Southwest Airlines Co Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Stephen Trent - Ciit - Analyst : Hi, yes, good afternoon, everybody, and thanks very much for taking my questions. I will -- just curious, when do we think about your CASM for 2025 and going forward, how are you thinking about your goals with respect to sale leaseback gains in the event that you might not receive equipment at the pace at which you're currently expecting. Thank you.

Question: Stephen Trent - Ciit - Analyst : Appreciate the time. Thank you.

Question: Savi Syth - Raymond James - Analyst : Hey, good afternoon, everyone. I was just wondering if you could share from the revenue trend perspective, just what you're seeing on the managed corporate side and as well as kind of generally how the quarter is progressing, given the noise. I know this call that the Milton -- Hurricane Melton impact here, but just wondering if there's anything else in the quarter that we should consider that's going to be on the core. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 4:30PM, LUV.N - Q3 2024 Southwest Airlines Co Earnings Call

Question: Savi Syth - Raymond James - Analyst : Appreciate that and tell me if I might follow up on the previous question, when it comes to sale-lease backs, given that Boeing delivery uncertainties in the considerations that it includes like existing aircraft in the fleet that you could do sale lease backs, how are you thinking about that? Didn't assets the progression.

Question: Savi Syth - Raymond James - Analyst : Appreciate it. Thank you.

Question: Duane Pfennigwerth - Evercore ISI - Analyst : Hey, thanks. Not to beat a dead horse, but certainly appreciate for competitive reasons you might not want to be that specific. But many investors left the Investor Day with the perception that fleet monetization over the three-year time horizon only means sale lease back gains. Is that how investors should be viewing? Is that the right takeaway? Or is it more than that specifically on the new side?

Question: Duane Pfennigwerth - Evercore ISI - Analyst : Thanks, and certainly appreciate the uncertainty with respect to fleet next year, but can you give us any high level shaping on cost trends, non-fuel cost trends? Maybe first half, second half is the down one to three? I think in the first call, is that new information or was that kind of your thinking at Investor Day? And I just to put a bow on it, like when do you expect unit revenue growth to exceed our non-fuel cost growth? Thanks for taking the questions.

Question: Tom Fitzgerald - TD Cowen - Analyst : Hi, everyone. Thanks very much for the time. Would you mind providing us an update with where things stand with the revenue management system is giving you a tail wind power, which the latest on that? Thanks.

Question: Tom Fitzgerald - TD Cowen - Analyst : Thanks very much. That's really helpful, Andrew. And then any color, it seems like just anecdotally interisland tariff in Hawai'i, they have been down picking up lately. You've seen any benefit from that? Thanks again for the time, everyone. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 4:30PM, LUV.N - Q3 2024 Southwest Airlines Co Earnings Call

Question: Scott Group - Wolfe Research - Analyst : Hey, thanks. Good afternoon. So I apologize if for turning this into a sale leaseback call, but I am still a little confused because I think I heard something different at the Analyst Day and then when I just heard so maybe time. And can you just clarify the 3% to 5% margin for next year, does that include or exclude any potential sale leaseback? And then just separately on the cost side, I know we talk a lot about CASM, but if I just looked Q3, got employees down 1% and labor cost up 18% year over year. I know we've got like new contracts, but I don't know that dropped that much like. Can you just help us understand like why labor costs are up so much?

Question: Jamie Baker - JP Morgan - Analyst : Hey, there, everybody Scott's question was the same as mine, so we should interpret today's 3% to 5% margin has essentially your guidance lift versus last month since fleet initiatives are now separate, correct?

Question: Jamie Baker - JP Morgan - Analyst : Okay. So the change in tone, Bob, in your prepared remarks in the end of the answers on this topic, what drove that? Would that something maybe that we have pushed for? Was it just sort of trying to clear up misperceptions? And I'm just curious, you handle for a while now I called it out as a special item.

Question: Jamie Baker - JP Morgan - Analyst : Yeah.

Question: Jamie Baker - JP Morgan - Analyst : And then for my second topic, just quickly on loyalty. It seems to me that with the local changes in the plants to better monetize the cabin, that there could be room for a more premium credit card than the I guess, two consumer cards that you offer through chase right now. I'm just wondering, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 4:30PM, LUV.N - Q3 2024 Southwest Airlines Co Earnings Call like mechanically, how does that work? Are you guys free to potentially offer a third card if you choose to or does that require reopening the contract stuff like that? Just wondering about those mechanics and whether there's maybe a loyalty benefit on top of the cabin stuff that you've already announced? Thanks in advance.

Question: Dan Mckenzie - Seaport Global Securities - Analyst : Bob, I know it's really early and I know your focus is the current plan, but when you were interviewing the board additions, I'm curious if the new members have begun to affect your thought process initially and if there were any ideas here that you're contemplating, I guess somehow the current strategic initiatives are being received?

Question: Dan Mckenzie - Seaport Global Securities - Analyst : Congrats on putting that behind you. Tammy, thanks for the comment around the fleet monetization strategy and apologies for going back to this again. But is the primary driver of the benefit just really a function of reduce depreciation and maintenance expense. Just wondering if there's a labor component in there or high level I guess, I'm just curious what the big drivers are to that customer that range?

Question: Conor Cunningham - Melius Research - Analyst : Everyone. Thank you. On the $1 billion EBIT build do you call up for '25? I believe most of that's revenue, but could you just you just talk about what percentage already enacted you show an ongoing network optimization and I know you're doing marketing now on revenue management? If you could just talk about where we're at now in terms of percentages of that already in the network today. Thank you.

Question: Conor Cunningham - Melius Research - Analyst : The $1 billion of EBIT coming from network optimization, marketing and so on. What is already in the market to the I know you made a lot of adjustments to your network in general, and you're doing marketing and so on. But if you could just level set up on what's already been put out there.

Question: Conor Cunningham - Melius Research - Analyst : Got it. That's helpful. And then maybe back to just put the headcount question that Scott was talking about. I know you're offering now paid time off to some employees and you're working through headcount general through natural attrition. Has there been any internal debate around being more aggressive with Pechiney, whether it's early retirements or so on Brazil, I ask you're buying back stock if you feel comfortable with the outlook? Has there been more of a focus on trying to get heads out that our tenants to certainly as productive as they're going to be given your expectations around classy growth. Thank you.

Question: Robert Silk - Travel Weekly. - Analyst : Thanks for taking my question of probably a question for Ryan. So the getaway product. So have you decided yet if your work the figure only sell direct or will you also reselling through travel agencies? And the second part of that question, as you all noted (inaudible) partners, but there were two others for you're able to say with the other two are?

Question: Robert Silk - Travel Weekly. - Analyst : Okay. So you have it will work through you're still going to they're going to be select agencies or will there be for general reach out to agencies?

Question: Rajesh Singh - Reuters - Analyst : Although I will ask two questions. one on Boeing, on second one on Elliott, but how vendors Boeing I thought the cycle, but the impacting your growth plans?

Question: Rajesh Singh - Reuters - Analyst : Congrats for getting the deal done. But point of view that the deal has come at a very high price that they have got five board seats. Some people are calling it more of a true than deal. Do you foresee it being disruptive or going forward for your turndown strategy?

Question: Leslie Josephs - CNBC - Analyst : Everyone. Thanks for taking my question. Just curious on the MAX7, then knowing what we know now on when do you easily expect that to fly for Southwest? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 4:30PM, LUV.N - Q3 2024 Southwest Airlines Co Earnings Call And then secondly, this is a little as essential, but Boeing is looking at it and then what it would look like in five years, slimming down and all its changes. How do you you're making a lot out of changes at Southwest. How do you see the airline in five years' time in 10 years time at that and keep it going to look at a level where like some of the legacy carriers and how do you expect to stand out?

Question: Leslie Josephs - CNBC - Analyst : Okay, thank you. And then you mentioned earlier that if the strike goes on much longer, you're going to have to revisit the fleet plan. What is much longer? Is it for the end of the year? Is it a couple of weeks would have said that cost?