Potential Changes to Seating Policy
Q: Are you considering assigned seating or premium cabins? " "
A: Bob Jordan mentioned that Southwest is seriously studying customer preferences regarding onboard seating and cabin configurations. While no decision has been made, early indications show interesting possibilities that could benefit both customers and Southwest. They plan to share more details at their Investor Day on September 26. " "

Capacity Reduction and Fleet Plans
Q: How should we think about early 2025 capacity and seat growth? "
A: Robert Jordan and Tammy Romo explained that capacity growth will be aligned with demand, and they plan to grow below macroeconomic trends until financial goals are achieved. They are moderating capacity due to Boeing delivery delays and their own capacity discipline. Any capacity growth will come from initiatives like turn time reductions and red-eye flying, and they expect seats to trail ASMs due to these changes. "

Cost Cutting and Headcount Reductions
Q: How are you managing headcount reductions without furloughs? "
A: Bob Jordan stated they plan to reduce headcount by 2,000 employees through planned attrition, voluntary time off programs, and efficiency initiatives, without resorting to furloughs. They are automating processes using AI to further reduce headcount while focusing on restoring financial returns. "

Operating Cash Flow and Dividend Policy
Q: How should we think about operating cash flow and dividend sustainability? "
A: Tammy Romo emphasized their focus on generating free cash flow and managing operating cash flows while balancing capital spending. They aim to maintain an investment-grade balance sheet and are working towards their long-term leverage goal. Plans for the dividend remain unchanged at this point. "

Business Revenue and Outlook
Q: What is the outlook for business revenue in Q2? "
A: Ryan Green reported that managed business revenue was up 25% in Q1 and reached 2019 levels. They expect performance to continue improving in Q2, driven by double-digit growth in unique travelers and widespread industry strength. "

Geographical Unit Revenue Trends
Q: How much differentiation are you seeing in unit revenue trends geographically? "
A: Ryan Martinez noted strong performance on the West Coast, with intra-California RASM and margins up double digits year-over-year. Phoenix and Las Vegas are performing well, with Vegas benefiting from the Super Bowl in February. Florida RASM is above system averages despite capacity pressures. "

Employee Communication and Alignment
Q: Do employees understand the company's challenges and need for change? "
A: Bob Jordan assured that there is alignment throughout the company. Senior leaders communicate directly with employees about financial returns and the path forward. They are committed to a comprehensive plan to restore financial targets, adjust capacity, enhance revenue performance, and offset cost pressures. "

CapEx and Free Cash Flow
Q: Can you discuss CapEx outlook and free cash flow generation? "
A: Tammy Romo stated that CapEx for this year is $2.5 billion, including $1 billion in aircraft spend. They are working on plans for next year and are focused on generating free cash flow, with more updates to be provided at the Investor Day. "

Red-Eye Flights Implementation
Q: What are the challenges in implementing red-eye flights? "
A: Ryan Martinez explained that technological and operational changes are needed, including crew scheduling updates and reserve period adjustments. With the new pilot contract allowing for three reserve periods, they are more comfortable proceeding. Red-eye flights will add capacity without additional CapEx by increasing aircraft utilization. "

Bonuses and Labor Agreements
Q: Can you remind us about the bonuses related to labor agreements? "
A: Tammy Romo confirmed they had accrued roughly $625 million for labor agreements expected to be paid out during the remainder of the year, including bonuses to employees and agreements with flight attendants. "