Southwest Airlines Company

Good day and welcome to the Southwest Airlines second quarter 2021 conference call. My name is Chad and I will be moderating today's call. This call is being recorded and a replay will be available on southwest.com in the investor relations section. After today's prepared remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. At this time, I would like to turn the call over to Mr. Ryan Martinez, Managing Director of Investor Relations. Please go ahead, sir.

Thank you, Chad, and thank you all for joining us today. In just a moment, we will share some brief remarks and then open it up for Q&A. And you will hear from our Chairman of the Board and CEO, Gary Kelly, Executive Vice President and incoming CEO, Bob Jordan, Executive Vice President and CFO, Tammy Romo, President Tom Nealon, and Chief Operating Officer, Mike Vanderman. We also have a few other senior executives with us for Q&A, including Andrew Watterson, Executive Vice President and Chief Commercial Officer. We will make forward-looking statements today, which are based on our current expectations of future performance, and our actual results could differ substantially from these expectations. And we also had several special items in our first quarter results, which we excluded from our trends for non-GAAP purposes, and we will reference those non-GAAP results in our remarks. So please see our press release from this morning and our website for more information on both topics, our cautionary statement, and a lot of helpful information about our results and trends. And before we get started, I want to let you all know that we are planning an investor event in December, and I will send out more information soon, so stay tuned for that.

Gary, over to you. Thank you, Ryan, and good morning, everybody, and thank you all for joining us for our second quarter earnings call. We're obviously very delighted at the turnaround in our business from the previous four quarters of billion-dollar losses, and our revenues nearly doubled in the second quarter from first quarter levels, and that was on a capacity bump of 44%. Our revenues were much stronger than we had been forecasting just 90 days ago, and all of that, of course, flowed through to better margins and better cash. Yesterday's cash was over $17 billion, and that's plus a billion dollar line of credit, well in excess of our $11.4 billion of debt. So while our bookings and revenue trends are even better than the month of June, and certainly better than second quarter as a whole, we're very well prepared to manage and muddle our way through if the Delta variant affects our business. And so far, we're not detecting any impact at all. Again, very strong bookings and revenue trends in the third quarter. So right now, I'm very pleased with all that, very pleased with our July business and the outlook for the rest of the quarter. This has been a long struggle to get to this point of profitability in the month of June. The pandemic, of course, turned everybody's world upside down, and it's still not completely right side up, but I must thank our employees once again for their heroic and very hard work. Normal summer demand is always a challenge to manage, and it's, of course, even more so here in 2021, especially in June when we had technology issues and bad weather combined. It made it very difficult. Things are much better in July. Still not where I want us to be. But we'll continue to improve, and I'm very confident that we'll adjust as necessary and if necessary. So our immediate focus is on running a very high-quality on-time airline and then gradually restoring our traditional efficiencies that are attendant with our low-fare, point-to-point, high-utilization business model. Given the revenue recovery, obviously our next focus is to sustain our profitability that we've achieved here in June. and maintain stability going forward. Next year, we plan to resume new aircraft deliveries with the desire to restore our route network as needed to pre-pandemic levels. And clearly, the network restoration will depend upon travel demand, which may in turn depend upon the state of the pandemic. So worst case, we'll reduce our growth and early retire our oldest aircraft which will be accretive to earnings with the tradeout with the max. So we're very well positioned and very well prepared to manage pretty much any scenario here in the next couple of years. So things aren't back to normal yet, but clearly they have stabilized and are much improved. And we're at a point now where we can actually plan and work on managing and spend less time on surviving the intensive care unit. And then finally, I did want to congratulate and welcome Bob Jordan. He'll be our next CEO come February 1 of next year. And the reception so far has been terrific. The transition work is well underway. Bob is very busy, and he may comment on that. But it's going very, very well. Very proud of Bob. He's going to do a terrific job. and I'm going to hang around to support our team in any way that I can. So with that, Bob, let me just turn it over to you. All right, Gary.