LUV - Earnings call 4 2023 | Southwest Airlines Co.

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Operator

Hello, everyone, and welcome to the Southwest Airlines Fourth Quarter 2023 Conference Call. My name is Gary, 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]. like the I'd Ms. over time, this to call turn to At Landrum, Relations. Investor President Julia of Vice Please ma'am. go ahead,

Julia Landrum

[indiscernible] Southwest remarks Airlines just be a Fourth to Quarter 'XX Lee happy share Conference will our your prepared take after we'll moment, which, questions. Call. In

with statements, based and call our and have called will are we we exclude are release. Ryan Operating press and Chief expectations. differ on which Jordan, which Commercial of today, our CEO, that in Tammy Romo; Officer, we our and Chief future our materially A that out Vice current Officer; will and President me performance. CFO, reference Also, and quick Andrew could results, items expectation Executive our reconciled non-GAAP Bob actual the On President to results special Executive forward-looking Vice reminder results Watterson. President make from GAAP Green;

this our information. please to to release the disclosures in call the I'm for you, more press our website over Bob. visit morning from With to turn Relations So and pleased that, refer Investor

Robert Jordan

the you, joining you, and today. thank everyone, for Julie, Thank call

winter we back And Southwest place Elliott. for our a on in we weather importantly, thank extreme their books on year, XXXX, come. moment getting to plan building feet disruption were mitigation heart their time want I mobilized I As warrior quickly prepare We Storm robust last Airlines at to and following simultaneously disruptions. us reflect the for resilience. Winter At put on future their close their this while to the efforts from far immediate spirit, we've to people take to how for incredible want the a more dedication, ultimately,

were already our staffing network, of the working to majority our in of aircraft we middle also course, and events, including return are the our with address negotiations of the full in utilization. hurricanes, And but been with we weather of to made pleased Chicago this winter plan, able I'm a We crude our fires. which completed our restore our storms customers. share -- month, successfully multiple remain recovered last the progress also has severe comprehensive to tested other events, quickly, be year. to weather as stable. be such extended to of all XXXX disruptions and unions. and the winter of We experienced on we other nationwide on winter incredibly types action labor needs side we fall to impact Through all the aircraft in minimize Maui networks those and were able and the We weather

and also staffed, got utilization our fully our restored network We of reached fleet. the full

is Our in place, healthy shows improvement. and operational network our it in a

improved in metric. we fact, In every operational nearly

at completion performance XX.X%. than best factor performance, more for the being full was XX% in in Our quarter quarterly fourth our particular, with at decade a year, fantastic

progress significant agreements, industry-leading made best-in-class earlier agreement labor our an also on our pilots. that secures including pay We ratification of this week for

accomplishment, and have those We to huge like successfully have thank those year, packages people. in I little reached commitment negotiations. a ratification tirelessly would market demonstrating our for a This is all our compensation X contracts supported providing who on over competitive now a to

and us order over continue the opportunity to or of our The Of modernization the other plans of up book management very of to flex Boeing. experience cost-effective host and rollout allows long provides addition our fleet a negotiation course, was multiple the the with a of the new to of this all accomplishments, system, in revenue down term. improvements growth launch order a the book customer

restoration. which place patterns. We roughly is increase response year-over-year network all reduced network significant and to X%, capacity also XXXX made to XXXX adjustments demand in rapid changing XXXX XXXX our to for and both changes of in These capacity planned carryover adjustments from put

be there additional work net in to network. route So new as capacity mature XXXX will our we no

our Moving performance. to

close-end year-over-year This expansion XXXX. us labor and agreements portfolio We our fourth cost over with be demand product. combined and quarter to be incremental in with yet for pressures another is despite driving strategic records from expense. from we XXXX at about strength aircraft optimization performance to $X.X demand profit to December our in seeing leisure billion led additional pleased billion continue pretax record core revenue network revenue. of efforts our contributions initiatives the We very November $X.X in strength, strength just corporate This that from operating and both operating margin year-over-year and increased continue and maintenance into are saw travel. for new And expect the

are Our hit schedule, a in profitability expect where place network to the point. March we changes inflection materially with

the While to we the in operating March. the early revenue our are and initiatives still month our target, exit delivering quarter, a towards for of with margin quarter expect strong

to begin While that we below compared our improvements. and rate that with efficiency initiatives everything from attrition head labor we at XXXX slow These will techniques digital have drive are to come these in with XXXX. as XXXX significant to with hiring counter gains that more our underway will or to have XXXX as year-end flat with efficiency modernization down help count in planned to in pressures scheduling inflationary levels from agreements, new pressures we include we

financial with capital a a of to and line returns sight cost XXXX. supports in improve our solid our of plan earn All of this

be ROIC is earning WACC and this well represents I Star, excess in clear, progress, consistent want and of it's adequate negotiable. not financial to North returns, our While notable

capacity make results. we it continues returns is we and deliver will consistent relentless shareholder of We and those value, our to be focus. adjustments, plans, how created until decades key will we have be in Adequate our executing needed, against to including adjustments, if and continue

initiatives Our a current year lot this nicely set Day. tracking you detail and at Investor of provide we'll more later is

tremendous the company. much progress working support in made finished a we're we X of XXXX, initiatives to sustainable -- and In addition, a next time. we over stronger support closing, In returns on in year

stronger We year will again. this finish

committed delivering fully targets, customer shareholders. generating experience, and long-term financial improving including to are returns our the our for on We

model, our I resilience. of and proud their and remain the in business to ultimate the asset, As heart company our for people will Tammy. source I me. with soul I They their particularly it our greatest for and always, and our of our people turn dedication pride absolute that, have and am confidence And of over

Tammy Romo

Bob, and Thank you, hello, everyone.

our both to and fourth side and quarter is on We Bob in was As are excluding thanks items, special that delivered but wasn't net ready without and employees. mentioned, million, million income the of on year, XXXX another we our our the challenges, to incredible all year better $XXX stronger for profits take when financial $XXX With energy delivering reliability prioritize which and of our has operations in of to taken network fully and focus. the excellence. expectations. network of the We restored, lot strong focus stable can now consistently with resources our restoration operational we delivering in a performance, drive and more a operational along much XXXX,

have and upon need regain leader. incredible and an We levers optimize build our industry as the to strengths position to we

and in the of in We performance steadfast goal will headway consistent be generating Ryan meaningful revenue and will with cover of to in year Andrew well make detail. capital. of returns in progress cost operations made we've of our our excess support our long-term our efforts this

with our before I'll performance fleet sheet. moving So start cost balance to and

items, the fourth down in excluding XX% cost, special Overall, were our quarter. unit year-over-year

for to of year of the per moved costs in per price $X.XX as gallon end fuel fuel market $X.XX our right in and fuel average quarter the due guidance, $X.XX market to $X of guidance significantly fuel low the the steady for dropped per prices in and into XXXX. mid-November. primarily fourth gallon price this welcome full we L.A. Thankfully, after at compared and the was jet with year first Our quarter to $X.XX reduction spiking prices gallon

strike price current our closer reflective of the $XX currently meaningful barrel. than at This the provide year in XX% protection, and hedges We barrel. first quarter hedged elevated XXXX prices Brent XX% is per $XX was hedged in and That's hedge a are of conditions hedging. around more per market began protection here with to which higher meaningful to full where cost for kicking

We to in to be calendar XXXX each hedged fuel with currently our line hedged for continue hedged in and hedge nearing are our to roughly XX% position goal XX% prudently year. add XX% XXXX, in

While also allowing while the that volatile grateful to hedging am market, catastrophic market immune fully to against fully our are I participate increases, energy protection us when not positions we provide decline. meaningful prices

Moving to cost. nonfuel

move decrease increased we our and lower and cost operational is Our of guidance their I elevated CASM-X disruption. was levels contract. market we employees pace labor general into fourth as of sticky expense. Obviously, to groups quarter result as Both year-over-year offset want by maintenance work quarter in are range, the all This ratified expenses a side operating well favorable significantly, pressures, to rates was employee XXXX primarily pilots which that higher fourth the as of pilot partially our elevated important inflationary driven keep including for appropriately. also reward our as on of wages has capacity newly the for XX.X% by it on congratulate XXXX.

As we and you the ratification estimate bonus, press this in pilot find the for new can the a and the a agreement, morning's breakout details result of of release. recorded treatment accounting in change

estimated of X XXXX quarter our increase in year-over-year. of of driven labor cost and wage currently points X% increase higher first off to overall The to estimate maintenance to as remainder the due range is roughly Looking CASM-X an to year-over-year honeymoon by XXXX, this quarter coming by increase X% is we pressure maintenance well their increase X market to increases period. first as in in expense accruals. XXXs driven are activity rate the our as CASM-X primarily rate

cost. year full to Speaking

Roughly to labor by Our attributable maintenance labor I X% roughly previously from driven CASM-X covered. guidance X the X and of points is and essentially is to X% to is year-over-year X maintenance cost increase also for pressures. reasons a points

a of market accrue we contract, year for the to step-up the this rule changes CASM-X ratified enhanced recently labor work the increase contributes wage due pilot and majority While rates, wage benefits. in rates,

look on of to controllable. as help we counter mentioned, As structural focused control are regaining what's Bob the efficiencies pressures cost some steadfastly we to

not financial returns are we satisfied our relentlessly strength and and you We until expect performance, will the current produce financial work Southwest from we Airlines. should with

network delivering maturation efforts The which of includes related, the a managed benefits value are bulk of of initiatives the incremental come $X.X have plan, benefit. increased billion from initiatives, $X.X market expected lift. majority contributing revenue pretax in of balance The billion primarily revenue in incremental and the of profits that providing revenue solid $X year-over-year We well business roughly XXXX initiatives. And the total from billion our benefit are incremental optimization GDS participation. the generating our strategic vast over XXXX

initiative. turn early to operating relates benefit modernization our primarily cost other monetization efforts service incremental such fleet The digital efficiency and yields as and from

We a into will our Investor year. later Day portfolio detail on lot at this go more initiative

early, well our our provides come significant to details of generate capital. Investor ROIC to cost XXXX in While excess more at plan Day. our our towards progress long-term goal Again, of

turning fleet. Now to our

During efforts ability minor of our validates XXXX, year our more to with a deliveries than plan fleet total shifting competitive in and less flexibility given of XXXX we mentioned execute XXX modernization than the and being and continued XX-X challenges advantage deliveries, facing planned, XX-XXX ending consistently and key total to the supply the chain Boeing. We thoughtfully a the of retirements received throughout retired one aircraft. a planned

is the certification of MAX X of expected there XXXX, into Moving and the Boeing around aircraft. deliveries the timing uncertainty continued

with from differs Boeing. Our plans currently fleet and our book contractual nimble order remain

We be for range and year-over-year. our resulting reflect in X% consideration, aircraft to of retire our XX we in year a up of levels plans and our are expect X-XXX, XX-XXX XXXX roughly expected be plan XX And currently XXXX billion better to the to capacity billion. current After and $X deliveries this finalizing MAX expect Taking flying. increase year to net capacity we our X environment, full current plans do into the planning XXXX not XXXX now refining CapEx to aircraft capacity this year. any $X.X include about expect

will plans of certification push to capacity our a aircraft So be out impacted. not continues that XXXX

are year-over-year improvement we modernization our bring fuel year. nearly fuel fleet reducing X% In as in continued retire more fuel-efficient we We initiatives with XXXX aircraft -XXX. and and to also efficiency saw expect on -X our in this improvement addition, expense and total continue a

fuel modernization to fleet environmental in initiative a component our reaching savings, In goals. sustainability key is addition our

to financial remain ended backbone am I sheet through and net dividend all U.S. rating debt agencies. We continue XXXX report move obligations proud to in to the into another a short-term We our position. continues $XXX cash in million our $XX.X with a XXXX, in balance that strength in airline only cash shareholders we finance retire an $XX payments and investments, Lastly, to billion be investment-grade million to the three year with be returned and year. as rating by lease paid

modest of $XXX We year income well expect in to interest expense and pay continue to debt $XX expect to this expected a payments exceed million interest million in XXXX. our

to behind our fully pleased year are restoring our us, significant plan be improvement more. much milestones made we have so So utilizing to becoming for this and major network, fleet with staffed, some as financial fully such a

as each sites and vision to and our set year close, of so hard Southwest are margins I'd covering one of XXXX. of to every Our capital like you. for of another work I sincerely the on I Airlines. grateful And and expanding and cost mission people am our dedication thank in for

that, turn with will And heroes. I to my truly over were Ryan. it You

Ryan Green

and Tammy, you, everyone. hello, Thank

by of business for disruption report year's as we for our which customers. pleased strengthening as engagement overall of finished no our both by with the last travel the from impact operational close-in over unit overall managed our past of Fourth in that The and down holiday the X.X% corporate holiday this Let made quarter expectations and a amazing to to enduring me November as year that very am demand execution better year-over-year. well people start leisure performance improvement last the operational the December bookings saw gains continuation from improvements than revenue loyalty season, well from at driven our speaks I we and initiatives. have was from customers. business and revenue business, performance market our I'm the sharing during pleased the loyal share as slightly strong

revenue of in In carry. including up operating pleased performed were about relative with progress. addition, performance, revenue our and all-time passengers all was quarter quarter with operating quarter an as quarterly $X average And over And our remain we multiple the fare quarter passenger for while as work record XXXX. do record Fares fourth passenger X.X% our well fourth another quarter billion quarter, well revenues our set, fourth in record all, revenue fourth also year-over-year. I have to fourth up still on very to with

to by operating a And we and revenue passengers, each record full record XX% our year record records, to XXXX results, year Rapid Looking full of $XX grew billion accompanied records operating revenue revenue. speaking XXXX. nearly revenues the set quarter in record year-over-year year Rewards the we ancillary of and for of

the XXXX, when we're unit year. when the to improvement last we first As seeing we period X.X% the and X.X% of into impact. even revenue growth benefits solid continue, quarter but tailwind unit compared we This represents momentum the from our year-over-year in efforts, to a sequential revenue network optimization move performance early normalized are same for year from disruption X-point seeing prior and encouraging expect highly

be XXXX We quarter sequential first with of normal, have compared demonstrating imply would than higher seeing bookings quarter we seasonal I quarter already that average about expected about nominal RASM fourth nominal points when our RASM. in fact, place, and performance. In network of our XXXX above optimization X are normal for Further are first efforts RASM currently better-than-normal working. to sequential XX% slightly

even believe tangible in this of we pull will more for which to our able contributor year, our in been plans As refined the we've capacity shoulder boosting periods, we a out flying performance. be

in of doesn't network to drive do to year-over-year, line that, growth detail. revenue and XXXX, material Tammy domestic in our driven is operating initiative-driven we double-digit largely demand by travel have a any efforts forecast our course, that Included managed the of While air business. for sight increase assume in revenue

we with Business I'm performance from pleased we very team. Southwest the the very points in fourth ranking of increase initiatives are our had business the We our News the proud than year, an share, the a score place on competitors' same in our market total the second space and example the In in business managed and more row in solid business improved over of X managed that Travel the years success to to of carrier business declined place against space. the while each increased another in of receive scores were X XXXX. We period. industry survey have only we're industry XXXX our in in progress making It's managed the past a

Of course, we're our also Rapid experience Rewards continuing our customer efforts to and improve our program.

as to levels Rapid seeing more on board. are we investments proceed making our and infrastructure improved award-winning are out We to and points travel digital We've our modernization plus introduced a our WiFi larger tracking to months. reduce there, in the customers' product rolling enhancements with and the including friction satisfaction bag A-List cash reach to scores look and sharing book we sea customer our Rewards later our preferred will it easier travel day our A-List larger soon plan the Reward and joining fleet of made aircraft ability bins more coming hospitality several experience on customer forward combination Rapid spring. this within every power We program, we with be with to in

All to customers it designed with make more to us to and easier choose give Southwest. this of reasons even fly is

As over people, route unparalleled the our plan to strength that Andrew, our very we leverages With continued we our progress our goals. a towards delivering you. and financial on of loyalty XXXX, look network, have solid we long-term product, program forward our enter and to that,

Andrew Watterson

Overall, our people temperatures to Ryan, frigid winter and XX different route intense this network pleased I'd successfully put start in and which the with spread four was systems storms. for Thanks, weather out on proactive weather we manage managing of our I'm test. a part. vast everyone. storms definitely significant the The of days very cancellations, operations over which sheer how named our like These wide recognizing by these through to resulted and conditions efforts plan our winter winter hello, magnitude of well month. the systems in portion impacted [indiscernible] overlapping with were their majority

XX% were average and made X advance canceled Our cancellations hours at advance. were XX on in with in least hours

that imagine, you the customer As experience. notice can providing improves much

it by In disruption those operations were in with with to itinerary. with industry that their primarily fact, Overall rates cancellation the to MPS result in line were scores directly that the found impacted customers no we can isolated have and the storms. approximate

we With is to what challenges. tied in customers to with our the spot Elliott the a experienced a year's preparedness the delivered winter contrast benefits both we list not we fewer with storm The This and a cancellations result XXXX. that protocols. much in our today plan, completed only of crew we are last on is modernize and long sentiments I echo for ago. of operations investments than our significant December than initiatives year, scheduling directly also X% operation of winter In a better year past operations our to Bob's employees. improvement winter

the and pace infrastructure good closed basically XXXX news The and people is metric. canceled hard out tools X% operate our winter all in have we and weather. up improved total the with staffing, in flights to that safely every operating equipment, in about our Our We at of only work performance. showed

performance, turn Trip year-over-year Net originators, led substantial in turn on-time in which Promoter early year-over-year baggery, factor, improvement, improvement morning to showed turn a compliance Score. and differential and our completion mishandled all Our

our to Quality despite continuing As the place Eliot the covering period. XXXX of XXXX priority quality. operating Metrics the Street of metrics Wall ranked XXXX, focus several on fourth storm will Airline build We we Journal we winter enter in on

#X. ranking ranked move Our goal is to this ultimately be up and

leverage These will operating and share double inefficiencies, reducing which X will operating on more these asset multiyear benefits in yielding the additional priorities: We structural also by material costs. out begin XXXX. are efforts, creating on months. in down coming productivity initiative-based increasing We'll bringing

thank since October pay in who groups, XXX represented am to worked to the like teams with TW so our like and have work close employees negotiations contributions. of reach Finally, we negotiating teams with tirelessly all employees our well-deserved and contract. also quality I'd agreements union their agreements we for We pilots These XXX remain hard I'd X can those on I of new reward to to reward by XXXX. two life and increases forward to TW and pleased look enhancements. congratulating reaching

turn I'll that, with Julia. back So it to over

Julia Landrum

our remarks. prepared Thank you, Andrew. This completes

Please now Instructions]. for We line [Operator ahead question. the open with will questions. analyst first the go

Operator

[Operator Instructions].

comes from Ravi first Morgan Shanker question The with Stanley.

Ravi Shanker

you we of do start detail to can the be have of billion more $X.X there, of how into bag, the kind and of get what chance different so kind you Trying with Maybe can much contributing may also that? the initiatives. in are, much speak. share items on any that visibility details a sense how And to

Robert Jordan

And in. improvements, some initiatives this then about of new place Obviously, of you that, Hey, initiatives and Bob. in Ravi, very by are know, a and feel is network that. majority the the lot perform. continuing fully materially can on improvement the place and a are of it's things, which of on March I'll beginning start, I I Ryan you maybe the early in delivering, then in counts jump which lot as mean have confident Day to summer. top which, year-over-year then Investor -- our of

It's is we're sight obviously, in, you what shoulder Tuesday, to new like The change About most like it's It's certainly, quarter, we But March anything? and feel of hit do we I though, revenue. network delivering. adjusting of track $X.X things to patterns. of that confidence is and track no, Ryan, have related. revenue there. will is on want that -- flying, for you of know things. demand incremental of the and while billion. And a And that initiatives adjusting the we're some basically in X/X optimization kinds Day it's those Wednesday, on how Investor -- line Again, add are. they have lot the so early into, delivering,

Ryan Green

mix of percentage continuing by development network to some development ranges optimization normal markets get lot of initiatives is revenue there, the the that XXXX. continues maturation back of of the to a of market the and Of end most more Yes. our --

here And mature So the watch those that few able their throughout to obviously, will been we've over curve certainly help. years. development last markets

it Managed business quarter as track. of see in here As are business in then also in they business. and improvement curve the from February portion as we A significant fourth here. is then coming mature the got the first initiatives get the that managed on continue with of additional talking better another that We're revenue bookings definitely begin booking perform. confident how that as quarter, -- can the continue that in to we've will I'm those third We the about. January. provide how grows. initiatives very are sequential in relates other the place, it to to benefit And expecting been into in to And quarter sets in, initiatives was in how and performing place managed that we and we're airline

quarter going the we and what here see how makes that see, everything then and quarter fourth can finished we the yes, confident. can forward first So in we very me

Ravi Shanker

what on you domestic of And your but just you apparent of be? the RASM to helpful. or quick a kind are that thoughts as of Very the follow-up. your raise premiumization that does room a love more response single kind to get cabin, to to give the I'd guys committed product. maybe product across Obviously,

Ryan Green

we're that is Well, it's in topic industry, the -- watching hot premium watch closely. a we something certainly and that

get on talked feedback to the the talk think of continue on. customers their we some last on one our We things This that is a we basis. also And it regular about call. to I

But in cycle shifts, adding is economic seats are into times As those out pulling seats carriers they're you about has the historically the premium industry, of one been of think cyclical. premium premium, This the cabin. where premium the revenue cabin. when seats, highly

the And we see and trends the have pandemic, forward. how these so here see persist as we'll go recovery to kind from of

forward will ancillary doing and follow the we working well as that is which we say compare our of record that I RASM, we're ancillary early performance. I product think working here. well. revenue boarding and product industry, go as overall very obviously, on how having upgraded that is bird relative boarding the revenue, our products, to we as majority improving on We're

I RASM revenue so those but improve able we And ancillary through products grow some cabin, a of and think, yes, to boarding as single we're have well.

Operator

is Jamie Baker JPMorgan. question from with next The

Jamie Baker

Obviously, a woah, discussion launch still I'm right? sorry, capacity -- of there, about domestic

Ryan Green

You're there.

Jamie Baker

Yes.

of probably cuts, was about that. and Lots expletive own Sorry said. capacity ever the others. Temis discussion domestic about that I've your It

Just you curious, as some though, try have you other pricing asking but seeing of of I'm in changes competing just that any been OA lower where of with I those cuts. overlap markets in it's there's regain how any that, you sort mean lower-cost capacity thing competitors, the about. they're seen speculation than airlines to of I'm profitability. not that

Robert Jordan

I've I Yes, there Jamie, obviously, as right now are probably -- mean, there ever are seen. as many moving parts

a focus right a route that outperforming, in industry cabin -- that you've on around you've -- got are the now. outperforming moving talked of Ryan our the parts lot about, of capacity network got as got got are You've you've

You've got mergers.

delivery, that due the tell of things. capacity DTF those that, all aircraft So it's on to -- tough obviously, to impacts you've issues, got top and

aircraft guess that it's those factors not more think to be probably get out. geared worse impact and as potential the I impacts So the due across My would capacity you especially going tease of of to turbofan. obviously, Boeing year. on all to to increase, impacts, those continue The see are

not right our course, our X and I'm We're points year roughly got that were plan at pleased of we got XXXX where talked we've under the financial here a So running now. the on good The before. we really Airlines. our that all 'XX. much year we're about. accomplished focus is more obviously, of is to a in And satisfied our area with that focused than really Southwest here performance. On and ended end, I'm capital we We follow. better carrier Southwest, cost

Operator

This is operator. a try conference Please from We is speaker location. the we speaker Pardon conference by continue. regained operator what relocate. audio this to connection the me, with the the Please stand location.

Robert Jordan

XXXX, know of then as Airlines, margins out on don't where my consideration focused of against to obviously point capacity are And years think, we in you the going make momentum see. covering industry, I sets the for We're there. of goals. apologies and even take into The here even my know we we our our capacity, play want I up financial lot those off. CapEx, thinking focused about plan I cost is on across that to XX that. have our making will Southwest. to to a we is forward, are for expanding Jamie, progress we'll 'XX. in us progress backdrop But left more just Southwest capital, just

Jamie Baker

Helpful. be And but have to second to fleet single decided considered then towards to provider tell it a industry obviously that your your putting that in is animosity I crescendoing, that Or conviction second, the go you've here? is that to sole your might finally have your Okay. words wait begin not would -- you from unreasonable path. seriously assume in single mouth? down type, past disclosed you don't fleet

Robert Jordan

very satisfied up address is work up of the quality, day, the Well, get with take types. going better let with something to support now own focus routinely like Obviously, in Airlines. right We're Boeing that certified. for up take issues and periodically fleet and we we back oversight MAX second. manufacturers that our Boeing. And we me I end -- because good Boeing, it. That's lot we We've the Yes. the past. But Boeing. aircraft with periodically. is great the at improve here with The is of Airlines. fleet FAA Obviously, on a a our Boeing do X just plan at a aircraft. plan, And X our the at the there's mean, to done any look the Southwest on MAX working Southwest aircraft

aircraft still we issue providers, to you have of say so type, another You company. as also understand I such, all derisk if have of this, such as but know to and XXX -- and an great one you no there there's being XX-XX -- Even to this. were multiple creates isn't able every know thing for risk XXX type aircraft you'd the have

best company, happening. the confidence is to thing that not will out all we what's got them we're which in is certification this can no, to But the confidence out even X, with work MAX company. So We've again we an make better the Boeing exactly great with do MAX-X, and of in get that will figured to FAA better charge we're get a date. come that eager have Boeing

Operator

O'Brien The with Sachs. Goldman Catherine next is question from

Catherine O'Brien

remaining XQ year. underlying just outlook unit year. ones. a revenue line go for forecast? based about top us year the revenue of the Maybe think into full unit of couple slow On from going your I'm forecast the you the growth just forward, from quarter the quick quarters help capacity on the assuming going first where we to Can double-digit is

So that a would be sequential tailwind.

through easy away quarter-to-quarter. the does revenue be of that trends from considering? impact book that think as Anything comp where lumpy some the You'll we we lapping How should else move year. unit you be

Tammy Romo

thoughts a you any you noise jump want there's to as and Yes. Ryan, there of with I'll start -- if year-over-year. have, really, in bit pointed out, off you then

So to is probably help way think through sequentially. of the kind that you best

first tougher in aware, And we in is a our the just network in industry. March. the seasonally materially changes place quarter airline general you're As quarter will have for

market. percentage with initiative, -- end So schedules. our to that year, then to completed we And of the we be continue following the we believe grow we'll we year, the on our continue expect go to that, expect the to through been you into e that -- as with with revenue. about, we benefits of line then development We've as expect our business our we we our And go expect to X%. managed covered, then Ryan and markets XX% mature, historical our improve of to have GDS would system and of call summer, through year. fully continue And the would top it, steadily as more by are summer to development in on is those just we

-- this got a would expect continue we've momentum expect lot would we that of We coming to year. into and... So

Operator

operator. conference We've a is lost from speaker Standby it. try This as audio me. the regain to Pardon again we location.

continue. This We've speaker regained from audio the location. you. the Thank operator. is conference Please

Robert Jordan

maybe year. development particularly And across X% March, then have really third network-related quarter. -- apologies. here, really I the talk because market-related the Tammy seats started capacity the quarter, is of is down, in did, having all the form on the simply, the about call -- the decelerating But accelerated year the are summer. And it. to just pile top they second On issue cover to We're and that, back conference XX% of some Trips on you accelerate QX, just XX% of half revenue everybody, would initiatives sorry initiatives they what X% the start initiatives just [indiscernible]. down. X% my and in in are which

contribution have across thinking initiatives So an year. indirect answer decreasing from year, but to capacity That's network you the about the your accelerated I'm question, the you how across and an have it. that's

Ryan Green

wouldn't are revenue those year. throughout say spread are pretty that very little I as there's component else, evenly the initiatives, add Those other -- to of And well. Yes. those anything that the the in than plan, lumpiness

So and about in it's of and year really coming optimization the back decelerating on. network efforts maturation the capacity the half the

Catherine O'Brien

year, unit Makes to a talk you very of question. second the XXXX to would you're some you're back costs in 'XX. side like lot just when like thinking cost us early, unit then sense. I for you down were maybe targeting what expecting Can about the for incremental to year-over-year. about headwinds for XXXX versus be and just my talk first but just know this of maybe And earlier

from in be something the in Of course, more you if walk as optimization couple year-over-year when up into then, color phase. to to there X. year-over-year? more us contract down the at get back lower pilot The step again, X go of X big higher. that or least we Any wages going And back could if you of in is great came just to we kind that early, of to year get your XXXX, into inflationary guessing It that, network lap I'm plus, would efficiency Like recovery a up you're the but would capacity. points down be great.

Robert Jordan

pile most I'll to we labor in. the part, increases here. got increases Thank will contract X accrued I and sure here it's We've were I'm mean start, you, in go it's XXXX. and our done, Tammy for really, the X for rate then

example, Those to to holiday pressure the a that's So take they've of the X the that increases. industry for if have a On X% you got going some pilots, be off X. of maintenance rate engines really XXX of top things, rate you and pressure, the points. couple majority of It's increase. wage That's got that that, was known. are pressure coming We've maintenance benefit shares. most the

about be Investor course, that our is Now forecast will you we'll add on give a growth of our naturally in we in the the end 'XX. across there, for the Tammy, year. not ready XXXX, peaked be [indiscernible] we've about ended think cost you our from target side, at -- than course, And will more fewer 'XX the as year Day this go headcount 'XX, with us decelerate hiring, in year. number, the a pressure anything? again lot dramatically year naturally to if would we you later control will, we our you our the we're goal, year, sharing of efficiency But maybe but more that make yes, goal unit which to to want as and to XXXX. heads a And

Tammy Romo

it labor you more is is would anticipated rate yes, than But we cost, cost, initially. story quite covered the is obviously, inflation there have actually the Yes, labor really simple all.

behind with So -- us. our the accruals. pilot contract, We've we've adjusted

XXXX maintenance, on the up obviously, share step more we're we'll the greater a Investor scale enhanced bringing XXXX out but at focused and associated with of wage those with benefits the increases and XXXX. to most in as and and So degree move -- step in through we is increases, Day, rate efficiencies Bob covered

Operator

from is Evercore ISI. question next The Duane with Pfennigwerth

Duane Pfennigwerth

time. the Appreciate

macro to So, improvement here? shot the you maybe these give It's guess about a as read would much would this. realignment what How that more the one to airlines just X better with initiatives? your network airlines attribute you points been And make demand? us on attribute best really in contributors to to just you quarter. are based how to at given much any doing sequential challenging of Can the underlying

you on And the look your if about I this Just seeing good last third macro? what was so, the revenue of macro. read if like where? at quarter just the think and didn't But in telling are a outlook particularly acceleration that year, you here, is you business

Ryan Green

Duane, Yes, it's Ryan.

way the kind holiday saw macro which the -- a strong. period think we we overall is we for the I I the us time of performance environment quarter, in closed came in at that our mean expectations very close-in demand fourth that above point. had accelerate

trends as was hand. XX% plenty quarter, a the get us sign first bookings into the on are as That's got the about for got think read you on we I the So how a sit that that, macro of in first the And good here to performing. of good quarter, year. we've beginning

I think fine. We're here. demand looks periods performing February, very strong trough in just January typically are which and

spring look at environment, that's macro March, period, overall as probably well. also, look you into travel I travel periods if relates just And to break you Easter it stronger very As looking and the think trends. the business the into managed then

to earlier, fourth. the side quarter mentioned quarter bookings for place I than was to business fourth into very think the the managed third better I first on curve. got better quarter February than as and be We've begin in that we expected part here this get of is strong

us overall So think really environment good year. up well macro a for having I the sets

Duane Pfennigwerth

waking parts focus cities follow-up up or for of back Any kind a you? country of the there. are that Just

Ryan Green

doing well doing us. fourth are quarter. markets destination-based in beat well. doing those say Phoenix, is would very are I for our expectations International very Orlando, very we Hawaii, the markets well. Well, Vegas,

it's doing -- California look, sure. improving you when come it's to for think I back, was slower

it's improve. the overall, definitely continue things network. across think So to pockets I again, But

Operator

is Brandon Barclays. question with next The Oglenski from

Brandon Oglenski

your airlines. And back, it yourself network matter you competitors guess premiumization come talking experience the in relative bluntly longer industry. I and these I differential which the the was the I'd the was to guess did distance I XXXX that further And in in products about can commercial matter And I address Hawaii about as maybe of about some just through I the Q&A how low-cost or initiatives some try what I maybe to here, length? side growing directly. want start that? we yield as to ask are more first you in and guys to ask question between does Does specifically guess well. on -- go Because So flight do to observe I think think,

Ryan Green

or of from premium first would product just a certainly has the would I all, the component that best we this I would in we take would is that that And highly Well, up industry. say, I very what I closely echo on said cyclical. would that. Southwest think I And want to coach question, want as to -- of product we we think coach product, that Airlines matters. want -- the before about absolutely you think study

expectations. I beat as we relative expectations beat a like Hawaii fourth in do quarter. long-haul do our Your question we the own how Hawaii, on market in We mentioned, for

continue think Hawaii develop And yields out was. think But our even industry the that may the for and when the that for Mainland evidence I there on product their today at of the demand -- that to that least segment, and you further. markets. those on But some I think lower I bottom product of products think well together, to And today once in to lower whole, types of end as I very not fares yes, there what demand no, franchise. the products there's as component be at much improve, those think look fares yields on long-haul matters. we'll the continue our I end

Robert Jordan

prediction would thing no And The than is is don't this only and I is more is Bob. add there. this this read Brandon, into --

their You've got to customers' meet demand your and expectations.

to want that. So those time, understand over as change you

to And you history that. that. want understand You be carefully -- have to a of demonstrating we want

years, the even at aircraft. So go and not we when a didn't There power can Airlines. go have been we a on on. XX wouldn't you We and on have would about here been Southwest about talking was WiFi. have And back you on talking program time loyalty

of into consumer coming as as flyers demands you've got different So system well. expectations change the generations and and

Again, at look decision. And here that, that constantly that. we history have at and that, right of and will doing warrants our want. what a will look will product we change, then customers the we We with if make our That's understand to no you experience. change, in regarding and understand sure will aren't stubborn demands trying cabin. in react that that see customer area we'll premium you make our predictor that as the know if we I'm just this we needed. that

Brandon Oglenski

can where Ryan, then quick appreciate just ability view and us tell if I weighted you that. maybe And Any capital get Bob follow-up today? I a cost your to of for Tammy.

Tammy Romo

the Yes, it's sure. It's -- probably X%. between high sitting Xs, close X% and

longer to a take And thing, over view capital. our we So view, a we X.X, view one of planning returns invested in it's it we're to on X.X. closer add X%. certainly on, been But term, longer-term terms just certainly Brandon, our as when about

Operator

is Helane Becker TD question next from The Cowen. with

Helane Becker

Thanks operator. very much,

improvement you the costs and better the issues, was you last I of up a margin As everything seasonality it have that for revenues about Because didn't should you we because would X things would where fourth said your how all fourth inflationary significantly think to than and like you look about you I already up have seems able quarter, see were something better. your you the as given weren't year, lot the at at of performed But the did your business thought or and next yet year, we quarter, yet look you XX.X% XX.X% last perform year, were the talked your now? for significant and forward to great have numbers pressure.

attendant get So do you pressures, from -- can inflationary asking other and a the report? away and just book back margins is, for cost help obvious you any strike to bridge do other maybe labor flight you then used vote. you the question you beyond inflation expect those my And expect me then how to

Robert Jordan

can you. thank and... Helane, I Maybe Maybe start Yes.

Helane Becker

question. lot of That was a

Robert Jordan

try I'll Yes, to remember everything.

of we did think everything I sort impact, capacity fourth to biggest the aside is think quickly. quarter just generally, restore I the in tearing choose

a was aircraft our normal one, number aircraft, back that all all utilization, basically, our to pilots, So our fly that. get choice to

our greater capacity, we load ramp-up you could than our factor. see had so -- And was a it, have therefore, in did drop and normal, we

that's that's normalize biggest the normal. back that capacity. contributor And normal terms we I as of to think get the performance in than rate different obviously, area plan, is there in 'XX our to

to And any your I don't that. flight related example, holidays, any Elliot the question. in -- like book that's don't or that. to of I'll something to So I biggest for don't thing. away to attribute attendant of me, that the We attribute get

of I think it capacity really was the restoration. rate

or at our we book customer Airlines, -- our As indication that Southwest we for customer or metrics, hangover at we saw our away. there's look behaviors, indicator any look no consumer demand

holiday In quarter. were of strongest fact, the periods the the periods

the ratified question and attendant, We really flight Your about year. X in proud labor just I'm folks. of agreements our over a

TW the of many strike to have who you does many, mediation, we vote not to headed or follow mediator, just occur and that. pilots are federal We the have point. meet the contract mediator many, get like that are that SAV can We determines XXX before I'm two confident are to strike. you you The flight done. mediation. were go, a mean and are one eager those in to do to in things mediation, get at a we our There And And dates we're with and when attendants. federal your

strike customer vote. We despite that SAV we strike vote. pilots, So authorization the even the on or our not see aware. an worried I'm authorization I When saw or any focused did take customers indicator strike it very a not about little were

here there? of attendant So expect Ryan, you flight of from do to kind customer add in want with any anything I vote. demand the -- terms hangover because of that don't

Ryan Green

no there's about from make concerned in anything that that that. a evidence would perspective we track No, customer us sentiment

Robert Jordan

satisfaction recovered been at our records levels. to NPS have to And have scores, recently back pre-pandemic point. this fully and is sentiment That our customer certainly

Operator

Global. We We'll have more question take time Dan from last one with McKenzie for Seaport question. that

Daniel McKenzie

that in per like prior that fully would go, want -- that's what on line in there aircraft then could and serve for And reasonable come get FTEs to guess or secondly, of that to on as investors year further Southwest ultimately first. sight could good assume improvement a I I where XXXX. XXXX, is benchmark. efficiency could guess

Robert Jordan

add if I'll Andrew, you answer Yes, in. and chime want directly to

I this the Day key that quickly covering like returns up get is in key maybe we're goal able as our But not year, goal. just the be later our year talk ROIC goal detail restoring this here efficiency the to fewer think to heads and this XX you year in and we the is about directionally the we this end to restore getting ready similar That get percent a same terms We quite or the it's of back until a capital to to year. to to right have in goal Not of of bit. than want then hiring all to, which of plan The above that absolutely, flying. ramped peaked historic we and discuss hiring XXXX. and much our year, Investor been network but as aircraft our well our to alongside efficiency our or have in help cost here to October decelerating we with will a certainly X-or-so began ready 'XX, and obviously November, would rapidly in again, grow last days. WACC,

-- also hate the We here. a have tease significant number

planning that our we we'll about as about both more efficiency aircraft. in and are a think the We have again Investor of of later people that year. turn, a around processes sharing be of Efficiency efficiency significant the we number initiatives and our things this Day like lot

Andrew Watterson

team kind efficiencies. accelerate element rapidly to cross-functional same I'd hiring driving groups now one that these up use our we on is say, of kind of Bob, that same the for that is to responsible

you FTE of per to say lever ins managing And you'd needs the if CASM ways. year. the So furthest. aircraft, aircraft actually I a block less and because achieve while every conscious hours block what we're two for And needing think is the obviously it the my fluids could pilot pay, that count of where hours fly then a said that per would ground head day different get was is aircraft, literally we're just you a something have the day. that also say or I'd aircraft a end or [indiscernible] kind that flights a about X about the week could change We if different of times to longer

it So your and how the ultimate on flying get you deploying of against CASM depends staff aircraft how out it. you're you're

a hard to CASM FTE the and of at aircraft compare useful is a can that for have to bit So it some a it's order. signal, you try the fit outsourcing, on measure airlines to do because and get going false good across can little how -- but the the give of one aircraft B, but dependent what but you for the labor look really we're to

Daniel McKenzie

much opportunity? here. at Very savings hundreds it good. is shifted It's squeeze an that question the one complete How look cloud. cloud is in has point? once of like that Is that And the the to of if ultimately could a tens millions? this just transition millions, last of And on you to I what And the could shift endeavor, completed? one Southwest once

Robert Jordan

my it's tell we shift the cloud. path as the might here, appropriate what, companies, to you the like cloud. things a But I to of have again, but it a as stretching shift It's to sound. technical you're not lot I'd to believe abilities simple

more. on and a have shift lot we below order just in we XX% goal what shifted to of I've is got a think something my I have the head,

more A which gain is is that that is of what our systems, systems operations, obviously I think absolutely. cost to an but And ability in Some over reliability. is airline. critical modest. support and savings, lot the here fail of And support you --

You can't be problem. operational that XX minutes you have systems an cause down

effort in the hundreds savings. and -- the a cost guess of of all millions I lot of millions So Certainly, modernization to -- of cloud don't more code the is the is not savings. a it cost effort than it but much is shift and see And as that a as my is you'll a base tens resiliency just it's

Andrew Watterson

in are and allows can bigger cloud services to time. over then system, get internally, it improve you Bob, of I progress. we much so in mean, you we're think, But take side the very a hosted cost -- when I we talking to micro used that that about it be you good refresh application breakup talk and not [indiscernible] the productivity how and

products for new the products benefit. really it's these is So speed support the the really to market and drives what

in hosted will. So it's get you elsewhere business, benefit much of so if kind you costs, the the any not

Robert Jordan

of a -- really down earlier and lease is this too, an cost, that, -- and stop issue. expense or year Nodum the but a having the it's there that other issues -- The being not and then tech I'll cost, there we'll both is last is And and year, revenue very high outage you like a saw the hurt industry.

My reduce is of time guess can is because powerful. or of reduction more that terms that the an in even number extent the cost than to of very issue completely. is so reduction reduce technology issues, them of reduce the the And reducing length you powerful IROPs issues, the

Julia Landrum

analyst of our a have Okay. the That the reminder appreciate will the website. and be on I Investor a replay of call. call great day. quick everyone that A completes our joining, portion available and Relations transcript

Operator

Ladies introduce Communications Chief Ms. and media I'd like gentlemen, to of portion Eichinger, now we Whitney will call. first begin today's our with Officer.

Whitney Eichinger

to our members call of today. the media I'd like Gary. Thanks, to welcome

should a you up on we everyone question? how questions, queue Gary, instructions could taking Before begin give please for

Operator

[Operator Instructions].

Alison comes The Sider question Journal. Our from with Wall first Street

Alison Sider

X. Boeing think that Boeing delivering a before -- wanted the the to that those they you FAA have of on something calling address MAX should deny center issue, to Duckworth what can planes? you of start to today anti-ice [indiscernible] see do made is just waiver I

Robert Jordan

I'll Boeing. we start, the and here. and to X for and ahead really possible. that's want Obviously, I we Boeing Ali. speak on X get don't there, Andrew, MAX MAX want best you'll the file in, timing or certification the the it of issue Obviously, the want

I one certification time consider line. to and for certification here is more So it don't the process talk to in Boeing, thing but want

Andrew Watterson

but would off we would the that a is job. been a think between it's I slower process they've than FAA I say doing It's public the been like, certification Boeing. technical and good it's and a And been comment. based technically

opportunity analysis that for on be So people to for an technical comment it's done. to

And to party when so we're it. not It's get get not the a want aircraft. we'll it, that. We we'll a question of if

we're the support safe taking their we wants to way to go. make and it's whatever So they're sure pleased that time FA

Alison Sider

I on oversight you have mean do any Southwest production Boeing Plans your plans line? increase to And own the of

Andrew Watterson

done already have We that.

for had time, long representatives a is The whose the a in of changed mechanics, posture the up their are process. have to customer So there. our we that oversight Boeing in license job at production XXXX, it increased provides factory. on late of aircraft they payroll, Previously, to but quality we AMP our people provide team We direction. our

few up inspectors be to make times our -- team we It's And inspect from And is wings factory to inspect takes a Boeing where rolling and XX sure our well. year, requirements several built goes going people an that being things the to quality everything they about people have to ask areas places the our assurance out. where assemble Those days inspect then so we the for aircraft roughly at our expected. in inspect.

and the a production provides that once there's customary it acceptance the air give that oversight factory, happened a overseas really of spectrums worth final in the in So a set process [indiscernible]. good leaves FAA

And as so -- the in and then our sure performing it far by quite operator we system for expected. and of it's the analysis comes we on that is to And spec which our program, the we're have really surveillance and data our us conforming XXX, of and safety continuing since to provided lots robust. and allows ops aircraft maintenance largest make understand and

Operator

is CNBC. question next The from Leslie with Josephs

Leslie Josephs

let happen? a jobs I employees United the there Department you Chapter think those would if was the ever that about thoughts for in States another an should that Justice wondering Are do industry? have then how affect X buy airline? of the any you you would airline And

Robert Jordan

We the geared and Leslie, turbofan, parts business. They're I've merger the going lot years the is earlier, moving like deliveries, obviously, and industry. you right in is seen consistent now. issues I here mergers don't with One we our know stick that's on to acquisitions a more -- between in my said in Bob. as aircraft XX there have don't I potential it's industry. thing

we've focused and can improving Southwest that that we're all the on our best impossible profit It's happen. being improving speculate So to might margins, carrier talked returns the Southwest be on Airlines Airlines, and things we what about.

anything wouldn't to industry, that any they a speculate say if on carrier. opportunities sense, as would take I around that. look arise for certainly the we but make on at history going Southwest, Our want in other

Andrew Watterson

Southwest the plan, I is get and don't benefit we be. a rule or need our plan hit Airlines, judge need something or think we Bob, We destiny. break with anything to for control have our our to where anything. returns to We that way we else our we

results. our delivers plan Our

Operator

from question Reuters. next Singh Our with Rajesh comes

Unknown Attendee

it time Andrew, do update you was expected the Earlier, April. on line for have any by X. MAX certification of

So certification slowed process events of to due getting down the see risk Boeing? with do you any the current

Andrew Watterson

Well, get on updates the status process. of certification we weekly the

the what's after we that one -- and we've the we obviously, ultimate who inspect in spend assumption what previously, makes it we So oversees submitted April FAA would decision of internal our plan hasn't. and certified that that indicated that be is by had and and would time then But been it know then that.

I the think flat at as our and plan of could process. based on it new only we modify on assumptions We've our spec that mentioned, is of Tammy information. therefore, But year. And assumption. all next this -- that until the latest was earlier would had the along be take year, will us the that end

our change, move will assumptions that we should plan. So adapt and our

giving planned So the we this for or downs kind let and short-term by time, approach we won't what this affect year. ups any of lead ourselves conservative kind of have

Unknown Attendee

address have you confidence Do question the facing in currently to for Boeing's place have I Bob, company? who's you. And sit

Robert Jordan

anything the doing address this Raj, has obviously that's and us to I've partner Boeing Airlines. be a They're problems. committed will out working to I have better said Boeing good leadership. come And the personally Southwest the we'll is absolute confidence everything work Boeing issues, to very to FAA that their FAA quality a before, doing will XX for company. better for And and is the Boeing it on, that better that been I between talked going the takes years. oversight and of work address as with with

their I have address work the confidence through this that absolute they yes, and way will So issues.

Operator

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

Whitney Eichinger

for joining. Thanks, Gary. thank swamedia.com. and information The everyone at news release We are available our contact

Operator

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

now may disconnect. You

Southwest Airlines (LUV) 25 Jan 242023 Q4 Earnings call transcript