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

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Operator: Our next question will come from Mary Schlangenstein with Bloomberg News.

Mary Schlangenstein: I just wanted to clarify, when will you have everything under your winter plan, everything that was planned as a result of the disruption, when will you have all of that in place? And the $100 million to $150 million cost you mentioned earlier, that was for everything post disruption. Is that right?

Andrew Watterson: I’ll handle the timeline. So we have — October is the deadline we’ve given ourselves to get everything ready. We expect winter storms to actually be after that, but our internal deadline is October. And so that will be when we report our third quarter earnings, it will be later in October, and we’ll make sure to go through and have a comprehensive review and status update where we are on that. But so far, things are on track, and we’re taking delivery and encouraged by the results.

Tammy Romo: Yes. And Mary, your question on the $100 million to $150 million, would you mind repeating that?

Mary Schlangenstein: Yes. I was asking if that’s the cost for everything that you’ve put in place as a result of the disruptions or if that was just related earlier to the mention of additional training costs for ramp workers.

Tammy Romo: No, it didn’t. It’s our best estimate right now of what our onetime cost, there may — some of those costs that we — some of the investments that we made this year may prove to be somewhat sticky into next year, including some of our in some of our technology investments. But — so that’s just our best guess of what the onetime costs are.

Bob Jordan: And Tammy, I think it also includes things like we did gratitude pay. And we did — we had some incremental customer reimbursements this year and things like that that are really a onetime related to the disruption that don’t show up again in ‘24.

Tammy Romo: Mary, just one more thing, just — I just want to remind you that we — even before the event, we had — we had plans to modernize our operations. So, those are some of the investments that I was referring to earlier. Those were already in place and obviously, those will continue and all that’s been contemplated in our guidance.

Operator: Our next question will come from Dawn Gilbertson with The Wall Street Journal.

Dawn Gilbertson: A quick question here. Your competitors for more than a year now have been talking over and over again about how the leisure travel surge has everybody paying up for premium seats and so forth. You guys don’t have anything really to upsell to. But I’m curious, how has this manifested itself, if it has, at Southwest? I mean, can you share any details on demand for upgraded boarding, EarlyBird boarding, even leisure travel purchase of Business Select? Thanks. And one related question to that. I noticed a lot of — you’re making a lot of pitches now to buy A-List status. I could be wrong, but I don’t recall that in the past. So, I’m curious about the strategy there, too. Thank you.

Ryan Green: Hey Dawn, it’s Ryan. Good to talk to you. Yes, you’re right. Some of our competitors for a while now have been talking about premium revenue and that being a tailwind to their RASM performance. And I think that it probably has a material impact on their RASM performance that our business model just we don’t participate in that premium revenue stream to any of the same degree that they do. However, having said that, our ancillary revenue in the second quarter as an example was a record. It was a very good quarter for EarlyBird. EarlyBird had been lagging a little bit through the pandemic recovery, but EarlyBird, it performed very well in the second quarter. Upgraded boarding, we added the ability in the third quarter of last year to purchase upgraded boarding on digital — on your mobile device.

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