Southwest Airlines Co. (NYSE:LUV) Q4 2022 Earnings Call Transcript

Bob Jordan : And I just — just add that. Yes, you’ve seen a lot of the news that there are things that our unions have said that we have asked for, for years quote unquote and things like to work on notification. And we agree, there’s work to do on notification. I just want as you know, we agree with them, and that work is going on in negotiations here. And I’m optimistic that we’ll get there. Second, we’ve got this all of our Wyman report that will wrap up here quickly, and it’s a comprehensive review, and it’s a wide-ranging collaborative review with a lot of parties, parties that were involved, including the frontline in Denver, for example, and the NOC and leaders that were involved. But we’re also including our union leadership in that work to gather their feedback as well because they’re valued partners, and we want to listen and understand.

And then as Andrew said, you’ve got things that are more wrapped up in negotiation like scheduling rules that I don’t know that I attached to the event and the operational disruption. That’s a normal part of negotiations, just like compensation. But — and we’ll be moving through that as we continue to move through mediation. But no, we value our union partners, and we’re listening to them certainly in terms of their viewpoints of what happened in our December issues.

Ryan Green : We’ve already said for this, once a report comes out and now identify areas we need to improve upon, we will work with them to jointly develop solutions in the applicable areas for them. So I think we’re committed to them be part of the solution as we look to take advantage of the lessons learned reported.

Conor Cunningham : Appreciated, thank you.

Ryan Martinez : Okay. Well, that wraps up the analyst portion of our call today. I appreciate everyone joining, and hope you all have a great day

Operator: Thank you. Ladies and gentlemen, we will now begin with our media portion of today’s call. I’d like to first introduce Ms. Linda Rutherford, Chief Administration and Communications Officer.

Linda Rutherford: Thank you, Chad, and welcome to the members of the media on today’s call. We can go ahead and get started for the Q&A portion. Chad, if you’ll get them queued up for us.

Operator: Certainly. Thank you. And our first question will be from Dawn Gilbertson from the Wall Street Journal. Please go ahead.

Dawn Gilbertson: Hi, good morning –afternoon everybody. I have two questions. The first one is for Bob or Andrew or both, and the second one is for Ryan. The first one is you guys seem to be sending some mixed messages here. You clearly state the staffing sign issue. Andrew just said crew communication was a problem, but not the problem. And then you mentioned this functional gap and said other airlines didn’t — also didn’t have this gap addressed. But isn’t it because the scope of your issues here were so large, that’s why it exposed this system? So I guess what I’m asking here is how much of the — without waiting for the Oliver Wyman report how much of this was bad decision-making on Southwest Airlines? Or what was the problem, please?

Andrew Watterson : Well, the reason we do the work is to find the problem. I know we’d like to know it now and not later, but that’s the point of it, respectfully. But we know that the — when this kind of functional gap showed up was because you had a lot of close-in cancels. As I mentioned earlier, we frequently — if we’re seeing a storm come in, you do cancels in advance. So I cancel today for tomorrow, just like we did, yes, recently with Midway. And so that we had done for the storm. Then we got ourselves in a position where we’re making lots of cancels close in. And as Bob mentioned, from the 23rd, which was still a weather event and towards the 24th or a transition to a crew event, sometime in that time frame, this level of closing cancels led us to get behind and then we lost the use of the automation.

And when we lose use of the automation, there’s just not enough hours in the day for the crew schedules to catch up manually. They almost did a couple of times, but we know, ultimately, we didn’t. And so then the question becomes, well, what were the sequence of events that led to that point. We’ve had a lot of these close-in cancels. That is what we’re trying to get to the bottom of so we can address that. And so we don’t know that right now. So that’s why we don’t give you a very clear answer on that specific thing, even though we understand where ultimately that led to.

Dawn Gilbertson: Okay. That’s helpful. So you’re saying that you guys had, obviously, a lot more last-minute cancellations than others since they recovered much more quickly even though you don’t know why that was at this point? Is that correct?

Andrew Watterson : I’m not necessarily saying versus others. I mean for ourselves, we have a lot of close-in cancels, and that’s what led to our problem is what we believe at this point in time. I’ve not done a comparative that I have in front of me that I can tell you that — what the others did at the same time, that will also be part of the work that we’ll look at as well. But as far as what I can see right now, what I’m suspecting at this point in time is that was the sequence. But once again, you need to kind of dig into it with both interviewing people to understand who did what when, so to speak, with the interviews and then also with the data to corroborate that, that was actually what happened. So it’s — I wouldn’t call it tedious, but it’s detailed work to fit that picture all together and come out with a time line that shows with good fidelity and backed up with data of what happened and what that led to.

Dawn Gilbertson: Okay. Thanks very much. The second question is for Ryan or somebody or maybe Tammy. Can you guys attach them — I know you’ve given the total dollar figure, but can you attach some dollar figures to the dollar figure of refunds, the dollar number? I know you’re only 80% through on reimbursement. And also on reimbursement, I’m curious, did you guys, because of the scale and scope of this and the damage to your reputation, did you broaden the definition of reasonable as you’re going through all these expenses? Thanks very much.