Southwest Airlines Q4 2025 Southwest Airlines Co Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Southwest Airlines Co Earnings Call
Conference call which is being recorded.
A replay will be available on southwest.com and the investor section.
After today's remarks, There's an opportunity to ask questions.
To queue up for an opportunity to ask a question. Please press star and 1 to withdraw, your question, the command is star and then 2
Now, Danielle Collins managing director of investor relations will begin the discussion.
Please go ahead. Danielle.
Thank you. Hello everyone and welcome to Southwest Airlines fourth quarter, 2025 earnings call.
In just a moment. We'll share our prepared remarks after which we will move to Q&A joining me. Today are Bob Jordan, our president and chief executive officer, Andrew Watson, our chief operating officer and Tom, doxy our Chief Financial Officer
Before we begin, our reminder that today's session will make forward-looking statements, which are based on our current expectations of future performance and our actual results could differ materially from expectations.
Also, we will reference our non-gaap results, which exclude special items that are called out and reconciled to Gap results in our earnings press release.
With that, I'll turn the call over to Bob.
Thank you, Danielle, good morning, everyone and thank you for joining our earnings call today.
Operator: Hello, everyone, and welcome to the Southwest Airlines Q4 2025 Conference Call. My name is Jamie, and I will be monitoring today's conference call, which is being recorded. A replay will be available on southwest.com in the Investor section. After today's remarks, there's an opportunity to ask questions. To queue up for an opportunity to ask a question, please press Star and One. To withdraw your question, the command is Star and then Two. Now, Danielle Collins, Managing Director of Investor Relations, will begin the discussion. Please go ahead, Danielle.
Operator: Hello, everyone, and welcome to the Southwest Airlines Q4 2025 Conference Call. My name is Jamie, and I will be monitoring today's conference call, which is being recorded. A replay will be available on southwest.com in the Investor section. After today's remarks, there's an opportunity to ask questions. To queue up for an opportunity to ask a question, please press Star and One. To withdraw your question, the command is Star and then Two. Now, Danielle Collins, Managing Director of Investor Relations, will begin the discussion. Please go ahead, Danielle.
Uh, we've been looking forward to 2020.
About the Southwest team will show dramatically improved results first. However, a few comments on this past year and our fourth quarter 2025 results.
The fourth quarter, capped a year of meaningful transformation and accelerated. Execution at Southwest, we finished the year in the quarter, strong for both revenue and cost achieving 4 year, even of 574 million which was above our prior guide of 500 million.
Danielle Collins: Thank you. Hello, everyone, and welcome to Southwest Airlines' Q4 2025 earnings call. In just a moment, we'll share our prepared remarks, after which we will move to Q&A. Joining me today are Bob Jordan, our President and Chief Executive Officer, Andrew Watterson, our Chief Operating Officer, and Tom Doxey, our Chief Financial Officer. Before we begin, a reminder that today's session will make forward-looking statements, which are based on our current expectations of future performance, and our actual results could differ materially from expectations. Also, we will reference our non-GAAP results, which exclude special items that are called out and reconciled to GAAP results in our earnings press release. With that, I'll turn the call over to Bob.
Danielle Collins: Thank you. Hello, everyone, and welcome to Southwest Airlines' Q4 2025 earnings call. In just a moment, we'll share our prepared remarks, after which we will move to Q&A. Joining me today are Bob Jordan, our President and Chief Executive Officer, Andrew Watterson, our Chief Operating Officer, and Tom Doxey, our Chief Financial Officer. Before we begin, a reminder that today's session will make forward-looking statements, which are based on our current expectations of future performance, and our actual results could differ materially from expectations.
Operating revenues of 7.4 billion for fourth quarter and 28 billion for the full year were quarterly and annual records. Our fourth quarter and full year results underscore that our initiatives are generating the, uh, desired results and provide great momentum. As we head into 2026,
We also ran a terrific operation coming in. Number 1, in, on-time performance, completion factor, and the lowest extreme delays in December. And our strong operational performance throughout the year led to Southwest earning the top spot. As the Wall Street journal's best US Airline of 2025.
I'm proud of the results but I'm especially proud of our people.
Also, we will reference our non-GAAP results, which exclude special items that are called out and reconciled to GAAP results in our earnings press release. With that, I'll turn the call over to Bob.
Who are the ones getting this done every single day day in and day out.
Before moving to 2026 in the exciting year ahead. I want to underscore some of the key initiatives that we successfully implemented in 2025 and here are the larger ones.
Bob Jordan: Thank you, Danielle, and good morning, everyone, and thank you for joining our earnings call today. We've been looking forward to 2026, when all the incredible work undertaken by the Southwest team will show dramatically improved results. First, however, a few comments on this past year and our Q4 2025 results. The Q4 capped a year of meaningful transformation and accelerated execution at Southwest. We finished the year and the quarter strong for both revenue and cost, achieving full-year EBIT of $574 million, which was above our prior guide of $500 million. Operating revenues of $7.4 billion for Q4 and $28 billion for the full year were quarterly and annual records. Our Q4 and full-year results underscore that our initiatives are generating the desired results and provide great momentum as we head into 2026.
Bob Jordan: Thank you, Danielle, and good morning, everyone, and thank you for joining our earnings call today. We've been looking forward to 2026, when all the incredible work undertaken by the Southwest team will show dramatically improved results. First, however, a few comments on this past year and our Q4 2025 results. The Q4 capped a year of meaningful transformation and accelerated execution at Southwest. We finished the year and the quarter strong for both revenue and cost, achieving full-year EBIT of $574 million, which was above our prior guide of $500 million.
We changed our product offering including the implementation of bag. Fees addition of a basic economy, fare product, and Flight. Credit expiration optimized, our wrap Rewards program, including variables, earn and burn rates a minute of co-brand credit card agreement with Chase including new benefits and improved economics.
Operating revenues of $7.4 billion for Q4 and $28 billion for the full year were quarterly and annual records. Our Q4 and full-year results underscore that our initiatives are generating the desired results and provide great momentum as we head into 2026.
Bob Jordan: We also ran a terrific operation, coming in number 1 in on-time performance, completion factor, and the lowest extreme delays in December, and our strong operational performance throughout the year led to Southwest earning the top spot as The Wall Street Journal's best US airline of 2025. I'm proud of the results, but I'm especially proud of our people, who are the ones getting this done every single day, day in and day out. Before moving to 2026 and the exciting year ahead, I want to underscore some of the key initiatives that we successfully implemented in 2025, and here are the larger ones. We changed our product offering, including the implementation of bag fees, addition of a Basic Economy fare product, and flight credit expiration. Optimized our Rapid Rewards program, including variable earn and burn rates.
We also ran a terrific operation, coming in number 1 in on-time performance, completion factor, and the lowest extreme delays in December, and our strong operational performance throughout the year led to Southwest earning the top spot as The Wall Street Journal's best US airline of 2025. I'm proud of the results, but I'm especially proud of our people, who are the ones getting this done every single day, day in and day out. Before moving to 2026 and the exciting year ahead, I want to underscore some of the key initiatives that we successfully implemented in 2025, and here are the larger ones.
Launched free Wi-Fi for loyalty program members in partnership with T-Mobile expanded, our online presence through new Partnerships with Expedia and price lines. Outperformed our 370 million cost reduction Target for 2025 including the first layoff of non-contract and management employees added 6, new Airline Partners launched getaways by Southwest added Redeye, flying reduced term, time to increase aircraft utilization deployed, new technology to boost operational reliability a key. Enabler of our top spot in the Wall Street Journal ranking of Airlines. This continued, the fuel hedging program
Completed 2.6 billion in share Buybacks in 2025 representing about 14% of share shares outstanding while maintaining our investment grade rating.
And on Tuesday, we implemented a signed and extra legroom seating, which required retrofitting over 800 aircraft.
We changed our product offering, including the implementation of bag fees, addition of a Basic Economy fare product, and flight credit expiration. Optimized our Rapid Rewards program, including variable earn and burn rates.
It is just a stunning list of initiatives, undertaken, by the Southwest Team all implemented on time and all delivered with excellence in my 308. Year career in this industry at cannot think of another airline that embarked on so many fundamental changes to their business model and in such a short time let alone executed so well.
Bob Jordan: Amended our co-brand credit card agreement with Chase, including new benefits and improved economics. Launched free Wi-Fi for loyalty program members in partnership with T-Mobile. Expanded our online presence through new partnerships with Expedia and Priceline. Outperformed our $370 million cost reduction target for 2025, including the first layoff of non-contract and management employees. Added six new airline partners, launched Getaways by Southwest, added red-eye flights, reduced turn time to increase aircraft utilization, deployed new technology to boost operational reliability, a key enabler of our top spot in The Wall Street Journal ranking of airlines. Discontinued the fuel hedging program. Completed $2.6 billion in share buybacks in 2025, representing about 14% of shares outstanding, while maintaining our investment grade rating. And on Tuesday, we implemented assigned and extra legroom seating, which required retrofitting over 800 aircraft.
Amended our co-brand credit card agreement with Chase, including new benefits and improved economics. Launched free Wi-Fi for loyalty program members in partnership with T-Mobile. Expanded our online presence through new partnerships with Expedia and Priceline. Outperformed our $370 million cost reduction target for 2025, including the first layoff of non-contract and management employees. Added six new airline partners, launched Getaways by Southwest, added red-eye flights, reduced turn time to increase aircraft utilization,
The list of initiatives falls into 2. Categories 1 focused on offering a significantly better experience for our customers and the other focused on Revenue growth and operational efficiency.
service and Hospitality low cost and operational efficiency our unique culture,
deployed new technology to boost operational reliability, a key enabler of our top spot in The Wall Street Journal ranking of airlines. Discontinued the fuel hedging program. Completed $2.6 billion in share buybacks in 2025, representing about 14% of shares outstanding, while maintaining our investment grade rating. And on Tuesday, we implemented assigned and extra legroom seating, which required retrofitting over 800 aircraft.
And especially our unrivaled people.
Speaker #3: program. Completed $2.6 billion in share buybacks in 2025, representing about 14% of shares outstanding while maintaining our investment-grade rating. And on Tuesday, we implemented a signed and extra legroom seating which required retrofitting over 800 aircraft.
This transformation is expected to result in a significant Step Up in how we grow earnings as compared to the past few years. And for 2026, we are forecasting earnings that are dramatically higher than 2025
For the full year, we are not yet guiding an EPS range. Well, being well. Above Wall Street consensus. We are providing EPS guidance. That represents the lower end of our internal forecast.
Bob Jordan: It is just a stunning list of initiatives undertaken by the Southwest team, all implemented on time and all delivered with excellence. In my 38-year career in this industry, I cannot think of another airline that embarked on so many fundamental changes to their business model and in such a short time, let alone executed so well. The list of initiatives falls into two categories: one focused on offering a significantly better experience for our customers, and the other focused on revenue growth and operational efficiency. Collectively, the large investments we have made result in a fundamental transformation and evolution of our business model while building on our core historic strengths, the largest domestic network, a strong balance sheet, unmatched customer loyalty to our brand, outstanding service and hospitality, low cost and operational efficiency, our unique culture, and especially our unrivaled people.
It is just a stunning list of initiatives undertaken by the Southwest team, all implemented on time and all delivered with excellence. In my 38-year career in this industry, I cannot think of another airline that embarked on so many fundamental changes to their business model and in such a short time, let alone executed so well. The list of initiatives falls into two categories: one focused on offering a significantly better experience for our customers, and the other focused on revenue growth and operational efficiency.
With that qualifier. We are guiding foyer 2026, adjusted EPS of at least 4 dollars Which is materially higher than 2025 adjusted EPS of 93 cents.
Let me share our reasoning. Why we are not yet providing an upper range for 2026 earnings.
Assign an extra leg room seating became operational, just 2 days ago.
And we see earnings upside based on how booking Behavior related to those initiatives. Unfolds
Collectively, the large investments we have made result in a fundamental transformation and evolution of our business model while building on our core historic strengths, the largest domestic network, a strong balance sheet, unmatched customer loyalty to our brand, outstanding service and hospitality, low cost and operational efficiency, our unique culture, and especially our unrivaled people.
Specifically upsell revenue from close in bookings which are more closely affiliated with business and price flexible customers and second we expect growth in both the business and Leisure customer base driven by our new more attractive product offering.
Speaker #3: strong balance sheet, unmatched customer loyalty to our brand, outstanding service and hospitality, low cost and operational efficiency, our unique culture, and especially our unrivaled people.
Bob Jordan: This transformation is expected to result in a significant step-up in how we grow earnings as compared to the past few years. For 2026, we are forecasting earnings that are dramatically higher than 2025. For the full year, we are not yet guiding an EPS range. While being well above Wall Street consensus, we are providing EPS guidance that represents the lower end of our internal forecast. With that qualifier, we are guiding full year 2026 adjusted EPS of at least $4, which is materially higher than 2025 adjusted EPS of $0.93. Let me share our reasoning why we are not yet providing an upper range for 2026 earnings. Assigned and Extra Legroom seating became operational just two days ago, and we see earnings upside based on how booking behavior related to those initiatives unfolds.
This transformation is expected to result in a significant step-up in how we grow earnings as compared to the past few years. For 2026, we are forecasting earnings that are dramatically higher than 2025. For the full year, we are not yet guiding an EPS range. While being well above Wall Street consensus, we are providing EPS guidance that represents the lower end of our internal forecast. With that qualifier, we are guiding full year 2026 adjusted EPS of at least $4, which is materially higher than 2025 adjusted EPS of $0.93. Let me share our reasoning why we are not yet providing an upper range for 2026 earnings.
We expect to have better visibility to the upside Potential from these initiatives in the next month or 2 and we'll provide range bound EPS guidance when the current quarter results are reported if not before, also going forward, we plan to follow the industry Norm of providing guidance to investors using Broad company forecasts and results.
This means we will step back from providing details and specific numbers around activities, such as bag fees.
Assigned seating, the co brand program and so on.
I believe that Southwest 2026 earnings growth will stand out when compared to other major airlines.
This is largely due to the nature of the many initiatives we have implemented.
And issues that were previously implemented by other airlines over the last decade or more where Southwest is implementing these initiatives now.
Assigned and Extra Legroom seating became operational just two days ago, and we see earnings upside based on how booking behavior related to those initiatives unfolds.
And the work will not stop. Here, we see meaningful opportunities ahead to grow earnings, from areas, such as route Network optimization under a backdrop of improved operating margins in the business.
Bob Jordan: Specifically, upsell revenue from close-in bookings, which are more closely affiliated with business and price-flexible customers. Second, we expect growth in both the business and leisure customer base, driven by our new, more attractive product offering. We expect to have better visibility to the upside potential from these initiatives in the next month or two, and we'll provide range-bound EPS guidance when the current quarter results are reported, if not before. Also, going forward, we plan to follow the industry norm of providing guidance to investors using broad company forecasts and results. This means we will step back from providing details and specific numbers around activities such as bag fees, assigned seating, the co-brand program, and so on. I believe that Southwest's 2026 earnings growth will stand out when compared to other major airlines.
Specifically, upsell revenue from close-in bookings, which are more closely affiliated with business and price-flexible customers. Second, we expect growth in both the business and leisure customer base, driven by our new, more attractive product offering. We expect to have better visibility to the upside potential from these initiatives in the next month or two, and we'll provide range-bound EPS guidance when the current quarter results are reported, if not before. Also, going forward, we plan to follow the industry norm of providing guidance to investors using broad company forecasts and results.
Increasing our corporate customer base driven by product changes that better appeal to the business traveler. And this is a long-term journey. And we believe that executed well, we will see the rewards and additional cost takeout and efficiency efforts.
we have an exciting year ahead, as we continue to deliver for our customers and for our shareholders,
I am incredibly proud of our people.
And we see earnings upside based on how booking Behavior related to those initiatives, unfolds, specifically, upsell revenue from close in bookings, which are more closely affiliated with business and price flexible customers. And second we expect growth in both the business and Leisure customer base driven by our new more attractive product offering.
They are the ones getting it done every single day, running a strong operation, serving our customers and transforming our company for the future.
And with that, I will turn it over to Andrew.
Thank you, Bob.
From a network perspective Q4 capacity. Grew 5.8% year-over-year.
In roughly flat year-over-year.
This means we will step back from providing details and specific numbers around activities such as bag fees, assigned seating, the co-brand program, and so on. I believe that Southwest's 2026 earnings growth will stand out when compared to other major airlines.
We expect to have better visibility to the upside potential from these initiatives in the next month or two, and we'll provide range-bound EPS guidance when the current quarter results are reported, if not before. Also, going forward, we plan to follow the industry norm of providing guidance to investors using broad company forecasts and results.
This means we will step back from providing details and specific numbers around activities, such as bag fees.
In the initiatives, like, reduced turn times and the introduction of Redeye, flying allowed us to maximize asset utilization, while maintaining industry-leading, reliability.
Sign seating, the co-brand program and so on.
Bob Jordan: This is largely due to the nature of the many initiatives we have implemented, initiatives that were previously implemented by other airlines over the last decade or more, where Southwest is implementing these initiatives now, and the work will not stop here. We see meaningful opportunities ahead to grow earnings from areas such as route network optimization under a backdrop of improved operating margins in the business, increasing our corporate customer base, driven by product changes that better appeal to the business traveler. And this is a long-term journey, and we believe that executed well, we will see the rewards and additional cost takeout and efficiency efforts. We have an exciting year ahead as we continue to deliver for our customers and for our shareholders. I am incredibly proud of our people.
This is largely due to the nature of the many initiatives we have implemented, initiatives that were previously implemented by other airlines over the last decade or more, where Southwest is implementing these initiatives now, and the work will not stop here. We see meaningful opportunities ahead to grow earnings from areas such as route network optimization under a backdrop of improved operating margins in the business, increasing our corporate customer base, driven by product changes that better appeal to the business traveler.
I believe that Southwest's 2026 earnings growth will stand out when compared to other major airlines.
For the full year offering Revenue increased. 1.7% year-over-year supported by initiatives kicking in and strong demand that drove both traffic and real life fairs.
This is largely due to the nature of the many initiatives we have implemented.
My comment on real life, flares, reflects effective buyouts from the changes we implemented.
Fourth quarter rasim, which was impacted by the FAA, mandate schedule cuts.
And issues that were previously implemented by other airlines over the last decade or more where Southwest is implementing these initiatives now.
Was down slightly at negative 0.2% year-over-year.
On the strong Foundation. We're entering q1 with momentum.
And confidence.
And the work will not stop. Here, we see meaningful opportunities ahead to grow earnings, from areas, such as route Network optimization under a backdrop of improved operating margins in the business.
we expect rasim to increase by at least 9.5% year-over-year with contributions from yield
And this is a long-term journey, and we believe that executed well, we will see the rewards and additional cost takeout and efficiency efforts. We have an exciting year ahead as we continue to deliver for our customers and for our shareholders. I am incredibly proud of our people.
load Factor initiatives and loyalty programs.
Q1 capacity is expected to grow between 1 and 2% year-over-year.
As we operate with approximately 7, fewer aircraft.
Increasing our corporate customer base driven by product changes that better appeal to the business traveler. And this is a long-term journey. And we believe that executed well, we will see the rewards and additional cost takeout and efficiency efforts.
A reflection of continued efficiency gains.
We have an exciting year ahead, as we continue to deliver for our customers and for our shareholders.
Bob Jordan: They are the ones getting it done every single day, running a strong operation, serving our customers, and transforming our company for the future. And with that, I will turn it over to Andrew.
They are the ones getting it done every single day, running a strong operation, serving our customers, and transforming our company for the future. And with that, I will turn it over to Andrew.
Importantly, Tuesday marked the launch of 2 major product enhancements.
so, I seeing
And or extra legroom offering.
I am incredibly proud of our people. They are the ones getting it done every single day, running a strong operation, serving our customers and transforming our company for the future.
All aircraft conversions technology development and employee training were completed on schedule.
Andrew Watterson: Thank you, Bob. From a network perspective, Q4 capacity grew 5.8% year-over-year, despite the fleet count being roughly flat year-over-year. Efficiency initiatives, like reduced turn times and the introduction of red-eye flying, allowed us to maximize asset utilization while maintaining industry-leading reliability. For the full year, operating revenue increased 1.7% year-over-year, supported by initiatives kicking in and strong demand that drove both traffic and realized fares. My comment on realized fares reflects the effect of buyups from the changes we implemented. Fourth quarter RASM, which was impacted by the FAA-mandated schedule cuts, was down slightly at -0.2% year-over-year. Building on this strong foundation, we're entering Q1 with momentum and confidence.
Andrew Watterson: Thank you, Bob. From a network perspective, Q4 capacity grew 5.8% year-over-year, despite the fleet count being roughly flat year-over-year. Efficiency initiatives, like reduced turn times and the introduction of red-eye flying, allowed us to maximize asset utilization while maintaining industry-leading reliability. For the full year, operating revenue increased 1.7% year-over-year, supported by initiatives kicking in and strong demand that drove both traffic and realized fares. My comment on realized fares reflects the effect of buyups from the changes we implemented.
And with that, I will turn it over to Andrew.
Customer response has been overwhelmingly positive.
Thank you, Bob.
From a network perspective Q4 capacity. Grew 5.8% year-over-year.
And these products are expected to be meaningful contributors to further Revenue, growth and customer, satisfaction and 2026.
In roughly flat year-over-year.
I want to take a moment and reflect on the changes implemented 2 days ago.
Overnight, we made the switch to assigned seating.
And the introduction of Redeye, flying allowed us to maximize asset utilization, while maintaining industry-leading, reliability.
Implemented, the differentiated service in our new extra legroom section.
Process.
For the full year offering Revenue increased. 1.7% year-over-year supported by initiatives kicking in and strong demand that drove both traffic and real life fairs.
On Tuesday, we operated more than 3200 flights at the different Airline while continuing to deliver our usual high quality operation.
Fourth quarter RASM, which was impacted by the FAA-mandated schedule cuts, was down slightly at -0.2% year-over-year. Building on this strong foundation, we're entering Q1 with momentum and confidence.
A testament to our incredible team.
My comment on real life, flares, reflects effective buyouts from the changes we implemented.
Fourth quarter RASM, which was impacted by the FAA, mandate schedule cuts.
Was down slightly at negative 0.2% year-over-year.
These initiatives aren't just enhancements. They represent a fundamental transformation and how Southwest delivers value to customers and shareholders.
On the strong Foundation. We're entering q1 with momentum.
Andrew Watterson: We expect RASM to increase by at least 9.5% year-over-year, with contributions from yield, load factor, initiatives, and loyalty programs. Q1 capacity is expected to grow between 1% and 2% year-over-year, even as we operate with approximately 7 fewer aircraft, a reflection of continued efficiency gains. Importantly, Tuesday marked the launch of two major product enhancements: assigned seating and our extra legroom offering. All aircraft conversions, technology development, and employee training were completed on schedule. Customer response has been overwhelmingly positive, and these products are expected to be meaningful contributors to further revenue growth and customer satisfaction in 2026. I want to take a moment and reflect on the changes implemented two days ago. Overnight, we made the switch to assigned seating, implemented a differentiated service in our new extra legroom section, and changed our boarding process.
We expect RASM to increase by at least 9.5% year-over-year, with contributions from yield, load factor, initiatives, and loyalty programs. Q1 capacity is expected to grow between 1% and 2% year-over-year, even as we operate with approximately 7 fewer aircraft, a reflection of continued efficiency gains. Importantly, Tuesday marked the launch of two major product enhancements: assigned seating and our extra legroom offering. All aircraft conversions, technology development, and employee training were completed on schedule.
And confidence.
We're evolving our product to meet the needs of today's Travelers while staying true to the Southwest brand.
We expect RASM to increase by at least 9.5% year-over-year, with contributions from yield.
In summary southwest's, executing with discipline and delivering results the position us for sustained success.
load Factor initiatives and loyalty programs.
Our operational reliability product changes and strong demand Trends. Give us confidence as we move into 2026.
Q1 capacity is expected to grow between 1% and 2% year over year.
I'll now turn it over to Tom.
As we operate with approximately 7, fewer aircraft.
A reflection of continued efficiency gains.
Importantly, Tuesday marked the launch of 2 major product enhancements.
Science seating.
And or extra legroom offering.
Thanks, Andrew, we delivered a solid quarter with an ebit of 386 million. We continued, our strong cost performance with Chasm X up 0.8% year-over-year, despite operating less capacity than initially planned.
Customer response has been overwhelmingly positive, and these products are expected to be meaningful contributors to further revenue growth and customer satisfaction in 2026. I want to take a moment and reflect on the changes implemented two days ago. Overnight, we made the switch to assigned seating, implemented a differentiated service in our new extra legroom section, and changed our boarding process.
All aircraft conversions, technology development, and employee training were completed on schedule.
Customer response has been overwhelmingly positive.
And these products are expected to be meaningful contributors to further revenue growth and customer satisfaction in 2026.
our fourth quarter performance, reflects the strength of the transformation underway at Southwest and reflects well on our evolving culture, 1 that is relentlessly pursuing new revenue streams and operational efficiencies in areas that in the past, we had not focused on
I want to take a moment and reflect on the changes implemented 2 days ago.
At the same time, we continue to invest heavily in our customers, our people, and our technology to position, Southwest for long-term success.
Overnight, we made the switch to assign seating.
Leg room section.
Andrew Watterson: On Tuesday, we operated more than 3,200 flights as a different airline while continuing to deliver our usual high-quality operation, a testament to our incredible team. These initiatives aren't just enhancements. They represent a fundamental transformation in how Southwest delivers value to customers and shareholders. We're evolving our product to meet the needs of today's travelers while staying true to the Southwest brand. In summary, Southwest is executing with discipline and delivering results that position us for sustained success. Our operational reliability, product changes, and strong demand trends give us confidence as we move into 2026. I'll now turn it over to Tom.
On Tuesday, we operated more than 3,200 flights as a different airline while continuing to deliver our usual high-quality operation, a testament to our incredible team. These initiatives aren't just enhancements. They represent a fundamental transformation in how Southwest delivers value to customers and shareholders. We're evolving our product to meet the needs of today's travelers while staying true to the Southwest brand. In summary, Southwest is executing with discipline and delivering results that position us for sustained success.
And changed our boarding process.
Looking ahead are initiatives, which represent a deep fundamental transformation of our business are set to drive significant earnings growth in 2026.
On Tuesday, we operated more than 3,200 flights at the different airline while continuing to deliver our usual high-quality operation.
A testament to our incredible team.
The impact from the initiatives launched in 2025, is well, understood by us at this stage of the rollout and we have confidence in our ability to deliver meaningful margin expansion, and strong earnings growth this year,
These initiatives aren't just enhancements. They represent a fundamental transformation and how Southwest delivers value to customers and shareholders.
We're evolving our product to meet the needs of today's travelers, while staying true to the Southwest brand.
Our operational reliability, product changes, and strong demand trends give us confidence as we move into 2026. I'll now turn it over to Tom.
In summary, Southwest is executing with discipline and delivering results. The position us for sustaining success.
As Bob stated for fully year 2026, we are providing an adjusted EPS guide of at least 4 dollars, which represents the lower end of our forecast. For the first quarter of 2026. We are guiding an adjusted EPS of at least 45 cents per share, which also represents the lower end of our forecasts and compares to a loss of 13 cents in the first quarter of 2025.
Our operational liability product changes and strong demand Trends. Give us confidence as we move into 2026.
Tom Doxey: Thanks, Andrew. We delivered a solid quarter with an EBIT of $386 million. We continued our strong cost performance with CASM-ex up 0.8% year-over-year, despite operating less capacity than initially planned. Our Q4 performance reflects the strengths of the transformation underway at Southwest and reflects well on our evolving culture, one that is relentlessly pursuing new revenue streams and operational efficiencies in areas that, in the past, we had not focused on. At the same time, we continue to invest heavily in our customers, our people, and our technology to position Southwest for long-term success. Looking ahead, our initiatives, which represent a deep fundamental transformation of our business, are set to drive significant earnings growth in 2026.
Tom Doxey: Thanks, Andrew. We delivered a solid quarter with an EBIT of $386 million. We continued our strong cost performance with CASM-ex up 0.8% year-over-year, despite operating less capacity than initially planned. Our Q4 performance reflects the strengths of the transformation underway at Southwest and reflects well on our evolving culture, one that is relentlessly pursuing new revenue streams and operational efficiencies in areas that, in the past, we had not focused on. At the same time, we continue to invest heavily in our customers,
I'll now turn it over to Tom.
We expect continued strong cost, discipline with kmx projected to increase approximately 3.5% year-over-year.
Thanks, Andrew. We delivered a solid quarter with an EBIT of $386 million. We continued our strong cost performance, with CASM-X up 0.8% year-over-year, despite operating less capacity than initially planned.
which includes approximately 1.1 points of impact from the removal of 6 seats from our 737-700 Fleet to enable extra legroom seating
We plan to keep management headcount expense flat to 2025 levels in 2026.
And we'll also be focused on operational efficiency within our Frontline teams.
our fourth quarter performance, reflects the strength of the transformation underway at Southwest and reflects well on our evolving culture, 1 that is relentlessly pursuing new revenue streams and operational efficiencies in areas that in the past, we had not focused on
our people, and our technology to position Southwest for long-term success. Looking ahead, our initiatives, which represent a deep fundamental transformation of our business, are set to drive significant earnings growth in 2026.
At the same time, we continue to invest heavily in our customers, our people, and our technology to position, Southwest for long-term success.
Turning to Fleet, Boeing continues to execute on its delivery commitments. We expect 66 Boeing 737-8, deliveries in 2026, and anticipate retiring, 60, aircraft during the year.
Full year, net, capital spending is expected to be in the range of 3 billion to 3.5 billion.
Tom Doxey: The impact from the initiatives launched in 2025 is well understood by us at this stage of the rollout, and we have confidence in our ability to deliver meaningful margin expansion and strong earnings growth this year. As Bob stated, for full year 2026, we are providing an adjusted EPS guide of at least $4, which represents the lower end of our forecast. For Q1 2026, we are guiding an adjusted EPS of at least $0.45 per share, which also represents the lower end of our forecast and compares to a loss of $0.13 in Q1 2025.
The impact from the initiatives launched in 2025 is well understood by us at this stage of the rollout, and we have confidence in our ability to deliver meaningful margin expansion and strong earnings growth this year. As Bob stated, for full year 2026, we are providing an adjusted EPS guide of at least $4, which represents the lower end of our forecast. For Q1 2026, we are guiding an adjusted EPS of at least $0.45 per share, which also represents the lower end of our forecast and compares to a loss of $0.13 in Q1 2025.
Looking ahead are initiatives, which represent a deep fundamental transformation of our business are set to drive significant earnings growth in 2026.
In November we issued 1.5 billion dollars, unsecured, bonds and industry-leading terms. We ended the quarter with 3.2 billion dollars in cash and a gross leverage ratio of 2.4 times both within our targets.
The impact from the initiative launched in 2025 is well understood by us at this stage of the rollout, and we have confidence in our ability to deliver meaningful margin expansion and strong earnings growth this year.
During 2025, we repurchased, 2.6 billion dollars of shares and distributed 399 million in dividends.
At the same time, we plan to make the necessary investments in our business while staying within the guard rails that support our investment grade rating.
Tom Doxey: We expect continued strong cost discipline, with CASM-ex projected to increase approximately 3.5% year-over-year, which includes approximately 1.1 percentage points of impact from the removal of 6 seats from our 737-700 fleet to enable Extra Legroom seating. We plan to keep management headcount expense flat to 2025 levels in 2026, and we'll also be focused on operational efficiency within our frontline teams. Turning to fleet, Boeing continues to execute on its delivery commitments. We expect 66 Boeing 737-8 deliveries in 2026 and anticipate retiring 60 aircraft during the year. Full-year net capital spending is expected to be in the range of $3 to 3.5 billion. In November, we issued $1.5 billion unsecured bonds at industry-leading terms.
We expect continued strong cost discipline, with CASM-ex projected to increase approximately 3.5% year-over-year, which includes approximately 1.1 percentage points of impact from the removal of 6 seats from our 737-700 fleet to enable Extra Legroom seating. We plan to keep management headcount expense flat to 2025 levels in 2026, and we'll also be focused on operational efficiency within our frontline teams. Turning to fleet, Boeing continues to execute on its delivery commitments. We expect 66 Boeing 737-8 deliveries in 2026 and anticipate retiring 60 aircraft during the year.
As Bob stated, for full year 2026, we are providing an adjusted EPS guide of at least $4.00, which represents the lower end of our forecast. For the first quarter of 2026, we are guiding an adjusted EPS of at least $0.45 per share, which also represents the lower end of our forecasts and compares to a loss of $0.13 in the first quarter of 2025.
In closing 2026 is positioned to be a year of significant margin expansion and earnings growth for Southwest and we remain confident in our ability to deliver and create long-term value for our shareholders. And with that, I'll pass it back to Danielle to start our Q&A.
We expect continued strong cost, discipline with kmx, projected, to increase approximately 3.5% year-over-year, which includes approximately 1.1 points of impact, from the removal of 6 seats from our 737-700 Fleet to enable extra leg room seating.
Thank you, Tom. This concludes our prepared remarks. We will now open the line for analyst questions, to help us manage time efficiently. We'll ask that you please add your 1 to 2 questions, back to back at the outset.
We plan to keep management headcount expense flat to 2025 levels in 2026.
And we'll also be focused on operational efficiency within our Frontline teams.
Full-year net capital spending is expected to be in the range of $3 to 3.5 billion. In November, we issued $1.5 billion unsecured bonds at industry-leading terms.
And ladies and gentlemen, we will be getting that question and answer session to join the question queue. You may press star and then 1 using a touchtone telephone to withdraw your questions. You may press star and 2. If you are using a speaker-phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
Turning to Fleet, Boeing continues to execute on its delivery commitments, we expect 66 Boeing 737-8206 and anticipate retiring, 60 aircraft during the year.
Once again, that is star and then 1 to join the question queue.
Full year, net, capital spending is expected to be in the range of 3 billion to 3.5 billion.
Our first question today comes from Katherine O'Brien from Goldman Sachs, please. Go ahead with your question.
Tom Doxey: We ended the quarter with $3.2 billion in cash and a gross leverage ratio of 2.4 times, both within our targets. During 2025, we repurchased $2.6 billion of shares and distributed $399 million in dividends. At the same time, we plan to make the necessary investments in our business while staying within the guardrails that support our investment-grade rating. In closing, 2026 is positioned to be a year of significant margin expansion and earnings growth for Southwest, and we remain confident in our ability to deliver and create long-term value for our shareholders. With that, I'll pass it back to Danielle to start our Q&A.
We ended the quarter with $3.2 billion in cash and a gross leverage ratio of 2.4 times, both within our targets. During 2025, we repurchased $2.6 billion of shares and distributed $399 million in dividends. At the same time, we plan to make the necessary investments in our business while staying within the guardrails that support our investment-grade rating. In closing, 2026 is positioned to be a year of significant margin expansion and earnings growth for Southwest, and we remain confident in our ability to deliver and create long-term value for our shareholders.
In November we issued 1.5 billion dollars unsecured bonds at industry-leading terms. We ended the quarter with 3.2 billion dollars in cash and a gross leverage ratio of 2.4 times both within our targets.
During 2025, we repurchased, 2.6 billion dollars of shares and distributed 399 million in dividends.
At the same time, we plan to make the necessary investments in our business while staying within the guard rails that support our investment grade rating.
With that, I'll pass it back to Danielle to start our Q&A.
Danielle Collins: Thank you, Tom. This concludes our prepared remarks. We will now open the line for analyst questions. To help us manage time efficiently, we'll ask that you please ask your 1 to 2 questions back-to-back at the outset.
Danielle Collins: Thank you, Tom. This concludes our prepared remarks. We will now open the line for analyst questions. To help us manage time efficiently, we'll ask that you please ask your 1 to 2 questions back-to-back at the outset.
In closing 2026 is positioned to be a year of significant margin expansion and earnings growth for Southwest and we remain confident in our ability to deliver and create long-term value for our shareholders. And with that, I'll pass it back to Danielle to start our Q&A.
Thinking about the upside to your base case you shared today, you know, how does January booked rasim compare uh to 1 half February and and how to both of those time frames, compared to that 9 and a half percent base case guide, you know, I'm just trying to get a sense of like what you're evaluating on potential upside is that, you know, higher upsell than, you know, potentially higher upsell going forward shares shift something else. I know that was a long for some second 1. I'll keep it quick, you know, you beat your 4 q. Casm guy pretty handily. What drove that? Anything shift out of the quarter, we should be aware of as we model. 26 cases on 1, Q. Thanks for the time.
Thank you, Tom. This concludes our prepared remarks. We will now open the line for analyst questions, to help us manage time efficiently. We'll ask that you. Please ask your 1 to 2 questions, back to back at the outset.
Operator: Ladies and gentlemen, we will begin that question-and-answer session. To join the question queue, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue... Our first question today comes from Catherine O'Brien from Goldman Sachs. Please go ahead with your question.
Operator: Ladies and gentlemen, we will begin that question-and-answer session. To join the question queue, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue... Our first question today comes from Catherine O'Brien from Goldman Sachs. Please go ahead with your question.
Hey there Katies Bob. I I'll take the first 1 and then Tom will take the second. Um, you know, on the on the, on the upper range. Uh, well first I would just say that, you know, booking
For everything related to our new products and initiatives. All look really good.
Hey, ladies and gentlemen, we will be getting that question and answer session to join the question queue. You may press star and then 1 using a touchtone telephone to withdraw your questions. You may press star in 2. If you are using a speaker-phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
Once again, that is star, and then 1, to join the question queue.
Uh, so everything is on track, uh, we're just not ready to provide an upper range or or or upside today. I mean, it's really simple. We've got lots of booking data related to the new initiatives, but we have limited data regarding close in bookings, and the behavior of, you know, Fair upsell and, and C, uh, ancillaries, especially with those close in bookings, overweight business,
Our first question today comes from Katherine O'Brien from Goldman Sachs, please. Go ahead with your question.
Catherine O'Brien: Hey, good morning, everyone. Thanks for the time. So I'll listen to the rules, Danielle, and ask my 2 questions up front. So first question is, I realize it's very early innings on the rollout of your seat products, but I'm just trying to get a sense of how you're thinking about the upside to your base case you shared today. You know, how does January booked RASM compare to one half February? And how do both of those timeframes compare to that 9.5% base case guide? You know, I'm just trying to get a sense of, like, what you're evaluating on potential upside. Is that, you know, higher upsell and, you know, potentially higher upsell going forward, share shift, something else? I know that was a long first one. Second one, I'll keep it quick.
Catherine O'Brien: Hey, good morning, everyone. Thanks for the time. So I'll listen to the rules, Danielle, and ask my 2 questions up front. So first question is, I realize it's very early innings on the rollout of your seat products, but I'm just trying to get a sense of how you're thinking about the upside to your base case you shared today. You know, how does January booked RASM compare to one half February? And how do both of those timeframes compare to that 9.5% base case guide? You know, I'm just trying to get a sense of, like, what you're evaluating on potential upside.
And uh customers that are are, are are more flexible and that tends to have higher ancillary take rates. So we just need to see it. Uh, and by the way, I'm dying to know the upside, uh, as well and, uh, that asking Andrew every day, but seriously, uh,
We will let you know as soon as possible we just need, you know, a month or 2 to to really see the potential and then maybe separate from that.
Uh, we're not stopping there. We have uh, you know, there's no Victory lab we have
Is that, you know, higher upsell and, you know, potentially higher upsell going forward, share shift, something else? I know that was a long first one. Second one, I'll keep it quick.
Catherine O'Brien: You know, you beat your Q4 CASM guide pretty handily. What drove that? Anything shift out of the quarter we should be aware of as we model 2026 CASM-ex beyond Q1? Thanks for the time.
You know, you beat your Q4 CASM guide pretty handily. What drove that? Anything shift out of the quarter we should be aware of as we model 2026 CASM-ex beyond Q1? Thanks for the time.
Other things that we are focusing on above and beyond this potential with the current initiatives. Well, I mean, we have the opportunity for more cost, takeout efficiency, uh, Network optimization.
Uh, with our new products, we think we can grow our corporate share.
Bob Jordan: Hey there, Katie, it's Bob. I'll take the first one, and then Tom will take the second. You know, on the upper range... Well, first I would just say that, you know, bookings for everything related to our new products and initiatives all look really good. So everything is on track. We're just not ready to provide an upper range or upside today. I mean, it's really simple. We've got lots of booking data related to the new initiatives, but we have limited data regarding close-in bookings and the behavior of, you know, fare upsell and seat ancillaries, especially with those close-in bookings, overweight business, and customers that are more flexible and that tends to have higher ancillary take rates. So we just need to see it.
Bob Jordan: Hey there, Katie, it's Bob. I'll take the first one, and then Tom will take the second. You know, on the upper range... Well, first I would just say that, you know, bookings for everything related to our new products and initiatives all look really good. So everything is on track. We're just not ready to provide an upper range or upside today. I mean, it's really simple. We've got lots of booking data related to the new initiatives, but we have limited data regarding close-in bookings and the behavior of, you know, fare upsell and seat ancillaries,
Seat products. But I'm just trying to get a sense of higher thinking about the upside to your base case you shared today, you know, how does January booked rasim compare uh, to 1 half February and and how to both of those time frames, compared to that 9 and a half percent base case guide, you know, I'm just trying to get a sense of like what you're evaluating on potential upside is that, you know, higher upsell than, you know, potentially higher upsell going forward shares? If something else. I know that was a long for some second 1. I'll keep it quick, you know, you beat your fork, qasm guy pretty handily. What drove that? Anything shift out of the quarter, we should be aware of as we model. 26 cases Beyond 1 Q. Thanks for the time.
And of course, we're going to continue to optimize the revenue initiatives that we've just put in place.
Either case, Bob, I'll take the first one, and then Tom will take the second.
Um, you know, on the, on the, on the upper range. Uh, well first, I would just say that, you know, bookings,
Katie. Uh, thanks for your question on costs. I'm really excited. Uh continue to be really excited about the way in which the entire management team is aligned in spending smartly and being efficient uh with with our costs.
especially with those close-in bookings, overweight business, and customers that are more flexible and that tends to have higher ancillary take rates. So we just need to see it.
For everything related to our new products and initiatives, all look really good. Uh, so everything is on track. Uh, we're just not ready to provide an upper range or, or, or upside today. I mean, it's really simple. We've got lots of booking data related to the new initiatives, but we have limited data regarding close-in bookings, and the behavior of, you know, fare upsell and, and seat, uh, ancillaries, especially with those close-in bookings, overweight business,
Um, there there's no shift that we're talking about today out of 4 q into 1 Q. So this is truly us going in and finding efficiencies in different areas of the business and its widespread, uh, throughout really every line item, uh, their we're finding cost items.
All right, in our next question.
Bob Jordan: And by the way, I'm dying to know the upside, as well, and am asking Andrew every day. But seriously, we will let you know as soon as possible. We just need a, you know, a month or two to really see the potential. And then maybe separate from that, we're not stopping there. We have, you know, there's no victory lap. We have other things that we are focusing on above and beyond this potential with the current initiatives. I mean, we have the opportunity for more cost takeout, efficiency, and network optimization. With our new products, we think we can grow our corporate share. And of course, we're gonna continue to optimize the revenue initiatives that we've just put in place.
And by the way, I'm dying to know the upside, as well, and am asking Andrew every day. But seriously, we will let you know as soon as possible. We just need a, you know, a month or two to really see the potential. And then maybe separate from that, we're not stopping there. We have, you know, there's no victory lap. We have other things that we are focusing on above and beyond this potential with the current initiatives. I mean, we have the opportunity for more cost takeout, efficiency, and network optimization. With our new products, we think we can grow our corporate share.
Our next question comes from. Connor Cunningham from Melius research. Please, go ahead with your question.
And uh customers that are are, are are more flexible and that tends to have higher ancillary take rates. So we just need to see it. Uh, and by the way, I'm dying to know the upside, uh, as well and, uh, that asking Andrew every day, but seriously, uh,
We will let you know as soon as possible we just need, you know, a month or 2 to to really see the potential and then maybe separate from that.
Uh, we're not stopping there. We have, uh, you know, there's no Victory Lab. We have—
Other things that we are focusing on, above and beyond this potential with the current initiatives—well, I mean, we have the opportunity for more cost takeout, efficiency, uh, network optimization.
And of course, we're gonna continue to optimize the revenue initiatives that we've just put in place.
Uh, with our new products, we think we can grow our corporate share.
Tom Doxey: Katie, thanks for your question on costs. I'm really excited, continue to be really excited about the way in which the entire management team is aligned in spending smartly and being efficient, with, with our costs. There, there's no shift that we're talking about today out of Q4 into Q1, so this is truly us going in and finding efficiencies in different areas of the business, and it's widespread. Throughout really every line item, there, we're finding cost items.
Tom Doxey: Katie, thanks for your question on costs. I'm really excited, continue to be really excited about the way in which the entire management team is aligned in spending smartly and being efficient, with, with our costs. There, there's no shift that we're talking about today out of Q4 into Q1, so this is truly us going in and finding efficiencies in different areas of the business, and it's widespread. Throughout really every line item, there, we're finding cost items.
And of course, we're going to continue to optimize the revenue initiatives that we've just put in place.
Hi, everyone. Thank you. Just on, on the load Factor decline, uh, in 3Q, or sorry, in 4 q. And then, it just was larger than the decline in 3Q. Could you just help frame up? What's, what's happening there? I I was under the impression that, uh, that you were pushing for additional loads, uh, you know, given this Theta distribution and so on. And, and, and within that comment, maybe you could talk about, like, is there a load Factor Target that you need to hit your bag fee, Target for 2026 and then my second question. Sorry. Um, I I was hoping you could talk about the decline in in the ATL. Um, I realized that there's a revised credit, you know, Chase agreement in there, but just if you could just frame up the drivers, I think that there is some concern out there in terms of like there being a larger decline from 3 key to 4K. And then you expect a pretty big uh Revenue uplift in 2026. So just any, any thoughts around? That would be helpful. Thank you.
Katie, uh, thanks for your question on costs. I'm really excited—uh, continue to be really excited—about the way in which the entire management team is aligned in spending smartly and being efficient, uh, with our costs.
Um, there there's no shift that we're talking about today out of 4 q into 1 Q. So this is truly us going in and finding efficiencies in different areas of the business and its widespread, uh, throughout really every line item, uh, their we're finding cost items.
Operator: And our next question-
Operator: And our next question-
Hi, it's Andrew, I'll take the first 1. Um and so I'd say that, you know, our employees are super engaged with um uh the the new southwest and it go that extends to our Tech Ops employees and they did such a great job at retrofits of of the aircraft overnight that they got. So efficient that we were able to delay. The dash summon Dash, 700 retrofits until January, uh, because the -700 is, you probably know, we take out a row of seats. Now, doing that late in the booking curve, uh, means there's limited Revenue upside, but there is revenue upside, especially on the peak, uh, holiday travel dates.
Catherine O'Brien: Next question.
Danielle Collins: Next question.
Operator: Our next question comes from Conor Cunningham from Melius Research. Please go ahead with your question.
Operator: Our next question comes from Conor Cunningham from Melius Research. Please go ahead with your question.
All right, and our next question.
Our next question comes from. Connor Cunningham from Melius research. Please, go ahead with your question.
Conor Cunningham: Hi, everyone. Thank you. Just on the load factor decline in Q3, or sorry, in Q4, and then it just was larger than the decline in Q3. Can you just help frame up what's happening there? I was under the impression that you were pushing for additional loads, you know, given the OTA distribution and so on. And within that comment, maybe you could talk about, like, is there a load factor target that you need to hit your bag fee target for 2026? And then, my second question, sorry. I was hoping you could talk about the decline in the ATL. I realize that there's a revised credit, you know, Chase agreement in there, but just if you could just frame up the drivers.
Conor Cunningham: Hi, everyone. Thank you. Just on the load factor decline in Q3, or sorry, in Q4, and then it just was larger than the decline in Q3. Can you just help frame up what's happening there? I was under the impression that you were pushing for additional loads, you know, given the OTA distribution and so on. And within that comment, maybe you could talk about, like, is there a load factor target that you need to hit your bag fee target for 2026? And then, my second question, sorry. I was hoping you could talk about the decline in the ATL.
Um, and the extending that meant that, um, you know, is it came on at almost no cost and so doing that, uh, was even positive. And so we don't manage the business to uh, for any kind of sub metric of low factor or yield where largely managing for rasim or the rasim casm spread. And so in that situation we chose uh, uh, uh, decision that maximize earnings, but was, you know, unflattering, perhaps the load Factor. Uh, but it was the right decision. That's how we want to manage the company.
I realize that there's a revised credit, you know, Chase agreement in there, but just if you could just frame up the drivers.
Conor Cunningham: I think that there is some concern out there in terms of, like, there being a larger decline from Q3 to Q4, and then you expect a pretty big revenue uplift in 2026. So just any, any thoughts around there would be helpful. Thank you.
I think that there is some concern out there in terms of, like, there being a larger decline from Q3 to Q4, and then you expect a pretty big revenue uplift in 2026. So just any, any thoughts around there would be helpful. Thank you.
Hi, everyone. Thank you. Just on, on the load Factor decline, uh, in 3Q, or sorry, in 4 q. And then, it just was larger than the decline in 3Q, just help frame up. What's, what's happening there? I I was under the impression that, uh, that you were pushing for additional loads, uh, you know, given the, the distribution and so on and, and, and within that comment, maybe you could talk about, like, is there a load Factor Target that you need to hit your bag fee, Target for 2026 and then my second question. Sorry. Um, I, I was hoping you could talk about the decline in, in the ATL. Um, I realized that there's a revised credit, you know, Chase agreement in there, but just if you could just frame up the drivers, I think that there is some concern out there in terms of like they're being a larger decline from 3, key to 4 key and then you expect a pretty big uh, Revenue uplift in 2026. So just any, any thoughts around? That would be helpful. Thank you.
Bob Jordan: Hey, it's Andrew. I'll take the first one. And so I'd say that, you know, our employees are super engaged with the new Southwest, and it extends to our tech ops employees, and they did such a great job of retrofits of the aircraft overnight, that they got so efficient that we were able to delay the 737-700 retrofits until January. Because the 737-700, as you probably know, we take out a row of seats. Now, doing that late in the booking curves means there's limited revenue upside, but there is revenue upside, especially on the peak holiday travel dates. And the extending that means that, you know, it came out of at almost nil cost. And so doing that was EBIT positive.
Bob Jordan: Hey, it's Andrew. I'll take the first one. And so I'd say that, you know, our employees are super engaged with the new Southwest, and it extends to our tech ops employees, and they did such a great job of retrofits of the aircraft overnight, that they got so efficient that we were able to delay the 737-700 retrofits until January. Because the 737-700, as you probably know, we take out a row of seats. Now, doing that late in the booking curves means there's limited revenue upside, but there is revenue upside, especially on the peak holiday travel dates.
And the extending that means that, you know, it came out of at almost nil cost. And so doing that was EBIT positive.
Hi, it's Andrew, I'll take the first 1. Um and so I'd say that, you know, our employees are super engaged with um, uh the the new southwest and It Go extends to our Tech Ops employees. And they did such a great job of retrofits of of the aircraft overnight that they got. So efficient that we were able to delay, the -7 -700, retrofits until January. Uh, because the -700 is, you probably know we take out a row of seats. Now doing that late in the booking curve, uh, means there's limited Revenue upside but there is revenue upside, especially on the peak, uh, holiday travel dates.
The benefits that we have now is we have more differentiation in our product and the ability to provide, uh, the differentiation to, uh, you know, those that are at different, uh, different different levels within in the Loyalty program. Um, is that more of the revenue can be recognized? The Loyalty, Revenue can be recognized sooner, um, whereas previously we had to wait, you know, primarily the benefit that was derived from being in the program was when you had ultimately redeem points. Well, now depending on your status you have the ability to derive a benefit, you may book a flight paying cash tomorrow where you have the ability because of your status to uh, select a seat, uh, for free. You may have the ability to have a free bag or bags, so those are benefits that can be derived sooner. So that differentiation that we have in um, in our product offering now allows us to recognize more Revenue sooner. Uh, so obviously that means that there is less that that falls into
Bob Jordan: And so we don't manage the business to for any kind of submetric of load factor or yield. We're largely managing for RASM or the RASM CASM spread. And so in that situation, we chose a decision that maximized earnings, but was, you know, unflattering, perhaps the load factor, but it was the right decision. That's how we want to manage the company.
And so we don't manage the business to for any kind of submetric of load factor or yield. We're largely managing for RASM or the RASM CASM spread. And so in that situation, we chose a decision that maximized earnings, but was, you know, unflattering, perhaps the load factor, but it was the right decision. That's how we want to manage the company.
That ATL category. So if, if, if anyone is looking at that ATL category and seeing that it's smaller and trying to, you know, forecast some sort of Revenue weakness in the future, that's not what's happening.
Appreciate it. Thank you.
Our next question comes from Jamie Baker from JP Morgan. Please go ahead with your question.
Um, and the extending that means that, um, you know, is it came on at almost no cost and so doing that, uh, was even positive. And so we don't manage the business to uh, for any kind of sub metric of low factor or yield. We're largely managing for rasim or the rasim chasm spread. And so in that situation we chose uh, uh, uh, decision that maximize earnings, but was, you know, unflattering, perhaps the load Factor. Uh, but it was the right decision. That's how we want to manage the company.
Tom Doxey: To your second question on ATL, one of the benefits that we have now is we have more differentiation in our product, and the ability to provide differentiation to, you know, those that are at different levels within the loyalty program, is that more of the revenue can be recognized, the loyalty revenue can be recognized sooner. Whereas previously, we had to wait, you know, primarily the benefit that was derived from being in the program was when you would ultimately redeem points. Well, now, depending on your status, you have the ability to derive the benefit. You may book a flight paying cash tomorrow, where you have the ability, because of your status, to select a seat for free. You may have the ability to have a free bag or bags...
Tom Doxey: To your second question on ATL, one of the benefits that we have now is we have more differentiation in our product, and the ability to provide differentiation to, you know, those that are at different levels within the loyalty program, is that more of the revenue can be recognized, the loyalty revenue can be recognized sooner. Whereas previously, we had to wait, you know, primarily the benefit that was derived from being in the program was when you would ultimately redeem points. Well, now, depending on your status, you have the ability to derive the benefit.
You may book a flight paying cash tomorrow, where you have the ability, because of your status, to select a seat for free. You may have the ability to have a free bag or bags...
Tom Doxey: So those are benefits that can be derived sooner. So that differentiation that we have in our product offering now allows us to recognize more revenue sooner. So obviously, that means that there is less that falls into that ATL category. So if anyone is looking at that ATL category and seeing that it's smaller and trying to, you know, forecast some sort of revenue weakness in the future, that's not what's happening.
So those are benefits that can be derived sooner. So that differentiation that we have in our product offering now allows us to recognize more revenue sooner. So obviously, that means that there is less that falls into that ATL category. So if anyone is looking at that ATL category and seeing that it's smaller and trying to, you know, forecast some sort of revenue weakness in the future, that's not what's happening.
Uh, yeah, good morning. Um, everybody a couple, you know, for for Tom so you know, with assigned seating, broadly, anticipated by customers. I'd have thought there might have been a surge in early bird bookings. You know? Given that, you know, there's this significant ramp from the new initiatives but you know I guess that's differently. Wasn't there already a meaningful amount of early bird in the base? I just kind of thought people would have front run the changes by protecting themselves with that. And then second with so many changes at Southwest taking place, I recognize the team isn't going to rule anything out. Uh but you know, maybe for Bob, can you disclose if you have any aircraft rfps in the market? This is not usually a state secret. You know, everybody knew Delta had a why body campaign stuff like that. Um, just just curious if you can comment on that. Thank you to you both.
A quick 1, I'll take the first and then Andrea will take the uh, the second.
And to your second question, on ATL is 1 of the benefits that we have now is we have more differentiation in our product and the ability to provide, uh, the differentiation to, uh, you know, those that are at different, uh, different different levels within in the Loyalty program. Um, is that more of the revenue can be recognized? The Loyalty, Revenue can be recognized sooner, um, whereas previously we had to wait, you know, primarily the benefit that was derived from being in the program was when you had ultimately redeem points. Well, now depending on your status you have the ability to derive a benefit, you may book a flight paying cash tomorrow where you have the ability because of your status to uh, select a seat, uh, for free. You may have the ability to have a free bag or bags, so those are benefits that can be derived sooner. So that differentiation that we have in, um, in our product offering now allows us to recognize more Revenue sooner. Uh, so obviously
No, because it's quick. Uh, no. We do? We do not have any active aircraft rfps in the market.
That means that there is less that that falls into that ATL category. So if if if anyone is looking at that ATL category and seeing that it's smaller and trying to, you know, forecast some sort of Revenue weakness in the future that's not
Happening.
Jamie Baker: Appreciate it. Thank you.
Conor Cunningham: Appreciate it. Thank you.
Appreciate, thank you.
Operator: Our next question comes from Jamie Baker from J.P. Morgan. Please go ahead with your question.
Operator: Our next question comes from Jamie Baker from J.P. Morgan. Please go ahead with your question.
Jamie Baker: Yeah, good morning, everybody, a couple, you know, for, for Tom. So, you know, with assigned seating broadly anticipated by customers, I'd have thought there might have been a surge in Early Bird bookings, you know, given that, you know, there's this significant ramp from the new initiatives. But, you know, I guess asked differently, wasn't there already a meaningful amount of Early Bird in the base? I just kind of thought people would have front-run the changes by protecting themselves with that. And then second, with so many changes at Southwest taking place, I recognize the team isn't going to rule anything out, but, you know, maybe for Bob, can you disclose if you have any aircraft RFPs in the market? This is not usually a state secret. You know, everybody knew Delta had a wide-body campaign, stuff like that.
Jamie Baker: Yeah, good morning, everybody, a couple, you know, for, for Tom. So, you know, with assigned seating broadly anticipated by customers, I'd have thought there might have been a surge in Early Bird bookings, you know, given that, you know, there's this significant ramp from the new initiatives. But, you know, I guess asked differently, wasn't there already a meaningful amount of Early Bird in the base? I just kind of thought people would have front-run the changes by protecting themselves with that. And then second, with so many changes at Southwest taking place,
Our next question comes from Jamie Baker from JP Morgan. Please go ahead with your question.
Okay, and then the other 1, the early bird. We um, if I'm going to send you a question correctly, uh, we see selling early bird for departures after Tuesday. Um, and so, uh, now people can get a good seat by buying the Standalone ancillary and we do see stain on an ancillary, you know, uh, accelerate close in. And that's the part that Bob talked about. We don't fully understand yet on expect to have the next month or 2 more insights into how that, uh, the booking curve ends for those higher fare passengers. Well, so maybe I misunderstood I, I thought, you know, 4 weeks ago, you know, somebody could have bought early bird to kind of avoid the seating so that's not how it worked.
I recognize the team isn't going to rule anything out, but, you know, maybe for Bob, can you disclose if you have any aircraft RFPs in the market? This is not usually a state secret. You know, everybody knew Delta had a wide-body campaign, stuff like that.
Jamie Baker: Just curious if you can comment on that. Thank you to you both.
Just curious if you can comment on that. Thank you to you both.
Uh, not for departures, on Tuesday, the 27th and beyond. All those were just seat assignment. We do have a, a, a kind of upgraded, uh, boarding early boarding you could do. But we didn't really push it and, and promote it that much because, uh, we didn't want to add customer confusion, we will do that later but that's a modest thing. Uh, the large money is coming from fair upsells. So buying a higher fare product or buying Standalone ancillary hey, Jamie, I think the easy thing is upgraded boarding and early bird. The old an ancillary is ended on Monday with open seating and the new ancillary started on Tuesday from a revenue perspective and that's the best way to think about it. Perfect. Thank you.
Bob Jordan: Yeah, Jamie, I'll... It's a quick one. I'll take the first, and then Andrew will take the second, 'cause it's quick. No, we do not have any active aircraft RFPs in the market.
Bob Jordan: Yeah, Jamie, I'll... It's a quick one. I'll take the first, and then Andrew will take the second, 'cause it's quick. No, we do not have any active aircraft RFPs in the market.
Uh, yeah, good morning. Um, everybody a couple, you know, for for Tom so you know, with assigned seating, broadly, anticipated by customers. I'd have thought there might have been a surge in early bird bookings. You know? Given that, you know, there's this significant ramp from the new initiatives but you know I guess that's differently. Wasn't there already a meaningful amount of early bird in the base? I just kind of thought people would have front run the changes by protecting themselves with that. And then second with so many changes at Southwest taking place, I recognize the team isn't going to rule anything out. Uh but you know maybe for Bob, can you disclose if you have any aircraft rfps in the market? This is not usually a state secret. You know, everybody knew Delta had a widebody campaign stuff like that. Um, just just curious if you can comment on that. Thank you to you both.
Andrew will take the, uh,
Our next question comes from Scott group from Wolfe research. Please go ahead with your question.
Jamie Baker: Okay.
Jamie Baker: Okay.
Andrew Watterson: And then the other one, the Early Bird, we, if I'm understanding your question correctly, we see selling Early Bird for departures after Tuesday. And so, now people can get a good seat by buying the standalone ancillary. We do see standalone ancillary, you know, accelerate close in, and that's the part that Bob talked about we don't fully understand yet, and expect to have in the next month or two, more insights into how that, the booking curve ends for those higher fare passengers.
Andrew Watterson: And then the other one, the Early Bird, we, if I'm understanding your question correctly, we see selling Early Bird for departures after Tuesday. And so, now people can get a good seat by buying the standalone ancillary. We do see standalone ancillary, you know, accelerate close in, and that's the part that Bob talked about we don't fully understand yet, and expect to have in the next month or two, more insights into how that, the booking curve ends for those higher fare passengers.
The, the second, uh, because it's quick. Uh, no, we do? We do not have any active aircraft rfps in the market.
Hey, thanks. So, uh, just a couple things, so big picture. Usually, when Aaron soleri goes up, there goes down, you know, historically, what do you think is sort of different here? Um, is there any way to sort of share? Like what percent is?
Going on since Tuesday is going basic versus prior and then maybe just Tom like a modeling kind of question. Like I'm guessing January, you know, you have, you didn't have seats. It's the toughest comp, like,
Jamie Baker: Well, so maybe I misunderstood. I thought, you know, four weeks ago, you know, somebody could have bought Early Bird to kind of avoid the seating peak. So that's not how it worked?
Jamie Baker: Well, so maybe I misunderstood. I thought, you know, four weeks ago, you know, somebody could have bought Early Bird to kind of avoid the seating peak. So that's not how it worked?
Are we exiting the quarter with like raasm in the teens or something like that? Is that the implication of this guide? So I know there's a few but thank you.
Okay, and then the other 1, the early bird. We, um, if I'm going to send you a question correctly, uh, we see selling early bird for departures after Tuesday. Um, and so, uh, now people can get a good seat by buying the Standalone ancillary and we do see Standalone ancillary, you know, uh, accelerate close in. And that's the part that Bob talked about. We don't fully understand yet on expect to have the next month or 2 more insights into how that, uh, the booking curve ends for those higher fare passengers. Well, so maybe I misunderstood I, I thought, you know, 4 weeks ago, you know, somebody could have bought early bird to kind of avoid the seating so that's not how it worked.
Andrew Watterson: Not for departures on Tuesday, the 27th and beyond.
Andrew Watterson: Not for departures on Tuesday, the 27th and beyond.
Jamie Baker: Okay.
Jamie Baker: Okay.
Andrew Watterson: All those were just seat assignment. We do have a kind of upgraded boarding, early boarding you could do, but we didn't really push it and promote it that much because we didn't want to add customer confusion. We will do that later, but that's a modest thing. The large money is coming from fare upsells, so buying a higher fare product or buying standalone ancillary.
Andrew Watterson: All those were just seat assignment. We do have a kind of upgraded boarding, early boarding you could do, but we didn't really push it and promote it that much because we didn't want to add customer confusion. We will do that later, but that's a modest thing. The large money is coming from fare upsells, so buying a higher fare product or buying standalone ancillary.
Yeah, yeah, I'll take the first 1 and Tom will take the second, you know, I think they're really disconnected. So ancillaries especially now that a lot of that is a seat ancillary which comes much later. It it uh, tends to be a separate decision from the fair purchase. So the original booking and purchase of the ticket
Uh, not for departures, on Tuesday, the 27th and beyond. All those were just seat assignment. We do have a, a, a kind of upgraded, uh, boarding early boarding you could do. But we didn't really push it and, and promote it that much because, uh, we didn't want to add customer confusion, we will do that later, but that's a modest thing.
Um, we don't see the correlation in terms of, you know, the ancillaries go up, the fear goes down. I mean, all of this.
Bob Jordan: Yeah, Jamie, I think the easy thing is upgraded boarding and Early Bird, the old ancillary, ended on Monday with open seating, and the new ancillary started on Tuesday from a revenue perspective, and that's the best way to think about it.
Bob Jordan: Yeah, Jamie, I think the easy thing is upgraded boarding and Early Bird, the old ancillary, ended on Monday with open seating, and the new ancillary started on Tuesday from a revenue perspective, and that's the best way to think about it.
Jamie Baker: Perfect. Thank you.
Jamie Baker: Perfect. Thank you.
Uh, the large money is coming from fair upsells. So buying a higher fare product or buying Standalone ancillary hey Jamie, I think the easy thing is upgraded boarding and early bird. The old ANC ancillary ended on Monday with open seating and the new ancillary started on Tuesday from a revenue perspective and that's the best way to think about it. Perfect. Thank you.
Operator: Our next question comes from Scott Group from Wolfe Research. Please go ahead with your question.
Operator: Our next question comes from Scott Group from Wolfe Research. Please go ahead with your question.
Scott Group: Hey, thanks. So just a couple of things. So big picture, usually when ancillary goes up, fare goes down, you know, historically. What do you think is sort of different here? Is there any way to sort of share, like, what percent is going on since Tuesday is going basic versus prior? And then maybe just, Tom, like a modeling kind of question, like, I'm guessing January, you know, you didn't have seats, it's the toughest comp, like, are we exiting the quarter with, like, RASM in the teens or something like that? Is that the implication of this guide? So I know there's a few, but thank you.
Scott Group: Hey, thanks. So just a couple of things. So big picture, usually when ancillary goes up, fare goes down, you know, historically. What do you think is sort of different here? Is there any way to sort of share, like, what percent is going on since Tuesday is going basic versus prior? And then maybe just, Tom, like a modeling kind of question, like, I'm guessing January, you know, you didn't have seats, it's the toughest comp, like, are we exiting the quarter with, like, RASM in the teens or something like that? Is that the implication of this guide? So I know there's a few, but thank you.
Our next question comes from Scott Group from Wolfe Research. Please go ahead with your question.
Uh, change, especially with the signed seating, and extra leg. Room is driven from a, from a revenue benefit perspective by offering customers Choice. And then, giving them buy up opportunities at the time that they book, and then given them ancillary opportunities, uh, at the time, for example, when they select the seat, but no, we don't we don't see that correlation uh, at all at your disguise discussing and and to your second question, you know, of course we're not going to give razom guidance by month, but it is a true statement that the extra leg room seats in the seat, assignments. Uh, you know those in those enhanced unit revenues.
Hey, thanks. So, uh, just a couple things, so big picture. Usually, when Aaron soleri goes up, there goes down, you know, historically, what do you think is sort of different here? Um, is there any way to sort of share? Like what percent is?
All right. Next question, please.
Our next question comes from Mike lindenberg from Deutsche Bank. Please, go ahead with your question.
Going on since Tuesday is going basic versus prior and then maybe just Tom like a modeling kind of question. Like I'm guessing January, you know, you have, you didn't have seats. It's the toughest comp, like,
Uh yeah hey thanks everyone. So yeah 2 questions. Um I have a capex question for Tom and a revenue question for Andrew.
Are we exiting the quarter with like raasm in the teens or something like that? Is that the implication of this guide?
So um, I guess Tom um, you know, in the release.
Bob Jordan: Yeah, yeah, I'll take the first one, and Tom will take the second. You know, I think they're really disconnected. So ancillaries, especially now that a lot of that is a seat ancillary, which comes much later, it tends to be a separate decision from the fare purchase of the original booking and purchase of the ticket. So we don't see the correlation in terms of, you know, the ancillaries go up, the fare goes down. I mean, all of this change, especially with the assigned seating and Extra Legroom, is driven from a revenue benefit perspective by offering customers choice and then giving them buy-up opportunities at the time that they book, and then giving them ancillary opportunities at the time, for example, when they select a seat.
Bob Jordan: Yeah, yeah, I'll take the first one, and Tom will take the second. You know, I think they're really disconnected. So ancillaries, especially now that a lot of that is a seat ancillary, which comes much later, it tends to be a separate decision from the fare purchase of the original booking and purchase of the ticket. So we don't see the correlation in terms of, you know, the ancillaries go up, the fare goes down.
So I know there's a few but thank you.
A purchase of the ticket.
You did give us the capex number, um, although you indicated that it was a net capex number. So presumably, um, either I don't know if there's either a lease backs or there's aircraft divestitures. Can you give us a rough sense of maybe what the gross capex number is or or or maybe, you know, to give us a sense of, you know,
I mean, all of this change, especially with the assigned seating and Extra Legroom, is driven from a revenue benefit perspective by offering customers choice and then giving them buy-up opportunities at the time that they book, and then giving them ancillary opportunities at the time, for example, when they select a seat.
Divested your gains, um, from aircraft sales in 2025.
So we, uh, we don't see the correlation in terms of, you know, the ancillaries go up, the fare goes down. I mean, all of this.
Shure mic. Um, so we'll we'll stick with the range that we've got it. There is an element of uh aircraft sales that are there, the the that that, that bring that down from the gross number. Uh, but we'll, we'll we'll stick with what's out there in the public. Number is the net capex.
Okay, but it's specifically aircraft sales offsetting and it's not sale lease back gains or anything else.
Bob Jordan: But no, we don't, we don't see that correlation at all, that you're discussing.
But no, we don't, we don't see that correlation at all, that you're discussing.
Tom Doxey: To your second question, you know, of course, we're not going to give RASM guidance by month, but it is a true statement that the extra legroom seats and the seat assignments, you know, those enhance unit revenues.
Tom Doxey: To your second question, you know, of course, we're not going to give RASM guidance by month, but it is a true statement that the extra legroom seats and the seat assignments, you know, those enhance unit revenues.
Uh, change, especially with the assigned seating and extra leg. Room is driven from a, from a revenue benefit perspective by offering customers Choice. And then, giving them buy up opportunities at the time that they book, and then given them ancillary opportunities, uh, at the time, for example, when they select the seat, but no, we don't we don't see that correlation at at all, at your disguise discussing and, and to your second question, you know, of course, you're not going to give razom guidance by month, but it is a true statement that the extra leg room seats in the seat, assignments. Uh, you know those in those enhanced unit revenues.
Jamie Baker: All right, next question, please.
Danielle Collins: All right, next question, please.
Operator: Our next question comes from Mike Linenberg from Deutsche Bank. Please go ahead with your question.
Operator: Our next question comes from Mike Linenberg from Deutsche Bank. Please go ahead with your question.
All right. Next question, please.
Mike Linenberg: Yeah. Hey, thanks, everyone. So, yeah, two questions. I have a CapEx question for Tom and a revenue question for Andrew. So, I guess, Tom, you know, in the release, you did give us the CapEx number, although you indicated that it was a net CapEx number, so presumably, either I don't know if there's either sale leasebacks or there's aircraft divestitures. Can you give us a rough sense of maybe what the gross CapEx number is, or, or, or maybe, you know, to give us a sense of, you know, divestiture gains, from aircraft sales in 2025?
Mike Linenberg: Yeah. Hey, thanks, everyone. So, yeah, two questions. I have a CapEx question for Tom and a revenue question for Andrew. So, I guess, Tom, you know, in the release, you did give us the CapEx number, although you indicated that it was a net CapEx number, so presumably, either I don't know if there's either sale leasebacks or there's aircraft divestitures. Can you give us a rough sense of maybe what the gross CapEx number is, or, or, or maybe, you know, to give us a sense of, you know, divestiture gains, from aircraft sales in 2025?
Our next question comes from Mike Linenberg from Deutsche Bank. Please go ahead with your question.
Uh yeah hey thanks everyone. So yeah 2. Um I have a capex question for Tom and a revenue question for Andrew.
That's correct. Okay, great. And then just my question to to Andrew, um, you know, segmentation it it, you know, it it kind of a new thing. I mean, maybe you'll disagree with me, but I think it is somewhat of a new thing for Southwest. I mean, even in, you know, your commentary. You said that, you know, you're, you're learning a lot about, you know, customer Behavior. As as we think about, you know, how things evolve, you know, sort of what, what inning are we in. And, and, you know what, you know, what are the Milestones that you're going to look for that. You know, things are really starting to pick up and you know, maybe as as as a kind of a teaser here, I know in the past, I recall, you know, you indicating that the majority of of your bookings or or tickets sold
So um, I guess Tom um, you know, in the release.
Used to be in the lowest fare bucket and I would suspect that that's going to change, especially you know, as people want the assigned seats and the extra leg room. Can you just give us some, you know, sort of, you know, thoughts on how you see that evolving and maybe some of the key Milestones. Thanks for taking my question.
You did give us the capex number, um, although you indicated that it was a net capex number. So, presumably, um, either—I don't know if there's either a leaseback or there's aircraft divestitures. Can you give us a rough sense of maybe what the gross capex number is, or maybe, you know, to give us a sense of, you know,
Divested your gains, um, from aircraft sales in 2025.
Tom Doxey: Sure, Mike. So we'll stick with the range that we've guided. There is an element of aircraft sales that are there that bring that down from the gross number. But we'll stick with what's out there in the public number as the net CapEx.
Tom Doxey: Sure, Mike. So we'll stick with the range that we've guided. There is an element of aircraft sales that are there that bring that down from the gross number. But we'll stick with what's out there in the public number as the net CapEx.
Mike Linenberg: Okay, but it's specifically aircraft sales offsetting, and it's not sale leaseback gains or anything else?
Mike Linenberg: Okay, but it's specifically aircraft sales offsetting, and it's not sale leaseback gains or anything else?
Shure mic. Um, so we'll we'll stick with the range that we've got. There is an element of uh aircraft sales that are there that that, that that bring that down from the gross number. Uh, but we'll we'll stick with what's out there in the public. Number is the net capex.
Bob Jordan: ... That's correct.
Bob Jordan: ... That's correct.
Okay, but it's specifically aircraft sales offsetting, and it's not sale-leaseback gains or anything else.
Mike Linenberg: Okay, great. And then just my question to Andrew. You know, segmentation, it's kind of a new thing. I mean, maybe you'll disagree with me, but I think it is somewhat of a new thing for Southwest. I mean, even in, you know, your commentary, you said that, you know, you're learning a lot about, you know, customer behavior. As we think about, you know, how things evolve, you know, sort of what inning are we in? And, you know, what are the milestones that you're going to look for that, you know, things are really starting to pick up?
Mike Linenberg: Okay, great. And then just my question to Andrew. You know, segmentation, it's kind of a new thing. I mean, maybe you'll disagree with me, but I think it is somewhat of a new thing for Southwest. I mean, even in, you know, your commentary, you said that, you know, you're learning a lot about, you know, customer behavior. As we think about, you know, how things evolve, you know, sort of what inning are we in? And, you know, what are the milestones that you're going to look for that, you know, things are really starting to pick up?
Thanks, Mike. Uh, the um yes, we're we're going from a kind of feral based segmentation. We always had segmentation like with divine's purchase and stuff like that to a product based segmentation which you can kind of pay more to get more. And so the question becomes who will pay more to get more from our current customer base. And we're seeing that our current customers who previously bought the kind of Base products, uh, all in, uh, wanted to buy up. They wanted more from us, they wanted the ability to buy these extra product features. And even if they're buying early in the booking curve, they're willing to pay for them. And then, of course, later in the booking curve, where most of those people are that are price flexible, uh, you, you expect to see a kind of a surge of people, uh, demanding, the higher products. And so, um, we expect to go from like 80 plus percent by the lowest fare product down to something, you know, half or, or, or, or, or, or less by the very, uh, basic product. And so, we don't know what the Outlook of the full booking curve, uh, for the full year through High season and low season, but we know that that accelerates at the end, and that's kind of what we're waiting for. So the
Mike Linenberg: You know, maybe as a kind of a teaser here, I know in the past, I recall, you know, you indicating that the majority of your bookings or tickets sold used to be in the lowest fare bucket. I would suspect that that's gonna change, especially, you know, as people want the assigned seats and the extra legroom. Can you just give us, you know, sort of, you know, thoughts on how you see that evolving and maybe some of the key milestones? Thanks for taking my question.
You know, maybe as a kind of a teaser here, I know in the past, I recall, you know, you indicating that the majority of your bookings or tickets sold used to be in the lowest fare bucket. I would suspect that that's gonna change, especially, you know, as people want the assigned seats and the extra legroom. Can you just give us, you know, sort of, you know, thoughts on how you see that evolving and maybe some of the key milestones? Thanks for taking my question.
Level of acceleration, we see through the kind of February and March where you have low season High season will give us a really good idea of what the upside is for this.
That's correct. Okay, great. And then just my question to to Andrew, um, you know, segmentation it it, you know, it it kind of a new thing. I mean, maybe you'll disagree with me, but I think it is somewhat of a new thing for Southwest. I mean, even in, you know, your commentary. You said that, you know, you're, you're learning a lot about, you know, customer Behavior. As as we think about, you know, how things evolve, you know, sort of what, what inning are we in. And, and, you know what, you know, what are the Milestones that you're going to look for that. You know, things are really starting to pick up and you know, maybe as as as a kind of a teaser here, I know in the past, I recall, you know, you indicating that the majority of of your bookings or or tickets sold
All right, our next question.
Our next question comes from John, Gooden from Citigroup, please. Go ahead with your question.
Hey guys, thanks for taking my question. Um,
Used to be in the lowest fare bucket and I would suspect that that's going to change, especially you know, as people want the assigned seats and the extra leg room. Can you just give us some, you know, sort of, you know, thoughts on how you see that evolving and maybe some of the key Milestones. Thanks for taking my question.
Bob Jordan: Thanks, Mike. Yes, we're going from a kind of fare rule-based segmentation. We always had segmentation, like with advanced purchase and stuff like that, to a product-based segmentation, which you can kind of pay more to get more. And so the question becomes, who will pay more to get more from our current customer base? And we're seeing that our current customers who previously bought the kind of base product, all in, wanted to buy up. They wanted more from us. They wanted the ability to buy these extra product features, and even if they're buying early in the booking curve, they're willing to pay for them.
Bob Jordan: Thanks, Mike. Yes, we're going from a kind of fare rule-based segmentation. We always had segmentation, like with advanced purchase and stuff like that, to a product-based segmentation, which you can kind of pay more to get more. And so the question becomes, who will pay more to get more from our current customer base? And we're seeing that our current customers who previously bought the kind of base product, all in, wanted to buy up. They wanted more from us. They wanted the ability to buy these extra product features, and even if they're buying early in the booking curve, they're willing to pay for them.
Bob Jordan: Then, of course, later in the booking curve, where most of those people are that are price flexible, you expect to see a kind of a surge of people demanding the higher products. So, we expect to go from, like, 80+% buying the lowest fare product down to something, you know, half or less buying the very basic product. So we don't know what that'll look over the full booking curve for the full year through high season and low season, but we know that that accelerates at the end, and that's kind of what we're waiting for.
Then, of course, later in the booking curve, where most of those people are that are price flexible, you expect to see a kind of a surge of people demanding the higher products. So, we expect to go from, like, 80+% buying the lowest fare product down to something, you know, half or less buying the very basic product. So we don't know what that'll look over the full booking curve for the full year through high season and low season, but we know that that accelerates at the end, and that's kind of what we're waiting for.
Um, when I look at the last time that happened, um, ASM growth was considerably higher. So as you get back to your return Target, I'm curious how we should be thinking about a re acceleration in growth. Thanks,
Bob Jordan: So the level of acceleration we see through the kind of February and March, where you have low season, high season, will give us a really good idea of what the upside is for this.
So the level of acceleration we see through the kind of February and March, where you have low season, high season, will give us a really good idea of what the upside is for this.
Yeah, I'll take the first 1 and then, um, maybe a combo, maybe Andrew and the sick 1, especially the thinking about capacity, um, you know, thinking about breaking down rasim detail. I mean, last year, I just got a pause, uh, it was just a fundamental transformation of the business model of this company.
Thanks, Mike. Uh the um yes we're we're going from a kind of feral based segmentation. We always had segmentation like with Advanced purchases and stuff like that to a product based segmentation which you can kind of pay more to get more. And so the question becomes who will pay more to get more from our current customer base. And we're seeing that our current customers who previously bought the kind of Base product, uh, all in uh, wanted to buy up. They wanted more from us, they wanted the ability to buy these extra product features. And even if they're buying early in the booking curve, they're willing to pay for them. And then, of course, later in the booking curve, where most of those people are that are price flexible, uh, you, you expect to see a kind of a surge of people, uh, demanding, the higher products. And so, um, we expect to go from like 80 plus percent by the lowest fare product down to something, you know, half or, or, or, or, or, or less buying the very, uh, basic product. And so, we don't know what that look of the full booking curve, uh, for the full year through High season and low season, but we know that that accelerates at the end, and that's kind of what we're waiting for. So the, the
Level of acceleration, we see through the kind of February and March where you have low season High season will give us a really good idea of what the upside is for this.
Mike Linenberg: All right.
Mike Linenberg: All right.
Andrew Watterson: Our next question comes from John Godin from Citigroup. Please go ahead with your question.
Operator: Our next question comes from John Godin from Citigroup. Please go ahead with your question.
All right, our next question.
And it went extremely well. I'm I'm so so very pleased and and, and proud of our people. And now all of that, I mean, all these initiatives, they they are the business, they are the new business, the Southwest Airlines, it's not a set of initiatives any longer.
And we're managing that way. And uh,
John Godin: Hey, guys. Thanks for taking my question. Congrats on the big RASM guide. I wanted to just sort of reask it a little bit on the 9.5%. What is literally in that number and what isn't? It sounds like there's a low expectation of the ancillaries coming in, but it's not like you have zero. But I just wanted to kind of understand, you know, really what's in there versus what could be upside. That's question one. And question two, it seems like there's a decent chance this year is an all-time high EPS annual year for you. When I look at the last time that happened, ASM growth was considerably higher.
John Godin: Hey, guys. Thanks for taking my question. Congrats on the big RASM guide. I wanted to just sort of reask it a little bit on the 9.5%. What is literally in that number and what isn't? It sounds like there's a low expectation of the ancillaries coming in, but it's not like you have zero. But I just wanted to kind of understand, you know, really what's in there versus what could be upside. That's question one. And question two, it seems like there's a decent chance this year is an all-time high EPS annual year for you. When I look at the last time that happened, ASM growth was considerably higher.
Our next question comes from John Gooden from Citigroup. Please go ahead with your question.
Hey guys, thanks for taking my question. Um,
Uh, so everything in our 20206 guides and include those run rates coming off of the implementation in 25 and then, of course the assigned seating launch here on Tuesday and that's just how we're managing the business. And we're focused uh, even more beyond that on the additional upside.
Uh, you know, managing those initiatives, uh, and optimizing. And then our incremental opportunities again like Network optimization further cost, takeout,
uh, so
John Godin: As you get back to your return target, I'm curious how we should be thinking about a reacceleration in growth. Thanks.
As you get back to your return target, I'm curious how we should be thinking about a reacceleration in growth. Thanks.
We are moving to as you obviously know, an EPS guide uh everything related to the initiatives and the Run rates are baked in. And uh that's how we're thinking about managing the business and we will uh, provide the upside. Once we are able to quantify it,
Bob Jordan: Yeah, I'll take the first one, and then, maybe Macombo, maybe Andrew on the second one, especially the, thinking about capacity. You know, thinking about breaking down RASM detail, I mean, last year, just got to pause, it was just a fundamental transformation of the business model of this company, and it went extremely well. I'm, I'm so, so very pleased and, and proud of our people. And now all of that, I mean, all these initiatives, they, they are the business. They are the new business of Southwest Airlines. It's not a set of initiatives any longer, and we're managing that way. So everything in our 2026 guides include those run rates coming off of the implementation in 2025, and then, of course, the assigned seating launch here on Tuesday.
Bob Jordan: Yeah, I'll take the first one, and then, maybe Macombo, maybe Andrew on the second one, especially the, thinking about capacity. You know, thinking about breaking down RASM detail, I mean, last year, just got to pause, it was just a fundamental transformation of the business model of this company, and it went extremely well. I'm, I'm so, so very pleased and, and proud of our people. And now all of that, I mean, all these initiatives, they, they are the business. They are the new business of Southwest Airlines. It's not a set of initiatives any longer, and we're managing that way.
My EPS annual year for you. Um, when I look at the last times that happened, um, ASM growth was considerably higher. So as you get back to your return Target, I'm curious how we should be thinking about a re acceleration in growth. Thanks,
Yeah, I'll take the first one and then, um, maybe a combo, maybe Andrew on the second one. Especially the thinking about capacity. Um, you know, thinking about breaking down RASM detail. I mean, last year, I just got to pause—uh, it was just a fundamental transformation of the business model of this company.
And it went extremely well. I'm I'm so so so very pleased and and proud of our people. And now all of that, I mean, all these initiatives, they they are the business, they are the new business of Southwest Airlines. It's not a set of initiatives any longer.
And then, on the, uh, on the growth. I mean, we're not thinking about any kind of crazy growth rates or anything like that. We're thinking about mostly, um, is in addition, to, whatever modest growth rate, we, we choose is a reallocation of capacity. Um, and so we we have a product now that we see demand for that before we weren't offering. Um, and then also the water line for all of our markets Rises with increased profitability. So we have a great opportunity to redeploy capacity within our current footprint. Uh, to uh, you know, have less of a negative and more of a positive by moving capacity around. That's what we're really focused on over the in the next 1224 months. Uh, and we think there's a that's upside, uh, to the numbers we've currently, given you,
So everything in our 2026 guides include those run rates coming off of the implementation in 2025, and then, of course, the assigned seating launch here on Tuesday.
And we're managing that way. And uh,
Our next question comes from, Dwayne pfennigwerth from evercore isi, please, go ahead with your question.
Hey, thank you.
Bob Jordan: Now, that's just how we're managing the business, and we're focused, even more beyond that on the additional upside, you know, managing those initiatives, and optimizing, and then our incremental opportunities, again, like network optimization, further cost takeout. So we are moving to, as you obviously know, an EPS guide. Everything related to the initiatives and the run rates are baked in. That's how we're thinking about managing the business, and we will provide the upside once we are able to quantify it.
Now, that's just how we're managing the business, and we're focused, even more beyond that on the additional upside, you know, managing those initiatives, and optimizing, and then our incremental opportunities, again, like network optimization, further cost takeout. So we are moving to, as you obviously know, an EPS guide. Everything related to the initiatives and the run rates are baked in. That's how we're thinking about managing the business, and we will provide the upside once we are able to quantify it.
Uh, so everything in our 2026 guides is included in those run rates coming off of the implementation in '25. And then, of course, the assigned seating launch here on Tuesday, and that's just how we're managing the business. And we're focused, uh, even more beyond that on the additional upside.
Uh, you know, managing those initiatives, uh, and optimizing. And then our incremental opportunities again like Network optimization further cost, takeout,
Um I wanted to follow up uh Tom on a comment you made about uh the Loyalty faster, loyalty rev wreck. I assumed there was a, a bump up with the bag fees, uh, and now another bump up with seats and extra leg room. So, whatever the rasim Tailwind was from rek, and for you, it's likely a larger. Now, in 1 Q, I wonder if you would frame.
uh, so
Um, how many points of your 10 points in rasim growth is due to rev wreck uh policy changes and then my follow-up. Um do you have any data or early learnings on you know, recept receptivity of seats or maybe uplift?
We are moving to, as you obviously know, an EPS guide. Everything related to the initiatives and the run rates are baked in, and that's how we're thinking about managing the business. We will provide the upside once we are able to quantify it.
Andrew Watterson: And then on the growth, I mean, we're not thinking about any kind of crazy growth rates or anything like that. What we're thinking about mostly is in addition to whatever modest growth rates we choose, is the reallocation of capacity. And so we have a product now that we see demand for that before we weren't offering. And then also the waterline for all of our markets rises with increased profitability. So we have a great opportunity to redeploy capacity within our current footprint, to you know, have less of a negative and more of a positive by moving capacity around. That's what we're really focused on in the next 12, 24 months, and we think that's upside to the numbers we've currently given you.
Andrew Watterson: And then on the growth, I mean, we're not thinking about any kind of crazy growth rates or anything like that. What we're thinking about mostly is in addition to whatever modest growth rates we choose, is the reallocation of capacity. And so we have a product now that we see demand for that before we weren't offering. And then also the waterline for all of our markets rises with increased profitability. So we have a great opportunity to redeploy capacity within our current footprint, to you know, have less of a negative and more of a positive by moving capacity around.
In core Southwest markets versus, maybe more jump ball. Uh, markets, where you have lower share. Thanks, thanks for taking the questions.
And then, on the, uh, on the growth. I mean, we're not thinking about any kind of crazy growth rates or anything like that or thinking about mostly, um, is in addition to, whatever modest growth rate, we, we choose is a reallocation of capacity.
That's what we're really focused on in the next 12, 24 months, and we think that's upside to the numbers we've currently given you.
Thanks. Dwayne. We have a Quantified, uh, publicly what the change is there? You know, there's a shift that goes, uh, you know, where the split prior was was part. ATL part other Revenue, you know, now it's part ATL some to re or some to other revenue and some to passenger Revenue. Um, but the, the exact percentage is there, you know, some of that relates to the way that our program is is structured. And so we don't get into the details of that our cues and K's have a bit more color on it. Uh, but but uh, we don't go into the specific percentages.
Um, and so we we have a product now that we see demand for that before we weren't offering. Um and then also the water line for all of our markets Rises with increased profitability. So we have a great opportunity to redeploy capacity within our current footprint. Uh, to uh, you know, have less of a negative and more of a positive by moving capacity around. That's what we're really focused on over in the next uh, 1224 months. Uh, and we think there's a that's upside, uh, to the numbers we've currently, given you
Andrew Watterson: Our next question comes from Duane Pfennigwerth from Evercore ISI. Please go ahead with your question.
Operator: Our next question comes from Duane Pfennigwerth from Evercore ISI. Please go ahead with your question.
Our next question comes from Dwayne Pfennigwerth from Evercore ISI. Please go ahead with your question.
Duane Pfennigwerth: Hey, thank you. I wanted to follow up, Tom, on a comment you made about the faster loyalty rev rec. I assume there was a bump up with the bag fees, and now another bump up with seats and Extra Legroom. So whatever the RASM tailwind was from rev rec in Q4, it's likely larger now in Q1. I wonder if you would frame how many points of your 10 points in RASM growth is due to rev rec policy changes? And then my follow-up, do you have any data or early learnings on, you know, receptivity of seats or maybe uplift?
Duane Pfennigwerth: Hey, thank you. I wanted to follow up, Tom, on a comment you made about the faster loyalty rev rec. I assume there was a bump up with the bag fees, and now another bump up with seats and Extra Legroom. So whatever the RASM tailwind was from rev rec in Q4, it's likely larger now in Q1. I wonder if you would frame how many points of your 10 points in RASM growth is due to rev rec policy changes? And then my follow-up, do you have any data or early learnings on, you know, receptivity of seats or maybe uplift?
Hey, thank you.
Some a second 1 we find that the new product is giving us a a strong Tailwind in all of our markets. So it's not just uh a traditional Southwest stronghold, we see the benefit, it's across uh all customer segments and across all geographies and that's that's what's really encouraging for us.
Our next question comes from Tom Fitzgerald from TD Ken please go ahead with your question.
Um, I wanted to follow up, uh, Tom, on a comment you made about, uh, the Loyalty FASTER, Loyalty Rev Rec. I assumed there was a bump up with the bag fees, uh, and now another bump up with seats and extra legroom. So, whatever the RASM tailwind was from Rec in Q4, it's likely larger now in Q1. I wonder if you would frame—
Hey thanks so much for the time. Um just curious on the extra legroom feeding. I think last fall we had talked about that hitting its full run rate potential in the in the third quarter, is that still the expectation as you sit here today and then um on the fuel side, I think, at 1 point last year, Tom we had talked about, um, there being like a nice, um, with bag fees there being a nice fuel offset, um, from the back, the implementation. And I'm wondering if, if you started to see that, um, this year, thanks again, for the time,
Duane Pfennigwerth: ... in core Southwest markets versus maybe more jump ball markets where you have lower share? Thanks, thanks for taking the questions.
... in core Southwest markets versus maybe more jump ball markets where you have lower share? Thanks, thanks for taking the questions.
Um, how many points of your 10 points in rasim growth is due to rev wreck uh policy changes and then my follow-up. Um do you have any data or early learnings on you know, recept receptivity of seats or maybe uplift?
Tom Doxey: Thanks, Duane. We haven't quantified publicly what the change is there. You know, there's a shift that goes where the split prior was part ATL, part other revenue. You know, now it's part ATL, some to reven-- or some to other revenue and some to passenger revenue. But the exact percentages there, you know, some of that relates to the way that our program is structured, and so we don't get into the details of that. Our Qs and Ks have a bit more color on it, but we don't go into the specific percentages.
Tom Doxey: Thanks, Duane. We haven't quantified publicly what the change is there. You know, there's a shift that goes where the split prior was part ATL, part other revenue. You know, now it's part ATL, some to reven-- or some to other revenue and some to passenger revenue. But the exact percentages there, you know, some of that relates to the way that our program is structured, and so we don't get into the details of that. Our Qs and Ks have a bit more color on it, but we don't go into the specific percentages.
In core Southwest markets versus, maybe more jump ball. Uh, markets, where you have lower share. Thanks, thanks for taking the questions.
That's also part of uh our discussion of we don't of the complete upside, but right now we're seeing a, a strong initial reaction as I said earlier, uh, both to buy ups and Seed ancillaries.
Thanks. Dwayne. We have a Quantified, uh, publicly what the change is there? You know, there's a shift that goes, uh, you know, where the split prior was was part. ATL part other Revenue, you know, now it's part ATL some to Revan or some to other revenue and some to passenger Revenue. Um, but the, the exact percentage is there, you know, some of that relates to the way that our program is is structured. And so we don't get into the details of that our cues and K's have a bit more color on it. Uh, but but uh, we don't go into the specific percentages.
Andrew Watterson: On the second one, we find that the new product is giving us a strong tailwind in all of our markets. So it's not just a traditional Southwest stronghold where you see the benefit, it's across all customer segments and across all geographies, and that's what's really encouraging for us.
Andrew Watterson: On the second one, we find that the new product is giving us a strong tailwind in all of our markets. So it's not just a traditional Southwest stronghold where you see the benefit, it's across all customer segments and across all geographies, and that's what's really encouraging for us.
Some a second 1 we find that the new product is giving us a, a strong Tailwind in all of our markets. So it's not just uh, a traditional Southwest stronghold, we see the benefit. It's a cross uh, all customer segments and across all geographies and that's that's what's really encouraging for us.
Operator: Our next question comes from Tom Fitzgerald from TD Cowen. Please go ahead with your question.
Operator: Our next question comes from Tom Fitzgerald from TD Cowen. Please go ahead with your question.
Tom Fitzgerald: Hey, thanks so much for the time. Just curious on the extra luggage fee. I think last fall, we had talked about that hitting its full run rate potential in Q3. Is that still the expectation as you sit here today? And then, on the fuel side, I think at one point last year, Tom, we had talked about there being a nice fuel offset with bag fees from the bag fee implementation, and I'm wondering if you started to see that this year. Thanks again for the time.
Tom Fitzgerald: Hey, thanks so much for the time. Just curious on the extra luggage fee. I think last fall, we had talked about that hitting its full run rate potential in Q3. Is that still the expectation as you sit here today? And then, on the fuel side, I think at one point last year, Tom, we had talked about there being a nice fuel offset with bag fees from the bag fee implementation, and I'm wondering if you started to see that this year. Thanks again for the time.
Our next question comes from Tom Fitzgerald from TD Cowen. Please go ahead with your question.
Uh, Tom, I love that you asked about fuel. Uh, just last week, I'll brag a little bit about our operations team here. Uh just last week was in a meeting where we were walking through the full list of fuel savings initiatives that we have uh, you are correct 1 of those is, is that as we carry fewer bags overall which we knew would be a byproduct of the bag fee. There are fewer bags uh you know on board the aircraft and there is a fuel savings that comes from that. Uh but there are so many other things that we're doing as a company, you know, new technology tools that we have that are helping us as well as just uh, you know, the behavior that we have in our airports and in our maintenance facilities uh to be able to save fuel. And so often in this industry, we talked about uh, cadmaxx and you know, it's appropriate. Uh, but fuel is a big expense too and uh, we're doing a lot to become more efficient there as well.
Our next question comes from a tool, Maori from UBS, please. Go ahead with your question.
Andrew Watterson: Yeah, I, I think previously in our guidance, we've given that we expect in next year that we have the full run rate benefit of the seats. Obviously, we're endeavoring to get that faster. We know there's a ramp up as customers adapt to it. That's also part of our discussion of we don't of the complete upside. But right now, we're seeing a strong initial reaction, as I said earlier, both to buy-ups and seat ancillaries.
Andrew Watterson: Yeah, I, I think previously in our guidance, we've given that we expect in next year that we have the full run rate benefit of the seats. Obviously, we're endeavoring to get that faster. We know there's a ramp up as customers adapt to it. That's also part of our discussion of we don't of the complete upside. But right now, we're seeing a strong initial reaction, as I said earlier, both to buy-ups and seat ancillaries.
Hey thanks so much for the time. Um just curious on the extra leg room fee and I think last fall we had talked about that hitting its full run rate potential in the in the third quarter, is that still the expectation as you sit here today and then um on the fuel side, I think, at 1 point last year, Tom we had talked about, um, there being like a nice, um, with bag fees there being a nice fuel offset, um, from the back, the implementation. And I'm wondering if, if you started to see that, um, this year, thanks again, for the time,
yeah, I I think previously in our guidance, we've given, uh, that we
Good morning. Uh, thanks a lot for taking my question. Uh, just 2 questions first, uh, based on your, uh, implied raasm, uh, for the full year. And, and based on what we've heard from others, it would appear that. If you all hit your outlooks, there might be a meaningful shift in Airline revenues, as percent of GDP this year versus you know, the past few years.
Tom Doxey: And Tom, I love that you asked about fuel. Just last week, I'll brag a little bit about our operations team here. Just last week, was in a meeting where we were walking through the full list of fuel savings initiatives that we have. You are correct, one of those is, is that as we carry fewer bags overall, which we knew would be a byproduct of the bag fee, there are fewer bags, you know, on board the aircraft, and there is a fuel savings that comes from that. But there are so many other things that we're doing as a company, you know, new technology tools that we have that are helping us, as well as just, you know, the behavior that we have in, in our airports and in our maintenance facilities, to be able to save fuel.
Tom Doxey: And Tom, I love that you asked about fuel. Just last week, I'll brag a little bit about our operations team here. Just last week, was in a meeting where we were walking through the full list of fuel savings initiatives that we have. You are correct, one of those is, is that as we carry fewer bags overall, which we knew would be a byproduct of the bag fee, there are fewer bags, you know, on board the aircraft, and there is a fuel savings that comes from that. But there are so many other things that we're doing as a company, you know, new technology tools that we have that are helping us, as well as just, you know, the behavior that we have in, in our airports and in our maintenance facilities, to be able to save fuel.
We know those are ramped up, uh, as customers adapt to it. That's also part of, uh, our discussion of we don't know the complete upside, but right now, we're seeing a, a strong initial reaction, as I said earlier, uh, both to buy-ups and Seat ancillaries.
I know you can only speak for Southwest. So the question is, is the incremental revenues that you're generating this year, is that primarily coming from your existing customers who always wanted to spend more at Southwest? But basically could not in the past. Since you did not have that offering. And and that would explain why, you know, the revenue GDP equation moves to the right.
Or are is the incremental revenues that you're generating this year coming from attracting customers of other airlines which would mean that you know, the revenue GDP equation does not change much for the overall industry even as Southwest generates a significant Revenue dollar. So that's question, 1 and then question 2 in the at least 4 dollars, EPS Target, what is the zoom for macro given Southwest and really the broader industry? Clearly lots of
Tom Doxey: So often in this industry, we talk about CASM-ex, and, you know, it's appropriate, but fuel is a big expense, too, and we're doing a lot to become more efficient there as well.
So often in this industry, we talk about CASM-ex, and, you know, it's appropriate, but fuel is a big expense, too, and we're doing a lot to become more efficient there as well.
Good portion of revenues last year due to macro issues. So in that 4 dollars. What are what portion are you assuming that you get back. Thank you very much.
Uh, Tom, I love that you asked about fuel. Uh, just last week, I'll brag a little bit about our operations team here. Uh just last week was in a meeting where we were walking through the full list of fuel savings initiatives that we have uh, you are correct 1 of those is, is that as we carry fewer bags overall which we knew would be a byproduct of the bag fee. There are fewer bags uh you know on board the aircraft and there is a fuel savings that comes from that. Uh but there are so many other things that we're doing as a company, you know, new technology tools that we have that are helping us as well as just uh you know the behavior that we have in our airports and in our maintenance facilities uh to be able to save fuel. And so often in this industry we talk about
Yeah, tool. It's Bob I I I can take both of those uh really the uh what's what's the NR guide for 2026?
Uh, cadmaxx and you know, it's appropriate, uh, but fuel is a big expense too and uh, we're doing a lot to become more efficient there as well.
Operator: Our next question comes from Atul Maheswari from UBS. Please go ahead with your question.
Operator: Our next question comes from Atul Maheswari from UBS. Please go ahead with your question.
Our next question comes from a tool, Maori from UBS. Please, go ahead with your question.
Atul Maheswari: Good morning. Thanks a lot for taking my question. Two questions. First, based on your implied RASM for the full year and, and based on what we've heard from others, it would appear that if you all hit your outlooks, there might be a meaningful shift in airline revenues as percentage of GDP this year versus, you know, the past few years. I know you can only speak for Southwest, so the question is: Is the incremental revenues that you're generating this year, is that primarily coming from your existing customers who always wanted to spend more at Southwest, but basically could not in the past since you did not have that offering? And, and that would explain why, you know, the revenue GDP equation moves to the right.
Atul Maheswari: Good morning. Thanks a lot for taking my question. Two questions. First, based on your implied RASM for the full year and, and based on what we've heard from others, it would appear that if you all hit your outlooks, there might be a meaningful shift in airline revenues as percentage of GDP this year versus, you know, the past few years. I know you can only speak for Southwest, so the question is: Is the incremental revenues that you're generating this year, is that primarily coming from your existing customers who always wanted to spend more at Southwest,
Is, uh, it's the performance of the initiatives, uh, you know, kind of on our current customer base. So there's no assumption number 1 of of a big Snapback in the macro. And there is no assumption number 2 of a big share shift.
Good morning. Uh, thanks a lot for taking my question. Uh, it's two questions. First, uh, based on your, uh, implied RASM, uh, for the full year, and, and based on what we've heard from others, it would appear that if you all hit your outlooks, there might be a meaningful shift in airline revenues as a percent of GDP this year versus, you know, the past few years.
but basically could not in the past since you did not have that offering? And, and that would explain why, you know, the revenue GDP equation moves to the right.
Atul Maheswari: Or, is the incremental revenues that you're generating this year coming from attracting customers of other airlines, which would mean that, you know, the revenue GDP equation does not change much for the overall industry, even as Southwest generates a significant revenue dollar? So that's question one. And then question two, in the at least $4 EPS target, what is assumed for macro, given Southwest and really the broader industry clearly lost a good portion of revenues last year due to macro issues. So in that $4, what portion are you assuming that you get back? Thank you very much.
Or, is the incremental revenues that you're generating this year coming from attracting customers of other airlines, which would mean that, you know, the revenue GDP equation does not change much for the overall industry, even as Southwest generates a significant revenue dollar? So that's question one. And then question two, in the at least $4 EPS target, what is assumed for macro, given Southwest and really the broader industry clearly lost a good portion of revenues last year due to macro issues. So in that $4, what portion are you assuming that you get back? Thank you very much.
I know you can only speak for Southwest. So the question is, is the incremental revenues that you're generating this year, is that primarily coming from your existing customers who always wanted to spend more at Southwest? But basically could not in the past. Since you did not have that offering. And and that would explain why, you know, the revenue GDP equation moves to the right.
And now again, I I do think with the far more attractive product offering, especially to our business customers. That is part of the, the upside that we, uh, can pursue over time. That's a longer Journey. But I do think the, the product offering now, certainly appeals more to everybody but certain appeals more to our business customers. So that is something we will be attacking this year and that provides additional upside. But no to be specific. There's there's not a share shift in the calculation and there's not a, you know, a plan, uh uh uh, snap back in the economy, in the macro.
Our next question comes from.
Our next question comes from Savvi. Seth from Raymond James, please, go ahead with your question.
Or are the incremental revenues that you're generating this year coming from attracting customers of other airlines, which would mean that, you know, the revenue GDP equation does not change much for the overall industry even as Southwest generates the significant revenue dollars? So that's question one. And then question two, in the at least $4 EPS target, what is the assumption for macro given Southwest and really the broader industry? Clearly, lots of...
Hey, good morning and congratulations to this kind of Greater Southwest team on that. Number 1, Wall Street Journal ranking especially in a in a year that you've been kind of doing a lot of change.
Bob Jordan: Yeah, Atul, it's Bob. I can take both of those. Really, what's in our guide for 2026 is the performance of the initiatives, you know, kind of on our current customer base. So there's no assumption, number one, of a big snapback in the macro, and there is no assumption, number two, of a big share shift. Now, again, I do think with the far more attractive product offering, especially to our business customers, that is part of the upside that we can pursue over time. That's a longer journey, but I do think the product offering now certainly appeals more to everybody, but certainly appeals more to our business customers. So that is something we'll be attacking this year, and that provides additional upside.
Bob Jordan: Yeah, Atul, it's Bob. I can take both of those. Really, what's in our guide for 2026 is the performance of the initiatives, you know, kind of on our current customer base. So there's no assumption, number one, of a big snapback in the macro, and there is no assumption, number two, of a big share shift. Now, again, I do think with the far more attractive product offering, especially to our business customers, that is part of the upside that we can pursue over time. That's a longer journey, but I do think the product offering now certainly appeals more to everybody, but certainly appeals more to our business customers.
A good portion of revenues last year was down due to macro issues. So, in that $4, what portion are you assuming that you get back? Thank you very much.
Yeah, tool. It's Bob. I I can take both of those. Uh, really the uh what's what's in our guide for 2026?
Um I I know you're not providing kind of granular guidance, but I was curious Tom, if you could, um, you know, provide color on Chasm X progression through the year, particularly is it fair that the 3 and a half percent pressure in 1 Q is maybe the high water mark, especially with capacity stepping up. Um, and then maybe for my second question, on the corporate front, I was curious. You know what kind of corporate Revenue growth? You saw in 4 q and and maybe what the trends are that you're seeing so far in in in in 1 Q
And thanks SI and and thanks for the shout out, on the uh Wall Street Journal. Number 1 ranking that that is a big deal. Another thing to brag about for our really great operations team and for our people
So that is something we'll be attacking this year, and that provides additional upside.
Bob Jordan: But no, to be specific, there's not a share shift in the calculation, and there's not a, you know, a planned economic snapback in the economy, in the macro.
But no, to be specific, there's not a share shift in the calculation, and there's not a, you know, a planned economic snapback in the economy, in the macro.
Is, uh, it's the performance of the initiatives, uh, you know, kind of on our current customer base. So there's no assumption number 1 of of a big Snapback in the macro. And there is no assumption number 2 of a big share shift. And now again, I I do think with the far more attractive product offering, especially to our business customers. That is part of the, the upside that we, uh, can pursue over time. That's a longer Journey. But I do think the, the product offering now, certainly appeals more to everybody, but certain appeals more to our business customers. So that is something we will be attacking this year and that provides additional upside, but no to be specific. There's there's not a share shift in the calculation and there's not a, you know, a plan, uh, uh, uh,
Snap back in the economy, in the macro.
Operator: Our next question comes from Savi Syth from Raymond James. Please go ahead with your question.
Operator: Our next question comes from Savi Syth from Raymond James. Please go ahead with your question.
Our next question comes from.
Our next question comes from Savvi Seth from Raymond James. Please, go ahead with your question.
Duane Pfennigwerth: Hey, good morning, and congratulations to the kind of greater Southwest team on that No. 1 Wall Street Journal ranking, especially in a year that you've been kind of doing a lot of change. I know you're not providing kind of granular guidance, but I was curious, Tom, if you could, you know, provide color on CASM-ex progression through the year. Particularly, is it fair that the 3.5% pressure in Q1 is maybe the high watermark, especially with capacity stepping up? And then maybe for my second question, on the corporate front, I'm curious, you know, what kind of corporate revenue growth you saw in Q4, and maybe what the trends are that you're seeing so far in Q1?
Savi Syth: Hey, good morning, and congratulations to the kind of greater Southwest team on that No. 1 Wall Street Journal ranking, especially in a year that you've been kind of doing a lot of change. I know you're not providing kind of granular guidance, but I was curious, Tom, if you could, you know, provide color on CASM-ex progression through the year. Particularly, is it fair that the 3.5% pressure in Q1 is maybe the high watermark, especially with capacity stepping up? And then maybe for my second question, on the corporate front,
Couple of years now since we've had our labor agreements, usually takes a little bit of time for some of those costs to to, to come in. Um, and so now that we're a couple of years separated from that uh and and uh, you know, we've got, I think pretty good view on what costs will look like for the year. And we're able to take that into account as we develop the full year, EPS number that we've, we've given to you today.
Hey, good morning and congratulations to this kind of Greater Southwest team on that. Number 1, Wall Street Journal ranking especially in a in a year that you've been kind of doing a lot of change.
I'm curious, you know, what kind of corporate revenue growth you saw in Q4, and maybe what the trends are that you're seeing so far in Q1?
Um I I know you're not providing kind of granular guidance, but I was curious Tom, if you could, uh, you know, provide color on Chasm X progression through the year, particularly is it fair that the 3 and a half percent pressure in 1 Q is maybe the high water mark, especially with capacity stepping up. Um, and then maybe for my second question on the corporate fund, I was curious, you know what kind of corporate Revenue growth? You saw in 4 q and and maybe what the trends are that you're seeing so far in in in in 1 Q
Tom Doxey: ... Thanks, Savi, and thanks for the shout-out on the Wall Street Journal number one ranking. That is a big deal. Another thing to brag about for our really great operations team and for our people. On CASM-ex, you know, we've given guidance for Q1. That'll be, you know, we'll give guidance for unit costs and unit revenues, you know, during the quarters, and so, you know, won't go beyond one Q. But what I will say is that I feel like we have a good handle for what the costs are this year. You know, it's been a couple of years now since we've had our labor agreements. Usually takes a little bit of time for some of those costs to come in.
Tom Doxey: ... Thanks, Savi, and thanks for the shout-out on the Wall Street Journal number one ranking. That is a big deal. Another thing to brag about for our really great operations team and for our people. On CASM-ex, you know, we've given guidance for Q1. That'll be, you know, we'll give guidance for unit costs and unit revenues, you know, during the quarters, and so, you know, won't go beyond one Q. But what I will say is that I feel like we have a good handle for what the costs are this year. You know, it's been a couple of years now since we've had our labor agreements.
And for corporate um you pull out government, which was kind of volatile there in Q4. Uh our corporate business is up mid single digits and then entering this year. And in January, we had very high bookings. If others have reported, so very strong start to the, uh, uh, to the corporate bookings. Um, the benefit though, is we talked about 4 is the new product. Uh, we invested in our corporate uh uh uh infrastructure a while ago, a couple years ago, we have now presence in the distribution channels. We have a sales force, the kind of business BTN rankings about how well we are to do business. Uh,
Uh uh is we're number 2, just behind Delta and so what's missing is a product that the corporate Travelers want to buy and frankly they're the companies, let them expense. Uh and so having this new product, we will combine that with marketing efforts, our Salesforce incremental distribution efforts and we think there's upside to our corporate business uh, from this new product on top of the infrastructure, we already built.
Our next question comes from Andrew Dora from Bank of America. Please go ahead with your question.
Usually takes a little bit of time for some of those costs to come in.
Tom Doxey: And so now that we're a couple of years separated from that, you know, we've got, I think, a pretty good view on what costs will look like for the year, and we're able to take that into account as we develop the full year EPS number that we've given to you today.
And so now that we're a couple of years separated from that, you know, we've got, I think, a pretty good view on what costs will look like for the year, and we're able to take that into account as we develop the full year EPS number that we've given to you today.
Or what the costs are this year. You know, it's been a couple of years now, since we've had our labor agreements, usually takes a little bit of time for some of those costs to to, to come in. Um, and so now that we're a couple of years separated from that uh and and uh, you know, we got, I think pretty good view on what costs will look like for the year. And we're able to take that into account as we develop the full year, EPS number that we've, we've given to you today.
Andrew Watterson: And for corporate, you pull out government, which was kind of volatile there in Q4, our corporate business is up mid-single digits. And then entering this year, and in January, we had very high bookings, as others have reported, so a very strong start to the, to the year in corporate bookings. The benefit, though, as we talked about before, is the new product. We've invested in our corporate, infrastructure a while ago, a couple of years ago. We have now presence in the distribution channels. We have a sales force, the kind of BTN rankings about how well we are to do business, we're number two, just behind Delta. And so what's missing is a product that the corporate travelers want to buy and frankly, that the companies let them expense.
Andrew Watterson: And for corporate, you pull out government, which was kind of volatile there in Q4, our corporate business is up mid-single digits. And then entering this year, and in January, we had very high bookings, as others have reported, so a very strong start to the, to the year in corporate bookings. The benefit, though, as we talked about before, is the new product. We've invested in our corporate, infrastructure a while ago, a couple of years ago. We have now presence in the distribution channels. We have a sales force,
Good morning, everyone. Um, Andrew. I know you. You mentioned earlier that you obviously managed to, to rasim not a yield or or load Factor, but, um, just curious, like, if you give us any color on, kind of how you're thinking about, you know, load Factor particularly here into to 1 Q. Um, obviously, you're coming off a pretty low base last year I think around 74%, you know, historically, 1 cues are closer to 80. So, any thoughts around? That would be helpful then. And then for my second question, I know Bob, you, you spoke to the opportunity for maybe some more cost to take out this year. Um, could you speak to maybe where that could come from and maybe how to think about, you know, Chasm and cost opportunities in a 2 to 3%? Um, growth
Thank you.
Yeah, Andrew. I'll I'll just give it a start. The um,
The main point was a couple of things.
the kind of BTN rankings about how well we are to do business, we're number two, just behind Delta. And so what's missing is a product that the corporate travelers want to buy and frankly, that the companies let them expense.
Andrew Watterson: And so having this new product, we will combine that with marketing efforts, our sales force efforts, incremental distribution efforts, and we think there's upside to our corporate business, from this new product on top of the infrastructure we've already built.
And so having this new product, we will combine that with marketing efforts, our sales force efforts, incremental distribution efforts, and we think there's upside to our corporate business, from this new product on top of the infrastructure we've already built.
I, I don't want anybody to think that uh, that we're done. I mean, there's no Victory lap here. As I said, there's a lot of hard work ahead. We're pleased with the momentum but we are not done. This is a journey and we're going to keep pressing on additional opportunities beyond the transformation, uh, that that's been underway.
So, you know, we we took a lot of uh of cost out last year, more this year. We've done, you know, we doubled the original cost Target.
And for corporate um you pull out government which was kind of volatile there in Q4. Uh our corporate business is up mid single digits and then entering this year. And in January, we had very high bookings. If others have reported, so very strong start to the, uh, uh, to the in corporate bookings. Um, the benefit though, is we talked about 4 is the new product. Uh, we invested in our corporate uh uh uh infrastructure a while ago, a couple years ago, we have now presence in the distribution channels. We have a sales force, the kind of business BTN rankings about how well we are to do business. Uh uh uh uh is we're number 2, just behind Delta and so what's missing is a product that the corporate Travelers want to buy and frankly the companies let them expense. Uh, and so having this new product, we will combine that with marketing efforts, our Salesforce incremental distribution efforts and we think there's upside to our corporate business uh, from this new product on top of the infrastructure, we already built.
Operator: Our next question comes from Andrew Didora from Bank of America. Please go ahead with your question.
Operator: Our next question comes from Andrew Didora from Bank of America. Please go ahead with your question.
We did our first corporate uh layoffs, which was tough.
but what I can tell you is, um,
Our next question comes from Andrew Dora from Bank of America. Please go ahead with your question.
Andrew Didora: Hey, good morning, everyone. Andrew, I know you, you mentioned earlier that you obviously managed to RASM, not a yield or, or load factor. But, just curious, like, if you could give us any color on kind of how you're thinking about, you know, load factor, particularly here into Q1. Obviously, you're coming off a pretty low base last year, I think around 74%. You know, historically, Q1's are closer to 80%, so any thoughts around that would be helpful. And then for my second question, I know, Bob, you, you spoke to the opportunity for maybe some more cost takeout this year. Could you speak to maybe where that could come from and maybe how to think about, you know, CASM and cost opportunities in a 2 to 3% growth world? Thank you.
Andrew Didora: Hey, good morning, everyone. Andrew, I know you, you mentioned earlier that you obviously managed to RASM, not a yield or, or load factor. But, just curious, like, if you could give us any color on kind of how you're thinking about, you know, load factor, particularly here into Q1. Obviously, you're coming off a pretty low base last year, I think around 74%. You know, historically, Q1's are closer to 80%, so any thoughts around that would be helpful. And then for my second question, I know, Bob, you, you spoke to the opportunity for maybe some more cost takeout this year.
you know, nothing broke the company. If anything is moving faster. There's more agility more pace and so, um, I think it that's, uh, been someone enlightening that we can press harder. And so there, you know, our, our corporate overhead will will be down, a headcount will be down again this year, so I'm just admitting that we're going to press even harder on costs on efficiency, so not ready to quantify anything yet. Uh, but just making sure that everybody understands.
That we aren't done with this transformation. We will be attacking other opportunities, uh, throughout the year.
Could you speak to maybe where that could come from and maybe how to think about, you know, CASM and cost opportunities in a 2 to 3% growth world? Thank you.
Bob Jordan: Yeah, Andrew, I'll just give it a start. The main point was a couple of things. I don't want anybody to think that we're done. I mean, there's no victory lap here, as I said. There's a lot of work, hard work ahead. We're pleased with the momentum, but we are not done. This is a journey, and we're going to keep pressing on additional opportunities beyond the transformation that that's been underway. So, you know, we took a lot of cost out last year, more this year. You know, we doubled the original cost target. We did our first corporate layoff, which was tough, but what I can tell you is, you know, nothing broke. The company, if anything, is moving faster. There's more agility, more pace.
Bob Jordan: Yeah, Andrew, I'll just give it a start. The main point was a couple of things. I don't want anybody to think that we're done. I mean, there's no victory lap here, as I said. There's a lot of work, hard work ahead. We're pleased with the momentum, but we are not done. This is a journey, and we're going to keep pressing on additional opportunities beyond the transformation that that's been underway. So, you know, we took a lot of cost out last year, more this year. You know, we doubled the original cost target. We did our first corporate layoff, which was tough, but what I can tell you is, you know, nothing broke.
Good morning, everyone. Um, Andrew. I know you. You mentioned earlier that you obviously managed to, to rasim not a yield or or load Factor, but, um, just curious, like, if you give us any color on, kind of how you're thinking about, you know, load Factor particularly here in to to 1 Q. Um, obviously, you're coming off a pretty low base last year I think around 74%, you know, historically, 1 cues are closer to 80. So, any thoughts around? That would be helpful then. And then for my second question, I know Bob you, you spoke to the opportunity for maybe some more cost to take out this year. Um, could you speak to maybe where that could come from and maybe how to think about, you know Chasm and cost opportunities in a 2 to 3%? Um, growth world. Thank you.
Yeah, Andrew. I'll I'll just give it a start. The um,
The main point was a couple of things.
I would say our our teams Revenue management. Uh, marketing we focus on Revenue maximization, uh, we don't get caught up in load factor or yield now we our our tools and our people. Now include the incremental upsells, we get the incremental passenger comes with a bag fee, a seat fee, other type of an so that's included under our calculus. So quantitatively uh that's in there but they're all about Revenue maximization. Not going out to the sub metrics because that can really lead you down a bad path and I think or just look at Revenue maximization. We have done a good job over the last you know uh uh 18 months of doing that.
I—I don't want anybody to think that, uh, that we're done. I mean, there's no victory lap here. As I said, there's a lot of hard work ahead. We're pleased with the momentum, but we are not done. This is a journey, and we're going to keep pressing on additional opportunities beyond the transformation, uh, that's been underway.
Continue doing that going forward.
Our next question comes from Robbie chancre from Morgan Stanley, please go ahead with your question.
So, you know, we we took a lot of uh of cost out last year, more this year. We've done, you know, we doubled the original cost Target.
We did our first corporate, uh, layoffs, which was tough.
but what I can tell you is, um,
The company, if anything, is moving faster. There's more agility, more pace.
Bob Jordan: And so, I think it's been somewhat enlightening that we can press harder. And so there, you know, our corporate overhead will be down, our headcount will be down again this year. So I'm just admitting that we're going to press even harder on costs, on efficiency. So we're not ready to quantify anything yet, but just making sure that everybody understands that we aren't done with this transformation. We will be attacking other opportunities throughout the year.
And so, I think it's been somewhat enlightening that we can press harder. And so there, you know, our corporate overhead will be down, our headcount will be down again this year. So I'm just admitting that we're going to press even harder on costs, on efficiency. So we're not ready to quantify anything yet, but just making sure that everybody understands that we aren't done with this transformation. We will be attacking other opportunities throughout the year.
Changes. Uh, and maybe that normalized over time. Or do you see it gets better from here? Thank you.
Andrew Watterson: I would say our teams, revenue management, marketing, we focus on revenue maximization. We don't get caught up in load factor or yield. Now, our tools and our people now include the incremental upsells. We get an incremental passenger comes with a bag fee, a seat fee, other type of ancillaries. That's included into our calculus. So quantitatively, that's in there, but they're all about revenue maximization, not going after the submetrics, because that can really lead you down a bad path. And I think or just look at revenue maximization, we have done a good job over the last, you know, 18 months, of doing that, and we will continue doing that going forward.
Andrew Watterson: I would say our teams, revenue management, marketing, we focus on revenue maximization. We don't get caught up in load factor or yield. Now, our tools and our people now include the incremental upsells. We get an incremental passenger comes with a bag fee, a seat fee, other type of ancillaries. That's included into our calculus. So quantitatively, that's in there, but they're all about revenue maximization, not going after the submetrics, because that can really lead you down a bad path. And I think or just look at revenue maximization, we have done a good job over the last, you know, 18 months, of doing that, and we will continue doing that going forward.
you know, nothing broke the company. If anything is moving faster. There's more agility more pace and so, um, I think it that's, uh, been someone enlightening that we can press harder. And so there, you know, our, our corporate overhead will will be down, a headcount will be down again this year, so I'm just admitting that we're going to press even harder on costs on efficiency. So we're not ready to quantify anything yet. Uh, but just making sure that everybody understands that we aren't done with this transformation. We will be attacking other opportunities, uh, throughout the year.
I would say our our teams Revenue management. Uh, marketing we focus on Revenue maximization, uh, we don't get caught up in load factor or yield now we our our tools and our people. Now include the incremental upsells, we get the incremental passenger comes with a bag fee, a seat fee, other type of analysis that's included under our calculus. So quantitatively uh that's in there but they're all about Revenue maximization. Not going out to the sub metrics because that can really lead you down a bad path and I think or just look at Revenue maximization, we have done a good job over the last you know, uh uh, 18 months of doing.
Continue doing that going forward.
Operator: Our next question comes from Ravi Shanker, from Morgan Stanley. Please go ahead with your question.
Operator: Our next question comes from Ravi Shanker, from Morgan Stanley. Please go ahead with your question.
All right, um, I'll, um, try to uh, go through your questions there. So uh yes, the the ELR and the preferred seats assigned seats in general. Uh, is going better than expected. Um, we are getting booked away from other carriers, when they have poor reliability, we, we have that, uh, consistently over the last couple of years. So that is a, a Tailwind doesn't happen every single day, but does have them quite frequently and it is is a benefit and those people now come over and buy an Standalone seat or a higher fare. So that that's very helpful uh to have that extra book Away. Um and then the the ancillary uh we find that what people do when they get to the gates of crowded flight, they have a higher propensity to buy up, so you get to the gate, it's crowded. Uh, and you're like well what seed am I? Oh, I want to change my seat. I will pay more and so that we see the full of the flight, the higher, the insulated benefit,
Tom Doxey: Great, thanks. Good morning, everyone. Sorry to go back to the 27 January changes, obviously an important topic here. So I'll hit one topic with multiple questions. I think you said that it's going better than expected. A, can you confirm that? And B, can you—do you guys know if both the incoming revenues and the book away are higher than expected, or is the book away lower than you initially expected? And maybe a second question on the same topic. Is there a risk that the ancillary revenues are higher out of the gate because people are maybe taken by surprise with some of the changes, and maybe that normalized over time, or do you think it gets better from here? Thank you.
Ravi Shanker: Great, thanks. Good morning, everyone. Sorry to go back to the 27 January changes, obviously an important topic here. So I'll hit one topic with multiple questions. I think you said that it's going better than expected. A, can you confirm that? And B, can you—do you guys know if both the incoming revenues and the book away are higher than expected, or is the book away lower than you initially expected? And maybe a second question on the same topic. Is there a risk that the ancillary revenues are higher out of the gate because people are maybe taken by surprise with some of the changes, and maybe that normalized over time, or do you think it gets better from here? Thank you.
Our next question comes from Robbie Chancre from Morgan Stanley. Please go ahead with your question.
Our next question comes from, Sheila.
Here, rajul from Jeffrey's, please go ahead with your question.
Okay good. Um, thank you guys so much. Um, my first question and congrats on the entire undertaking in the progress. You've made, I'd love to hear what the back you're getting on the product segmentation our customers even aware. How has that changed your promotional activity and in cities like Chicago, where it's become a hot city of late. What? Really differentiates, South West versus the network carrier, and maybe my follow-up on the 4 dollars of eps.
Are the gates because people are maybe taken by surprise with some of the changes, uh, and maybe that normalizes over time? Or do you think it gets better from here? Thank you.
Andrew Watterson: All right, I'll try to go through your questions there. So, yes, the ELR and the preferred seats and assigned seats in general is going better than expected. We are getting book away from other carriers when they have poor reliability. We have that consistently over the last couple of years, so that is a tailwind. Doesn't happen every single day, but does happen quite frequently, and it is a benefit, and those people now come over and buy a standalone seat or a higher fare, so that's very helpful to have that extra book away. And then the ancillary, we find that what people do when they get to the gate, it's a crowded flight, they have a higher propensity to buy up.
Andrew Watterson: All right, I'll try to go through your questions there. So, yes, the ELR and the preferred seats and assigned seats in general is going better than expected. We are getting book away from other carriers when they have poor reliability. We have that consistently over the last couple of years, so that is a tailwind. Doesn't happen every single day, but does happen quite frequently, and it is a benefit, and those people now come over and buy a standalone seat or a higher fare, so that's very helpful to have that extra book away.
What is assumed paid load factor in total uh ancillary uplift and the extra legroom seats relative to the 25 base. Thanks excellent. Let me take a piece of the first 1 and I think Andrew will take the the second um you know the what is different about Southwest Airlines now obviously has been common.
And then the ancillary, we find that what people do when they get to the gate, it's a crowded flight, they have a higher propensity to buy up.
Andrew Watterson: So you get to the gate, it's crowded, and you're like: Well, what seat am I? Oh, I wanna change my seat. I will pay more. And so that we see the fuller the flight, the higher the ancillary benefit.
So you get to the gate, it's crowded, and you're like: Well, what seat am I? Oh, I wanna change my seat. I will pay more. And so that we see the fuller the flight, the higher the ancillary benefit.
All right, um, I'll, um, try to uh, go through your questions there. So uh yes, the the ELR and the preferred seats assigned seats in general. Uh, is going better than expected. Um, we are getting booked away from other carriers, when they have poor reliability, we, we have that, uh, consistently over the last couple of years. So that is a, a Tailwind doesn't happen every single day, but does have them quite frequently and it is is a benefit in those people. Now come over and buy a standalone seat or a higher fare. So that that's very helpful uh to have that extra book Away. Um and then the the ancillary uh we find that what people do when they get to the gates of crowded flight, they have a higher propensity to buy up, so you get to the gate, it's crowded. Uh, and you're like well what seed am I? Oh, I want to change my seat. I will pay more and so that we see the full of the flight, the higher, the end. So it benefit
Operator: Our next question comes from Sheila Kahyaoglu from Jefferies. Please go ahead with your question.
Operator: Our next question comes from Sheila Kahyaoglu from Jefferies. Please go ahead with your question.
Our next question comes from, Sheila.
Uh a common question since we implemented a signed seating and I've been here 38 years and um we have changed constantly over those 38 years and and every single 1 was well you're just off the same Southwest and every single time uh, that person or those folks were wrong. So I just want to clear this up. I mean, our people and their heart for serving our customers. I mean, that is and always will be the greatest competitive advantage of Southwest has. That's the difference that was true on Monday, with open seating and it was true on Tuesday, with a signed seating and nobody no other Airline can copy the heart and the soul, and the service of our people. So that's what makes Southwest Airlines different.
Sheila Kahyaoglu: I'll take it. Thank you guys so much. My first question, and congrats on the entire undertaking and the progress you've made. I'd love to hear what feedback you're getting on the product segmentation. Are customers even aware? How has that changed your promotional activity? And in cities like Chicago, where it's become a hot city of late, what really differentiates Southwest versus a network carrier? And maybe my follow-up on the $4 of EPS, what is the assumed paid load factor and total, ancillary uplift from the extra legroom seats relative to the 25 base? Thanks.
Sheila Kahyaoglu: I'll take it. Thank you guys so much. My first question, and congrats on the entire undertaking and the progress you've made. I'd love to hear what feedback you're getting on the product segmentation. Are customers even aware? How has that changed your promotional activity? And in cities like Chicago, where it's become a hot city of late, what really differentiates Southwest versus a network carrier? And maybe my follow-up on the $4 of EPS, what is the assumed paid load factor and total, ancillary uplift from the extra legroom seats relative to the 25 base? Thanks.
Okay, Rajul from Jeffries, please go ahead with your question.
And I would say um, at a place like Chicago uh at Midway we have a very strong Network and so that our offering to uh, customers and where you want to go, we have the strong Network there uh price. We have lower costs in our competitors and so we can offer uh you know, great deals uh conscious that we're still pushing rasim we with lower costs. We can we we can push uh a great deals. Uh reliability now Airlines talk about
Okay, I'll take it. Um, thank you guys so much. Um, my first question and congrats on the entire undertaking in the progress. You've made. I'd love to hear what feedback you're getting on the product segmentation our customers even aware. How has that changed your promotional activity and in cities like Chicago, where it's become a hot city of late. What? Really differentiates, South West versus the network carrier and maybe my follow-up on the 4 dollars.
The VPS.
Bob Jordan: Hey, Sheila, let me take a piece of the first one, and I think Andrew will take the second. You know, what is different about Southwest Airlines now, obviously, has been a common question since we implemented assigned seating. I've been here 38 years, and we have changed constantly over those 38 years, and every single one was, "Well, you're just not the same Southwest." And every single time, that person or those folks were wrong. So I just want to clear this up. I mean, our people and their heart for serving our customers, I mean, that is and always will be the greatest competitive advantage that Southwest has. That's the difference. That was true on Monday with open seating, and it was true on Tuesday with assigned seating.
Bob Jordan: Hey, Sheila, let me take a piece of the first one, and I think Andrew will take the second. You know, what is different about Southwest Airlines now, obviously, has been a common question since we implemented assigned seating. I've been here 38 years, and we have changed constantly over those 38 years, and every single one was, "Well, you're just not the same Southwest." And every single time, that person or those folks were wrong. So I just want to clear this up. I mean, our people and their heart for serving our customers,
What is assumed paid load factor in total, uh, ancillary uplifts and the extra legroom seats relative to the 25 base. Thanks.
Let me take a piece of the first 1. I think Andrew will take the the second um you know the what is different about Southwest Airlines now obviously has been common.
Liability. But it's extraordinarily difficult to copy, uh, and the fact that we have much higher reliability than any airline in Chicago, uh, customers can count on, uh, coming to Midway and having a much better reliability, uh, than than over at O'Hare and then Hospitality once again, everyone says their employees are the best but guess what? Look at MPS scores our employees, really, uh, deliver uh uh, great hospitality and a high score and it's extraordinary difficult to copy. You can tell your people to treat customers better, but if they don't what do you do for us, our customers, our employees want to treat customers well and so these are durable advantages of having great hospitality and great reliability.
I mean, that is and always will be the greatest competitive advantage that Southwest has. That's the difference. That was true on Monday with open seating, and it was true on Tuesday with assigned seating.
Our next question comes from Brandon olenski from Barkley's, please go ahead with your question.
Uh a common question since we implemented a signed seating and I've been here 38 years and um we we have changed constantly over those 38 years and and every single 1 was well you're just not the same Southwest and every single time uh that person or those folks were wrong. So I just want to clear this up. I mean, our people and their heart for serving our customers. I mean, that is
Bob Jordan: Nobody, no other airline can copy the heart, the soul, and the service of our people. That's what makes Southwest Airlines different.
Nobody, no other airline can copy the heart, the soul, and the service of our people. That's what makes Southwest Airlines different.
Andrew Watterson: And I would say, in a place like Chicago, at Midway, we have a very strong network. And so our offering to customers where you wanna go, we have the strong network there. Price, we have lower costs than our competitors, and so we can offer you know great deals. Conscious we're still pushing RASM. We, with lower costs, we can push great deals. Reliability. Now, airlines talk about reliability, but it's extraordinarily difficult to copy. And the fact that we have much higher reliability than any airline in Chicago, customers can count on coming to Midway and having a much better reliability than over at O'Hare. And then hospitality. Once again, everyone says their employees are the best, but guess what? Look at NPS scores.
Andrew Watterson: And I would say, in a place like Chicago, at Midway, we have a very strong network. And so our offering to customers where you wanna go, we have the strong network there. Price, we have lower costs than our competitors, and so we can offer you know great deals. Conscious we're still pushing RASM. We, with lower costs, we can push great deals. Reliability. Now, airlines talk about reliability, but it's extraordinarily difficult to copy. And the fact that we have much higher reliability than any airline in Chicago, customers can count on coming to Midway and having a much better reliability than over at O'Hare.
And always will be, the greatest competitive advantage that Southwest has—that's the difference. And that was true on Monday with open seating, and it was true on Tuesday with assigned seating. And nobody, no other airline, can copy the heart and the soul and the service of our people. So that's what makes Southwest Airlines different.
And I would say um, at a place like Chicago uh at Midway we have a very strong Network and so that our offering to, uh, customers where you want to go, we have the strong Network there uh price. We have lower costs in our competitors and so we can offer uh you know, great deals, uh conscious. We're still pushing rasim we with lower costs. We can we we can push uh a great deals uh reliability.
Hey, good morning and congrats as well. Um, I think I'll just keep it to 1 here but Bob, I mean, I think just judging by some of these questions and definitely like the bloggers and the airline observers out in the ecosystem, there's this View and I think you've hit on it and the answers to a couple of these questions. But like Southwest is losing, its uniqueness no more free bags, you know, and it's it. Now it's e out or maybe less Echo than, but the reality is, I think if we listen to all your competitors, things have moved much more towards a premium focus with consumers. So I don't know. Can you just maybe wrap this up a little bit? Like isn't this just offering the market what they wanted and incrementally. I think you hit on the culture too but you know, has has the employee base really fully embraced this too. Thank you.
Hey Brandon, thank you. And uh yeah this this is about uh 1 thing and that is chasing our customer. We we are we are committed to following the customer providing what they want.
And then hospitality. Once again, everyone says their employees are the best, but guess what? Look at NPS scores.
Andrew Watterson: Our employees really deliver a great hospitality and a high score, and it's extraordinarily difficult to copy. You can tell your people to treat customers better, but if they don't, what do you do? For us, our employees want to treat customers well, and so these are durable advantages of having great hospitality and great reliability.
Our employees really deliver a great hospitality and a high score, and it's extraordinarily difficult to copy. You can tell your people to treat customers better, but if they don't, what do you do? For us, our employees want to treat customers well, and so these are durable advantages of having great hospitality and great reliability.
Copying anybody this has to do with offering our customers uh what they want and then as Andrew said, doing it even better.
Now, Airlines talk about reliability, but it's extraordinarily difficult to copy, uh, and the fact that we have much higher reliability than any airline in Chicago, uh, customers can count on, uh, coming to Midway and having a much better reliability, uh, than than over at O'Hare and then Hospitality once again, everyone says their employees are the best but guess what? Look at MPS scores our employees, really, uh, deliver uh uh, great hospitality and a high score and it's extraordinary difficult to copy. You can tell your people to treat customers better, but if they don't what do you do for us, our customers, our employees want to treat customers well and so these are durable advantages of having great hospitality and great reliability.
Because we've got the employees and the service delivery and the reliability.
Operator: Our next question comes from Brandon Oglenski from Barclays. Please go ahead with your question.
Operator: Our next question comes from Brandon Oglenski from Barclays. Please go ahead with your question.
Brandon Oglenski: Hey, good morning, and congrats as well. I think I'll just keep it to one here, but Bob, I mean, I think just judging by some of these questions, and definitely, like, the bloggers and the airline observers out in the ecosystem, there's this view, and I think you've hit on it in the answers to a couple of these questions. But, like, Southwest is losing its uniqueness, no more free bags, you know, and it's now egalitarian or maybe less egalitarian. But the reality is, I think if we listen to all your competitors, things have moved much more towards a premium focus with consumers. So I don't know, can you just maybe wrap this up a little bit? Like, isn't this just offering the market what they wanted?
Brandon Oglenski: Hey, good morning, and congrats as well. I think I'll just keep it to one here, but Bob, I mean, I think just judging by some of these questions, and definitely, like, the bloggers and the airline observers out in the ecosystem, there's this view, and I think you've hit on it in the answers to a couple of these questions. But, like, Southwest is losing its uniqueness, no more free bags, you know, and it's now egalitarian or maybe less egalitarian. But the reality is, I think if we listen to all your competitors, things have moved much more towards a premium focus with consumers.
Our next question comes from Brandon Olenski from Barclays. Please go ahead with your question.
Uh, that they cannot match. I mean, just look I'm not not meaning to brag but maybe I am. But we won the number 1 ranking in the Wall. Street Journal, best US Airline for 2025 for a reason that's because our service was better. Our operation was better and customers see it and again, at the, at the high level, um,
We are on track. I mean,
You see the numbers that we're guiding for 2026?
Uh, so we're seeing customers embrace the changes book, the product, we are not seeing book away from Southwest Airlines, if anything
So I don't know, can you just maybe wrap this up a little bit? Like, isn't this just offering the market what they wanted?
Brandon Oglenski: Incrementally, I think you hit on the culture, too, but, you know, has the employee base really fully embraced this, too? Thank you.
Incrementally, I think you hit on the culture, too, but, you know, has the employee base really fully embraced this, too? Thank you.
Uh, we're encouraged that we'll see shares shift to Southwest Airlines because the product is a stronger offering now, especially with corporate. Uh, so again, this is all about following the customer.
Hey, good morning and congrats as well. Um, I think I'll just keep it to 1 here but Bob, I mean, I think just judging by some of these questions and definitely like the bloggers and the airline observers out in the ecosystem, there's this View and I think you've hit on it and the answers to a couple of these questions. But like Southwest is losing, its uniqueness no more free bags, you know, and it it now it's e out or maybe less ecoeats we listened to all your competitors. Things have moved much more towards a premium focus with consumers, so I don't know. Can you just maybe wrap this up a little bit? Like, isn't this just offering the market what they wanted and incrementally. I think you hit on the culture too. But you know, has has the employee base really fully Embraces.
Bob Jordan: Hey, Brandon, thank you. And, yeah, this is about one thing, and that is chasing our customer. We are committed to following the customer, providing what they want today, which is different than what they wanted 5 and 10 years ago, and what they want in the future. Because we know if Southwest Airlines doesn't provide it, they're gonna go to a competitor, and we are not going to let that happen over time. So this is completely... This has nothing to do with copying anybody. This has to do with offering our customers what they want. And then, as Andrew said, doing it even better, because we've got the employees, the service delivery, and the reliability that they cannot match.
Bob Jordan: Hey, Brandon, thank you. And, yeah, this is about one thing, and that is chasing our customer. We are committed to following the customer, providing what they want today, which is different than what they wanted 5 and 10 years ago, and what they want in the future. Because we know if Southwest Airlines doesn't provide it, they're gonna go to a competitor, and we are not going to let that happen over time. So this is completely... This has nothing to do with copying anybody. This has to do with offering our customers what they want.
Too, thank you.
Our next question comes from David Vernon from Bernstein. Please go ahead with your question.
And then, as Andrew said, doing it even better, because we've got the employees, the service delivery, and the reliability that they cannot match.
So this is completely, this has nothing to do with copying anybody, this has to do with offering our customers, uh, what they want and then as Andrew said, doing it even better because we've got the employees and the service delivery and the reliability.
Bob Jordan: I mean, just look, not meaning to brag, but maybe I am, but we won the number one ranking in The Wall Street Journal Best US Airline for 2025 for a reason. That's because our service was better, our operation was better, and customers see it. And again, at the, at the high level, we are on track. I mean, you see, you see the numbers that we're guiding for 2026. So we're seeing customers embrace the changes, book the product. We are not seeing book away from Southwest Airlines. If anything, we're encouraged that we'll see share shift to Southwest Airlines because the product is a stronger offering now, especially with corporate. So again, this is all about following the customer.
I mean, just look, not meaning to brag, but maybe I am, but we won the number one ranking in The Wall Street Journal Best US Airline for 2025 for a reason. That's because our service was better, our operation was better, and customers see it. And again, at the, at the high level, we are on track. I mean, you see, you see the numbers that we're guiding for 2026. So we're seeing customers embrace the changes, book the product. We are not seeing book away from Southwest Airlines.
Uh, great maybe uh, Bob just to kind of build on that um, idea, right? If you're going to be taking share raising fairs by something in the double digits like normally you would think there'd be some sort of demand elasticity problem in that map. Why isn't that the right way to think about this? Why isn't the big risk here that, you know, you put all these changes in customers get used to them and then eventually they can just look across other Airlines and maybe you're more expensive and you see um, you know some of the expectation for what you're going to get in the unit Revenue growth uh competed in a way because it is still a pretty competitive market. This is as far as I as far as we look at it. Anyway, any thoughts on the the yeah. Yeah. And and thank you again. It's, it's not this is not about raising fairs. This is about offering our customers choice.
Uh, that they cannot match. I mean, just look I'm not not meaning to brag but maybe I am. But we won the number 1 ranking in the Wall. Street Journal, best US Airline for 2025 for a reason that's because our service was better. Our operation was better and customers see it and again, at the, at the high level, um,
We are on track. I mean you you see the numbers that we're guiding for 2026?
If anything, we're encouraged that we'll see share shift to Southwest Airlines because the product is a stronger offering now, especially with corporate. So again, this is all about following the customer.
uh, so we're seeing customers embrace the changes book, the product, we are not seeing book away from Southwest Airlines, if anything
Uh, we're encouraged that we'll see shares shift to Southwest Airlines because the product is a stronger offering now, especially with corporate. Uh, so again, this is all about following the customer.
Operator: Our next question comes from David Vernon from Bernstein. Please go ahead with your question.
Operator: Our next question comes from David Vernon from Bernstein. Please go ahead with your question.
That we know that they want so offering them a very basic fare if that's what they want offering them a fair that comes with extra leg room and a drink and and a a different level of service and boarding if that's what they want and a lot of products in between. So it's the customer's choice to buy up, which is very different than sort of across the board, raising fairs. Same thing on the ancillary side, just like we sold, you know, early bird and upgraded boarding. We're offering our customers a choice around priority boarding and obviously Choice around seat selection. So this has nothing to do with raising the fairs this has to do with offering customers choice, that they can then choose to buy or not buy. And what we are seeing is that they are
David Vernon: Great. Maybe Bob, just to kind of build on that, idea, right? If you're gonna be taking share or raising fares by something in the double digits, like, normally you would think there'd be some sort of demand elasticity problem in that math. Why isn't that the right way to think about this? Why isn't the big risk here that, you know, you put all these changes in, customers get used to them, and then eventually they can just look across other airlines, and maybe you're more expensive, and you see, you know, some of the expectation for what you're gonna get in the unit revenue growth, competed away? Because it is still a pretty competitive market, as far as we look at it, anyway. Any thoughts on the, the-
David Vernon: Great. Maybe Bob, just to kind of build on that, idea, right? If you're gonna be taking share or raising fares by something in the double digits, like, normally you would think there'd be some sort of demand elasticity problem in that math. Why isn't that the right way to think about this? Why isn't the big risk here that, you know, you put all these changes in, customers get used to them, and then eventually they can just look across other airlines, and maybe you're more expensive, and you see, you know, some of the expectation for what you're gonna get in the unit revenue growth, competed away?
Our next question comes from David Vernon from Bernstein. Please go ahead with your question.
Choosing to buy those new options.
Because it is still a pretty competitive market, as far as we look at it, anyway. Any thoughts on the, the-
Our next question comes from Dan McKenzie, from Seaport Global. Please go ahead with your question. Oh, hey, thanks for the time. Um, first huge, congrats to the entire company for pulling off. I think what most, uh, couldn't be done. Um, but a couple questions here first, um, you know, the 50% of the tickets that are sold with the buy up feature. My question really, is what percent of Revenue does this account? For what would you expect it to account for once you're, um, at maturity?
Bob Jordan: Yeah. Yeah, and thank you again. It's not. This is not about raising fares. This is about offering our customers choice that we know that they want. So offering them a very basic fare, if that's what they want, offering them a fare that comes with extra legroom, a drink, and a different level of service and boarding, if that's what they want, and a lot of products in between. So it's the customer's choice to buy up, which is very different than sort of across the board raising fares. Same thing on the ancillary side. Just like we sold, you know, early bird and upgraded boarding, we're offering our customers a choice around priority boarding and obviously choice around seat selection. So this has nothing to do with raising the fares.
Bob Jordan: Yeah. Yeah, and thank you again. It's not. This is not about raising fares. This is about offering our customers choice that we know that they want. So offering them a very basic fare, if that's what they want, offering them a fare that comes with extra legroom, a drink, and a different level of service and boarding, if that's what they want, and a lot of products in between. So it's the customer's choice to buy up, which is very different than sort of across the board raising fares. Same thing on the ancillary side.
Uh, great maybe, uh, Bob just to kind of build on that um, idea, right? If you're going to be taking share raising fairs by something in the double digits like normally you would think there'd be some sort of demand elasticity problem in that map. Why isn't that the right way to think about this? Why is it the big risk here that, you know, you put all these changes in customers get used to them and then eventually they can just look across other Airlines and maybe you're more expensive and you see, um, you know, some of the expectations for what you're going to get in the unit Revenue growth. Uh, competed away because it is still a pretty competitive market. This is is as far as I as far as we look at it. Anyway, any thoughts on the the yeah? Yeah, and and thank you again. It's, it's not this is not about raising fairs. This is about offering our customers choice.
And then secondly, here, if if corporate bookings are up high single digits, or double digits, what fairs are they replacing? My, my guess is they're displacing the, the 39 fair and then just related to that corporate. I'm just curious if the capex guide embeds new lounges,
so on the, uh,
Just like we sold, you know, early bird and upgraded boarding, we're offering our customers a choice around priority boarding and obviously choice around seat selection. So this has nothing to do with raising the fares.
Bob Jordan: This has to do with offering customers choice that they can then choose to buy or not buy. And what we are seeing is that they are choosing to buy those new options.
This has to do with offering customers choice that they can then choose to buy or not buy. And what we are seeing is that they are choosing to buy those new options.
Buy up that that's the type of stuff that we are working out, that Bob's bugging me for all the time and so we're not going to uh give those right now. It'll become clear over time as we give the, the high end of our guide and we start to report, but right now we're just focused on uh, on uh, on delivering uh, um, uh, the um, the current guide, um, and corporate bookings. Um, uh, we found that the kind of but uh, segmentation where we introduce the basic Fair, uh, the the corporate found that they did not want that in their ecosystem, so uh, our sales force did a great team of helping configure selling tools so that that was not featured, um, and that was beneficial.
That we know that they want so offering them a very basic fare if that's what they want offering them a fair that comes with extra leg room and a drink and and a a different level of service and boarding if that's what they want and a lot of products in between. So it's the customer's choice to buy up which is very different than sort of a cross the board raising fairs. Same thing on the ancillary side, just like we sold, you know, early bird and upgraded boarding. We're offering our customers a choice around priority boarding and obviously Choice around seat selection. So this has nothing to do with raising the fairs this has to do with offering customers choice, that they can then choose to buy or not buy. And what we are seeing is that they are
Corporate revenues.
Choosing to buy those new options.
Operator: Our next question comes from Dan McKenzie, from Seaport Global. Please go ahead with your question.
Operator: Our next question comes from Dan McKenzie, from Seaport Global. Please go ahead with your question.
Dan McKenzie: Oh, hey, thanks for the time. First, huge congrats to the entire company for pulling off, I think, what most thought couldn't be done. But a couple questions here. First, you know, the 50% of the tickets that are sold with the buy-up feature, my question really is, what percent of revenue does this account for? What would you expect it to account for once you're at maturity? And then secondly here, if corporate bookings are up high single digits or double digits, what fares are they replacing? My guess is they're displacing the $39 fare. And then, just related to that corporate, I'm just curious if the CapEx guide embeds new lounges.
Dan McKenzie: Oh, hey, thanks for the time. First, huge congrats to the entire company for pulling off, I think, what most thought couldn't be done. But a couple questions here. First, you know, the 50% of the tickets that are sold with the buy-up feature, my question really is, what percent of revenue does this account for? What would you expect it to account for once you're at maturity? And then secondly here, if corporate bookings are up high single digits or double digits, what fares are they replacing? My guess is they're displacing the $39 fare.
And uh, as we offer these ancillaries, we'll be doing the same thing and we anticipate additional benefit once the the tools and expense policies, uh, calibrate to our, our new offerings that we'll see additional benefits from that.
Our next question comes from Dan McKenzie, from Seaport Global. Please go ahead with your question.
Oh, hey, thanks for the time. Um, first, huge congrats to the entire company for pulling off, I think, what most couldn't be done. Um, but a couple questions here. First, you know, the 50% of the tickets that are sold with the buy up feature—my question really is, what percent of revenue does this account for? What would you expect it to account for once you're, um, at maturity?
And then, just related to that corporate, I'm just curious if the CapEx guide embeds new lounges.
And then secondly, here, if if corporate bookings are up high single digits, or double digits, what fairs are they replacing? My, my guess is they're displacing the, The $99 fair and then just related to that corporate. I'm just curious if the capex guide embeds new lounges,
Bob Jordan: So on the buy-up, that's the type of stuff that we are working out, that Bob's bugging me for all the time, and so we're not gonna give those right now. It'll become clear over time as we give the high end of our guide and we start to report, but right now we're just focused on delivering the current guide. And corporate bookings, we found that the kind of segmentation, where we introduced the basic fare, that the corporates found that they did not want that in their ecosystem. So, our sales force did a great job of helping configure selling tools so that that was not featured, and that was beneficial to our corporate revenues.
Bob Jordan: So on the buy-up, that's the type of stuff that we are working out, that Bob's bugging me for all the time, and so we're not gonna give those right now. It'll become clear over time as we give the high end of our guide and we start to report, but right now we're just focused on delivering the current guide. And corporate bookings, we found that the kind of segmentation, where we introduced the basic fare, that the corporates found that they did not want that in their ecosystem. So, our sales force did a great job of helping configure selling tools so that that was not featured, and that was beneficial to our corporate revenues.
so on the, uh,
I think our people again the level of execution last year was so many things it was just done so flawlessly on time with quality and to be able to win the Wall Street Journal. Number 1 ranking at the same time, you're changing the company.
Then to have a winter storm that's historic and manage it incredibly. Well, come out of that with no hang hangover at all. And by the way, the next day, do the largest change over in the history of the company with the science seating and to have excellent operating metrics on that day. I just don't know how to say anything. But wow, I'm just stunned by what our people have done.
Buy up that that's the type of stuff that we are working out, that Bob's bugging me for all the time and so we're not going to uh give those right now. It'll become clear over time as we give the, the high end of our guide and we start to report, but right now we're just focused on, uh, on uh, on delivering, uh, um, uh, uh, the, um, the current guide, um, and corporate bookings. Um, uh, we've found that the kind of, uh, segmentation where we introduce the basic Fair. Uh, the the corporate found that they did not want that in their ecosystem. So uh, our sales force did a great team of helping configure selling tools so that that was not featured, um, and that was beneficial.
Bob Jordan: And, as we offer these ancillaries, we'll be doing the same thing. We anticipate additional benefit once the tools and expense policies calibrate to our new offerings, that we'll see additional benefits from that. And Dan, just quickly on the lounge question, I think I mentioned before, there, you know... We're obviously, we're looking at, again, things that our customers want. There's nothing specific to report there today, but just know that the assumptions that we have internally around what that could look like are built into our guides. So they're not incremental to the guides that we've given you for the quarter or for the year. And I'm gonna go back to your first sentence. I just can't help myself about, you know, the congrats on the implementation.
And, as we offer these ancillaries, we'll be doing the same thing. We anticipate additional benefit once the tools and expense policies calibrate to our new offerings, that we'll see additional benefits from that. And Dan, just quickly on the lounge question, I think I mentioned before, there, you know... We're obviously, we're looking at, again, things that our customers want. There's nothing specific to report there today, but just know that the assumptions that we have internally around what that could look like are built into our guides.
Corporate revenues.
And our next question comes from Chris Weatherbee from Wells. Fargo, please, go ahead with your question.
And, uh, as we offer these ancillaries, we'll be doing the same thing. We anticipate additional benefit once the tools and expense policies, uh, calibrate to our new offerings, that we'll see additional benefits from that.
Yeah. Hey thanks. Good morning. Thanks for getting me on the call. Um, I I guess I wanted to to talk a little bit about the business, um, commentary and I guess what? You're looking to see over the course of the next couple of weeks for the movie, there's been some conversations there and you seem optimistic about upside. So any insight there would be helpful and maybe where some of the share might be coming from and then the second question would just be sort of understanding what's embedded in the in the $4 plus guidance around BuyBacks. Thank you.
So they're not incremental to the guides that we've given you for the quarter or for the year. And I'm gonna go back to your first sentence. I just can't help myself about, you know, the congrats on the implementation.
Bob Jordan: I just wanna say thank you, and I gotta thank our people again. The level of execution last year with so many things, it was just done so flawlessly, on time, with quality, and to be able to win The Wall Street Journal number one ranking at the same time you're changing the company, then to have a winter storm that's historic and manage it incredibly well, come out of that with no hangover at all. And by the way, the next day, do the largest changeover in the history of the company with assigned seating, and to have excellent operating metrics on that day. I just don't know how to say anything, but wow, I'm just stunned by what our people have done.
I just wanna say thank you, and I gotta thank our people again. The level of execution last year with so many things, it was just done so flawlessly, on time, with quality, and to be able to win The Wall Street Journal number one ranking at the same time you're changing the company, then to have a winter storm that's historic and manage it incredibly well, come out of that with no hangover at all. And by the way, the next day, do the largest changeover in the history of the company with assigned seating, and to have excellent operating metrics on that day.
On the first 1, I would separate out the, uh, the 2 segments, 2 things between 1, the uh, what we see is the upside from the ancillary sales and the buy up. Those are the normal booking curve management. What we expect to see there, uh, through the low season of February and the high season of March, that'll help us understand better. What the upside potential is in. The short term. What's not in? Our guide is this kind of uh, medium-term uh, benefit from increased corporate share or increased corporate Revenue as people buy uh uh the our ancestors on the company dime and so that is something that will unfold over medium-term and is not in our guide.
I just don't know how to say anything, but wow, I'm just stunned by what our people have done.
On on the buyback question. Uh, you know, we continue to believe that the shares are undervalued relative to the long term fundamentals of the business. And so, uh, we'll continue to be opportunistic there and we'll make sure that we stay in the guard rails. That, that keep us, uh, with our, uh, investment grade rating.
On the implementation. I just want to say thank you and I got to thank our people again, the level of execution last year was so many things it was just done so flawlessly on time with quality and to be able to win the Wall Street Journal. Number 1 ranking at the same time, you're changing the company then to have a winter storm that's historic and manage it incredibly. Well come out of that with no hang hangover at all. And by the way, the next day, do the largest change over in the history of the company, with assigned seating and to have excellent operating metrics on that day. I just don't know how to say anything. But wow, I'm just stunned by what our people have done.
Operator: Our next question comes from Chris Wetherbee, from Wells Fargo. Please go ahead with your question.
Operator: Our next question comes from Chris Wetherbee, from Wells Fargo. Please go ahead with your question.
Chris Wetherbee: Yeah. Hey, thanks. Good morning. Thanks for getting me on the call. I guess I wanted to talk a little bit about the business commentary, and I guess what you're looking to see over the course of the next couple of weeks. Presumably, there's been some conversations there, and you seem optimistic about upside. So any insight there would be helpful, and maybe where some of the share might be coming from. And then the second question would just be sort of understanding what's embedded in the $4+ guidance around buybacks. Thank you.
Chris Wetherbee: Yeah. Hey, thanks. Good morning. Thanks for getting me on the call. I guess I wanted to talk a little bit about the business commentary, and I guess what you're looking to see over the course of the next couple of weeks. Presumably, there's been some conversations there, and you seem optimistic about upside. So any insight there would be helpful, and maybe where some of the share might be coming from. And then the second question would just be sort of understanding what's embedded in the $4+ guidance around buybacks. Thank you.
And our next question comes from Chris Weatherbee from Wells. Fargo, please, go ahead with your question.
In our 1, Another Thing, 1 other thing I'll add to that too is you know, we've invested a tremendous amount of capital into our people and into our business as well and into our customers. You know, we've talked about the investors who made into the cabin things like the, uh, you know, the the bigger bins and the new lighting, and the new seats and the inseat power and free Wi-Fi and you know, all of these things, uh, are are part of that Capital, allocation as well. And so, we stay within the guard rails. We invest in the business we invest in our people, uh, and we invest in our customers. Um, and and ensure that we stay in those investment grade guard rails,
Bob Jordan: On the first one, I would separate out the two segments, two things between one, the... What we see as the upside from the ancillary sales and the buy-up, those are the normal booking curve management, what we expect to see there, through the low season of February and the high season of March. That'll help us understand better what the upside potential in the short term. What's not in our guide is this kind of medium-term benefit from increased corporate share or increased corporate revenue as people buy our ancillaries on the company dime. And so that is something that will unfold over medium term and is not in our guide.
Bob Jordan: On the first one, I would separate out the two segments, two things between one, the... What we see as the upside from the ancillary sales and the buy-up, those are the normal booking curve management, what we expect to see there, through the low season of February and the high season of March. That'll help us understand better what the upside potential in the short term. What's not in our guide is this kind of medium-term benefit from increased corporate share or increased corporate revenue as people buy our ancillaries on the company dime.
Yeah. Hey thanks. Good morning. Thanks for getting me on the call. Um, I I guess I wanted to to talk a little bit about the business, um, commentary and I guess what? You're looking to see over the course of the next couple of weeks presumably, there's been some conversations there and you seem optimistic about upside. So any insight there would be helpful and maybe where some of the share might be coming from and then the second question would just be sort of understanding what's embedded in the in the $4 plus guidance around BuyBacks. Thank you.
Our next question comes from Jamie Baker from JP Morgan. Please go ahead with your questions.
Oh yeah, thanks for squeezing me in at the last minute. Um, so the earlier comment about, uh, passengers making Vibe, decisions at the gate. Have you padded your turn times to account for that? Is there any sort of operational impact from that phenomenon? Thanks.
And so that is something that will unfold over medium term and is not in our guide.
Uh, actually, we took turn time out. Jamie uh, and uh, sorry.
Tom Doxey: On the buyback question, you know, we continue to believe that the shares are undervalued relative to the long-term fundamentals of the business. And so, we'll continue to be opportunistic there, and we'll make sure that we stay in the guardrails that keep us with our investment-grade rating.
Tom Doxey: On the buyback question, you know, we continue to believe that the shares are undervalued relative to the long-term fundamentals of the business. And so, we'll continue to be opportunistic there, and we'll make sure that we stay in the guardrails that keep us with our investment-grade rating.
On the first one, I would separate out the, uh, the two segments, two things between, one, the, uh, what we see as the upside from the ancillary sales and the buy-up. Those are the normal booking curve management. What we expect to see there, uh, through the low season of February and the high season of March, that'll help us understand better what the upside potential is in the short term. What's not in our guide is this kind of, uh, medium-term, uh, benefit from increased corporate share or increased corporate revenue as people buy, uh, the—our ancillaries on the company dime. And so that is something that will unfold over the medium term and is not in our guide.
On on the buyback question. Uh, you know, we continue to believe that the shares are undervalued relative to the long term fundamentals of the business. And so, uh, we'll continue to be opportunistic there and we'll make sure that we stay in the guard rails. That, that keep us, uh, with our, uh, investment grade rating.
Operator: And our next-
Operator: And our next-
Tom Doxey: One other thing I'll add to that, too, is, you know, we've invested a tremendous amount of capital into our people and into our business as well, and into our customers. And we've talked about the investments we made into the cabin, things like you know, the bigger bins and the new lighting and the new seats and the in-seat power and free Wi-Fi. And, you know, all of these things are part of that capital allocation as well. And so we stay within the guardrails, we invest in the business, we invest in our people, we invest in our customers, and ensure that we stay in those investment-grade guardrails.
Tom Doxey: One other thing I'll add to that, too, is, you know, we've invested a tremendous amount of capital into our people and into our business as well, and into our customers. And we've talked about the investments we made into the cabin, things like you know, the bigger bins and the new lighting and the new seats and the in-seat power and free Wi-Fi. And, you know, all of these things are part of that capital allocation as well. And so we stay within the guardrails, we invest in the business, we invest in our people, we invest in our customers, and ensure that we stay in those investment-grade guardrails.
Yeah so um uh all this is you know that we've scripted out what we sell when and what happens when and our and our uh and our boarding, we have standards. And those allow us to handle both uh um employees traveling for a non-revenue uh as well as uh, upselling in the in the gate area. And so uh uh all that I think works well for cost efficiency and revenue optimization. And I've got to just add again. I mean, we took, we took term time out of the turn.
Managing all these changes which include changes to boarding and we won the Wall Street Journal ranking as the best US Airline most of which are operational metrics.
I mean, not bad.
and on that note we'll conclude today's call as always if you have any follow-up questions, please reach out to investor relations and we appreciate everyone for joining
In our 1, other thing 1 other thing, I'll add to that too is you know, we've invested a tremendous amount of capital into our people and into our business as well and into our customers. You know, we've talked about the investors who made into the cabin things like the, uh, you know, the the bigger bins and the new lighting, and the new seats and the inseat power and free Wi-Fi and you know, all of these things, uh, are are part of that Capital, allocation as well. And so, we stay within the guard rails. We invest in the business we invest in our people, uh, and we invest in our customers. Um, and and ensure that we stay in those investment grade guard rails,
Operator: Our next question comes from Jamie Baker, from J.P. Morgan. Please go ahead with your question.
Operator: Our next question comes from Jamie Baker, from J.P. Morgan. Please go ahead with your question.
Ladies and gentlemen, with that, we'll conclude today's conference. Call in presentation. We do thank you for joining, you may now disconnect your lines.
Jamie Baker: Oh, yeah. Thanks for squeezing me in at the last minute. So the earlier comment about passengers making buy-up decisions at the gate-
Jamie Baker: Oh, yeah. Thanks for squeezing me in at the last minute. So the earlier comment about passengers making buy-up decisions at the gate-
Our next question comes from Jamie Baker from JP Morgan. Please go ahead with your questions.
Jamie Baker: Have you padded your turn times to account for that? Is there any sort of operational impact from that phenomenon? Thanks.
Have you padded your turn times to account for that? Is there any sort of operational impact from that phenomenon? Thanks.
Oh yeah, thanks for squeezing me in at the last minute. Um, so the earlier comment about, uh, passengers making buy decisions at the gate—have you padded your turn times to account for that? Is there any sort of operational impact from that phenomenon? Thanks.
Andrew Watterson: Actually, we took turn time out, Jamie, and,
Andrew Watterson: Actually, we took turn time out, Jamie, and,
Jamie Baker: Sorry.
Jamie Baker: Sorry.
Andrew Watterson: Yeah. So, all this is, you know, we've scripted out what we sell when and what happens when in our boarding. We have standards, and those allow us to handle both employees traveling for non-revenue, as well as upselling in the gate area. And so, all that, I think, works well for cost efficiency and revenue optimization.
Andrew Watterson: Yeah. So, all this is, you know, we've scripted out what we sell when and what happens when in our boarding. We have standards, and those allow us to handle both employees traveling for non-revenue, as well as upselling in the gate area. And so, all that, I think, works well for cost efficiency and revenue optimization.
Uh, actually, we took turn time out. Jamie, uh, and uh, sorry. Yeah.
Bob Jordan: I've got to just add again, I mean, we took, we took turn time out of the turn, managing all these changes, which include changes to boarding, and we won the Wall Street Journal ranking as the best US airline, most of which are operational metrics. I mean, not bad.
Bob Jordan: I've got to just add again, I mean, we took, we took turn time out of the turn, managing all these changes, which include changes to boarding, and we won the Wall Street Journal ranking as the best US airline, most of which are operational metrics. I mean, not bad.
Yeah, so, um, uh, all this is—you know, that we've scripted out what we sell, when, and what happens when, and our, and our, uh, and our boarding, we have standards. And those allow us to handle both, uh, um, employees traveling for a non-revenue, uh, as well as, uh, upselling in the gate area. And so, uh, uh, all that, I think, works well for cost efficiency and revenue optimization. And I've got to just add again—I mean, we took, we took term time out of the turn.
Managing all these changes which include changes to boarding and we won the Wall Street Journal ranking as the best US Airline most of which are operational metrics.
Danielle Collins: On that note, we'll conclude today's call. As always, if you have any follow-up questions, please reach out to Investor Relations, and we appreciate everyone for joining.
Danielle Collins: On that note, we'll conclude today's call. As always, if you have any follow-up questions, please reach out to Investor Relations, and we appreciate everyone for joining.
I mean, not bad.
And on that note, we'll conclude today's call. As always, if you have any follow-up questions, please reach out to Investor Relations, and we appreciate everyone for joining.
Operator: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Ladies and gentlemen, with that, we'll conclude today's conference. Call in presentation. We do thank you for joining, you may now disconnect your lines.
