I'm here. That was—oh, I guess we'll get going. All right. All right, we're going to get going with our next session with Southwest Airlines. Really happy to have Tom Doxey, CFO of the company, at our conference. First time at our conference as someone at Southwest, so. That's right. Welcome. You've, I guess, graduated from the ULCC panel, which is great. I'll pass it to you for some opening thoughts and comments, and then there's lots to talk about. Yeah, it is great to be here. There is a lot—maybe it is an understatement—there is a lot happening at Southwest right now. We are really excited about the changes and the pace of those changes as they come in. First and foremost, we just heard the pilot panel. The focus on safety that we have is something that we all share. As we think about some of the things that we have coming up, next week we announce basic economy, and we—or I am sorry, we implement basic economy in bags. In the first quarter, we had several things that we talked about on our earnings call around Expedia, for example, coming in, some changes that we made with our frequent flyer program, the earn and burn there, and the new deal that we did with Chase. There is a lot that is happening that has just happened or is just about to happen. As we go throughout the year, we'll have—in the third quarter, we'll start selling the extra legroom seats and seat assignments, which we're really excited about. That is for flying that will happen in the first quarter. Those airplanes are actually out flying now. About two, two and a half weeks ago, I was down in Houston with our maintenance team as they were doing those during overnights. More and more, even though we're waiting for the full fleet to be modified, there is an opportunity that people will have to be able to get into those seats. We're looking at ways we might be able to monetize that even ahead of time. There is a lot happening, but it's exciting. The pace of change at Southwest, I think, is something that's very different than it was before. Awesome. I'll start. If you have questions, raise your hand. We'll get you involved. There's so much, to your point, specific to Southwest to talk about that I want to get to. Maybe we'll spend a little less time than normal just on near-term demand trends, but let's just start there, just sort of knock it out. I guess we've heard from a bunch of airlines so far, right? Some variations of stabilization to it's getting better. How would you characterize the environment as we're progressing through Q2? What are you seeing? Are you in the stabilization camp or the, you know what, it got worse and now it's starting to get better again? Yeah. I mean, so to give maybe just a little bit of context. Yeah, please. 1Q was about 3 points for unit revenue, was about 3 points worse than we were expecting at the beginning of the year. 2Q is probably about 6 points worse than what we were expecting at the beginning of the year, right? We have, of course, guided for that. We have a lot of data. We have a lot of industry data. We have not seen in the industry an inflection back, right? We have seen those reductions that happened earlier in the year. We are not seeing an industry inflection back now. I think that is, as you saw what we talked about and where we wanted the focus to be at our earnings call, we were very deliberate about the reiteration of the incremental EBIT contribution that is coming from all of these different initiatives. That was at $1.8 billion for this year and over $4 billion for next year. We reiterated those targets. We did not reiterate the guide for the overall EBIT for the company, which is what pretty much all the airlines did. We did not want the focus of the call to be on, well, what about this assumption about the economy or what? That is sort of the background into that decision. We wanted it to be focused on the things that were more in our control that are going well and that are on track. Okay. As you just think about sort of where you are, right, are there certain parts of the—you're domestic, but any certain parts of the country or regions that are feeling better or worse than others? More? Any just sort of color to share there? Yeah, you're right that there on a relative basis has been more—this has been pretty widely discussed—but more relative weakness for main cabin leisure, which is where we're currently underweighted versus our peers. We've seen that. In spite of that, in 1Q, we've talked about a lot of these initiatives that we have on the revenue management side, some network shifts and things that we've done. You've seen us pull out of Atlanta, for example, and made some reductions there. That's working, right? Certainly when you look at carriers that are also more leisure and main cabin focused, we outperformed, but we even outperformed on a unit revenue basis in 1Q versus those that were not as overweighted in those areas. I think those initiatives that we have largely are working. I don't know that I would say that there's any specific area of the country other than the changes that we've announced to the network where we're making those adjustments today. Just maybe an update on capacity plans. I think you talked about maybe not 1% for the year, but how that looks, the shape of that the rest of the year. Yeah, we were already quite conservative on the capacity that we're rolling out, right? We were at 1%-2% for the year. That capacity really was not—so we've got 50 aircraft retirements for the year. Our current planning assumption for aircraft coming in from Boeing is 38. Now, as the year goes on, I think we're getting a little more comfortable with perhaps some potential upside to that number, which could result in more retirements for us. We wouldn't use that to grow. That incremental capacity really was coming from the different efficiency items that we had, right? We had the turntime reductions that we've had. We've had red-eye flights that are scaling up through this year that have been really successful for us so far. That's where that capacity was coming from. That already low capacity was being created that way. A few weeks back, we took some pretty decisive action that even though we had lower overall capacity for the year, just given the uncertainty that was out there, we wanted to be decisive and to reduce capacity. We did that by about a point and a half for the back part of the year, which will put us toward the lower end of the 1%-2% guide for the year. Of course, I mean, it's obvious, but the reason why we wanted to make sure we did that early was you get more opportunity to be able to take cost out. We've talked about low single-digit exit rate for unit costs. That still holds even with that capacity. It might be a little bit of an adjustment there, but that range still holds for us coming out of the year. One more just sort of on the market, and then I want to get into all the Southwest stuff. I've asked maybe, I guess I've asked this to everybody, right? We entered the year, seemingly everyone's seeing very good RASM trends, people getting excited about a demand outpacing supply. Now for a lot of the industry, we're back to sort of a negative RASM environment. Is this an issue of too much supply again, or is this a demand issue that sort of creeped up on us? Yeah. We do not fully know, right? I think that some of that uncertainty is why you saw most carriers pulling capacity in the year, because you do not need to get a firm answer on some of that stuff before you start making a decision on what you are going to do. We wanted to be decisive. I think there were some other carriers that were decisive in what they did as well. Whichever side it ends up being, we wanted to make sure that we were making adjustments that would allow us to react and control the things that were more in our control. Okay. Now let's get into some of the numbers around all the initiatives. You talked about $1.8 billion of EBIT initiatives this year. You've reiterated that, right? I guess help us just think about how that builds throughout the year. How much of that did you realize in 1Q? How much is the assumption for Q2? We could sort of obviously then fill in what's left for the back half of the year. Yeah. So there's kind of three broad categories, I guess, of the $1.8 billion. There's $1 billion that is core business improvements, things like our revenue management system, network adjustments that we've made. You can see that being manifest, for example, in our reported numbers for 1Q, right, where our unit revenues compared very favorably, even versus carriers that weren't as domestic main cabin focused as we are. That's about $1 billion of the $1.8 billion. There's about $400 million or so that is related to the initiatives that were largely announced a couple of months ago in March. Where the $1 billion is a little more spread throughout the year, the $400 million for these incremental initiatives are a little more back-weighted. As you think of what some of these different initiatives are, I mentioned in the first quarter how we had Expedia that rolled out, we had the frequent flyer program and some of the earn and burn changes. That stuff was starting to come in then, but really these things start to come in as the year goes on. I mentioned next week, basic economy and bags roll out. That happens, I think, six days from now. We will start selling in the third quarter the extra legroom seats and seat assignments for flying in the first quarter. You start to see that $400 million ramping up as the year goes on. The remaining $400 million or so is on the cost side. Recall at our investor day last fall, we had talked about a $500 million cost reduction by 2027. A couple of months ago, we doubled that to be over $1 billion by 2027 and said that we would achieve just shy of $400 million of that during this year. We're on track. Been really excited about what we've seen on the cost side. Where you look back to 1Q, we were + 8% initially for unit costs. We reduced that six weeks or so later to + 6%. By the time we got to the end of the quarter, we had gained another point and a half, gained in a good way. I think what's great about it, and this is a stat I love, is that 42 of our senior executives had a budget beat in the first quarter. 42 out of? 42 out of 60 some odd, right? This is a broad-based, it is not just a lot of times when you have a beat like that, well, we had this maintenance item that moved out or this one thing, this special item, this was broad-based cost savings. We are seeing that continue on as we go throughout the year. Feeling very confident about that. Of course, the lion's share of that, probably 2/3 or so of the number for this year is related to the reduction, the headcount reduction that we had, which was done earlier than planned and ended up being larger than planned. One thing that you said surprised me a little bit of that billion eight, that there's a billion that's more like just revenue management, core business changes, and then $400 million of because you've announced a lot of bag fees, premium seats. I'm surprised that's a $400 million. I would have thought it could have been maybe the opposite, right? Is it that those are just much more 2026-weighted? And because I guess it's a billion eight this year and it turns into $3 billion next year. Does the lion's share of all of these big things really show up in 2026? That's exactly what it is. It's the timing of these things. Yeah. It goes, it's 4.3 next year, right? As you think about what these things are, bags and basic economy that start next week, but you could book a flight today for a flight a month from now and it would be under the current structure. That will ramp up. We talked about seats and seat assignments, which I think will be really great. That is something that doesn't actually, we're not actually flying that with those being sold until the beginning of next year. Yeah, I think that's what's so exciting for us is that as we start to look to 2026, maybe we're not at a full run rate for each one of these things as we get into 2026, but they ramp up significantly as we move toward the back part of this year. As we get into 2026, there's a significant amount of these new initiatives that are now there. Yeah, it is a timing and a ramp-up thing. Okay. If there's a, actually, we'll come to you in one second, Jason. If there's a mic, we'll get you. Just so I understand, of the, is there a way to sort of size, like again, when you add up the premium legroom, bag fees, what is the size of that, not this year, but just over the next couple of years in total? Yeah. We've sized a couple of them. We've tried to get away from giving a specific estimate for. Maybe not each one, but just when you add them up in total. Yeah. We've talked about a billion or so in contribution that would come from the seat assignments and the extra legroom as we get more toward a run rate. Kind of a 2027 number for those. As we think about this year and that $400 million, we've talked about the fact that the loyalty program changes and bags and basic economy make up, those are the two biggest ones. To give you a sense for some of the others, like the credits. We've gone from credits, and this is not frequent flyer points, Rapid Rewards points, but it's the credits for refunds, that for our basic economy product, those will expire in six months. For the others, they will expire in 12 months. That alone for this year, we think is $100 million. It gives you a sense for the fact that this is not all weighted in this year toward any one big item there. Is that cash or non-cash, that piece? That's EBIT contribution. Okay. Yeah. Okay. Sorry, I cut you off. Go ahead. Yeah. Yeah. It's EBIT contribution. Yeah. As we think about these different items, we've had a net impact for these that we've put into these numbers. I think sometimes it's, okay, are we, in fact, I think it was even asked on the earnings call, right? Is this a gross number you're assuming? Are you assuming any sort of impact for the fact that you're moving to a basic economy in bags? We are. What's factored into these numbers, into the $1.8 billion, is a net number for these, net of those impacts. Jason, your question. Building off this, I mean, it's pretty obvious that the market doesn't believe these numbers. Otherwise, the stock would be a lot higher. When you think about moving through this process, I think some of it is we all open models, we make assumptions about share loss versus you guys doing baggage fees, all these initiatives. Apparently, a lot of people are getting much lower numbers. What are you guys going to do over time as far as giving out more information to help us understand some of the assumptions as you guys roll it out? What's the cadence of information? Right now, from our perspective, it's a number, 1.8, 4.3. How you got there? How aggressive is it or not? How does information come out to you as more comfortable? Yes. That was about the nicest way of him to ask, why is my model so bad? Yeah. No, you're right. I think in the models, probably maybe around 60% or so of what we've put out there has made its way into the models, and then something less than that that's actually made its way into the valuations. So there's a bit of a wait and see approach, I think, on some of these things. And I think the wait and see is probably different for the different initiatives. I'm excited about our next earnings call, right? We're about two months away from that next earnings call. In that earnings call, knowing that we're six days away from launching Basic Economy and launching bags, we will be able to talk. Now, there'll be a ramp-up there, right? Because it's for people who are buying starting that day and flying starting that day. There'll be a ramp-up, but we'll be able to talk about the impact that we're seeing there in reported numbers. I like to be able to do that. We didn't have a lot of the initiatives that were there in 1Q, but we got to do that in 1Q. We talked about Expedia and the benefit that we were seeing there. That exceeded expectations, right? We got to talk a little bit about what we were seeing on the unit revenue side. The further we get into this, and as we have that actual data, we will then be able to talk about exactly what that is. The short answer is you'll see more and more specificity around what we're seeing as we get to where it is part of our reported numbers. That is a bit of a wait and see approach, which I get, by the way. I get that when we announce a lot at a time, that as an investor or as an analyst, you'd say, look, I like what you're doing. I mean, you just heard Hank here as well. I think our employees, we refer to each other as cohorts, right? There is a lot of support in the building and out in our operation for what we're doing as well. You heard that on the panel. I think there is a lot of optimism. As I talk to investors and I talk to analysts, there is a lot of optimism about what we're doing and how we're doing it. It then turns to the quantum and the ability to then be able to execute well on it. That wait and see approach, what's so great is we're at the point where for more and more of these items, that wait isn't very long, which I'm excited about. Bags and basic, which we have coming up now, I think bags gets a little more of the press. The basic economy structure, though, is really what I'm excited about. As you think about, we historically, and we're changing the names, but historically, we've had four different categories: Wanna Get Away, Wanna Get Away Plus, Anytime, and Business Select. The lion's share of our bookings go through Wanna Get Away. The answer to why is obvious. It's because there was so much included in that bottom category that there was no incentive to buy up. The challenge, one of the challenges, one of the big challenges is largely we have had to compete that very inclusive Wanna Get Away product with basic economy at a United or at a Delta. That basic economy product comes with far fewer features, but we've had to compete on price. However, for basic economy, you have heard people like Delta and United talk about the fact that it's actually not that large percentage of the overall bookings that are actually completed in that category. Think about that. We're competing the lion's share of, we're offering the lion's share of our product and competing it on price against something that's a very small percentage of somebody else's where the product is not at the level that ours is. We needed to fix that. That will happen as part of what we're doing. It's about product differentiation, right? Bags are a part of that. Extra legroom will be a part of that. Seat assignments will be a part of that. We have been pretty open about the fact that we are not done, right? Now, we are not ready to talk specifically about what that might mean, but there is more product differentiation that we know that our customers and people who are not, or are choosing not to be our customers today, that they want that we are not offering. Do not think of this as the end state, what we have announced. Think of this as a point in time as we continue to move forward and offer more differentiation, more of what we think people want. That basic kind of, that matters even more as you are on Expedia and things like that. Absolutely, it does. It's more directly comparable. Absolutely. To your point, what is the, do you have a number, like what percentage of the tickets today are Wanna Get Away and what percent do you think will be this new basic economy for you? It's a majority today. We haven't publicly talked about what the specific number is, but it's a majority today. We don't know exactly where we'll end up. I think this goes to the wait and see question. We have some thoughts. We have some well-informed thoughts on where we're going to get. Again, we'll know a lot more as we get to earnings, which is just a couple of months away. Maybe just to follow up on Jason's questions a little bit, I go back to the Q1 call and you didn't reiterate the billion seven of EBIT, right? But you said, hey, it's still possible or it's still on our site or I forget the exact language you use. What do you want to say with respect to that? Yeah. We were deliberate about saying that going into the call. The background there is heading into the call, we're looking at different sets of assumptions with the model and looking at the up and down for things like fuel, for things like revenue, and things like the initiatives, and to see kind of what that fan might look like. As we did that, there were scenarios that got us to that number, right? As we saw that, we did not want to send too much of a signal with not reiterating the EBIT guide for the year, other than as other carriers said, there was so much uncertainty there that it really was impossible to tell how those assumptions were going to play out. We did not want the whole focus of the call to be on those sorts of assumptions. We wanted it to be on the things that were more in our control. Yeah, it is, and of course, the further the year goes on, and as we're not seeing inflections, the longer we get into the year without that inflection, the harder it becomes to achieve those things, right? Certainly, we saw sets of assumptions that would still get us there. I want to go to the billion bucket from revenue management. Yeah. They are more than just that. It is revenue management. It is changes we are making to the network and the structure. We are moving to more connections. We are going from 39 to 56 banks as we get into the August schedule. There is a lot of things to it. We heard some versions of that in 2024, 2023 that did not necessarily show up. I guess what is different about it today and is that, how much of that billion is sort of totally in your control versus still needing some supportive macro backdrop, if that makes sense? Yeah. So the 1Q relative RASM that we had, I think is one proof point that we have around what that was. And as we continue to move forward and continue to make some of those structural changes, whether it's to where we're flying, how we're structuring the network, I think sometimes a question will come, well, are you going to be more a connecting carrier or more a point-to-point? As if it's a binary decision. I think what you're seeing is that, especially where there's more relativity between the peaks and the troughs for the whole industry, but certainly for leisure, there's much more relativity between those two. Connections become increasingly powerful, especially during those times where you're in the trough, where you just have the ability to bring, if you have 20 flights coming in and 20 flights going out, if you add two more, you didn't just add two more, you added two more plus all of those. Connecting becomes more powerful as part of this too. That is part of what we're doing. The direct answer to your question is I would point to what we did in 1Q and then the things that we've announced that we'll continue to roll out throughout the year. Okay. Back to cost for a second. Rough numbers about just under $400 million of cost saved this year. Yes. I think the guidance applies like an incremental $400 million plus next year, right? You did like the big corporate overhead reduction this year. What's the next sort of to get a similar total cost saved next year? What are the drivers of getting us there? Yeah, that's the larger one, right? There are a lot of other things that we're doing. The way that we're looking at our procurement, we're doing a top-to-bottom review of all of our procurement today. We're looking at the way that we're doing technology. I think I did a LinkedIn post yesterday where I shared one of the neat tools that we're using AI to be able to better predict lobby flow and the way that we dynamically staff. There is a lot that we've done to invest on the technology side, and we've come a long way in a short period of time there. As we look at that, there are opportunities for us to become more efficient in the way that we're deploying those resources. That's a part of it. The way that we're looking at staffing as well with our ground operations. One of the big inputs to ground staffing, of course, is bags. There will be incremental revenue that will come from bags, but there will also be cost savings that result from the fact that we will fly fewer bags. We fly significantly more bags than any other carrier does today, and that will be reduced. That is a big driver of staffing, but it is also a driver of weight. It is a driver of maintenance cost for engines. There is that as well. The list goes on, but there is a whole host of things. The largest is that reduction that we had specifically for this year. It is about two-thirds of it, and then it is a lot of these other things that are throughout the business. As you think about any update, chasm, what, four to five this quarter, what is the back half of the year like? I know an unfair question to ask you about next year, but I do not know. I do not think about next year in any way. Yeah. Of course, we've guided for 2Q, have not given specific guides for 3Q or 4Q, but what we've talked about is an exit rate that's kind of in the low single digit right now. We talked about that prior to bringing capacity down by a point and a half in the back part of the year. There'll be a bit of impact there, but that doesn't change the statement that we made that we still feel, even after the capacity change, that we'll be able to exit the year at those levels. We start to get to the point where we're lapping implementation of contracts as those start to come in. There are some of those tailwinds that we get as we move toward the end of the year. Okay. Just last couple of minutes. I want to talk about balance sheet, cash flow a little bit. You guys have been aggressive with the buyback. Yeah. $2.5 billion, we're going to be completing by. By July. By July. Do you think that there, so I guess talk about where you want to target cash balances. Do you think, would you consider ever adding some net leverage in order to sort of keep supporting the buyback, or is that sort of, we do not want to do that? Yeah. I think it comes back to a framework, right? I think as we, I'm three months into the job. I think as we get just a few more months down the road, you'll see us putting a little more specificity around what some of those metrics are for the balance sheet. It is critical for us that we maintain a strong and efficient investment-grade balance sheet. We have one of the strongest balance sheets in the world for airlines. There are just a couple of others that are even investment-grade. It's really important that we stay there. It gives us the ability to borrow, if we borrow unsecured, really, really attractive rates. You'll see us continue to do that. Really, in the end, it's about working within that framework, investing in the business, ensuring that we keep that strong and efficient balance sheet. Really what the focus is, that third category being shareholder returns in the form of dividends and share repurchases. Where our focus is, is more around building incremental proceeds that could be used for that framework. All the initiatives that we've announced, that's about building more free cash flow. That's about building more proceeds. The fleet monetization that we're doing, you'll likely see us doing fewer sale leasebacks, more direct sales, which probably means it shifts things a little to the right as far as when those transactions actually occur and the proceeds come in. There are accounting gains generated by those, but you're not going to see us emphasizing that. You're going to see us talking about the proceeds that can come from the embedded value in our existing fleet and in our order book. As we generate more free cash flow through the initiatives, as we unlock that embedded value in our order book and in the existing fleet, that produces that free cash flow. You work within that framework to be able to allocate based on those three priorities that I. Do you think you stay net cash? It's something that we're looking at, right? I think that we're going to make sure that we have a strong and efficient investment-grade balance sheet. I think over the next coming couple of months, we'll give you a little more specificity on exactly where we want to be. I know we're getting over, but just last couple of things. Some talk about adding more international routes, Europe. Is that likely timing? Is that in the numbers we've been given already? Yeah. You probably saw in the news some Open Skies. We've been flying international for a long time now, almost a decade. That's something that gives flexibility. It's a framework that we can work in. Speaking of frameworks, it's a framework that we can work in for the ability to be able to fly international. You asked a question earlier to the pilot panel about the ability to continue to expand the network, right? That has to be something that we continue to look at, right? Is whether that is something that is going to be accretive to the business as we look at the different product elements that we're using to enhance what we're doing. Okay, great. And then just lastly, I'm giving everyone a chance. We touched on a lot, but anything we didn't touch on or anything you want to emphasize, just make sure people in the room understand about Southwest. Yeah. I am really excited about what we are doing. The pace with which we are doing it, the thoughtfulness, the execution that we have seen, we are running a really, really good operation, right? Really, really good. You look at the Wall Street Journal rankings, those come out just once a year, but we track that portfolio of rankings and we have been number one in those rankings. The overwhelming majority of when you look at a net promoter score, right? How satisfied are you? The overwhelming majority of that score comes from running a reliable operation. We are absolutely doing that better than anybody right now, which is great. Between that, that sets the foundation and all of the things that we've been talking about here, all these initiatives that are rolling out, and the fact that the wait and see, that the wait now is just around the corner. We're six days away from the next big milestone as we launch Basic Economy and as we launch bags. We're moving into the seat assignments and the extra legroom as we get throughout the year. There is more to come. It's a really exciting time to be at Southwest. The team is just incredible, I think, in executing. One last thing that I'd like to do, if you'll let me. Be quick, yeah. Is just to recognize Julia. Julia is retiring from her role and has just been fantastic. Julia, I just wanted to make sure to thank you. This is Julia's last conference. I just wanted to thank you for everything that you've done and for the impact that you've had on Southwest. Thank you. Julia, a round of applause. Thank you for saying that, Tom. Thank you, Julia. Thank you. This was great. Appreciate it. Thank you. All right. Thanks all. Taking a quick break on the airline side, we have Curtis Wright coming in right now. Sorry, we ran a little bit over. This presentation has now finished. Please check back shortly for the archive.