Southwest Airlines Company · NYSE:LUV
Southwest Airlines — Investor Day (December 2022)
42 slides from Southwest Airlines's investor day presentation, Dec 7, 2022
Slide 1: 2022 Investor Day
2022 Investor Day New York Stock Exchange December 7, 2022
Slide 2: Welcome Ryan Martinez
Welcome Ryan Martinez Vice President Investor Relations
Slide 3: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward-Looking Statements The Company’s 2022 Investor Day presentations and slides contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forwa
Slide 4: Presentation Bob Jordan
Presentation Bob Jordan Chief Executive Officer
Slide 5: Proven Track Record
Proven Track Record We have an unmatched record of financial performance in the U.S. airline industry, emerging from the pandemic with an improved competitive position Southwest has a proven track record of industry leadership, and its business model and Vision remain intact Southwest has improved i
Slide 6: Strategic Priorities Support our Purpose and Vision
Strategic Priorities Support our Purpose and Vision Our five strategic priorities remain unchanged through 2026 Purpose Connect People to what’s important in their lives through friendly, reliable, and low-cost air travel Vision To be the world’s most loved, most efficient, and most profitable airli
Slide 7: 2022 Focus Areas
2022 Focus Areas We focused on ‘the basics’ this year with a goal to stabilize our business, and we made significant progress in each area Get properly staffed • Expect to hire >10,000 net Employees in 2022 • Surpassed 2019 staffing levels in May 2022 Focus on our People and our Culture • Implemente
Slide 8: 2023 Focus Areas
2023 Focus Areas We are ready to move past ‘the basics’ of recovering from the pandemic as our business has stabilized, and we aim to thrive in 2023 Live our Southwest Way Values • We win when we support each other, serve others, and work together as a Team Build on our legendary Hospitality • Offer
Slide 9: Strategic Initiatives
Strategic Initiatives Our strategic initiatives are performing in line with expectations, and we continue to expect significant financial benefits in 2022 and 2023 Maintain our Win more Customers and grow revenue low-cost advantage New fare product Southwest and New Chase Business and Revenue co-bra
Slide 10: Diversity, Equity, and Inclusion
Diversity, Equity, and Inclusion Our Diversity, Equity, and Inclusion (DEI) goals are aimed at strengthening our Culture, and our Board of Directors set a goal to increase diverse representation by 2025 In 2020, we set the following Company goals: Key actions taken: Executive diversity • Formed cros
Slide 11: Environmental Sustainability
Environmental Sustainability We have made progress toward our goal to achieve full carbon neutrality by 2050 and continue to expect to achieve our near-term goals by 2030 Environmental sustainability targets through 2030: Key actions taken: Maintain carbon neutral growth to 2019 levels every • Publi
Slide 12: Presentation Tammy Romo
Presentation Tammy Romo EVP & Chief Financial Officer
Slide 13: Fourth Quarter 2022 Guidance Update
Fourth Quarter 2022 Guidance Update Our guidance remains unchanged with the exception of fuel costs, which are estimated to decline ~$.05 per gallon compared with previous guidance Guidance metric 4Q 2022 Operating revenues (vs. 4Q 2019) Up 13% to 17% Managed business revenues (vs. 4Q 2019) Down 20%
Slide 14: 2023 Guidance Update
2023 Guidance Update We expect to make significant progress in 2023 toward our financial goals, with a focus on restoring our route network and growing profits, margins, and returns on invested capital Guidance metric 1Q 2023 2023 Aircraft1 Not provided 841 Available seat miles (ASMs, or capacity) (
Slide 15: Fuel Hedging Protection
Fuel Hedging Protection In 2023, we will continue to maintain our multi-year fuel hedging program to provide insurance against material spikes in jet fuel prices Estimated fuel hedging settlement gains (Brent crude price per barrel; hedging gains per gallon) Brent Crude 1Q 2023 2023 $70 $.01 $.02 Cu
Slide 16: Fleet Modernization
Fleet Modernization Our Boeing order book supports growth and fleet modernization plans, and we have significant fleet flexibility Contractual Boeing order book As of December 7, 2022 -7 firm orders -8 firm orders -7 or -8 options Total 2022 14 100 -- 1141 2023 21 69 -- 90 2024 41 -- 45 86 2025 30 -
Slide 17: Sustainable Cost Position
Sustainable Cost Position Our industry cost position has improved, supported by a moat of business model advantages—all Boeing 737 fleet, point-to-point route network, and short turn times Pre-pandemic unit costs Current unit costs 2Q 2019, excluding fuel, stage-length adjusted4 2Q 2022, excluding f
Slide 18: Financial Goals
Financial Goals Our annual goals are to generate consistent profitability, grow the route network and revenue, and enhance Shareholder value by generating consistent returns on invested capital in excess of weighted average cost of capital Focus areas Annual goals Modest new market growth and levera
Slide 19: Capital Allocation Priorities
Capital Allocation Priorities Our investment-grade balance sheet continues to be an enduring strength and remains top in the U.S. airline industry 1 2 3 4 Maintain Invest in the Enhance Reduce debt adequate business to Shareholder and leverage cash reserves fund growth returns • Cash balance of • 20
Slide 20: Presentation Ryan Green
Presentation Ryan Green EVP & Chief Commercial Officer
Slide 21: Revenue and Customer Initiatives
Revenue and Customer Initiatives We have several areas of focus for 2023 designed to drive revenue performance 1 Network restoration Focus on lower risk capacity additions as we restore and 2 New market maturation mature the network Southwest Business and REVENUE 3 GDS 4 New fare product Portfolio o
Slide 22: Network Restoration
Network Restoration Network restoration is a priority in 2023 as we rebuild a robust post-pandemic network in key Southwest markets through lower-risk capacity growth Historical and projected trips Trips per day Pre-pandemic through year-end 2023 Monday schedule 5,000 ~85% Same-Store 4,500 Restored
Slide 23: New Market Maturation
New Market Maturation We are focused on maturing new markets that launched during the pandemic, and shifting capacity growth to restoring core markets Percent of system ASMs in development Hawaii service 2022 and 2023 vs. 2019, by quarter December 2022 18% 17% 16% 15% 14% 14% 13% 13% 13% 12% 12% 11%
Slide 24: Southwest Business and GDS
Southwest Business and GDS We have invested in People, processes, and technology to grow our presence in the corporate travel space, and have grown our passenger share by 10 percent ARC Share: Business1 agencies only Southwest vs industry Business Travel News (BTN) survey results; AA DL UA Other Sou
Slide 25: New Fare Product
New Fare Product With the May launch of our new fare product, Wanna Get Away Plus™, we now provide Customers even more flexibility, choice, and rewards for modest buy-ups Fare Product Offerings Wanna Get Away Plus Likelihood to repurchase1 Attributes ® ® Rapid Rewards® Pts / $ 12 10 8 6 Refundable R
Slide 26: Revenue Management System
Revenue Management System Revenue Management System modernization creates the opportunity for incremental revenue by improving forecasting and optimization science Quickly adapt forecast to Upgrade optimization recent trends science Revenue Management System Improve workflow to Modernize forecasting
Slide 27: Co-Brand and Loyalty
Co-Brand and Loyalty In addition to our Chase agreement benefits, we are seeing momentum in acquiring new Cardmembers and increased spend per Cardmember, with very low attrition Co-brand acquisition performance1 Spend per Cardmember $2,200 $2,100 +32% $2,000 $ $1,900 $1,800 $1,700 $1,600 32% more ac
Slide 28: Inflight Customer Experience Enhancements
Inflight Customer Experience Enhancements To further strengthen our brand, we are investing in a cabin experience tailored to our Customers’ needs Inflight enhancements WiFi upgrades In-seat power installations Larger bin installations Upgrades to WiFi hardware are expected to continue through 3Q 20
Slide 29: Enhanced Flexibility
Enhanced Flexibility Flexibility has become more important to our Customers, and flight credits that don’t expire further strengthens our competitive position Program feature engagement effectiveness1 Flexible policies2 Domestic airlines Two bags fly free® 80% No change fees No cancel fees Poi
Slide 30: New Capability and Initiative Pipeline
New Capability and Initiative Pipeline As we have historically done, we are continually planning and investing in the next set of opportunities that continue to supplement revenue performance Commercial development pipeline Multi-year projects to enhance revenue capabilities have continued to be fun
Slide 31: Presentation Andrew Watterson
Presentation Andrew Watterson Chief Operating Officer
Slide 32: Productivity Goals
Productivity Goals By the end of 2023, we expect to achieve 3 of the 4 productivity goals set last year, and we intend to leverage business model advantages to drive additional improvements 210M+ ~80 6+ 80+ ASMs per aircraft1 FTEs per aircraft2 Average trips per gate3 ASMs per gallon Unexpected Chal
Slide 33: Operations Focus Areas
Operations Focus Areas As we move beyond the pandemic, we are leveraging the strengths of our business model to drive efficient growth, operational reliability, and an enhanced experience for our Employees and Customers Aircraft Operating Operating Frontline productivity leverage quality staffing &
Slide 34: Aircraft Productivity
Aircraft Productivity We plan to increase our asset utilization while speeding up the tempo of the operation Turn execution Aircraft Block productivity execution Maintenance optimization Overnight Increase asset flying utilization Flight scheduling Planned 2023 delivery Page 34
Slide 35: Operating Leverage (1 of 2)
Operating Leverage (1 of 2) We have many opportunities to pursue efficient growth across the core of our network by aligning network restoration plans with staffing and facility capacity; we also have several initiatives designed to improve operating leverage Targeted flight adds Operating NG1 engin
Slide 36: Operating Leverage (2 of 2)
Operating Leverage (2 of 2) We have significant growth opportunities in our largest airports within existing flight volume peaks, enabling better utilization of existing ground staff and facilities Several of our large airports have consistently …while many have valleys that represent high flight ac
Slide 37: Operating Quality
Operating Quality We intend to lessen the impact of irregular events and reduce the causes of disruption Originator performance Operating Transfer quality operations Network Further strengthen design & recovery operational Reliability and Hospitality Station command centers Planned 2023 delivery Pag
Slide 38: Frontline Staffing and Tools
Frontline Staffing and Tools We intend to rapidly close gaps and increase investment in the Frontline Employee experience Targeted staffing levels Frontline Training and staffing & tools proficiency Get properly staffed Mobility / digital and better equip our tools Employees Continuous improvement P
Slide 39: Driving Value from the Southwest Business Model
Driving Value from the Southwest Business Model Our operations focus areas are expected to continue to build upon and enhance the key operational strengths of our business model Operations focus areas Aircraft Operating productivity quality Operating Frontline staffing leverage & tools Key operation
Slide 40: Break 10 minutes
Break | 10 minutes
Slide 41: Q&A
Q&A Bob Jordan Panel Tammy Romo Ryan Green Andrew Watterson
Slide 42: Thank you for attending!
Page 42 Thank you for attending!