Tag Archives: Southwest Airlines

Southwest offers incentives for vaccinated employees

Southwest Airlines is joining other airlines by offering incentives to vaccinated employees.

The airline’s incentives include 16 hours of extra pay to vaccinated employees who show proof of vaccinations and it will pay for 13 trip segments for pilots and flight attendants.

The airline will also terminate COVID-19 pay protections for staff after November 15 if they are unvaccinated.

Southwest announces leadership changes, announces a fall sales campaign

Southwest Airlines Boeing 737-8 MAX 8 N8809L (msn 65439) BUR (Michael B. Ing). Image: 955033.

Southwest Airlines made this leadership announcement:

Tom Nealon, 60, has decided to retire from his duties as President effective immediately, but will continue to serve the Company as a strategic advisor, focusing primarily on the airline’s environmental sustainability and carbon emissions reduction plan. Nealon has held numerous leadership positions during his tenure with the airline, including Executive Vice President Strategy & Innovation from 2016 to 2017, Director on the Southwest Board from 2010 to 2015, and in a consultant capacity as Senior Vice President and Chief Information Officer from 2002 to 2006.

“I’m honored to have served Southwest throughout the years in several different capacities, and especially to have been President of the best airline in the business,” Nealon said. “I look forward to continuing to serve and advise Southwest on strategic initiatives, and most importantly, on the airline’s long-term environmental sustainability plans.”

Gary Kelly, Southwest’s Chairman and CEO, announced on behalf of the Southwest Airlines Board of Directors that Chief Operating Officer Mike Van de Ven, 59, has been named as the Company’s President, effective immediately. Van de Ven will take on the additional responsibilities of the Company’s Internal Audit, Business Continuity, Emergency Response, and Enterprise Risk Management functions.

“I want to thank Tom for his countless contributions to the cause that is Southwest Airlines over the years—they are many and immeasurable. I’m grateful Tom will continue serving as a strategic advisor. I’m thrilled for Mike as he assumes his new role as President, in addition to COO. Mike is as talented and dedicated a leader as one will find, and he has directly contributed to Southwest’s success during his 28 years serving the Company and our People.

“The transition efforts being led by Executive Vice President and incoming CEO Bob Jordan are going extremely well, and as that continues, we are taking steps to shift reporting roles in preparation for Bob to assume the CEO role on February 1, 2022,” said Kelly.

As the transition progresses, the Finance, Commercial, Legal & Regulatory, Operations, and Technology teams that were reporting to Kelly or Nealon will now report to Jordan, also effective immediately.

“On behalf of the Board of Directors, I’d like to thank Tom for his nearly five-year tenure as President and more than 15 years of service to our Southwest Airlines Employees, Customers, Shareholders, and the Communities we serve,” said Southwest Airlines Lead Director William Cunningham. “We are extremely proud to have such a talented and robust leadership bench at Southwest Airlines, and are delighted with the announcement of Mike Van de Ven as Tom’s successor.”

Southwest Airlines also announced additional Senior Leader promotions:

  • Laurie Barnett, from Managing Director Communications & Outreach, to Vice President of Communications & Outreach. Barnett is responsible for guiding the efforts of the airline’s Public Relations & Communications, Creative Studio, Digital & Social Business, and Community Outreach functions. She also helped create and provided Leadership support for the Company’s Emergency Response, Business Continuity and Enterprise Risk Management functions.
  • Ryan Martinez, from Managing Director Investor Relations, to Vice President of Investor Relations. Martinez has been instrumental in evolving Southwest’s IR strategies and communications along with the changing economic environment. Under his Leadership, Southwest is well-positioned to continue effectively communicating with investors while the Company manages through the pandemic.
  • Juan Suarez, from Managing Director, Deputy General Counsel in the Legal Department to Vice President Diversity, Equity & Inclusion. Suarez serves as Southwest’s executive-level champion for organizational goals related to diversity, equity, and inclusion both internally and externally. Among other things, Suarez is responsible for creating and driving the development of diversity initiatives that align with our business objectives and advises on policies and practices involving diversity, equity, and inclusion. He will partner closely with peers throughout the Company on diversity, equity, and inclusion efforts as it applies to, among other things, supplier diversity, diversity hiring and recruiting, and training.
  • Marilyn Post, from Deputy General Counsel and Corporate Secretary to Vice President Legal and Corporate Secretary. Post heads the Legal Department’s Corporate & Transactions Team, which is responsible for assisting with the legal aspects of all of Southwest’s securities and transactional matters. She also serves as a senior advisor to the Company’s Board of Directors and Executive Team on corporate governance, executive compensation, and SEC matters.
  • Lauren Woods, from Managing Director Technology, to Vice President Technology-Technology Platforms. Woods and her Teams are responsible for delivering stable technology platforms and driving transformation efforts across Technology. Under her leadership, the Technology teams will continue to focus on building out new modern foundational platforms used and leveraged by development Teams to increase efficiency and speed to market.

“I am pleased with the Team’s flexibility and support as we continue the steady pace of our Leadership transition efforts,” Jordan said. “I am looking forward to working with Tom on our sustainability imperatives and collaborating with Mike as we set the agenda for the Company moving forward. I know Gary joins me in congratulating Lauren, Laurie, Marilyn, Juan, and Ryan on their well-deserved promotions; we are fortunate to have a deeply talented bench of Southwest Leaders.”

In other news, the company also launched its fall Wanna Get Away® campaign with fares as low as $59 one-way for a fall getaway. Customers can book today through Sept. 27, 2021, 11:59 p.m. Central Daylight Time, pack their bags for a trip valid Oct. 4, 2021, through Dec. 15, 2021 (for continental U.S., continental U.S. to/from Hawaii, inter-island Hawaii, and international travel), and get ready for a fall-tastic getaway.

With the carrier’s low fares, Legendary Hospitality, and flexible policies (including no cancellation fees, no change fees, and bags fly free®)*, Southwest® is ready to take Customers on their next office or school getaway.

  • As low as $59 one-way nonstop between Houston (Hobby) and Corpus Christi,
  • As low as $59 one-way nonstop between Atlanta and Jackson, Miss.,
  • As low as $59 one-way nonstop between Oakland and Eugene, Ore.,
  • As low as $67 one-way nonstop between Nashville and Savannah/Hilton Head, and
  • As low as $99 one-way nonstop between Denver and Santa Barbara, Calif.

*At Southwest Airlines, there are no change fees (fare difference may apply), no cancellation fees (failure to cancel a reservation at least 10 minutes prior to scheduled departure may result in forfeited travel funds), and bags fly free (first and second checked bags, weight and size limits apply).

**Advanced purchase and blackout date requirements apply; seats, days, and markets are limited. 

Top Copyright Photo: Southwest Airlines Boeing 737-8 MAX 8 N8809L (msn 65439) BUR (Michael B. Ing). Image: 955033.

Southwest Airlines aircraft slide show:

Photo: Southwest Airlines Boeing 737-7H4 WL N214WN (msn 32486) (Maryland One) BWI (Tony Storck). Image: 954921.

Updated 2021 "Maryland One" with new tail

Copyright Photo: Southwest Airlines Boeing 737-7H4 WL N214WN (msn 32486) (Maryland One) BWI (Tony Storck). Image: 954921.

SWAPA lawsuit accuses Southwest of ignoring union bargaining duties during pandemic

From Reuters:

“The Southwest Airlines Pilots Association (SWAPA) filed a complaint in federal court in Dallas on Monday claiming that Southwest should have collectively bargained with the union instead of giving itself “force majeure” rights when air travel plummeted during the pandemic.

The union claims Southwest implemented an “emergency time off” program, altered schedules, and scaled back prescription drug and retirement benefits without bargaining, in violation of federal labor law.

It asked the court for an injunction, forcing the airline to stick to the terms of the collective bargaining agreement, which lapsed on Aug. 31, 2020, until a new agreement is reached.”

Read the full article:

https://www.reuters.com/legal/government/lawsuit-accuses-southwest-airlines-flouting-union-bargaining-duties-during-2021-08-31/

Southwest Airlines to cut its schedule in an attempt to fix operational issues

 

Southwest Airlines has announced it will eliminate an average of 27 flights a day from its schedule from September 7 through October 6 and will also cancel 162 flights a day from October 7 through November 5.

Southwest also plans to adjust its flight schedules in November and December, but the airline said it would protect holiday bookings.

‘We’re not out of the woods yet’: Southwest admits struggles will continue as employee gripes grow

From USA Today:

https://www.usatoday.com/story/travel/airline-news/2021/08/20/southwest-airlines-flight-cancellations-delays-changes-fourth-quarter-cuts/8210108002/?utm_source=feedblitz&utm_medium=FeedBlitzRss&utm_campaign=usatodaytravel-flights

Southwest Airlines and the International Association of Machinists and Aerospace Workers reach tentative agreement for customer service employees

Southwest Airlines and the International Association of Machinists and Aerospace Workers (IAM) have reached a Tentative Agreement for Southwest’s more than 5,000 Customer Service Employees.

“The parties concluded these negotiations with an agreement designed to reward our hard-working Employees, support future market expansion for Southwest, and increase our overall efficiency,” said Vice President of Labor Relations Russell McCrady. “We appreciate the work by both Negotiating Committees, along with the assistance of the National Mediation Board, to get us to this point.”

Composed of the Company’s Customer Service Agents, Customer Representatives, and Source of Support Representatives, these Employees deliver excellent Customer Service by helping our Customers get to their destinations, whether that is taking a phone call to change a Customer’s travel plans or assisting a Customer or fellow Employee on the ground at one of the airports we serve.

The IAM will communicate to its membership the details of the Tentative Agreement and the ratification process.

Southwest says Delta variant is hurting forward books and cancellations

Southwest Airlines, like other U.S. airlines, is now advising the market that the surging Delta variant of COVID-19 is hurting forward bookings and causing cancellations to rise.

The carrier is also advising it will be difficult to produce a profit in the third quarter.

Read more from Fox Business:

https://www.foxbusiness.com/markets/southwest-airlines-says-delta-variant-is-hurting-its-business

Southwest reports second quarter 2021 results

Southwest Airlines Company today reported its second quarter 2021 financial results:

  • Second quarter net income of $348 million, or $.57 per diluted share, driven by a $724 million offset of salaries, wages, and benefits expenses related to the receipt of Payroll Support Program (PSP) proceeds under the Consolidated Appropriations Act, 2021 and American Rescue Plan Act of 2021
  • Excluding special items¹, second quarter net loss of $206 million, or $.35 loss per diluted share
  • Second quarter operating revenues of $4.0 billion, down 32.2 percent compared with second quarter 2019
  • Generated second quarter operating cash flow of $2.0 billion and free cash flow¹ of $1.9 billion; achieved positive average daily core cash flow² in June
  • Ended second quarter with liquidity³ of $17.9 billion, well in excess of debt outstanding of $11.4 billion

Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “Second quarter 2021 marked an important milestone in the pandemic recovery as leisure travel demand surged. We generated net income in June 2021, representing our first monthly profit without taking into account the benefit of temporary salaries and wages cost relief provided by PSP proceeds, since the negative effects of the pandemic began in March 2020. While the rapid ramp up in June travel demand provided stability to our financial position, it has impacted our operations following a prolonged period of depressed demand due to the pandemic. Therefore, we are intensely focused on improving our operations as we restore our network to meet demand. I am beyond thankful for our People, who are heroes, and whose resiliency, hard work, and unwavering resolve is on display every day. I am pleased for them that we were able to accrue $85 million of profitsharing for our Employees in second quarter 2021, for a total of $109 million in first half 2021.

“Compared to the last four quarters, second quarter 2021 operating revenues significantly improved, decreasing 32.2 percent compared with second quarter 2019. June 2021 operating revenues decreased 20.7 percent, compared with June 2019. Monthly operating revenue trends improved sequentially throughout the quarter. Leisure passenger traffic in June 2021 rebounded above June 2019 levels, while passenger fares were comparable with June 2019. Based on current bookings, leisure passenger traffic and fares in July are expected to trend higher than July 2019 levels. Business revenues continue to lag leisure revenue trends; however, we are encouraged by the improvement in business revenues in second quarter 2021, and we continue to experience steady weekly improvements in business bookings, thus far, in July 2021.

“Second quarter 2021 jet fuel prices increased significantly compared with first quarter 2021 and second quarter 2020. Despite cost penalties of technology and weather disruptions, our second quarter 2021 non-fuel cost performance was in line with guidance. We currently expect higher fuel prices and capacity-driven cost increases in third quarter 2021, year-over-year. To support the return of flight activity, we expect to recall the vast majority of our Employees early from voluntary time-off by the end of third quarter 2021, which is expected to reduce our prior forecasted savings from voluntary leave programs beyond second quarter 2021. Absent the costs associated with fewer Employees on leave, along with ramp up costs and premium pay offered for Operations Employees, third quarter 2021 non-fuel unit costs, excluding special items and profitsharing, are forecast to trend in line with, or below, 2019 levels⁴.

“Our balance sheet strength remains unmatched in the U.S. airline industry and a competitive differentiator. As of June 30, 2021, our total liquidity was $17.9 billion. Average core cash burn² was approximately $1 million per day in second quarter 2021; however, as anticipated, we achieved positive average core cash flow in June 2021, which was approximately $4 million per day. Based on our current booking trends and cost outlook, we are hopeful to be profitable, both on a GAAP and non-GAAP basis, again in third and fourth quarter 2021. Should the pandemic negatively affect our current trends, we are prepared to manage through it.

“We have tremendous flexibility and opportunity with our Boeing 737 MAX (MAX) order book. In addition to committing 55 aircraft to 18 new cities and approximately 37 aircraft to Hawaii by the end of this year, we intend to utilize new aircraft next year and beyond to restore most of our pre-pandemic routes and frequencies, and pursue new market opportunities. We can choose to accelerate fleet modernization efforts if these growth opportunities do not materialize. We believe 2022 will be another transition year in the pandemic recovery, and our primary goals will be to deliver operational reliability with optimized resources; generate solid profits and margins; restore and grow the route network; and reduce carbon emissions intensity.

“We recently announced I will transition to Executive Chairman in February 2022, at which time Bob Jordan, Executive Vice President, will become Chief Executive Officer. Bob is well-prepared to take on this important role as a gifted and experienced executive with 33 years of broad experience at Southwest. A smooth transition is underway, and we remain focused on managing through the pandemic, as well as sharpening up our strategic plan with a crystal clear set of initiatives for the next five years. In addition to restoring our route network and core operational efficiency, these initiatives include the continued rollout of Global Distribution System (GDS) access for corporate travelers; the acceleration of fleet modernization efforts to replace our 737-700 aircraft with the MAX; and the development of tangible steps to minimize our carbon footprint and support our goal to be carbon neutral by 2050. I have the utmost confidence in Bob, our Southwest Leadership Team, and the People of Southwest Airlines to successfully implement these initiatives and lead the Company forward. And I’m proud to continue to be a part of the Team for years to come.”

Revenue Results and Outlook
The Company’s second quarter 2021 operating revenues increased 297.6 percent, year-over-year, to $4.0 billion, but decreased 32.2 percent compared with second quarter 2019 due to the pandemic. Second quarter 2021 operating revenue per available seat mile (RASM, or unit revenues) was 11.99 cents, a decrease of 18.9 percent, compared with second quarter 2019, primarily driven by a passenger revenue yield decrease of 18.9 percent and a load factor decrease of 3.5 points.

The Company performed significantly better than expected at the outset of the quarter. The Company experienced sequential monthly improvements in operating revenues during second quarter 2021, driven primarily by improvements in leisure passenger traffic and fares. While business travel demand continued to lag leisure trends, June 2021 managed business revenues were down approximately 69 percent, which represented another sequential improvement compared with a decrease of 77 percent in May 2021, and a decrease of 80 percent in April 2021, all compared with respective 2019 levels.

The following table presents selected revenue and load factor results for second quarter 2021:

April 2021

May 2021

June 2021

2Q 2021

Operating revenue compared with 2019 (a)

Down 42.2%

Down 34.7%

Down 20.7%

Down 32.2%

Previous estimation

Down ~42%

Down ~35%

Down ~20%

(b)

Load factor

79.0%

83.5%

85.5%

82.9%

Previous estimation

(c)

~84%

~85%

(b)

(a) 

The Company believes that operating revenues compared with 2019 is a more relevant measure of performance than a year-over-year comparison due to the significant impacts in 2020 due to the pandemic.

(b)

No previous estimation provided.

(c)

Remains unchanged from previously provided estimation.

Thus far, the Company continues to experience typical leisure booking patterns for summer and fall 2021 travel. The Company’s revenue outlook for August 2021 is impacted by less holiday travel, an estimated one to two point headwind, compared with August 2019, as the Labor Day holiday weekend falls in September 2021, whereas it was split between August and September in 2019. Despite steady weekly improvements in business bookings, thus far, in July, the lag in business travel recovery is expected to continue to have a negative impact on close-in demand and average passenger fares in third quarter 2021.

The following monthly table presents selected preliminary estimates of revenue and load factor for July and August 2021:

Estimated
July 2021

Estimated
August 2021

Operating revenue compared with 2019 (a)

Down 10% to 15%

Down 12% to 17%

Previous estimation

Down 15% to 20%

(b)

Load factor

~85%

~80%

Previous estimation

(c)

(b)

(a) 

The Company believes that operating revenues compared with 2019 is a more relevant measure of performance than a year-over-year comparison due to the significant impacts in 2020 due to the pandemic.

(b)

No previous estimation provided.

(c) 

Remains unchanged from previously provided estimation.

The Company achieved its goal of enabling industry-standard corporate bookings through Amadeus’s GDS platform and Travelport’s multiple GDS platforms (Apollo, Worldspan, and Galileo) in 2020. The Company plans to go live with Sabre on July 26, 2021. The Company also uses Airlines Reporting Corporation (ARC) to handle the industry-standard settlement of tickets booked through Travelport and Amadeus channels. Sabre tickets are also expected to settle via ARC. The Company’s enhancement of its GDS channel strategy is part of its larger “channel of choice” offering and complements its direct strategy through the expanding Airline Tariff Publishing Company’s (ATPCO) New Distribution Capability (NDC) Exchange, as well as its existing SWABIZ® direct travel management tool. The goal is to distribute Southwest’s everyday low fares to more business travelers through their preferred channel.

Cost Performance and Outlook
Second quarter 2021 operating expenses increased 59.9 percent, year-over-year, to $3.4 billion, but decreased 30.9 percent compared with second quarter 2019 due to the pandemic. Excluding special items, second quarter 2021 operating expenses increased 31.9 percent, year-over-year, to $4.2 billion. Second quarter 2021 operating expenses per available seat mile (CASM, or unit costs) decreased 17.3 percent, compared with second quarter 2019. Excluding special items, second quarter 2021 CASM increased 1.0 percent, compared with second quarter 2019.

The following table presents economic fuel costs per gallon¹, including the impact of fuel hedging premium expense and fuel derivative contracts, for second quarter 2021 and the prior year period:

Second Quarter

2021

2020

Economic fuel costs per gallon

$1.92

$1.33

Fuel hedging premium expense

$24 million

$24 million

Fuel hedging premium expense per gallon

$0.06

$0.12

Fuel hedging cash settlement gains per gallon

$0.02

The Company’s second quarter 2021 available seat miles (ASMs, or capacity) per gallon (fuel efficiency) declined 8.7 percent, year-over-year, due to the return to service of more of its least fuel-efficient aircraft, the Boeing 737-700. When compared with second quarter 2019, fuel efficiency improved 4.5 percent in second quarter 2021 due to the March 2021 return to service of its most fuel-efficient aircraft, the MAX. The MAX is critical to the Company’s efforts to modernize its fleet, reduce carbon emissions intensity, and achieve carbon neutrality by 2050. The Company expects third quarter 2021 fuel efficiency to be in line with second quarter 2021, on a nominal basis.

Based on the Company’s existing fuel derivative contracts and market prices as of July 15, 2021, the following table presents estimates of economic fuel costs per gallon⁵, including the estimated impact of fuel hedging premium expense and fuel derivative contracts, for third and fourth quarter 2021 and prior year periods:

Third Quarter

Fourth Quarter

2021

2020

2021

2020

Economic fuel costs per gallon

$2.05 to $2.15

$1.23

$2.05 to $2.15

$1.25

Fuel hedging premium expense

$25 million

$24 million

$25 million

$24 million

Fuel hedging premium expense per gallon

$0.05

$0.08

$0.05

$0.08

Fuel hedging cash settlement gains per gallon

$0.04

$0.02

 

As of July 15, 2021, the fair market value of the Company’s fuel derivative contracts for the remainder of 2021 was an asset of approximately $67 million, and the fair market value settling in 2022 and beyond was an asset of approximately $422 million. Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding fuel and oil expense, second quarter 2021 operating expenses increased 39.0 percent, year-over-year, and decreased 31.4 percent, compared with second quarter 2019. The Company accrued $85 million of profitsharing expense in second quarter 2021, compared with no profitsharing accrual in second quarter 2020. The Company’s second quarter 2021 net income included special items, the largest of which was a pre-tax benefit of approximately $724 million of PSP proceeds, which offset salaries, wages, and benefits expenses and was comprised of $177 million under the Consolidated Appropriations Act, 2021 and $547 million under the American Rescue Plan Act of 2021.

Excluding fuel and oil expense, special items, and profitsharing, second quarter 2021 operating expenses increased 13.3 percent, year-over-year, which was in line with the Company’s expectation. The year-over-year increase was driven primarily by variable, flight-driven expenses as capacity increased 86.8 percent, year-over-year. As expected, the Company realized approximately $325 million of cost savings in second quarter 2021 from voluntary separation and extended leave programs. The Company now estimates annual 2021 cost savings from these programs to be approximately $1.0 billion, down from its previous guidance of $1.1 billion to $1.2 billion due to earlier than projected Employee recalls from voluntary leave programs. The Company expects third quarter 2021 cost savings from these programs to be approximately $150 million. Second quarter 2021 CASM, excluding fuel and oil expense, special items, and profitsharing expense, decreased 39.3 percent, year-over-year, driven primarily by the significant increase in capacity and increased 7.6 percent, compared with second quarter 2019.

Based on current cost trends and capacity plans, third quarter 2021 operating expenses and unit costs, excluding fuel and oil expense, special items, and profitsharing, are expected to increase in the range of one to five percent, compared with third quarter 2019⁴. The Company currently expects three to four points of the unit cost increase in third quarter 2021 to be attributable to ramp up costs and premium pay offered to Operations Employees. Another one point is expected to be attributable to lower estimated cost savings from voluntary leave programs due to higher than projected Employee recalls.

Other expenses in second quarter 2021 decreased $20 million, year-over-year, primarily due to an improvement in other gains and losses driven by adjustments for fuel derivative contracts not designated as fuel hedges for accounting purposes, which are excluded from the Company’s non-GAAP results as a special item.

The Company’s second quarter 2021 effective tax rate was 31 percent. The Company currently estimates its annual 2021 effective tax rate to be approximately 26 percent, compared with its previous guidance of approximately 23 percent. The higher tax rate in second quarter and annual 2021 is primarily due to higher state taxes than previously estimated.

Fleet and Capacity
The Company ended second quarter 2021 with 736 Boeing 737 aircraft, including 68 MAX 8 aircraft. During second quarter 2021, the Company took delivery of seven MAX 8 aircraft from The Boeing Company (Boeing). The Company expects delivery of one more leased MAX 8 aircraft in 2021. Also during second quarter 2021, the Company returned one leased 737-700 aircraft to its lessor and expects to return one more leased 737-700 aircraft in 2021, for a total of 10 retirements in 2021. As of June 30, 2021, 39 737-700 aircraft remained in temporary storage due to the prolonged period of depressed demand levels. These aircraft are expected to have required maintenance checks completed and be returned to service by the end of this year.

In March, the Company amended its aircraft order book with Boeing through 2031 driven by growth opportunities and ongoing fleet modernization plans for less carbon-intensive aircraft. During second quarter 2021, the Company further amended its aircraft purchase agreement with Boeing, including a Supplemental Agreement in June 2021 to accelerate 10 MAX options from 2023 to 2022. On July 1, 2021, the Company exercised three options for delivery in 2022. And, the Company intends to exercise another three options this month for 2022 delivery. Upon the intended exercise of these three additional options, the Company’s 2022 firm orders will be 70 with 44 remaining options, and bring its order book with Boeing to 389 MAX firm orders (240 MAX 7 and 149 MAX 8) and 262 MAX options (MAX 7 or MAX 8) for years 2021 through 2031. The Company continues to expect that more than half of the MAX aircraft in its firm order book will replace a significant amount of its 461 737-700 aircraft over the next 10 to 15 years to support the modernization of its fleet, a key component of its environmental sustainability efforts. Additional information regarding the Company’s aircraft delivery schedule is included in the accompanying tables.

The Company’s second quarter 2021 capacity increased 86.8 percent, year-over-year, due to increased flight activity driven primarily by increased leisure passenger traffic. The following table presents capacity results for second quarter 2021:

April 2021

May 2021

June 2021

2Q 2021

ASMs year-over-year

Up 82.9%

Up 125.8%

Up 64.3%

Up 86.8%

Previous estimation

Up ~83%

Up ~126%

Up ~65%

Up ~87%

ASMs compared with 2019

Down 23.8%

Down 18.2%

Down 7.4%

Down 16.4%

Previous estimation

Down ~24%

Down ~18%

Down ~7%

Down ~16%

The Company expects its third quarter 2021 capacity to increase from second quarter 2021 levels, based on the expectation of further improvement in travel demand. The Company is in the process of adjusting its published flight schedules for September and October 2021. Including these adjustments, the following table presents capacity estimates for third quarter 2021:

Estimated
July 2021

Estimated
August 2021

Estimated
September 2021

Estimated
3Q 2021

ASMs year-over-year

Up ~41%

Up ~41%

Up ~68%

Up ~49%

Previous estimation

(a)

Up ~39%

(b)

(b)

ASMs compared with 2019

Down ~3%

Up ~3%

Comparable

Comparable

Previous estimation

(a)

Comparable

(b)

(b)

(a)

 Remains unchanged from previously provided estimation.

(b)

 No previous estimation provided.

In addition, the Company currently expects its fourth quarter 2021 capacity to increase approximately 68 percent, year-over-year, and to be comparable with fourth quarter 2019. The Company will continue to monitor demand and booking trends and adjust capacity, as needed. As such, the Company’s actual flown capacity may differ materially from currently published flight schedules or current estimations.

Liquidity and Capital Deployment
As of June 30, 2021, the Company had approximately $16.9 billion in cash and short-term investments, and a fully available revolving secured credit facility of $1.0 billion. During second quarter 2021, the Company reached an agreement with the U.S. Department of Treasury and received approximately $1.9 billion in PSP proceeds under the American Rescue Plan Act of 2021. The Company also received its third and final disbursement of PSP proceeds in the amount of $259 million under the Consolidated Appropriations Act, 2021. The Company currently has unencumbered assets with an estimated value of more than $11 billion, including aircraft value estimated in the range of $9 billion to $10 billion, and approximately $2 billion in non-aircraft assets such as spare engines, ground equipment, and real estate. In addition, the Company has significant value from its Rapid Rewards® loyalty program. As of July 21, 2021, the Company had cash and short-term investments of approximately $16.8 billion.

Net cash provided by operations during second quarter 2021 was $2.0 billion, driven primarily by PSP proceeds of $1.5 billion. Second quarter 2021 capital expenditures were $95 million. The Company now estimates its 2021 capital expenditures to be in the range of $500 million to $600 million, compared with its previous guidance of approximately $500 million, primarily due to an increase in aircraft pre-delivery payments associated with the 2022 option exercises for MAX deliveries next year, in addition to other aircraft related capital expenditures shifting into 2021. Based on 70 firm orders planned for 2022, the Company’s contractual aircraft capital expenditures for 2022⁶ are now estimated to be approximately $1.6 billion, compared with its previous guidance of approximately $1.5 billion. Further, the Company’s total contractual aircraft capital expenditures for all years 2021 through 2026, which represent 209 MAX firm orders (175 MAX 7 and 34 MAX 8 aircraft), are estimated to be approximately $5.7 billion. Fleet and other capital investment plans are expected to continue to evolve as the Company manages through this pandemic recovery period, and the Company intends to evaluate the exercise of its remaining 44 MAX options for 2022 as decision deadlines occur throughout the remainder of this year.

As of June 30, 2021, the Company had current and non-current debt obligations that totaled $11.4 billion. The Company repaid approximately $43 million in debt and finance lease obligations during second quarter 2021 and is scheduled to repay approximately $111 million in debt and finance lease obligations in second half 2021. Based on current debt outstanding and current market interest rates, the Company expects third quarter 2021 interest expense to be approximately $115 million. As of June 30, 2021, the Company was in a net cash position⁷ of $5.5 billion, and its adjusted debt⁸ to invested capital (leverage) was 57 percent. The Company remains the only U.S. airline with an investment-grade credit rating by all three rating agencies.

A look back: Hot Pants, Love Potions, and the Go-go Genesis of Southwest Airlines – Texas Monthly

WSJ: Southwest offers workers double pay to avoid July travel snags

"Freedom One", celebrating 50 years of flying

From the Wall Street Journal:

Southwest Offers Workers Double Pay to Avoid July Travel Snags – WSJ

Top Copyright Photo: Southwest Airlines Boeing 737-8H4 SSWL N500WR (msn 36898) (Freedom One) SAT (Fernandez Imaging). Image: 954168.

Southwest aircraft slide show: