LUV - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the Southwest Airlines Fourth Quarter and Annual 2020 Conference Call. My name is Chad and I will be moderating today's call. This call is being recorded and a replay will be available on Southwest.com in the Investor Relations section. After today's prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] At this time, I'd like to turn the call over to Mr. of Director Managing Martinez, Investor Relations. Ryan ahead go sir. Please

Ryan Martinez

it everyone Thank a our for and then moment, appreciate you, I joining open and call remarks will our us for share Q&A. Chad we prepared up today. In just

comprehensive will Operating CFO, Chairman Chief of from you and and Van Mike reminders. Romo. de and First, A President, update Gary Executive Tom President Board Nealon; CEO, our Tammy few a hear Kelly; Officer, the Ven; our Vice

results are which could based our We these will fourth our today remarks. information make GAAP in which have excluded more from and reconciliations release statements, several important results forward-looking of press we risk our factors. quarter we trends expectations actual expectations. had our non-GAAP we performance non-GAAP purposes our differ on future items And in for also morning and other to and non-GAAP statements current from regarding in special this results, results forward-looking those will And reference our we substantially

find release Investor helpful website. other Relations our and resources our on can You

I turn So, started and will let's Gary. it over get to

Gary Kelly

top But having this we in on especially, one a weather XXXX. call. you, as big we is and closed immune want good Ryan and XXXX that, everybody for and out us and with $X.X non-GAAP we said Southwest COVID-XX Thank to industry. annual was for surprises. quarter since airline fourth important to the first morning joining year And billion. in and no It well-prepared loss storm coming expected our not with thanks even remain and losses were the We continuing to very is emerge that our at recognized

liquidity. have the We strongest

doesn't in our $XX.X cash have and that flyer in billion equivalents, $XX.X unencumbered frequent program. assets, and billion $XX include including We billion

was total record We and XX%. debt a strongest capital have balance sheet to pre-pandemic at company the low

debt. well our have excess credit We in we outstanding have ratings, and of cash investment-grade

the have business we Third, best model.

We XX fares that on years run unprecedented has And of especially and was profitability coupled in low unprecedented great and turn built service. of cost resulted in security job have an with for years and low of And and during without a airline XX of only cut, to without that very pay the unprecedented all proud I'm major this going airline a avoid that. very, an on that furlough, pandemic.

surveys We have the number of Street as Journal's as airline of again Wall this by my I it at Satisfaction released we best the in service the Fewest DOT we once finally, was Customer of the operation. terms be United on And and base best expectation annual brand And the ranking performances States week have was and that Index numerous Complaints. will customer top that evidenced the Southwest Customer industry one. of

grateful put And first have loss our for is that ready. a revenues. company. that was just that pass we for that mean and times. Herb, can And one no combination listening of traffic that was Now, these recapping to he shall these are me just reminded it deny many any a less much say start-up our I pointed the resurgence in attributes ago powerhouse years a as not to a to does is And I I I never every best when mentioned year. much -- But in most single bad of category too that and surge be this perspective. ready, be Yes, really hopeful being to have we things it speaking brag, we achieve will in out five. designation to since to things reason companies that And yes, had but we be and

and for to ready then to to breakeven have achieve we want have that prosperity. that. And we be beyond So that

and here as at and balancing act offering our a to ability we're compared conserve reduced do schedule the losses, we the So, that desire can we only traffic achieve flights. there's by operate and more that to to a which balancing minimize more by generating and need requires cash a breakeven

And we'll and that So the key the getting February we've we're got winter that intensely see experience we this happens is we to focused balance add we'll on Once get need execute just I'll doldrum, that January, tools the and respond and have accordingly. that. we've what talent, past and that got execute we well.

excellent this our COO; Romo, Ven, morning prepared our CFO. Van got de for updates you from President; Nealon we've Tammy So Tom and Mike our

through of we again. gotten us have any gratitude And I -- their get They They and performed to one call, just all are us in to third this mentioned be our especially think them And repeat say They join people, mentioned room at steal lot their want will could grateful They've resolve, that and point. to say me me am proud more we to So important superbly. for especially I them how of love. with to know we and are thing. would last don't and I civility their I I have do to profusely. heroes. our this. resilience, a thank everybody their this we quarter in it their thunder time Southwest. except I it's that but want And before grateful for.

Mike, of want are And here congratulate with I me. a these sitting some So performance. operational magnificent you heroes to on

COO. this Mr. Van So de us off morning, why you Mike don't kick Ven,

Mike Van de Ven

and thanks, to. I'd happy Gary Well, be

service. to in government needed things, concessions best to away grow day-to-day was security. every time-consuming their terms -- to tremendous activity was fourth our return rollout those As The that our and exceptional. and I or able job There's quarter are portfolio to people. all they those the produced the to a history. with And mentioning We in I as very operation, and were allowed mentioned. throughout day from those much of us on things all just And momentum performance Gary support though associated our work to I'm Gary built received yet significant just Southwest our grateful And to our go discussions vaccines MAX environment And proud operational We people furloughs items those pivot was in our and overall about issues quarterly too never and city beneath and addition each began. just and pandemic quarter. have mentioned, We company of approved a great focus our deal team. other. with on still our they lose customers, they of the very

and best since year and XX% So for the XXXX. was industry-leading fourth the in We at our that was the XX% our performance of history. on-time best finished quarter, the

equally being Our over was damaged impressive just mishandled. per as bags baggage with two handling XXXX or carried

best again, produced Scores And top the you So if mid-XXs flip our about Net around quarter in the the in for a year. in reliability XX.X% and and accuracy in history our that's Promoter the for tier with the fourth hospitality industry. that rate. the coupled That

So again, the do are DOT the history. with the customer more best we published. to complaint once performance our lowest And expect industry ratio in lead when those

to by of airline Middle operational we Scorecard. So Journal's performance Wall finished with measured the overall the best XXXX Seat all Street as any U.S. off, cap it

great team. So before just said a as I've

as our lower and a additional ops have fleet is aircraft most burn. a this of is And fuel older environment more has by It's several expensive been comfortable with most efficient now a our tech, quieter. it flying well MAX. The as our of a from component Our necessary pandemic. reliable. from our optimize has And of future. us replacing to less late. customer a particular from to It and a key demand the MAX storing available as aircraft We any it's to aircraft our gives to that maintenance our aircraft maintain combination focus MAX the some perspective. It's lower of costs department service return options

if So in MAX we storage that year-end. combine to MAX with seven Boeing XX brought XX MAX in delivery the And we leased by from had Victorville that fleet you in took aircraft of our December.

profile that count XXX-XXXs fleet There fleet the to program. brought near-term had we NGs we for identified accelerated in aircraft go included year-end as down long-term We operation our an our in are into XX a their total that in of XX older at storage the expensive and also use that year-end retirement maintenance XXX and XXXX.

through visits. dictates. or And maintenance rest the airplanes, and operation near-term the us slow that or heavy accelerate so And demand rotate our down flexibility they our approach tremendous activity either short-term of as in gives parking they're program to flight

So to flying. the MAX revenue is March XX when returns

will pilots been our have All trained. of

month XXX of out isolated a in We small validation the flying. be MAX we'll and manner for to XX had be tests starting with over all will or lines. And just completed. flight focused have very lines They'll first readiness

aircraft roughly normal We expect our mode expect the MAX fleet the as in just that in We continue the XXX in in XXXX. as XXXX book and running month for closing available will service. we with service we In retirement similar have aircraft. operational mid-April. that co-mingle fleet, and XXXX MAX After in be plan we'll with of NG end XX not MAX for We'll first on to discussions analysis longer-term do XXXX evaluate fleet order maintenance aircraft like costs are did Boeing our XXXX. XX by to to year-end beyond we And optimize we needs we our to XXXX. and fleet at don't the compared grow with to to

of couple Year, critical we our have areas. other New this start do operational we on a do eye As

we eight very location. is actions equipage record. is a that locations into First, new bit now and are facility operations I coordination eight And between opening build-out new and a team. of and by June think that go all-time early staffing quite June There's in initiating a impressive Gary another X. Southwest And up security-related

There domestic our we various are respect COVID day. and are mask-related requirements challenges and attestation are reactive teams environment reacting international requirements to are to a that protocols. new They every with evolving very restrictions. testing with there in Second, are

And retirements take the be I of all I'm to operating be you. environment, eight to a on to as about that COVID I'll day. special fleet I look team constantly new into does it just service airplanes to open think I of and record-breaking they're and to deliver think the a to And and complicated changing it locations Tom, make that adjust every up older it. results, back optimizing and to said a bringing fly MAX over turn And it in just special able proud they people our requirements. part and a managing with months team really of easy they four do so So

Tom Nealon

marketing our recognizing Okay. Mike. of really I accomplished I've They we've and network the result our to the a they customer also of point that everybody. again. they with Well, you. do our is doing what deserve calls, commercial incredible. I Thank planning, to and else if thanking what also there employees. aren't I teams are year, relations all What recognize revenue few they're management, teams. frontline always the Very team Southwest folks, want start But want prior team. ground a proud a of nothing And a made absolutely good good, that that morning, happens. what in by always really business, In mean

Our strategy teams, our so our teams teams, finance technology and many others.

past cannot work honestly So the or even envision. imagine they've over incredible I done that year,

so you're much for thanks So doing. what

the cover So of guidance our to then revenue I'll for and quarter. provide recap near-term a want trends our performance. fourth quick I do And quarter first

a fares comp pockets quarter. the we average premium down quarter experienced down sequential some that our third XX% modest We to fares yield a XX% is being is sequential quarter XX% in encouraging. in compared with XX%, the of fourth XX% in down third see improvement favorable our revenue operating did which was which year-over-year, was passengers declined the year-over-year and were decline quarter. which Fourth So

quarter in was all Our by is our XX%, load as the And fourth primarily XX% factor this December CCAP quarter. up on all you And on load XX% at look boost was X. capacity was was fourth down from you this the quarter factor know third driven, in XX%. year-over-year. at And which December a

up of despite leisure from October factor demand that's down revenues September monthly and well a bookings as were XX% if down travel. October September operating all benefiting held load a Day performance few XX%, basis. year-over-year and holiday highlights will. compared capacity XX%, Just Labor on with to you a

a pretty November for trends. that environment to a though, the result given see we revenue encouraging begin So October. did slowing of was

government never orders, weeks coincidentally, to drivers cancellations of year-over-year pandemic leisure the new we revenues we the these the to demand. to coincide with the expected more benefited cases in that for demand Thanksgiving restrictions, in are that of due trip travel background. to see got travel The we the but hindsight We the rest and which trends, on XXXX. will along increase one an I with the et is cetera, with was requirements, quarantine primary the holiday that even in in suppose elections, surprising our period all timing on back And given Thanksgiving. cetera, and operating rise, month, presidential shift pre-election are hospitalizations COVID to the to have from saw Relative also the softness resilient points worsening et two November

December, So December cancellations. for And November capacity cases, load holiday softness had outpaced on COVID Operating December and XXXX to a challenges in November, down as same just impact line a demand all operating a non-holiday pockets down a factor bookings year-over-year shift with many points In a December. supported XX% Again, of leisure trends trip and reminder, of of with And revenues of time comp which and a travel of guidance Thanksgiving, holiday the and passenger to for down leisure leisure year-over-year surge in load with had of demand with revenue elevated similar basis. continued revenues for periods. we in some finished a by that seven XX% down with negative were were XX%, in XX%. in XX% factor six was XX%, December saw were capacity year-over-year our both strength. that year-over-year. on was the

$XX an million regarding October and middle of operating penalty estimate we see in $XX seats, November. a in income penalty million Let's

and no surprise you availability know for really we as all So, seats X. December referenced, And opened as there. up beginning

a all seats. of for a as So boost result December, revenue estimate around million we selling of $XX

year-over-year Our was points compared you up very December's four But were factor what was the December of holidays month-over-month. much year-over-year calendar line And in improved adjust and versus sequentially for expecting. down we were impact points yields if this load to XX November. revenues November, with again, as our

think demand the of very And have third terms improvement fourth down we be corporate continues of. down business movement travel to In heavily demand was that's surprising the slight to was no this don't anybody. it to in XX% Business quarter, a oriented. down but in to quarter, real I -- to be actually to expect continues the remain we travel clearly significantly which speak environment, year. be and our leisure managed weak

for And we're boarding than travel down in early typically less which expect the highlights right XX% almost revenue, As talk in which other minutes that you few I'll hit I on business of you passenger as want the year-over-year, obviously heavy of we decline and line has are decline even was know, our January trended much is the passenger revenues. more making is months, upgraded in and seeing. and with products absence travel experienced bird like revenue to do quickly about travel but February very few just business period a a weaker that a challenging, leisure here.

a to performance Rewards improvement year-over-year, Revenue for down a Rapid revenue the program. And from much loyalty third in program for the well. decrease for solid XX% our Rapid very stronger is our continues redemptions travel, XX% from Rewards However, perform of we've from program quarter. again very, which our aside seen rather that card is

to for as of the are point credit I've portfolio strength cards strong purchases as for what is our think, many wallet for our we're travel. from for Our a air a cards, real that credit see times, I differentiator everyday well top and is which card customers of co-brand which continuing really said reinforces us, performance

and quarter acquire also from well, simply performed spend XX% We're only to down Rapid traveling. because cardholders, rate was continuing people fewer year-over-year. revenue slower the in and fourth new new members a card Rewards are although fact In at there

of environment. So given environment I of the is essentially in statement unchanged, the the program is spite a powerful our which pretty think size

valued and provided They're are them their all recently seen certainly to Companion towards points A-List Rewards a value status. status. and these value and have with Pass -- And we tier know may value Preferred as most they us, and they members You customers tremendously we very A-List qualifying you Rapid boost.

just get in we as granted. those results, for So and hard Mike to are things as DOT that. to worked -- want and tell the and I get the don't to sat take we really you proud customer our Gary our industry to hard score But close that results. worked people it very hit referenced of that's I out our QX, Both were and brand will those NPS We really a do that scores I few well rankings. best

the score, X.XX And hospitality far our boarded, of to culture ratio we a again had passengers per incredible to comes result. our it an in. XXX,XXX we ahead customer which people Specifically complaints of what competition. our just customer And believe DOT to our to sat service down and far, it's is our to and

thanks for So I say to to our folks that. want just

the this So and quarter. done fourth remained that's at January you we for has with into demand QX. stalled. We'll as keep seeing nearly move Well, it the are point

And January bad. We year-over-year environment or this with this XX%. XX% think basis. month a to for mid-December demand so. pretty so expect steady all a decrease revenues with revenue the on load being both our to honestly load And favourably in January ranges compares of And XX% operating again I guidance to XX% And down has and steady factor. slightly over XX% that's ASMs past isn't to held factor

to the during first point revenue expect We right but take see revenues don't at operating I'll revenue And down load we'll but return to for thoughts stronger worth year-over-year. XX% March XX% normally that really beyond mid-February be certainly a guidance, in benefit think travel and is decrease And capacity about XX% know month. in did February XX% January, demand now. all business an a the week did at February, fairly travel. at we're January In And a what similar this travel for the point. in time. But this year-over-year that. We we providing performance that X-K February holiday to a low XX% this with -- point So February from it's providing expect this filled aren't cover year-over-year XX% seeing as you up. historically catalyst we demand month real of sharing showing few factor currently we'll I and the simply isn't leisure a at of

So it that curve the is are March but uptick think But April, previously be. relative still seeing we'd a February where in curve. given We've and pretty the our months. We're for said surprise. booking slight early bookings I for both in in booking we normally a that's behind situation, versus to and January don't

I to expected. think be that's

had more the we've You included unusual promotional likely activity for travel a usual March and than us. recent saw that air that April sale That's including period.

seeing to we're we in, every other build our breakeven. fact Those But things to there's need revenues this January. need I We are on continuing more so continues In get quite they're any think and in XX% what of inventory, XX% the booking back a is don't for bookings our we XXXX, that our continue do and to bookings the simple, get focusing this yet. And we will with be upside We stimulate but well. real place. no skewed day travel. say March. operating were this expectations. in operations. sales recall But our to in be we boost clear week is what I'd close roughly in surprised about performed expect continue load us to managing point, clear to control in sale before, that that's having are could in. and we're the could at where doing not pretty factors on they of a we costs, bookings that, and But at cash wild to we the talking control capacity, for said curve material goal not though until once get we with much should that the line be we'll What's to pricing, to all our our point shared you to we we but now We've fill to degree. revenues But manage

quarter destinations regional In inspired some with Texas, and terms stay-at-home to The strength momentum. reverse that. We're and orders Florida of will Hawaii of outperform. in beach Colorado, California and throughout began both nature trends, seeing fourth Arizona. quarantine encouraging continue the

and markets are larger our underperforming. like in Northeast, of New Midwest the Chicago York Some

I'm what not you exhaustive an to So we're some you list of but does trying give perspective it seeing. give

the know As effect alluded this requirements took international Mike to you Tuesday. testing on

teams we're bit continuing any go really issues. we factors operational ready to new prior the to into did cancellations for and see Our are beyond. We if actually very a to effect. increase international go just and have But requirements load March few build slowly

all keeping managing we're keep a of eye close the that accordingly. So on but loads

process our of booking better match in we're the to In current terms flight more to of capacity scheduled to adjustments March making trends. schedules,

QX year-over-year. cautious characterize to as we're outlook and around Our capacity, first quarter for I expecting XX% ASM decrease remaining

real I Just on quick to our a markets. give do update new quick, want

butter with outlined so running not very Group. online answer. of will several here. this release, all over new four coming over why I announced of to airports it we've this you going up months. As and past now I and airports Southwest know is We've the easy But and the the XX I'm more repeat very, of in The is these coming say all bread months earnings think question the that eight to

think Valley which good. after we Southwest so new airports been Miami to our also O'Hare, adding Performance the The the you business Houston customer do When And second, pools. network strong Montrose, Miami, service our our Southwest very Yampa has very that new First, markets aircraft and is travel, new far are the response strong in in important revenue Palm leverage into fit cleanly very such going in we're have have as they these the base people Springs, fourth And that markets. for it. relevant. we Chicago about quarter. was the Intercontinental very strong very Bush we're

we're seeing. pleased with quite So what we're

costs start-up of this bringing airports more these modest from than incremental were the early and airports, the online new revenue Our cost flights. operating on the of very even cover and cost

Right I we Looking ahead, Worldspan see just new as Apollo, and term corporate demand and also Travelport's quickly continue are and end year. thing. cities. to and with with to Galileo near we want platforms strong very, like In the four though travel we expect the being our reported long-term quarter. platforms. where an pleased I'm very to to last we at happy these very mature GDS live strengthen Sabre One work, new I just these rest early outlook pleased of to as the agreement stations markets that very risk. we're able positive. the last But signs of we're Amadeus very the always are and system there's cover last with with now, and reach again,

participation those Amadeus Travelport function. new with Our teams Sabre industry-standard capabilities full allow similar GDS and is using will to agreement full their with that and

I and of second Now is with to weeks where plan through half target return will implementation in which XXXX, working travel. business live four we're coincide the to this only our into our think go

product And through Amadeus. And travel in this And SWABIZ consistent have with of we're industry. is our coach. business booked And Sabre. said always through content doing I API it domestic this coach being for available terms repeating. have XXX% think I our with think again, our the available of content, I and In worth booked we'll really before, is business than the is we content XX% travel of best we'll currently in more of what channels. XX% have certainly

cities. great a with and network our have new that's strengthening point-to-point We

We incredible fares have with low flexibility.

customer industry-leading have hospitality. service We and

that heard You've about today.

we program sales deployed our Southwest a markets. key have We teams great loyalty our to and

is also and Based us most our closed. and XX% customers of is we of where research, challenge expectation compete perspective, what and expect domestic revenue from business to from from on GDS intend the in is perhaps, travel what is still business we're a past Our learning the even of by aggressively that channel, if expect booked post in that's XXXX and is is to could our continue will ourselves. the what our weren't you gap smaller, that's end be seeing of in travel we Southwest. and which XX%. and business the We slowly still pandemic, return But down to outside upside range there's that it again, lot of for that

to first focus two with GDS, areas: exist commercial and adding combinations entry more network; these our So markets that our new our itinerary means second into ultimately network.

Southwest more We more have grow very passengers, and more to simply revenue opportunities Airlines. opportunities

with So I'm going over it that, to turn Tammy. to you

Tammy Romo

fleet, we Q&A. liquidity today's up comments overview of performance, right. before burn open and for our All Thank round cash with you, Tom, and I'll cost out an everyone. hello it

with if record as of start, did for year the past remiss Southwest over XXXX, first years resulted dealt loss our profitability, of I we consecutive this warriors incredible their our since impacts effects pandemic. our not in ending pandemic a be history. efforts XX streak of unimaginable of unmatched the Before The I team acknowledge I'd the wonderful all of annual in aviation

Our XXXX loss net $X.X was billion.

time-off Excluding net special as The billion XXXX our a or well per our payroll drivers were that offset as $X.X $X.X of from $X.XX share. proceeds of billion biggest items for and which were special voluntary annual diluted loss loss accruals wages was emergency sale-leaseback an items, $XXX programs benefits offset extended transactions. in separation billion was $X.X salary gain and support by million to

reacting While cutting were significantly to year last in liquidity. line pandemic progress our our made costs, bolstering great and bottom reducing results and we capacity disheartening, the

For cost manage spending. performance to fourth as continued quarter, meticulously we our strong was overall

increased basis. unit and billion XX%. our expense with Fuel $X.X XX% gallon down price gallon largest of driver Excluding the per decrease, special was a year-over-year down on and operating to XX% XX% items, X% year-over-year consumption cost year-over-year decreased the down

gallon, per our down the fuel quarter Our of year-over-year. midpoint price fourth $X.XX at guidance $X.XX at was range

increased Following energy estimates slightly fuel fourth three first sequential gallon quarter a the $X.XX quarter We be $X.XX currently market consumption lower have cost to roughly range. economic million despite lower of quarters gallon fuel in quarter, price expect prices prices, our per increase with compared estimate to first of in We first our in $XXX recently. fuel quarter.

gallon Our unchanged the throughout XXXX premium result per XXXX portfolio our year materially as a of gallons lower in and fuel fuel hedging remained direct consumed. simply cost increased

our to also full premium $XX equated per quarter fourth gallon. $X.XX million Our per and $XX gallon million, premium was $X.XX expense of year expense

portfolio outlook quarter with $XXX million. estimated expense premium expense estimated is million of XXXX similar $XX and Our XXXX full year premium first of to

Our for begin would hedging $XX reflects per that get to XXXX barrel. gains hedging Brent currently at more per prices with $XX once around gains material you barrel protection

In from cuts. aircraft performance. parked as our the tailwind on-time remaining strong by being fuel and cost efficiency quarter fourth well efficiency year-over-year, market factors, by as lower improved older Fuel fuel out X% prices, addition capacity of driven given also load lower service, many our our to of helped is

improve to We and continue quarter first X% to fuel in currently by X% to estimate this trend expect efficiency year-over-year.

by unit capacity. our XX% down in year fourth year-over-year, guidance and were Excluding significant which XX% the year-over-year, range. prior quarter a fuel, basis, primarily line increase operating reduction year-over-year sharing, special profit was On driven costs was with right items in the

related $XXX Our fuel, the flight-driven excluding fourth -- year-over-year, in flights and resulted revenue-related expense, of reduction of approximately XXX costs. to personnel variable landing and quarter XX% of which capacity fees primarily driven was million maintenance costs, a down

areas a In we I'll inflationary our increases recapping of the transactions and a that extended component near-term in sale response voluntary who rents employees the advertising with contractual managing fourth in performance strong our and X% from pro of reduced continued rate greater would and discretionary We completed with such fourth are We program, to airport our very a extended through or pressure, leave pleased two our in few a the our recalled $X.X cost and in voluntary of and like program the a actions none of selected million deferred billion. minutes of crucial participated time XXXX, had the a The billion, from five-year higher as salary of that we programs cost have spend I end XX% as before expenses programs, participating XX,XXX leave that control total XXXX cost well pilots also rate benefits leave increases approximately if increases, pay reduce is XX% on very quarter, in these thank savings total our We such by We programs; they XXXX. by since saved for as quarter. those wages rates most I aircraft our these total, cost to rata share programs in employee in our expense investments, exceeds cost. and employee the employees key $X leaseback and to are participation off. and horizon. few also NPV burn. the of in the voluntary In case, is cut taken an am cash airport voluntary cost that in time $XXX leave and in projects have driven realized in we've did pandemic. spending.

billion pilots. includes recalls voluntary item elected would of is period that which program and the of months, $X.X million beginning XX results, costs extended the to XXXX. second for recorded the of of with time-off all were a the remaining we current approximately the annual XXXX, extended the end employees total through and of time as accrued the terms $X.X be The non-GAAP longer of quarter there solely the from accruals consists $XXX associated costs February of environment, accrual covered from to accounting, and no separation for XXXX of In is elected that XX assumption, than related are beyond Due time The that off our least of employees billion that programs special period. the who in uncertainty XXXX, through months this an in cost program, which program. XX-month no time reflected at off material extended XXXX elections

course if and cash to We of record between We split in fourth appropriate. pretty $XXX the quarters. evenly third continue further environment, to and made will closely demand million monitor of XXXX, payments approximately accruals employees

about for of cash $XXX the XXXX be $XXX that million to program expect quarter. million, payments first in We

recognized program. for of And and and XXXX, XXXX. the savings full So, salaries, those cost the approximately for accounting we in $XXX $XXX wages in the of benefits basics are lower these of programs, year fourth terms million from quarter million

million expect we XXXX, month. For $XXX total or XXXX this in for per million savings in savings programs these year above over $X.X and incremental roughly an estimated from $XXX billion

our be program XXXX annual $XXX beyond. expect rate and We beginning roughly in voluntary separation continue from million, run to savings to the

the are We programs, of savings. provide success with these very significant which happy

give extended we recover we to flexibility, of recall should programs us the In a the business fast employees. and addition, lot lead need determine,

fuel proceeds fewer reduced taking cash Breaking $X.X with plan. than capital approximately plans. sale-leaseback people, spending our more billion. less transactions fuel is were $X.X expenses The the and dividends share testament by account Our swift items special benefit of to This profit actions down, primarily XXXX compared remaining spending for and of proceeds sharing to suspension decrease that relatively to oil savings, excluding $X as XX% and fuel supplier gallons by swift from driven expenses, capacity with XX% line of capacity action operating capacity quarter and cost programs. and continue savings excluding control. our estimated we expect strict levels similar expense Based expenses, special to operating items oil fourth first fuel voluntary from and well expense employee reduced our first on our to and by laser are we special driven focused cost benefit the in quarter basis, quarter and quarter in On on for remains plans quarterly leave trends results, cost our compared cash We a a into tremendous as current consumed and XXXX, reduced savings billion operating items fuel billion received. were nominal original as self-help our repurchases. year-over-year. outlays and by capacity of savings range their XXXX excluding The from and down our $X.X first billion drove from down

and as remains fees. maintenance, we flight-driven are continued such providing XXXX benefits, landing variable savings fuel year guidance capacity we driven cost wages consumption, flight long While and expense salary expect muted, not in as expenses, full as

have of incremental million will time-off anticipate of We this areas savings from year. We cost our voluntary extended expect of contractual And rate pressure, programs increases. costs. leave we $XXX rate inflation pay in terms and and airport

as as depreciation amortization facility and continue aircraft crucial expect We and resume a deliveries in an we investments. as increase well MAX of owned technology and mix we and leased as rentals

-XXX this more in the year have reasonable even flight of continue we extent, rising will have particular burn economically had a Overall, margin I are are to CASM to activity, also we mainly reductions our temporary covered on be costs many although our by XXXX. excess our in capacity To how to will be function we cost environment. back extension. We maintenance heavy to significant staffing, recovery of from end our cash inefficiencies basis, it and carrying which a non-fuel impact checks by that that And been fleet. this PSP on are more plan across for them capacity with believe some industry. focus just the the cost relative changes of We would XXXX will spending improvements. could caution during get depressed dependent a is in XXXX levels less the and will need There the fuel cost be with supported will it On constant as operating revenue evolves.

we Southwest, a to airline structure are and changes we make need cost growth support to product structural fleet we our the believe and don't strategy, to business growth model, with offering. For

focus in within industry a this demand pandemic. during and We than to are long-term recovery very in managing point on rather our time health for and travel well our positioned position the a particular

being statutory XX.X% federal effective tax the rate annual than XXXX tax rate. and Our higher was

on call created our Act quarter, XXXX CARES the mentioned prior in to beginning be allows tax losses to we years applied As last XXXX. any with

XXXX, cash provision a a we for take to higher annual being CARES taxpayer net carryback able provision expect estimate full corporate passage years, $XXX XXXX. XXXX applied which later tax The Act due XX% refund tax tax past million, from the receive of and advantage the the until full tax currently to XXXX our carryback loss are of this is reform of in this loss higher to net year. As a rate of five we rate approximately to in and

NOL the levels beyond years applicable to to and available XXXX, provisions in quarter tax normal expect the to carryback Act our For we of be rate not are in first back to the range as CARES subside XX% XXXX. XX%

fleet through fleet return very whether to retirements service to I to through lower Turning the to years, CapEx. to next to our our adjust continue over comfortable with and ability up environment supports when ramp to the feel or flexibility several capacity, growth. demand aircraft

focused on the service MAX revenue covered, to Mike As are we on XX. returning March

in aircraft. December, of MAX end which XXXX. XX agreement eight an of Boeing reached aircraft seven XX the we of expect quarter, received fourth XXXX, During and were remaining leased the we aircraft to leased XX take with we through those In including delivery aircraft

to order year which Boeing order we We Our of the provide XXX updated current below end us with do fleet book. plan of at XXX in end aircraft this the bring beyond is to restructure aircraft year, would return XXXX this XX expired to well leased at still that are aircraft not to XXXX. longer-term of book as have discussions an our our

leased and XX the owned owned accelerated returned retired -XXXs XX we of -XXX including XX XXXX aircraft During retirement -XXXs.

million to operating our XXX We replaced more with with ended in be we this charge. X these retire savings resulted fleet. the XXXX treat decision as quarter estimate MAX charge impairment that new early aircraft they exceed aircraft. And will in aircraft special Our fuel-efficient $XX XX item during of it will fourth a an and

in also annual proceeds million received supplier XXXX. in Our more million factoring transactions the investment by in same continue of project of offset significantly deferral to When was planned originally the and billion deliveries the $XXX million to originally our successful $XXX managing capital which CapEx $X.X majority capital aggressively billion the aircraft and will capital in we minimal cash We for our and totaled of we $X.X or XXXX XXXX. proceeds spending were throughout of spending cancellation than offset XXXX do pandemic from sale-leaseback for planned during in $XXX the the year. XXXX,

agreement the the facilities in XXXX XXXX we than to delayed the prior credits aircraft, by as capital result we $X.X original an planning with a and of and related operational have annual approximately to in progress combined spending the more damages to currently Our technology estimate agreement, $XXX aircraft million, XXXX XXXX no undelivered spending capital made billion. to we by And estimate as our of investments. as pandemic grounding. be Compared and primarily projections capital spend driven our with recent our well XXXX settlement reduced provided Boeing amount included on immaterial of date delivery MAX payments

spend pandemic, the Before short-term we up an ended billion Since $XX.X overview I and of open quarter balance and cash position issuances repayments investments and our and liquidity in were $X sheet XX%. transaction debt bolster the call our a and fourth fully cash of common for wrap up with ended and our on year revolver. with proceeds. billion of were billion burn. including of cash debt the Net billion payroll approximately $XX.X through liquidity $X in quick provide net and reduce billion have of leverage cash our sale-leaseback we raised of position. questions, we to We billion the I'll We stock offering $XX.X and program of support $XX.X onset a available

to significant am $XX powder persist should in billion pleased and dry pandemic that as and Rewards doesn't very We the assets include with we liquidity approximately in I value our the unencumbered have Rapid significant XXXX. substantial here continue our it need from program.

far in $XXX as and million $XXX thus the for expected for funded $X.X form remaining grateful of has agreement of extension The Treasury million a January. an be to the with billion are funding. in The U.S. which least reached million of received proceeds cash PSP been be billion $XXX PSP first in of are total will at loan. in quarter. the $X.X recent here the proceeds funded We We

as yesterday X.X purchase received nearly cash of And balance also We our PSP will million including stock. the warrants thus was common funds issue of to far shares billion. $XX.X

from our was day quarter And and and a sequential Turning burn, day core continuation despite fourth in XXXX, the seen third was December. burn $XX through deceleration as improvement the expected. cash this to in $XX million November our trends per average rate a sequential quarter per million revenue improvement of cash in of

The million day, almost fuel trends, approximately currently revenue quarter $X earnings seasonally our fourth in for day million ATL of release, burn core the cash be current and $XX to by driven our albeit first build to Given the keep average higher begin our day, February $X rising capital, we as certain with programs. million as calculation leave cash from quarter changes for core quarter changes million in Including weaker burn, working not to $XX fourth burn our and in factor per revenue made including burn, by million building not currently in quarter We rates. day. with coupled in improvement payments estimate estimate employee $XX voluntary was primary lower we entirely capital, cash changes XXXX And higher by travel increase range primarily prices, per our driven per prices. driven bookings again, and than fourth average a per does period quarter capital. per be million balance January $XX historical mind to burn our fuel at in our is first that mostly core in defined day cash working working cash sequential in

a One breakeven to cash XXXX. of burn our in achieve is goals key

we we I Coming remains rebound had and and our In all. U.S. that it of meet timing XXXX current unpredictable closing, how are managing prepared And team for necessary entire maintain airline least, the in say is the am unpredictable. immensely Southwest sheet this in unprecedented we demand was today. of environment. balance the the XXXX, position while proud through to into goal travel the strongest However, the industry to

will we on that the can are rebound on we But the ongoing we focused until what the liquidity. vaccine control. this by hopeful substantial point through occurs, will strength financial at presented front, and news remain year. As demand we challenges that some maintaining focused we our navigate remain on pandemic, With encouraging

capacity will our momentum We demand to on adjust XXXX, to the varying in focus of control will terms we efficiency. and continue levels and from cost continue

managing revenue cash good burn have We made are our progress despite environment. the and

We GDS growth. are continued revenue to through and in new pools pursuing future for prudent make have network investments expansion

PSP We the people. much-needed in March. for extension, for the our return are have with MAX year we another of security preparing of the job And

manage us the again, continue and through As have what nimble as demonstrated again it our takes and to to carry people uncertainties. pandemic be they this we'll we through have

opportunities of emerge decade. blessed this with people. over more strengths, the are for believe from We our many we And I even will next competitive with and the growth are advantages greatest which environment,

As say, our will "We our would not founder track sit laurels." record And for speaks Herb on itself. Kelleher our

for take Our challenges up With people that, are the fighters and questions. we are all ready ahead. are Chad, we to analyst

Operator

you. Thank

begin question-and-answer Raymond with We And question go will will Instructions] from James. now Please first ahead. [Operator come Syth the the session. Savi

Savi Syth

afternoon. this Good be Tammy, Hey. might you. for

of more of As sustained get you what are a priorities a levels, for think more CapEx? stable we As a debt, liquidity for cash about to path get we targets recovery? to to back the demand your as a bit recovery,

Tammy Romo

one. through obviously, we think that's because, start Savi, number pandemic, I I'll Hey, liquidity, this with Yes. how are you? as goal manage

can down strong reasonable. want One our long-term from the sheet this investments reserves and debt. of intend And go of for and the inflection maintain we course, there of our a target profitability a liquidity. tough to certainly we to exactly as And is been maintain sufficient is that So, hit pandemic we cash of our but level with thing the point, as reinforced repay future least to cash balance we've high it's for Board agreed $XX saying course, to our when the maintain In crisis And, goal environment, predict until sure, to are we our we'll at have adequate pandemic. there to has an comfortably satisfy debt. recovery current we a past now we imperative and as billion post for manage for we'll prepare growth. return

liquidity crisis, As to weather to happen maintain a decade. a adequate want to we'll which once always, seems

serve a that a As set liquidity our not want portion mindful here ticket when source capital crisis. we be may purchases, large our a of working post targets definite of to as advance we're in which is pandemic, we'll

have factors together that So health manage I thoughtful but to so there spend consider and think, want with maintain that we we for a to through that we've we'll prepared and level done on the the liquidity future. as positioned are we'll CapEx recovery need as be some of the an be And for to incredible job to to to continue be financial lot we'll continue Southwest. to side, far, work CapEx we of well of regard the to

as to our GDS to minimal that we'll such we to that stated, same already took in are projects year. Tom I've we'll the next capabilities at want And As requirements that manage for very while have year, future, this into time, want important our you continue invest through.

So, manage to would more to go. we're but our we're And CapEx normal that I to return to manage as returns continue profitability just levels. our to levels, here going expect to have that, we as normal going to

Savi Syth

ATL. have might just a And Helpful. comment I follow-up quick the on if on

a Just kind cash that to of compares curious a more environment? coming versus how is kind of your current normal credits of from new that sales, of and much how

Tammy Romo

Yes.

current liability of that being remainder -- then that more. with had liability credits to program million And And revenues, ATL balance and about of we $X the was cards already our to travel just $X just the issued. $XXX help of the was early bird --- a we've billion $X.X ATL where things a there, about at represented or billion, of billion consisted gift et $X.X our billion and cetera. had about end And that of give like of we a current from little little our loyalty the about tickets, what you balance So insight at is end our non-current of XXXX, and -- $X billion. a

bit thinking about might Savi ahead. that you help you're little as So what the give hopefully, be will of a breakdown

Savi Syth

I kind are lot you're I'm a seeing guess, -- you of was purchases? a in lot though, usage of of That's guessing terms use current what seeing heavier I in credits curious. heavier

Tammy Romo

Yes.

normal quarter. quarter, XX% to the fourth And the Savi, had that is during something return about fourth credit During of hope, would that redemptions, like the our our we was sales X%. more non-loyalty that

Savi Syth

you. Perfect. All right. Great. Thank Very helpful.

Operator

Keay And come will Please Wolfe go the from next Hunter Research. question with ahead.

Hunter Keay

plans. Hi elaborate on Tammy, you bit the afternoon. everyone. Good CapEx little a can

XXXX? I billion And -- how think the outlook said ties high possibilities and you you in and You if XXXX, that out. CapEx bracket to your low? count both would you said Can $X.X fleet low high also for

Tammy Romo

Yes. Sure.

as I'm restructure not As return about our call levels. return guidance said billion. to Boeing today with I expect And if you And said going to order normal saying profitability, yet. $X we earlier, I as to earlier, to would I our still, go We're book. back historically, to our working CapEx more I'm that's that

will fleet we'll efforts. Obviously, So, do environment demand that up we yet. how then And to focused pick down renewing fleet we be evolves. really and also want our see modernization locked we we haven't the to with -- want our on

the at all a balancing beginning, it's said act. Gary as So,

expect we delivery as we're down million. book we you our pick largest to with below up technologies largest past $XXX want So, And to our our now -- the continue guidance you've normal but forth. the seen you -- said but CapEx pandemic just in past. But as exact Boeing. right portion And prepared I'm and give I've total, get as so locked I -- to to of facilities levels to because would already, not And haven't aircraft. and goes our the to CapEx that invest we'll in more levels in know our

that pick at be up see that because we in ready prepared we some rebound here to So, we when demand. want may to point need and certainly

Gary Kelly

just pile very on I'll Hunter And quickly. here

fair we yet. have not that very -- And just to that think we an I answer question. that's I'm a comfortable

kind So, a answer you scenario. depends. Obviously, it it's -- there's nobody a acknowledge already high-low that the of likes

So, we owe you that bracketing.

One start-up-like of of of there we're a of to I we've We've of institutional environment. year company, are And that want well-funded. us over starting a opportunities. lot that lot We aspects to things as is got a current some capabilities. -- we're demand. think to a have a don't We've lot got do this just but this lot the got not

which outside invest the was behave like Tammy fleet So, we of don't want to would are we're business to definitely that as out we if things there in going to. referring of and

us for I our applies to we've want re-baseline so to the not been be at, on It's non-aircraft but that, and and capital all will relook survival just What making obviously So, far also is both. category. we're plan, health those that have down and sure very questions we XXXX and -- it really it aircraft, of screw that focused they're and customers. appropriate the the soon And aren't care XXXX, you they'll important. but welfare people our not taking be our of pressing spending

phase. a to is I reiterate think the are in what thing Tammy we just most that pressing retirement said

want whether airplanes plan pre-pandemic fleet we is modernization. opportunity need longer, whether want with follow some make through will about our need whether great to So, judgments we with with about to keep retirements, to replacing. we we There to stick

those working that are factors you in questions. Tammy are to answering finally, middle right and And with Boeing all then So, all question. the good as That and Mike of obviously know we're in your negotiation.

So, that's not complete yet either.

to not it offer yet. quite answer. work you we owe just We're to there ready done be an there's So, and up

Hunter Keay

that too. and now does What with Thank Hawaii about MAX Hawaii the in a re-baselining understood. the give question fleet MAX? for think happening in COVID as and light it's do the even then you with NGs And what's No you operation things you you. think How about of the -- don't? Yes.

Gary Kelly

is is enthused then we -- Hawaii. of we're the in as serve MAX one market and those. about on we from looking maybe we're But MAX the be things I mean, better thinking that's the a but I this to all think a also don't for. the thinking seven emerge factor Hawaii you I'm know, -- it, and I about the way lot and we point we're more if but think way you're were with will of certainly about -- exactly

extraordinarily going going don't to a know, do Yes, well. think So, I to I -- we're to think there. Tom, off want to I Mike do -- we're we're great start if or you

Tom Nealon

want Actually, and we this just Andrew came to in. about before -- talking I I were just

Andrew Watterson

a Yes. Certainly, the MAX better gives us certainly cost performance.

which sector of have with westbound improved the So, payload actually of the year aircraft. time right immediately, wind the and the the contribution that Also, restrictions of our high network going NGs now. improves is

the so payloads. having have to be year-round demand full aircraft with the year So restrict right this to NG. restrict the we The normally, go we with the of MAX all the payloads not range now, will able greater service. time would we're so -- really the But airfields to to the

increment an that our So also Hawaii. will gates in business be to

Hunter Keay

you. Thank

Gary Kelly

demand how demand the of out is actually had back strong. Hawaii, what darn whole that's and not second, in gone demand pretty of just actually is a is The I'm demand we've lots mind. about stuff executive through really orders Actually, to we've Hawaii sure Hawaii. seen talk we for haven't And about they've many story my talked demand. all can We

the lot in demand solid. ways through leveraging actually managing very, is for of are The pretty that it put a place make that I really does And the and quarantines program several orders Hawaii XX with now different they've such. executive straightforward. pre-cleared experience like of carriers the XX, something think that, very

a there's of delayed. fall tremendous was we're it just there. think Long what amount Andrew, up that opportunity guess, initially We're opening Beach, I service excited was We're we we the about up. there. excited started Diego last about So that San doing

the really us to be I for Hawaii in significant. think continues upside So

even and excited better. eight as makes So, it about that the MAX

well. the can cover actually territory as expands it we So,

So, new so. with cities that

Hunter Keay

Thanks.

Gary Kelly

from Hunter. to hear Good you,

Operator

And with our Evercore. Please next go question will Pfennigwerth come Duane from ahead.

Duane Pfennigwerth

position I does Gary, afternoon. priorities to given Good of AXA? How your might AXA. role how wanted about change the at involvement posture recent Thanks. at And Hey. coming you're your ask you from change a strength? leadership potentially

Gary Kelly

Duane, is we're And -- obviously, have but never Southwest this stint we I chair. second one my hat my off, take as boat.

we think, a this how small association. understand It's I relatively all works. So

new some members. have We

And building, be among some all that to can there's we to. then there's would -- strategy tell some to. we such would a basically, thing competitors team that the of arrive So, to agree you work and then if addressed outside agree for falls work need do. a logic at And on. things administrative of or scope But we the what there's therefore that can't to association then things

fair-handed our we be to the much that can. don't organization I'll or just strength, do it by or as it's lead as is I driven So as in a so know to productive way weaknesses to business, much try so what Southwest

members is therefore organization. there I There the was a since think that members. think were -- XXXX. AXA a very I time been a we talented was not time We've

it's in be -- a long that thought of a horizon. a table and have the to the I association job in part it's XXXX be not. better a seat to So particular. as at great We think did opposed And

and got being of another which in a bandied as about. itself, administration, that's task You new a is stimulus well as

work be of done, -- forward time in Washington of was consequence and that. looking and plenty it, there's So to honored to a as spending more volunteer, I'll to I I'm to and be happy do be asked

Duane Pfennigwerth

the I appreciate thoughts. you biting on that and

for profile trying you savings in Thanks everybody given and think for will back the mix ways. in and But be? get when taking my you do question XXXX the capacity that your CASM fleet locked ask much the same the levels it XX to you flavor and maybe follow-up have covered benefits obviously question. you different Just cost how is better to

Gary Kelly

pleased really was fleet. bounce had I bounced - very were ways thoughtful way it. got with a XXXX. our some we turn the underutilizing times. in because in do to operational ball the longer the Yes. a good Tammy -- can way answer. she doubt way you is give you question I a But that on -- the and asked working I'll more let We is we performance she give no you the And

to is magic schedule. our with operational and been doesn't cost some be in really that. the performance. that's the rest But addressed like it And to Andrew efforts intended our here terms of factors to being was has load real the and improve in effectiveness. lower the and on had Mike reveal work the things of XXXX improve able XXXX What efficiency working all that and You further organization

-- And to really so don't capacity I think not we're I'm all know what XXXX ready looks -- just like. curious I

We pretty horribly inefficient to doing now good and our job right peers. still relative are a

so So planned to the that layer kind some then we initiatives I'm very of and to with on productivity had aircraft the do where is what of that back we've got efficiency we've made and far. top we see progress to about cost get enthused our get.

are Tammy's encouraging. I don't out first which pretty if But this to you fuel is vary from quarter got costs quarter the they strip darn fourth update. -- basically you much think from

we've costs. definitely So a out stripped lot of

that I we've of think lot compared before. like of there the were to feel were a in especially investment projects more technology we discretionary driven. significant and terms gained like where pandemic programs We post efficiencies

us. So good for

now. Then just of the think lot factors to we to, stick. things are we and going to Can you that's I improve But quite speculative all we get were again? efficiencies load XXXX beat have I you the and And with we'll that do a think continue the opportunity block should turn on ground of going if XX% And costs scheduling that time a frankly. down some Are fairness dense have so can handily realizing? those we time think right that's I again? in

Right have it any produce to people in go. now XXXX. an more was of more way far I airplanes to long than a and it's more think taking us we than and ASM what like

back so I arithmetic there us get to determined about more all I'm worried what adds the than up am to. So

know how that I answer So Tammy, that's -- question. would don't you

Tammy Romo

the more program. that through in retirement a to separation have Yes. cost I XXXX. And the record I on efficiency have delivered just track took really cost And that. improve as have think such know overall accelerated I our in the add some to aircraft voluntary lot proven to we you don't we But addition some takeouts we to as whole a permanent opportunities have Gary our management side. here of

spiked which obviously continue work note of fuel So I recovery. recently. hard through to because that is to did fuel has there we'll want just the part on dependent

return continue manage of know, that be bringing a all to given you the MAX the that of relative The as there's just I going we're start efficiency at our a adding also factor. we aircraft, capacity as to we'll But makes older costs MAX to sense back surface that efficiencies think to So will pace lot a replacing we're gain, significant MAX. and the the back.

And to at -- is it's again, so a a hard specific specific commit we time-based. level. ASM That to CASM

But to XXXX we said, we levels guidance while ASMs down. give even there. CASM as going not are believe, our we're Gary So do hit could

very we remarks, just, that pandemic. said carry get here as rallied reduce done. everybody of proud just and again to has here, I of what costs going we're my this together So, to our until in Everybody's the to other side on

Gary Kelly

know what wasn't what you it about I'm now. Duane, right I we're this criticizing or efficiency but our is. complaining didn't way I And It take sure is doing it you --

a do done cost less horse. think on a thin the it getting before forced a nearly right we to commitment I'm some make now do. of efficient not we're to cost we than know that we -- So can And very our sustaining but demand. we've viable an outstanding little the -- afraid far network, what have trying of is well, is what job I And as is,

that need So in the efficiency demand we We need is. we we to then to to get add that. schedule and back had We to make can as to know then what XXXX it level some. of with schedule and back to strive need efficient as our

As Tammy going all out, taken said, but it's overhead some we've and the to things schedule. about there's be

as in all up future our we're But to I think of able competitors. there. on well as beautifully, execute anxious we're Don't know. any set get be to I the hit we're cost. set that? up better to think we'll When I think, And

would up I we're fact, In better. set argue

Duane Pfennigwerth

response. thoughtful the Appreciate

Operator

is question from ahead. next JPMorgan. go The Jamie Please Baker with

Jamie Baker

a at in I that's segue your XXXX are entered afternoon of and reductions, that question, didn't part. my structure to The competitors obviously your CASM outstanding less news competitors bad and capacity. on significantly question is significant good cases but in cost your for targeting back is the Duane's actually pretty getting good mind guess, The the that some Hi, Southwest least good news Gary, cost crisis most with into mine. is it bad an news everybody. their

of your frame And sort Tammy if think this the her you cost did So, variant deflected this memory means a serves, Southwest? in for actually the remarks. know, I do ask the time during advantage in narrows, bankruptcy what of if question back era. you I XXXX

hear updated to your love I'd So, thoughts.

Gary Kelly

relative Well narrowed. XX to cost -- and course, of XX last the to years, manage our to has

your think know to what going And then question so they're I don't my proved I and be do. then valid. concerns be able to to

and in are we is least to stickier the think, stuff you outsource costs we shed, shrink. know, easier now, fixed of more I don't on our are much so way at and a of I'm terms as as what lot down. seeing which right We sticky

of several be you all think, that will we advantage. that as back grow noted I our to have

come because, attach wanted for revenue reasons operational out point one cost of to won't the as volumes have to So the that back. I we margin performance we'll the to variable expansion XXXX. the That's see

in tremendous we -- when fact past. do the right down to As it poor from you you learned, expensive. XXXX, have then you things able when And that on-time the is about what that, very it's if quantify waste, learnings been that all our point, And it's mean operation, could than I to when comes of in an just we've performance we've scientifically cost. have or quality had the more we get in early school all not we much to value the years it it

of initiatives a got lot know a So that from we've good techniques and coming wonderful redundant. I'm I learnings of forward. and lot good a lot to of tools a being with bit apply little

It's that. and the proud things low ago. to excellent think It's strong I know. things sheet. low-cost Herb so the those and XX combined. the we point If It's cost brand. great that I customer I narrows, our balance a fare was having that of advantage the liquidity. than It's service are with structure coupled all It's have, five years culture And years strong those a things the say, the just we're really that more that So good. XX mentioned I to it's last XX still could

point and So is you this. narrowed. I those And in be advantage near-term. where will us won't flow certainly losing -- the again. to going that. don't theory talked theory it are We and may it My a I time about lose there and My and widen the see is have in that ebb

So innovate the continue upon to it's look beat rest of for where kind to can those of incumbent opportunities the crowd. and us we

Jamie Baker

that's question Take for not years. today. Gary, I And Thanks. care. promise for ask the question my to next only the XX

Gary Kelly

Well, we'll see how this XXXX. looks in

Jamie Baker

Statute All Take of limitations. right. care.

Operator

Ladies and our time question we Oglenski more Barclays. go from Please have Brandon gentlemen, We'll with last ahead. question. for one take

Brandon Oglenski

and hours important but levels to want just XX% a it back XX% back for prior far. getting still discussion What it's of to get to as So, forward? to you return profitability employment, drop because well? on What are been full breakeven -- man schedule? about breakeven? reaching Gary, invested those returning guys is Obviously, important capital to I focus guess the reaching great about the margins to did what to thus getting full back is cash you looking I Is

Gary Kelly

now yes, it's think absolutely. It's right so just because need we'll theoretical this to I And we're Oh, theory -- in all mired just right? pandemic.

It's on to question do days. intensive a the like hope our we the bit I a really me, patient having skirting is next XX, forgive care. because XX, leaders focus what urge just So you'll here XX in

be be got even we'll fair of where your get XXXX, So it don't way was I is demand to traffic and again, to If we making question. volumes can it's questions. earlier we unless customer if we've my waste to remarks wonky right the I just links question, is we do I flying significantly boost is matter We to can't so be less a back get near-term to point, is to XXX% possible the questions point, to normal -- an that trying some back answer strike formulate to do answer focus far what need it's those levels what in honestly than XX% crafted you from all think there. it leisure. but way answers and is we the are My that's need of balance know then opening a at to real we're to the here XX%. we your our will theoretical of of I the we there's money. from mix used traffic on in profit, There and traffic roughly we a easier so to lot boost return to be not where it's fares All there. we -- no generate that to If Hunter they the think Duane. why new our the reason My to I will today. isn't If it a back commit the realistic. capital where so get to and what's at the business same I need get and that, are our that your maybe of our that, is there's did. but yes, We on to things we flying. going simple We can breaking was

to we prolong do our have than to is for think that out very as that of it worked competitors. on getting can. as optionality, us, we've don't right we balance reacting period. can't tried -- we other recovery maintain So quickly focused any be and And What be that worse any I beautifully so better than that's

a do focus. we're my position prime that that So is I and to in think

Now kind point once about we work need profits -- our to targets resetting what a get on to need of to I capital near-term what we be spending. there think question that was

afford thing, That's the to stop next and which to we and a and lead capital a strong we at balance are I bleeding. do pay customers can make and we've profitability win can that that sure our for then the to what need sheet. let's on. depends the still be profitability do. then from on a can this down will things on will level simple. and iterate where And that of the cry think debt where our us that can spending focus really to year will let's maintain point But I platform five we to All next what then is getting for put those that rally capital this are will what got we of the kinds what we sustainable afford program a more years. get is is people our welcome to the we'll It

we So it's give of you they're in honest an kinds And do determined time and they're don't truth. specific to lives. a answer are the just telling but just we're us you tries We better to prepared else. and none and -- anybody the to -- god's uncertain of And that's not we to like manage questions, those our -- real ever know, just that's seen truth. than that anybody it have respond

Brandon Oglenski

truth for thank the speaking you Gary. Well

Ryan Martinez

others, have Thank me to have call Okay. know today. the Well for of that we free feel you our give a great shared if wraps you joining any all and call. all up day. the you analyst a for a great portion lot And I questions. information. Thank of

Operator

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

Linda Rutherford

Q&A welcome call And Chad. think media of the to we can Well right portion. to thank I'd like the get you, our to I today. members

So on to started. inspections get Chad, for them queue we'll would a you how if up question give

Operator

Sider Certainly. from [Operator Alison our question first go Instructions] The with come you. And Thank Street will Journal. Wall Please ahead.

Alison Sider

of up existing end Hi, additional I aid, the hearing to thanks expires for March. picking anything or you're wanted of the when requests you're about at government so sort much. see what if PSP

of every if united the of aid? kind the -- regardless through you that equally plan aid the industry if You've furlough airline the curious, this to said you won't see don't you federal question, any just needs same the on front end year, and employees maintaining not

Gary Kelly

question, Alison. Great Yes.

far out table. we Southwest they airlines have but Airlines know relief. because don't you the have at America. to like just more administration will in -- I the in that we $X But cash fourth to the with within of the this around. acknowledge extend the program -- this, down the reached the rough $XX of theory time first billion I'll with at quarter, leaders unions like Congress was have in was here support member So year, know flow than was point, what dollars done that at just was another last for losing first the the second and higher time, quarter which quarter payroll billion point, staring And from program payroll it I'll months. time prices. And like seat simply would I less September did I in X provide to first input urging terms we're for the around. fuel all support this know -- a Well in second that here through just speak had was just for I the We another

the ended be. quarter certainly So anybody's second not has this and guess it's what will

in all about same XXXX. won't airline promise promised only pay thing concerns So That again losses in no this jobs. that have we're beyond to doesn't that. the is and And risk job lived we or here this. protecting cuts We up We to the XXXX. mean

are indefinitely. alike. So all this airlines And we're promising not

administration specific at. answer I you here. a have early but is So answer, at glad definitely too we'll And that the Congress I'm it's to looking think seat it's table glad short I'm the something the looking give is it. a I'm is glad that that at

Alison Sider

you. Thank

Operator

next be Reuters. the And Tracy with will Please ahead. Rucinski from question go

Tracy Rucinski

AXA it or Thanks COVID-XX possibility? taking for Hey, domestic looking at is everyone. actively test approached this it The that for said mandating about week my travel. CDC this Has Southwest question.

Mike Van de Ven

But do you for speak ahead. go I'll -- Gary. Tom

Tom Nealon

international requirements -- to Well just say the actually a stuff wouldn't And thoughts. past I the I was Tuesday it it kicked give there. nonevent mean this few I for you us. a mean in was certainly

fairly U.S. all what, of the it If But clear how into not to OAs underweight to process With the were manual and the your thinking so -- we scale to if technology will it's clear you -- have if us. is problem it's that because we'd sprung so to that domestically. compared And international first quickly get that there do now say be coming certainly will to when, that wasn't you about. you upon to but not asked we're us it's what's if a would don't for it's of how being -- respect We something something internationally mind. that. a it's that's what required domestically? got I pretty all if right think do similar Well I

going -- by I you we're domestic really airport, a testing be don't or if think of protocol or regimen. city, want doing by this airline, type think of by ultimately state. I to type being done by

I going as be for Texas, challenging rodeo. say navigate that customers a think real all it's to mean not that could consistent thing country. across a we go I to be it's real if of in the

somebody something, we're So I same really the reading it. hearing been the affairs anticipating you're about out team, going which if have They or team We're fairly our from I don't think way team but want the government figure quickly. coming. to indications are do thinking that any it we CDC. operations customer something our our reading by things think given And we're experience to

nothing experience through if how So in but CX to thinking what did do we fact fruition at are come this it technology known our is point. that customer might and is teams CX teams

Gary Kelly

aware reached very a think I'm extension specific the not us. so I aware to I'm America. And not question your that costly. Airlines to that they've reached Yes. I'm CDC out But to yes, mistake. has It's it -- the out By for would be

you go an the administer are to have As country travel? getting us earlier of to to test first to make a pointing testing take argument But them ball. that hate to available vaccinated. country they rolled we getting capacity on the pick for grocery be our that to our why and and And Where would eye adequate place. store. Test test, If I emphasis Test but the go them two in that a on in interview test don't want vaccines for the them the Tammy sporting go restaurant. the is was off event. they needs out out just to would I them air before before them people before test they the

transportation That's what distancing, who to And we that effectively just right here. I I that been unrealistic and mask, need clean efficiently extremely And the wearing cabin a is with or in air the trains customers sector, that's it's ride which think or extend better approach the can think fly hygiene, the administration mask large is the testing we airport new of scale. well millions should the social beyond. buses recognized on expect with do most or it's healthy just and whatever, and and now which in the mandating safe.

Tracy Rucinski

could up. I just if Well follow

could the just either that the these variants from was the any Carolina. the so in have this strains leaders I that you like example could Do concern from think go progress for that out like now new -- coming really new -- country be spread strong the the may part there in out of of made messaging discovered really which we South go Europe window of and the case discouraging messages industry far government have kind or if there that today in see are travel. concern a of been be

So South if if Carolina it's reaches California, that's than it contained for example. in better

Gary Kelly

different question that's a a no, fair Well, and question.

something want we you would mandate obviously and your just no. to one difficult. access we extremely know my effective answer that's I need impractical. threat about we trying an in different that. is selfishly administered. to -- that where your not kind it's And friends family know don't addressed. at we before get But to So needs with point, prohibited the now would that be flying, through a scenario. has we're we're is, something But obviously a and needs experience point, this reached be you experience that's out It's try that think might but significant to and I point discussed what a different that from that dealing more has don't to frankly. I question hope means test quite to been, get be wholly address us strains. No to do in testing what of fortunately to to but a And that these test to from don't

Tracy Rucinski

you. Thank helpful. That’s

Operator

Please more for time one USA and have We ahead. with from Gilbertson question Today. Dawn comes go that question

Dawn Gilbertson

my taking Thanks Hi. so for second. Switching for much a call. gears

when much. me guys back now walk the to planes, that of your are just food You Could someone seeing you filling sale going and there of timetable you chatter and including very alcohol? regular thought drink a you're kind service. bring lot the about Thank process through any especially of

Tom Nealon

of with full the point, point selling we this We middle at -- for us more interactions surge is for the way at it anything attendants passengers the went made which else what huge the thought by having is to required which be which care people alcohol we're Well, the flight than a probably is that back between the about sense and plane. to alcohol, the lot what's not full not to a is selling seat surprise.

this with team us our our well sometime point through and it? working the team experience can quarter. and first provisioning at we're team that in-flight are in and through sense It to do So it make very be when operations for customer working does

forth. think there every on at two state going case Case And are we're about of so hospitalizations certainly and before how in on into down with that though of it. just think the has And counts what bearing coming that counts up. really every I so we or a case looked still have lot a terms much, think and does say to call I pretty it seeing were the shouldn't counts. I one I were are down, do and

And so I'd work say still in a process. it's

anything that? But back. on decided to have Mike, to be it back break. you for is time That intent to in chosen have and bring Our is want determined. it you to spring to be love We'd do add

Mike Van de Ven

cabin. and help attendants Hopefully, risk sometime with us to a -- opportunity help the more. and back. It just an the toward people Dawn. that's to flight No, us for conversations that going And of really limit Tom mingling bringing mentioned, the time I distance as some point the throughout does people middle it's customers think the and face-to-face it's start to time, reduce At in just is be year. that right

customers that very thing other with bring accommodating the very or The for to they that. we're if with food from though we've onto colas the been want airplane, airports accommodating

Gary Kelly

just But reason the mean I have the service we're both Tom only covered health. is to but interaction. on. about all their that and reemphasize. encouraging we keep to mask the to it's And the that's Mike people limit is discontinued obviously, It it, face-to-face

the those only reasons. So are

Tom Nealon

it's The I'd only kind is add, thing of Dawn, interesting.

engagement of our the and and flight it. miss miss customers job fun their through really Our person sparkles of kind attendants miss customers. they drinks that's the part our the actually where the That's with and

and it's safe. So wait think when can't We it. it's time we to do

Gary Kelly

We're up. coming coming with into the discounts winter the

it right not tell to us we're about but high I it, now. it's do think for our made three in to until folks get here comfortable. a continuing not and all back service that to choice, of priority exactly our which we're can by is answers the it And talk you right

Dawn Gilbertson

Thank Okay. you.

Operator

conference the our any concludes session. turn back over for Ms. to would remarks. Rutherford like This closing question-and-answer to I

Linda Rutherford

and you, Thank you today. thank us Chad joining for

using can any questions XXX-XXX-XXXX all very have at or our online you follow www.swamedia.com. communications you group certainly other our all much. with up at newsroom Thank you If

Operator

Thank concluded. now today's has conference presentation. attending The for you

disconnect. You now may

Southwest Airlines (LUV) 29 Jan 212020 Q4 Earnings call transcript