Hello everyone, and welcome to the Southwest Airlines Third Quarter 2025 conference call. I'm Gary, and I'll be moderating today's call, which is being recorded. A replay will be available on southwest.com in the investor relations section. After today's remarks, there's an opportunity to ask questions. To queue up for an opportunity to ask a question, press star, then one. To withdraw your question, the command is star, then two. Now, Lauren Yett from Investor Relations will begin the discussion. Please go ahead, Lauren. Thank you. Hello everyone, and welcome to Southwest Airlines' Third Quarter 2025 earnings call. In just a moment, we will share our prepared remarks, after which we will move into Q&A. I am joined today by our President, CEO, and Vice Chairman of the Board, Bob Jordan, Chief Operating Officer, Andrew Watterson, and Chief Financial Officer, Tom Doxey. A quick reminder that we will make forward-looking statements, which are based on our current expectation of future performance, and our actual results could differ materially from expectations. Also, we will reference our non-GAAP results, which exclude special items that are called out and reconciled to GAAP results in our earnings press release. Our press release with third quarter 2025 results and supplemental information, including our initiative highlights, were both issued yesterday afternoon and are available on our investor relations website. I am pleased to turn the call over to you, Bob. Thank you, Lauren, and thanks everyone for joining us today. The third quarter was another story of continued strong execution across the board: operational reliability, cost discipline, and the delivery of initiatives against our transformational plan. Southwest Airlines continues to transform at a faster pace than ever before, and I'm pleased with the results of our strategic transformation that we saw during the third quarter and the quality of the initiatives delivered. Both costs and revenue finished meaningfully ahead of expectations, and the rollout and impact of our initiatives remain firmly on track. We began selling assigned and extra legroom seating in July, a major milestone for our customer experience and product changes. The rollout was smooth, and while still early, we're right on track with our expectations, and we're already seeing a 4% improvement in customer Net Promoter Score on aircraft with this new configuration. Additionally, we have continued to launch new products and services, showing our commitment to meeting the needs of our customers and our ability to execute quickly. Starting tomorrow, we will be offering free Wi-Fi, sponsored by our partner T-Mobile, for our Rapid Rewards members. We continue to roll out our updated cabins with larger overhead bins, in-seat power, upgraded lighting, and more. We expanded our distribution channels, launching a partnership with Priceline. We launched our new in-house vacation product, Getaways by Southwest. We announced a new partnership with EVA Air to provide customers more connection opportunities. We announced new markets, including the additions of Knoxville, Tennessee, St. Martin, Santa Rosa, California, and our first-ever flights to Alaska, servicing Anchorage, all to start in 2026. We aren't done. While we don't have specifics to share today, we're actively looking at continued changes to widen our product offering for our customers, provide additional premium revenue opportunities, and further enhance our Rapid Rewards loyalty program and co-brand economics, including things like premium seating, airport lounges, and long-haul international destinations served by Southwest Airlines. Our customers are responding to these enhancements. Our brand Net Promoter Score has returned to the levels seen prior to our policy changes announced in March, and we are excited to deliver further enhancements as we improve the customer experience. Our strategic plan continues to progress well, and we're encouraged by the sustained outperformance of bag fee revenue and the momentum across other key revenue and cost initiatives. We saw a clear, positive inflection in the demand environment beginning in early July, which continued throughout the quarter, and we are proud to report record third-quarter revenue performance. Looking to the fourth quarter, we expect to deliver an all-time quarterly record revenue performance. We maintain strong cost discipline across the organization, significantly beating our CASM-X guide for the quarter. We have identified additional cost-saving opportunities in the back half of the year and remain confident in our full-year EBIT guidance range of $600 million - $800 million. We are entering the fourth quarter with confidence and anticipate meaningful margin expansion as the benefit from our initiatives continues to mature as we execute our transformational plan. Our people delivered a strong operational performance throughout the quarter. Their dedication, their resilience, and the world-class hospitality continue to set Southwest Airlines apart. We've made measurable progress across nearly every key operational metric since January, and we continue to lead the industry as we track our performance against the Wall Street Journal Airline Scorecard. These results stand out even more given the hurdles that we've faced, including summer weather, ongoing ATC constraints, and the full rollout of reduced turn times across many of our stations, and it's a testament to our operational excellence and the heart of our company. While we're not providing 2026 guidance today, we're excited about the opportunities ahead and confident in our strategy. In 2026, we expect to recognize even greater benefits from our portfolio of Southwest-specific initiatives, including a full year of revenue from bag fees. We expect to deliver more than $1 billion of incremental EBIT from assigned and extra legroom seating in 2026 and hit a full run rate of approximately $1.5 billion in 2027. We will continue to be disciplined in our cost execution across the organization and expect that momentum to continue into 2026. It's just an exciting time at Southwest Airlines. We're transforming faster than ever before, and the momentum is real. With that, I'll turn it over to Andrew to share more on our revenue and operational performance. Thanks, Bob. I want to echo Bob's appreciation for our people. Their hard work and commitment enabled us to deliver an outstanding operation this quarter, even in the face of early July weather challenges. We've come a long way over the past couple of years, working to enhance processes and technologies to improve daily operations and better manage disruptions. A great example of this was in September, when an external telecommunications issue in Dallas impacted radar, radio, and computer systems, triggering FAA ground stops at local airports. Despite our significant presence at Dallas Love Field Airport, we had just one cancellation, finishing second among all U.S. airlines for the day, including many that weren't directly affected by the issue. Our teams, particularly those in the NOC and at the station, responded quickly and effectively, keeping our operation running smoothly and reliably. We know reliability is one of the biggest drivers of customer Net Promoter Scores and a primary driver of loyalty, so it's critical that we continue to innovate and invest in both our operation and our people. The demand environment inflected up in early July and sustained momentum throughout the quarter. The improved demand environment and our execution of our initiatives contributed to our record third-quarter revenue and to be in the midpoint of our third-quarter guide, with RASM coming in at up 0.4%. Even with increased capacity from our strong operational results and our ability to prolong the filling of the six to-be-removed seats on our 737-700 aircraft, we were pleased to see load factor up year-over-year in August, September, and so far in October. Corporate travel demand improved sequentially, with a particularly strong September where we saw multi-point passenger growth. We're also seeing great traction with our loyalty program and co-brand credit card enhancements, which align with our new product offerings and incentivize everyday spending. Third-quarter loyalty revenue was up 7%, and we saw double-digit growth in co-brand card acquisitions year-over-year. Our recent 100K point promotion saw the highest acquisition activity in over five years, signaling that these enhancements are resonating with customers and driving increased engagement. Looking ahead to the fourth quarter, we expect RASM to be in the range of up 1% - 3%. This outlook assumes the positive inflection in demand we've seen across the industry since early July remains at current levels through the end of the quarter. It also reflects the planned acceleration from our initiatives, the approximate two-point year-over-year increase in fourth-quarter capacity since July, and the recent observed impact of the government shutdown. To the extent that demand strengthens beyond current levels, it would provide upside potential to our full-year EBIT guide of $600 million - $800 million. We're planning for fourth quarter year-over-year capacity growth of approximately 6%, which compares to a relatively low base in fourth quarter 2024. Compared with fourth quarter 2023, planned capacity is up about 1%. This capacity level now contemplates further pushing out the retrofit timing of our entire 737-700 fleet to be completed in January without any impact to the planned operate date for seat assignments and extra legroom seating on January 27th. A big shout-out goes to our Tech Ops team for streamlining the timeline to complete this work, allowing us to capture additional revenue on those six seats during the entire holiday period at almost no incremental cost. On the product side, we launched the sale of assigned and extra legroom seating on July 29th. While early, bookings are in line with our expectations. We're seeing strong interest from customers, and the trends are encouraging, including demand for our new products, fare product buy-up, and ancillary seat sales. These offerings are helping us differentiate and enhance our products and drive incremental revenue. We feel confident in our ability to deliver more than $1 billion of incremental EBIT from assigned and extra legroom seating in 2026 and hit a full run rate of $1.5 billion in 2027. We're proud of the progress we've made and excited about what's ahead. With that, I'll turn it over to Tom. Thanks, Andrew, and hello everyone. As you've heard from both Bob and Andrew, our initiatives are on track for this year, and we expect further acceleration and contribution from these initiatives into the fourth quarter and into next year, according to our plan. As you know, our continued performance on costs is a key element of our transformation, and I am pleased to once again report that we delivered strong cost performance this quarter, with CASM-X coming in at up 2.5%, beating the midpoint of our guide by two points, a strong beat with or without the capacity increase we saw in the quarter. We continue to see broad-based cost discipline across the entire business. I should also emphasize that this is more about spending smartly than it is about simply cutting costs or simply pushing costs forward, as evidenced by the customer, technology, and operational investments being made across Southwest Airlines. This was a company-wide effort, and I want to thank our teams for their focus and execution. Looking to the fourth quarter, we are expecting strong continued cost execution, with CASM-X up in the range of 1.5% - 2.5%, on capacity up approximately 6%, both on a year-over-year basis. Excluding the impact of expected book gains from fleet transactions in the fourth quarter of both years, which gives a more accurate view of the cost performance of the underlying base business, we expect CASM-X to be in the range of flat to up 1% year-over-year. Turning to fleet, Boeing continues to hit their delivery plan, and we've increased our 2025 delivery assumptions from 47 to 53 Boeing 737-8 aircraft. We received eight aircraft deliveries in the third quarter and retired 16 aircraft from our fleet, including the sale of one 737-800 aircraft and plan to sell four additional 737-800 aircraft in the fourth quarter. We will continue to be opportunistic as we evaluate potential sale transactions from our existing fleet. We continue to expect full-year 2025 capital spending to be in the range of $2.5 billion - $3 billion, which includes the additional aircraft deliveries expected this year, as well as the expected proceeds from aircraft sales. We finished the quarter with $3 billion in cash, in line with our liquidity target of $4.5 billion, including our revolver, and with a gross leverage ratio of 2.1 x, within our target range of 1 to 2.5 times. We also executed an accelerated share repurchase program in the amount of $250 million under the previously announced $2 billion authorization. We intend to continue opportunistically repurchasing shares based on market conditions. This reflects our continued confidence in our strategy and our commitment to returning value to shareholders. Overall, our third-quarter performance was ahead of our expectations for cost, revenue, and net income, which is another key milestone as we execute our transformational plan. We are managing costs well, executing our initiatives, investing in our product and customer experience, running an industry-leading operation, maintaining a strong and efficient investment-grade balance sheet, and we remain confident in our ability to achieve our full-year EBIT guide of $600 million - $800 million. With that, I'll hand it back to Bob. Thanks, Tom. As we wrap up, I want to leave you with a few key thoughts. First, the pace of change at Southwest Airlines is accelerating, and at the same time, our execution has never been stronger. We're transforming our product, enhancing the customer experience, and delivering meaningful financial improvement, all thanks to the incredible work of our people. Second, we're confident in our ability to hit our fourth quarter and our full-year guides. We built a strong foundation, and our initiatives are ramping as planned. The operational rollout of assigned and extra legroom seating has been smooth, and we're seeing encouraging early results. Third, we're not stopping here. We've continued to evolve our product, expand our network, and lean into the customer experience. Free Wi-Fi for Rapid Rewards members starts tomorrow. New markets are launching, and we're building momentum across the business. While we aren't ready to share specifics just yet, work on the longer-term strategy to meet evolving customer preferences is well underway. Finally, I want to thank our employees once again. Their excellence and hospitality are unmatched, and they are the driving force behind our success. It's a very exciting time at Southwest Airlines. We're executing with urgency and purpose, and we're confident in the future we're building and the benefit it will provide for our shareholders. Thank you all for joining us today. With that, I'll pass it back to Lauren to start our Q&A. Thank you, Bob. This completes our prepared remarks. We will now open the line for analyst questions. We would like to get to as many of you as possible, so we ask that you please limit yourself to one question. We will now take the first question. Thank you, Lauren. Again, to ask a question, press star, then one. To withdraw your interest, press star, then two. If you are on a speakerphone today, please pick up your handset before pressing the keys. Our first question today comes from Conor Cunningham with Melius Research. Please go ahead. Hi, everyone. Thank you. I was hoping you could frame up the sequential improvement that you're seeing into the fourth quarter versus what you were messaging in September. I'm just trying to understand the building blocks there. I realize that capacity is a little bit higher, but I think you knew that was going to be happening. If you could just talk about specifically around the new initiatives, is that still two points, and does that carry into the first quarter of next year? Thoughts around the moving parts on unit revenue. Thank you. Yeah, Conor. Hey, Bob, I'll give you a start. I think it's pretty simple, and it's a couple of things. We have the two points of added capacity that you referenced, and that's just delaying the retrofits of the 700s into January. That allows us to fly those extra six seats through the holidays and just capture extra revenue in peak demand periods. Real proud of our tech ops folks because they can get all those retrofits done now in January. That's the two points of capacity. We've got two other points, and it's really, we just chose to not assume that the macro would inflect further from where we are. You heard we had a solid inflection in July. That has maintained itself, but we didn't want to assume further macro inflection simply because you've got some uncertainty, and in particular, it's the uncertainty around the government shutdown, its impact, and obviously its duration. We felt it was prudent to guide, assuming that things are stable from here, but that the demand does not inflect further. On the RASM front, you've got a tailwind as the initiatives continue to kick in. All of the initiatives are on track. They're on track from a benefit perspective. They're on track from a timing of delivery perspective. It's really just those two points of not assuming that the macro would continue to inflect further. Yeah, and I'd say, Bob, we've seen past government shutdowns, right? We know what happens when they go on. First, you see government travel goes to zero very quickly. Next, it goes to government adjacent, then overall business travel, then leisure travel, as we saw in 2018 and 2019. Obviously, like everyone else, we experienced the government stopping travel very quickly. Last week, we did see government adjacent. This is state and local governments depending upon government reimbursement. These are defense contractors. These are companies that kind of do business with the government. They held up until last week, and they went down sequentially. View that more as a canary in a coal mine. It's not material numbers that we're talking about between those two categories of observed, but we know what happens in the future. If you're uncertain about when the government shutdown ends, that makes you less able to assume an economic inflection. It all is tied up, I think, in when the government shutdown ends. Conor, just to last, you know, kind of maybe connect your tangent to that is, you know, either way, whatever happens to the macro, whatever happens with the shutdown, we're committed to hitting our 2025 reaffirmed EBIT guide. We're not sitting around waiting for the macro to show up as an example. We're going to continue to press on other areas, in particular cost, like you saw us press and beat on CASM-X in Q3 to just, you know, add more assurance around meeting that full-year guide. I wouldn't take that as we're just waiting to see. We're absolutely working proactively to put some insurance around the guide, irrespective of what the macro does, what the government shutdown does. Am I allowed to follow? Can I just follow up to that? Just on, I guess the pushback that I've heard is that basically you've added two points to incremental capacity, and it's basically, it's almost like that's almost a zero revenue contribution. I mean, you're going to get natural uplift in overall growth. Maybe you could just frame up why was it the right decision to add that incremental growth. I understand that there's a cost benefit. I would have thought cost would have moved down a little bit more. Just how you're balancing that in general on that decision. Thank you. Sure. First of all, it's an EBIT guide, not a RASM guide. It did imply a RASM, what you're asking about. The decision, because the tech ops team has been much more productive, we will be doing them faster. When you do it faster, it overall costs less money. It also, that lower number shifts into Q1. For the seats, there is incremental in the high periods during the holidays. We did this late in the curve, so you won't, the non-holiday portion won't benefit that much. It is very RASM dilutive, but it's very EBIT accretive because that little bit of revenue plus the cost going down make it EBIT positive to do that, which is what our guide was about and what our objective is about, is EBIT, even though it will make RASM look unflattering in Q4. That was the decision-making behind it. Okay, thank you. All right, Conor, thanks. The next question is from Mike Linenberg with Deutsche Bank. Please go ahead. Yeah, hey, good morning. Just some questions, maybe Andrew or Tom, just some stats on some of the initiatives, even rough numbers. You know, what we could see in the quarter, we did see an inflection on at least connections. It looked like your entertainment outpaced passengers, and you know, presumably that helped your load factor, which was much better this quarter than where we were in the beginning of the year. Also, on the basic economy rollout, what are you seeing on the buy-up? You know, I think there was a point where maybe the majority of Southwest tickets were sold in the bottom fare bucket. I suspect that that's been moving up. Any color stats that you can provide on some of the initiatives that you put in with respect to those? Thank you. Yeah, I'd be happy to. Yes, as I mentioned in my prepared remarks, we did see, as we had predicted, that load factor would inflect positive post-summer. August, September, and October had year-over-year increases in load factor. That came from the enhanced connectivity we talked about. It came from the third-party channels, and also I think some of the basic rollout, which allows you to have a more segmented offering, which means your highs get higher and your lows get lower. That allows for good targeted volume. We're on track as far as that goes of switching from yield driving our RASM to load factor driving our RASM, which is what we indicated earlier in the year. As far as the buy-up, the buy-up out of the bottom basic, we need that to inflect really positively with seats. In the interim, we have improvements that go about mid-single-digit points of increase in optional buy-up. Those who decide to buy up to the second, third, or fourth, we did see good traction with that. The big step up will come in Q1, but in the interim, it is a positive move. From a financial standpoint, everything's on track for the initiatives. Everything that we're seeing for assigned seats and extra legroom is very much on track. It's still relatively early for the late January start for operating that, but all the data that we have so far shows that that's still on track. The other suite of initiatives, as Bob said, is also on track. If you look, just sort of getting into maybe granular what Tom was saying, it's early. There are limited bookings in place post-January 26 when the bookings started for travel for the new assigned seating, extra legroom. Both volume and the mix of fare products is what Andrew was referencing. Basic should fall further as an example. What we're seeing in terms of ancillary seat buy-up, all of those things are encouraging and on track. It's early, but I'm really pleased with that. While we're not literally selling extra legroom for assigned seating, we're selling it for after January, but we have aircraft out there that have the extra legroom retrofit configuration. Folks flying on those aircraft, we have more than 400 converted, are giving us a four-point higher Net Promoter Score than those without. That's without being able to book yourself into extra legroom. They're flying on an aircraft that has that section reconfigured. That's very encouraging as well from the customer experience perspective. To put an exclamation point on that, Bob, we see literally a knife edge on January 27 in our bookings of pre-imposed assigned seating. We see a knife-edge yield improvement. Clearly, customers are voting with their wallet as well as the surveys that they like assigned seating, extra legroom. What is great this time around versus bags, where we started selling and operating on the same day and then you were ramping up from then, is we've been selling the assigned seat and extra legroom since July. When we hit the end of January, we'll effectively be at that run rate. Fantastic. Thanks for answering my question. The next question is from Savi Syth with Raymond James. Please go ahead. Hey, good morning, everybody. If I might, just on the initiatives and kind of the unit revenue trends, ask a little bit of a question on how we should think about, as you head into 1Q, just not assuming any kind of demand environment change, just based on that initiative ramp-up and capacity plans. How should we think about the progression of year-over-year RASM? Not looking for a guide, just trying to understand kind of the magnitude of how that moves from 4Q to 1Q. Yeah, so what we have talked about is a $1 billion number for the extra legroom and the seat assignments. As you think about the other initiatives, by and large, by the time you get to 1Q, those will be approaching run rate. There are some of them that still have some ramp that occurs during the first half of the year. The loyalty program, for example, continues to ramp along with the benefits that come with seating. I think you can think about it in those terms. You're right, we're not guiding 2026 yet, but that $1 billion number that we've talked about for next year and the ability for that to then grow to $1.5 billion as we move to the following year is still very much intact. If you look at Q1, capacity is already published. We're not saying it's final, but we know that when we publish, we don't move it that much. It's a modest year-over-year increase. We have not, we will still be lapping our load factor initiatives that started really in August and beyond. That benefit should still carry on into Q1. As I mentioned, the knife-edge improvement yield starting 127, coming from seat fees and buy-up to extra, to higher fare products. Those, I think, three combinations of low capacity growth, load factor improvements going and still tracking, and extra yield makes for an interesting Q1. For the full year, I know we're going on a long time about this kind of combination of what both we're talking about. If you just take the midpoint of our guide that was reaffirmed for EBIT for the year, $600 million - $800 million, and then you stack on top of that the $1 billion that Tom referenced around the benefit of assigned seating and extra legroom, and then you stack on top of that the incremental value of a full annualized year of bag fees, which I think is roughly $700 million, and then we have obviously rewards improvements and a number of other initiatives that are all maturing. It just gives you an idea of the EBIT stack for the year. Certainly, we're not guiding 2026 today, but it just gives you an idea of how to think basically about that EBIT stack. That's helpful. Thank you. You're welcome. The next question is from Sheila Kahyaoglu with Jefferies. Please go ahead. Good morning, and thank you for the time. Maybe if I could ask on just if you could fill in the details on the corporate growth, how you're thinking about that filtering into your sales numbers and changes on that growth formula going forward, given you're selling forward into January and you're seeing a knife-edge in that yield premium coming through. Yes, the corporate for the new year is extraordinarily low right now, so I wouldn't give a read into that. I will say for Q3, corporate sales for future travel, kind of excluding the government, inflected up to a plus 5% year-over-year. We're seeing corporates improving. Our trip growth was down. It was actually, we shrank trips where our competitors increased. Normally, since corporate is schedule-sensitive, not price-sensitive, that should have led to kind of a reduction in share, and we didn't necessarily see that. We see good, solid trends with demand for Southwest business. We expect, as you hint at, in Q1 with assigned seating, that will unlock additional growth. Right now, through various different measures, we think our domestic managed business share is in the mid-teens, which is below our overall capacity share, and we think extra legroom assigned seating should give us tailwinds in our corporate share, and that is not quantified to the numbers that we just gave you. Great. Thank you. My pleasure. The next question is from Jamie Baker with JPMorgan. Please go ahead. Hey, good morning, everybody. I suppose the definition of sell-side insanity is asking the same question over and over and expecting a different response, but here it goes. Fourth quarter RASM guide, up 2% at the midpoint, but all of the tactical improvements, the bag fees, loyalty, some slight credit noise, that's what, eight points of benefit. That suggests RASM at your core, excluding the good stuff, is down mid-single digits. Why is this not the right way to think about it, that the core is deteriorating, but new initiatives are making up for it for now? Of course, that could prove challenging when you begin to anniversary those initiatives. Yeah, I don't know where you're getting the eight, Jamie. I apologize, not following your math. You did mention the flight credits. The way the flight credit breakage works is that when customers cancel a flight and it drops to a residual travel fund, then those break prospectively. The breakage rate changing is not something that you will see changing until next year. We expect 2026 to have to show breakage benefits from the change in policies. That one's coming. The bag fees obviously are a, let's call it a three-point benefit year-over-year. Sequential is less than one because most of the policy was already in place for Q3. We do have on a year-over-year basis, if you're doing that, our stages engage is growing year-over-year, whereas our competitors, that's going down as they restore to regional. That's about a two-point headwind for RASM if you did normal stage length adjusting. I'm just not getting your eight. If you walk us on it, maybe we can answer it. Let me ask it differently. In the fourth quarter guide, how much, what is your initiative RASM then? If we take, so whatever your answer is, maybe it's + 3%, maybe it's + 11%. I mean, it's not going to be, but whatever the initiative-related RASM contribution is, shouldn't we think of the difference relative to the 2% midpoint as the core? Is that deteriorating? I think if we look at, I'm not sure, maybe Tom can help with the initiative stuff, but if you look at others' domestic main cabin, which is clearly not their strongest, our domestic, you can look at us as a proxy for a pure play domestic main cabin. We see sequential improvement, and theirs doesn't necessarily imply that either. As far as the core, you look at our core customers, as we mentioned, we see our credit card applications have accelerated with the new products and the new features. We're seeing Rapid Rewards signups accelerate, and we're seeing the kind of our road warrior travel also improve. Our core customers are responding back. Our brand, our Net Promoter Scores from our customers did dip post-year conference and kind of went to the bottom in June and now have returned to where they were pre-year conference. All the kind of telltale signs of the micro level show our customers increasingly engaged, increasingly using Southwest Airlines, whether it's a credit card or traveling with us. We see good trends in the core. Yeah, maybe what I'd add there, Jamie, as well, is as far as where you draw the line between an initiative versus the base business, it's not always a clear line. We knew as we announced, actually at your conference, several of these initiatives that there would be an offset. As we guided these things, we guided them, and we gave estimates for some of them. We guided those or gave those estimates as a net. It's not always a clear line on where you draw it between base business or the initiatives. A quick second one for Bob. Thank you for all that color, by the way. In that lounge survey that you sent around, Southwest used the word hub for what I think might be the first time in history, and correct me if I'm wrong. What do you consider your hubs to be? I guess I could just look at some base level of departures, but that doesn't necessarily speak to connectivity. I think that's just word choice rather than intended to imply some kind of strategy change or change the way we think about cities. We have, depending on how you count them, roughly 15 to 17 what we call mega cities. They do some things that traditional hubs do. They have what we call intentional connections or banking opportunities throughout the day. They are not full banks, but they also have a lot of non-banking, banking of aircraft activity. Those intentional connections are just to drive connectivity across the network. I wouldn't confuse that word choice as any change in Southwest Airlines' network strategy. Now, back to the survey, obviously, if we were to choose to go forward with lounges, and we've been talking about where do we go next strategically to continue to widen our offering for our customers, to continue to widen our offering of things that they desire at a particular premium, and then how do we do all that to impact the economics of the Rapid Rewards program and the co-brand card. We're looking at what would our customers want in a lounge, where would those lounges be located relative to where we have strong passenger strength and demand. That's really what it was about. We're hopeful to, and this work is not just thinking about it. There's active work in terms of developing the next strategy, and I'm hopeful to be able to lay parts of that out early in 2026. Yeah, I think, Bob, to put a point on that, if you domestic prism, if you index that to 2018, we're getting very close to our competitors here in Q3 and Q4, maybe close the gap. Where we have still a gap is the other revenue. Our credit card hasn't done as well as others in recent times. Credit cards these days, you've probably seen from your own bank and from other newspapers that it's driven by high-end, high-fee credit cards that come with lounge access. Our gap in RASM is turning into now more the quote "other revenue" driven by high-end credit cards. That's what drives us to look at it, as well as the customer desires that Bob talked about. The next question is from Catherine O'Brien with Goldman Sachs. Please go ahead. Hey everyone, thanks for the time. Maybe just a quick first one on shareholder returns. Can you walk us through how you think about the guardrails of shareholder returns? You know, you're within your one to two and a half times leverage target, 2.1 times at the end of 3Q. How much headroom do you want to leave yourself on the high end of that leverage target, given there's still some uncertainty out there? I do have one quick follow-up. Yeah, thanks for the question, Katie. As we look at that, it is, I think, important to us that we do leave a little bit of headroom there, knowing that there's some uncertainty out there. As we look at that range of the one to two to two and a half, we continue to believe that keeps us squarely in the investment grade and strongly within investment grade. We've got the $3 billion plus $1.5 billion revolver liquidity target as well, which we were right on for the quarter. As we think of shareholder returns, it's about ensuring that we're staying within those guardrails and that as we look at the variability that might be there within the guide, we leave room to stay within that under those different scenarios. Okay, great. I had to laugh at Jamie's sell-side insanity, but I'm going to keep going down the path, so forgive me. I think it just may be helpful to understand a little bit more as we think about next year and the initiative ramp this year. Maybe just a question on the EBIT target, rather than RASM super specifically. You reiterated your EBIT target from last quarter, but fuel is down a bit and capacity is a bit higher. Are you able to share the EBIT contribution from the initiatives that you already booked in third quarter and then what you're incorporating in fourth quarter? How much of that fourth quarter figure is already on the books? Thanks so much for the time. Thanks, Katie. I don't know that we'll go into that level of detail with it. I think Bob laid it out pretty well as far as the initiatives that we have this year and the increment that we expect to see next year. Yeah, I think you can think of the, I believe the bag, you know, the largest, of course, right now is bag fees. That sequential incremental improvement from third quarter to fourth quarter's contribution is about a point. A little bit less. Maybe a little bit less than a point. Obviously, as you get into 2026, all of the EBIT associated with assigned seating, extra legroom is fully, there's nothing today. It's a fully 2026 value that then wraps to $1.5 billion in 2027 as it matures. You've got some smaller things, as Andrew talked about, you know, the Rapid Rewards optimization, flight credits, which that will come home as they break, which tends to be later. We'll lay all that out as we, you know, as we stack up the EBIT guide for 2026. We're just not ready to do that today. Yeah, and then there's, of course, the continued cost savings as well. I think your question was a little more focused on the revenue-related initiatives, but we've got the cost initiative that will continue to ramp up and is also on track for next year. The next question is from Brandon Oglenski with Barclays. Please go ahead. Hey, good morning, and thanks for taking the question. Tom, maybe I'll just follow up there. You guys did reiterate $4.3 billion, I think, in total initiatives next year, but you guys keep talking about the $1 billion from assigned seat and premium. I get that. Maybe can you talk to the totality of the $4.3 billion? Is that still valid? I want to keep it to one question, but I guess two parts here. Can you give us a better understanding of how the buy-up process is working today in the fourth quarter, and then how that potentially changes from like a basic fare to a plus fare just based on seat assignments and premium availability? Thank you. Thanks, Brandon. I'll start, and then Andrew will take the second part of your question. The $4.3 billion is very much still intact. We've talked about $780 million or so in cost savings. We've talked about $1 billion that would come from bag fees. We've talked about $1 billion that would come from extra legroom and seat assignments, which we'll start operating in January. We've got the earn and burn on the frequent flyer. We've got the amendments that we've made and the enhancements that we've made to the Chase agreement. All of these things stack together. What's great is we're seeing these continue to be on track as we're ramping through this year, especially as we get into the fourth quarter and into the first quarter of next year, as you see these continue to ramp. Yes, very much still intact for the $4.3 billion. As far as the buy-up process goes, right now, the buy-up process is mostly about flexibility. Going from basic to choice, the primary differences are flexibility and Rapid Rewards accrual that kind of entice customers to buy up. The very highest kind of entry fares are no longer basic. If you think about a $350 fare as an entry point for a flight, that's not basic because it's a pretty high fare to be basic. All that to say that about 80% of our tickets were one getaway last year, and a little bit less than 50% are buying basic. A portion of the remainder are people who have choices like a standalone. That's the first entry point for them. Then you have, as I mentioned, a mid-single-digit composition increase of those who voluntarily, who are presented with a low fare and can buy up for the additional features. That is a mid-single-digit increase right now. When we go into next year with seat assignments, that is much bigger. The booking curve is such that people who buy early are generally less elastic. As the booking goes along, you have more elastic demand. At the end, it's also, again, inelastic. Right now, we're seeing strong buy-up and fare products in the kind of Q1 period with seat assignments. We expect, as we get into the meat of the booking curve for Q1, that we have more and more seat-only sales that people add in as well. That composition will mix a little bit. Given the different entry points customers have into it, it is all about giving choice, as our fare product indicates. That has led to, as I said, a quite strong increase in yields this far in the booking curve. I think the other thing to note, I know we've said many, many times, is there are so many transformational initiatives that are underway. Between what we laid out in September, a little more than a year ago, and what we laid out in March, all of that stuff is complete. The only thing that is still to come home is the operation of assigned seats. We're selling those, and that huge change has been really, really smooth. Number one, everything that we laid out as a contributing initiative is done. Second, done as in high quality, ready to go, and on time, and is expected to, or already showing signs that it's contributing the value that was expected, or in the case of bags, even greater. You've got initiatives on time. They'll start as planned, and they are in line right now to deliver the value that we expected. We have high confidence in both the total value of EBIT to be delivered through initiatives, and then our EBIT guide in the fourth quarter of this year for the full year, and then the EBIT guide that we'll put in front of you in 2026. The execution of all this has just been stellar. Thank you. The next question is from Duane Pfennigwerth with Evercore ISI. Please go ahead. Thank you. I'm going to keep it to one. I think we're struggling a little bit with that request. I assume some of these initiatives have a learning curve associated with them from a revenue management perspective. I wonder if you have any anecdotes about early learnings or tweaks you have made since the early rollout. Maybe some of these items were disruptive initially, but are settling down as we get more fully baked into the booking curve. Yeah, certainly. I think Tom made a good contrast of bags and basic was kind of all at once because you started selling and operating right away, whereas assigned seats, we have a long run-up to it. We mentioned last time that we saw a customer reaction to bags and basic, which affected the third quarter by 1%. That since has been resolved, and that basically comes down to, you know, you have a much wider set of price points. As an earlier question implied, the number of people who buy in just your lowest entry point used to be so high, and now it's a lot wider. You did see different reactions from customers in June and July. As they've learned it, we saw that stabilize by mid-July, and the customers are kind of buying like normal, if you will, for that. I consider that all the revenue management stuff doing very well on that. For Q1, we have a long run-up, and the tweaks are small in nature. As you're looking at, you know, who buys a seat only, who buys the buy-ups, tweaking those, high demand, low demand flights, we have a long runway to do that. We feel very comfortable about how that's going. There still is an overall ramp-up in that. In my prepared remarks, I told you the 26 number and the 27 number, the difference is an implied ramp-up in the value. To the extent we go faster, obviously the number gets bigger next year. Yeah, I think that's a really important point. Andrew, I don't want, sorry, just to say the same thing you just did, but I want to make sure everybody hears that the $1 billion contribution from assigned seat and extra legroom next year contemplates time to do exactly what you said, which is ramp up the value. You know, some of these things like seats are dynamically priced, learn, tweak, and so the $1 billion contemplates a ramp-up time versus we've got a guide for EBIT for that initiative, and there's risk because there's going to be ramp-up. That's actually contemplated in the value that we've given you. Keep it there. Thank you. Thanks, Duane. The next question is from Chris Stathoulopoulos with SIG. Please go ahead. Good morning, everyone. Thanks for taking my question. I'm going to be compliant as well here and keep it to one. United gave a CASM-X algo last week over the midterm to help us think about all the moving pieces here as it relates to capacity and their investment here in the product and other areas here. I realize you're still in your budgeting plan for next year, but any thoughts on how we should frame that, whether you want to describe that as your mid to long-term algo versus what you've given, I guess, your guide on low single-digit capacity over the midterm? I just want to understand the moving pieces around that, and I think we can all do the math on the EBIT side and what that might mean for unit margins and things like RASM. Thanks. Yeah, you're right that we're still working through the planning process for 2026. At our next call, we'll have more detail on next year. What you've seen from us is strong cost performance, quarter after quarter. We had a strong beat this last quarter with or without the incremental capacity that came from operating the 700 seats. It was broad-based. There's work that we're doing on small things and discretionary spending. There's things we're doing on large things around supply chain and optimizing our retirement plan and the component maintenance work that goes along with that, the way we're looking at real estate and technology. We're looking everywhere. We've talked about being on track this year, next year, and to the $1 billion in 2027 for the cost savings initiatives that we have. That will roll in. Again, we'll put that into the context of 2026 at our next call. Thank you. The next question is from Scott Group with Wolfe Research. Please go ahead. Hey, thanks. Good morning. When I think about the billion aid of initiatives this year, the guide has $300 million of incremental EBIT. Call it a $1.5 billion gap. Do you think we should contemplate something similar next year with a sizable gap between the initiatives and the actual EBIT? Is there a reason to think the gap widens? Could the gap potentially go away? I guess you're not ready to give 2026 guidance, but just at a high level, how do you think about that gap and how that develops into next year? Yeah, Scott, you're right. We're not ready to guide 2026. The gap is simply the macro and what happens to the macro inflection, like we talked in Q2. We were down sort of from where we thought the beginning of the year we would be. We were down roughly six points. We've seen, obviously, some of that come back. I think absent maybe the uncertainty of the shutdown impact, there would be more certainty that continued macroeconomic inflection would continue. You've heard some others say that that macro inflect back is going to be completely back to pre, you know, before the issues by the end of this year. You've heard others say close. You just don't know. I think that's really what the gap is. It's how much does the macro claw back the gap from where we thought we would start the, where we thought we would be when we started this year. We got down six. We've come back, you know, a material piece of that, but we're not all the way back. The other piece of it too, Scott, as you think about the initiatives, what we've done is we have put everything into the initiative bucket that we're doing to counter what would be sort of typical increases in cost in the business. As we move into next year, we've talked a lot about moving more to an EPS-guided range. Of course, everything nets into that number. We'll still talk about the initiatives and what they are and what they're doing. As we guide, likely we move more toward kind of an EPS range where everything is netted. As we talk about these initiatives, hey, this particular cost savings initiative, kind of in a year where we're not so initiative heavy with the transformation that we have, those types of things just find their way into the sort of typical efficiencies that you're building into your budget as you're moving forward. Don't confuse my word typical, of anything other than just talking about kind of standard budgeting practices. We're going to continue to be really focused on the efficiency coming out on the cost side. Thank you, guys. Appreciate it. The next question is from David Vernon with Bernstein. Please go ahead. Hey, good morning, guys, and thanks for taking the questions. Andrew, I'd love to kind of narrow in on that comment around the knife-edge improvement in yields with bookings for the assigned seating in January. Can you, is there a way to dimension it and to talk a little bit about how much of the schedule is sold at this point in time, whether the sell-through rate is being affected by the higher yields, or any additional commentary you can give us on what that knife-edge comment was would be great. Thank you. I apologize in advance. I'm going to do my best not to. Because it's early in the curve, this is our first time doing assigned seats and stuff like that. We have studied others. We've scoured for good industry data. We think we have good compares. Our models are trained on how we sell early bird stuff and upgrade boarding, so we think we have good context. I'm not going to give you the number because I don't know how long they'll persist through the booking curve. When you do see a knife-edge, it's clearly a change in customer reaction. You rarely see knife-edges, and when you do see a knife-edge, something happened. In this case, we see a disproportionate customer reaction to the ability to buy an assigned seat or to upgrade to a fare product that includes it. That gives us confidence that we will see a revenue-positive customer reaction as we go throughout the booking curve. It's just the amount being different than our business case is something where it's just too early for us to hint at. Thank you. Maybe just as a quick follow-up, Tom, I applaud the desire to get out of initiative jail here because the incremental math from this side is really tough to get to. If you think about the cadence of what you guys have in your initiative plan, can you tell us kind of what quarter we hit peak initiative? Is it Q1, Q2, Q3? Where in the way you guys have done the math around the initiatives do we get the max contribution from the initiatives? Thanks. Yeah, you know, of course, I'm not sure if your question is the quarter where most of the inflection occurs or if it's when you're hitting peak contribution from. Peak contribution from. Yeah, peak from would be, you know, tell me your time horizon. It should be the last quarter. We should continue to build and build and build on these. The big inflection that we have as we continue to move forward, of course, is what Andrew just described as we move into first quarter, where you have that big positive inflection where we've had a full booking curve to be able to sell into that. Again, contrasting that to what we did with bags. From there, it should continue to build. We have structured the amended Chase agreement around the attributes of this new program. As we have bags, as we have seat assignments, these are things that then you have entitlements to as you have the card. Bob talked about other, Andrew and Bob both talked about other things that we're looking at around the potential for clubs and what that might mean for the ability to buy up. The short answer to your question is tell me your time period, and it's going to be the last quarter of your time period. We're going to keep building. Now, I'm going to do exactly what Andrew and Tom probably don't want me to do. If you just sort of speculate on that, I think if given that if you just know how the booking curve works and where the meat of the booking curve is, you're through the meat of the booking curve for, you know, folks that are now booking the new products and assigned an extra legroom seating, I think that would tell you somewhere around early third quarter, that peaks would be my guess. I think you'll have annualized the ramp-up of the new voucher expiration policies, those kinds of things. The only thing that I can think of that will continue to ramp, obviously, is the policy changes, and then especially the changes in values of the card related to assigned seating benefits, boarding benefits. Those should continue to ramp all year as that causes customers to want to get the card, engage with the card, the co-brand card, spend on the card. I would think that initiative continues to ramp throughout the entire year. The big one, which is assigned an extra legroom seating based on the booking curve, that would tell me that somewhere around early third quarter, you get the peak value. Okay, thank you, guys. Thank you. The next question is from Andrew Didora with Bank of America. Please go ahead. Hey, good morning, everyone. Thanks for squeezing me in here. Maybe I'll ask a non-initiatives question here to close it out. Your fuel guidance in this environment was, you know, a little bit surprising. I know it's been volatile, but also West Coast crack spreads have been high for several weeks now. I guess, a quick two-parter here. One, Tom, just curious if you're able to give us what your exposure is to West Coast crack spreads. Then two, Bob, what levers do you have in your business that you think could help offset potentially higher fuel from your guidance? Thank you. Yeah, for us, West Coast is probably somewhere around 30 or so. Gulf Coast, we're probably more like about half or so of the exposure. On levers, not just fuel, you saw us really go to work and have what I think is really good cost discipline in the third quarter. That cost discipline is sustainable. It's not just shoving cost out to the future. We're going to work the same way in the fourth quarter, the first quarter, and the second quarter to do exactly the same thing. That is everything from just managing traditional costs and departments. We have some opportunities to continue to work on fuel efficiency, which obviously is material given the amount of fuel. We have efficiency work in a lot of departments that are back office. Everybody's throwing AI around, but it is the ability to automate transactions, that kind of thing. We're seeing good results there. We have large efficiency programs in the operation. Some of those take longer. My point is that this cost work is really across the board. It's every discipline within the company. We'll just keep working there. To me, that's the best insurance around whether it's fuel or the macro or the government shutdown impact or whatever it is. The best insurance around hitting our EBIT guide is to just keep putting manic pressure on cost and efficiency and continue to beat those numbers. Thanks for the thoughts. I'll leave it there. Thank you, Andrew. That wraps up the analyst portion of today's call. We appreciate everyone joining. Ladies and gentlemen, we will now transition to our media portion of today's call. Ms. Whitney Eichinger, Chief Communications Officer, will lead us off. Please go ahead, Whitney. Thanks, Gary. Welcome to the media on our call today. Before we begin taking your questions, Gary, can you please remind us how to queue up for a question? To queue up for an opportunity to ask a question, press star, then one. To withdraw your question, the command is star, then two. If you're on a speakerphone, please pick up before pressing the keys. We'll pause for a moment and then start answering your questions. Our first question comes from Robert Silk with Travel Weekly. Please go ahead. Good morning. What I wanted to ask is, during the last quarter, you talked about your checked baggage. You made about $300 million, you were estimating $350 million for this year. Is that number still on course, and the rate of checked bags, how is that weighing in compared to the industry and compared to expectations? Yeah, the financials are right on top of what we have been giving you and a little ahead of what we thought. It's still, you know, that's right. It puts the annualized contribution from checked bags at right around $1 billion. Yeah, the reduction in lobby bags, so checked bags is, Andrew can give you a better deep, it's about 30%. We are seeing a modest increase in gate checked bags, so gate, you know, bags that show up at the gate that have to be handled there. Overall, our bags are down and down materially. Okay, how does it compare to industry standard? It looks like our checked bag revenue per passenger is right along the same lines as the big three. It seems like it's a very similar rate that we're getting. Okay, thank you all. Thank you. This concludes our question and answer session for media. Back over to Whitney now for some closing thoughts. If you have any further questions, our Communications group is standing by. Their contact information, along with today's news release, are all available at swamedia.com. The conference has concluded. Thank you all for attending. We'll meet here again next quarter.