| Metric [Unit: USD Billion] | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|----------------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Total Operating Revenues   | **6.2**  **[LUV_3178238_9]** **[0000092380-23-000007_er-12312022xerdoc.htm:0]**  | **5.7**  **[0000092380-23-000024_luv-20230331.htm:42]** **[0000092380-23-000021_er-3312023xerdoc.htm:0]**  | **7.0**  **[0000092380-23-000038_luv-20230630.htm:43]** **[0000092380-23-000036_er-6302023xerdoc.htm:0]**  | **6.5**  **[0000092380-23-000049_luv-20230930.htm:43]** **[0000092380-23-000047_er-9302023xerdoc.htm:1]** **[0000092380-23-000047_er-9302023xerdoc.htm:0]** **[LUV_3362159_5]**  | **6.8**  **[0000092380-24-000003_er-12312023xerdoc.htm:1]** **[0000092380-24-000003_er-12312023xerdoc.htm:0]** **[0000092380-24-000027_luv-20231231.htm:94]**  | **6.3**  **[0000092380-24-000055_luv-20240331.htm:36]** **[0000092380-24-000055_luv-20240331.htm:40]**  | **7.4**  **[0000092380-24-000111_luv-20240630.htm:44]** **[0000092380-24-000108_er-6302024xerdoc.htm:1]**  | **6.9**  **[0000092380-24-000145_er-9302024xerdoc.htm:0]** **[0000092380-24-000147_luv-20240930.htm:50]**  |
| Passenger Revenues         | N/A     | **4.7**  **[0000092380-23-000024_luv-20230331.htm:42]** **[0000092380-23-000021_er-3312023xerdoc.htm:0]**  | **6.3**  **[0000092380-23-000038_luv-20230630.htm:43]**  | N/A     | N/A     | **5.3**  **[0000092380-24-000055_luv-20240331.htm:36]** **[0000092380-24-000055_luv-20240331.htm:40]**  | N/A     | **6.3**  **[0000092380-24-000145_er-9302024xerdoc.htm:0]** **[0000092380-24-000147_luv-20240930.htm:50]**  |
| Other Revenues             | N/A     | **1.0**  **[0000092380-23-000024_luv-20230331.htm:42]** **[0000092380-23-000021_er-3312023xerdoc.htm:0]**  | **0.7**  **[0000092380-23-000038_luv-20230630.htm:43]**  | N/A     | N/A     | **1.0**  **[0000092380-24-000055_luv-20240331.htm:36]** **[0000092380-24-000055_luv-20240331.htm:40]**  | N/A     | N/A     |
| Ancillary Revenue          | N/A     | N/A     | Record  **[0000092380-23-000036_er-6302023xerdoc.htm:1]**  | Record  **[0000092380-23-000049_luv-20230930.htm:43]** **[0000092380-23-000047_er-9302023xerdoc.htm:1]** **[0000092380-23-000047_er-9302023xerdoc.htm:0]** **[LUV_3362159_5]**  | Record  **[0000092380-24-000003_er-12312023xerdoc.htm:1]** **[0000092380-24-000003_er-12312023xerdoc.htm:0]** **[0000092380-24-000027_luv-20231231.htm:94]**  | N/A     | N/A     | N/A     |
| EarlyBird Revenue          | N/A     | N/A     | **0.1**  **[LUV_3255825_23]**  | N/A     | N/A     | N/A     | N/A     | N/A     |

63cd00d9484503ae2f39f69c0f562c79667150eb37f2ea014efe8f90de692a32

Domestic Operations

Foreign Operations

Total Revenue

bcb1c3bed974d569e6541b5528c38e9f426e3c1e343ac17d98f653d42c11ba70

Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

e0bc34b1e935916b5aaea7e7f606bd5631b65bbe82169bd05e067d75529ad796

Total Revenue [USD, Millions]

Cost of Goods Sold (COGS) [USD, Millions]

SG&A [USD, Millions]

R&D [USD, Millions]

D&A [USD, Millions]

Interest Expense [USD, Millions]

Operating Income (EBIT) [USD, Millions]

Net Income [USD, Millions]

EPS - Basic [USD, Per Share]

EPS - Diluted [USD, Per Share]

2168deac2a6e821aea00147644c8d9d4e4832d337e7d3205e8365d23e4d7316b

Southwest Airlines Co. (LUV) operates in the airline industry, focusing on providing low-cost air travel by utilizing a single aircraft type, the Boeing 737, which aids in simplifying scheduling, maintenance, and training **[0000092380-24-000027_luv-20231231.htm:6]**. The company primarily generates revenue from passenger services, with additional income from ancillary services and its Rapid Rewards loyalty program **[0000092380-24-000065_filename1.htm:4]**. Southwest is engaged in strategic initiatives to enhance customer experience and increase revenue, including assigned seating, extra legroom, and partnerships like Getaways by Southwest **[0000092380-24-000145_a20241024_3q24supplement.htm:3]** **[0000092380-24-000121_a20240926_luvinvestorday.htm:22]**.

1. **Passenger Services** - Offers low-cost air travel primarily using Boeing 737 aircraft, focusing on high asset utilization and reduced operational costs by servicing secondary or downtown airports **[0000092380-24-000027_luv-20231231.htm:6]**.
2. **Rapid Rewards Loyalty Program** - Provides a loyalty program that significantly contributes to revenue, encouraging customer retention and repeat business **[0000092380-24-000065_filename1.htm:4]**.
3. **Ancillary Services** - Includes additional services such as assigned seating and extra legroom, aimed at enhancing customer experience and increasing revenue **[0000092380-24-000145_a20241024_3q24supplement.htm:3]** **[0000092380-24-000121_a20240926_luvinvestorday.htm:22]**.
4. **Getaways by Southwest** - Engages in partnerships to offer vacation packages, combining flights with hotel stays and other travel services **[0000092380-24-000145_a20241024_3q24supplement.htm:3]** **[0000092380-24-000121_a20240926_luvinvestorday.htm:22]**.

515d0d23271d4a3e68269c2f8f1c5ace4d13bf169ac0e320f867de618ebdac12

| Metric (Unit) | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|---------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Average Length of Passenger Haul (miles) | **952** **[0000092380-23-000007_er-12312022xerdoc.htm:16]** | **977** **[0000092380-23-000024_luv-20230331.htm:36]** **[0000092380-23-000021_er-3312023xerdoc.htm:12]** | **994** **[0000092380-23-000036_er-6302023xerdoc.htm:12]** **[0000092380-23-000038_luv-20230630.htm:37]** | **1,008** **[0000092380-23-000047_er-9302023xerdoc.htm:11]** **[0000092380-23-000049_luv-20230930.htm:37]** | **989** **[0000092380-24-000026_a262024-updated2023financi.htm:9]** **[0000092380-24-000003_er-12312023xerdoc.htm:14]** | **1,007** **[0000092380-24-000055_luv-20240331.htm:35]** | **1,019** **[0000092380-24-000111_luv-20240630.htm:38]** **[0000092380-24-000108_er-6302024xerdoc.htm:11]** | **1,034** **[0000092380-24-000147_luv-20240930.htm:40]** |
| Average Aircraft Stage Length (miles) | **713** **[0000092380-23-000007_er-12312022xerdoc.htm:16]** | **715** **[0000092380-23-000024_luv-20230331.htm:36]** **[0000092380-23-000021_er-3312023xerdoc.htm:12]** | **728** **[0000092380-23-000038_luv-20230630.htm:37]** | **735** **[0000092380-23-000049_luv-20230930.htm:37]** | **739** **[0000092380-24-000026_a262024-updated2023financi.htm:9]** | **753** **[0000092380-24-000055_luv-20240331.htm:35]** | **766** **[0000092380-24-000111_luv-20240630.htm:38]** | **770** **[0000092380-24-000147_luv-20240930.htm:40]** |
| Fuel Costs per Gallon (including tax) ($) | **3.18** **[0000092380-23-000007_er-12312022xerdoc.htm:2]** | **3.19** **[0000092380-23-000021_er-3312023xerdoc.htm:12]** **[0000092380-23-000024_luv-20230331.htm:36]** **[0000092380-23-000021_er-3312023xerdoc.htm:12]** | **2.60** **[0000092380-23-000038_luv-20230630.htm:37]** **[0000092380-23-000036_er-6302023xerdoc.htm:12]** | **2.80** **[0000092380-23-000047_er-9302023xerdoc.htm:11]** | **3.01** **[0000092380-24-000026_a262024-updated2023financi.htm:9]** | **2.92** **[0000092380-24-000053_er-3312024xerdoc.htm:11]** **[0000092380-24-000055_luv-20240331.htm:35]** **[0000092380-24-000053_er-3312024xerdoc.htm:11]** | **2.76** **[0000092380-24-000108_er-6302024xerdoc.htm:11]** | **2.52** **[0000092380-24-000145_er-9302024xerdoc.htm:10]** |
| Fuel Consumed (million gallons) | **484** **[0000092380-23-000007_er-12312022xerdoc.htm:16]** | **483** **[0000092380-23-000021_er-3312023xerdoc.htm:12]** | **538** **[0000092380-23-000036_er-6302023xerdoc.htm:12]** **[0000092380-23-000038_luv-20230630.htm:37]** | **557** **[0000092380-23-000049_luv-20230930.htm:37]** **[0000092380-23-000047_er-9302023xerdoc.htm:11]** | **565** **[0000092380-24-000026_a262024-updated2023financi.htm:9]** **[0000092380-24-000003_er-12312023xerdoc.htm:14]** | **524** **[0000092380-24-000053_er-3312024xerdoc.htm:11]** | **577** **[0000092380-24-000111_luv-20240630.htm:38]** **[0000092380-24-000108_er-6302024xerdoc.htm:11]** | **562** **[0000092380-24-000145_er-9302024xerdoc.htm:10]** **[0000092380-24-000147_luv-20240930.htm:40]** |
| Operating Expenses per ASM (cents) | **17.49** **[0000092380-23-000007_er-12312022xerdoc.htm:16]** | **15.74** **[0000092380-23-000024_luv-20230331.htm:36]** | **14.66** **[0000092380-23-000036_er-6302023xerdoc.htm:12]** | **14.51** **[0000092380-23-000047_er-9302023xerdoc.htm:11]** | **15.88** **[0000092380-24-000026_a262024-updated2023financi.htm:7]** | **15.91** **[0000092380-24-000053_er-3312024xerdoc.htm:11]** | **15.04** **[0000092380-24-000111_luv-20240630.htm:52]** | **15.11** **[0000092380-24-000145_er-9302024xerdoc.htm:9]** |
| Operating Expenses per ASM (excluding Fuel, Special Items, Profitsharing) (cents) | **13.39** **[0000092380-23-000007_er-12312022xerdoc.htm:16]** | **11.67** **[0000092380-23-000024_luv-20230331.htm:47]** **[0000092380-23-000021_er-3312023xerdoc.htm:11]** | **11.05** **[0000092380-23-000036_er-6302023xerdoc.htm:11]** | **10.67** **[0000092380-23-000047_er-9302023xerdoc.htm:10]** **[0000092380-23-000049_luv-20230930.htm:52]** | **10.96** **[0000092380-24-000003_er-12312023xerdoc.htm:12]** | **12.25** **[0000092380-24-000053_er-3312024xerdoc.htm:10]** **[0000092380-24-000055_luv-20240331.htm:45]** | **11.50** **[0000092380-24-000108_er-6302024xerdoc.htm:10]** **[0000092380-24-000111_luv-20240630.htm:52]** | **11.91** **[0000092380-24-000145_er-9302024xerdoc.htm:9]** **[0000092380-24-000147_luv-20240930.htm:59]** |
| Economic Fuel Costs per Gallon ($) | **3.18** **[0000092380-23-000007_er-12312022xerdoc.htm:2]** | **3.19** **[0000092380-23-000024_luv-20230331.htm:44]** | **2.60** **[0000092380-23-000036_er-6302023xerdoc.htm:2]** **[0000092380-23-000038_luv-20230630.htm:44]** **[0000092380-23-000036_er-6302023xerdoc.htm:2]** | **2.78** **[0000092380-23-000049_luv-20230930.htm:45]** **[0000092380-23-000047_er-9302023xerdoc.htm:2]** | **3.00** **[0000092380-24-000026_a262024-updated2023financi.htm:2]** | **2.92** **[0000092380-24-000055_luv-20240331.htm:42]** | **2.76** **[0000092380-24-000108_er-6302024xerdoc.htm:2]** **[0000092380-24-000111_luv-20240630.htm:45]** **[0000092380-24-000108_er-6302024xerdoc.htm:2]** | **2.55** **[0000092380-24-000147_luv-20240930.htm:52]** **[0000092380-24-000145_er-9302024xerdoc.htm:1]** |
| Fuel Hedging Premium Expense per Gallon ($) | **0.03** **[0000092380-23-000007_er-12312022xerdoc.htm:2]** | **0.06** **[0000092380-23-000024_luv-20230331.htm:44]** **[0000092380-23-000024_luv-20230331.htm:38]** | **0.06** **[0000092380-23-000038_luv-20230630.htm:44]** | **0.05** **[0000092380-23-000049_luv-20230930.htm:45]** | **0.05** **[0000092380-24-000003_er-12312023xerdoc.htm:2]** | **0.08** **[0000092380-24-000055_luv-20240331.htm:42]** | **0.07** **[0000092380-24-000111_luv-20240630.htm:45]** | **0.07** **[0000092380-24-000147_luv-20240930.htm:52]** **[0000092380-24-000147_luv-20240930.htm:52]** **[0000092380-24-000145_er-9302024xerdoc.htm:1]** |
| Fuel Hedging Cash Settlement Gain per Gallon ($) | **0.37** **[0000092380-22-000063_luvinvestorday12072022.htm:6]** | **0.12** **[0000092380-23-000024_luv-20230331.htm:44]** | **0.09** **[0000092380-23-000038_luv-20230630.htm:44]** | **0.16** **[0000092380-23-000049_luv-20230930.htm:45]** | **0.04** **[0000092380-24-000055_luv-20240331.htm:42]** | **0.04** **[0000092380-24-000111_luv-20240630.htm:45]** | **0.02** **[0000092380-24-000147_luv-20240930.htm:52]** |
| Available Seat Miles per Gallon (Q1 2023) | **78** **[0000092380-23-000010_luv-20221231.htm:90]** |
| Available Seat Miles per Gallon (Q1 2024) | **80** **[0000092380-24-000055_luv-20240331.htm:37]** |
| Maximum Fuel Hedged Percentage (%) | **61%** **[0000092380-22-000060_luv-20220930.htm:54]** | **56%** **[0000092380-23-000007_er-12312022xerdoc.htm:3]** | **51%** **[0000092380-23-000024_luv-20230331.htm:44]** | **49%** **[0000092380-23-000038_luv-20230630.htm:45]** | **47%** **[0000092380-23-000049_luv-20230930.htm:46]** | **60%** **[0000092380-24-000027_luv-20231231.htm:102]** | **58%** **[0000092380-24-000111_luv-20240630.htm:46]** **[0000092380-24-000111_luv-20240630.htm:46]** **[0000092380-24-000055_luv-20240331.htm:42]** | **58%** **[0000092380-24-000147_luv-20240930.htm:52]** |

75364edb8884bf04f6088be60ec466d48606ea4472a18faa2ca0b513f0cbfd78

d55111756f30da4aa9912071d42b61bc398faf8440876757ce2788adce6f1731

1. Given the uncertainty surrounding Boeing's aircraft deliveries due to the ongoing strike  **[LUV_3403660_11]** , how will this impact your ability to meet your 2025 capacity growth target of 1% to 2%  **[LUV_3403660_24]** , and what contingency plans are in place if deliveries are significantly delayed?

2. With the planned introduction of assigned and premium seating options significantly contributing to EBIT in 2026  **[LUV_3403660_1]** , can you elaborate on the risks associated with regulatory approvals and vendor readiness for retrofitting aircraft, and how delays might affect your financial targets  **[LUV_3403660_2]** ?

3. You mentioned the fleet monetization strategy, including sale-leasebacks and aircraft sales, as a significant contributor to your EBIT targets  **[LUV_3403660_1]** **[LUV_3403660_11]** ; given market conditions and Boeing's delivery challenges  **[LUV_3403660_10]** **[LUV_3403660_11]** , how confident are you in realizing the expected benefits, and what are the key risks?

4. As you anticipate ending the year with headcount down 2,000 compared to year-end 2023  **[LUV_3403660_2]** , how will you ensure that operational reliability and customer service levels are maintained, especially given industry-wide labor shortages and your plans to improve turn times and introduce red-eye flights  **[LUV_3403660_2]** ?

5. With the recent settlement with Elliott and the addition of new Board members  **[LUV_3403660_7]** , how might this influence your strategic priorities, and are there any expected changes to the execution of your Southwest Even Better transformational plan  **[LUV_3403660_1]** **[LUV_3403660_7]** ?

e59ba991e22aa780260a71ad85cbb7079a529fbaee6d3a9078165bed14a9b26f

Average Length of Passenger Haul (miles)

Average Aircraft Stage Length (miles)

Fuel Costs per Gallon (including tax) ($)

Fuel Consumed (million gallons)

Operating Expenses per ASM (cents)

Operating Expenses per ASM (excluding Fuel, Special Items, Profitsharing) (cents)

Economic Fuel Costs per Gallon ($)

Fuel Hedging Premium Expense per Gallon ($)

Fuel Hedging Cash Settlement Gain per Gallon ($)

Available Seat Miles per Gallon (Q1 2023)

Available Seat Miles per Gallon (Q1 2024)

Maximum Fuel Hedged Percentage (%)

bd6ebff176b47ad3f2c2111b4c683044691e5bfefe915ee416cd42729c46dfe9

- **American Airlines**: Mentioned in the context of a legal proceeding alleging collusion to limit capacity and maintain higher fares  **[0000092380-24-000027_luv-20231231.htm:83]** .
- **Delta Air Lines**: Mentioned in the context of a legal proceeding alleging collusion to limit capacity and maintain higher fares  **[0000092380-24-000027_luv-20231231.htm:83]** .
- **United Airlines**: Mentioned in the context of a legal proceeding alleging collusion to limit capacity and maintain higher fares  **[0000092380-24-000027_luv-20231231.htm:83]** .
- **Ultra-Low Cost Carriers (ULCCs)**: Mentioned as competitors that have surpassed Southwest's cost advantage with larger aircraft, increased seat density, and lower wages  **[0000092380-24-000027_luv-20231231.htm:55]** .

bd5d62353a4683ae5ab05c492e9177c2a471c6750b4fda0be265c8029d007966

Passenger

- Non-Loyalty

- Loyalty - Air Transportation

- Ancillary Sold Separately

Freight

Other

Special Revenue Adjustment

5c962bb5b96e29c2c42c962349067b994608d1d707efe3488284124385e59133

- Southwest Airlines is **targeting a return on invested capital (ROIC) of at least 15% by 2027** and **operating margins (excluding special items) greater than 10%**, indicating strong financial goals and a focus on shareholder value.  **[LUV_3413765_14]**
- The company expects a **constructive industry backdrop** to persist due to ongoing manufacturing constraints affecting aircraft supply, which could **lead to favorable capacity dynamics and a favorable revenue environment** for the airline industry in the coming years.  **[LUV_3413765_19]**
- Southwest is executing a **fleet modernization and monetization strategy**, including potential **aircraft sales and sale-leaseback transactions**, which is expected to **boost margins** and provide significant **EBIT contributions**, with multiple levers to enhance financial performance depending on Boeing's delivery pace.  **[LUV_3413765_14]**

26d278c549eaa1ca1296d0d6e13126997bb271e40b293e03e5662012bbab843a

- **Unit cost inflation is higher than expected**, driven by **market-driven wage rates, airport costs, and health care**, which may pressure profitability. Tammy Romo stated, "We are experiencing above normal unit cost inflation, most notably in market-driven wage rates, airport costs and health care."  **[LUV_3413765_14]**
- **Uncertainty in fleet modernization due to reliance on Boeing deliveries**, which could impact the execution of the fleet monetization strategy and capacity plans. Tammy Romo mentioned, "So that would make your question a little bit tricky in terms of timing, but we could have potentially up to **50 to 55 deliveries**. And again, those would go towards our fleet modernization efforts."  **[LUV_3413765_14]**  Robert Jordan added, "So the more Boeing can deliver, the more we can execute the strategy in 2025."  **[LUV_3413765_14]**
- **Incremental costs expected from cabin retrofit efforts**, with significant impacts hitting in the fourth quarter, potentially pressuring margins. Tammy Romo stated, "Yes. So it ramps up with the biggest impact hitting in the fourth quarter."  **[LUV_3413765_11]**

3b6d00c748d3d3329903f7e506353123d9a9d374bfb296f0e5f66a27555d598c

1. **Fleet Strategy and Cash from Aircraft Sales**  
   **Q:** How much cash can be unlocked from aircraft sales?  
   **A:** Tammy Romo stated they have planes in excess of what is needed for their **1%-2% capacity growth target**, and the sale of these excess aircraft could generate significant cash.  **[LUV_3413765_17]**  The exact proceeds depend on Boeing deliveries and market conditions, but they are focused on hitting operating margin targets and return on invested capital.  **[LUV_3413765_17]**  Robert Jordan added they are committed to extracting every dime of embedded value from their order book to deliver value to shareholders.  **[LUV_3413765_17]** 

2. **Revenue Outlook and Management Initiatives**  
   **Q:** How are revenue management initiatives impacting revenue?  
   **A:** Andrew Watterson explained that revenue management had a stronger impact in Q4 and into Q1 than other initiatives, contributing to outperformance in RASM compared to competitors.  **[LUV_3413765_15]**  He expects the **$1 billion in tactical revenue-driven initiatives** to progress throughout the year, with yield benefits growing and load factor improvements coming later.  **[LUV_3413765_15]** 

3. **Unit Cost Expectations**  
   **Q:** Can Southwest achieve modest unit cost growth ahead?  
   **A:** Robert Jordan believes it is doable to achieve **low single-digit CASM-X growth** over the next few years, with a low single-digit exit rate for 2025 indicating their goal.  **[LUV_3413765_12]**  The recent labor rate surety from closed contracts supports this outlook.  **[LUV_3413765_12]**  Tammy Romo added they are focused on cost reduction efforts ramping up throughout the year.  **[LUV_3413765_10]** 

4. **Balance Sheet Metrics and Capital Returns**  
   **Q:** Will paying down debt affect capital returns acceleration?  
   **A:** Tammy Romo confirmed plans to reduce leverage by paying down debt this year, moving closer to their **mid-30% leverage target**.  **[LUV_3413765_18]**  Robert Jordan mentioned they are committed to maintaining a strong balance sheet and will address capital returns with the Board as they progress.  **[LUV_3413765_18]** 

5. **Sale-Leaseback Transactions and EBIT Contribution**  
   **Q:** How do sale-leasebacks impact EBIT and fleet strategy?  
   **A:** Tammy Romo explained that sale-leasebacks are a tool to manage the exit of older aircraft, aiming to do this in an **NPV-positive way**.  **[LUV_3413765_16]**  While they recognize a gain on sale, increased rents are considered, and the bulk of the EBIT benefit comes from sales of excess aircraft, depending on Boeing deliveries and market conditions.  **[LUV_3413765_14]** **[LUV_3413765_16]** 

6. **Industry Capacity Outlook**  
   **Q:** Will industry capacity decrease in Q2 through Q3?  
   **A:** Andrew Watterson noted that schedules beyond mid-May are still in flux, but what is firm is constructive.  **[LUV_3413765_19]**  Robert Jordan expects the current constructive backdrop to persist due to manufacturing constraints that will last for years, keeping capacity in check.  **[LUV_3413765_19]** 

7. **Progress on New Seating Configuration**  
   **Q:** What is the update on new seating configuration certification?  
   **A:** Robert Jordan stated they have finalized cabin layouts, allowing completion of weight and balance certification with the FAA in Q1 and STC certification in Q2.  **[LUV_3413765_13]**  Retrofits will start midyear, with the biggest impact hitting in the **fourth quarter**.  **[LUV_3413765_11]** **[LUV_3413765_13]** 

8. **Amended Credit Card Deal**  
   **Q:** Will the amended Chase deal increase remuneration?  
   **A:** Robert Jordan mentioned that the new deal includes significant additional compensation, competitive with recent market deals, and was contemplated in their Investor Day plan.  **[LUV_3413765_21]**  Ryan Green added they are pleased with the amendment and expect it to drive co-brand card acquisitions.  **[LUV_3413765_21]** 

9. **DEI Approach**  
   **Q:** Has there been a shift in Southwest's DEI approach?  
   **A:** Robert Jordan stated there is no change in how they think about treating and rewarding people; hiring and promotions have always been merit-based.  **[LUV_3413765_22]**  They aim to create an inclusive environment where employees feel they belong at Southwest.  **[LUV_3413765_22]** 

62a8c5277755d0fa886d1f2d0771a119d41e761a2037afd472ea5eba2bd6d265

Southwest Airlines eyes 15% ROIC by 2027 and 10%+ margins, boosted by fleet modernization and tight capacity trends. But higher wage, airport, and healthcare costs may strain profits. Boeing deliveries remain key to unlocking excess aircraft sales and margin gains.

f8875e1f5e28b33753602bef52e30aad29a6f00a463b82e872f5dfcd83bd4704

**Quarterly guidance for Q1 2025:**
- **CASM-X**: 7% to 9% year-over-year  **[LUV_3413765_6]**  (no prior guidance)
- **RASM**: 5% to 7% year-over-year  **[LUV_3413765_3]**  (no prior guidance)

**Annual guidance for FY 2025:**
- **Gross Capital Expenditures**: $2.5B to $3B  **[LUV_3413765_8]**  (no prior guidance)
- **Share Repurchases**: $2.25B  **[LUV_3413765_9]**  (no prior guidance)
- **Incremental EBIT Contribution**: $1B from tactical initiatives; $1.5B total  **[LUV_3413765_9]**  (no prior guidance)
- **CASM-X**: Low single-digit year-over-year growth by Q4 2025  **[LUV_3413765_6]**  (no prior guidance)
- **Cabin Retrofit Costs**: $150M incremental in 2025  **[LUV_3413765_6]**  (no prior guidance)

No metrics matched across both issued periods to determine “raised,” “lowered,” or “no change.”

e61bbb223b9ad6436e3076207002b83ce5a460f578acaa439cbbcf581aa5aa53

### Q3 2024 Earnings Call
- **Issued Period:** Q3 2024
- **Guided Period:** Q4 2024
- **Guidance:**
  - **Operating Margin:** 3% to 5%  **[LUV_3403660_16]** **[LUV_3403660_15]** .
  - **Capacity Growth:** 1% to 2% annually over the next three years  **[LUV_3403660_6]** **[LUV_3403660_5]** .
  - **CASM-X (Cost per Available Seat Mile excluding fuel):** Increase of 11% to 13% year-over-year  **[LUV_3403660_5]** .
  - **Fuel Costs:** $2.25 to $2.35 per gallon  **[LUV_3403660_5]** .
  - **Revenue per Available Seat Mile (RASM):** Increase of 3.5% to 5.5% year-over-year  **[LUV_3403660_4]** .
  - **Capital Expenditure:** Approximately $2.1 billion, with just under $1 billion for aircraft CapEx  **[LUV_3403660_6]** .
  - **Return on Invested Capital (ROIC):** At least 15% by 2027  **[LUV_3403660_6]** **[LUV_3403660_1]** .

### Q2 2024 Earnings Call
- **Issued Period:** Q2 2024
- **Guided Period:** Q3 2024 and Q4 2024
- **Guidance:**
  - **CASM-X:** Full year increase of 7% to 8%  **[LUV_3394320_5]** .
  - **Fuel Price:** $2.76 per gallon for Q2, with 50% hedged  **[LUV_3394320_5]** .
  - **Capacity:** 
    - Q3 increase by 2%.
    - Q4 decrease by 4%.
    - Full year increase by 4%  **[LUV_3394320_5]** .
  - **Capital Spending:** Approximately $2.5 billion  **[LUV_3394320_5]** .
  - **Debt and Liquidity:** $29 million in debt repayments, interest income to offset interest expense  **[LUV_3394320_5]** .
  - **Revenue Management:** 
    - Q3 RASM flat to down 2% year-over-year  **[LUV_3394320_4]** .
    - Positive RASM growth by Q4  **[LUV_3394320_4]** .

### Q1 2024 Earnings Call
- **Issued Period:** Q1 2024
- **Guided Period:** Q2 2024 and FY 2024
- **Guidance:**
  - **Revenue and Capacity:**
    - Q2 RASM decrease of 1.5% to 3.5% year-over-year  **[LUV_3380774_7]** .
    - Q2 capacity increase of 8% to 9% year-over-year  **[LUV_3380774_6]** .
    - Full year capacity increase of 4%  **[LUV_3380774_6]** .
    - Operating revenue growth approaching high single digits  **[LUV_3380774_8]** .
  - **Costs:** 
    - Q2 CASM-X increase of 6.5% to 7.5%  **[LUV_3380774_5]** .
    - Full year CASM-X increase of 7% to 8%  **[LUV_3380774_5]** .
  - **Fuel:** 
    - Full year fuel price $2.70 to $2.80 per gallon  **[LUV_3380774_4]** .
    - Q2 fuel price within the same range  **[LUV_3380774_4]** .
  - **Capital Expenditures:** Approximately $2.5 billion  **[LUV_3380774_5]** .
  - **Fleet:** 20 aircraft deliveries expected  **[LUV_3380774_5]** .

### Q4 2023 Earnings Call
- **Issued Period:** Q4 2023
- **Guided Period:** Q1 2024 and FY 2024
- **Guidance:**
  - **CASM-X:** Increase of 6% to 7% year-over-year  **[LUV_3370820_4]** **[LUV_3370820_3]** .
  - **Fuel Price:** $2.55 to $2.65 per gallon, 57% hedged  **[LUV_3370820_3]** .
  - **Capacity:** Full year increase of 6%  **[LUV_3370820_4]** **[LUV_3370820_2]** .
  - **CapEx:** $3.5 billion to $4 billion  **[LUV_3370820_4]** .
  - **Aircraft Deliveries and Retirements:** 79 deliveries, 49 retirements, net increase of 30 aircraft  **[LUV_3370820_4]** .
  - **Interest Expense:** $249 million, with interest income expected to exceed this  **[LUV_3370820_5]** .
  - **Revenue Growth:** Double-digit operating revenue growth  **[LUV_3370820_6]** **[LUV_3370820_2]** .
  - **Unit Revenue Growth:** Q1 2024 growth of 2.5% to 4.5%  **[LUV_3370820_6]** .

6374be3a41886784d0ff9ebaccacfe295300ac4a7b300d1625eca13a945ca43d

| Name               | Position                                                                 | Start Date          | Short Bio                                                                                                                                                                                                 |
|--------------------|--------------------------------------------------------------------------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Gary C. Kelly      | Executive Chairman of the Board                                          | February 2022       | Gary C. Kelly has been with Southwest Airlines since **1986**, serving in various roles including CEO from **July 2004 to February 2022**  **[0000092380-24-000027_luv-20231231.htm:91]** **[0001193125-23-093040_d361430ddef14a.htm:12]** .                                                                 |
| Robert E. Jordan   | President & Chief Executive Officer                                      | February 2022       | Robert E. Jordan joined Southwest in **1988** and has held numerous executive roles. He became CEO in **February 2022** and President in **January 2023**  **[0000092380-24-000027_luv-20231231.htm:91]** **[0001193125-24-087857_d503384ddef14a.htm:24]** **[0001193125-24-227059_d808640ddefa14a.htm:13]** **[0001193125-23-093040_d361430ddef14a.htm:12]** .                                       |
| Andrew M. Watterson| Chief Operating Officer                                                  | October 2022        | Andrew M. Watterson joined Southwest in **October 2013** and has served as COO since **October 2022**  **[0000092380-24-000027_luv-20231231.htm:91]** **[0000092380-23-000010_luv-20221231.htm:84]** .                                                                                               |
| Ryan C. Green      | Executive Vice President & Chief Commercial Officer                      | October 2022        | Ryan C. Green has been with Southwest since **2002**. He transitioned to Executive Vice President Commercial Transformation in **July 2024**  **[0000092380-24-000027_luv-20231231.htm:91]** **[0001193125-24-227059_d808640ddefa14a.htm:14]** **[0001193125-24-227059_d808640ddefa14a.htm:60]** **[0001193125-24-227059_d808640ddefa14a.htm:64]** .                                                  |
| Justin Jones       | Executive Vice President Operations                                      | December 2023       | Justin Jones joined Southwest in **2001** and became Executive Vice President Operations in **December 2023**  **[0000092380-24-000027_luv-20231231.htm:92]** **[0000092380-24-000027_luv-20231231.htm:91]** .                                                                                      |
| Tammy Romo         | Executive Vice President & Chief Financial Officer                       | September 2012      | Tammy Romo joined Southwest in **1991** and became CFO in **September 2012**. She is a CPA and holds a B.B.A. in Accounting  **[0001193125-24-227059_d808640ddefa14a.htm:15]** **[0000092380-24-000027_luv-20231231.htm:91]** .                                                                        |
| Linda B. Rutherford| Chief Administration Officer                                             | October 2022        | Linda B. Rutherford has been with Southwest since **1992** and became Chief Administration Officer in **October 2022**  **[0001193125-24-227059_d808640ddefa14a.htm:16]** **[0000092380-24-000027_luv-20231231.htm:91]** **[0000092380-23-000010_luv-20221231.htm:85]** .                                                                        |
| Mark R. Shaw       | Executive Vice President & Chief Legal & Regulatory Officer & Secretary  | November 2018       | Mark R. Shaw joined Southwest in **2000** and has held various legal roles. He became Corporate Secretary in **August 2022**  **[0000092380-24-000027_luv-20231231.htm:92]** **[0000092380-23-000010_luv-20221231.htm:85]** .                                                                      |
| Jason Van Eaton    | Executive Vice President, Chief Regulatory & Corporate Affairs Officer   | June 1, 2024        | Jason Van Eaton joined Southwest in **May 2015** and was promoted to his current role effective **June 1, 2024**  **[0001193125-24-227059_d808640ddefa14a.htm:17]** **[0000092380-24-000096_xslF345X02/wk-form3_1717620601.xml:0]** .                                                                                 |
| Jeff Novota        | Vice President General Counsel & Corporate Secretary                     | June 1, 2024        | Jeff Novota joined Southwest in **2011** and was promoted to his current role effective **June 1, 2024**. He has a background in transportation finance and regulatory matters  **[0000092380-24-000058_newsrelease-shaw_novotax.htm:0]** **[0000092380-24-000058_newsrelease-shaw_novotax.htm:1]** .                    |

1d05535cf7316366e38663bd4f98ce1fa94bf4ce88af2e988711e2efa0a3f2ed

195d5a96e69a265051b77fe1f7492e5ac6e3caed80f70596cedaba54cf25b4a3

| Program Details           | Program 1          | Program 2          |
|---------------------------|--------------------|--------------------|
| Approval Date             | May 15, 2019  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]** | September 25, 2024  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  |
| End Date/Duration         | Terminated on September 25, 2024  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  | N/A |
| Total additional amount   | **$2.0 billion**  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  | **$2.5 billion**  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  |
| Remaining authorization   | **$0** (terminated)  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  | **$2.5 billion**  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  |
| Details                   | Replaced by new authorization  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  | No repurchases made as of September 30, 2024  **[0000092380-24-000147_luv-20240930.htm:83]** **[0000092380-24-000147_luv-20240930.htm:65]**  |

8ba28d5b37717a40b5aed9a27263313bc21551a12270530e5a260337041424f5

96a7a8fbe54d79911cf6046bc10a5678e8691497b5125fc7fa3cc29be0ae54b0

6772bf662c2e041b05680c567dde449745275c72baab9b24b6dfbbba96a107a4

**Quarterly guidance for Q4 2024:**
- **Operating Margin**: 3% to 5%  **[LUV_3403660_16]** **[LUV_3403660_15]**  (no prior guidance)  
- **Capacity Growth**: 1% to 2%  **[LUV_3403660_6]** **[LUV_3403660_5]**  (lowered from 4%  **[LUV_3394320_5]** )  
- **CASM-X**: 11% to 13% year-over-year  **[LUV_3403660_5]**  (raised from 7% to 8%  **[LUV_3394320_5]** )  
- **Fuel Costs**: $2.25 to $2.35 per gallon  **[LUV_3403660_5]**  (lowered from $2.76  **[LUV_3394320_5]** )  
- **RASM**: 3.5% to 5.5% year-over-year  **[LUV_3403660_4]**  (raised from flat to down 2%  **[LUV_3394320_4]** )  
- **Capital Expenditure**: Approximately $2.1 billion  **[LUV_3403660_6]**  (lowered from $2.5 billion  **[LUV_3394320_5]** )  
- **Return on Invested Capital (ROIC)**: At least 15% by 2027  **[LUV_3403660_6]** **[LUV_3403660_1]**  (no prior guidance)  

0a0aae7108357b2111434fb5e3a5e99dad724f0a8d7644638a1c85822f54d1ae

| Name              | Start Date | End Date | Reason for Change |
|-------------------|------------|----------|-------------------|
| Ernst & Young LLP | 1971  **[0000092380-24-000027_luv-20231231.htm:190]**  | Present  | Current auditor   |

21ce55cf1c83514b3d1d5e0128e87d434d4e88523b18a881a193779c6ecccf6d

2a88144f9346103b70d317b282b462d322cedaf6c1ae0dcbb7469fb2607296f5

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

- Total Revenue: $6,870 million (+5% YoY)  **[0000092380-23-000049_luv-20230930.htm:12]** **[0000092380-24-000147_luv-20240930.htm:12]**   
- Passenger Revenue: $6,250 million (+6% YoY)  **[0000092380-23-000049_luv-20230930.htm:12]** **[0000092380-24-000147_luv-20240930.htm:27]**   
- Operating Income (EBIT): $37 million (**-68% YoY**)  **[0000092380-23-000049_luv-20230930.htm:12]** **[0000092380-24-000147_luv-20240930.htm:12]**   
- Net Income: $67 million (**-65% YoY**)  **[0000092380-23-000049_luv-20230930.htm:12]** **[0000092380-24-000147_luv-20240930.htm:12]**   
- EPS (Diluted): $0.11 (**-68% YoY**)  **[0000092380-23-000049_luv-20230930.htm:12]** **[0000092380-24-000147_luv-20240930.htm:12]**   
- Capital Expenditures (CapEx): $517 million (**-89% YoY**)  **[0000092380-23-000049_luv-20230930.htm:14]** **[0000092380-24-000147_luv-20240930.htm:14]**   

ea7f8418662f9f4e76c0babf1a537a50a6a3af5754b1ea5a3313997049f22f91

| Year | Amount Due (Millions) | Debt Type                          | Interest Rate (%) | % of Total Debt                                                                 |
|----------|----------------------------|----------------------------------------|------------------------|------------------------------------------------------------------------------------|
| 2025     | 1,302 **[0000092380-24-000147_luv-20240930.htm:33]**              | 5.25% Notes                            | 5.25 **[0000092380-24-000147_luv-20240930.htm:33]**           | 16.3% = (1,302 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                     |
| 2025     | 1,611 **[0000092380-24-000147_luv-20240930.htm:33]**              | 1.25% Convertible Notes                | 1.25 **[0000092380-24-000147_luv-20240930.htm:33]**           | 20.1% = (1,611 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                     |
| 2026     | 300 **[0000092380-24-000147_luv-20240930.htm:33]**                | 3.00% Notes                            | 3.00 **[0000092380-24-000147_luv-20240930.htm:33]**           | 3.7% = (300 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                        |
| 2027     | 108 **[0000092380-24-000147_luv-20240930.htm:33]**                | 7.375% Debentures                      | 7.375 **[0000092380-24-000147_luv-20240930.htm:33]**          | 1.3% = (108 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                        |
| 2027     | 300 **[0000092380-24-000147_luv-20240930.htm:33]**                | 3.45% Notes                            | 3.45 **[0000092380-24-000147_luv-20240930.htm:33]**           | 3.7% = (300 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                        |
| 2027     | 1,727 **[0000092380-24-000147_luv-20240930.htm:33]**              | 5.125% Notes                           | 5.125 **[0000092380-24-000147_luv-20240930.htm:33]**          | 21.6% = (1,727 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                     |
| 2030     | 500 **[0000092380-24-000147_luv-20240930.htm:33]**                | 2.625% Notes                           | 2.625 **[0000092380-24-000147_luv-20240930.htm:33]**          | 6.2% = (500 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                        |
| 2030     | 976 **[0000092380-24-000147_luv-20240930.htm:33]**                | 1.000% Payroll Support Program Loan    | 1.000 **[0000092380-24-000147_luv-20240930.htm:33]**          | 12.2% = (976 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                       |
| 2031     | 566 **[0000092380-24-000147_luv-20240930.htm:33]**                | 1.000% Payroll Support Program Loan    | 1.000 **[0000092380-24-000147_luv-20240930.htm:33]**          | 7.1% = (566 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                        |
| 2031     | 526 **[0000092380-24-000147_luv-20240930.htm:33]**                | 1.000% Payroll Support Program Loan    | 1.000 **[0000092380-24-000147_luv-20240930.htm:33]**          | 6.6% = (526 / 8,005) * 100 **[0000092380-24-000147_luv-20240930.htm:33]** **[0000092380-24-000147_luv-20240930.htm:12]**                                        |

f7eb2d4259328e5943c990f30cc09c774d827358ad111a1bac395534cfb37d8d

bb7c9cfb8f561f922bc0c0dd6086fe5e30a42d37ccc16263821f229343f0bb74

11f4076ea36de146082e9d5012024ba9ddd6efafa389c8fdb1e24b6595188f9e

- **Uncertainty in Aircraft Deliveries Due to Boeing Strike:** CEO Robert Jordan acknowledged that the ongoing Boeing strike is a wildcard for 2025 capacity plans. He stated that if the strike continues, it will be hard to hit capacity growth targets because they won't receive the necessary aircraft deliveries. This uncertainty could hinder Southwest's ability to execute its capacity plans and meet market demand.  **[LUV_3403660_24]**
- **Continued Cost Pressures from Labor Contracts and Overstaffing:** CFO Tammy Romo reported ongoing cost pressures driven primarily by new labor contracts and overstaffing. She mentioned that they expect fourth-quarter CASM-X to increase by 11% to 13% year-over-year, indicating sustained cost inflation. This could negatively impact Southwest's profitability if not managed effectively.  **[LUV_3403660_5]**
- **Risks Associated with Fleet Monetization Strategy Amid Boeing Uncertainties:** Southwest plans to monetize its fleet through potential aircraft sales or sale-leasebacks. However, uncertainties related to Boeing's situation could affect this strategy. Tammy Romo noted that they have to consider the fluidity of the situation at Boeing when solidifying plans, adding risk to their financial outlook and potentially impacting future earnings.  **[LUV_3403660_11]**

453392583170a3d521e64e996e57e0a9326edeb266df3893c4a6943a669f16a7

- **Southwest Airlines is implementing tactical and strategic initiatives** that are already showing positive results, including yield improvements and acceleration in unit revenue trends, aiming to generate **$1 billion in EBIT by 2025**  **[LUV_3403660_22]** .
- The company's **capacity rationalization and network optimization efforts** are positioning Southwest to capitalize on strong operational performance, with **industry-leading on-time performance and completion factor in Q3 2024**, despite challenging weather conditions  **[LUV_3403660_4]** **[LUV_3403660_3]** .
- **Southwest's fleet monetization strategy**, including potential aircraft sales and sale-leasebacks, along with disciplined capacity growth of **1%-2%**, is expected to reduce CapEx, drive earnings accretion, and support the company in achieving a **ROIC of at least 15% in 2027**, even without relying on benefits from the fleet strategy  **[LUV_3403660_6]** **[LUV_3403660_11]** **[LUV_3403660_5]** .

5c70f4d951a15bf0c352985f92d5335b4058d3642c71328a144be69a04f9fffd

- **Managed business revenue increased by 25% year-over-year in Q1 2024, reaching 2019 levels, with expectations for continued and accelerated growth in Q2.**  **[LUV_3380774_18]**
- **Strong performance in key markets, with West Coast revenues and margins up double digits year-over-year, particularly in intra-California routes, Phoenix, and Las Vegas.**  **[LUV_3380774_14]**
- **Focused on generating free cash flow by reducing 2024 capital expenditures to $2.5 billion, including $1 billion in aircraft spend, and working towards free cash flow generation in the future.**  **[LUV_3380774_19]**

56784101534ae2d640470796c528df7532bad2837d8b18c84846d150961c5d53

- *Significant labor cost inflation impacting margins**: Southwest Airlines is facing higher-than-anticipated labor costs due to new wage rate increases, particularly from the pilots' contract, contributing to a **6% to 7% increase in unit costs (CASM-X) for 2024**. This labor cost inflation is more than initially expected and is a major factor in the company's cost pressures.  **[LUV_3370820_14]**
- *Rising maintenance expenses adding to cost pressures**: The company expects increased maintenance costs due to higher rates and increased maintenance activity as their **800 aircraft engines come off their 'honeymoon period'**, adding a couple of percentage points to the unit cost increase and further impacting margins.  **[LUV_3370820_14]**
- *Potential delays in Boeing MAX 7 certification affecting fleet plans**: Uncertainty around the timing of the **Boeing MAX 7 aircraft certification** may delay Southwest's capacity growth and fleet modernization efforts. The company has adjusted its plans, assuming the certification could take until the end of the year, which could impact their operational efficiency and capital expenditure.  **[LUV_3370820_23]**

48c398a01958836c1048ab32f7e920ceedfa9151d5116fb0c9d3d4b1b4784b26

1. **Potential Changes to Seating Policy**  
   **Q:** Are you considering assigned seating or premium cabins?  **[LUV_3380774_12]** **[LUV_3380774_13]**   
   **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.  **[LUV_3380774_12]** **[LUV_3380774_13]** 

2. **Capacity Reduction and Fleet Plans**  
   **Q:** How should we think about early 2025 capacity and seat growth?  **[LUV_3380774_15]**   
   **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.  **[LUV_3380774_15]** 

3. **Cost Cutting and Headcount Reductions**  
   **Q:** How are you managing headcount reductions without furloughs?  **[LUV_3380774_26]**   
   **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.  **[LUV_3380774_26]** 

4. **Operating Cash Flow and Dividend Policy**  
   **Q:** How should we think about operating cash flow and dividend sustainability?  **[LUV_3380774_16]**   
   **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.  **[LUV_3380774_16]** 

5. **Business Revenue and Outlook**  
   **Q:** What is the outlook for business revenue in Q2?  **[LUV_3380774_18]**   
   **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.  **[LUV_3380774_18]** 

6. **Geographical Unit Revenue Trends**  
   **Q:** How much differentiation are you seeing in unit revenue trends geographically?  **[LUV_3380774_14]**   
   **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.  **[LUV_3380774_14]** 

7. **Employee Communication and Alignment**  
   **Q:** Do employees understand the company's challenges and need for change?  **[LUV_3380774_17]**   
   **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.  **[LUV_3380774_17]** 

8. **CapEx and Free Cash Flow**  
   **Q:** Can you discuss CapEx outlook and free cash flow generation?  **[LUV_3380774_19]**   
   **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.  **[LUV_3380774_19]** 

9. **Red-Eye Flights Implementation**  
   **Q:** What are the challenges in implementing red-eye flights?  **[LUV_3380774_11]**   
   **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.  **[LUV_3380774_11]** 

10. **Bonuses and Labor Agreements**  
    **Q:** Can you remind us about the bonuses related to labor agreements?  **[LUV_3380774_10]**   
    **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.  **[LUV_3380774_10]** 

33bb022f4f5ba8b86bae23d1ddf90a31fb7dc5d6aff955a4ee1474bb87ddb082

1. **Financial Performance and Margins**  
   **Q:** How will you improve margins and cover the cost of capital?  
   **A:** We are focused on expanding margins and covering our cost of capital in 2024, currently running roughly **4 points under our cost of capital**.  **[LUV_3370820_11]**  We have a solid plan to achieve this through margin expansion, setting us up for momentum into 2025.  **[LUV_3370820_11]** 

2. **$1.5 Billion Revenue Initiatives**  
   **Q:** Can you share more details on the $1.5 billion revenue initiatives?  
   **A:** We are confident in achieving the incremental **$1.5 billion** in revenue, primarily through network improvements that began in March and will be fully in place by early summer.  **[LUV_3370820_9]**  About **two-thirds** of this is revenue-related, including network optimization and maturation of our development markets returning to normal mix levels by the end of 2024.  **[LUV_3370820_9]** 

3. **Unit Cost Outlook**  
   **Q:** Why are unit costs up 6–7%, and what about 2025?  
   **A:** The increase is mainly due to **labor rate** cost inflation from new contracts, with pilots receiving a **4%** rate increase, and maintenance pressures from **800 engines** coming off warranty, contributing a couple of points.  **[LUV_3370820_14]**  We plan to improve efficiency by controlling headcount, aiming to end 2024 with the same or fewer employees than in 2023, setting the stage for cost deceleration in 2025.  **[LUV_3370820_14]** 

4. **Capacity Growth and Unit Revenue**  
   **Q:** How will decelerating capacity growth impact unit revenue trends?  
   **A:** Capacity growth decelerates from **10%** in Q1 to **8–10%** in Q2 and **3–5%** in Q3, with trips and seats down in the back half of the year.  **[LUV_3370820_13]**  Concurrently, revenue initiatives will accelerate throughout the year, leading to improved unit revenue trends as capacity growth slows and benefits from network optimization materialize.  **[LUV_3370820_13]** 

5. **Demand Environment**  
   **Q:** What is your outlook on the macro demand environment?  
   **A:** The overall macro environment for demand is very strong.  **[LUV_3370820_15]**  We closed the fourth quarter above expectations, and demand in January and February—typically trough periods—is robust.  **[LUV_3370820_15]**  Managed business trends are improving, with the first quarter expected to be better than the fourth.  **[LUV_3370820_15]** 

6. **Fleet Strategy with Boeing**  
   **Q:** Will you consider a second fleet type given issues with Boeing?  
   **A:** We routinely evaluate aircraft types, but our focus remains on our fleet plan with Boeing.  **[LUV_3370820_12]**  We have great confidence in the **MAX 8** and are eager to get the **MAX 7** certified.  **[LUV_3370820_12]**  Even with multiple providers, risks remain, so we are working with Boeing to make them a better company.  **[LUV_3370820_12]** 

7. **Competition and Capacity Cuts**  
   **Q:** Have you noticed changes in competition beyond capacity cuts?  
   **A:** There are many moving parts, including capacity shifts and mergers, making it tough to isolate factors.  **[LUV_3370820_11]**  We are focused on our performance and have not seen significant changes beyond industry-wide capacity reductions.  **[LUV_3370820_11]** 

8. **RASM Improvement and Premiumization**  
   **Q:** How are you addressing premiumization to improve RASM?  
   **A:** While we operate a single cabin, we enhance **RASM** through record **ancillary revenue** from products like EarlyBird Check-In and upgraded boarding.  **[LUV_3370820_10]**  Premium revenue is cyclical, so we focus on improving RASM through these offerings.  **[LUV_3370820_10]** 

9. **Efficiency Initiatives**  
   **Q:** What are your plans for improving efficiency?  
   **A:** We peaked in hiring and plan to end 2024 with the same or fewer employees than in 2023, improving efficiency.  **[LUV_3370820_19]**  We have significant initiatives planned to enhance aircraft and personnel efficiency, details of which will be shared at our Investor Day.  **[LUV_3370820_19]** 

10. **Flight Attendant Strike Vote**  
    **Q:** Will the flight attendant strike vote affect operations?  
    **A:** We are not worried about a strike despite the strike authorization vote.  **[LUV_3370820_18]**  We have ratified **nine agreements** in over a year and are confident in reaching an agreement with our flight attendants.  **[LUV_3370820_18]**  There's no evidence of customer concern or impact on demand.  **[LUV_3370820_18]** 

11. **Product Importance**  
    **Q:** Does product matter more on longer flights like Hawaii?  
    **A:** Absolutely, product matters.  **[LUV_3370820_16]**  Our coach product is considered the best in the industry, and we beat our own expectations for Hawaii in the fourth quarter.  **[LUV_3370820_16]**  We continue to monitor customer demands and are open to adapting if needed.  **[LUV_3370820_16]** 

12. **Cost of Capital**  
    **Q:** What is your current weighted cost of capital?  
    **A:** Our weighted average cost of capital is approximately **8.6% to 8.7%**, historically closer to **9%**.  **[LUV_3370820_17]**  We consider this in our planning to ensure returns on invested capital meet our longer-term views.  **[LUV_3370820_17]** 

13. **Shift to the Cloud**  
    **Q:** How is the shift to the cloud progressing, and what savings do you expect?  
    **A:** We've shifted just below **50%** to the cloud and aim to increase that.  **[LUV_3370820_20]**  Cost savings are modest—more in the **tens of millions** than hundreds—but the main benefits are reliability and resiliency, reducing operational issues.  **[LUV_3370820_20]** 

a83204eb86c29b7868318cba8b45721e3c1cc0c8d036338e42790098f6bee576

- **Strong macro demand environment** with positive booking trends; **Q1 bookings are already at 60%**, indicating a **strong start to the year**. Key markets like **Hawaii, Phoenix, Orlando, and Vegas are performing well**, and **managed business travel is improving sequentially**.  **[LUV_3370820_15]**
- Management is **confident in delivering $1.5 billion in incremental pre-tax profits** from strategic initiatives, mainly due to **network optimization and maturation of development markets**, and **improvement in managed business initiatives**.  **[LUV_3370820_9]**
- **Decelerating capacity growth across the year** (from **10% in Q1 to 3-5% in Q3**) while **revenue initiatives accelerate**, leading to expected **improvement in unit revenues and margins** as the year progresses.  **[LUV_3370820_13]**

1ebb2dddc8469383bd4fb0180e1953f130e14e030c18377245f996fd35f551cd

- **Management conflicts with activist investor Elliott Management, including threats of a proxy fight and public personal attacks on leadership and the Board, indicating potential instability and shareholder dissatisfaction.**  **[LUV_3394320_24]**
- **Rising costs due to new labor contracts and overstaffing related to Boeing delivery delays are increasing operating expenses and pressuring margins.**  **[LUV_3394320_15]**
- **Demand challenges with domestic capacity outpacing demand and choppiness in leisure spending are potentially impacting revenue growth.**  **[LUV_3394320_14]**

b084760fa8f04cb98e479e88be248b2006cfaadf07b4f3e5092717e3cfa185c8

1. **Assigned Seating Introduction**  
   **Q:** Why is Southwest introducing assigned seating now?  
   **A:** Robert Jordan explained that changing customer preferences led to the decision. Extensive research showed that **80% of customers favor assigned seating**, and it's the **#1 reason customers defect** from Southwest. The change aims to meet strong demand and will be implemented in **2025**.  **[LUV_3394320_7]** 

2. **Addressing Insular Culture Criticism**  
   **Q:** Is Southwest addressing criticism of being insular?  
   **A:** Robert Jordan emphasized a focus on transformational change, including new products like assigned seating and red-eye flights, and is committed to moving forward with pace.  **[LUV_3394320_8]** 

3. **Boarding Process with Assigned Seating**  
   **Q:** Will boarding still use a single agent?  
   **A:** Robert Jordan affirmed that boarding with a single agent remains the intent. They aim to maintain a calm and orderly boarding process that customers love, even with assigned seating.  **[LUV_3394320_9]** 

4. **Revenue Management Issues**  
   **Q:** Why did Southwest sell too many seats at low prices?  
   **A:** Robert Jordan acknowledged issues with their O&D revenue management system, leading to selling too many seats at low prices for peak summer. An action plan is in place to address this.  **[LUV_3394320_10]** 

5. **Fare Sale Activity**  
   **Q:** How should fare sales be interpreted?  
   **A:** Andrew Watterson explained that frequent promotional activity is normal to drive customers to their website. The current sales do not indicate significant changes in discount depth or strategy.  **[LUV_3394320_10]** 

6. **Timing and Cost of Seat Changes**  
   **Q:** How long will seat changes take, and what's the cost?  
   **A:** Robert Jordan stated they plan to sell assigned seating in **2025**, modifying **800 aircraft**. The modifications are capital-efficient, with very little incremental **CapEx** required, as they will use existing seats.  **[LUV_3394320_11]** 

7. **Modifying 700 Aircraft**  
   **Q:** Why modify 700s if retiring them in 10 years?  
   **A:** Robert Jordan stated that 700s will remain in the fleet for a while, and they want the extra legroom section available on every flight to ensure consistency.  **[LUV_3394320_12]** 

8. **2025 Growth and Capacity Management**  
   **Q:** How will capacity be managed without extra CapEx?  
   **A:** Robert Jordan mentioned initiatives like red-eye flying and turn compression will allow them to fund capacity growth in **2025** without buying extra aircraft, avoiding incremental CapEx.  **[LUV_3394320_12]** 

9. **Demand Environment and Price Sensitivity**  
   **Q:** Is price sensitivity affecting demand?  
   **A:** Andrew Watterson noted they are not seeing specific segments pulling back. **Business travel is growing faster than capacity**, and their customer base resembles legacy carriers.  **[LUV_3394320_13]** 

10. **CASM Guidance Improvement**  
    **Q:** Why is CASM improving despite lower capacity?  
    **A:** Tammy Romo explained they are anniversarying some contracts, contributing to the improvement. Robert Jordan added that labor pressures from new contracts and extraordinary items will tail off, aiding CASM improvement.  **[LUV_3394320_14]** 

11. **Network Changes and Margin Improvement**  
    **Q:** Can margins improve before product changes?  
    **A:** Andrew Watterson believes margin improvement can be achieved through network changes, yield improvements, and marketing activities before product enhancements are implemented.  **[LUV_3394320_15]** 

12. **Checked Bags Policy**  
    **Q:** Will you change the free checked bags policy?  
    **A:** Robert Jordan stated they are not considering changing their **"Bags Fly Free"** policy, as it's a key factor attracting customers and cited as the **#1 reason customers choose Southwest** after fare and schedule.  **[LUV_3394320_16]** 

13. **Safety Concerns and FAA Review**  
    **Q:** Are there common themes in recent safety incidents?  
    **A:** Robert Jordan emphasized that safety is paramount and issues are taken seriously. Andrew Watterson added that efforts began in April to investigate root causes, enhance communication, and collaborate with the FAA on a focused review.  **[LUV_3394320_19]** ,  **[LUV_3394320_20]** 

14. **Engagement with Elliott Management**  
    **Q:** Has Southwest engaged with Elliott Management?  
    **A:** Robert Jordan stated that Elliott has not shown willingness to engage in meaningful conversations, focusing instead on public personal attacks. The leadership team remains focused on transforming the company.  **[LUV_3394320_18]** 

15. **Rapid Rewards and Hawaii**  
    **Q:** How important is Hawaii for Rapid Rewards?  
    **A:** Andrew Watterson stated Hawaii is important, especially for West Coast customers. While he couldn't recall exact percentages, he noted that **Aruba is their highest redemption** destination.  **[LUV_3394320_9]** 

fef367c5b935fc1b8a21c1d49ab5630fd85dd5fcc1d4af0230fbda68f908ea75

- **Southwest Airlines is transitioning to an assigned seating model with premium seating options**, expected to significantly boost revenue and shareholder value with minimal capital investment. This change responds to customer preferences, as **80% of customers prefer assigned seating**, and is designed to monetize the cabin more effectively.  **[LUV_3394320_19]** **[LUV_3394320_25]** **[LUV_3394320_12]**
- The company is **strategically transforming by investing in operational and digital capabilities**, enhancing resilience, reliability, and customer experience. Initiatives like **red-eye flights** are being implemented with minimal incremental costs by utilizing existing staff and aircraft, demonstrating efficient resource management and positioning the company for future growth.  **[LUV_3394320_21]** **[LUV_3394320_22]** **[LUV_3394320_8]**
- Southwest Airlines has **flexibility in its aircraft order book**, allowing it to manage growth and capacity in line with financial goals. This disciplined approach enables the company to align capacity with demand and focus on achieving returns in excess of the cost of capital.  **[LUV_3394320_20]**

1f71addb48c5344c8a21f63ef5223910ac1f2de4b5f17bcbd9b50149de9a6aa8

1. **Fleet Monetization Strategy**  
   **Q:** Does fleet monetization include aircraft sales?  
   **A:** Management clarified that fleet monetization over the three-year period includes potential aircraft sales, not just sale-leasebacks. They emphasized flexibility in managing their **694-aircraft** order book, especially given uncertainties with Boeing deliveries.  **[LUV_3403660_11]** 

2. **Margin Guidance Clarity**  
   **Q:** Does 3%-5% margin guidance include fleet gains?  
   **A:** Management explained that the low end of the **3%-5%** operating margin guidance for next year excludes the fleet monetization strategy, while the high end includes it. This range accounts for potential gains from their fleet initiatives.  **[LUV_3403660_15]** 

3. **Boeing Delivery Impact**  
   **Q:** When will Boeing strike affect growth plans?  
   **A:** The company acknowledged uncertainty due to the Boeing strike. They planned for a strike lasting about **five weeks**, but a longer strike could impact their **2025** capacity plans. They emphasized flexibility in their fleet plan but noted that prolonged disruptions could necessitate schedule adjustments.  **[LUV_3403660_26]** 

4. **Board Changes and Strategy**  
   **Q:** Are new board members affecting strategy?  
   **A:** Management stated that while the board refresh was ongoing prior to Elliott Management's involvement, they have added **five** new board members with significant airline experience. They believe these additions will bring valuable perspectives but affirmed their commitment to current strategic initiatives.  **[LUV_3403660_19]** 

5. **2025 EBIT Build**  
   **Q:** What part of $1B EBIT is enacted?  
   **A:** Management indicated they are on track for the **$1 billion** EBIT increase in 2025, mainly through revenue initiatives like revenue management changes implemented in August, ongoing network optimization, and marketing efforts. They did not quantify the exact percentage already enacted but are confident in their progress.  **[LUV_3403660_22]** 

6. **Revenue Management Improvements**  
   **Q:** Is the new revenue system helping?  
   **A:** Management confirmed that enhancements to their revenue management system are yielding results. They reduced the forecasted **Q3** revenue drag from **2 points** to **1 point** and are seeing yield growth on their strongest flights, giving them confidence in the system's effectiveness.  **[LUV_3403660_13]** 

7. **Labor Cost Increases**  
   **Q:** Why are labor costs up 18% YOY?  
   **A:** Management attributed the **18%** year-over-year increase in labor costs primarily to new labor agreements and normal inflationary pressures. They noted that moderated capacity growth and investments in initiatives like assigned seating also contribute to costs, but they expect savings from their cost plan to offset some pressures next year.  **[LUV_3403660_15]** 

8. **Headcount Reduction Plans**  
   **Q:** Will you reduce headcount more aggressively?  
   **A:** Management reiterated their commitment to reducing headcount, aiming to be down **2,000** employees this year and again next year. They are considering tools like early retirements as part of their cost initiatives but emphasized the need to assess the numbers before determining methods to achieve targets.  **[LUV_3403660_23]** 

9. **MAX 7 Entry into Service**  
   **Q:** When will MAX 7 fly for Southwest?  
   **A:** The company expects the Boeing MAX 7 to be certified by mid-next year, but will need at least **six months** afterward to integrate it into operations. Therefore, the MAX 7 is not included in next year's plan but could be part of their **2026** schedule depending on certification progress.  **[LUV_3403660_28]** 

10. **Hawaii Fare Benefits**  
    **Q:** Are you benefiting from higher Hawaii fares?  
    **A:** Management reported significant increases in Revenue per Available Seat Mile (RASM) for both inter-island and mainland-to-Hawaii flights, outperforming system RASM. They credit focused efforts and cross-functional teams for driving progress and expect continued improvement until they reach their business goals.  **[LUV_3403660_14]** 

b594584337609e679a7ac896aee3be3c298ddb3f057bec9283805c1a4033703c

- **Southwest Airlines is closing four underperforming cities and reducing capacity in other markets due to weak performance and lower-than-expected maturation of new markets.**  **[LUV_3380774_14]** **[LUV_3380774_23]**
- **The company's financial returns are significantly below expectations, leading to cost-cutting measures including a planned reduction of headcount by 2,000 employees this year, with more reductions next year.**  **[LUV_3380774_17]**
- **High capital expenditures of $2.5 billion, including $1 billion in aircraft spending, combined with a weaker demand outlook and higher leverage than desired, raise concerns about cash flow and financial flexibility.**  **[LUV_3380774_19]** **[LUV_3380774_16]**

5727eb2adbe921a67c22d467141e16e8db4715a8bcab0561f575f8cce0b8e0e6

Southwest Airlines Co (LUV)

Financials