At least gives you some indication of what we're striving for maybe a reasonable we're striving for.

Brian: Good Brian.

Brian: Thank you anyway.

Brian: Okay.

Speaker Change: Over the course of the rest of the planned 26 27, so not unreasonable that we can have CASM in that low single digit.

Speaker Change: On question and in fact, I do have one for you Tammy.

Brian: I think about it.

Brian: The sale leaseback transaction that you guys took in the fourth quarter and so that was 35 airplanes call it $90 million I know that in the past.

Speaker Change: Range.

Speaker Change: And.

Speaker Change: We have labor rates surety with contracts closed out we really don't have any overs openers of magnitude of 27, So yes, I think thats absolutely.

Brian: We indicated that we could see a margin boost.

Brian: Upwards of call. It maybe two points from this strategy and so when I think about your revenue base for 2025 2026.

Speaker Change: It is absolutely.

Brian: Look at this transaction and I realized not every transaction is going to be sort of size. This way, but it does seem like that we could be looking at maybe upwards of 100 airplanes on a sale leaseback basis I mean.

Speaker Change: Doable.

Speaker Change: Thanks, and then maybe just for my follow up the.

Speaker Change: Certification process for your new seating configuration can you can you give us an update there what have you learned since last quarter or since Investor day.

Is that number too high how should I think about it and what sort of as a follow up.

Speaker Change: And when does this really start in earnest.

Speaker Change: What are you sort of targeting for 2025 with respect to sale leasebacks and I know that there was an RFP for 30 outright divestitures, where does that sit so kind of a multi pronged airplane question. Thanks for taking my question.

Duane: Yeah, Hey, Duane.

Speaker Change: Yeah.

Speaker Change: We finalized really our cabin layouts, which allows us to finish up weight and balanced certification with the FAA and get our STC certification will get the weight and balance certification.

Mike Lindenberg: Yes, no no. Thank you, Mike and I think Youre a lot of fun too.

Speaker Change: Certification, we're planning for that of course, it's dependent on FAA timelines, but we're pretty confident we'll get that here in the first quarter and then the STC.

Speaker Change: So on.

Speaker Change: On your question.

Speaker Change: I think the overarching theme here is we have a lot of levers we can pull.

Speaker Change: Certification in the second and then that will we can begin retrofits following at.

Speaker Change: To hit our.

Speaker Change: At that point.

Speaker Change: Targeted EBIT contribution from our fleet strategy.

Speaker Change: That goes along with Tami is note on the retrofit costs being in the second half of the year, we will get the retrofits started here mid year, and then that will ramp.

Speaker Change: So and the sale leasebacks are going to be dependent.

Speaker Change: Through the remainder of the year and we're confident that we've got the vendors in place our employees are in place.

Speaker Change: On.

Speaker Change: Our 800.

Speaker Change: Our 800 exit strategy here. So that's just really a technique.

Speaker Change: To get the fleet retrofit before we get to our operating day.

Speaker Change: To help us manage that and obviously.

Speaker Change: Thank you.

Speaker Change: The next question comes from excuse me. The next question is from Mike Lindenberg with Deutsche Bank. Please go ahead.

Speaker Change: To the extent.

Speaker Change: The proceeds the proceeds will go to <unk>.

Speaker Change: Our fleet modernization efforts obviously.

Mike Lindenberg: Oh, Yeah, Hey, good morning, everyone and I Echo.

Mike Lindenberg: Echo the comments of what everybody has said about Tami, Tim it's been a lot of fun and I think I've been there for the majority of those 33 years. So.

Speaker Change: Ultimately with the replacement of the Max eight because we get EBIT benefit from that as well.

Speaker Change: But the the.

Speaker Change: Good Brian.

Speaker Change: The book and again, we're going to just to be clear you know.

Mike Lindenberg: Thanks anyway.

Speaker Change: It will depend on the economics of those transactions and with the goal obviously to be NPV positive.

The way.

Speaker Change: On question and in fact, I do have one for you Tammy.

Mike Lindenberg: I think about.

Mike Lindenberg: The sale leaseback transaction that you guys took in the fourth quarter and so that was 35 airplanes call it $90 million I know that in the past.

So the bulk of the benefit really comes from sales of the excess aircrafts that we do not need to.

Mike Lindenberg: <unk> indicated that we could see a margin boost.

Mike Lindenberg: All forward to call. It maybe two points from this strategy and so when I think about your revenue base for 2025 2026.

Speaker Change: Hit our moderated capacity plans.

Speaker Change: So that of.

Speaker Change: Of course is dependent on Boeing deliveries.

Mike Lindenberg: Look at this transaction and I realized not every transaction is going to be sort of size. This way, but it does seem like that we could be looking at maybe upwards of 100 airplanes on a sale leaseback basis I mean.

Speaker Change: And just.

Speaker Change: Market conditions, but the main constraint there is Boeing deliveries and Bob reported on Boeing in his remarks, so they are ramping up and we did.

Mike Lindenberg: Is that number too high how should I think about it and what sort of as a follow up.

Speaker Change: And we did I think have a pretty conservative estimate of what our deliveries are for this year at 38. So we will see where Boeing ends up. So that's what makes your question a little bit tricky in terms of timing.

Mike Lindenberg: What are you sort of targeting for 2025 with respect to sale leasebacks and I know that there was an RFP for 30 outright divestitures, where does that sit so kind of a multi pronged airplane question. Thanks for taking my question.

Speaker Change: But we could have potentially up to 50% to 55 deliveries in and again those would go towards our fleet modernization efforts.

Mike Lindenberg: Yes, no no. Thank you, Mike and I think Youre a lot of fun too.

Mike Lindenberg: And so on.

Speaker Change: So I think the.

Mike Lindenberg: On your question.

Yes.

Mike Lindenberg: I think the overarching theme here is we have a lot of levers we can pull.

Speaker Change: The takeaway here is that we have a lot of levers we're going to manage this very carefully.

Mike Lindenberg: To head our.

And again the goal with the Dash eight hundreds is we are exiting.

Mike Lindenberg: Targeted EBIT contribution from our fleet strategy.

Speaker Change: We're exiting <unk>.

Mike Lindenberg: So and that the sale leasebacks are going to be dependent.

And they sell leaseback is just an effective tool to help us manage that but.

Mike Lindenberg: On.

Mike Lindenberg: Our 800.

Speaker Change: The bulk of the program would come from sales yes.

Mike Lindenberg: Our 800 exit strategy here. So that's just really a technique.

Speaker Change: Yes, I was going to say.

Speaker Change: Just any of the sale leaseback is just a pull forward sale right. So you are being our strong preference is sales eight hundreds to replace and lower operating costs.

Mike Lindenberg: To help us manage that and obviously.

Mike Lindenberg: To the extent.

Speaker Change: And assets to maximize the embedded value against a market that's in the fleet order book.

Mike Lindenberg: The proceeds the proceeds will go to our fleet modernization efforts obviously.

Speaker Change: Just to say it again.

Mike Lindenberg: Ultimately with the replacement of the Max eight because we get EBIT benefit from that as well.

Speaker Change: And so the more Boeing can deliver the more we can execute this strategy in 2025.

Mike Lindenberg: But the.

Seattle last week and really encouraged.

Mike Lindenberg: The book and again, we're going to just to be clear you know those it will depend on the economics of those transactions and with the goal obviously to be NPV positive.

Speaker Change: By what I saw on the line the processes the procedures slack time coming out sort of all things you want to see they have a long ways to go.

Speaker Change: But pending.

Speaker Change: We don't know about.

Mike Lindenberg: So the bulk of the benefit really comes from sales of the excess aircrafts that we do not need to.

Speaker Change: Optimistic strongly optimistic they can exceed a 38 and we probably have upside to 50 to 55, so that would certainly help in executing the fleet strategy on the sales side. So.

Mike Lindenberg: To.

Mike Lindenberg: Hit our moderated capacity plans.

Mike Lindenberg: So that.

Speaker Change: Lots of be lots to be seen here I think we'll know a lot. Once we know whether Boeing breaks right 38 and March early April I expect that they will we'll have to see and then I think that puts us in a good spot to really update you on.

Mike Lindenberg: Of course is dependent.

Mike Lindenberg: On Boeing deliveries.

Mike Lindenberg: And just.

Speaker Change: Market conditions, but but the main constraint there is Boeing deliveries and Bob reported on Boeing in his remarks, so they are ramping up and we did.

Speaker Change: What we now expect in terms of deliveries and what we now think we can execute in terms of the fleet monetization plan.

Speaker Change: We did I think have a pretty conservative estimate of what our deliveries are for this year at 38, So we will see where Boeing ends up. So that's what makes your question a little bit tricky in terms of timing.

Mike Lindenberg: And Mike I, just wanted to make one more just want to be really clear on this.

Mike Lindenberg: We are working to get to our 2027 target which is without fleet.

Speaker Change: But you know we could have potentially up to 50% to 55 deliveries in and again those would go towards our fleet modernization efforts.

Mike Lindenberg: At the end of the day, our core base business.

Mike Lindenberg: We are aiming to get to our 15% return on invested capital.

Speaker Change: So I think the.

Speaker Change: Yes.

Mike Lindenberg: Of.

Speaker Change: The takeaway here is that we have a lot of levers we're going to manage this very carefully.

Mike Lindenberg: Of at least 15% and op margin of excluding special items of greater than 10%, So thats really.

Speaker Change: And again the goal with the Dash eight hundreds is we are exiting.

We're talking a lot about fleet, but I, just don't want that to get lost in the conversation.

Speaker Change: We're exiting and Gs and they sell lease back is just an effective tool to help us manage that but the.

Mike Lindenberg: Great. Thanks, Thanks, everyone.

Mike Lindenberg: Okay.

Speaker Change: The next question is from Catherine O'brien with Goldman Sachs. Please go ahead.

Speaker Change: That's the bulk of the program would come from sales, yes, I was going to say just just any of the sale leaseback is just a pull forward sale right. So you have strong preferences as sales eight hundreds to replace and lower operating costs.

Speaker Change: Hey, good afternoon, everyone and maybe I haven't been here for almost 33 years like Mike has but it's truly been a pleasure to work with you.

Speaker Change: And dash eights to maximize the embedded value against a market that's in the in the fleet order book.

Speaker Change: So congratulations on a career.

Speaker Change: I'm quite a career and happy retirement.

Speaker Change: Just to say it again.

Speaker Change: So I have one.

Speaker Change: And so the more Boeing can deliver the more we can execute this strategy in 2025.

Speaker Change: One one quick revenue one of them.

Speaker Change: One quick fleet.

Tammy: Fleet, one for you Tammy, but maybe I'll start on revenue.

Speaker Change: Seattle last week and really encouraged.

Speaker Change: The <unk> RASM result.

Speaker Change: By what I saw on the line the processes the procedures slack time coming out sort of all the things you wanted to see if they have a long ways to go.

Speaker Change: Mentioned that the beat was driven in part by stronger holiday peak and then also the ramp of revenue management can you just help us think about in broad strokes, how much each of those buckets contributed and then how do we think about the pacing of that $1 billion in tactical.

Speaker Change: But pending something that we don't know about.

Speaker Change: Optimistic strongly optimistic they can exceed a 38 and we probably have upside to 50 to 55, so that would certainly help in executing the fleet strategy on the sales side. So.

Speaker Change: EBIT.

Speaker Change: Revenue driven initiatives.

Speaker Change: In 2025, how much of your <unk> guide does that drive versus general industry environment, and how does that build through the year.

Speaker Change: It's always hard to completely tear it apart accurately.

Speaker Change: Lots to be lots to be seen here I think we'll know a lot. Once we know whether Boeing breaks right 38 and March early April I expect that they will we'll have to see and then I think that puts us in a good spot to really update you on.

Speaker Change: I would say that if you got to look at kind of sequentially, how our RASM went from Q3 to Q4.

Speaker Change: And how that compares to our norms how the other airlines.

Speaker Change: So of course progressed and how it compares their norms youll see our level of outperformance.

Speaker Change: What we now expect in terms of deliveries and what we now think we can execute in terms of the fleet monetization plan.

Speaker Change: With Airlines do the same thing in Q4 to Q1, you see that same amount.

Speaker Change: And Mike I, just wanted to make one more just wanted to be really clear on that yes. We are working to get to our 2027 target which is without tweet.

Speaker Change: In effect, if you will of an outperformance of sequential basis, which gives you an idea that it's some.

Speaker Change: Company specific things that are happening there.

Speaker Change: So it gives us confidence of our investors confidence that we're seeing that kind of RASM reversion that we need back to our historical levels.

Speaker Change: At the end of the day, our core base business.

Speaker Change: We are aiming to get to our 15% return on invested capital.

Speaker Change: Our plan now within that kind of tear them apart each of these by design elements of our tactical initiatives are self reinforcing the network the network changes the revenue management changes.

Speaker Change: Of.

Speaker Change: Or at least 15% and op margin of excluding special items of greater than 10%. So that's really.

Speaker Change: Hum.

Speaker Change: Yes.

Speaker Change: Marketing changes all of those work together, so really the order of operations of quantifying. It wherever you go with first gets a bigger benefit so to speak now revenue management did have a stronger impact in Q4 and into Q1 than the other two so that's why we called it out in our prepared remarks.

Speaker Change: We're talking a lot about fleet, but I, just don't want that to get lost in the conversation great great. Thanks. Thanks, everyone.

Speaker Change: Okay.

Speaker Change: The next question is from Catherine O'brien with Goldman Sachs. Please go ahead.

Catherine O'brien: Hey, good afternoon, everyone.

Speaker Change: All kind of contributing so I think the idiosyncratic.

Maybe I haven't been here for almost 33 years like Mike has but Tammy it's truly been a pleasure to work with you.

Speaker Change: Southwest part is those three combined and we see that progressing throughout the year I will say the ones. We highlighted in Investor day, where they kind of are getting back to our normal kind of yield discount if you will versus our competitors and getting back our load factor to norm. So the two big levers, we highlighted that we'll be signals of us.

Catherine O'brien: So congratulations on a career.

Catherine O'brien: I'm quite a career and happy retirement.

Catherine O'brien: Yes.

Catherine O'brien: So I have one.

Catherine O'brien: One one quick revenue one of them.

Catherine O'brien: One quick fleet.

Tammy: Fleet, one for you Tammy, but maybe I'll start on revenue.

Speaker Change: But we did we had more progress than frankly, I expected on the yield side.

Catherine O'brien: The four Q RASM result.

Mentioned that the beat was driven in part by stronger holiday peak and then also the ramp of revenue management can you just help us think about in broad strokes, how much each of those buckets contributed and how do we think about the pacing of that $1 billion in tactical.

Speaker Change: <unk> Park is on load factors. So as we go throughout the year I expect to keep and grow that yield benefit and then load factor that would be the one that comes second to us throughout the year. So I think if you look closely at those each quarter, you'll get an idea of how we're progressing in the tactical initiatives.

Catherine O'brien: EBIT.

Catherine O'brien: Revenue driven initiatives.

Catherine O'brien: In 2025, how much of your <unk> guide does that drive versus general industry environment, and how does that build through the year.

Speaker Change: That's great. Thanks, and then I guess.

Speaker Change: One last question for Tammy.

Speaker Change: On the fleet strategy, you've called out you expect that to contribute about $500 million in EBIT on average per year understand that's very fluid.

Catherine O'brien: It's always hard to completely tear it apart accurately.

Catherine O'brien: I would say that if you got to look at kind of sequentially, how our RASM went from Q3 to Q4.

Speaker Change: Tim in your answer to Mike. Thank you made it clear that the bulk of that will come from.

Catherine O'brien: And how that compares to our norms how the other airlines are.

Speaker Change: Straight sales not sell leasebacks.

Speaker Change: Should we think of sale leasebacks as offsetting that positive fill impact just with the first silly spec to increase rent over three years offset the gains the decrease in DNA or do we need to be adding like other items like lower maintenance dispatch reliability.

Catherine O'brien: How they sequence.

Catherine O'brien: And how it compares their norms youll see our level of outperformance itself.

Catherine O'brien: Southwest Airlines do the same thing in Q4 to Q1, you see that same amount.

Catherine O'brien: Same effect, if you will of an outperformance of sequential basis, which gives you an idea that it's some company specific things that are happening there.

I guess, what I'm really getting at is do you expect the net gain aircraft front and DNA for these sale leasebacks to also be EBIT positive or how do we think about that thanks, Yes, no great question Katy, Yes, when we look at our sale leaseback opportunities.

Catherine O'brien: As it gives us confidence of our investors confidence that we're seeing that kind of RASM.

Catherine O'brien: <unk> that we need back to our historical levels to hit our plan now within that kind of tear them apart each of these by design elements of our tactical initiatives are self reinforcing the network the network changes the revenue management changes.

Speaker Change: We.

Speaker Change: Our goal and our intention is to do all of those.

Speaker Change: And then P.

Catherine O'brien: <unk>.

Speaker Change: The positive way, so while yes, youre recognizing a gain.

Catherine O'brien: Okay.

Catherine O'brien: Marketing changes all of those work together, so really the order of operations of quantifying. It wherever you go with first gets a bigger benefit so to speak now revenue management did have a stronger impact in Q4.

Speaker Change: When you sell the aircraft and there's increased rents that that would exceed the depreciation expense.

Speaker Change: Again. These are these are short term sale leasebacks again to help manage the exit of the 800.

Catherine O'brien: Into Q1, then.

Catherine O'brien: Other two so that's why we called it out in an hour.

Catherine O'brien: Repaired remarks, but they're all kind of contributing so I think that for that idiosyncratic.

Speaker Change: But when we look at that in total.

Speaker Change: <unk>.

Catherine O'brien: Southwest part is those three combined and we see that progressing throughout the year.

Speaker Change: It's NPV positive and that's the way we're constructing our fleet strategy here so.

Catherine O'brien: We'll say once and we highlighted in Investor day, where they kind of are getting back to our normal kind of yield discount if you will versus our competitors and getting back our load factor to norm. So the two kind of big levers, we highlighted that we'll be signals of us progressing that we did we had more progress than frankly I expected on the yield side.

But we're taking into account all of the considerations that you just mentioned maintenance et cetera and.

Speaker Change: We've got again a lot of levers we can pull to do this in a NPV positive way and hopefully that helps.

Catherine O'brien: <unk> Park is on load factor so.

Speaker Change: Thanks, and congrats Debbie.

Catherine O'brien: Each quarter, you'll get an idea of how we are progressing the tactical initiatives.

Debbie: Thank you Katie.

Speaker Change: The next question is from Dan Mckenzie with Seaport Global Please go ahead.

Catherine O'brien: That's great. Thanks, and then I guess.

Speaker Change: One last question for Tammy.

Dan Mckenzie: Oh, Hey, thanks, Good morning, Tammy I have to jump on the bandwagon here and say huge congrats on.

Speaker Change: On the fleet strategy, you've called out you expect that to contribute about $500 million in EBIT on average per year understand that's very fluid.

Such an extended run as a CFO.

Speaker Change: Tim in your answer to Mike. Thank you made it clear that the bulk of that will come from.

Speaker Change: And it has helped us of course.

Speaker Change: A couple of questions here following up on Mikes question in and.

Speaker Change: Straight sales that Phillies box.

Speaker Change: Should we think of sale leasebacks as offsetting that positive impact just with the first silly spec to increase rent over three years offset the gains in the decrease in DNA or do we need to be adding like other items like lower maintenance dispatch reliability.

Speaker Change: When all is said and done how much cash could potentially be unlocked from the balance sheet from these sales and so I guess my question is how many aircraft fall into that attractive mid age bucket and over how many years could these sales potentially occur if you wanted to pull the trigger.

Speaker Change: I guess, what I'm really getting at is you know do you expect the net gain aircraft front and DNA for these sale leasebacks to also be EBIT positive or how do we think about that thanks, Yeah. No no great question Katy Yeah, when we look at our.

Speaker Change: Yes, well first of all thank you Dan.

Speaker Change: <unk>.

Speaker Change: It's been a pleasure working with you over the years and so we're not going to give specific guidance on the total proceeds.

Speaker Change: Our sale leaseback opportunities.

We.

Speaker Change: We.

Speaker Change: Our goal and our intention is to do all of those and in N P. B.

Speaker Change: We've got you.

Speaker Change: If you look at your if we look at our order book and I shared this at an Investor Day, you know, we we just have airplanes in excess of.

Speaker Change: The positive way, so while yes, you're recognizing a gain when you sell the aircraft and there's increased rents that that would exceed the depreciation expense.

Speaker Change: The aircraft that we're going to need here over the next three year period to hit our 1% to 2% capacity growth target.

Speaker Change: Again. These are these are short term sale leasebacks again to help manage the exit of the 800.

Speaker Change: So that.

Speaker Change: But when we look at that in total.

Speaker Change: Gives us.

The.

Speaker Change: It's NPV positive and that's the way we're constructing our fleet strategy here so.

Speaker Change: The proceeds from that would obviously be would obviously be significant and again.

Speaker Change: What we're focused on is hitting the operating margin targets that we provided you at Investor day as well as the return on invested capital.

Speaker Change: But we're taking into account all of the considerations that you just mentioned maintenance et cetera and yet.

Speaker Change: We've got again a lot of levers we can pull to do this in an NPV positive way and hopefully that helps.

Speaker Change: So not not not prepared to give you that today because again this depends on the market and we're going to do transactions that makes financial Smith. The financials, then and that are prudent to the bottomline.

Speaker Change: Thanks, and congrats Amy thank.

Amy: Thank you Katie.

Speaker Change: The next question is from Dan Mckenzie with Seaport Global Please go ahead.

Speaker Change: And again, we're managing our invested capital base with those proceeds in and focused on.

Dan Mckenzie: Oh, Hey, thanks, Good morning, Tammy I have to jump on the bandwagon here and say huge congrats on.

Speaker Change: Such an extended run as a CFO.

Speaker Change: Exiting our LNG fleet by 2031, which will set us up really well for the next generation in terms of <unk>.

Speaker Change: And it itself west of course.

Speaker Change: A couple of questions here following up on Mikes question and and.

Speaker Change: Capex requirements to.

Speaker Change: When all is said and done how much cash could potentially be unlocked from the balance sheet from these sales.

Speaker Change: <unk> future growth.

Speaker Change: So I'm not trying to give you a non answer I'm really not just not prepared to.

Speaker Change: So I guess my question is how many aircraft fall into that attractive mid age bucket and over how many years could these sales potentially occur if you wanted to pull the trigger.

Speaker Change: Walk you through specifics because it really does depend on Boeing here and the market.

Speaker Change: And I'll just chime in there I think just to quickly add I've said. This many many times we are committed to extracting every dime out of that value embedded value in the order books. So I think we have 672.

Dan Mckenzie: Yes, well first of all thank you Dan and.

Dan Mckenzie: It's been a pleasure working with you over the years and so we're not going to give specific guidance on the total proceeds.

Speaker Change: Right now so.

Speaker Change: Yes.

Speaker Change: The commitment is what whatever.

Speaker Change: Whatever the exact strategy in terms of how every transaction lays out the intent is to pull every every bit of value out for ourselves and our shareholders and.

Dan Mckenzie: We.

Dan Mckenzie: We've got you.

Dan Mckenzie: If you look at your if we look at our order book and I'm sure. It does that in Investor Day, you know, we we just have airplanes in excess of the.

Speaker Change: If you run this out you get to an average fleet age I think a five <unk>. That's terrific. It's very low. So there is also work to do I think to look at the intersection of optimizing a still really good fleet really good industry, leading fleet age.

Dan Mckenzie: The aircraft that we're going to need here over the next three year period to hit our 1% to 2% capacity growth target.

Speaker Change: And the number of aircraft that could be excess at current capacity right. So there's work to do to maybe tackle exactly what is optimal in terms of your question and then lastly, you didn't ask this but there's been some discussion of.

Dan Mckenzie: So that gives us you know.

Dan Mckenzie: Uh huh.

Dan Mckenzie: The proceeds from that would obviously be a would obviously be significant and again.

Dan Mckenzie: What we're focused on is hitting the operating margin targets that we provided you at Investor day as well as the return on invested capital.

Speaker Change: This fleet strategy related to maybe what some others are doing.

Speaker Change: <unk>.

Speaker Change: The difference is to me, we have excess aircraft with strong embedded values because of the credits and our own value pricing.

Dan Mckenzie: So not.

Dan Mckenzie: Not not prepared to give you that today because again this depends on the market and we're going to do transactions that makes financial Smith, the financial sense and that are prudent to the bottomline.

Speaker Change: Actually on the Max Eights, and we're using the cash proceeds to buyback stock.

Speaker Change: And.

Speaker Change: <unk> deliver value to our shareholders and to modernize the fleet and lower operating cost. So that's it.

Dan Mckenzie: And again, we're managing our invested capital base with those proceeds in and focused on.

That excess cash is going to work for the right things.

Speaker Change: So again, the exact optimal intersection of the fleet age and a number of transactions sort of TBD, but we're certainly going to run it out to a very attractive fleet age.

Dan Mckenzie: Exiting our LNG fleet by 2031, which will set us up really well for the next generation in terms of.

Dan Mckenzie: Capex requirements to.

Speaker Change: Yeah, that's perfect. Thanks.

Dan Mckenzie: Fund future growth.

Speaker Change: Second question here is a balance sheet question I believe the plan is to pay down the debt coming due this year I think it's $2 9 billion in the first half if I'm not mistaken. Please correct me on that but where would that leave the balance sheet metrics and secondly would that open the door for the board to consider an acceleration of capital returns once you hit those metrics.

Dan Mckenzie: So I'm not trying to give you a non answer I'm really not just not prepared to.

Dan Mckenzie: Walk you through specifics because it really does depend on Boeing here and the market.

Speaker Change: Yeah, I'll just chime in there I think just to.

Speaker Change: <unk> I've said this many many times we are committed to extracting every dime out of that value embedded value in the order books. So I think we have 672.

Speaker Change: Yes. So we're yes, we would well the plan is to continue to reduce our leverage here.

Speaker Change: Right now so.

Speaker Change: <unk>.

Speaker Change: The commitment is what.

Speaker Change: The exact strategy in terms of how every transaction lays out the intent is to pull every every bit of value out for ourselves and our shareholders.

Speaker Change: As we go as we shared at Investor Day and.

Speaker Change: <unk>.

Speaker Change: Well obviously.

Speaker Change: And.

Speaker Change: If you run this out you get to an average fleet age I think of five all Max fleet. That's terrific. It is very low. So there is also work to do I think to look at the intersection of optimizing a still really good fleet really good industry, leading fleet age.

Speaker Change: Address that question here.

Speaker Change: As we go with the board Yeah, obviously, we're committed to.

Speaker Change: Maintain what everyone is praising Tammy for your strong balance sheet.

Speaker Change: And in <unk>.

Speaker Change: Maintaining the appropriate level of leverage obviously theres a range to everything here and we will be taking that up with the board.

Speaker Change: And you know our target there is the mid 30% range. So obviously the pay down of debt.

Speaker Change: This year will put us.

Speaker Change: Of.

Speaker Change: This fleet strategy related maybe what some others are doing.

Speaker Change: Put us closer to that goal.

Speaker Change: Thanks, So much you guys.

And.

Speaker Change: Thank you.

Speaker Change: The difference is to me, we have excess aircraft with strong embedded values because of the credits and our own value pricing, especially on the Max eights and we're using the cash proceeds to buy back stock.

Speaker Change: There is time for one more question it will come from Ravi Shanker with Morgan Stanley. Please go ahead.

Katherine: Hi, Good afternoon. This is Katherine on for Robbie Thanks for taking my question.

Speaker Change: So wanted to thank you Tammy for all your help over the past few years and we congratulate you as well.

Speaker Change: And.

Speaker Change: Deliver value to our shareholders and to modernize the fleet and lower operating cost. So that's.

Speaker Change: I was just wondering if you had thoughts on overall industry capacity in <unk> through <unk> and whether you're confident that may come down from what we're seeing maybe in schedules or if theres any.

That excess cash is going to work for the right things. So again, the exact optimal intersection of the fleet age and the number of transactions sort of TBD, but we're certainly going to run it out to a very attractive fleet age yeah. That's perfect. Thanks.

Speaker Change: Areas of pockets.

Speaker Change: Capacity that you're seeing specifically.

Speaker Change: Yes, certainly I would say that our schedules are really firm for Q1.

Speaker Change: Our schedules are relatively firm pretty far out because we don't like to republish.

Dan Mckenzie: Second question here is a balance sheet question I believe the plan is to pay down the debt coming due this year I think it's $2 9 billion in the first half if I'm not mistaken. Please correct me on that but where would that leave the balance sheet metrics and secondly would that open the door for the board to consider an acceleration of capital returns once you hit those metrics.

Speaker Change: Those are some level.

Speaker Change: Just what's necessary given the Boeing delivery situation, we just discussed here for the last hour but.

Speaker Change: While the airlines took an approach of of modifying substantially the capacity closer and so as a result.

Speaker Change: Summer and beyond we don't view as a complete yet and so we'll wait until those firm up before we make a.

Dan Mckenzie: Yes. So we're yes, we would well the plan is to continue to reduce our leverage here.

Speaker Change: Testament of what the back half of the year could look like some airlines have even publish beyond kind of mid may so it's still in flux, but what we do see it's published and firm is constructive.

Dan Mckenzie: As we go as we shared at Investor Day and.

Dan Mckenzie: <unk>.

Dan Mckenzie: Well obviously.

Dan Mckenzie: The address that question here as we go with the board Yeah, obviously, we're committed to.

Speaker Change: Constructive backdrop and Catherine one other questions. We get a lot obviously is how long does the constructive backdrop persist despite the optimism.

Dan Mckenzie: Maintain what everyone is praising Tammy for your strong balance sheet.

Speaker Change: That we feel with Boeing.

Dan Mckenzie: And.

Dan Mckenzie: And maintaining the appropriate level of leverage obviously theres a range to everything here and we will be taking that up with the board.

Speaker Change: There's still a lot of work to do to get back to the significant rates.

Speaker Change: And completely get supply chain healthy obviously on the Airbus side, you've got the geared turbofan and long lungs spanned times on engines and so.

Dan Mckenzie: Our target there is the mid 30% range. So obviously the pay down of debt.

Speaker Change: I'm of the view that despite the improvements we're seeing the constructive backdrop, driven by especially manufacturing constraints still exist for years ahead. So this this is not something that's going to come off anytime soon so I think it's going to remain constructive for quite a while.

Dan Mckenzie: This year well put us.

Dan Mckenzie: Put us closer to that goal.

Speaker Change: Thanks, So much you guys.

Dan Mckenzie: Thank you.

Speaker Change: There's time for one more question it will come from Ravi Shanker with Morgan Stanley. Please go ahead.

Katherine: Hi, Good afternoon. This is Katherine on for Robbie. Thanks for taking my question. We also wanted to thank you Tony for all your help over the past few years and we congratulate you as well.

Speaker Change: And just as a quick follow up I know you guys have kind of talked about your plans for retrofitting aircraft for the premium cabin, but I was just curious if you could give us a quick update on the progress you've made since the Investor day, maybe you know something that you've been excited about it.

I was just wondering if you had thoughts on overall industry capacity and maybe <unk> for <unk> and whether you're confident that may come down from what we're seeing maybe in schedules or if theres any areas of pockets.

Speaker Change: And thank you for taking my questions.

Speaker Change: Thank you.

Speaker Change: Yes Catherine.

Speaker Change: We covered the retrofits.

Katherine: Overcapacity that you're seeing specifically.

Speaker Change: The progress there which is good.

Katherine: Certainly I would say that our schedules are really firm for Q1.

Speaker Change: Earlier in the call I think the getting the amendment done with Chase is another key step in.

Katherine: Our schedules are relatively firm pretty far out because we don't like to republish.

Speaker Change: Are the path towards selling and operating and then assigned and premium seats.

Katherine: So there's some level.

Katherine: Adjustments necessary given the Boeing delivery situation, we just discussed here for the last hour but.

Speaker Change: Environment, we needed to switch kind of our boarding benefits over to boarding and seating benefits, which I think our customers will be out with the details soon and with our customers, but I think what we built there in partnership with Chase is going to be really exciting for customers I think it's going to drive co brand card acquisitions in the future.

All the airlines took an approach of.

Katherine: Modifying substantially the capacity closer and so as a result.

Katherine: Summer and beyond we don't view as a complete yet and so we'll wait until those firm up before we make our assessment of what the back half of the year is going to look like some airlines have even published beyond kind of mid may so it's still in flux, but what we do see it's published and firm is construct.

Speaker Change: So definitely excited about that.

Speaker Change: And just generally.

Speaker Change: Pleased with our progress overall technology development is going well.

Katherine: Backdrop and.

Speaker Change: The team broadly across southwest has really rallied around this as a key priority for the company everybody understands the value to our customers value to shareholders.

Katherine: And Catherine one other questions, we get a lot obviously is how long does the constructive backdrop persist despite the optimism.

Katherine: We feel with Boeing.

Katherine: There is still a lot of work to do to get back to the significant rates.

Speaker Change: And value to our employees and I, just think that the pace of execution has been has been really good and the focus is there so.

Katherine: And completely get supply chain healthy obviously on the Airbus side, you've got the geared turbofan and long lungs spanned times on engines and so.

Speaker Change: I am encouraged by our progress and what's left to come here over the balance of the year I would also add Brian we started.

Katherine: I'm of the view that despite the improvements we're seeing the constructive backdrop, driven by especially manufacturing constraints still exist for years ahead. So this this is not something that's going to come off anytime soon so.

Speaker Change: Tenda dynamically price.

Speaker Change: Seats in the.

Speaker Change: New product and we went live with dynamic pricing for upgraded boarding product.

Katherine: It's going to remain constructive for quite a while.

Speaker Change: This quarter.

Speaker Change: Actually just recently and that's going to kind of give us kind of training the models and given us practice of the processes and technologies for almost a full year here before we go live. So I think that's a kind of early win that will help us this year, but also as a proof point of our technology acumen in advance of the new product.

Katherine: And just as a quick follow up I know you guys have kind of talked about your plans for retrofitting aircraft for the premium cabin, but I was just curious if you could give us a quick update on the progress you've made since the Investor day, maybe you know something that you've been excited about it.

Katherine: And thank you for taking my questions.

Katherine: Thank you.

Speaker Change: 100% agree.

Katherine: Yes Catherine.

Speaker Change: Ladies and gentlemen, we now transition to our media portion of today's call Ms. Whitney <unk> Chief Communications Officer leads US off. Please go ahead Whitney.

Katherine: We covered the retrofits.

Katherine: Progress there which is good.

Katherine: Earlier in the call I think the getting the amendment done with Chase is another key step in.

Speaker Change: Thanks, Gary welcome in the media on our call today before we begin taking your questions could you. Please remind everyone has a share of how to queue up for questions.

Katherine: Our.

Katherine: Path towards selling and operating and assigned and premium seats.

Speaker Change: To queue up for an opportunity to ask a question Press Star then one.

Katherine: <unk>.

Katherine: Environment, we needed to switch kind of our boarding benefits over to boarding and seating benefits, which I think our customers will be out with the details soon and with our customers, but I think what we built there in partnership with Chase is going to be really exciting for customers I think it's going to drive co brand card acquisitions in the future.

Speaker Change: To withdraw your question. The command is Star then two.

Speaker Change: If you're on a speakerphone, please pick up before pressing the keys will pause for a moment then start answering your questions.

Speaker Change: The first question comes from Eric from Mary <unk>.

Speaker Change: <unk> <unk> with Bloomberg News. Please go ahead.

Katherine: So definitely excited about that.

Katherine: And just generally I'm.

Speaker Change: Hi, Thanks, I just had a quick question on the amended.

Speaker Change: I am pleased with our progress overall technology development is going well.

Speaker Change: Credit card deal with you.

Speaker Change: Forecast is going to really drive acquisitions of the card.

Speaker Change: The team broadly across southwest has really rallied around this as a key priority for the company everybody understands the value to our customers value to shareholders.

Speaker Change: Are you offering any kind of a forecast in terms of how your remuneration from chase may expand in.

Speaker Change: Some idea of what that could be on an annual basis going forward.

Speaker Change: And value to our employees and I, just think that the pace of execution has been has been really good and the focus is there so.

Speaker Change: Okay.

Ryan: Maybe I'll start and I'm sure Ryan I'll add I just wanted to say first thanks to our team into the Chase partners, It's a big amendment and we move through it.

Speaker Change: I'm encouraged by our progress and what's left to come here over the balance of the year.

Speaker Change: Speed and pace and so I'm very grateful, but now we're really pleased with the new deal.

Ed Ryan: So Ed Ryan.

Ed Ryan: We started we intend to dynamically price the seats and the new product and we went live with dynamic pricing for upgraded boarding product.

Speaker Change: Does include significant additional compensation.

Speaker Change: I think you can think of it as competitive with recent deals in the market that I'm sure you're familiar with it was contemplated in our Investor Day plan.

Ed Ryan: This quarter.

Ed Ryan: Actually just recently and that's going to kind of give us kind of training the models and given us practice of the processes and technologies for almost a full year here before we go live. So I think that's a kind of early win that will help us this year, but also as a proof point of our technology acumen in advance of the <unk>.

Speaker Change: But no we're not going to.

Speaker Change: Not able to provide exact details on the financials, but Ryan if you want to add anything.

Speaker Change: We're pleased to get it done.

Speaker Change: It's a proof point in the plan and like you said it.

Ed Ryan: Product.

Ed Ryan: 100% agree.

Speaker Change: Absolutely very competitive with.

Speaker Change: What's out there with legacy carriers in the market.

Speaker Change: Thank you.

Ed Ryan: Okay.

Speaker Change: The next question is from Robert Silk with travel weekly. Please go ahead.

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

Speaker Change: Thanks for taking my call.

Robert Silk: Two quick questions one.

Speaker Change: Has there been a shift.

Speaker Change: Thanks, Gary welcome in the media on our call today before we begin taking your questions could you. Please remind everyone has a share of <unk> <unk>.

Speaker Change: Southwest approach to be.

Speaker Change: I know there's been some attention paid to the change in title.

Speaker Change: You up for questions.

Speaker Change: To queue up for an opportunity to ask a question Press Star then one to withdraw your question. The command is Star then two.

Speaker Change: From your Vice President.

Speaker Change: By changing the corporate citizenship and Chief inclusion Officer first question. One question two very different questions getaways by southwest any updates on that in terms of how you will work with the travel trade with travel advisors.

Speaker Change: If you're on a speakerphone, please pick up before pressing the keys will pause for a moment then start answering your questions.

Speaker Change: I'll start with the second one first with that one we have no changes to announce in general where we.

Speaker Change: We previously discussed or direct to consumer business and so.

Speaker Change: Yeah.

Speaker Change: The great majority of the business case is predicated on sell into our current customers, who want to buy packages, but who arent fulfilled by southwest Airlines. So we will be able to offer them, what they want to buy it or buying today and so we think that'll be a benefit whether we ought to work with a trade or not how much we do with the margin in some situations.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: The first question comes from Eric from Mary.

Speaker Change: Schlangen Stene with Bloomberg News. Please go ahead.

Speaker Change: Hi, Thanks, I just had a quick question on the.

Credit card deal with your forecast that it's going to really drive acquisitions of the card.

Speaker Change: And theres nothing philosophically against that but mostly the business case is predicated on direct sales, but as we get closer to go live will firm up our trade policies.

Speaker Change: Are you offering any kind of a forecast in terms of how your remuneration from chase may expand in.

Robert Silk: And Robert on the the question, whether it's today five years ago, 10 years ago, or 20 years ago or 37 years.

Speaker Change: Some idea of what that could be on an annual basis going forward.

<unk> worked hard to hire people, who are just nicely fit the culture and to create an environment that is inclusive and we use the word belonging people just feel good about being here they like coming to work.

Speaker Change: Hey.

Ed Ryan: I'll start and I'm sure Ryan I'll add I just wanted to say first thanks to our team into the Chase partners.

Speaker Change: And it's a big amendment and we move through it.

Speaker Change: Their team and they feel like they belong it at southwest and then as it relates to hiring and promotions they've always been merit based.

Speaker Change: The speed and pace and so I'm very grateful, but now we're really pleased with the new deal.

Speaker Change: Does include significant additional compensation.

Robert Silk: And no different.

Speaker Change: You can think of it as competitive with recent deals in the market that I'm sure you're familiar with it was contemplated in our Investor Day plan.

Robert Silk: Across our history.

Robert Silk: No no changes in terms of how we think about how we treat people and how we reward people now obviously, there's a lot of questions about.

Speaker Change: But no we're not going to.

Speaker Change: We're not able to provide exact details on the financials, but Brian if you want to add anything.

Robert Silk: The flurry of executive orders.

Robert Silk: And.

Robert Silk: As needed, we'll be evaluating those and understanding what we may need to do and so I think just sort of stay tuned there.

Speaker Change: We're pleased to get it done.

Speaker Change: It's a proof point in the plan and like you said it.

Speaker Change: Okay. Thank you very much youre welcome.

Speaker Change: Absolutely very competitive with.

Speaker Change: What's out there with legacy carriers in the market.

Whitney: This concludes our question and answer session for media so back over to Whitney now for some closing thoughts.

Speaker Change: Thank you.

Speaker Change: The next question is from Robert Silk with travel weekly. Please go ahead.

Whitney: If anyone has any further questions. Our communications group is standing by their contact information along with today's news release are all available at SWA media Dot com.

Speaker Change: Thanks for taking my call.

Speaker Change: Two quick questions one.

Speaker Change: Has there been a shift.

Speaker Change: Southwest approach to be.

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

Speaker Change: There's been some attention paid to the change in title.

Speaker Change: From your Vice President.

Speaker Change: By changing the corporate citizenship and Chief inclusion Officer first question. One question two very different questions.

Speaker Change: Southwest any updates on that in terms of.

He will work with the travel trade with travel advisors.

Speaker Change: I'll start with the second one first with that one we have no changes to announce in general were.

Speaker Change: We previously discussed or direct to consumer business and so.

Speaker Change: Great majority of the business case is predicated on sell into our current customers, who want to buy packages, but who own fulfilled by southwest Airlines. So we will be able to offer them what they want to buy they're buying today and so we think that'll be a benefit.

Speaker Change: We work with a trade or not how much we do with the margin of some situations and theres nothing philosophically against that but mostly the business cases predicated on direct sales, but as we get closer to go live will firm up our trade policies and.

Robert: Robert on the <unk>.

Speaker Change: A question, we get whether it's today five years ago, 10 years ago, or 20 years ago I've been here 37 years, we've always worked hard to hire people, who are just nicely fit the culture and to create an environment that is inclusive and we use the word belonging people just feel good about being here they like coming to work they like their team and they feel like they.

Robert: Belong it at southwest and then as it relates to <unk>.

Speaker Change: <unk> and promotions they've always been merit based.

Robert: And no different.

Speaker Change: Across our history.

Speaker Change: So no no changes in terms of how we think about how we treat people and how we reward people now obviously, there's a lot of questions about.

Speaker Change: The flurry of executive orders.

Speaker Change: <unk>.

Speaker Change: As needed we will be evaluating those and understanding what we may need to do and so I think just sort of stay tuned there.

Speaker Change: Okay. Thank you very much you are welcome.

Speaker Change: This concludes our question and answer session for media so back over to Whitney now for some closing thoughts.

Speaker Change: If anyone has any further questions. Our communications group is standing by their contact information along with today's news release are all available at SWA media Dot com.

Speaker Change: The conference has concluded thank you all for attending and we'll meet again here next quarter.

Speaker Change: [music].

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