Southwest Airlines Co. (NYSE:LUV) Q1 2024 Earnings Call Transcript

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Rajesh Singh: And have you increased your Inspectors at the Boeing sites following the last fire incident?

Andrew Watterson: Thank you for the question. In 2022, we increased from having just a representative, which other airlines have to having a team of AMP certified mechanics on process, on site to inspect our aircraft as they go through the production process. I believe there’s north of 85 inspection points that they look at between entering the factory and exiting the factory. And so — that is the way we assure day-to-day that our quality of aircraft is maintained. We additionally have the engagement at the executive level that Bob talked about where we also see good results. So overall, our heightened attention to Boeing and the quality of the aircraft they manufacture has been going on for a while, and we think it’s bearing fruit.

Operator: The next question is from David Slotnick with TPG. Please go ahead.

David Slotnick: Hi, good afternoon. Thanks for the question. And going back to the transformation, you said that you’re looking at changing customer preferences. And I’m sort of just wondering what perspective you’re taking on that? Like are you looking at this as something where because of those preferences customers are choosing to book other airlines over Southwest? Or are you looking at this as maybe a place where Southwest is missing an opportunity to earn revenue on premiums or upsells what your rivals are from existing passengers? Thanks.

Robert Jordan: Ryan can give you much more detail, but I think you want to know all those things. You want to know — why do customers book Southwest? What do they expect to Southwest? You want to know why do they book others and not Southwest Airlines, you want to know if they have preferences for other things within our product that we don’t offer today, how do you think about pricing, those kinds of things and how it affects their desire to book Southwest Airlines. But now you want to need to know all those things. And again, additionally, in addition to the customer preference, you need to know what does it do for the operation and how we — how quickly especially we turn our aircraft and we’re studying that as well. Ryan?

Ryan Green: I think you hit it all. Clearly, with any sort of transformational change, you’re going to have a very robust, highly scientific, very sophisticated statistical models and research methodologies to test all of those things that Bob walked through. That’s what anybody would expect of a company like Southwest, and that’s the rigor at which we are approaching studying this issue.

David Slotnick: And I mean, back to the question before just considering the share of their revenue that your rivals are earning from upsells and from premium. Do you think you can really rule out something like a curtain in the cabin?

Ryan Green: Look, we’re going to study customer — like we’ve said, we’re going to study customer preferences, but there’s strong demand today for Southwest Airlines and the brand that we put and the product that we put in the marketplace today, it has worked for us for over 50 years, and customers understand well who we are and what we bring to the marketplace. We’re not going to try to be somebody that we’re not. And so we’ll study it all, but we’re — at the end of the day, we’re going to remain true to who Southwest Airlines is.

Andrew Watterson: I think you also have to look at the revenue per square foot and you get in the cabin. And so it can be seem like you won’t want to have a fancy product. But if it doesn’t generate revenue off of that square foot, you have in the cabin, then it’s necessarily not worth it. So we take a strong eye to the revenue that any of our products would generate as we evaluate this.

Robert Jordan: Okay. And I think the — I know we’ve said this probably 20 times on the call today, and I think the other short answer is we’re not ready to go into detail. We have work to do here, obviously, to continue to finish up our work and then if there are things we do want to change, to understand how we would do it in the Southwest way. And so we will be back with detail when we’re ready. And if there is something that we’re going to change, we’re aiming to do that at our Investor Day, which is planned in September, and we’ll share obviously a lot more of that.

David Slotnick: Thank you.

Robert Jordan: Thank you.

Operator: This concludes our question-and-answer session for media. So back over to Whitney now for some closing thoughts.

Whitney Eichinger: Thanks everyone who joined us today. If you guys have any further questions, our Communications Group is standing by. Their contact information along with today’s news release are all available at swamedia.com.

Operator: The conference has concluded. Thank you all for attending. We’ll meet again here next quarter.

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