Andrew Watterson: I think I’ve been really encouraged over the last couple of months with both the pace and quality of negotiation meeting every week. Sometimes that’s with the mediators and sometimes that’s without the mediators. And so, we’ve made — we’ve also had enhanced leadership negotiation from both sides, and leadership presence on negotiations from both sides, and that’s worked out really well. Our mediators have been quite active. And so, we have to have both sides agree to get to a deal. So no one side can predict when it’s going to finish. But we’ve made substantial progress with a small but a difficult list of things remaining to close out. And I have confidence in our team and the SWAPA and negotiating committed to be able to do that in a timely fashion.
The mediator has — barring no government shutdown, more dates for us throughout the rest of this month and next month. And I also would say that the also negotiations with our ramp union, TWU 555. And so hope to be engaged with them here in the next couple of weeks for next step there. So we can — that would then be the last deal for us to close out.
Alexandria Skores: Yes. That was my second question was TWU 555, I understand they reached an agreement, but it doesn’t seem like there was a ratification announcement. So, I’m wondering if you all can give an update there.
Andrew Watterson: That was a month or so ago. I can’t recall exactly, Bob. But they’ve voted that one down. Their union, as most unions do, follow up with the surveys to understand where the frontline workers, the members did not like the proposed agreement. Based on that feedback, the union will develop a slate of changes. We will do that on our side as well. And then, we’ll get back together in early to mid-November to talk about next steps with them for the next round. We’re not in mediation with that. We have I think very productive negotiations without mediators with the 555 and we expect that to continue.
Operator: Our next question comes from Leslie Josephs from CNBC.
Leslie Josephs: Just curious about your discounting strategy. Your have fare sales frequently, but it seems like the fares are pretty low currently. Could you kind of put that into context with previous fare sales and how that compares and how you’re thinking about the fourth quarter?
Bob Jordan: Yes. Hey Leslie. We do — we are finishing up restoration here. And so, we do have more seats to fill. I would characterize our promotional activity as being slightly more than normal. It’s definitely not a tectonic shift from how promotional we have been historically, but there is a little bit more. When we have been — as we have put those fare sales out there, we use some fairly sophisticated tactics and strategies to be very surgical in where we drive the demand. So oftentimes, those sale fares — well, always, those sale fares are available when we have distressed inventory to sell. And we keep the higher demand flights. The promotion is not applicable on the higher demand flights. So it allows us to drive load without diluting yields.
Yes. I would just also point out to relative to your comment on really low fares out there. The fares — our average fare in the third quarter was up 2.6%. So if we were being — if we were having to overly discount, you wouldn’t expect average fares to be up. So, I think the strategy overall is working as designed. We’ve got a lot of seats to fill. We’re selling our distressed inventory through discounting and protecting our higher-yield flights.
Leslie Josephs: And are there any specific routes or regions where you’re seeing you’re having to discount more or even times of the week or month or recent months?
Ryan Green: It’s less about the markets in different geographies and more about travel patterns today. Tuesdays and Wednesdays are tougher, shoulder periods of the day are tougher. And so that inventory is a little — that’s where a lot of the discounting is actually happening. We’re adapting to those travel patterns and trends as we move forward here with our network optimization starting after the first of the year to reduce some shoulder flying, reduce — further reduce some Tuesday, Wednesday flying to help address that. But it’s more that than it is particular geographies.
Operator: Our next question comes from Mary Schlangenstein from Bloomberg News.
Mary Schlangenstein: I was going to ask a question about how you are adjusting capacity to help with the reshaping of the business travel and the way it hasn’t come back as you expected. And Ryan may have just answered that question, but I wanted to see if you could put a little bit more specifics out there on those adjustments, days of weeks, times of days, cutting frequencies, things like that.
Bob Jordan: Yes. Mary, I’ll talk and then Andrew and Ryan can finish, obviously, correct me. But yes, that really is why we are making the — both the network adjustment and optimization that we had already announced that is in the first quarter that’s worth over $500 million in profit next year. And then this new set of capacity adjustments, both in the first quarter and then throughout 2024 in the nonpeak period. It’s really about the shoulder periods — the nonpeak periods being more shoulder than before. So for example, some of that was backfilled by business travel, which, again, business travel is rising for us. It’s just steady. It’s just not fully recovered to pre-pandemic levels. But as an example, this reduction in January and February of 2024 next quarter, that is really all — that’s as much about matching new business travel demand trends and patterns as it is anything. So that carries through 2024, but yes.
Andrew Watterson: You heard Bob — Mary, this is Andrew, say that overall business travel is down maybe 10% or 15% versus 2019. So, it’s not like a guardrail to guardrail move. It’s just more a modest recalibration on network. So it is geared less — a little bit less towards business, a little bit more towards leisure or mixed leisure business. Tuesday, Wednesday, which historically has been a more business travel heavy day will be much lower versus kind of Monday, Thursday, Friday. So, that was one big part of it. And also, if you look at certain cities, if you look at the route combinations, some routes would have predominantly business travel on it. And so, we’ve replaced those routes in those cities, ones that have kind of either pure leisure or a mix of leisure and business. So, it’s really a modest adjustment of the portfolio of routes as well as a kind of Tuesday, Wednesday reduction in overall capacity.
Operator: Our next question comes from David Slotnick from TPG.
