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

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Now, as always, and I remember that plan very well, at the end of the day, we are determined to drive the returns on invested capital that we can all be very proud of. And as always, one of the wonderful things about Southwest Airlines as we build our plans with ample opportunity. So to your point, we have a flexible order book and flexible fleet plans. And you’re exactly right. If we — if we’re not — we don’t have — we’ve given you our plans, but should we need to adjust, we’ve got the levers that we could we could do so. But, at this point, based on everything that we’ve seen, we believe with these network changes that we can drive the revenue performance next year that we all desire. So, a lot of moving parts here, and we’re busy at work on our 2024 plan.

But again, as we look ahead to next year, we are very focused on delivering a 2024 plan that will deliver margin expansion and as well as expansion and return on invested capital.

Bob Jordan: Conor, you’re just in a period here where we’re not optimized, too. I’m really proud of the fact that we got all the aircraft open flying here in the third quarter, and we’ll have our network restored by the end of the year. But again, it doesn’t mean optimal. And it’s not just the network. It’s not optimal in terms of how we think about our resource, usage and our efficiency. And so we’ll attack that very aggressively, just like we’re attacking the network here in the first quarter of 2024. Past that, to me, the biggest question would be, do you have opportunities for the aircraft that we’re talking about, the mid-single-digit growth supporting. And we have significant opportunities in just name a place, Denver and Austin and Nashville and on and on and on, where there’s huge demand for the Southwest product.

We have gates coming on line. I would be worried if you’re sitting here going, I don’t know where to put the next aircraft. That’s not the case. We have tremendous demand for the brand. We have tremendous demand in our focus cities, in our large cities and others and a lot of brand strength here. And again, yes, absolutely, there’s work to do to optimize the airline, wring out cost, continue to boost revenues to things like the network actions and then obviously boost our returns. And as Tammy said, we have a lot of flexibility.

Conor Cunningham: Okay. That’s helpful. And then maybe just to put a finer point on 2024 or as we just think about what you’ve added so far, the implications for ‘24. If you just pull fourth quarter capacity through ‘24, I think it’s — the implied capacity growth is like 6% year-over-year. So, is that the low watermark that we should expect next year? I’m just — again, just trying to understand the context of this measured and orderly and all these other moving parts you have that’s going on with your number right now. Thank you.

Tammy Romo: So, the impact of just the carryover to next year is probably, I would say, 7 points.

Bob Jordan: Yes.

Operator: We have time for one more question. We’ll take our last question from Sheila Kahyaoglu with Jefferies. You may now go ahead.

Sheila Kahyaoglu: Hi. Thank you, everyone. So just lots of moving pieces on RASM and obviously a very hot topic. As we look out to 2024, you gave us a lot of moving pieces. How do we think about earnings growth for 2024, given you have $500 million benefit from network optimization, but RASM, it will be down most likely and CASM-X could be up. So, is there a possibility for flat earnings or revenue — EBIT growth next year?

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