Southwest Airlines Co. (NYSE:LUV) Q2 2023 Earnings Call Transcript

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Take rates have tripled since that point. And so, we’ve had very strong upgraded boarding revenue over the course of the last year. And we’ve been able to maintain the price and grow the price actually some on upgraded boarding and EarlyBird as well. So, ancillary revenue is definitely a high point for us in the quarter. It’s just we don’t participate at the same level from a premium revenue standpoint as some of our competitors do. Related to your last question on the ability to buy A-List status, we have historically — we run campaigns, we call those tier qualifying points, the ability to kind of top off — pay a little bit and top off your tier qualifying points to get to A-List, A-List Preferred. That’s nothing new. We’ve recently run some of those campaigns, but we’ve done those historically in the past as well.

Dawn Gilbertson: Can you — one follow-up. Can you give any — it’s been years, I think, since you guys have put any dollar figures on EarlyBird revenue and/or now that you have upgraded boarding revenue. Can you quantify that at all, please? Thanks.

Ryan Green: Yes, we generate hundreds of millions of dollars from those boarding products on an annual basis. And like I said, we just had a record here in the second quarter. So those revenues continue to grow.

Tammy Romo: Yes. And just for second quarter, just to give you a little, EarlyBird alone was in excess of $100 million.

Operator: Our next question will come from Leslie Josephs with CNBC.

Leslie Josephs: Just curious on the RASM decline for Q3, is that just kind of like a return to seasonality and capacity going up? And are you seeing any sharp drop-off after, say, like mid-August, and how does that compare with 2022 and maybe more people were flying off season? Thanks.

Ryan Green: Yes. Hey Leslie, it’s Ryan. So certainly, there is a RASM headwind with the capacity growth that’s a little bit — or that’s above seasonal norms in the third quarter. So, there’s definitely a headwind there. But if you take third quarter on balance and just look at the demand in place, I’m very encouraged by where the third quarter sits today. We are anticipating a record third quarter revenue here over the next couple of months. We have more bookings in place actually at this point in the curve for third quarter than we had at the same time — same point in time in the curve for second quarter. We had an all-time record fare sale in June for our fall travel. We had top 10 booking days during that fare sale and including our all-time record for bookings taken in a single day.

And that compares to — even when we open up schedules for the summer or for the holidays, we took more bookings for the fall during the fare sale than we have any other day in our history. So, we’ve got a tremendous base of bookings in place for the fall. I think that that shows a lot of demand for the Southwest Airlines product, like we’ve talked about on the call. And from a fare standpoint, July is roughly booked at this point and the strong fare environment from the second quarter has persisted here into July. So, I think that while RASM is decelerating here in the third quarter, we do have the capacity headwinds. But when you compare that to some of the domestic RASM of our peers, I think the way we’re shaping up looks favorable.

Operator: Our next question will come from Alison Sider with Wall Street Journal.

Alison Sider: I guess, the pilots have been talking a lot about attrition in the last couple of months. I’m curious if that’s something you’re seeing in your data, if it’s at a level that’s unusual or concerning? And then, I guess, if so, like do you have a sense of when in their careers are pilot leaving or a sense of why?

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