Southwest Airlines (LUV) 26 Apr 182018 Q1 Earnings call transcript

Company Profile

Participants

Ryan Martinez	Southwest Airlines Co.
Gary C. Kelly	Southwest Airlines Co.
Tammy Romo	Southwest Airlines Co.
Thomas M. Nealon	Southwest Airlines Co.
Michael G. Van de Ven	Southwest Airlines Co.
Linda B. Rutherford	Southwest Airlines Co.
Hunter K. Keay	Wolfe Research LLC
Jamie N. Baker	JPMorgan Securities LLC
Jack Atkins	Stephens, Inc.
Rajeev Lalwani	Morgan Stanley & Co. LLC
Savanthi N. Syth	Raymond James & Associates, Inc.
Michael J. Linenberg	Deutsche Bank Securities, Inc.
Duane Pfennigwerth	Evercore ISI
Darryl Genovesi	UBS Securities LLC
Joseph William DeNardi	Stifel, Nicolaus & Co., Inc.
Brandon R. Oglenski	Barclays Capital, Inc.
Conor Shine	The Dallas Morning News, Inc.
Alana Wise	Reuters
Mary Schlangenstein	Bloomberg LP
Leslie Josephs	CNBC
Dawn Gilbertson	The Arizona Republic, Inc.
David Koenig	The Associated Press

Call transcript

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Southwest Airlines First Quarter 2018 Conference Call. My name is Tom and I will be moderating today's call. This call is being recorded, and the replay will be available on the Southwest.com in the Investor Relations section. At this time, I'd like to turn the call over to Mr. Ryan Martinez, Managing Director of Investor Relations. Ryan. ahead, go Please

Ryan Martinez

and earnings to call. Tom, our everyone first quarter I you, welcome want to Thank

kick a Joining Chairman and will of today, the off me we Board CEO, have and opening remarks. few Gary Kelly, us with Gary

disclaimers few Van on President Operating cover Romo, A we an XXXX. intent, will outlooks; revenue Flight results our performance trends regarding Vice of update materially Officer, Nealon, Tom include Mike of based CFO, and who an Today's and We to have outlook. Executive de our and Chief started. statements Tammy expectations financial variety different. will actual the before call could our will A provide get Ven, current provide cause factors be and our overview forward-looking projections. President, and will company's

We references include excludes non-GAAP which results, will also special items. to

financial release company morning's results. to information reference the that also earnings March Certain X-K standards. reflect new forward-looking can to adoption I standards accounting January information, the X, SEC non-GAAP recast And for You of been these information and for the GAAP on reference to effective statements has our of adopted new further three note reconciliations furnished more please to Form this XX. regarding And XXXX. want prior-year

our prepared we will remarks, SEC You filings up of our following questions. on earnings our find release and section open can And the Investor Southwest.com. Relations for it

turn time, the Gary. to over I'd this like So at call to

Gary C. Kelly

on for important a want opportunity week been extraordinary by to your affected that her was am remains first last dark in particular, to XXXX was the course, Thank And our all passing. our for start just of were extraordinary and, those Jennifer mourn caring And She quarter all shareholders you, and and person thanks support an our us family earnings joining the and since that concern soul. call. compassion a Riordan. and truly course, to have pleased matters. it and Ryan, ones for we event It loved I supporting of sharing everyone. and of of of day, Flight good but and, the have priority I couple update morning, by the touches

Our by Shults, Captain led five-person flight magnificently. crew, Jo performed Tammy

finally, There was pitched Team thank for all took had NTSB. of many I I diverted Our the to Ground many of especially Operations customers task support threw as employees, flight, our I our selfless American but into in while Airlines. want that matter, Airlines, And of themselves teams that Philadelphia customers on who sprung competitors well which as And want being the help supporting to many, customers our into came flight the day. the In to hours. were aftermath, heroically customers' Southwest Philadelphia. our thank of to of for to and have to want on the that thank all behalf action we that in who the aid

our And that and priority, blades us, have fatigue. CFM, for it and back FAA We with Boeing is have the the are ensuring led there with team dates through tech-ops equal XXXX. no and that metal protocols, inspection industry working to new an GE, truly

We're They the last Directive this to event. with CFM's very compliance inspections. the we service reveal their in which we and was support, Emergency FAA's work continue of pleased to So NTSB and cracks CFM issued and as Friday, in FAA of with findings, course, that are I've no last week, full well accelerated as of with bulletins the Airworthiness working investigation very preliminary ensure the closely we're fatigue. the well. been GE, going or

next the want is team tasks to is that our you task. assure I up and multiple Southwest have And the to business. I want priority to cover underway, We the

been Our first and that a techniques relating in we solid. and in cash to have cost but still earnings the management trends predictable, since our management aggressive plan to already history. the per margins, should me. our are reform this half system being first enhancements we've share it second several this our And quarter revenue excluding the The for is every in is story, you makes effect year second-half of booking performance, we And to we a of. taking revenue better quarter our quarter already be taking release excellent and roughly against shift days course, implemented for week the performance, second not to away unfolds. our finally, strong. aware shareholder midyear reservation major were strong. new returns second-best remains into effect solid, from bottom account as Regardless, was It free all normal pretty help it look softness always capital, year's first has schedule Strong last optimizing sequential that mentioned will flow, strong best the Tax revenue XX overly line of this manage flight press despite And has that been strong demand discounting. very results that. return all timing and quarter, the Easter revenue on

is in announced extension an year more options firming XXXX. on ten fleet track. other our from We X is and very per Lihue, share This we the And and Hawaii the MAX couple our alive. of modernization Hawaii moving in Maui, foremost prospect strategy. and items four period, Our Kona, announced Honolulu, outlook of up XXXX-XXXX of non-GAAP and time per destinations: A remains to the positive, earnings first XX work starting notable is much record them release.

on XXX-XXX X. economics The more have We strong capital Tammy results. like a that, call thank our business want makes to to this With MAX superior to to in the for making the further investment I quarter feasible, I'd replace turn course reform happen. over their and older very support first case of elaborate the tax to benefit Boeing aircraft, for that Southwest Romo of given

Tammy Romo

today. million, alongside being my and families Gary, week's excluding also you, other and was I reported income, our compassionate together you That's accident. quarter am take to and XX% consensus. performance customers items morning, very to year-over-year, each up strong year-over-year last proud with in gratitude of and all $X.XX pulled XX% we our what per work difficult first people. and during above Thank an how $X.XX, and earnings I of caring net want call our and up exceptional for thank This share all like express special incidents $XXX a employees our of do they to care our on times, for

Our an last operating first XXXX, in margins from net our was tax was we X.X%, lower line XX.X%, as quarter corporate X.X%, begin a quarter the realize rate. first margin improvement And significant to from solid with savings year.

after-tax was on XX.X% for months an March XX.X%, ROIC XX pre-tax or ended Our basis XX. the

guidance. Our revenue performance with first quarter was line previous right in our

than Our that's performance with some outlook to second was cost due into year. quarter spins and primarily a better shifting expected, cost for the solid

half. more While new benefits up the the the half quarter ramping second significant of we with coming benefits system our reservation the first plan off are in in here are from year, second the in our

year-over-year the performance unit after will have be second everything year, revenues unit from our we we expect our ahead. in our in revenue far, sub-optimal fall. we pressure our Based to We retirement on know as also quarter and we a the last quarter recede keep schedule to fleet the Classic bottom overcome goal to expect so from for positive deficit quarters third our

belts coming operating Our still $X our online a margin flow, And reservation a and we cash spending great have million our balance well-positioned margins manageable achieve through our very fuel we over reform, outlook. that strong system, net during to year we walk of trends hedge along allowing goal under to as protection provides the had to that rising modernize are with to and XXXX continue our I'll and from to capital very year-over-year first you we overview, this $XXX meaningful for in sheet it from items. excluding remains quarter special environment benefits new quarter tax with brief to first expand of shareholder With $X.X benefits quarter. strong returns billion. fleet, of billion And strong, another Tom turn revenue fuel our our

Thomas M. Nealon

Okay. Thank Good morning, you, everyone. Tammy,

with start QX and me right let our off jump QX. performance So into I'll

in know, billion as So passenger of you of which we had record operating the revenues first record driven billion. $X.X by was revenues $X.X quarter,

performance very Other EarlyBird up which XX% strong quarter, products, performing as you record up this and our the which of double of is growth had, in in revenues, XX.X% partner strength Upgraded are also had continued first in also Rapid factor our of And the revenues, know, combination business which both were were the program of quarter. Rewards concluded as well we both strength Boarding a very a year-over-year. for load for and digits We And as well.

revenues said having that, growth So in right grew all our line with our of X.X%. ASM

were RASM we those for that caused update X-K to on there quickly. last our real guidance to I month, and several factors as So, quarter, shared our us the want hit

RASM very reduced first March than Having for the off impact X said though, spring This results XX and anticipated. negative travel little largely finished we March strong was factor load calendar than more shift, that RASM. strong with first very a The the which demand of and less factors. we resulted were which performance, the RASM this trends, strong break our in point days to of was of March,

we range Easter million. particular, to in a from days And saw mid-single-digit fact, the in April In year-over-year. March yields said, of March, during $XX XX us benefit roughly as grow in calendar the shift Tammy last our gave the

this very in was aircraft to But And as one, obviously, impact profitable which will And Tammy in the we've you'll new quarter. was called a factor that our in early then in day understand we're and you are that know, into more be the to had yields. our flight The in to lower out recede competing come market, this extending means third that. specifically schedule, a RASM flying to you for this see the which But been fleet this. means continue results just competitive quarter fly I and to and fair in environments. contribute we service. very and in second and the profitability. And as transition, think the which do they the the But speak factor planes clear, morning the all as middle I competitive the of X-K overall night, negative and there a later we're still fact, into want schedule to network begin final the said, fewer flights and was, generally these we California, doing we sub-optimal to aggressively, is, on

very able out fact, You a know in international we California. commercial a and XX% and of we're margins. air XX% a into factors in flights, have share our all that capacity which even increase getting our amount It impacting intra-Cal all costs, of And, includes we Southwest in new and California fares, additional have load and we in market factors strong customers. travel, fact, for low we've to a market is, and have added load fair RASM. share We've strong with time California. position market operating our But low been high first

and bad not we're that's a profits customers, gaining strong generating are and new formula. We

of environment We was RASM impact compete, sub-optimal the and we for will roughly succeed. The prepared fare point in combined are schedule of well the quarter. X to the RASM very

QX. So, that's

seeing Gary tends Now all throughout demand, suggested, regions. the the At pretty quarter let's talk are be level, strong macro it much we to across about and QX. as

unique X% second our having of XXXX. factors you'd I expect, that said us it are and a to that, the have X%. the gets quarter impacting impact first, think of is down to And several that Now guide RASM as Flight we

us will forecasting be a for X.X of RASM accident, in point lost skewed between of the impact close-in in the for to quarter. week be tough the for somewhere RASM And we've revenue was for X% terms bookings towards context, and to seeing on far. also very an range in seen to are We and first X% recover. that since so But just of we're point May decline That travel X beyond. the

a clear, the revenue time. period isn't impact for would full we some impact do of there So, totally expect continued but

up our only all marketing paid of Now upon keep included television, back this, this back what past accident. significant. weekend. lot paid bring all with the see. slowly everything. display, And to back will And I but into turned see expect Southwest.com our off mind, yet a but back ramp is like we levels. all it of pretty that's event normal And Those marketing market, is we the emails, all it's up, traffic this to begin yet. we in went pretty marketing paid But social, to And not Tuesday, as Traffic to that that to did not we an began think I'd vehicles rebound, immediately traffic all much drive Southwest.com. last search, there all to

second the continued that on The hit flying it's QX I impact the is the to I thing. covered really want And factor in same of update. shoulder

ongoing will And throughout third have new into in planes quarter in will begin environment us the we We the to see diminish this bring the competitive quarter, that is with third service. California. as second but factor we the

and well Southwest are As financially compete I are with generating will prepared and to our said, we we profits succeed customers. and we strong

the Now million as we in still of we'll $XXX side from feel on with of discussed we're the And million res quarter to on past. million that to other the past. $XX the benefit in our benefit track system, in confident capture we you that we also $XX discussed equation, to annual very the continue new second see

quarter begin see to our aircraft quarter. while second of increasing will new with focused And get plan XXXX, kick terms of Airlines, year-over-year improve and of the So begin the strong on benefit Southwest Things to and second for as you half the to new trends. back the our the half in RASM in schedule the with first fleet we'll revenue begin with the solid balance we and off system. We'll aircrafts clearly We'll from expect the earnings, reservation are in are deliveries. in of very our second re-optimize returns margins bottom year. the in our the we is solid

very going optimistic, and it with turn we you. to to I'm Tammy, So, are that, back

Tammy Romo

Thank you, Tom.

a to gallon volatility of $X.XX January. up during of $X.XX a in slightly from actual our per $X.XX first only contracts Turning expectations first fuel price was gain from There fuel, prices original included lot cost. and premium down quarter XXXX settled being economic market the hedging hedging but ended quarter, a

portfolio price and quarter, estimated to we on $X.XX $X.XX for $X.XX expect as XX, to And April gallon cost. prices economic our premium $X.XX based currently hedging XXXX, Looking be including premium to includes hedging second an an ahead $X.XX gallon price hedging of full be year hedging $X.XX, fuel we market per and that range. our $X.XX gain a in fuel to expect hedging our And the economic per a estimated gain cost. and approximately

fuel with market XXXX current kick in barrel and that material modest gains Brent at producing are hedge per prices above. $XX gains position more crude Our at

our our us prices goals volatility against in financial Our earnings. beyond to in business exposure, for price our maintain protection catastrophic adjustments environment hedge rising portfolio and reduce to in rises energy risk provides in it a XXXX without and enables us order make floor fuel prudent to and

benefits fuel modernization. fleet We from ongoing are our efficiency to continuing realize

gallon first expect per improved XXXX, Our to we a to for X.X% in per ASMs year-over-year; improvement by X% gallon. quarter ASMs X% year-over-year continue

to expenses our non-fuel increased first special operating non-fuel Moving X.X% year-over-year. excluding decreased our basis slightly quarter on cost, a and unit items

maintenance as guidance, were in advertising. Our better such slightly to low quarters, benefits. cost came rentals shifting due Classic costs Year-over-year depreciation end offset aircraft airport benefits, than by of latest to future and and in to salary, due retirement and lower our primarily costs and wages unit the increases

with profit-sharing, and related and include primary by and – including deficit; more and our to CASM, there quarter drivers operating Classic in second X% cost labor related driven quarter, as day the and increase fuel costs, AMFA I the expect first range higher fleet our current and from our to X% extended to an earlier, our shifting and retirement mentioned excluding cost. minor cost For agreement other costs estimated year-over-year, the we

controlling and remain fuel to always first now we comparable our again with year-over-year, and XXXX, I'd our year and AMFA. excluding to am and as growth be and full financial before finding costs Mike deployment now, cover our cost an I I outlook, on focused to update to turn our like provide to more positions, And and agreement efficient. Flight pleased performance, includes over it For we on CASM, productive quarter our this ways expect capital XXXX. with be profit-sharing

Michael G. Van de Ven

Okay. Well, thank you, Tammy.

the tested, hub; fan event was there's be here's partially has and that to and we was NTSB so that that was fan an remnant failure fracture it number a the NTSB one of XX break. was when suggested what was had still of of We the XX. XX So, the the to know There engine the from and blade blade missing caused fan found fatigue that's And a blade blade engine, the to it fatigued. attached initiating far.

inlet Next, engine of the and the shouldn't we suffered the loss of and just to such cowling the stabilizer. may pieces have fuselage, cowling and caused a dramatic the damage And wing inside significant responsible know the that damage be that impact. blade for loss, engine single the

So very cooperating mentioned, as investigation. doing they're a Gary we're NTSB, the with and thorough completely

throughout with have investigation. the We parties all constant in the contact been involved

to Gary as those them inspections goal point. complete X,XXX no the days, subsurface completed timelines. of about XX have had complete year-end some bulletin recommended on a had support this we and them that the a by XX,XXX last XX,XXX have our remaining remaining the cracks. fan We fan and got the accident accelerated findings would've color blades that and mentioned, at in inspected And meant inspections of of We've our week on we fleet. accident, path of Just we we blades. Since roughly the about to those on to prior were XX,XXX service inspections with

it's can really to inspections, the to deep their the all-hands been to diligent is and understand a ensure sincerely do and and has a happened to why. involved it dive we're want and and I their And we investigation deck thorough for everything on this – everyone thank So, to work doesn't again. happen going activity truly committed to around-the-clock XX/X It do effort, an work. through their what

Tammy, that, So with back to it you. I'll turn

Tammy Romo

cash Thanks, through I'll here. the quickly sheet now and to Mike. that you and take balance turn flow,

cash and approximately of return shareholders short-term $XXX Our and with liquidity is billion ended million us was in flow cash repurchases free cash and quarter $X we million, Operating allowing quarter our dividends. first the strong, was investments billion. $X.X approximately and to $XXX flow through to share

in Our leverage the on line tweaks is $X taken the you billion $XXX $X.X be XXXX this non-aircraft our and in expected is we low- leverage to XX%, is in we've to Boeing our in range. to range. million CapEx to approximately order $XXX billion with aircraft Based the of million mid-XX% target, our to CapEx our through, that $X.X expect range. book CapEx total, approximately which already in Included XXXX billion

effectively deployment, mix to will evaluate dividends our drive for to value repurchases and company, shareholders. We and flows. $X capital balance preserving we manage our sheet our healthy of our including share shareholders, to the repurchase we overarching our people have cash continue and focused and balance and currently overall an remain and investments of on strong our goal with billion continue million We our $XXX long-term remaining authorization, in share our

effective lower be to tax to are We XX% in from to we corporate tax XXXX the and expect XX.X% rate, our range. rate a benefiting continue

had XXX a the during quick we and fleet, quarter to deliveries on we first ended aircraft. quarter Moving with update XX

in quarter bulk around deficit deficit we And fleet the the aircraft Classic we fleet a in had to our midyear when we're get will XXXX compared our third communicated, we've quarter when third into before XXXX. of -XXX recede XXXX. fleet XXX of retirement As

order range order will through and changed this also for earnings and approximately in we'll needs this XXX outlook have our our $X.X CapEx in over XXX-XXX XX books has remains growth XX next retirement with remaining end per to the manageable billion the billion aircraft, options, We very the the to at you, Gary expect covered and $X.X along book that we covered and manage next significant refresh year an Aircraft that year years, low on retirements we've the a continue increase not years, to five measured you capacity year-over-year. full us and and in X% with to and with with allows year our average way. for release,

a margin our and of shareholders net expand is our good closing, in financial XXXX, am pleased that I start realizing our the and are we're year, and for fares excluding customers. people, we to So off performance it to investing to putting meaningful solid our already reform, special costs a working we to our And in can benefits items. for start and off work tax back our giving hard rewarding low to continue keeping business, by for and our

overview, that with to ready we So questions. are take

Operator

our take Hunter from we'll And first Keay you. question Thank with Research. Wolfe

Hunter K. Keay

said Hi. I about clarification, change expansion guys. comment? misinterpreting there point just quarter had spoke, talking just margin in of the am EBIT appreciate Thank time. Is Or you the Last a I plan? you're you, Tammy, net expansion. now. the we quick margin

Tammy Romo

Hi, the are you for as the not first we've Hunter. No, the plan. acknowledged comment. year, we here of misinterpret half off And did

we the you And guess, our not we good side. on reform tax we a you, are when here. fuel here hedge the – that net about And the quarter. into see solid Certainly, of goal feel progress margins, rate, it in tax So, our great I feel how trends I goal. fuel, good depend the account margin about on terms helpful will the from first on recover towards about take that revenue feel our lower that. we've terms benefit we But should place, be pretty quickly side got in obviously, so is if in of of cost in

we revenue second here how start off we're margin, have the to feel and just side. the year-over-year, the good plays out will benefits about cost we in have that coming just half. net on of see real to But great here a revenue Our it on I

with you reservation those with covered pretty we've extensively respect the to system. think I

our compounding the side. no really change just on going We're And revenue to so, in goal. unit away keep

think that's the So here for half. help that online about good about think second we feel again, us have the outlook coming the we we our for I really all as quarter. of the But second here mark over question real

Hunter K. Keay

eight Xs And to retirements? that be those Thanks. coming MAX ago. XXXX -XXX to three Are to are incremental going the offset in be the relative plan by going then Okay. months incremental

Tammy Romo

Yeah, the modernization are yeah, that we order you, for our covered fleet efforts. those with

be intent. So yes, that would the

Gary C. Kelly

I recap Yeah, Boeing would airplanes that there some from say, XXXX. my are little moving Hunter, absent XXXX back-of-the-envelope that I'm own are to just around trying order here, but math this into

in So, XXXX, means I are fleet absolutely ten, are our that the equivalent think And we've modernization covered as casting so is additional deliveries that you. additional an we And number this XXXX. orders. there ten for XX of planning -XXX retirements firm part XXXX, with firm number XXXX, of these

are that. But we flexibility to have do offset Now, not is what can fleet. is the however telling exercised we with that retirements. with you that We and what are those we you fall, got choose we've is would today sharing that we XX, they in today

Hunter K. Keay

you. Thank

Operator

next our JPMorgan. Jamie Baker from take with We'll question

Jamie N. Baker

you the isn't But Gary, long-term just I your to familiarity track in share assumptions you're be of Is testament to that you safety not a All had analysis Southwest's to you week, Hey. precedent and willing haven't I'm culture analytical would as in type that to had the weakness compliment. the in engage think embraced actual following? a it's obviously, this that at past. more analysis an of since Southwest, do analysis the of lingering this you until do that, this May? there identifying area book-away some thankfully, some Good in that conducted since, and morning. the get to past for is record how trying you is modeling specific mean industry I

Thomas M. Nealon

hey, This Well, is Jamie. Tom.

take try (XX:XX). one, don't and you I'm can for I mind, best If going that and the I'll do to you

Jamie N. Baker

Sure, thanks guys.

Thomas M. Nealon

X little point morning, point. X.X on closer a are probably versus point, this At to based we this

top was So, that traffic it's we're it thing. technology back draw whether we had event whether right was we staying had But XXXX. though on it not of in this events the or as other haven't would outage down, an

So, are it a when and we people event up. do have bring see dip generally we in a takes we it traffic aware, to some public and we see history have with back what

So, But as about That's if that's you basis for we're this. our how the that's I of will. kind baseline. analytic of kind said, the thinking baseline,

don't just her I reason we're events X% think we And we and that's at referencing prior the when this and going our we with traffic. and seeing any and team, TV and not feel the probably right far. point, but just it's to I really social And question, because are into go with back on have appropriate doing this We're back what are your that marketing is team, running is lot thus to we think other saw does to of working do personality, our that But has Rutherford online lot our fun. a market, in think online. not it are we a for of appropriate we to search. any of our paid for yet TV has trying direct way want what do close just the it comps bring back best keep are us up The to terms really is based happen And respond in Linda our social to with we with get we probably sentiment, X% mind, go listening reasonable back her the social to right? now. or

Jamie N. Baker

excellent That's Okay. color.

Tammy Romo

other to thoughts, just a just clear. add I'll be Yeah, and couple

And you taken our said. out in is marketing. bookings, understandable below to Tom as certainly We some our we distribution pre-accident point the we're as our I'd this with currently through and that's for And to running respect continuing just direct are to And rate. Tom's model. see run weakness reasons you as all expect our meaningful stated, that very

estimate already return admittedly, out rebound. the impact But point, our quarter. difficult we we we've activities, we as know in year-over-year trends for back to we X normal our second RASM to But about a it marketing expect as pointed lost So, precision. to the with is

loss that be close-in comes tough recover of the once to on we lost see rebound. our those are based back in we'll course, So, marketing online, revenue, trends it'd hopeful bookings, that but

Jamie N. Baker

slots Southwest Understood, the the that follow with I you're our to press slot much grow our an into network." up, could've release And mentioned that only the that, said of new new network. to and cute when complement you transaction, imply going Does that going quick a read slots? complement you too interpretation? too in as Or to don't cities just discussed "the want but fly existing is you to are

Gary C. Kelly

think all trying cities was you're we with, our for from able will complement LaGuardia of that those were to network in be existing I routes capacity, have two a a Reagan. that existing fleet, that point say so. And already and our to main we're the that use we those Oh, new and familiar basically part strong we'll growth the is simply

Jamie N. Baker

Okay.

Gary C. Kelly

anything destinations, Southwest, to still necessarily those of are markets developing both tinker read with we so think the I word continue yeah, into complement. and wouldn't and for But frequencies I

Jamie N. Baker

you Thank Gary. it, very appreciate I much. Okay.

Operator

We'll Jack take Stephens. our Atkins from next question with

Jack Atkins

time. effort year the prepared to of to in year? if – match off-peak for the back you positive adjust better it, an maybe Thank four call in the capacity not, RASM in this you be back, you are expect months schedules demand? with still market And third Gary, afternoon. flying back Good do to some

Gary C. Kelly

well. I Well a will and your to Tammy have as view and know Tom question as –

think is is what off are we I that plan. that obvious

to goal, hit of that to don't telling here, had end an that have I we going confident off result so what we're all because momentum know I'm I my terms and confident we've I think don't exactly that admit our that X event, we'll how and to very much, will be. I regain have percent I we in our think you just we're our don't level am I trend of know and Now, in confidence exactly which the will. when, know

call. again, read into but much Now close say and it's don't I personally too too would just to this,

we that we all either. is not way, a cannot it's at can it But make said it. likewise, not So different obvious obvious that

think add and close the and the question continue going confident only the thing but basically same that. be Tammy wanted margins the same is just asked to year, performance, onto that I little side. growth the too reasons that to Hunter onto unit earlier, margin It's the I for there just would is to and a for I add that call us was on out of answer the I will RASM The the positive to are goal say. of count all net to we're important, having revenue So, don't goal it's pretty other

And a you...? think up started. so secondly, that will lot year on Tom, prices, what do to I depend obviously, So, one, since the number what then, are which happens on revenue. answer happens fuel on what

Thomas M. Nealon

Well, This Tom. Jack. is Hey.

profitable, very is shoulder how performing all, to our I concur though, it's may the doing shoulder but are just profitability. how And still it's find And said. that I at flying terms profitable; But redeploy that pull us. we are we'll take a not fact accretive. capacity flights stringent First of we right the dilutive, also look performing. we it's will on think, be back more if It in elsewhere. flying at helpful with what a look RASM now to probably is way of the Gary in always that and

though, you'd don't of right? that So, my away turning profit us think kind metric, to I that's a just so it. take Understanding your improve see objective on

Gary C. Kelly

prefer implying we that, what that of to is the that's is do got Tom address flights able of more we've what day, would second and to the think be think part the into back in shoulder we'll I as clearly, those I to Tom; peak your and Yeah, airplanes question with the online. is here technique I And the half best come more agree move year.

Jack Atkins

time flying in there then, this a year. you to very market flying, of a either year it's from That's to early profitability great. just or the system-level next new of development, off it ask or accretive sort kicking color. this I the follow-up, you Okay, late again question get helpful new enter get timeframe once for it, start to market of you the context could sort sort historically us Hawaii where of what's to sort my remind And sort on of

flying that for think normal ramp you market you Hawaii to do how guys? to relative Just development will sort of

Thomas M. Nealon

different two questions. Those are

first one. take the me Let

long and I'm take so. we years. or And sorry? connect profitable. sorry. to The serve it's to first misspoke. is for one markets how I turn it typically I'm we typically Three know initiation from us, us does where markets when the customers three-month profitability, a turn

Tammy Romo

years. Three

Thomas M. Nealon

years. Yeah, yeah. Three

what So we're seeing. that's

I the really quickly, see up ramp think because in Hawaii, In all a to very the going we're terms Coast. that West nice us know customers of

base Coast. customer on largest the airline of have the We West

you're to going think very and up see very, pricing. quickly, ramp going to think I it lead I on we're

going to traffic lot very, quickly. of I that generate we're think a very

Jack Atkins

again. you, Thank great. Okay,

Tammy Romo

Tom Field, about said, depends markets Normally, ramp probably we're you where think see on with And falls, Hawaii, the up Just significant it the about years. quickly a market. the Coast. agree very in of our a we'll what market presence West three to is more given years, hoping our When up I what Love that see that was add for we we international like saw Hawaii really Dallas very but here, probably That think will onto quickly. year. three ramp

Gary C. Kelly

Jack, here And year-over-year. ask but then, that or you agree. X%, I quarter is, modest Yeah, And our Tammy, is the growth of this I think, percentage less. in exactly, "development" the call didn't markets very we first

of system, component the a one. So, current small very it's number

the later undertake And the two, markets plan the sort sets to of on in is I factoid to sort a under international, number year, up to so lot was mid-single in don't offer little segment, very us modest. meaning say going want I year-over-year, that to our growth And have of up expansion that development. that digits. of newest well an i.e., that's we also we that low- is other

maturing. we'll a launch. are to the system got up the good Hawaii some I queued revenue-enhancing position undertake and and especially We've the second techniques be in very that for think So, half, is

Jack Atkins

very Tom, Tammy, you Gary, thank great. Okay, much for your answers.

Gary C. Kelly

Sure.

Operator

Rajeev We'll Lalwani with Morgan take our next Stanley. question from

Rajeev Lalwani

Good afternoon, guys.

Gary C. Kelly

afternoon. Good

Thomas M. Nealon

afternoon. Good

Rajeev Lalwani

the to Tom, reservation that comfort provide around specifically to turn you can through it we going as year features talk you RASM in to impact relates and color to are help scheduling, or then apologies hit benefits relates of there. the to of maybe about you so already? to where the And and any you're for do the that a around those what's and us on being that XQ triangulate system, And some benefit what rest then XQ kind it or XQ if question the as there? can the just the see you can progression provide get how two get the you provided that

Thomas M. Nealon

Yeah. that. Sure. Glad to do

I or really talking one O&D benefit, opportunity So the guys with non-stop by network. bid capability the notion primary one the about us is And we've you gives does what that connecting understand but the that, of of been that res this on passengers mix really functionality. the you maximize pricing and is to optimizing revenue think it

not level. optimize level, revenue to there. the old the flight So, of at will that's way by flight you're more method, you'd what we're optimizing focus but the trying so do the the example, itinerary just optimizing on at And

we And or mid to of and – oh, seeing first full from deployed for, that's do $XXX feel a confidence the QX, about We have QX see comes primarily is are a in that year. up tuning and gosh, the we really year. team to this, trying for and already have the good So, signed value million benefits. kind we're the of getting kind for we really half nice the starting it they're it, that's going late lot what when what and of so and we we're where

margin very it enhancement hear And question, what in coming was from feel the you're really tell about Rajeev, half? we your second that good me second Is that. asking? I So, again, couldn't where's the

Rajeev Lalwani

scheduling, to RASM XQ will the to be the impact scheduling on of start the in then the the half what it's year? back and benefits Yeah,

Tammy Romo

Rajeev, X of of benefit – year-over-year yeah, Yeah, XQ, in our point it's Jack, for expecting that it's it's RASM. terms – we're

Rajeev Lalwani

XQ? in Okay. And

Tammy Romo

I'm sorry, penalty.

Rajeev Lalwani

And will the of end that the year accelerate (XX:XX)? through

Tammy Romo

That's well...

Gary C. Kelly

There's penalty quarter. a second X the in point

Tammy Romo

so penalty There's the point a thought second quarter. for X said I'd that. apologize penalty, I in

Rajeev Lalwani

that in year of the then penalty versus what in benefit or And the XQ Okay. half XQ is point back the X and XQ? in

Tammy Romo

second the In reservation again, want the half of shoulder the – part. sure, flying just half second to make of on the the for for year, and the benefit,

yeah, So to that's going to just recede. we that expect –

see the overlapped we time to, We get that should fleet recede we through year. so we our as continue say, will go have by to October and the

Rajeev Lalwani

question. quick a Mike ask can I if And

accident, all and cetera, – shape the associated reviewed, have your in that's procedures all appropriate there, ask? good you're with to if et terms maintenance In of been

Michael G. Van de Ven

our with bulletin? of all in service procedures are if asking You're line maintenance the

Rajeev Lalwani

Exactly.

Michael G. Van de Ven

Yes.

we've XXXX. been GE of back in since and back with and went CFM August incident we So participating first our

concern. it so And bulletins on look like And that. we with in them the have at we lockstep the been this and a through service requirements have time, point compliance doesn't

Rajeev Lalwani

helpful. Very

Sorry for the confusion, guys.

Gary C. Kelly

when meaning point. we that just removing is they the developed CFM are inspection more current And that would ultrasonic we're XXXX, that a do eddy I service the the they extensive add the were inspection then which blade. provider, do GE, back that in using at our procedures that by same do ones with overhaul, the

recent is obviously I and frequency as his are most those earlier report, and inspections. week, had themselves findings up confirmed have is air And What inspections last we a since the Mike and So expect the positive. with that we with with the procedures this unchanged. now bulletin stepped no directive of obviously would at point, service doing different what readiness is reported the we've which

Rajeev Lalwani

Thank you.

Operator

take question Savi Raymond Syth from We'll with our next James.

Savanthi N. Syth

to has part to there. passengers this strategy opportunities If your on for I'm pull forward correct Hey. planning and here, maybe might your offering the Good California kind that strengthening if afternoon. of of me it of were seemed that – wrong California – of and defending I the the me kind been position follow you of kind up strategy to

that those think normalize? of of from fast-tracking of is to fair should is a So start as an revenue, a I more it growth? to thing? develop should kind impact markets And multiyear to as that that unit assume of kind of they Or this kind near-term a

Gary C. Kelly

former. Well, I think it's the

all us be or it's are on expansion else is performance. you by very that revenue. And And matures Whenever should in by fair, would then an see unit what being revenue time. what here you going And you've a some equal things dynamic. underway it to competitors, improved think our there whether over be there's is, impact I market, is expect typical. unit got

is will that absolutely our will. – if So – these way cost, the this looking competitors tune, are opportunities we'll an you opportunity it, we're at but tune, there's

in attend So West we some point our that the we and that. in have to would for know time, we to customers, enhance our system route opportunities at

So and considering And country. a But it capacity competitors well. unit perhaps I add not performing of your really also much capacity as I competitive situations this this, and Tom But highlighting while interpretation competitive we're California. is with very how Tom and going this adding got accelerating was point that we're California, quarrel example. just not not have much The it's it's the is, revenue think an impact. performance Southwest see a out kind perhaps would said We've that. that don't I bit, over all some to

was. instantly everybody think well, almost was exception. instantly an I – think it And profitable Love has was how in that expansion. I unique nary the ever But that the happened impact with on my revenues. That the it is unit only remarkable. was that was and Field knows memory clearly time that But

Savanthi N. Syth

end expected year gets capacity the in capacity? to kind meaningful therefore very move half? just around a capacity not XXXX may, growth. driver Hawaii can be How of second the of kind actually on that the I if XXXX Was Hawaii – of Hawaii? And of around could when kind timing of at much launch depending get helpful. on of the Or of on that is clarification the launched, That's and a always the the skewed of

Gary C. Kelly

think that's I right. No,

planning think year. the towards been I that into best we've would pretty be that opportunity our deep

think I that So you it. nailed

Your spot on. thought is

Savanthi N. Syth

have So that it wouldn't an impact.

Thomas M. Nealon

when you the saying, impact. certification. sure massive still – to just today, cities sell sure now going depends and our get understand, but we're want – We've been this our fly we with we've able of not ETOPS first it's saying just on And be those we year. we're the to It to ETOPS. be saying through this we process able want It depends to to announced Well, we FAA been year. going just a really have be to upon certification all, to

certification start I of think a with what ETOPS you'll can't you schedule. see is full is the part

of the kind to your that and it with and proficiency into have FAA thing. grow way You kind of demonstrate

our I So a flying would it's late I the I have think us on the significant year, think back half capacity. year, to be to in for love the of But going Hawaii. impact don't

Gary C. Kelly

So in other words, for right now we've flights. reserved airplanes these

to that year, with told those yet. haven't then do what And then this we upon commit fly what planning later the the be time. exactly dependent and exact will airplanes, our you can't are I because We what on when date an becomes we think don't think Hawaii at we're if we answer and do question know we options that I

impact But to but trying Tom with wouldn't. answer would It we're obviously airplanes be. we in give airplanes, Hawaii on we was that you just right Hawaii to not the we're So most If have It think capacity, think move it how in we we'll theory on fly are flying now, productive opportunity. those I depends that where some have could else hoping somewhere and when off our that of an those possible. going honest know Hawaii.

Savanthi N. Syth

guys. color. Got it. you, Thank That's great

Operator

with Linenberg Deutsche Mike take We'll our question from next Bank.

Michael J. Linenberg

back questions a two it by Hey. looks I third. about scale guess here. JetBlue like to Beach Long is Gary, going just

free like be sufficiently presence? your obviously, in I would served? Or you now Beach up know that feel slots. growing interested so, it's you a Long in market market. that you're Is And that

Gary C. Kelly

and Sure. hobbled Long by have we not been I more agree being Beach. to Tom that access to have able

so have operation very We modest a news. welcome there, that's

Michael J. Linenberg

Okay.

question, And or Okay. just and then this my Tom. Gary is second

of the power-by-the-hour extensive believe I checks? inspection And maybe does of some impact as engines does, this be and blade I'm the do, wrong you costs, agreements. of this the cover process, wondering in Just if through these I recall, you I cost some just mitigate that did that could have

Gary C. Kelly

to want that? to you speak Mike,

Michael G. Van de Ven

of on have we Yeah, sure. Yeah, different our types – engines two are agreements.

time as particular and power-by-the-hour, our material. on them some are excuse this of airplane you of the This are have on then are on others material We – me, time that kind and on and XXXs with say, power-by-the-hour.

And because so, GE, of does back the our that yeah, transfer there. risk us the those mitigate the service provider help to cost is

Michael J. Linenberg

an are do is dollars? the it cost just some be millions Mike, dollars? it we thousands have in it have too of of mean, Southwest, you hundreds I protection could Is there? is you that on early? Or sense what fact of early talking, for potential that do quarter even the

Tammy Romo

but of give an And early, It to in line, the what But, it again, idea dollars, that provided. implications is CASM-ex just within actually with to would a capital directionally. I of hit the to in would be millions you expect that. little what there's involved our some cost would you given we've the costs best terms guidance our be guess as we've

Michael G. Van de Ven

of mostly (XX:XX) engine some remodeling costs, those would outside those And of be The be labor the the inspections, repair delay those actually kinds costs with doing associated things. of costs. time That things. would over other kinds

Michael J. Linenberg

Okay.

Okay. Great. Thank you. Thanks, everyone.

Operator

with take ISI. Evercore Pfennigwerth We'll from next question our Duane

Duane Pfennigwerth

different Thank got think wondering just you lots versus allocation, you. alternatives. ways. M&A allocate I'm of Gary, in on to capital other how you've about capital

there considerations or Are cyclical How current do some environment? experience you there. have other You that about think considerations? the in

Gary C. Kelly

our hospitality we're strategic reform, a basic wonderful we've service, opportunities to particular, boost sources here quality of XXXX in the This it's airline. the on us. to to We And primary of very hope behind is is continue things. our want always the focus XXXX, operation, to think customer grow. investing the initiatives major Well, a and of do. got nice financing. the and got that But, in focused tax those of Airlines. to very Duane, little grow Southwest We've in in cost-effectiveness my our really I our is obviously, lot to XXXX fair particular year work our and There's say

acquisition. for So be imperative there's an hunting no to that we need

now. to organically. I eyes have view, is admittedly if open that shareholder that, we've in a is our always we'll be that a we priority good were take it's something how focus and got late always XXXX. in clearly and a different opportunity there our a XXXXs; look but can right and focus about to thinking not just think is that's grow that, is at. that than not we our the said about improve clearly where And Having XXXX, value, this We're thinking

Duane Pfennigwerth

Very good. you. Thank

Operator

We'll from take Genovesi question UBS. with next our Darryl

Darryl Genovesi

$XXX going and said Thanks Of new come of million guidance? through you is revenue Hi, system that for everybody. time. to your the the second from that quarter this how management in the you have reservation year, much is embedded said

Thomas M. Nealon

We did. million. between and we said $XX Yeah, Tom, million $XX

Tammy Romo

$XX $XX million and million.

Thomas M. Nealon

to the second attributed ...was quarter.

Darryl Genovesi

you. Thank

Thomas M. Nealon

target our run rate get the million to $XXX for to in the And year. is

Darryl Genovesi

you're implies headwind time basis RASM Thank seat it based from like growth up through something of to it year-over-year correlated And one than this up I I on last. that guidance, If called should day less or incremental XXX year me could fleet, on think by like is context pretty in going that to of fourth the think the seats looks your in of follow number to with about utilization X.X% about guidance I and I then the guess if I when question. that's quarter flying, that implied And fleet in about be And low your steady Rajeev's just the last in to If to try increase you've more average I guess X% that I fourth on acceleration suboptimal then three versus quarter. within year the rate. X% the something a be that higher in XXX,XXX you. basis, out growth quarters your capacity the think your looks year. stepping points of ASM that's utilization consider your this which

So you're flying RASM off-peak we can you just from our sort utilization the year? through of sort reconcile versus what the fading saying as make the the of with on dynamic way hit

Gary C. Kelly

this recollection, is necessarily without puts takes is utilization fourth that having our go "very for studied I'm the I'll all the hard my pushed first quarter following fleet year pretty And Well, last no. and And here. normal." that in we that the is morning this year. you're not describing. answer The

we So the absolute and my of year basic in recollection of that those very is at utilization all second and is of quarter. half used that to normal especially things look the block fourth the kind hours the

bit. because sure that's classic offline stage don't you following – I IR increasing these know is our but that increasing. length recall right we can down question. the we're and as gauge one you I be let that know, now your a So why things take folks all is of The The

Tammy Romo

It's down.

Gary C. Kelly

trips the doing trips what So doing. are the are

I me, have so don't that And I would of of that offline that to front take anyway, easiest just is be it all in think and okay. if

Darryl Genovesi

very much. Thanks Okay.

Gary C. Kelly

Yes, sir.

Operator

with next go We'll Joseph to Stifel. DeNardi

Joseph William DeNardi

think. that you confidence this why have future? creep you some talk of the your back what about I a Yeah, it of met this has like it you Can thanks. your a just control, track side and bit of think expectations Can CASM Gary, happened outside feels last but been you little quarters year. hasn't The about talk lot the un-Southwest-like. pretty that near control, – just gives revenue there's is this couple obviously, on get in of can in is of you

Gary C. Kelly

that a agree think I I Oh, I un-Southwest-like. fair don't know is it's so question. that it would

retrospect, fleet by to sometimes do in go roll performance through year same in been it's our And also think a been good think a spoiled been get I just how new brand this transition. reservation is. system. challenge – out It's the to I challenge it's a we

than it's So timing think absolute it execution. is I more

would the again we're on. in focused put third I these that that think there, thing things and I are

first is would quarter fair the I some kind environment. techniques I that enhancements we're management we've made thing third manage the competitive just better focused our say in think to environment. in And that So to that on of already the revenue

three. are So those the

flying goes several is is route has which to which That over of years. mean continuing day by, now I just understanding think the length process in, strong. we optimize too cities I itself sound that especially it been last very really the the as right We're airplane system are destinations. time to, and the long. other

are So that really are really expansion very we "developing we're me. and dramatic looks markets just managing of those international maturity." that are quarter we very fairly finish really reaching strong. I to apology. to as an my back positioned opening to I'd The they showing some significant all things had still not wasn't this revenue good have good a comments. It's well go looks through. of think solid, improvement performance, and So kind our very we and that When know it year best

Joseph William DeNardi

Okay.

Gary C. Kelly

we But aren't I time understand your any miss and we it ourselves. and we point. get happy We a plan have here, with it,

not sense, performance. But assure saying solid satisfactory. it's that this can that I you we're a on satisfied. very that never So think we're still the I is whole, In

Joseph William DeNardi

helpful. That's Okay.

that my And guys questions I'll some you asked, got the so be kind the with worst go to Chase provide of other disclosures one. industry. agreement of around this The continue in the

the business Southwest essentially market take on address can And then, dollar community to credit every more could So that the I'm know a investment card? that. may you you of cut appreciate about like where just spent if Chase the you wondering and a secondly,

Tammy Romo

asked be for you I'll little more you since information to Sure. today. happy provide a

I So you if passenger better, $XXX associated kind to redemptions. of just Rapid passenger of believe Rewards, revenues And related other you look little Rewards. of at understand help were revenue, attributable revenues Rapid before, which our pointed our a our Rapid revenue, revenue economics our other to out with approximately bit partner and revenues to most to we've relates Rewards million

of program, for capacity growth that continuing Rewards we're So a in our Rapid see our overall, and growth. grew quarter excess in the first to nice

just a disclosures on robust be you more more then and revenues, XX-Q bit. little you should $X our once of filed. to little current And you So Rewards. on give roughly insight billion that we our we'll the the Rapid $X.X – balance sheet get providing help the $X.X on to the billion think balance liability, that it's for billion of portion sheet I air-traffic relates

Rapid amount Rapid sheet, liability balance balance total that noncurrent the to Rewards Rewards you'll add related billion of to get see traffic a ATL $X.X you of that air when So related to the you on billion. $X

Rapid So Rewards. total add roughly you the portions when look relates when noncurrent of ATL current our and half you to – both at

your in hope that helps I So analysis. you

Joseph William DeNardi

can you on perspective interested Gary, you. just your more that understand want maybe know it. why in the market Thank I'm about to would business?

Gary C. Kelly

Well, I'd don't move again, And And happy we'll meet what my be our to disclosure. to whatever at for are, harsh in to to perspective. mean ranking deferring requirements a we as you all. all, share requirements this us at Tammy I'm I me have certainly and doesn't way last but guide us

is here relations. called investor bet, I what of marks. I'll first them think all, give function you is, have our And balance to we high

bend needs. the of meet I do competitors know. every want be we're these – very of the to to spirit kind many At I it consider things component, backwards much things time, Airlines. of would them our them all I think the they slugging of And well, investors' things proprietary. revenues and these include that's to want with single we out there day, same Chase Southwest that our are not manage and don't to how over know

understand se. also the But We're from investors, to not own loyal I So hide They our competitors. per Southwest. investors that's think trying aren't our reason. anything only that you to

continue because and wouldn't our want the make But what guard protecting that we meet know, Southwest, judgments is that we only so meet have also needs. the the and more to duty of reason provide to will about we that your we'll competitors So and companies' jealously. we very information don't needs

Joseph William DeNardi

Yeah, Investor I the the And sentiment color help just wasn't stock. thank on the means. more by insult side I and multiple on trying any of you, Relations could to business that Gary. think

I clear. think that's pretty you. Thank

Gary C. Kelly

insulted. feels don't I no, anybody Oh, think

you whole fair I least we general at why ask reason open You gave and hopefully ledger. the just question a a don't up

Operator

Barclays. final question. one today And we with more have time for Brandon We'll take our Oglenski from question

Brandon R. Oglenski

Good end. the Hey. Thanks getting for everyone. afternoon, in at me

to just it. I'll alluded even I ask and So, you Gary, think one,

find X% outlook prices reality flying an issue well, If up really of that the you that back the not so come the But being go there. somewhere one's capacity proactive for that can't the half no the offset to out up bit the And different investor fuel. in fuel had costs competitors But We're do growth an you'll quite your get going a we've Hawaii is aircraft taking is to have since believe reflect everyone's asked ground, put reality. off time. yet as plus tracking, to it's year. as but this step revenue and is else this

prices term? are to just is Or that fuel are So long this? live volatility investors we to thinking of we not at with? that come looking just expect out should fuel maybe Or something volatile too and have how

Gary C. Kelly

it I'm point. years this are take give of the me not if let that But financial vast of year results. all, you industry. and the a Well, in I've After phenomenal being four majority try decades, over business hitting in I'll first been for redirect these your working the the

results. So really, these really are good

have hedging we perspectives are in that outlook the outlook as our revenue margins other We with have. have, from areas well well that positioned as we really fuel very we of couple the a prosperous the cost and

to think very not shock. $XXX-plus are. we're What something what to have I'll sum a issue. repeat, I an a think we get I up, we is goals about. talk fuel just will through our have well If else we positioned then which way hope it I manage But now our barrel, to real price

to every Our perhaps And unit goals to addition in have that, year margin we positive performance. are importantly, revenue more want expansion.

prices So think expanding. And margins I go fuel up. much impacted get somewhat industry go be all need to fuel we when to doesn't likewise, when down, that for margin the will seem prices recognize credit

us And would quarter. at have one because put cover flights the profits Tom to rapidly, be escalates to that add look would in analogy, these they compared won't schedule. that. as flying our revenues better of to think we're they just on still as if on are I fuel would to more margin, say That have the pressure flying an a more shoulder it. – off So and we happen also that simply tools clearly I the not the made But point would an profitable

some the to to still If prices to fares, airplanes? our fuel way. at be Well, they're if raise would stop were decision immediately to not have able So we not in that lead a same flying of would looked profitable.

but this again, is We're of a a So I we're got very we'll to to means shareholder continue motivated revenue strong margins We've returns, lot shot think this need have unit happy. is very which very net year generate growth. the at aspire drive and just grow bottom to prize margins, generate which the depends. continue margin motivated. very, income significantly. to to to to we growth, But line I'm

very environment, environment. a well-positioned way to our to at I least manage through a it's we're higher cost and good have think fuel somewhat

Brandon R. Oglenski

Appreciate Gary. it,

Operator

concludes to of the analyst the media joining. you Ladies gentlemen, Chief Linda portion Senior now Rutherford, Vice first of that Ms. begin with I'd for Officer. and today. And call. we'll our call portion Communications introduce like Thank today's President,

Linda B. Rutherford

if media give get today, Tom, you'll very portion go ahead them and the questions. instructions of much. thank for up started call some you our to queue with can We

Operator

And, . The Conor begin question, first with Dallas will our Shine from ma'am. News. our Morning ladies Yes, with and question gentlemen, comes we now

Conor Shine

Good afternoon, guys.

like those just I'm guys about you XXXX or conversations engine at fan accident I is risk with was expressed in in if the still looking understand months and the that, is level NTSB there's and this – wondering failure. involved the any question of regarding comment following around from provide International color with blades. what my So what CFM were the can

Gary C. Kelly

blade way also you surprised inlet cowl. a it. fail, the and would fail all, that think – then correct But, Well, would and cowl I first that that start surprise can Mike, it maybe would destroy such a would it there can well, was, inlet I the of in that fan

the led So needed that that inspections. to the realization we to increase immediately

GE Mike, So CFM, does I the actually engine not maintenance, believe.

increased by cycles. we initially the the on CFM, do their with and GE the happen inspection examining blades then, has single XX,XXX were Conor, working our time we step by ultimately, And Southwest, And first, every our they – you then, evolved They by maintenance end bulletin our the which in to is they service eddy our the to by cycles. just X,XXX overhaul And that in blade Airworthiness fleet doing CFM every see fleet layperson's way, So between the the that ultrasonic every in then changed FAA that we in and XXXX older that overhaul, And that. that identifying inspect were and it for of examination. has – also now decided the touched those what their their Directive changed is the current. before we would technique technique. and the to inspection work, terms, implemented essentially

beg I well, your So, pardon.

bulletin service the just it's think CFM. I by

to improve was examined, all that It think that, But the response inspections was I and at necessary. with earlier continue blades. what so essence, reported work what is again, aren't with thought cracks the you just the to in aggressive I I look blades Mike these we've you and did, So find their appropriate. the blades don't any we'll the short manufacturer answer in

of there work discarded. very make fatigue few and but I just engines. very, previous was In sure with Boeing have that we'll that found to and to think blades we GE them. continue we'll XXXX, improve on blade, no engines failures, both to one those But the meantime, are in course,

Michael G. Van de Ven

is the on hours in it, kind XXXX, XXX engines those fleet history back of the that time north of they Yeah, Conor, first had an worldwide million of probably the you of that in in also, and had flight just engine engine, that first that event that event. the

not thought issue. it so an and type of was or And aggressive it trying that some on or understand GE I or age thought type whether they and to were was there happened what other I very CFM, that of just anomaly

I Gary agree said. so with And what

was is focused the think recent into they I inspection, was that bulletin techniques, introduction needing were ultrasonic engines, to into they and an then older look So this there part comprehensive. inspection then to there numbers, at very drive techniques, most certain improvements service inspection of on a

Conor Shine

Thank you.

Gary C. Kelly

by have in that's was these that FAA rulemaking The asking they on we working now happy Mike, there and, through inspections. a effect, confusing. more probably be confusion, for supersede think I previous in been been XXXX while there detail take have CFM bulletins the we'd And proposed – during that one, you to three service already because is but there comment were doing

do inspections never Emergency So been that an out deadline. last came all which with that that has issued the very easily we FAA before their Friday, incremental required will Airworthiness the by Instead, form. Directive in

compliance engines that. But are other want necessary. the we'll we we to all think like that things to I work with stepped-up have the agree them in inspections that are inspected, with

in we that interval, doing and engines have I make very any think we're to crack it's quick darn blades at that a them. just don't them have on sure a

Conor Shine

Thank you.

Operator

We'll next take from our question Reuters. Alana with Wise

Alana Wise

Hi. question. Thanks so much, everyone, for taking my

that something the this had prior part this whole inspected as but So think I XXXX this thing, Tuesday, is of been bit course has throughout on the little the a to been of the into class unclear engine blowout look of engines? involved

Gary C. Kelly

not clear. manufacturer the did for made year. not the is it because due this inspection That criteria inspected. established was the the engine inspection. meet reason that was And that No, was for It had

on, it by been inspected just but was was had schedule it on inspected, the April. be again, not to So

Tuesday we the done we either those have X,XXX we a are inspect is over since from we what, will have blade to be cycles engine that fleet, and will every inspecting baseline, last point month. fleet, meaning the or every So XXXX then course since in in next forward. we of said every going the And

hopefully made parts all those sense So to moving you.

Alana Wise

much. so Thanks Fantastic.

Gary C. Kelly

required been fully had its through in of engine your terms so had yet. et and all the overhauls, this maintenance. just up been inspected question, its cetera, current matter was for inspections for to of not It date Except it

been So would've it later again, year. this

Alana Wise

you. Thank

Operator

Bloomberg Schlangenstein We'll with Mary our question take News. from next

Mary Schlangenstein

Thanks. I found previous maybe ask, Mike. wanted because Hi. then Can cracked say blade was? second you for Gary, is said one there'd to my before XXXX. you been when that And question

found unusual noteworthy but found have haven't any you thought else you all? in that or at said guys You was fatigue or inspections you cracks, anything blade anything the or

Michael G. Van de Ven

Well, noteworthy. Mary, and found inspections, wouldn't blade I'll start, all I so we do yeah, we say the anything

would find You you like fan see object the mix that. things foreign debris, normal maybe blades on with normal coating,

we found inspections, blades. So we in those as those these replaced have

Mary Schlangenstein

Okay.

Michael G. Van de Ven

back in of Gary GE, it, in And with part comment it we that May it XXXX. had and some was the question work – crack then of was your a doing that had, back on on were that

Mary Schlangenstein

Okay.

after incident? the XXth was it So

Michael G. Van de Ven

of that going part and that Right, we through found the blade. were it processes inspection was

Mary Schlangenstein

Okay.

Gary C. Kelly

think we about blades. have I And XX,XXX

of blades, those found we out one. so And all

there them. with so will we now know And that obviously, cracks blades in be

there was that, about So there's done. is it comforting that was hopefully to nothing know were one so extraordinary that with least found inspections that but at only the

up in of with the just sure now we'll fleet frequent blades that with point keep doesn't make caution have slip an the through. inspections with to the all very being, abundance to So that

Mary Schlangenstein

I And total if thought maybe said The you I on XX,XXX. can earlier ... misheard. Okay. the number, XX,XXX. But double said just check I Mike number of

Michael G. Van de Ven

XX,XXX. It's

Mary Schlangenstein

XX,XXX.

Okay.

Gary C. Kelly

As usual, right. Mike is

Mary Schlangenstein

Thank you very much.

Gary C. Kelly

You're welcome.

Operator

We'll go Josephs to Leslie next with CNBC.

Leslie Josephs

Thanks question. Hi. taking for my

with know about using safety on any isn't second training You, just you speaking the Mike, the so Are recommending something masks CFM causing blade to any a you're fan tests the like wrong, passengers are damage. briefings? question, a people flight that? that how Thanks. cowling of are attendants? doing, And earlier stable or my was lot with ensure capable much or of there there or it how is I about along commentary oxygen is test had to the or working following said itself

Michael G. Van de Ven

couple of Just things. a

so inlet of part before that it's an to the blade engine, conducts is the talking the whether about and into now what minimize not to kind The there and so it engines the talking all, the of can engines frequently having with are inside First airflow And contained before fan respect out so tested those in we're design, cowling. engine it's the cowling that's opportunities failure is engine energy a engine containment it cowl, of the with are this inlet comes fan or terms cowl that. we're and in its a that about and that in blade release. of – improve durability

the training we that the absolutely services, and matter get that the will of as from do do is make the what investigation In inside one cabin NTSB view communication can to a the in-cabin know terms fact, flight that on out safe, into a And may and of up a that going things do with I to our the is they'll that of good is And look the so of out great and of learn more thorough we make the better, about come good media sure a has things you cabin. of kind adequate. try customers some actually group social set attendants, study recommendations.

Leslie Josephs

XXXX, they've since the done that Since incident, that?

Michael G. Van de Ven

NTSB? The that? Who's

Leslie Josephs

Yeah.

Michael G. Van de Ven

the at Yeah, the that's investigation, part onboard of of activities. part in-cabin that's XXXX, the they're looking

Leslie Josephs

working Okay. But you're yet? just not on anything specifically

Michael G. Van de Ven

in them We're that supporting effort.

Leslie Josephs

Okay. Thank you.

Operator

our We'll from Republic. next Gilbertson take question Dawn with The Arizona

Dawn Gilbertson

questions. have from dollar XXXX? or with either associated Gary bookings Tammy One, can Good morning. two give the a figure us, you hit flight or I somebody,

Gary C. Kelly

of Tammy points revenues, what of have top off second head? you were X or do think X about your so talking I Well, was that Tom and quarter the percent to earlier

Thomas M. Nealon

range. million $XX the in to It's million number? absolute $XX An

Tammy Romo

Yeah, (X:XX:XX).

Dawn Gilbertson

Perfect, thank you.

Tammy Romo

do it's in rough do a the the it's million. range, math, of million to going million so to and $XX at $XX you middle, – you it's ballpark. $XX and, we $XXX wide be a It's least kind just It's going if math, impact just if were to just a the million

Dawn Gilbertson

And you just to on unrelated process. mentioning, for expert, you on you're Hawaii through option color your the Can more with no was able question to Okay. more I had ETOPS the through thought to the you process that you that? then and through. that, an might just began. Tom were as you service Hawaii. that us any certification wasn't but as give about, going one I I'm aware get go start you ETOPS certification when be in talking were small this

Thomas M. Nealon

Oh no, once begin get we certification, the service. will we

So the intend to We're is get terms hoping serve. of we the this year. sometime airports I our get question four when cities scheduling, four certification. in But it Gary the will later via think announced to the we

smaller, but announce laid would It's ramp it here's planning Our be for network see to to do the time, we start will schedule when and service, up being. would what time has not over begin I certainly out, it think. that, we team will us

Dawn Gilbertson

you Okay. misunderstood must've said what I then.

Thomas M. Nealon

four. Dawn, and way, it's words, ultimately always we FAA pair today. all Yeah, four that's one intention but we've What would when the our and that like in start, we'll focus not understood and But one serve routes modestly. and start which and like probably committed we'll city with is start to always other those our been plan intended what with. we've to has start announced we'll that announced always then modestly, to airports Obviously, we that

Dawn Gilbertson

city one pull to this goal that you pair. your you this able that are And modestly, with for it if Is say when year, off year?

Thomas M. Nealon

working day, think on one of think to pair. you But I mean, us, be kind of the part city thinking it I to I to And is the determined that, with would FAA. the that's probably that be in in ought fairness idea be first about.

say one I'd I how serving But very don't not yet. we're definitely short to city us long, just just Now for and planning rather I think pair modestly. start very see yeah,

Dawn Gilbertson

much. very you Thank

Operator

We'll with go Press. Associated next to The Koenig David

David Koenig

know followed late. said I clarify Mike kind I two of Gary Thanks. but it's to then is on. what Hi. earlier the getting have questions, up first and

so So your heard correctly, if XX,XXX I like, or inspected, XX,XXX Mike of you've it blades. sounds

window. newer to second-generation inspect and blades? in to So those you're those left Are that got, about going you've XX-day do XX,XXX what all would the mean

Michael G. Van de Ven

focused been we've fleet, on Well, our David. XXX mostly

share ago, should be the lion's the be the so really yeah, six XXXs is XXX yeah, would just those so So newer-generation of – the generally or speaking, we taking years started and remaining blades. fleet, five those what's

Gary C. Kelly

then I worked we But Southwest started David, out oldest blades, within going and we with engines. with to XXXX, CFM, oldest the back think, the

between And been focus that so on move engines since engines. the knowing then, around blades has

accelerating the all blade. inspections single So the of from age of have by to regardless the we the XX within next will every days last week, covered engine

David Koenig

Right.

grounding Was under with either which new maybe planes, that Well, shop leads cycles, that Great. you engine ever other with thought? I or their ever any most question like last considered the had, into cycles Okay. whether those engine since visit? was the

Gary C. Kelly

on Based all the...

Thomas M. Nealon

After, yeah.

Gary C. Kelly

just based have, history cycle on the that accelerated have because the NTSB, CFM, and fan blades. wasn't ...evidence of that the inspection we with that we the the and data FAA, discussions consideration Boeing, these on a

David Koenig

Thank Okay. you. All right.

Operator

gentlemen, I'd Ms. the any to ladies like for turn Rutherford time this over and back remarks. at call to And, closing

Linda B. Rutherford

you Thank very all much.

questions, do follow-up If team. to please reach have Communications any our you

get can You at or website much. them XXX-XXX-XXXX via Thanks media www.swamedia.com. our at very

Operator

Thank for joining. you

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.