LUV - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, welcome to today's Southwest Airlines Second Quarter 2019 Conference Call. My name is Greg, and I'll be moderating today's call. This call is being recorded and a replay will be 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

thank cover for today's a and We comments. us need to few you Greg, joining all today. Thanks, disclaimers before

of of current includes the exclude assumptions additional on guidance fourth beyond special approval First, based both website disclosures. for is to our also the could as in regulatory We'll service making based XXXX. quarter be information that in release. detailed items an groundings reference during expectation more schedule Also from our earnings and well our result outlook given MAX also which return Please we could recent check to Difficulty]. additional further our MAX Any changes delays impacts. of Boeing. the and aircraft January results, flight forward-looking non-GAAP assumption adjustments most our That [Technical IR these Xth, ongoing will as on in delivery statements result to current financial

great a Executive Vice today Officer; President; our Romo, got our including Tammy Tom and Nealon, we've CFO. Operating Ven, de lineup President Chief So Van our Mike speakers of

Kelly. And off, to turn Gary will the to kick our CEO, and I call Chairman over us

Gary Kelly

good our Thank a story out is everybody joining you, the second is the but the had by were in year news year, unexpected. ride. for we prepared Ryan. for some This overwhelmed quarter MAX We to us And call. wild for earnings exceptionally quite The grounding. thanks turned be well subplots the earlier

on and we MAX, that's track. We back are it, we'll body and than get despite blow the get through the and ever healthier will from

much has had anticipated. than is The that frustrating call we our thing the longer MAX grounding since extended last

settlement. September. amounts Boeing and was results that a in all any no airline surprise from operating great without Boeing And fix won't until the produce that's done last month. financial very course given this we meantime, be a the latest software will have Of news now revealed strong

Our word tough, have want don't only well done use that are resilient, people and are for thank to they're compassionate, job I job, a they they not I And they lightly. done. brilliant, a them heroic are and

Our hear But without about sing office is risen time heroes, have to lot truly at numerous occasion frontline our flight don't a folks plan. certainly a you have time have frontline so dealing mission to I cancellations. hard a and XX,XXX The completing back with for employees we the their a – they unsung hard them. want

of have proud an our very improvised, They I few. I'm and delivered. planning, grueling done And that, planners have to just and with they hours, I'm they really planning, worked network have amazing would planning lead job going that And our a rename re-planners off really, name operations to to groups, have financial have our everybody.

margins, strong, financial lot the strong the a results there's While really performance, remarkably revenues, press flow, strong of in cash and release. cost a are good news

from a like You're get Tammy, excellent out going just of would and a I but things. insights Mike, to few to Tom lot point

issue that only are to on. of to it's just it's about course, we to focus helpful able thing the the one MAX. with one, all dealing Number be That's really and have

is solid. else rock company within everything So the

is business strong. Secondly,

Second had expected. came RASM. We strong quarter as in

second up it forecasted to X% Third relative quarter be which quarter. is to where right X%, should is

the we account. be beginning all at you the MAX looking taking where the our and and think in – will and to of flat MAX second into we Thirdly, were out-of-service expect year for the solid. told be, that second full if again management is account at quarters we the the not are half the cost aircraft we third and We better Taking where CASM-Ex the year. in into that's we

this and of student any groundings of here decision forced a and capacity. is the our quickly approach X% cut the Newark, our painful Fourthly, of tactical Southwest by MAX will understand

slot we were Continental little required some XX slots. a United to background, divest acquired XXXX they of was of bit Newark in pairs and that where consequence merger As a the

that about in XX So we did hours. deal

we and virtually time, no had presence that year. about there in At for been had fact LaGuardia, at a only

yet XXXX, LaGuardia Airways the more the slots acquisition. of the we U.S. caused XXXX, On side slots LaGuardia we from and AirTran merger. things In with divestiture in at acquired by our more acquired American again

had presence at So Newark. back ourselves went a with when we find we XXXX in contemplated LaGuardia larger into significantly than we

than ourselves XXXX. find also started in what magnificent We a with in is better we significantly certainly which facility,

So, of daily be LaGuardia departures we from offer that as will currently XX October.

for New but destination York market. a is is market, a it us huge

Given our add any and to meaningful inability one for market, LaGuardia, Newark us relatively consolidate York to into our small it flights of makes City New airport. and our to number sense flying position these at

us. larger the majority XXXX. for customers. of choice Ohio for the City of our And of consolidated with We in markets Michigan vast couple airport. a operations our And locations into like Dallas, is Chicago, consolidated Houston, one out XXXX. LaGuardia in served character New Flint it's not in then We York bound Detroit we

a financially, our reduction in at superior financial Newark offset service seats add to there and more LaGuardia, able be to and result. productive we'll underperforms be with

So that's Newark. what's happening with

relevant and wait be straightforward. to to for to supports strategy. in Hawaii. and our without quickly press move We to resuming capacity we the this is leads where can't us, highly the that point, could I timing, which as MAX is expansion as underperforming We'll of the is this it's strategic my that afford have execution add Adding need fifth environment better competitive airplanes. which assets, We described in further thing, other having any and very overall becoming our The the is on release. cut Hawaii

to backing this of Hawaii. move, accelerating So in City growth be our California aren't with we clear, off New but we are York and

Van Chief turn Ven. are the call those better to us over off going And and Mike with details I'm high our the So to points. kick Mr. Officer, first, de to more insights, Operating

Mike Van de Ven

and taking to Gary our I they indeed want reiterating by are what our customers, Gary. by great this care and each thankful of MAX of thanks, about just quarter, very immensely start out in people. efforts. was our environment an XX said for company Well I where service, And believe aircraft am our the They good. other. Well for make we operations performance I have resilient their

Most very our good took we importantly, care customers. of

customers our We possible. flights First, we all X. to MAX other remaining scheduled where flying to June of used reaccommodated spare cover any aircraft then impacted the through

all-time aircraft June X. we And XX.X%. record of without we that load April X ran So from spare to an factor any quarterly did

unexpected hail to event we the important. XX. May service were Denver state unforecasted against had a events like They time to in in And just aircraft that And weeks the a already period XX spares obvious, spares. two up we of are without for of out protect on took

for like So minutes of for get that, a found our unexpected within customers in per time. that our XX% events scheduled no with people way to kind recovery any margin XX arrival of environment, to destinations their

they were at about swaps, DOT still than quarter. with. the the the of XX.X% the Promoter with took. reminder, checked complaint We we for operating on. lowest all Score crew whatever And time and customer XX% it less carrier extending industry the on operations and other changes, Through marketing bags industry-leading day schedule turn ratio Net to carried carriers the in flights We just led block with any our begin just aircraft our as a checked was

tier numbers Now the in Airlines. operations all to impacts of industry still last the the to from results but people have Southwest of down those overall were upper the MAX bit year, given really a grounding testament is a of our the

third the quarter our summer travel on we improve continuing are liability. month, aspects to of into the Going focused peak in all operational

we're to And the June we're in carry that eight appropriate our beginning service. seeing the and operated reliability we've already going year. throughout levels So with of improvements in spare the

significantly impacted on-time the performance adding So nicely has item since the spares. which back really rebounded was our most

finished by June And either is benefit carriers percentage they third to interisland of fourth. network month fourth We their larger place we Hawaii. ahead service to carriers one expect and of finish and Hawaiian the in or course, with of in a July industry being marketing us the respect the of of

our our very delivering I'm of product a in manner, and with hospitable terms thus a in far. pleased performance So, reliable

MAX. Turning to the

challenges operational the in groundings the manageable, they complexity as are do While extend. grow

Boeing, has as we MAX must service. of complete. before regulatory granting in to return Gary on FAA continued and work dependent are a as timeline that work, said improve to still they the earlier, MAX mentioned Ryan approval and So to conversations Boeing them The the to we must And the return are review FAA. for with and service

As removing through all the press January of in we're the we mentioned aircraft service from MAX release, in X. process

our to of the regularly service through a you approach So, reintroducing I'll high outline January on MAX to our level scheduled walk X.

is and each when three start for them address grounding with just that groups have I lifted, to we're context Before MAX process. to of going unique aircraft the a have of

So first, Victorville, has aircraft, a storage Southwest that we in MAX in California. have long-term aircraft XX

we're Southwest not that have yet process been group is delivery that to Second, Airlines. through going a of storing have Boeing aircraft to the

they're our own don't we So certificates. not those airplanes on and operating

the And then lifted will lastly, there course business. the in which grounding the want except from we production coming is to normal line delivered Boeing as of aircraft after will be

include mandated required the first that the and/or uploads software the with some fleet to That process from pilot other make requirements requirements along grouping will FAA specific instruction as training. operational. of the is the likely The regardless the step in be to technical will to aircraft

we're will simulator training. pilot the to assume additional include that Now not going requirements training

pilot pilot time back is with so plan and have to work to plan the to aircraft computer-based bring to every We fly XX-day our to our an end training to the agreed-upon every the period, aircraft to frame operational pilot fleet of correspond complete the time union fleet. the prepared that -- the in we into expected training we

we there will Victorville per could that procedures begin intake those and their complete maintenance long-term three additional approvals activities, at And could to transition believe operational state. one be In aircraft we an week readiness they're addition from aircraft once take point, Boeing storage the those deliveries. activities up to months to ready aircraft mandated this into the that two and to storage to for to storage

mentioned, for as we to delivery. available take they're aircraft So as I plan production

for which with the their grouping deliveries majority Our been into have their as XX change. Boeing would evolve to in contracted our Boeing way continues this and likely And the will expect we by remainder and delivery moving the year be schedules the of of XXXX. production storage schedule

schedules. return fleet the then so by we delivery November, can plan the January would to control at XX by we depending approval regulatory process, Assuming on to MAX fashion MAX aircraft controlled to early provide ramp will and in a to operational from schedule least be the service our network X the baseline there the

intended can is approach to staffing customer demand then aircraft XXXX, in balance that we the as availability So early the availability. best match with crew aircraft to

In October the MAX upgrade going X, we're terms January or defer class year. the new hire associated pilot line staffing, next class pilot removal of and captain April March the given the until to through our of

cost XXXX And those was in some from to match primary so, them flight savings productive the crews needs driver their give while deferring to better there flying is classes, more schedules. with

of people very it this the In to to of remove for quarter. a our remainder proud our relates closing, have And we as MAX year. the performance flying plan and the MAX, I'm

of that the We for the detailed plans ungrounding occurs. the fleet once have

those to. and idea deliveries need plans to from have taking resume Boeing make how an of we adjustments we if we're can ready to We

So, really exceptional customer holidays this be just service for to our provide prepared people our the as are to later year. customers to we summer, want this doing

think team and best got enjoyable safe, time, focused on remain do we've and and on just running in we really operation I an the to industry the So, a reliable, that.

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

Tom Nealon

thanks Good good afternoon or Well, I -- morning Okay. guess everybody. Mike.

quarter. this of and set what factor along very which challenging of in load has is I especially issues pretty we're think I of spite in strong. measure the the quarter, XX.X%, think But We by as with revenues, results we've record record said had So, our passenger a with record Gary results, operating both Mike a any deal a going were through. to produced considering impressive been revenues

simply was of I what's the said operation in MAX quality spite equally to Mike of think impressive just what reemphasize the cancellations. the

think I scores, at and industry. scores guys hear our Our throwaway very was may line, of this truly it's because customer the results strong, these brand you a the satisfaction are our performance top remain know a that lot of people. our you on-time but

and can this and And clear focus I see the running you tell and spent our is care in is in and pretty very it eyes you customers. a and you of Mike Gary our see in the feedback a morale I and lot on time high the it amazing. the people metrics have can of past it great quarter. It's stations can customers. and it read our taking from here And operation our of

the From a fewer we've significantly focused on schedule strength albeit very perspective, of planned. with our maintaining we've been aircraft network, than

Our network schedules. incredible as of Gary has our has to, job team, done alluded republishing and absolutely an already adjusting

were management has our an managing incredible And revenue doubt team done reservation And our equally by of revenue that benefit enabled new management job we're no environments. to revenue there's capabilities that continuing the system. the

improved which that X.X% pleased guidance result we Overall, RASM our very June Investor with our Update. I'm the right year-over-year growth of in with line second provided quarter is in XXth

RASM increase XXth call, the And several you as key the on reminder entered might in we in recall, X.X%. QX to things we to original X.X% expected a that guidance. as there just April that were And of range earnings

summary that. Just a quick of

we an the First, compared demand first leisure expecting trends in were as improvement to quarter.

We the expectations solid quarter also improved and during and month demand these had quarter. the travel and of for both actually business held both second throughout true of each leisure

we're pleased with that. So,

a in we improvement saw expecting in through close-in our yield actually were slight base as with progressed especially experience. we mid-May. second system-wide by business fares did we And in we environment, increase strong quarter Second, our the supported fare as which a fact

system from expecting expected. which year-over-year Third, a our point are RASM we as occurred one reservation benefit

action benefit capacity to lower due expecting in points. point two This up in MAX of year-over-year the are Next flights the schedules. removal RASM being a ended we about the one

Easter well we flight suboptimal had quarter point half And tailwinds last as the Fifth, benefit year-over-year had from XXXX Flight of QX. three of points no year's year-over-year out surprise second schedule. in as XXXX items finally a including shift we

our RASM a businesses these beach for robust especially international in challenges. six the So, considering well performed international X.X% again which out in domestic is particular especially for RASM the growth being markets. Mexican very Both in performance, drivers a net QX our strong with quarter and performance

was risk. not QX Obviously, execution without

our team the had of the way and our planning our QX our way March removing network. schedules to and network April flying manually of has challenge we in work from MAX republish Our integrity June that such through a and maintains base best

the first had impact of due -- our team carried to past a inventory through re-accommodations Our particular through due bit April. of reduced yielding inventory May. revenue management with more in also passenger to grounding manage higher the to during MAX half which close-in the But them

for possible. able were schedules commercially. focused a So, produce but throughout and I the as the quarter they to to were we and had simply incredibly And execution for the our these extraordinary. work of team's risk flight was that as also schedules was commercial think customers, moving they parts work that mitigated both much operationally and Southwest They result lot manage to

revenue in which EarlyBird have by very success of performed also And our year-over-year. and well reservation to products a fall system. being QX our with XX% lot last product ancillary Our variable was implemented we which enabled pricing up new continue with we other

We also business-oriented month planned targeted at launched business last to small card new which medium-sized as credit a we our customers. is

so results early very far strong. the are And very,

past from our We strong performance had Rapid this Rewards quarter. another program extraordinarily

second high. to rates credit the and our continue strong quarter grew card have acquisitions. also very credit And in loyalty total program be retention revenue Our XX% we to continue card

and Customer to the Freddie for the most Best recently Redemption which program So, pleased by as Card, Best Best by of year Rewards very Airline the recognized we're our performance Service. way Building, Rapid Awards Loyalty continues obviously the be of with program

we of very, the The Rewards economics strong. The a tremendous best-in-class program customer Rapid program benefits the to very and are of see grow are number opportunities significantly forward. going

for QX. it that's So,

So, let's talk QX. about

So, continue our very trends third to as business well. quarter strong be

trend positive thus up to RASM and expecting see continue range year-over-year performance X% QX We we're across travel strong in yield the demand and leisure a curve booking X%. healthy to the far. a of And business

the And quarter the QX. means coming have MAX the third closed-in are the had re-accommodation just same challenges aircraft into we through as which a schedule we entire on already reminder, don't

benefit our from outlook XXXX of headwinds point Our schedule point have does from last to X.X X.X is point QX RASM again due suboptimal made XXXX, QX up from a and which one from year.

year-over-year MAX Similar estimating to benefit the in X.X quarter, grounding expect second a are we RASM QX the two a to due our benefit we of the reservation new about year-over-year from capacity from reduced RASM points and system.

seeing year-over-year slight still categories. Rapid revenue result impact we strong ancillary as cancellations, a to flight MAX-related of and are expect but of We Reward both redemptions a negative performance another

well is in Turning exceeding early this, in start. far off Hawaii, every results to our we're expectations Hawaii I And are our can category. tell to expansion, so although fantastic you our a on

up six Hawaii, now eight and flights, interisland round-trip in we're So, flights. to XX daily California two

to for far system strong Hawaii Demand is our and our factors load our very, exceeding service average. very are

performing product experience you very Scores system Net extremely also Our and Hawaii above is with our our well in-flight high. customer which know were as average Promoter

interisland customer above system Demand also strong is our for very actually the is service for is for the interisland industry. very strong again total performance local us leads customers. service made our of of the mix and which up and experience brand And a

this to low-cost that Effect we're And our be to fares structure. is we're seeing enabled obviously our are them that fair where the markets at and It Southwest this the is in by we'd expect point. say serving

while the eager obviously the realize to Hawaii But fly need as MAX regarding as efficiencies. to NGs is XXX the eventual grounded. transition we're of flight we Hawaii cost can Now the to to we MAX, very long

morning soon, so talk we'll service to go that sale this plan have we Hawaii more more about later. on As announced we

additional you'd proactive any continues X%. commercial flight managing the be to outlook our be our execution. team And And cancellations continue and in to as we'll very our focused the of very on through looking expect, excess Now continue growth end of to in network adjustments be MAX will year-over-year year. RASM XXXX forward,

point at impact the quarter the from the deficit XX the regarding quarter. RASM, be fourth capacity and such third into second aircraft a where grows year-end revenue Now sequentially penalty estimated as quarter by in we'll approaching to QX and further a grow are we MAX

holiday over the So, when so. in versus off-peak combined have QX or with next month the work and of do still the the to seasonality peak normal we the of simply complexity nature schedule,

So, too to give on our our us one our clearly is deficit minimize guidance and fourth customers. for protect travel it's impact and to of you the early know any But tougher schedule grows. holiday decisions our fleet perspective or the get quarter for the priorities But as the RASM. impact as to changes

And faced, the challenges we remains very brand despite the finally, Southwest that strong.

industry Our capacity QX put Scores revenues, QX grow also to very And our or continue at remain as us spite Promoter in to at should results, and our Net the declining top with despite here near And we our near-term. industry. the of outlook the tremendous, of are in the of challenges. RASM we the expect year-over-year top

update, that with Tammy. So to over turn it I'll

Tammy Romo

thanks and Tom terrific joining everyone. hard hello of our us I'd focus to add my today you, and for to and Thank like their for employees work. you all Thank

are the time that they people and best, Our have simply time again. and proven

the flow. some with commentary on on managing plans challenges outlined and our I the sheet our impact cost, and remarks we've round will MAX and with balance cash the and through been groundings Tom Mike Gary, have and fleet MAX that our capacity out

for a cost great quarter. Starting commend I'd in with a to people job our managing challenging at like cost.

expected sharing, nominal better in little of profit the Our the than cost, came second quarter. we quarter beginning at a and fuel excluding

maintenance basis, to our with increase six increases remainder cost. impact related unit in increased On items the drove airport of XX.X% MAX this primarily groundings and special ex-fuel profit the spend, of points and cost The wages salary of year-over-year. sharing, a and year-over-year the benefits, increase planned

XX.X% June was range. in in CASM-Ex XX.X% quarter our when year-over-year to increase we update investor guidance second the a expecting were to Our favorable the we provided increase

weather resulted which than factor ASMs update, expected in investor down a the grounded further. completion our of the combination lower aircraft Following MAX and drove

expenses However, cost the offset quarters, incremental advertising by and airport to cost unit maintenance solid than shifting future of was more controls. pressure and lower-than-expected cost,

on inflation MAX year-over-year expecting Turning expect continued. points third groundings in had CASM-Ex quarter to impact due cost we call, August the in scheduled quarter in three-point from the X. earnings We through removed We pressure CASM-Ex flight year third The from year-over-year compared the the previously with communicated quarter. our unit MAX XXXX. groundings seven about mentioned the points started to this aircraft two now of of April the I our impact when

from the range one we XXXX increase in When combined with our cost relatively year-over-year in with point to the third in first at impact, CASM-Ex increase half shifting from line shifting XXXX, expect beginning year-over-year. third CASM-Ex MAX quarter year. the about X% our Sans plan and quarter of CASM-Ex a the now to XX% is cost our

schedule is quarter, flight that bidding cost some our good our as in temporarily were changes landing fees. for have The offsets lowered also and process we flight crew of news had we advance gained non-fuel well third

to some pale what mitigate we As doing can offsets Mike we've but in near-term also we we These will hiring. the temporarily cost do so. and continue flight pressure unit year-over-year to mentioned, comparison crew are penalty, delayed to

off MAX full six January Looking based an our year-over-year. year-over-year CASM-Ex to points X. The are Therefore, XX% as range growth estimate year, cancellations on CASM-Ex capacity in to nearly incremental to seven our original current to is currently increase ASMs we X% XXXX we points the are six grow the through MAX groundings driving XXXX plan at guidance X%. year annual full to

have this incremental communicated XXX-XXX the which million $XX includes expense and in moment. that to of with mechanics our maintenance reminder, cover year, of our year-over-year the a a increase seven X.X of we CASM-Ex from previously retire our related instead also agreement annual ratified for cost I'll point aircraft As increase to decided approximately keep

as fuel second much market fairly on through time steady I the quarter. won't spend too held

$X.XX right premium gallon fuel mid-point economic $X.XX of per guidance expense our around per of gains hedging the per was at quarter recent and $X.XX. included of second most gallon which price Our gallon

protection have with hedge great fuel hedging about quarters. place in a in both third and this We a year, fourth XX%

gallon, for premiums $XX XXXX. about approximately at for $X.XX hedging million XX% and this have Our we year or a position remain hedge per

well prepared. So, we are

quarter of For to market hedge, XXXX our on per and prices as XX we July fuel $X.XX based third in to fall given current the gallon our price range. expect $X.XX

I fuel by has mentioned our As last grounding. been significantly impacted MAX efficiency the quarter,

Second also per gallon ASMs to quarter per ASMs X% year-over-year the range. are declined X.X% year-over-year and in X% third gallon decline to quarter expected

efficiency This MAX on is back the the to decline to returns desired efficiency we fuel the Once XXX XX% about NG highlights the of our get track expect service, which gains. better fuel than with MAX fleet.

Turning and to fleet capacity.

aircraft retire of mid-March any groundings We aircraft since delivery and the not taken MAX we have this didn't quarter. in any

this started the shows we point, expect schedule the an update this Boeing XXXX. which quarter and airplanes. deliveries we will ended remaining So year. our with at contractual these with to majority XX delivery We to XXX of But shift don't have

now the year of XX mind, the -XXXs delays, original in versus impact of With of to this our we postponing this -XXXs. are We retirement have includes own To working retire plan help guidance, leased of delivery retirement Based the fourth delivery Boeing. seven quarter assuming, with we get XX we their currently deliveries on XXXX through mitigate which are delays the been aircraft. we XX. aircraft expect during will seven

to year-over-year. ASMs second declined our X.X% back Turning quarter,

entire given in we the X% be to aircraft the the of the For for year-over-year. quarter, expect MAX capacity down range X% absence quarter, third to

With to fourth year-over-year. the capacity extension through expected XXXX quarter cancellations down year-end, X% the be of is flat MAX to

the we at now, growing versus far number have in course, half fleet. we plans MAX and, year of function the half aircraft are a back planned is looking second our of impact the of XXXX in So the greater to had where our the of of that's groundings

now estimate X% capacity to XXXX, For X% year-over-year. be full down year range to the in we

and healthy with approximately in quarter billion We our and $X the with turning cash approximately billion. $X.X flows. balance And billion the billion would the spend. We spend finally, very ended XXXX aircraft-related be of to range, $X short-term total to in investments cash originally sheet CapEx $X estimated

most $XXX our $X.X to year, the billion aircraft total year. CapEx Boeing's for on the the CapEx billion recent in to Based now $X.X $XXX be The assuming to we million $XXX be deliveries aircraft-related XXXX million CapEx deliveries in range guidance reduction remaining this expect to this caught to to will delays next XXXX, are $XXX million year's million shift up range. in with

billion in first the of us income penalty operating year-to-date $X.X was MAX of of $XXX to billion, cash generated the we groundings, Despite operating quarter, strong through free flow year $X.X repurchases second cash in million million of from billion, which the $XXX flows with return our the half to the $X.X shareholders of allowing share and dividends.

are earnings managed load quarterly canceled margins the I the am huge financial managing have another closing, diluted to high all of Despite share. challenges MAX groundings quarter. and MAX XX,XXX and challenges the the through presented. negative per thank with and the our pleased who financial employees all-time factors tremendously all flights, and still like extend impacts from our this operational to to I'd revenues, produce In you we results groundings strong

Our even return on was grounding. pre-tax X capital with a X from invested MAX penalty XX.X% the strong a point to year-to-date

strong, provide return. and sheet balance meaningful cash allowing shareholder to Our us to continue flows remained

and strong benefit continue is system revenue our significantly ancillary production management our revenue we new to program Rapid revenues. Rewards and Our from

and great price a have pressure. fuel XXXX hedging beyond to fuel mitigate in place in protection We

costs, pressure putting on controlling our on is remain unit capacity cost non-fuel the we diligent lower While year-over-year we can.

returns to near XXXX FX, Based opportunity solid margins at with the on or what continue the we know industry-leading even continue today, to penalty, capital. in on MAX expect with delivering we stellar

our near-term our We results strength will and past network groundings second quarter and of low-cost from the our people. business XXXX demonstrate challenges model, our our the get financial MAX amazing

back turn now to Greg, Thank you. you it that, to questions. I'll take With

Operator

ma'am. begin with [Operator you, Bank Thank Instructions] We'll question Didora Andrew of now from with our America. first

Andrew Didora

but everyone. does you've fleet question I having on given just last Gary, of versions was afternoon, this I to going MAX ask offset you for economics call, single again. type? the got taking my of guess on it fleet a when type I risk thought important Good questions. tied to the know that's single with Thank Hi. everything the the that

Gary Kelly

the no fleet. would fleet for explore. with is yes, to Period. manufacturer question. risk today XX% thanks problem. something that being grounded want It's that's to one of Andrew, a XX%, be our avoid If a we the XX% and had way There's we'll huge other

today. partner have We don't I think Boeing a MAX strong you tell and the company, great to believe airplane anything category. that is best So X new its in very a the that is

We change in different view that. to our learned haven't on XX days anything

don't the But are. wise. I think our that your just and explore, having unique plan of narrowly fleet focused of on executing drastically current now, very we'll aren't have then their we that's as avoiding odds do be the is want question to I would who plans right having a so because growth of -- diversified this some the competitors impacted a this, nuance in again think scenario that scenario as something I don't

to is, in debated and change we do But and answer be we in now, not right is, need going answer the something short explored something longer don't strategy. to days. it's we're think, that that that's I needs a The see XX fully

a diversify practical to us take want we As years. matter, it would fleet, if the

around separate no that. sense, there's and So operating out that way a in easy airline acquiring and absent another going just carrier

Andrew Didora

enough. second you Gary. Tammy. for My that for Thank Fair maybe question there, color

impact this to in XXXX Just just your regulation XXXX the for thoughts how your and curious your is fuel? a get jet The policies. as hedge potential expectations and hedging IMO Thanks. WTI get around that just much on of of jet to to want compared tracks XX%

Tammy Romo

IMO time and question. some informed no, – thanks Yes for has been quite our involved We've contemplating – for strategy. XXXX the hedging that certainly

We have about Brent a oil WTI. XX% and a position in XXXX we and for heating combination have of

rather release, And So we spreads like it positioned from have – we earnings the have missed levels. portfolio, in and or increase diversified XX% see a a prices increase well for our just in we feel should hedge you we're XXXX. crack we case current

hedged. well very again So,

Andrew Didora

you. me. That’s Okay. Thank for it

Tammy Romo

You’re welcome.

Operator

DeNardi. Joseph have Moving on, from Stifel, we

Joseph DeNardi

Gary, into if for we laid moving discuss just think capacity like you afternoon. CASM-Ex how if the Good the year growth kind reintroducing should pieces? wondering, Thank the plan you'd that and all Thanks. of just about Mike out talk about to you. next that I'm MAX can Yeah. given given

Gary Kelly

to has from lot the a the variability Boeing schedule in work do, you about delivery of think when Mike here.

So all this assumptions. point put some the make at in do we a can is ground stake

we've think for what clear been near-term. are assumptions the I our here

Boeing how sometime taking deliveries where then guess think let's many hit in would off under Right that has we FAA we're can you many that how December deliver. Boeing Boeing ourselves, and and those unground as physically signs September many un-ground be now, in can we the airplanes assumptions dates, I I making we October, in when then physically to say. begin can Mike, done how assumption

uncharted So there there. territory is do always three MAX a there's or don't different week. we sources know. a Xs of in in and many. in can And We're just so day We

bearing. number We've of planned rather some MAX has some So XXX-XXXs Tammy I got a for year. that next for a or retirement think plan

in decelerating We have retirements. some the accelerating either interest or

see. to have just we'll So

don't the goal some I'll the if practically soon of would overarching At we we our possible. -XXXs. tell this as want you to can resulting I more MAXes like perhaps capacity then then think is lean as as And as we heavily we point, many deploy accelerate

that not at and And and helping money leave leaving market market performance, route market also of our look we and is unattended. that the our table all competitors. you after we spilling just tell anything As obvious I we're is that will that we're short will it traffic after on that capacity

from assure a range our passive, and a aggressive, quickly questions as that operation would try any to you from I that we're can again that be. And are we being would delivery Boeing next time we we next time to to think to to to possible system frame right the My and hope by that of year. goal the on we assuming can on, that year unproductive just about that. whether But our now and its next safely meet want smoothly whether reckless efficiently to as that give by there's and were the from and six months beat – end number do behavior you current never what rate if might schedule lot at year restore our we again depending whether can of deliver back be going us being you just it's expect I get the of So our we operation.

Tammy Romo

impact to long-term for on a for MAX And XXXX trends our the just cost XXXX, in growth our year-over-year in with and well groundings ASM means CASM-Ex creating obviously are unit unchanged. help all material target jump maybe this is cost, our what to

excluding annual includes this on point as salary, our that increases quarter's And estimates out year-over-year profit for I benefits, and growth goal cost fuel and unit below for X% I want target our just and cost discussed wages to sharing do Our is people. call. last

some the year. on capacity And will points XXXX year-over-year are We The due to does a MAX year again next the And one-time, result this the comparisons while from given pressures groundings. grounding. obviously about impact pressure favorable create this would experiencing lower near-term six challenges us, the our for cost, and are year's these unit be full of for that's as pass. to more

towards terms to for year, XXXX. absolutely declining next So in CASM-Ex a target would be in it year-over-year of drive just

Joseph DeNardi

have for are the What your about it's to the airline very that clear your more given in And your Gary, Thank business pretty at of your few the cycle? relative Chase changed? years economics just deal you talk That's durability the XXXX? you. the economics helpful. have another recently means years? last just now the how economics of for airlines And over a with favorable past partnership helping the one the you for XX then can did become you, that tenure industry And given then, over where most that over

Gary Kelly

Yeah.

So XX a card you topic. a we on as I I'll saw starting years, quick to But Tom XX great didn't comment. love that have and would affinity opine give just ago years for you think that an with then And opportunity.

XXXX of the And we and needed for we've program, started I frequent the enhancement an as just have cover to the concluded but for that was that a certainly covered is so flyer it there. It foundation the Southwest XX long and years. to one in a material obviously in make is award-winning driving number for in us, our again. program perspective revenues. brand lot the in I'll we the a industry-leading industry I that his But overhaul remarks, Tom frequent flyer yeah, CEO come When of don't quickly way that much as I know

have We plan. great a

it. love our and credit customers into droves card that all They our factor Our in take we obviously of economics.

the So the really may more were in XX than even generation we proud really, stable of That launched we terms XXXX years very was in revenue biggest Southwest XX say I before. far had to accomplishment that are new over today be would program Then of It significant. our single years. was the that. last

Tom, want want you the add economics? Obviously, to it that… but to very close you hold lot seems a on the that -- we anything to vest, of

Tom Nealon

customer massive long of But thrilled It's the just we engine know the be But just did you the partnership. not customer of We than we non-card-holding customer. retention, with that I can the going all value for incredible. do it. well our can a What as affinity, tell the to partnership. vest. with get good we The growth tell is into just us. program -- continues greater much get don't Chase. is really either. the that so thrilled economics a really growth you What you We are to economics is really thrilled to are We're into the has I time. It's of for a close

Joseph DeNardi

Thank you.

Operator

have we Cowen with Helane Next Becker and Company.

Helane Becker

can But taking of this that? address talk you time. have Hi, the the I'm you much them pilot through question. the for Can simulator? you months, operator. about and put much, sort two who just when one very you Thanks to everybody. training so do Thank answer not to sure maybe

Mike Van de Ven

computer-based is Hi, the MAX. put This to to awareness Helane. to We're needs that be What there can training there. is works be for shows sufficient pilot that the that have doing the of there the how what be through it's there system, them in -- MCAS and an that Mike. not what my the we is pilots simulator on training understanding going the believe is on airplane of expecting can

training the of are already since boundaries envelope the the we've called of with And Hawaiian through And Ethiopian they've x the the at doing have training -- two terms and our through we've over been pilots have been of airplanes the for the airline. We of limits. Air kind things. kind pilots their been our really performance Southwest, this training. of been the hand-flying in training inception last And years in those airplanes simulator like they've and situations where scenarios incident for introduced

second year they've that. completed of will all this So the be that

recurrent that that's So with training think why the out is simulator. when grounding we together you bundle all in the that training coming appropriate. the supplement computer-based that And ongoing then we of this

Gary Kelly

-- it I other sort the that your really which would it Helane, add environment is does question, but of beyond thing explained here. the

hours the addition to have captain gold flight first we And hire average for in hire that, X,XXX that I officers is Southwest on standard industry. We that have of the experience. officers think experience. first

crew. experienced with So cockpit a you very start

when the operations scenarios. for only leader certain obviously about we Then training are philosophy covered and industry fly our we the training and the to Mike flying airplane XXX, comes it and

prepared So we'll well be on take very new this requirement. to training

love forward more are very to and Our pilots, it and -- pilots I think our MAX service. to looking importantly restoring are comfortable the

reintroduction the plans. and allowing more they'll time role of we communicate But reintroducing And key all the play the of factored when MAX into our the that obviously, customers. We're ample a fleet. and our training for than we when we're to

airplanes think that the will January the Mike more reintroduction and as think time a target I to that of back I a with service allowed going is than into date. for more again, the is challenge just as talking we has earlier, maintenance challenge, be And maybe our And all what if Xth were much a of be enough of not task.

Helane Becker

in does you're not come So Got leaving the is the you. MAX I suspension a And slots? just going when And Newark, you question I can of go so to ask market is about back? one this the service. understand returning just This then just this?

Gary Kelly

ago. It Those the they But no unslotted XXXX. why the But was like them decision it's in whatever term where this years anymore. now, and is I when right is we consolidate. -- word FAA several that them -- a not slotted acquired that's

to and our significant a It want where know have with grow by time. And the XXXs customers presence. our MAX opportunity to over XX%, is new which have we'll -- New seat actually XX% don't York So we facility have we LaGuardia. and focused an the will there the X be City go I capacity

efficient that, it a far by So as airport one opposed ample and having into over production do have we'll diluted and more to consolidating revenue operation cost-effective to we opportunity have two.

small and still two it's larger again, relatively much efficient into LaGuardia. So more arguably today that operations will operation at a consolidate

Helane Becker

That's very everybody. Gary. Thanks you Thank helpful.

Operator

we Baker. have from Jamie JPMorgan, next And

Jamie Baker

as probably will clearly Hey, potentially MAX and good continue Have share profits basically you competitors' to your going this market asking you by already again declines afternoon, the coffers. for myself further tolerate funneling long I'm tolerate remains Gary, non-organic grounded. to any ask so to kicking as everybody. capacity today and for question growth? before I'm quarter last because it or long agitated give how into thought would choose You're consider year-on-year you to can do

much You've said today that. and as I respect

breaking a imagine point out somewhere. to got there's there I've So

Gary Kelly

Does to kick Just kidding. get I that too? you mean,

Jamie Baker

a about that things And employer on right the call. said my change you after for

Gary Kelly

you. without in just game a on we I the to to being with substance. legalistic be pragmatic trying mean, anything little trying that overly I'm I'm comment here just Again, play Obviously, bit. can't like

we've March this of that is emphasize was executing or really we're is As came we problem. to that view a we've the the I with any this And one clarify in tried here strategy this strategy a today things short-term practical into affecting that. a a and think matter, that got not of

it’s delay summer. we And the and next manage. by all can ungrounded view we essentially a be that handle that disappointing to So that early all find But to it to was it of another again out year. which yet going can is pushes

goes beyond So moves in your -- strategic for nature tolerance question the to a think into scenario tolerance this of question that fairness and well I the your the huge then question. because

Jamie Baker

Correct.

Gary Kelly

our work answer to year. and good get results going at made -- continue this. we've relative I really started hopefully so incredible this. shape. it's we compare question. through -- your so -- We're in superb And in got than pretty we'll to actually we right that. now to Obviously, actually strongly to can here through few end competitors are If exercised have a well even we're the that our that schedule financial that we've the to we way -- we that We're we're the there healthier manage muscles year and a doing new And ragged

an So that don't that's think issue I going be just for to us.

Jamie Baker

Okay. Fair appreciate enough. I that.

have As that Should this do? quick as case? fleet-type ordinarily they the competitors a soul-searching assume we talked question that for you in is you than Or current more some -- circling that environment and Tammy to the I structure. just as real about mean, not Boeing aggressively whole to I a a are follow-on

Gary Kelly

question. need the duty open have. we've Mike That's airplanes I and on. hopefully comfortable we our best and on that the customers to and company our so in there out that shareholders marketplace be we've our on decision -- for made answered know But And -- want always a that's been looking been always what's case. we case. And and yes That's the there's nothing. again to at other We -- has the

Jamie Baker

the the MAX we And on think calculus. if follow-up conference season. or call, overhaul should keeping? been quick housekeeping then wondering I to an if down mean the park for a or It's P&L And will them before that How that hit impact best expense Tammy. XXXs one suppose that both. you thank you're them? I you plan the Just quick engine about might this run exceptionally thorough is a

Tammy Romo

I And that. Jamie. kick Well, thank don't you after you want to

expense maintenance And to is guidance $XX associated with about but seven million those So aircraft all on the morning. provided going quarter as -- hit you this fourth in -- question to and that's that that's pushing we the your we contemplated on there we pull….

Jamie Baker

Thank you. Okay. Perfect.

Tammy Romo

Thank you.

Operator

Pfennigwerth we Duane with Evercore. have next And

Duane Pfennigwerth

Hey, thanks.

digits broad our was in than more XQ. this replanning was been MAX to math just The through brush By challenge going are XXX% that that. So managing of XX grow mid-single MAX of you've growth. you like in strokes that points the

to shrink utilization. fleet the ex-MAX shrink So was plan actually shrink just your maybe stage maybe

unwind can talk XQ So that about I the due. of assume just related events to some away how in aircraft you you practically maintenance going that? were are

damage? brush Just minimize the strokes that do broad and unwind you how in schedule

Gary Kelly

okay? I You take mind you Is can swing at up. would a clean that if Tammy, it that?

Tammy Romo

I do not mind at all.

Gary Kelly

the of I gross the to sausage-making I XX%. with the middle MAX we close out that. if to in -- that the as take would say for we're Well, the that were of fourth schedule believe is the quarter

the a quarter. So talking point in the about third X%, MAX of reduction quarter reference of we're in because again as X% a second

So have it airplanes. more we goes up because

Now holiday schedules day. the vast a the difference really are between of because peak day complicated an off-peak and

for years complicated really our automated. they've really fully it's And And it's planners. network over honed schedules those the and

this the our so want being And longer XX% or of a of they because capacity. instead and don't an less. and up go few manually. where the nature to flying the days day of the that XX% fly back something back have opportunity to try back trim And days do XX% to like it maybe off-peak and could of things some some we there's down blows off-peak We add of all that that scenario to now to XX% to and eliminate

But we we flights because What's and on versus from penalty CASM until It thinking have some that with it or figure do for here. about it. choice. But And we're customers. not perspective focusing that might independently profit give do without rather number. be some RASM way narrowly won't greatest is more productive optimal be we come of the out won't will our you with schedule. and what It a the I'd that's RASM those a

And looking where quarter as it more coming Tom airplanes for point. at I the with by challenging from time us. question. goes of if But your fourth and But that gets XX is schedules for that's I more you don't number are you the know that of why think complicated different were that's correct said we're because because

what matter all to said still So quarter. a that no We'll a having we're have going solid have profit. solid

the Mike proud rather is. cetera. Tom? and It will just a can of operated well et like be sense won't in et schedule operate that cetera, be that tuned We publish or it optimized it. It'll normally we're staffed

Tom Nealon

Well, yes. that. I just want to add to

question perspective? to your need unwind I your are but interpret not think so think that's schedule we part financially going when customers was I the -- of of are I we're how be But weren't to the quality with shorter-term this about need performers. comments just going how to -- get RASM you to Obviously, from I it. of lower as take kind performance that perhaps a we in CASM routes well view to as and thinking Gary's as routes to on poor that where we -- it some that had have the thing.

a this manually. There's got not it on just -- in is we're kind said, network as team to through way do And Gary the working through of we haven't scale. process this our this

So we've that of the had to underperforming some are average. back our against long-haul routes pare

also There are options. routes long-haul -- also reducing back. routes some international of the we're frequencies. those pare We that And can were are there alternative where

to and We by that's profitability. be. getting But to opportunistic. at It's we're being doing happen our they So very it's look about it line how needed it. about we're where customers line

heroes planning doing. and to the point are they they're heroes. about role Gary's the that's right network now what That's unsung But the

So...

Gary Kelly

there? clean up to want you anything Tammy

Tammy Romo

much No. of to I to is that. don't add there all think

All we But capacity obviously here that. around full what And all we're down our to of just of working bow year that -- we're of guidance of through today. of put a just year-over-year. you for in still expecting X% ASM terms all give as sit X% to did we this maybe, again

that there be guidance and lot little of we backing a point as will just But up it we'd down a so you're I does any as go quarter. our that bit So coming into fourth firm of down up parts moving a or here. imply Duane maybe with exactly that for maybe again

Duane Pfennigwerth

And the that to parts follow-up, want the then for up year. Great. on appreciate any that quick just appreciate this you outcomes make commentary that and really gave in Thanks real moving answer. you your about ground generous lost on up, XXXX all

you'll you MAX really based end the your knowledge deliver, Boeing's based your same ability XXXX to current before at this current end on year you on that of expected next think But knowledge count of shell approvals, to do grounding?

Gary Kelly

aware what Well, know Tammy six would based today, we XXXX. into we're deliveries, on that slip

be less So take question And than thought. here. it'll just to literally trying we your yes, what

talking that. But I plenty That's next we're I'm lot as into is And year. with about a airplanes think enough. - close everybody of service putting aware, fine

So if six going not of XXXX as that's huge into slipped XXXX from fine well. It's difference. out that make to perspective, a

that. see that I whether lot want do sensible there's done and just tail-by-tail is, analysis a to maintenance be try think goes and play we again what's just work try could that. to a there in cost some into to And avoided and teams really There's our is do it retirements. more whether to to to whether profit-accretive accelerate what that's be

Mike. really Our good staffing plan year for next looks

we up. slowed real next year to So such have haven't snapback we catch our that hiring a

attendant we bit we're to way think So next into earlier guess out year. don't that's couple a I flight saying, a of pilot unproductive. overstaffed. defer of But you pointed and another fancy it's as classes I a have had

manage We good way getting around, We're the this. we're think can set all again, well. So up at it. I very

hit will think not midyear, if be reasonably in-line – that's the earlier. it And we'll assumed that by should with have I the been you. we we'll shared where hopefully timeline So with if back hopefully, case, we

which potentially will we very be So quickly welcome. recover could

Tammy Romo

Yes.

said tremendous this our flexibility plan. talked to Just we in we've fleet and what about add Gary had on lot, a to have

and through it work of with results we'll care way of in this we'll all the proud So customers. do to produce and that our goal be a financial that takes obviously

there. retirement we're Gary through we but lot working a we've as of got So plan, -- our flexibility said,

really we'll when think And it's done. results through all be proud And work and I said so of the that. you'll all

Duane Pfennigwerth

much. Thank you very

Operator

right. All

last We'll We question Rajeev take question. Stanley. Morgan have more one from time for that analyst Lalwani with

Rajeev Lalwani

obvious in. tackle load for you Thanks have the sure how plan terms plane that months? make talk about from me Can in to Mike confidence squeezing factors the a to and for you question get don't flying the first passengers if and the couple with suffering are of going that you in the on and yields MAX. the Gary of you're you

their move along, this you to you're about urgency of highlighting? pressures And then part on any sense with FAA? about sort of relating the to color you're that dialogue can that, talk having some you given whether And any that obviously the

Gary Kelly

why don't if I you reverse. talk the Tom Well, can take them want in reintroduction. you about And

and on here Mike you can the the Well, FAA -- yes So is me on the out FAA? answer help yes.

dialogue with FAA. We have the daily

is FAA the on done that of work -- MCAS signed off I And I the think the that Boeing well I and Gary's on believe it. is words. are is these FAA believe that

is it Although "all are they off done”. component done. is to you they until tell -- will MCAS they're think going that sign MAX But clearly the not on I the X

different. at disappointed that if to on FAA that and grounding. extend learn this shocked, learn we But motivated the be anything don't different sense anything be I'd I'll is all to I

I that doing sure is covered, think are they frankly. they their quite everything and want job make to

it other anything a came such wrong. in thing remote chance is that This wants would no environment, up, that and go remote But one this chance.

it with it readily thoughts. all could sooner, with will I I it's well. And worked no, up so sooner. had think those well, And way. It's have that. I -- we're wished agreed to admit fine we very as known on been Boeing So set But the that by

want is Mike? so you like there, assumed a reasonable Anything learn unless one. our to line new, we it time feels add And something

Mike Van de Ven

right. I No, that's think

of they've on once making sure focused better risk that they're out crossing forward. type Ts, is the with their think their FAA review there. I they comfortable guidance high-quality the And just that, Is, addressed go a unknown any to will dotting issue

Gary Kelly

talk Tom, the about to reintroduction? want you

Tom Nealon

Yeah.

I think there's -- media so much so I just think on the Rajeev, topic.

some I some period MAX to be to it's and away of think think going aircraft from time. service, be reintroduced certainly the people, for I going book the to are there to increase begins as who

customer, might going I kind good of our and it's to intent done than MAX to to be the pretty even And customers' their shorter where heads maybe of those in non-Southwest not than the but think fly we expect, respect think expect. less I with honestly a understanding just aircraft duration we we've at job things. all are of

customers' confidence interesting terms they our in vapour. different lot to cetera, And in really Southwest, customers. have et of time We're cetera. to our changed not break their one Southwest cohort with ways this the of what's is And customers spending all -- not at actually so iota, a to trust intent in Southwest, their has of fly, all there's perception et

So, based of very all our if a part return-to-service working plan we're through you robust -- will. that, obviously

going the piece for a be there's robust very There's operational communicate. side, we're for and a I to terms a communication to mean going want marketing the that. for big through side. It's and we there's big commercial plan. piece Mike piece And in a big how in of

if an of that's fly, a flying been asked MAX the to doesn't what one to yeah, a you is be I've has be questions to if going think initially. flexible? several -- customer issue we're going And I customer want on are flexible obviously, times the

And us. change change time, so have a the big customers all honest we flights for it's with you, to be not

but a In itinerary not fact, massive percent, our has percent sure what I'm changed. of

a big deal not for that's us. So

going while for feel it to get those and I that where as comfortable, confident have are. our customers think it. that of a be flexible through just we're we're We're all, and I very pretty aware thinking to But aren't. we

Gary Kelly

key just the Yeah. they're And We're communication. communications and that play in at that do will have this And going good the ones a have to a have campaign. ones comfortable, obviously that. I our They're that we're role to And know credible. too. to pilots be are

to nobody So, be unsafe. do company is this pilots that anything in our going especially to and deem they

going of matter and do that, we're a just it's to then work convincing that. to constituents hard of our So

Rajeev Lalwani

you. Thank there. it leave I’ll

Ryan Martinez

Well, of right. All follow-ups that ring. analyst it a the give us. me call. guys And you of does just if portion for course the you joining Thank have for

Operator

All portion Ms. of ladies Managing our Director will first call. and now today's and Barnett, media to gentlemen, with we of introduce like right. Outreach. begin Laurie I'd And Communications

Laurie Barnett

would Greg. members question? for And we welcome please media on you, call to everyone begin you like up I'd queue how questions, the our give Thank instructions Greg, should before of to taking today. a

Operator

ladies [Operator and Ma’am. Mary first waiting. course, with We'll take you And question Instructions] Schlangenstein from our Bloomberg for gentlemen News. thank Of

Mary Schlangenstein

calling questions. really for had on I Thanks me. quick Hi. two just

mentioned those Gary, is frame cancellations? remarks XX,XXX cancellations. occur? those in what And you first The MAX your earlier all time did over Are

Gary Kelly

that was total. Mike,

X,XXX I have think normally you'd cancellations.

but that to the -- vast would the to it put into perspective MAX. I attribute of majority excess So

Mike Van de Ven

we come with sell when out talk into really Mary, the MAX and there cancellations, XX,XXX about Yes. change we the have the schedule. two schedule they to forums, the

So before of we lot XX,XXX cancellation operated in don't we out flights. pulled that that I included we flights know schedule, number. we a pulled

many and to which as the April And secondly, once to MAX. we schedule, the were trying May did customers so re-accommodate close curve operate operated could, into we I spare the aircraft, would because as booking we any and we without attribute

Gary Kelly

Right.

Mike Van de Ven

the And weather recover or you things maintenance and other cancellations to events have unexpected hailstorms no just the as airplanes drove so, that, up also. events that we had way or like or

XX,XXX just the Gary XX,XXX are X,XXX. that was XX,XXX, numbers operations. the And for normally in those said, around cancellations So under as – quarter

that vast is the number XX,XXX of majority So MAX-related. cancellation

Mary Schlangenstein

is second XX,XXX for quarter? just that And the

Mike Van de Ven

That's right.

Mary Schlangenstein

Okay.

on other able to gates. Okay. was you My to gates real Are the question else? happens Newark quick those? to those sublease What somebody

Gary Kelly

lease, month-to-month a It's so no.

Mary Schlangenstein

And you United? from are Okay. them re-leasing

Gary Kelly

But Port don't -- No. it's yeah, to know. Authority. I It the with and No. be don't month-to-month I has think so. with it's --

So…

Mary Schlangenstein

okay, the great. With --

Okay, thank much. you very

Operator

The Street Sider. we from have Alison Wall Next Journal,

Alison Sider

Hi everyone.

Gary Kelly

Hi.

Alison Sider

else? information really disagree feel incomplete you to or -- provided Air or about feel about Southwest or do after think was is like about any -- about MAX hi you question whether at either safe anything you misled broadly Lion more that Boeing do do it's it -- My fly the MCAS or -- the

Gary Kelly

malintent there think was at don't I Well, any all.

have in knowledge We we wish this we were And done never that happened. done yeah, wish then. think the hindsight, I the being we obviously, it are that things wish now, that we then. all that now had Alison, all

and behaved that's Boeing way of judgments risk were think the they why the there So remoteness I did. made the about

Alison Sider

Got it.

from see don't anything criminal that perspective was you that there So your happened?

Gary Kelly

No. No.

and but asked the get a company country. have customers. confident a addressing lot. the problem. very to they're care recognize taking I again I'm they and Boeing not focused on our problem problem great and Boeing -- They and important their is about And Now Boeing a is of just Southwest

that tough a doubt and have been I situation have it's made. mistakes no So

terms this focus establishing job get get flying customers as harder of is the are my with confidence But to to do for in Boeing in restored than to us Some point its have others. the at solved, evaluate the problem public. MAX service,

need all for that have to intended. addressed. for. where And we I all to all the as been raised it earlier directive to the with we obviously, what provides adequately want airworthiness be was comfortable want just validate what works and have want go And, to issues that been the we'll We'll that's training ourselves think covering that Mike see through

great but not no been work that affected and a there have -- hate just many been have They're of company. So terrible obviously, is lot with. affected people a they're great they're us There here. This Southwest. of are in people I that are that a And, it. to situation

we and and -- problem the to just solve eye the keep we need our ball on So forward. move

Alison Sider

Thank you. All right.

Operator

next And Reuters. Tracy we with have Rucinski

Tracy Rucinski

good Hi, afternoon.

some is technical that to Boeing preparing facilities? more process? tell bit given expect You've And planes can XXXX. Boeing kits slip said you up that that you into are you to are delivery of when confident MAX us a at will you need stacking receive them How planes help that that you your those about deliveries little the

Gary Kelly

does a you Mike, on don't to with percentage new know XXX% Boeing not could airplanes of territory of sure we're latter. we've hit we're assumed a confident to the confident Well, it. our there's range in unground support confident. no And we're talk no not resources where for be got FAA. going we that. to the I'll put Then our to But time line. sort way own so quite is of to have I that XXX% on we this that we're so we're and let --

to and be at towards we're flexible. point estimated be this with So, yeah, to all have view a has to that going

that sure uncertainties when yeah, it there's ungrounding as it that I that learn we the better look lot get I'm – there's go maybe accelerate. starts. at a I would we'll and as will So But we what assume mean it exactly and no like we'll start of will surrounding airplanes

Michael Van de Ven

Yeah.

Mike. Tracy is this So

of We my get on delivery have And just a pile schedule and they And just if to have and all XX increases preference that we XXX-ish out the those is of facility we're storage a -- of -- Boeing bigger a out there. storage airplanes economy. in XXXX. airplanes made part airplanes in them to so put they take those

normal of in So it those some of into have more we airplanes can us right That and makes where of take give complexity. course rescheduled certainty sense us to would a off them to less XXXX production line business.

upgrades fixes I As the of point airplane. coming this what at that airplanes at most least to out is are that are understand the storage software of to the

we we will do. things not requirement That will need to And the complicated a software will a as take the upgrade other directive. do those will There be do. is Boeing be perform airworthiness will that hopefully service will airplane. if that may mandate there that FAA to to might work come out then that we will So an we we from bulletin And also. and

associated as then of I be will a pilot which mentioned directive, terms And training. second earlier there's in piece the airworthiness with

so does simulator days. we get long will training pilots And as XX not in it our time, through that -- is require

Tracy Rucinski

thanks. Okay,

related those upgrade? are kits, technical to the So software the

Michael Van de Ven

I'm be kits the for airplane. not now know for I going sure final right don't what is what the because the are to fix technical

Gary Kelly

a But technical least of is is question package. Mike your software at as interpretation describing what is the my

know don't be. -- don't know it I Mike. else what So else what I would I'm with

So all we know…

Tracy Rucinski

Okay.

Mike Van de Ven

firmware the thing know call. system. know earlier our then the I And this the the in all of to MCAS we is -- software software if I we're analyst only don't piece that make heard then, flight and to control you going yeah update So want

extensively training, simulator, in the of scenarios the don't for modified we and the trained because But that simulator pilots is is being feel our kinds software necessary are this for.

seems approach. that. on comfortable with we So, there will it And the what anyway. that's be can think we're be computer-based done a to be training, leaning But that FAA towards but

Operator

Next we Associated David Koenig. have from the Press,

David Koenig

Gary. for really This is Hi. quick

I it. question reviewing got left FAA that last to clarify, came portion, it on said to was is all think issue the you check signed FAA on that MCAS analyst month. And last off is Just the that that that up and

from that I wasn't Or clear did hear that you Boeing? from the did you FAA? hear

Gary Kelly

not what And I exactly David that's said.

So, those …

David Koenig

Okay.

Gary Kelly

quality not us, That's whether fact Gary's not --they have in tell FAA …were … words. telling the will they

David Koenig

Yeah.

Gary Kelly

…"signed them. it off" together on because don't MCAS, they want all comprehensively and I blame

was I Boeing FAA and the I is saying think from all from based status gotten that, that stand. the we've on on where reports they

continuing there the the Boeing you that not Boeing functions don't for I'm piece. either that getting FAA just we're done more speaking any I that those by there's that or sense FAA. by think any the I'm any work is or them. more not either to telling be on on

us I to it Boeing more. for here not they'll that us on September. issue. sitting expecting And they'll that suppose it that and gone then, to to done, know until now any still waiting show show And FAA in we'll the and we're they construction off second activity on until I'm get But with has completed. suspense to work is all What this be is

David Koenig

situation? the Okay. reading want but All don't of where that so sense that you to explain you got that's your right,

Gary Kelly

based yeah. I But did I Well on… thought

David Koenig

Okay.

Gary Kelly

discussions that we've the had … Boeing… with

David Koenig

right. All Okay.

Gary Kelly

if that … and the FAA will. they've you implied

David Koenig

Okay.

Gary Kelly

but So won't They separate asked be that they're I've off. I will -- signed want tell us but told would they have if "We -- me No. that they officially to clear. hopefully And not." -- they So, it. made them I

make all said, our that in I it's just on waiting I as together fact And want all They like sense sure and and to the that piece. those work blame is planned. work is them. don't second systems done and of done we're get the see rest it the But all news it good of

David Koenig

clarifying for you Thank that. Okay.

Operator

question. one All right with Star-Advertiser. we And from that we'll the Schaefers question Honolulu Allison for take more have final and time

Allison Schaefers

Hello, of you? all

Gary Kelly

Hello.

Mike Van de Ven

Hello.

Allison Schaefers

could Hawaii to service about routes? flights selling Hilo little be Sacramento, wanted San previously announced when just specific you I for see you bit a Diego and Southwest if for anticipate Lihue more or

is on end those the needed? of And on up this not year service expected XXXX ramp likely start time or based to as actual

Gary Kelly

guess schedule try our intent. Well I I disclose to should

I to going think that do today. I'm not

Mike Van de Ven

But ... for thank you

Gary Kelly

we will and -- the And right? and some still tell we're we're serve intend and said excited still from we and Lihue. Sacramento still that we're But Hawaii we very So, really serve to previously, San announcements you Diego things to making Kona soon. really I we all mean intend

intend and between we Hilo interisland And still other to islands. the have

So, everything still on. we spot said is

can't So, work announce right we do we as more to our to little wait to on well. it. schedules a and not working We're But flights ready just have those we're still now. begin

as -- phenomenal. more tell I'll from So communities robust and said And you from reception that. has you could we we've you our aloha local be heard the had not excited the when been very

So thanks.

Allison Schaefers

Okay. specifics for you with Hawaii? elaborate Any bit you've demand seen little the on some that can way a

Gary Kelly

we're numbers. earlier, I across my Well, comments I I are in don't can have my significantly have the any as any the system. you higher specific I tell don't factors fingertips. What demand that, what is said load experiencing at than

company factors announced and Hawaii the mind business in keep we that. surpassing And just our for load record is entire

load of actual it's about of just of demand In it think terms and phenomenal. kind I in terms

as well routes. that's for And for true islands a as the interisland California the to

is. islands said, we It six So, going really as have the and California trips have it's eight it's we I round to mainland, -- phenomenally. just and

So...

Allison Schaefers

gentlemen. thank Okay, you,

Gary Kelly

Thank you.

Mike Van de Ven

Thank you.

Operator

call like that our conclude Barnett closing does gentlemen, or for back ladies And to I'd over At remarks. turn any additional session. the question-and-answer time, Ms. to and this

Laurie Barnett

Thank you.

all to questions have you our other at XXX-XXX-XXXX. you. standing If communications assist any by is group Thank

Operator

today's And ladies Thank and call. gentlemen, for you that concludes joining.

Southwest Airlines (LUV) 25 Jul 192019 Q2 Earnings call transcript