LUV - Earnings call transcript Q1 2019

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Operator

Welcome to the Southwest Airlines First Quarter 2019 Conference Call. My name is Cody, and I will be moderating today's call. This call is being recorded, and a replay will be made available on 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. sir. ahead, go Please

Ryan Martinez

and Cody, welcome, you, everyone. Thank

projections. based Executive on our include statements, Chairman me Operating of Tom Tammy our are the other team. and CFO; de our call Kelly, Gary Officer; comments Romo, current President; intent, our note have senior we Nealon, President and members forward-looking our expectations on Chief and and today, and Ven, Joining Vice Please CEO; that leadership Van Mike will today these

we earnings the our through August special non-GAAP regarding current from have X are factors, groundings, and of of MAX the As to our could is connection made our assuming cause Relations We'll different our please flight guidance those the section as out particular forward-looking of based non-GAAP in we in GAAP guidance. which Investor this in morning, today estimates the the also to of noted release southwest.com. actual result will A And schedule August MAX materially of that more visit our through grounding reconciliations X. variety information provide to on MAX And references for we results, of control be adjustments with groundings. a statements results results, our items. make the exclude

So with that intro, I'll turn it over to Gary.

Gary Kelly

resilience I margins, But as and numerous as cancellation been would of customers us through margins their better. quarter we cash first quarter prospectively and and did our today, busy for a Based the despite especially. challenges MAX people better the flows, cancellations. cancellations. see we proud results during to where today can for XXXX goal They chaotic schedule returns a daily still, We're our prepared near-record But extraordinary to August second will and ever stellar and changes, have Ryan, perseverance. solid joining be what And industry-leading more our Overall, for on it job, our than rock-solid and are the and X, for among morning, good blowout their I the call. for from thank-you quarter. our Thanks, produced an events, huge been handle the people. a am provide thanks experience rather everyone, to summer, earnings of is have the

ranked their thunder, of list the named reiterate going to be a this first couple we again I'm far, Despite I of brief want points. to World's year number so being just out Employers. so having on a end Admired great Best List Most Forbes X companies with of months, and and great commercial, were want and great number all XX. don't capacity ready and prepared Our also on-time it's we'll delivery be solid happens that on quarter, financial get on performance Tom to assuming a the briefings our and steal second here as And as first and Restoring solid in service again back and it was the is couple MAX of schedule course. XXX ranked This employer. to did once priority, the challenging within the Fortune's morning. our of in expectations, and year, quarter. performances to the have will start our next We plan. of soon of were all, operations, people Mike, Companies. But companies excellent Tammy I And

DOT We Customer proud start to in off were for number the we're rankings XXXX. again. Satisfaction, very a we're in that. of X So great XXXX, And

XXXX as remain strong scores NPS well. in and brand and Our industry-leading

a We leverage sheet have less than of XX%. balance

We have almost $X.X billion in cash.

several place years. excellent, for the have risk cost-effective fuel off in We and an next hedge

exceptional an the having course, first quarter. is distractions in numerous expansion off and that is of to Hawaii Our start, despite

very track. and good ambitious, well I this may prices. making margins return effect, we're of And but Despite uncertainty challenges, a I in good this having set and for progress cuts start. except the planning Our year categories on lot of expect a having plans capacity to on there's the records the of not our year. some and certainly we're our surrounding But course. us next are we're to and, year initiatives on then, cost as that year. for capital the usual, this And are this timing expand we finally, year-over-year. well a And and to off technology of year giving admit economy they financial goal and But, on that, said a lot make progress on MAX things, fuel the proceeding up

with quick Officer, over Mr. very Mike? Mike Chief to let that Operating turn Ven. de it our overview, Van So me

Mike Van de Ven

Well, thanks, Gary.

the The had were course, start of maintenance reinforced to up for couple our I themes Hawaii quarter Most our our and being know. of launching rise the any a then, our year. fair have And we our important already service, and things MAX people challenge. absolutely challenges prevalent groundings quarter to that The first that the rise meet unanticipated will first share impacted operational operations.

we've despite remember, minute of had were service Maui the the in still we're about service and So, The first to authorization. Maui, since government And able quarter Sunday. launch in ETOPS Oakland quarter of Honolulu to middle planned. as a startup and started on you then, going went month extremely launch to plans, contingency shutdown We some an the worked on well. all service losing Oakland added our the to as timing, and the Honolulu will between

to returning mid-February, add started groundings the operations the disruptions we to last the half irregular to experience the to just as Our the during that Beginning to we quarter. onboard write-ups. with items experience occurred. And of unexpected operations created maintenance has are was in combined customer levels in and received mid-March, second quarter. Those unexpected, service high normal continuing MAX marks,

the associated crew and, of reroutes, we high volumes with and solid swaps, care customers spite produced environment anxiety logistics to board, they aircraft people, a performance canceled daily environment. airports. So very maintenance were in our centers, grounding customer in the at call across flights, consisted and our and to the took rose of of of a occasion again, operating course, But our the the demand that superb and that delayed operational

XX.X, are the our move forward. XX% that in that have from adjusted put the That's the as second performance good perspective. quarter for design lower a a approach a strong maintenance have sync and XX.X. was just and indication we we and network would on-time than the us the a we and operational modeled was impacts, for if have tad Our foundation carriers marketing in last would operational our the year's MAX and that in on-time industry range, performance And

again, XX,XXX as the quarter X/XX. significant really in the which carriers in the our customers. Gary people cancellations. customers. than the Southwest had caused significantly top the and maintenance additional and customer are for And as complaints We by of more measured flights quarter, that these evidence in our than level highest the was owned weather would during all and for of DOT. of domestic really That we write-ups XXXX, the that the have third the which X% groundings, caused the going more by fewest roughly expected latest mentioned, January our of providing schedule. that's maintained And MAX February, that's that to ranking and marketing people XXXX, Cumulatively, both our quarter the hospitality they great results. are just And disruptions our have leaning service canceled cancellations into to was have and, since fact, impacted we published in position issues

factors higher on But investments our the seats reaccommodate significant tools customers much over years, got customers impacted Of that course, in to and for we've those impact we load recovery fewer operational the made minimize several issues. today.

the scheduled. XX.X% destinations same XX.X% got quarter didn't of our first year last in issues these to to customers exist. And So, when as that's environment, day the their compared

So a solid, customer-service-driven very challenges. result, given the unexpected very

MAX. to Turning the

process a things We any an all do when program close aircraft can still so. all the of inspections in the required to ferried relaunching have includes able from need next as well will on we're as expected to those the the sometime to well doing take checks, issue those in so the a month and checks, Victorville, aircraft system is and place service cabin XX It plans. one as in that the or that to aircraft. be change additional We're aircraft possible. We're work, of have this in the maintenance and working oil that delivery of aircraft unsealing aircraft be when necessary a in on as ferry We're week. Orlando of them fluid new detailed MAX so. things. aircraft the it's Getting or software We XX efficiency engine fleet California. during using will to had flight. upgrades engine types the do aircraft, maintenance make-ready-to-fly Having the back grounded, improves fleet as relaunched, airplanes Victorville still being perspective that to XX for our the The cleaning, relaunch planned as work inspections, over like one are downtime

pilot Of additional completed. be also be will requirements FAA will need training to course, that there also

and we've Ryan mentioned, Gary our from through airplane As X. service scheduled the August removed

to network. the fleet August groundings utilize back that into the them spares bring pattern beginning cleared we'll to will if airplanes are continue adjustment support X. past course, them the date, of to service fly as then, need a They in And will begin fly normal to Assuming before to that we'll further operational pragmatically schedule. our and scheduled make the

the theme summer. into the customer an operational over move quarter, we to as exceptional So, experience provide second our is

of Our with us agreement. in AMFA. to agreement unexpected we educating since the AMFA's tentative maintenance our behind the mechanics the are agreed process events on

we results We're have on accustomed all being down, out customers period are to related in that safe, and have busy so We second focused are service. schedules voting the the exceptional of in contacted, impacted on-time process MAX our fun half that And provide given The customers left the expect can of capacity of getting the experience Southwest. pull May. on been the and reaccommodated. flights our summer been the we and reliable, across travel they're pulled

that, to Tom. it with will so And I turn over

Tom Nealon

Thanks, Okay. Mike.

have think all into lot several a came significant revenue challenges, you with very of performance XXXX we quarter. we strong. finished We the in know, first as delivered going strong I despite XXXX So, momentum. -- into very And that a

for. had they and the be $X.X serve tough and reaccoms, lot what our they we unit the performance our throughout achieved under a that revenues first record operating to Airlines, to fact, billion of to with in we And are on of lot kindness said, In day Gary revenue of famous hospitality just circumstances. is We the very people quarter of quarter add top the customers expected among the year-over-year carried and Southwest very, cancellations, a the the industry.

a been year-over-year. it's first all to ended March you shared So In the end would details our And the an growth investor of up said at high X% the be challenging did that incredible RASM guidance, quarter, which behind revised of X.X%. of forecast, QX drivers update, the with job. we we quarter and we X% XX our RASM

cover start let the the quick QX, I'll for our outlook quarter. me second of So recap and then

key in that the we increase; benefit the QX program; third, business system; a second, XXXX's our were X% went RASM tailwind trends Rapid XXXX; from the from points November's benefit reminder, experienced X.X of the to in continuation a QX of into increase continued of suboptimal that we year-over-year from expecting fare first, RASM So, And guidance: strong X.X our flight original QX January, just factors X%. system-wide Rewards base and as performance several to res were RASM new and finally, fourth, a QX range strength in there from schedule. in that

to for And roughly to shift. revenue planned from also grow our to X%. we shift due to the QX QX capacity plan by in million also $XX We the X.X% QX approximately Easter a

based the what that's was So on. plan

Let me recap quickly what's January. in earnings occurred call our since

the QX we a trend government most government-related easily see change leisure be shared shutdown clear we RASM $XX quantified demand the guidance shutdown to expectation shutdown. identified. of QX this obviously, plus we But to travel revise X% original our pretty plus much X% a the And continued throughout to caused million. impact began to the And was also to point to and X%. business X%, us quarter. full prolonged first, softened roughly the with is of what So previously, impact the RASM as down Versus our

through unscheduled maintenance mid-March. essentially RASM. events than little Second, mid-February resulting X.X large was in another the reduction points to more contributor, from And lasted a this QX

the to demand was really next our X.X March is grounding shutdown, revenue the MAX our largest QX leisure Third, And impact drag. the negative actually, softness government a RASM. related RASM. and QX in yields, of was to benefit, fourth, XX slight approximately which fleet It points was to

out we're think changed seeing right this and quarter. strength I yield leisure has and it's important to that second demand call in now trend the

with the below quarter original revenue forecast, ended about we ended X.X $XXX over the off So, million and quarter plan. our capacity points we our

the to available was and close-in for due the and customers of impact RASM disruptions to in our use grounding. less had to maintenance February March, part MAX of lot Now bookings. inventory saw, we due higher-yield reaccommodate this having close-in We a inventory to particularly the

to able much disruptions, and for the And to MAX which day the very unscheduled were advance much employees get impact our minimize difficult proactive in we to better days in the we and were contrast customers in of very out out, in flight several maintenance our Now, of more cancellations reaccomodating customers. in, the were day to our unpredictable customers, date. front our

all said sale. remained our simply the having Business per because inventory demand travel But close-in So be that, strong well. fewer continued of as close-in took bookings strong we to year-over-year. reduced yields

the this very revenue than points. in and RASM is lower mentioned original the year-over-year Our And a X.X to in drove point reduction of as just slightly expectation due X well the to continued as which capabilities softer perform our I was well trends inventory. benefit management quarter,

is the performing of double both as extremely the Our portfolio and continuing size Rapid digits, of total customer Rewards in industry-leading the of program well revenue. terms terms grow loyalty in as to is well

In We was every in record Rapid Rewards we strength across tremendous base. QX, and members. acquisitions continuing on are Rewards, saw see new to metric of already Rapid this an strong

combination. seeing which acquisition new also card rates, We is co-brand high retention we're highest holders. great of our also saw And credit ever very a

Rapid extremely Rewards continues to program again, So perform our well.

program, customers of is love of and the us Our and lot benefits there continued growth. of front for the the in a value runway

also That of products, terms very last performance, of also to pricing products, our continued and performance RASM expectations. In with product strength implemented the our variable the fall. ancillary our we strong all working in structure that well contribute of pricing boarding EarlyBird our double-digit they including it's first meeting quarter's in is

invest Southwest.com. industry-leading, And think capabilities we direct-to-consumer I also benefited platform. EarlyBird from will continue merchandising to Southwest.com our improved on our

very Caribbean. Though develop performance of international all Rico also mature. RASM, performance strengthening, as X% are this seeing our and noteworthy really Our well is and Puerto doing developing international we to business system markets are only yields, with are also And load the and seeing. capacity, continue we're and in our is pleased the factors planned. that we're

moving we And to, we're and bookings. Net sample customers, with levels, We feedback as our are the to Honolulu what up set, had small flights Score. consider And very know, high XX. Finally, demand as service look actually very than pricing. strong we And to low absolutely exceptional, satisfaction it's has as on our we while is seeing flights we Oakland at be normal which, connecting ladder and system, Promoter our is always began are launched higher initial Mike from experience if by we the extremely where our Hawaii our pricing the you March to Maui. early of in-flight rest and to today, a the began you their you know, initial alluded Hawaii with pricing in

our not well. this economy the trips, short- clearly trips and medium-haul and long-haul to speaks on and quality strength just of think I as the but on product,

we benefit management since healthy as And We year-over-year happened expect. happened a from QX, has another RASM months. year-over-year X over saw a XXXX. footnote, XXXX our Several QX a year-over-year a for but anticipate, strong continuation X.X of saw So, the past yields. have quarterly we enhancements. did third the RASM Rewards, in of this things did close-in revenue just Rapid not year-over-year we that saw quarter saw a of We suboptimal point and highest tailwind things lot that happened from schedule. in also our strong certainly summary, lot the a We very performance

So that's QX. it for

about talk the let's Now, second quarter.

trends republished strong we booking So is in up seeing. we're that very this the current and and get and on we X.X%. know, us the year-over-year to intent schedule as RASM you performance This pricing And knew have the this based that we well strong fleet. expecting range we QX curves in for stabilized And X are with to trends is schedule a month, that XXXs X.X% were with as April are to could the of improvement was Earlier and yield through demand as compared year-over-year improving. X, a simple, recent XXXs back our August our fly QX. and

slightly it the a famous maintains and the in operate integrity employees network we removed reliability we from the but our flight and intend is need As the back schedule. that's better way MAX in to what that for. doing and the our service, reduced of efficient schedule, that MAX a And us. run schedule, and the with we're until of to strength our our hospitality operation, a from way we're It's more the customers and

seat inventory. by inventory mind that on MAX seat keep just having with new grounding, to itineraries, done we'll impacted less being is because in Now, the because of have definition which close-in customers reaccommodate we're close-in

business we're and close-in both seeing bookings. The saw year-over-year. both and seeing we're are will in very holding in impact yields that seeing have in in fares We also for and is improvements a up bookings close-in on nicely, this improvement June. solid and of travel, continuation higher-yield leisure demand Easter, an close-in, we're strength April and So May for yields

encouraged of in drove the that line we're X by just X things a headwind a and as RASM is the this. that we're improvements QX. So, QX bottom point we And reminder, XXXX seeing in had

we had X-point and, flight second, we impact Flight the schedule First, impact a had the following from XXXX. X-point suboptimal

equates for a point this XXXX. RASM X to tailwind So QX

points We benefit due into a Easter also RASM year-over-year X.X had to the shift QX.

first So, roughly due of QX in Rewards is strong year-over-year in comparison of around in result QX similar And points we reservation to benefit in benefit about and QX a continued X-point system, and program expect And point RASM our we well quarter, Rapid in RASM to expect from X.X from revenues. we our ancillary performance this expect as as groundings. RASM X a strength year. last the lower capacity the finally, quarter benefit in to MAX our another of growth second in as the

As to in despite a demand the flights. has very sold very our due flights expectations quickly. is in said, off we start. And window, a out to X-week It initial first March, short Hawaii great our exceeded overwhelming our booking

sold were Reward flights initial Rapid out e-mail before able to the were we to first fact, out In members. even get

Sunday, this Kona San and launch second California connect connect to in to we'll So, service coming Maui. gateway, we'll we'll and around begin our service and XX. on we'll Honolulu on from Honolulu, and Maui, XX, between X, May On and continue. May We'll Honolulu May San Jose, Jose

performing. more of And and that service to XXXX. include inter-island service. markets with primary is service very have for XXXX We Southwest how are expansion Hawaii will to also our are route more pleased Hawaii we come, into And focus development the these

for And positive wrap very a of very for am revenue. quarter of we results. year. our across solidly it and fronts, our are many the RASM I I'm quarter And was So, proud performance people up, to certainly to proud off first first challenging

that XXXX brand on changed. of but to Southwest control. of has circumstances, things very some not we focused strength the can excess with RASM year-over-year We're we dealing high. goal The remains those are Our grow in X% unforeseen

continuing the valuable well and in our customer at customer our customer scores our service brand as continue We're Our particular, the base, as very top most NPS segments, top, very to in the grow be industry. key markets. of to

in out So, the be And very in a on is momentum for just outlook QX, at or the like QX again. our should top industry we focus QX our of solid near coming RASM and of have QX. immediate lot of execution

let that, financials. Tammy to over with So, turn take me it through to the us

Tammy Romo

the have a our resilient Southwest. challenges year, to add good through Mike solid the Gary, XX% thank I you, And employees hello, that strong Despite of for year, care their and shareholder generate the the margin, customers returns. the of all we on unwavering like Thank to consistently hardworking control Tom. the all people to our Tom my today continue the with start we've since cost beginning almost of and commitment their their cash outlined significant headwinds, want flows been and of we and for thanks midst focus managing pretax for are everyone. a I'd and in to our to to also off focus challenges. to

and to with first On the cost, basis, nominal ex headwinds. year-over-year. line X despite X.X% cost Our quarter fuel items sharing, there we the Relative at growth. year-over-year where increased drivers quarter, were expected them profit sharing, and the numerous fuel, profit were in our a excluding back expecting of beginning X% unit relatively the we were January, of approximately in higher to be the primary special

by close-in. with seat were have increased growth maintenance-related cancellations predominantly in about CASM-Ex didn't about first reduced X.X since flight and to fixed opportunities X that shed we the And at mile we by disruptions combined quarter additional year-over-year. our experienced points, First, our pressures from points that available costs weather cost

special in into first million sharing from previously a quarter year-over-year. a as and in offset due with was points shifting impact first This better-than-expected employee productivity with the CASM-Ex as airport items and point fuel, and completion salary, advertising the had first and rejected out of X negative $XX for well This X.X% higher quarter. of we Second, to costs wages AMFA, care trends, compensation our TA CASM-Ex profit tentative resulted represents increase factor, an CASM, last year. This to mechanics excluding and due our benefits quarter about in X-point by our created increase fall. agreement health another quarters to future increase year-over-year which compared of this

XXXX if So, events, the CASM-Ex exclude to to range X% in would been quarter unexpected growth have you recap, first the the X% from impacts year-over-year.

second for estimates. inflation similar to and were our January profit the expectations in ex initial year-over-year our quarter, to back quarter fuel first range Looking cost sharing in X%

As drivers a to labor half events the and were onetime initial in key in service investments. and first our the higher resulting delay our due cost; underutilization timing of reminder, expectations of well and airport, the as maintenance to Hawaii the technology startup the XXXX fleet our ownership costs; as of

While and our capacity those grounding inflationary pressure, are now drivers the an some second points net for still crew of X reduced of relevant, from is MAX additional landing driving flight quarter efficiencies fee we And X.X points quarter. advertising and airport beginning March. immediate cancellations first cancellations versus have our impact April negative cost about early proactive shifting in from from flight in from

to to result, As the in range XX.X% and now a sharing, quarter we excluding fuel profit year-over-year. expect increase XX.X% CASM, second

third to fourth to still today, we any service. in That longer, MAX the the quarter. know to second pressure to half MAX of the based sequential initially extended this year, about while and back August points we of sharing to CASM-Ex. third X from incremental on now And continue X, the our we around estimate quarter cost to fuel unit through CASM-Ex based flat Looking we groundings flight persist uncertainty improvement With what hope XXXX year-over-year this is doesn't returning date. there on in expected timing cancellations of expect we profit said,

capacity and of the For X-point headwind do result X.X% to range full-year to X, the XXXX about points not that the groundings August increase AMFA. of includes X.X sharing, lower we in fuel year-over-year. currently headwind groundings extend beyond under profit excluding with MAX costs, estimate CASM, This a X.X% the and a TA assumption MAX from as will due

course, learn will I we you keep more. updated as Of

to fixed the have most beginning since per Moving our first impacted our in with MAX has Brent guidance, increased the grounding. up line by at gallon. January price Also, since year been efficiency quarter $X.XX improvement fuel of prices said, crude on Fuel quarter with first fuel. our XX% X. economic fuel That was in recent the

second and this great in in year. of fuel-hedging XX% XX% hedge protection to place the second in have quarter the hedge We half year with XX%

for premiums per $XX year $X.XX remain million about hedging approximately at or this gallon. Our

Our XXXX current a market equivalent. and at kicks prices modest hedging protection produces Brent in at gains XX materially crude more

a we are So our continue of as prices. Brent mix to And hedges well-prepared energy rising WTI we reminder, XXXX should see are a very and crude.

hedging portfolio that fully structured any in so Our continues declines. to be market participate we

higher at most than modest than quarter, had fuel which XX a we first per with drove aircraft to on second X.X% XX For full quarter grounding our the our expect prices understandably current of lower planned. fuel-efficient in improved our of a as heavy year Fuel April XXXX MAX hedge, given was in expected fuel and mid-March. XXXX, Also, range. we and consumption winter $X.XX weather based also $X.XX efficiency market price gallon be the to

be MAX second efficiency from Second quarter is to flight the to expected year-over-year fuel as X% entire has been the flat removed quarter down schedule.

efficiency fuel our That improvement service to once XXXX of X% remains and part be fuel-efficient the percentage back comprise longer-term material MAX fleet. fuel efficiency For the full total now year, flat said, more year-over-year. story of to is a our aircraft up will in cost a is expected growing

Turning balance to sheet. industry-leading our now

quarter, as available. the leases billion leases quarter is new position with which as of and lease the recognized primarily $X fully our a We adopted $X.X the from prospective asset, corresponding We $X.X Our us balance of January which a thrilled Fitch ample ended on operating standard upgrade to A- during airport comprised a billion XXXX sheet. We and was a operating And we billion, basis. lease X, result, of impact an to the and are the liability. strong revolver primary aircraft investments short-term right-of-use with cash earned financial about. operating

to of obligation income was Field, a net billion balance the and billion for Dallas such Lauderdale. assets Houston the constructed reduction related immaterial. was projects of $XXX Hobby for Love construction $X.X Fort removed terminal others statement approximately as also to airport million and impact The the The We impact sheet. $X.X completed

new manageable spending continue in debt on very expect XXXX investments system. deliveries we point, XXXX. have significant On technology, for And in on progress and at this CapEx range, scheduled Boeing for year. to obligations making $X CapEx, to capital $X.X to are the based billion good the billion we plans non-aircraft a make this and We we continue remaining maintenance

investment significant investments LAX, Baltimore, in Our Nashville on and our Kansas hangar Phoenix Denver. is under and way, in Boston progress maintenance made being airport City, are Houston, and

drive productivity investments and our and to first share well cost flows objectives plans. strong through as support expect allowing and as We our help revenue million us repurchases return to dividends. longer-term incremental in cash shareholders to $XXX We quarter, had growth

and first fleet on leased with our in X X this MAX far ended XXX fleet, delivery aircraft of so aircraft quarter Lastly, year. taking We capacity.

the updates any We are delivery with at this but delays to through have currently working don't point. share Boeing, we

Although our hold, deliveries this back of XX the on year majority are remaining aircraft are them loaded. half

MAX book Boeing a our aircraft XX As we for order additional reminder, XX in aircraft and from MAX leased XXXX. have owned

duration groundings. that as XX point, our expect this evaluating retirement MAX we to will continue aircraft but subject this many year, are as fleet be but plans, to the We of obviously the at to retire

the our in X% helped fleet MAX we X, expect reducing flight maintenance to we improving know given range X% year year-over-year. efficiency, the flight to date, will now modernization and fuel burn, retirements and with XXXX second on year-over-year. cancellations annual XXXX, capacity our In X% given to be Our estimate we to range X% And our now based reliability, increase in burden. efforts, capacity August cancellations, MAX down quarter, through for what full

phase schedule includes of the on currently the flight our Our And that November, grounding. early duration the through schedule first as covered. MAX Hawaii revisions we'll further of evaluate based published Tom and plan, is

So in shared on take continued as despite to closing quick and recap our a care ongoing what groundings, our the employees MAX customers. and rally we of today, great

expecting it RASM management as quarter. expect year-over-year and revenue revenue is are performing and system producing in to, exactly second we gains Our strong growth we

we on on cost pressure continue stellar opportunity capacity cancellations unit for expect lower mitigate XXXX beyond in margins nimble. returns have nonfuel protection to though today, putting the fuel XXXX, continue We great to our we being know focus on our on we control what fuel a capital. in place prices. solid Flight deliver Based with and rising hedging costs, and to to and is strict

in our our fleet, we to serve technology, future many which support and including opportunities, make people, important continue airports will Hawaii. the our investments We and scalability growth

huge terrific I'll thank-you through to managing back Cody, it questions. are who a take that, do now turn of all and employees job. to our continue Another to a With you lot to

Operator

JP Morgan. first [Operator Instructions] Jamie question with We'll begin from with Baker our

Jamie Baker

before quarters Gary, perspective, stagnation, consecutive be you from considering nonorganic hypothetically, many opportunities? willing a to possibly capacity how tolerate would of growth

Gary Kelly

And Oh, now, wow. we've focused. of Well, been just I'll that stay ask not variations question, exactly. several that right folks one although asked our to

not have right contingency yet the We're for tasking at to on good very not pretty consider much our I -- be. any a or whatever is is audible now. C, call We're have We material XXXX. it B, that them might where the plan MAX D, need point asked Plan we group E the working to audibles.

ready that have question. answer just I to So, don't a

And the are quarter, things, under of scheme whether of return the in in is think going of us a reasonable grand working service reasonable assumption to begin we're normal, MAX then, I the third to sometime back a that immaterial. somewhat probably amount or all time. quarter to during is the to fourth

to that think a all referred we more have us a have goes little program. Tammy I is this, what are long, a we concerned too on of about so if -- retirement

a lot to I want we want it our down That be And on, here. is not that. an just work Jamie, quite we do operational would better got that goes certainly from unwind We've I more imply don't think be scratch would we what heads that already capacity And be with go things perspective, we've efficient. have do to of would from planned would not plan, our But retirements. that. would what and So, -- retirement to for and work us to in frankly.

be we an want that word, that clearly, now. time use asked don't need just But And scenario. growing. we just -- a do We this -- to that, -- that, ready to any You've we're is on that the of mode, more think don't And that long. continue have to outlier in And stagnation, question. answer broader, your is think thinking don't don't a pretty in so industry. not strategic we -- But terms very we'll clearly, about scenario. I likely a I is anything spending a much that's strategically, be question. a that's right a I growth I And don't

Jamie Baker

at to discussed do moving that I does follow-up. the regulatory but direction, helpful, event and/or the SWAPA FAA a training lead this pursue protocol, here FAA other if to is service, time, a mean, A part because with seems quite you've a union there with abroad, possibly, very That's risk require quick pressures or a that return that bit. nonetheless and goes obviously down, agencies Gary. whether might Yes. just appreciate public unions an the it. you In do, slow I the be is to pilot any scrutiny scenario that sim all? other as iPad-training in sim-based of even the it not would process the that or No,

Gary Kelly

would again, getting back that which think you I time. intend that and literally, just an think pilots for way the question yes, I taking a the would simulator just your into event be it, challenge, take Well, is

layperson is, depends trained. one training already this. already of that there I'm a -- train just can a our we it is the even in think the extensively point been least be MAX something as do is about tell the is many how that the I pilots already my I at but talking scenario at put and training has So that runway we And interpretation on to Mike, on one aircraft own the are service. because But into kind best again, what would world? MAX in stabilizer managing simulators back contemplating are covered.

go that, the we're hearing are point, So we operator But not precisely. just at to experienced this back that most just back requirement. don't I what again, mean we the would know I go in would world. that XXX will to a be

amount are for of tremendous experience, them pilots matter. experience, trained. unless don't that a Captain We extensively have they hire Our

to have directive we're as as obviously we'll to but to awaiting So know have well the exactly Boeing service what here, we regardless, we'll do. FAA the worthiness do bulletin do or whatever

Operator

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

Duane Pfennigwerth

So scheduled maybe clause delivery I'm grounded aircraft might this that half reading back has in actually too that of to much into no come not this MAX So grounding suggest sentence. for take prolonged you CapEx year "assuming that of the the But of to if still the you're CapEx down? and is that aircraft." reiteration this it's would

Gary Kelly

No.

think that I -- explicit. I'll be just

deliveries paying and, We not are for not we're now right therefore, taking anything. any

XXXX, any if just cannot lower. your scenario, CapEx in get But Boeing MAXes airplane be would don't took deliver and more we So you dramatically now. an our delivered

are crystal So be any airplanes again, that Field. to manufacturing, Boeing just clear, they're they at

not who are they them. so not Did we're Tammy? get the And for that money. sends Tammy is delivered I and paying being right, one the

I So, she... just think

Tammy Romo

will as writing delivered. are check our they be We

Gary Kelly

you go. There

So hopefully, that answers your question.

Duane Pfennigwerth

you of But obviously, cost start pressure. changes At a of longer-term the year, There's talked about profile. out then, with had cost to there and some a the grounding. first And noise XXXX. into flattening profile this lot around half the this respect just been was

seeing year, the extra thoughts your into us what the look can of this you you're profile XXXX? pressure Given like on might that cost cost just update

Gary Kelly

Tammy on very this. was is And attempting sir. Yes, Duane, high level, remarks in that that's comment at to, what my mentioned -- I and

have asking come they our we're budgets. spending kinds to budgets. all then, of obviously departments in their And under of hit where to activity-driven So their

So landings fuel, from as one landing fees not perspective. as not We're a we're burning and much example. rentals takeoffs many and incurring as jet

departments we our costs, to to So have we the extent expect that variable come under. in

are our quarter, assume to in would Those our that back let's to be in initiatives hit the plan pure. the cost I is MAX fleet would us cost fourth of the just series a for summertime. improve And efficiency. continuing. have the expect We which

expect a comparisons year-over-year have I we'd We'd our fleet. to restored. good. all of You'd -- schedule would have And have be cost quite our the

year, under it's Tammy don't comps XXXX any look trying like. report. outlook dependent the Again, that now, assumption this different on little question to XXXX for Ryan and upon project in to I the think happens XXXX. right and just costs -- what we've get be going see that here the point. we what cost this lot of a a should be are to cost flying and same that restored ultimately But Obviously, performance the the this based MAX will at forward unchanged,

Tammy Romo

Yes.

the get time. the good expect back MAX be that the at So, we on certainly, in to fourth quarter, assuming to trajectory we time are by would a service

completely So agree.

Gary Kelly

or be, Now we're or an there's kind outlook. issue, unexpected all events MAX a not of with the a and if sudden running that of that flying of normal understand might those incorporating Jamie's training delays you comment. into question an It's per the that whatever of extra becomes as training I'm assuming that more up it kind back

Operator

We'll from Research. question with next Wolfe now Keay take Hunter our

Hunter Keay

X% that on baseline will MAX in like XXXX that out think I'm ASM Thanks on is follow the Meaning, about about fair last for line taking to call you're CASM on whatever's for or -- underlying questioning year, is up production assume a MAX that for the that your plus X.X% whatever to be groundings? color for just year? year today. whatever for out all taken X%, the the to it was And this of Duane, this baseline for from profile the the Is year? sorry, thinking as fair CASM next next X% way plus

Gary Kelly

XX-ish in XXXX. Yes, the another -- built by got airplanes, Ryan's the we've then sir. Hunter, year-end XXX coming And, to we support other airline

to So yes, we and to want them. airplanes want fly we get

for of thinking XXXX, to fly. the that's to capacity year want begin us we're I what that So this

airplanes, and and committed up this yes, be Now Boeing again, XXXX how exactly there's as have about back we we would committed comes flying the plan get online as But then running, us, the we MAX to will they've started still questions everything we're service. year. all assuming to re-enter the we and

Hunter Keay

kind it's there? sense. doing I there it And elaborate in originally. great. operational XXX challenges that particularly flew Okay, not Any about of cracking It that MAX. operational within suited why can you're And distribution you've had But nut had and on you inter-island then the that there? how the ideally the makes if any local probably Hawaii in for also aircraft with could that you community the plane? talk most the Hawaii, know challenges you maybe you've

Gary Kelly

to Mike and about distribution. aspect the to I'll ask the speak talk Tom to operational

Mike Van de Ven

we flying we airplane. the so -- yes, So of especially We XXX. -- the on some really with any, that comfortable issues in aren't call, would some those knew, operational may though, the you're put seats, its when what against we that lids headwinds. very would with I We're range given significant to having have

So turning there, well. challenge for us. in are pretty well. on The We've bags program out that's the staffed well. excited. operational performance, the the weight the They're balance got been station works people scanning We're stations. blocked biggest it we're there airplanes fully The

operation, the support ground all we're to better But how the -- maintenance and planned. just Honolulu a we're little bit as crews the So and there. taxi navigate learning in the through the going and times of on terms airport the of airplane, the the

Tom Nealon

the back over year side, a for March. on ground community service Hawaii well outreach, I in been of terms distribution in community We've affairs. in the started on we Hunter, think

And for already Hawaiian we've deep roots a got new operation, pretty deep roots community. such so pretty the in

do always it's And so we in at what terms of southwest.com. distribution,

they're people they than -- to I from expected, Hawaii better rather, are brand flying Southwest. So the U.S know know or the many to and mainland actually, the because traveling have They would brand. the

lot a very brand reception actually seeing of of to strong, we're very, local marketing, strong a presence. lot So the on-island. And Southwest very

I'd best how So probably it. that's answer

Operator

Lalwani question Rajeev Stanley. next Our comes Morgan with from

Rajeev Lalwani

down If of -- or to shouldn't being before, growth because on going a year versus X% simply up to X% CASM materially end that on so the Gary? be flat you clarification just then from CASM capacity is talking of the higher earlier. that the to lower, a about MAX next some questions timing, lot were First, say, actually

Gary Kelly

think don't quote I I number. I a Well, number. know I quoted a didn't

probably what But go will so CASM next all and got our expecting XXXX that'll I into get I the already at in compare say to XXXX. I it communicate trying we're third into we've on here CASM and quarter. reduced expecting a we the through Well, yet. year. that we're the that's so would running higher was XXXX, to we've ways dribble this Clearly, ready April, year, before think half don't think will schedule of to to I point, be before whatever first because events flight this is X. So How in we this were August

insight easier give comp because So have what to of yes, prepared think you're we an of you today as to going don't that any to be. all But are this. I would

yes, X thought it X to just I you less was I to up It's something before, be agree. If don't how than going less that, know much yet.

Tammy Romo

comment. Yes, really has last changed from our nothing

unit all the remains target quarter So the from noise first setting long-term aside our we're unanticipated unchanged. events, just cost

nothing -- here today. new so update no And

Gary Kelly

Yes.

was earlier meant just a nominal amount. I a what amount, So not year-over-year

what else can do you? So for we

Rajeev Lalwani

this you think will? Tom, down, seeing for in do you going the you that or keep on the can that's year half of where that us Can of the not some sort side, moved objectives earlier and you're back be there's massive not, step you and the targets you laid of whether lot just with in RASM a those hitting you've I on year. around. There's are think out some then may refresh momentum XQ this the such Gary, been And into if

Gary Kelly

and We've lower a with got of on fuel year-over-year we fuel prices. case still and We're X% for in year intending is look MAX to got want juncture, chime Well, numbers to improve year unit looks quick In as were fuel know What bit remarks, then good. my at we our lower help with today. to I fuel that said will this the with also here. excess a goal his the getting still really we is Tom the versus little let was that consumption remains a little except our with front of We comment, margins. prices. That remarks in that, the he because looks, But of outlook began me growth wobbly that offer revenue year ago. suggest XXXX the the not. goal I now benefit for forward

I drive full So up the on margins, capital. better quarter. second we net a not of invested But give especially had the wouldn't happening for in returns to here desire year. the operating and half that the margins That's in first and on year

So cost. are their job doing managing our folks a good

irregular there First fewer all flights, the even though really was dealing operations, incurring with with quarter cost as had -- per more for call operations of we was flight of ragged them. because we

in perform, to gotten a quarter should second better were more like way. the lot I reschedule Tom just a and that. because, we've Mike, orderly saying, much So that think ahead the way you here of that airline It's

RASM? the So, Tom, talk you want to about

Tom Nealon

I X% for think I'd restate the flight have it. objective that just the we kind We're ground. and going is Yes, in of the

think I what so that's we're seeing far.

know, I was The call, hear I guys first a quarter, word choppy. you think choppy. -- as very you the earnings hearing the keep word Every

curves. this where we MAX thing to to be And seems because be. very, quarter of have we're need we're and pretty good really think stabilization environment. of really was it nice seeing just the it's first environment The that of that the We're shame choppy. And of out I a we on seeing and trends. a business it's normalization very demand normalization seeing coming We're going fare

a just are but good said, had of business we indicator more But economy, pretty this more a we indicator or strength, corporate to business that's climate core of to commentary our re-accommodating. bookings strong. we're I is wish my that. wish on the had So which close-in Like good travel, the and the robust. economic really inventory is sell. I sell, That's

Gary Kelly

I thing And mad and all impact the things our took from that's the excellent. I away on. brand I wanted -- are today, kinds And of and and one crazy of on you that read to all customers I about be our sure think that on

because in employees Our business -- work well. is really to good. customers And serve so our our it's it's hard so

that. and on any again, well looks is is deserved. happen. weakness So I strong to And no after of things Southwest to that quarter, our impacts evidence solid, really really, and -- are while of that and proud we're very of companies' there I very all think people always there our proud the there unbelievably is brand our unique for making brands and integrity operation are that first is And happen, intact no based think doubt

Tammy Romo

of And that as cancellations. I flexibility the our add is the seeing is tremendous. network on you are the and only in other I would our to all results point through And that we strength think work these

have put new a So point point just reservation that manage which I'd helping just also would an us exclamation revenue are all through out the management challenges. And new I also tools, there. then system, we

strengths just on really go So on. Southwest just the do and of

Gary Kelly

changes, network masterfully the have recognized, some of think And as just I were they all done. you

I'm customer of was out, also we So some that. done proud very the it again, had while to maintained a that, of in capacity trim that way integrity our offering. very,

Operator

Stephens. Atkins We'll with now next question move onto from our Jack

Jack Atkins

flying is sounds like great Hawaii certainly a It of the terms also experience. you. and with to off start to start, just off in Gary, customer both demand

changed the if got that curious a you've experienced changed, the under sort terms on them months to of couple your last to thoughts be have those in time ramp your all or has get around view routes of of So if I'd now system-level just you've couple what months. trends, your get given there profitability belt towards booking at

Gary Kelly

to again, I'll give Tom my let that. that, just speak you about too. Well, I'll opinion

that such is to And such just But is, offer a customer here pleased a missing to Hawaii that because up at I least I international the in that from is is very very is quarter. two, a market is fact in And what we bigger which about forecast, of our in International our And lot destination my is I experience, terrific I as First of that contrast. forecasting. have of international. due And think very number well. at than our we're immense first is at California, an me segment the schedule. performance the -- And did good Hawaii a course. developing flight nicely. all, haven't that talked very, segment surprisingly for. geared was system this of base we

see, mentioned on markets it's I think Southwest awareness I don't have see easier to are don't the tackling same far in do, international that what destinations have Hawaii don't our But gotten than that as just would Hawaii. we've don't strengths. to But opportunity international necessarily I we our all, of And Tom, just fair and because the -- about the anything started, in first we relative we discourage is in Tom greater I us. we far question. that certainly mean be certainly

fact, a press In that, But the out are pointed the your I we release, fact put out, sold as stunned. you flights even before out was what thoughts?

Tom Nealon

we them earnings said think typically Hawaii built-in this I I've turn. it not us don't have expect wanting know before, this to to in base than California on we customer how a much I've faster but I that call, such should take sure an said to

other markets. think new than develop faster will this I

a I'm mean, on below where we did with I at into You pricing. our curve. pricing competitive you our but we're really in early are, like look fares, is but international, we customer where good, built-in are we quickly might are. guys yesterday, our a but, have solid, base. just where I shopping the pricing and dotcom where -- sure with versus not at don't if have it's this competition, I we But seen have the and development taken strong very that love some And still yes, competition, us looking it's very thrilled at do I do we're

bag, bag, great at is when begin about can point think money we feel we dramatic third And second you of real make So a there's structure. the because Southwest our of to bag, it, price And Classic the add I difference. Effect. this cost first the fees, bag kind that

good Jack. about I where are, So feel we

Gary Kelly

question I on I airplanes. to earlier, seats sure we was we just make want that make commented there want But clear. this. do Mike -- that XXX these And to on were have And sure a

selling We XXX, are all not for reasons. operational

was And is and Mike's -- so earlier. point that that

I that's I and all that have And are even to modeling. our we good, up, we if think characteristics. very has markets. agree, question, in today with the think those into So there. you better range will the feel Mike, I think But airplane profitability, about, would where we just your think better better you just the because Tom, even offer It be I longer performance performance MAX that, context of the and in factored upside term, with

Tom Nealon

that. with agree would I

Jack Atkins

alluded call of I been revenue new And levers there you in Well, And for follow-up, the on XXXX. potential rolled that's just of months. potential anything next up for opportunities year? that revenue great. to that fourth the the there as could things your know bandwidth terms have taking factors a But Gary, into terms have you quarter the my there of few is outside on lot been management in out management can you us over in update for look last be out

Gary Kelly

has these secret think initiatives. sort don't distractions, unplanned, impact work we're the would the don't I an on that I on of of Tom, say doing couple the in of -- terms that I

Tom Nealon

Nope. They're totally unconnected.

Gary Kelly

do So, don't share to have a think, we but Tammy, I yet? news

Tammy Romo

no news yet. share There is to

So to have tuned going to everyone's stay there.

Gary Kelly

tuned patience stay begging then so soon. coming sir. And there, please, for your So

Operator

take Suisse. Credit with our from Joe question We'll last Caiado

Joe Caiado

happen squeezing Thanks back month have them keep to number to incremental there's get XX associated in. like order It costs me a short. sounds for those things think service; some once said preparations. there would is of I'll with about take I into rescinded Mike, you a the would it your grounding first. aircraft

guidance? already are and not your up on so, be it included? embedded the Or not Tammy, you year therefore, tab that you CASM-Ex are full picking going to for is and So in those revised

Tammy Romo

we'll if know we our costs to of obviously, you. -- But on there, best our all included. what guidance. Yes. And We've our it in it's includes done based anything the associated update changes incorporate

Joe Caiado

pattern Okay. I the And the you was what performed XB on on wondering, of type comment grounded that's and different expected? been while you've then whether wear of inspections that you kind any you are results able Wave they've than to of observed the

Mike Van de Ven

about the talking coking? fuel you are Joe, nozzle

Joe Caiado

yes. right, That's

Mike Van de Ven

Yes.

March from Orlando did have when Victorville, turned on shutdown we ferrying the it that when So flight XX, Orlando. to last were back we had we -- in-flight and to

in had it respect So the engine, spot fuel in created we a the and was the around there variance that spots with damage theory particular little pressure that the on and hot in hot the nozzles engine coking working airplane cold was the some spots a and to turbine.

monitor So GE thing itself the to you things. is went the or builds coking It manageable. time. great temperatures go and that inspect trends It it's engine repair those are fuel out lends then replace can detectable pretty and good over procedures about asked -- to go and and and

I at look down, We've to as of engine earlier, sitting some So like We replacements. XX new status it XX ours. get looked engines. asked a way thinking to done flying. And The the about up at replacements. almost delivery we we're fleet you done when nozzle it it and and some industry at mentioned our we've back comes

engine change rather from inspections and the having that. after fleet, things to on that us so do go like And relaunch do we'd it can we precludes we if do an

Gary Kelly

to they they CFM work call engines. some And add to develop manufacturer to repair to manufacturer. my or doesn't what every need Joe, I would the doing think And at break-in experience, it, matter new a has would in our with technical processes. operations inspections just it's I thing -- whether that And it is are I its engine only least maintain other that issues. and these the do engine,

not -- with we great, that for We're be as have was and expectations, don't engine only Mike It's expect efficiency. So a on that. some to didn't it regard, get out especially line But unusual with I here happen. and using, that that not have to with doing our of and, working ride inspected fuel clear to the the the good know some think has in the especially be performed what we are impression for work expect CFM in frequently. right they I better. example get engine, to that want We're doing. I need I And it's to so now. it's engines to nozzle an doing to things part these break-in you engine the a investigative most quiet items the We fuel

Ryan Martinez

that portion great, analyst Well, our the call. of concludes

you for if other to thank any you course, please out Of reach have all joining questions, me. us. And

Operator

Ladies our Linda Officer. Rutherford, Vice Chief Ms. call. and portion first begin today's Senior I'd media we'll Communications like President, gentlemen, to of now introduce

Linda Rutherford

you go to you, portion. Thank welcome on if to ahead members our queue the ahead We'll And, how go Cody. give And and Q&A on started and would up. today's of with them call. Cody, the meeting get instructions just

Operator

Street Sider with [Operator first Alison begin The Instructions] We'll Wall question Journal. from with now our

Alison Sider

steps is safe? with Boeing ease of conversations messaging around anything you about you kind pilots fly steps you're to eventually reassure flight how you'll crew? at people's take once you'll that thinking about Can MAX allowed expect of those us it started of What having to tell is sort Have or with minds take again, passengers, should or set sorts that? the the we

Gary Kelly

Alison, Gary. this is

yet. to working according a I ready, obviously, don't great our think to, want to share is you have, expect Tom, company. the is ungrounded. questions Tom, to that thoughts any This looking should get we're large gauge a what there? think our customers airplane. we'll a But to messaging degree. what you forward it's messaging. is But, I it And FAA Boeing say exactly with to great we're --

Tom Nealon

pretty good question. a That's

book by much that probably I everyone's asking the there got be certainly of some the have There's would think think that for how to the way. people time. But and I people coverage idea question. -- just some away media some there's so probably quantify do an that. will no topic and That's period to I that, I think expect everyone's I same be that on opinion, going that

the understanding issues, is a their good very of issues. lot is their what of with between awareness have issues, understanding are, what what a we We're think doing their work of customers' our what perceptions our are the and the I marketing team. understanding our concerns team communications

we pretty perspective a think I have So that. on good

of also when is grounding with some all has they at words think us Southwest have at the have about our has the changed from world, the know I reason that MAX. they're There's good to and have in least heard us very what's think you've like since words throughout the think they in the lot XXX of in trust Southwest. the what my to a understand and Airlines, use the customers' have the loyal they they confidence this confidence And because, the us. perception about better talk of Southwest. interesting, trust I brand, to pretty on, people, we a use carrier than company, and they of going not perspective, lot they Southwest. They They call, any of as that been

our I And a we plan be our that working communicates plan the but very have step work it. there's customers of we're -- to comprehensive on more right employees now. as through and very that way. learn So But tell we'll can focused done to we're directly every you our that's more,

So the question. appreciate

Gary Kelly

in the have for, think has media is to airplane return not think clarify that what is lack work it's want ready for, is understanding ourselves what Boeing I this there because do certainly to even. do I we'll functionality a what the satisfy done to But of we exactly to to service. And share to

earlier, up what so both task. And And confident which that I'm which earn I that on And Tom one But we're day. It's work great be done, people we brand. we fronts. every to mentioned is we again, that a think, mentioned think trust. is key, have to that there's I

do is mindful unsafe. and that we clearly, comfortable are think that message So be to. not to certainly we're want we'll in anything going of what committing we And to

That's a agree But not even Tom. topic. So that's question. not I with a even

I with think and they -- think get comfortable the I questions get that I there'll will think those answers. quickly be will people

Alison Sider

one if about could follow-up. Have been And what been that surveying right now? have And you how of Is just MAX communicating getting? they're been about you customers I something with of ask responses people? about directly kind you've feeling the sort

Gary Kelly

Tom we're Yes. doing That's absolutely what mentioned, is, that. yes,

Operator

Koenig We'll the from next question our David Associated from Press. take

David Koenig

Here is questions, I guess. another of those

from expect groundings? Tom, to also revenue. I'm fuel seek your And a to Boeing going hear Can we going when able sorry, even all booking you not supposed you sense planes Clearly, some enough talk to the you it got people about to are was magnitude what But Is additional away. spending? talking that the the that to hard might give Gary, I'm of of hit to the he about to over be can CASM, compensation the -- be you're First, there's get? you be? use serious XX XX you've plus was hit be it to

Gary Kelly

may for of just I be I of was I going concerned, for fill think issue them always some they don't only concern point trying going The that have make or using we'll some was like think And there's to we're be XX to No. time. airplanes. to up people fly a all to be risk going are intimidated we any any short to don't period it's certainly massive and us. do.

the I XXX. us, they know customers go us, know think trust that we our

I people my raising me wouldn't a want as be I comment just said fine. But So overstate my was we're I inflated. comment think to surprise or going I don't that. if that to few have

David Koenig

I appreciate history or are are past that that you clarification. that doing on of basing accidents, that you surveys That's basing had on good. that But you're planes have what?

Gary Kelly

to is as Score through the as well directly attentive if and And we're are research, what with with parties third Promoter of media. social seeing customers talking trip our David, perception as our well what brand you doing to. hearing on of customer's Promoter Net as the well a And brand Yes, on we're very we're customers. our as Net that the basing we that, lot as Score will, we're

good Boeing on yes, with there obviously, totally question, and happy we're conceded with they and, well, aspect what your Boeing already the customers not So be? Who that. thinking need that we feeling doing. to to a we've things really has address got I are And this that agree would situation. our and handle be on we what think need of then are

a airline safety impeccable We an record. the a in successful have most got We've history. without -- think great partnership. I We're the doubt,

we reason fine is our out expect things to I of They obviously, have we'll here. build would the anything way or And a many would what's we'll company. airplane to again, I with that arrangements said MAX this continue it we'll along or every X And once when Boeing ever. arrangements partnership, whatever with we the the go good to need will felt important, those contract to was launched fully our great the is times, might be, returns Boeing terms In Mike our modification. it. MAX, where of that to Boeing work is world, And together to with from the that all narrow-body very this a we airplanes. With partnership business fantastic that, privately. obvious, in that And this just not best restate situation. work there's company. the the to are be believe a continue service of case the it take lines up respect has software

Operator

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

Mary Schlangenstein

a question sooner the the that what would've for is, of engine you look a the to to you up you Leap And I those take the planes the actually degrading due to about I following you parts are my than Airbus plane? you intrigued enough went any fuel question, a quick coking? wanted on expected of to at of second nozzle couple AXXX like finding questions ask on the Mike. Mike, have

Tom Nealon

not expected. good unusual. the replace Well, I of care nozzles, you or sooner is nozzle if are create Mary, all than coking there is detectable fuel If over we know they built starting time, any Coking to repair fuel a that. of it's and take and thing and clearly on trends inspection about monitoring issue, their can procedures don't on

will fleet, line Boeing the learns I'm into on a production their it monitor about As it, they more as and they basis. that the will that get improvements they go-forward need mitigate inspections certain to that do worldwide have changes design design or will we'll

Gary Kelly

think be a word And Boeing. CFM, that intended But new, designed will that's anything And key, there perform there used or will way not that it -- the learning it's and is things operate I was to be learnings. Mary. that Mike don't. were certain and

call. trying early certainly make So taking I on the analyst here. place That's point that was was the to

Tom Nealon

maturity, think the don't Mary, turbo fan CFM think than that what Leap history Yes, engine all Rolls-Royce this that gear curve. curve what its this is was, I is, like in what right different I engine at all have maturity of on is. on engine don't They we're least that -- we it’s the feels, maturity a kind in this And a Southwest, curve. XXX all the at one its my feel

Gary Kelly

XX that a talk and about CFM make of Classic, It to a do CFM start. had GE kind before you has the CFM same the excellent You point. it was rocky thing. And engine, job. had been Do rocky on wonderful and and want whatever start, a phenomenal an Airbus?

Mike Van de Ven

Yes.

So, Mary, our team Europe down fleet but was unusual. and visiting, in not anything that's

there what's a lessors little people out talked We marketplace have gain gather airplanes. And always bit and just evaluate and there world. opportunity the of the that to there. And opportunities at to more & I trying most I out a trying nothing just than Whitney. OEMs, GE Boeing the got learn And Air was discuss all an got go I and just with to understanding of a was great NEO. the to information go, to Embraer. and one Series just around we're products the great talked out and opportunity had to those Every to because Show Bombardier me team great was about Pratt about time. was little it I the Paris economics a in and out way great relationships airplanes with about really, fleet of I And have talk that C with last to out the our MAX. to Airbus it year. there. for

Gary Kelly

want leak to to is perhaps did that speculation consider our current to be bit it's not our and was that I We the trip. the took That we And that MAX, a somebody. on change and reveal Mary, very part a to with I this add want And, true. timing this, a from didn't by dread Boeing intentional is unfortunate. I clear, direction

wanted there's a Mike. long not message planned so, trying I time out This And again, just -- point trip we're to send was ago, to any whatsoever.

so that. And just I'll leave at it

to have the grow is than We to event, fleet our say do that But in MAX. the other with prepared Will any not be no anything timing into case plan unfortunate. I'm the perpetuity? that.

Mary Schlangenstein

So, you the Mike, did like AXXX?

Mike Van de Ven

But, toys, all Yes. shiny new I Mary, like toys. new

Gary Kelly

Well, great it's a airplane. great a airplane. It is

Mike Van de Ven

car and new them product. It like I all. of like I just a kind -- to Mary, AXXX. I But, it's the Yes. going show. [Indiscernible] Embraer the was like like

all You out different see just there. like the that you products

Operator

with Rucinski Reuters. next We'll take our question from Tracy

Tracy Rucinski

your So point just about be be? you it to little to those those consider to adding changes models other a would on know on bit would XXXX. up more At what When through fleet? follow making you any order MAX what have Gary. might reasonable and I comments, XXX additions any or or consider

Gary Kelly

our little okay. aircraft aircraft fleet a to be repetitive. I'll fleet, type planning -- not to different a We're adding Well, on

repeat I'd that. So just

not planning do are We to that.

-- Mike, next are several over As MAX the to practical at a Boeing least want the years, grow a and matter, we with practical the our will airline we as matter. airline we grow

not work So it a for be we're in XX aircraft know be because and to that work it for type, months. us that's don't would add to how not a do would put different in order want it that take would completed timeline and us, long on I on don't that. to working I

not near to do about. least the we So you XX, have just anything might term won't to the term either. we parameters there's today. we all talking gives as different XX that's medium at And usual, doing long preparing What we from in doesn't we're be or hopefully, our And That in different there's doing minds. something mean if that about have those caveats. whatsoever. But now ourselves think not here no -- of intention to change years as we're some what

really answered Mike question. So the

more. new, be airplane to we AXXX have that in speak. look It and consideration is to It's our an We the at eligible what narrow-body and doing is. have to he's is That's would Airbus, understand so do for mission. obligation and it what nothing wheelhouse, a it the the

Operator

We'll Ghim-Lay take our Flightglobal. last question Yeo from from

Ghim-Lay Yeo

if or I Gary, you Thank I XXXX. that of plan. I having retirement to intends Southwest used are you. said retirement just regarding flight XXX And the especially for just the of had XXX marketplace? the to going the NGs know, terms in a to market XXX leases you you short-term just in release availability, out any What would pricing the seeing unwind and on question with doing capacity avoid currently? like wondering on plan was

Gary Kelly

it's is out going easy great market. and The not the short, I answer a answer. into it's a question, Well, we no, think contemplating used are

plan you've the thing is lease. wanted that. that some only some And we again, fleet make think that add would of already have I I me planned we the own would, retirements sense a Mike, the XX do XXXX. to we got or Tammy, airplanes to think unwind for if we to don't NGs to is

Tammy Romo

XXXX. For

Gary Kelly

mentioned at Tammy with least of that is plan And her them. through to point follow most at this

it Mike, we your onto is just on to effort, but handle that a scenario. honest But we we'll If an assumption question. used with -- scenario. it's that the might be in of couple it's because it, question, to don't working that decide of don't develop we're this out to confident because going is have that all there change think scenario -- it plan, a think, react that grounding nothing it keep. and that the -- grounded But on. a our So the and the to wrestle be extended don't would that very that we frankly. If period just materializes, include not market. have ungrounded the future worthwhile relatively we under airplanes for likely is we a time, is that mind airplane we can we and that I of we're quite working near don't I'm And And with to think way, working

Mike Van de Ven

got that practical for the out the to that NG NG It'd out in the already to our profile. used we that we for be been make We've maintenance leased or a lot and for be extend airplane. of market on sense airplanes years. used of just couple to go us our in it most NGs a already It maintenance the already are doesn't a have like. get us and out We've out program, Yes. than new the when for of last market just would there search of property go easier

market all So looking at the we're not out for in NGs.

Gary Kelly

want And that maintenance redo would And in to that -- tech And on our keeping for would be of the unwind of with are we numbers their work our each in more certainly to vastly to longer. said. that to then another continue we the and want under on work list. we're airplanes of add like that I things market, Mike But the bringing new the don't have these important already to one kind have and replace I the I retirements, we ops don't retirement maintenance easier set have think compared to program plan would the them. that's those tail maintenance airplane to the They reason that aircraft add department on he's a to just other to prefer airplanes on. bring to assumption

Ghim-Lay Yeo

there regards Gary, XXX that union from Sure. just, might from anything that it the Boeing Are so discussions And far at been there gather becomes ungrounded. for and that? for training has just to with MAX no additional indication be Is simulator with hearing the when FAA? you all the mentioned that what you from you your

Gary Kelly

parties a investment our we an do what on facility, reliance how in confident on we for in is answered, were airplane, plan state-of-the-art they I the and in then return fact be. train. And are are But very not, service as the they comfortable be matter great made the are training, Correct. And we've And our the if they not to our to is in they're in source of and admittedly. pilot they pilots, absolutely as That's here. But very to. the me put huge with from just which pride $XXX all a it. would currently I some We talked flight test flight million still the we the leadership, airline, of certainly, questions understand with our training litmus operations union. confident

Operator

this back I would closing call for over Ms. like remarks. time, At additional to or to the turn Rutherford any

Linda Rutherford

Cody. you, Thank

questions, standing have our swamedia.com or you XXX-XXX-XXXX. any is our online If us calling follow-up all by at Thanks much. at by newsroom so always, you, as communications for team

Operator

That concludes today's you joining. for call. Thank

Southwest Airlines (LUV) 27 Apr 192019 Q1 Earnings call transcript