Tag Archives: Southwest Airlines

Southwest reports second quarter 2021 results

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

  • Second quarter net income ofย $348 million, orย $.57ย per diluted share, driven by aย $724 millionย 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 itemsยน, second quarter net loss ofย $206 million, orย $.35ย loss per diluted share
  • Second quarter operating revenues ofย $4.0 billion, down 32.2 percent compared with second quarter 2019
  • Generated second quarter operating cash flow ofย $2.0 billionย and free cash flowยน ofย $1.9 billion; achieved positive average daily core cash flowยฒ in June
  • Ended second quarter with liquidityยณ ofย $17.9 billion, well in excess of debt outstanding ofย $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 accrueย $85 millionย of profitsharing for our Employees in second quarter 2021, for a total ofย $109 millionย 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 withย 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 levelsโด.

“Our balance sheet strength remains unmatched in theย U.S.ย airline industry and a competitive differentiator. As of June 30, 2021, our total liquidity wasย $17.9 billion. Average core cash burnยฒ was approximatelyย $1 millionย per day in second quarter 2021; however, as anticipated, we achieved positive average core cash flow in June 2021, which was approximatelyย $4 millionย 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 toย Hawaiiย 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, toย $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) wasย 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)ย 

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)ย 

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)ย 

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 SWABIZยฎ 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, toย $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, toย $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 gallonยน, 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

โ€”

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 gallonโต, 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

$2.05ย toย $2.15

$1.23

$2.05ย toย $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

โ€”

$0.02

โ€”

 

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 approximatelyย $67 million, and the fair market value settling in 2022 and beyond was an asset of approximatelyย $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 accruedย $85 millionย 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 approximatelyย $724 millionย of PSP proceeds, which offset salaries, wages, and benefits expenses and was comprised ofย $177 millionย under the Consolidated Appropriations Act, 2021 andย $547 millionย 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 approximatelyย $325 millionย 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 approximatelyย $1.0 billion, down from its previous guidance ofย $1.1 billionย toย $1.2 billionย due to earlier than projected Employee recalls from voluntary leave programs. The Company expects third quarter 2021 cost savings from these programs to be approximatelyย $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 2019โด. 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 decreasedย $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)

ย Remains unchanged from previously provided estimation.

(b)

ย 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 Juneย 30, 2021, the Company had approximatelyย $16.9 billionย in cash and short-term investments, and a fully available revolving secured credit facility ofย $1.0 billion. During second quarter 2021, the Company reached an agreement with theย U.S.ย Department of Treasury and received approximatelyย $1.9 billionย 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 ofย $259 millionย under the Consolidated Appropriations Act, 2021. The Company currently has unencumbered assets with an estimated value of more thanย $11 billion, including aircraft value estimated in the range ofย $9 billionย toย $10 billion, and approximatelyย $2 billionย in non-aircraft assets such as spare engines, ground equipment, and real estate. In addition, the Company has significant value from its Rapid Rewardsยฎ loyalty program. As of July 21, 2021, the Company had cash and short-term investments of approximatelyย $16.8 billion.

Net cash provided by operations during second quarter 2021 wasย $2.0 billion, driven primarily by PSP proceeds ofย $1.5 billion. Second quarter 2021 capital expenditures wereย $95 million. The Company now estimates its 2021 capital expenditures to be in the range ofย $500 millionย toย $600 million, compared with its previous guidance of approximatelyย $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 2022โถ are now estimated to be approximatelyย $1.6 billion, compared with its previous guidance of approximatelyย $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 approximatelyย $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 Juneย 30, 2021, the Company had current and non-current debt obligations that totaledย $11.4 billion. The Company repaid approximatelyย $43 millionย in debt and finance lease obligations during second quarter 2021 and is scheduled to repay approximatelyย $111 millionย 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 approximatelyย $115 million. As of June 30, 2021, the Company was in a net cash positionโท ofย $5.5 billion, and its adjusted debtโธ to invested capital (leverage) was 57 percent. The Company remains the onlyย U.S.ย 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 โ€“ 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:

Southwest’s CEO Gary Kelly to become Executive Chairman

Southwest Airlines has announced that Chairman and CEOย Gary Kellyย will transition roles in early 2022, becoming the carrier’s Executive Chairman with the desire to serve in that role through at least 2026 at the discretion of the Board of Directors. Executive Vice President Corporate Servicesย Robert Jordanย will become Kelly’s successor as CEO effective Feb. 1, 2022. Jordan also will join the Board at that time.

“On behalf of the Southwest Airlines Board of Directors, I am delighted to announce Bob Jordan as CEO,”Kelly said. “Bob and I have worked side by side for more than 30 years. He is a gifted and experienced executive and well-prepared to take on this important role. Working closely with President Tom Nealon and Chief Operating Officer Mike Van de Ven, we will begin developing transition plans in the coming weeks and months. These three top-notch Leaders make for a powerful team to lead us forward.”

Serving as CEO since 2004, Kelly, 66, has led Southwest through some of the airline industry’s most turbulent times. Kelly is a 35-year Southwest veteran who began his career at Southwest Airlines as Controller, moving up to Chief Financial Officer and Vice President Finance, then Executive Vice President and CFO, before being promoted to CEO and Vice Chairman in July 2004. He assumed the roles of Chairman and President in 2008. In January 2017, Kelly relinquished the title of President and named former Southwest Board Member and Executive Tom Nealon to the executive team as President. Prior to joining Southwest Airlines in 1986, Kelly was a CPA for Arthur Young & Company in Dallas and Controller for Systems Center, Inc.

Kelly has often said his biggest source of pride is the fact that Southwest Airlines has never had a single layoff or furlough in the airline’s 50-year history. As CEO, he has guided the airline’s transformation through several major initiatives, including the acquisition of AirTran Airways, the repeal of the Wright Amendment, the launch of international destinations for the first time in Southwest’s history, the installment of a new reservation system, introduction of a new frequent flyer program, debut of the new Heart brand and livery, initiation of the long-awaited service to Hawaii, and the introduction of the Boeing 737 MAX 8 into the airline’s fleet โ€”all while staying true to the Company’s core values and People-centric Culture.

“The airline has a strong Leadership team, and the Board has always taken seriously its role to oversee a strong succession plan for the top Leadership roles,”said William Cunningham, Southwest’s Lead Director on the Board. “Gary has been an outstanding CEO for Southwest for nearly two decades and has developed an excellent group of Senior Leaders to shepherd the airline into its next 50 years. We are thrilled he is willing to continue to serve as the Board’s Executive Chairman, subject to the annual elections process. Bob inherits a solid strategy and great momentum to continue the airline’s recovery as the COVID pandemic wanes. Bob has the Board’s full support.”

Jordan, 60, is a long-time Southwest Executive with broad and deep experience. Joining the airline in 1988, he has served in roles including Director of Revenue Accounting, Corporate Controller, Vice President Procurement, Vice President Technology, Senior Vice President Enterprise Spend Management, Executive Vice President Strategy and Technology, Executive Vice President and Chief Commercial Officer, AirTran President and Executive Vice President Corporate Services. During his tenure, he has led numerous significant transformational projects, including the acquisition of AirTran Airways, the development of the new southwest.com e-commerce platform, the Rapid Rewards loyalty program, and our enhanced boarding process. Most recently, Jordan led the efforts for the Company’s voluntary leave and early separation programs, which were key to reducing the airline’s labor expenses during the pandemic and instrumental in avoiding layoffs and furlough actions.

Prior to Southwest, Jordan worked for Hewlett-Packard as a programmer and financial analyst. He holds bachelor’s and master’s degrees from Texas A&M University. He joined Coppell-based The Container Store’s Board of Directors in 2013 and currently serves as its Lead Director. He and wife, Kelly, live in Flower Mound and have two adult children and two grandchildren.

“I’m humbled, honored, and excited to be asked to serve as the next CEO,”Jordan said. “The Heart of Southwest is our People; they make the difference for our Customers, and I look forward to serving them. We have a terrific team of Leaders, many of whom I have had the joy of working alongside for decades. I’m looking forward to working with Gary, Mike and Tom on the transition effort and setting up Southwest for the next 50 years of giving Customers the Freedom to Fly.”

Southwest celebrates 50 Years with a new “Freedom One” logo jet on N500WR

Credit: Stephen M. Keller, 2021

Southwest Airlines just announced:

Southwest Airlines today celebrated the 50th Anniversary of its first flight by thanking Employees by offering a gift of 50,000 Southwest Rapid Rewardsยฎ points. The Nationโ€™s largest domestic carrier also unveiled Freedom One, a Boeing 737-800 (Boeing 737-8H4 N500WR, msn 36898) emblazoned with a stylized flag of the United States of America.

โ€œThe word โ€˜freedomโ€™ has significant meaning to the People and history of Southwest Airlines,โ€ said Gary Kelly, Southwest Airlinesโ€™ Chairman of the Board and Chief Executive Officer. โ€œWeโ€™re eternally grateful to those who have served and are currently serving in our Armed Forcesโ€” including the more than 7,400 veterans and 1,500 military spouses in our Southwest Family. Our Purpose is to connect People to whatโ€™s important in their lives through friendly, reliable, and low-cost air travel. We simply couldnโ€™t fulfill our Purpose if not for the sacrifices and dedication of our military men and women. We appreciate their service and bravery in providing a blanket of freedom for our country.โ€

Freedom One was unveiled to Southwestยฎ Employees during a Company celebration at the Southwest Airlinesยฎ Technical Operations Hangar at William P. Hobby International Airport in Houston, where attendees included Southwest Military Ambassadors, Military Council, winners of the Companyโ€™s prestigious Presidentโ€™s Award, and others. Military Ambassadors are Southwest Employees who are veterans and military spouses. They serve as a resource for the Company to foster inclusion for veterans and service members.

The specialty plane features 50 stars and 13 stripes and becomes a high-flying tribute to 50 years of Southwest Airlines service with a symbol of unwavering pride for our Nation and its heroes. It is the first Boeing 737-800 to join the airlineโ€™s unique paint schemes. Other special paint schemes on Southwest Boeing 737-700s include: Arizona One, California One, Colorado One, Florida One, Illinois One, Lone Star One (Texas), Louisiana One, Maryland One, Missouri One, Nevada One, New Mexico One, and Tennessee One.

Before unveiling Freedom One, Kelly announced Southwest is offering an Employee gift to recognize and appreciate active Southwest Employees in the milestone moment for Southwest Airlines: 50,000 Rapid Rewards bonus points deposited later this year into the account of each Employee who chooses to accept the gift.

โ€œSouthwest revolutionized the travel industry since our very first flight on June 18, 1971โ€”a time when less than 15% of Americans ever had traveled by air,โ€ said Kelly at the Employee celebration. โ€œThe People of Southwest democratized the skies with friendly, reliable, and affordable air travel, and what better way to honor you, our Employees, on our 50th Anniversary than by offering a gift of 50,000 Rapid Rewards points.โ€

Southwestโ€™s first flights operated on what was known as the Texas Triangle, between Dallas, Houston, and San Antonio. Throughout the next fifty years, Southwest grew to become the nationโ€™s largest domestic airline, carrying up to 1 in the 4 travelers in the United States. Today, Southwest operates one of the worldโ€™s largest fleets of Boeing 737s, serves 121 destinations throughout North America, Employs more than 56,000 People, and is consistently ranked among the best airlines and best employers in the world.

June 18, 1971 Southwest Airlines begins service to DAL, SAT, and IAH. Our flight schedule starts with six roundtrips DAL-SAT and 12 roundtrips DAL-IAH with $20 one-way fares.

The early intrastate routes in Texas:

Following the Southwest Employee celebration, Freedom One departed Houston, headed for Dallas. Pilots and Flight Attendants onboard are Southwest Employees who served in the military or in the reserves. Additionally, a military veteran dispatched the flight from Southwestโ€™s Network Operations Control facility in Dallas. As the aircraft approached Dallas, it followed the Federal Aviation Administrationโ€™s HERBZ navigational flight path to the airport, recently named in honor of Southwest Founder Herb Kelleher.

Video: The painting of N500WR:

Southwest Airlines celebrates 50 Years with a special podcast series

Best Seller - The original three Boeing 737-200s, original titles

Southwest Airlines this week celebrates the 50th Anniversary of the carrier’s first commercial flights, which took place on June 18, 1971. To offer Customers and Employees a unique perspective on stories from the airline’s colorful history, Southwestยฎ, L.A. Times Studios, and At Will Media partnered to create the airline’s first public-facing episodic podcast series, called “Is This Seat Open?” which includes 20 episodes.

The podcast title, “Is This Seat Open?” draws upon Southwest’s open-seating policy, which is one of the ways the Company uniquely stands out in the industry and has been in place since the airline’s founding in 1971. “Is This Seat Open?” is available on all podcast platforms, including iHeartRadio, Stitcher, Apple Podcasts, Spotify, and more. There are currently 10 episodes available, with additional episodes launching on June 15 and June 22 for a total of 20 episodes in the series.

Stories are best told by the people who experienced them firsthand, so the narratives in this podcast are vibrantly depicted by some of the People who were a part of Southwest’s iconic moments through the carrier’s 50-year history. Southwest Employees Quinnie Jenkins, a Manager in Community Outreach, and Lucas Hershberger, an Inflight Supervisor, host the podcast.

The podcast project includes a companion website,ย latimes.com/isthisseatopen,ย which features photos, archival content, videos, news clips, and write-ups for further context and information about each story.

The podcast episodes feature moments throughout Southwest’s history, beginning with stories from the early years of the airline up to present-day, including:

  • Who Was Herb?ย Hear about Southwest Founder, Herb Kelleher, from the perspective of his daughter, Ruth.
  • Fare Play & Bottle of Booze:ย Southwest’s Senior Vice President and Chief Marketing Officer Ryan Green shares how a 1973 marketing masterstroke saved the fledgling airline and helped it turn its first annual profit.
  • Bringing Dad Home:ย Now retired Southwest Pilot Bryan Knight reveals how Southwest helped him honorably lay to rest his late father, a Vietnam veteran who had been missing for 52 years.
  • Go-Go Boots, Khakis, & Jams: Southwest Employee uniforms have been iconic throughout the carrier’s 50 years of flying. Kelli Bartlett, a Flight Attendant who has been with Southwest for more than four decades, recalls each unique uniform throughout the years and describes the current 75 bold, striking, and casual-yet-professional pieces worn today.

Anyone can tune in to the podcast on the ground, and Southwest Customers can listen to “Is This Seat Open?” via iHeartRadio free of charge through the Inflight Entertainment Portal on their personal devices. Customers who already have the iHeartRadio app installed on their devices can play the podcast directly from the app while onboard Southwest flights.

To learn more about Southwest’s 50th Anniversary and the five-decade-long history of friendly, reliable, and low-cost air travel, visitย Southwest50.com.

Due to licensing restrictions, iHeartRadio may not be available onboard WiFi-enabled international flights. The iHeartRadio product is available only on WiFi-enabled aircraft. “Is This Seat Open?” is funded by Southwest Airlines and produced by L.A. Times Studios and At Will Media. The Los Angeles Times newsroom was not involved in the production of this podcast.

A โ€œretrojetโ€ plane

1971 โ€“ Present

Pure Heart: The Evolution of the Southwest Corporate Logo

On June 18, 1971, a Boeing 737 โ€œred bellied warriorโ€ with the Southwest name took off from Love Field in Dallas, carrying its first paying Customers and launching a revolution that democratized the skies.

At a time when air travel typically was limited to elite โ€œjet setters,โ€ and airlines were introducing more class-based fare structures, Southwest was leveling the playing field. Its low fares; first-come, first-served mentality; and Fun-LUVing Attitude marked a departure from traditional airlines and helped define the Southwest business model. By the mid-1970s, Southwest had emerged as a true industry disruptor, but capturing the airlineโ€™s Heart in a corporate identity wasnโ€™t a task for the faint of heart.

For its first 10 years, Southwest never formalized its corporate logo. But its identity was still unmistakably uniqueโ€”from what were known as Hostesses (Flight Attendants) in go-go boots and hot pants to its desert gold, red, and orange airplanes. These planes were so much a part of the Companyโ€™s early identity that two Southwest planes today are painted desert gold as โ€œretrojetโ€ livery.

Although it didnโ€™t become the official brand mark of the airline until 1981, the tri-color parallelogram had been used in one way or another since Southwest took flight in 1971. Inspired by a Ramp Agentโ€™s uniform, the colorsโ€”orange, red, and desert goldโ€”mirrored the paint on Southwest jets and were intended to create the illusion of an airplane tail in motion.

On its 20th anniversary in 1991, with the introduction of the โ€œheart with wingsโ€ logo, the Company introduced the Heart that has since become synonymous with Southwest.

โ€œThe Heart, of course, is for LUV,โ€ said Colleen Barrett, Southwest President from 2001 to 2008. The addition of wings was a given. โ€œAfter all, we issue wings to first-time flyers and Unaccompanied Minors, and . . . Flight Attendants wear winged name tags,โ€ she said. โ€œWhen we decided that we were going to have an anniversary logo, it seemed natural that wings would be a part of that.โ€ Even after the anniversary year, the wings stuck.

While it was never an official logo, the โ€œtakeoff imageโ€ became an important visual component of Southwest marketing in the 1990s and early 2000s. The Company had built its following around a brand promise that gave people the โ€œfreedom to fly,โ€ so using imagery that reflected that sense of freedom was a natural extension of the brand. It appeared frequently in Southwest advertising and was featured in early iterations of the Southwest website.

The next evolution of the Southwest logo came in 2014โ€”a big year for the airline on all counts. With the Wright Amendment finally repealed, Southwest expanded into big-time markets like New York and Washington, D.C., and added international destinations, as well. It also successfully integrated AirTran Airways into its operations. No longer the underdog of the 1970s, Southwest was ready for a brand identity that better reflected its status as an industry trailblazer and trendsetter.

Southwest assembled a creative task force to tap more than 40 years of the Companyโ€™s history in an epic evolution of its visual identity. The task, was to take everything Customers and Employees love about Southwest and turn it into a one-of-a-kind brand visualization.

Even as the identity evolved, the livery remained the sameโ€”with the bold brand colors reminding the world that Southwest isnโ€™t like other airlines, and the Heart symbol on the belly of the plane conveying it as the airline with Heart and Hospitality. Every decision backs up the fact that the Values that put Southwest in the air in 1971 are the same Values that will take it into the future. The modern refresh stays true to Southwestโ€™s DNA while incorporating bolder, more modern colors, reflected across all facets of the business: planes, airports, corporate communicationsโ€”even snack packaging.

When it comes to the business of branding and marketing, Colleen said, โ€œwe must never allow the marketing of Southwest to be so strategic that we lose our heart and soul.โ€ With the Heart as the emotional punctuation of the brand moving forward, Southwest reaffirms its commitment to keeping its Values and Culture at the core of its corporate expression.

Top Copyright Photo: The “Original Three 737s” rest at the DAL base on a slow day in the early days. Southwest Airlines Boeing 737-2H4 N21SW (msn 20345) (original fleet and livery) DAL (Bruce Drum). Image: 101942.

Southwest Airlines aircraft slide show (old liveries):

Southwest announces its new schedule, adds Syracuse, will resume all international services

Southwest Airlines, which is celebrating the 50th Anniversary of its first flights this month, has extended its bookable flight schedule through Jan. 5, 2022, adding the carrierโ€™s 18th new airport since early 2020.

The carrier announced today service to Syracuse Hancock International Airport (SYR) in New York, will begin Nov. 14, 2021. Syracuse will become the 121st airport for Southwestยฎ. The carrier also published new flights today that resume service to all previously served international destinations.

SOUTHWEST SERVICE IN SYRACUSE, NEW YORK BEGINS NOV. 14, 2021

Southwest continues to grow across North America with service to its sixth destination in New York: Syracuse, beginning Nov. 14, 2021. Southwest initially will offer up to three daily flights each way between Syracuse and Baltimore/Washington (BWI).

Fly nonstop between
Syracuse and:

Initial service:

One-way fares as low as*:

Baltimore/Washington (BWI)

3 times daily

$49

*The number of seats, days, and markets for these fares are limited; blackout dates apply. Book from June 10, 2021, through June. 11, 2021.ย 

Southwest additionally will offerย nonstop service on select Saturdays during peak fall and winter holiday periods between Syracuse and Orlando.

SOUTHWEST TO BEGIN SERVICE FROM BELLINGHAM, WASH. NOV. 7, 2021

On Nov. 7, 2021, Southwest also will begin service to Northwest Washington with new service twice daily between Bellingham, Wash. and Oakland and once daily between Bellingham, Wash. and Las Vegas.

Fly nonstop between
Bellingham, Wash. and:

Initial service:

One-way fares as low as*:

Las Vegas

1 time daily

$39

Oakland

2 times daily

$39

*The number of seats, days, and markets for these fares are limited; blackout dates apply. Book from June 10, 2021, through June 11, 2021.

RETURNING TO INTERNATIONAL DESTINATIONS, PLUS NEW CANCUN SERVICE FOR CHICAGO (Oโ€™HARE) AND KANSAS CITY

With demand for beach and leisure destinations continuing to increase, Southwest intends to resume service to all of its previously served international destinations by Nov. 7, 2021.

Effective Oct. 7, 2021, Southwest intends to resume once daily nonstop service between Ft. Lauderdale and:

One-way fares as low as*:

Nassau, Bahamas

$69

Grand Cayman, Cayman Islands

ย  $99**

Providenciales, Turks and Caicos

$99

 

Effective Nov. 7, 2021, Southwest intends to resume once daily nonstop service between Ft. Lauderdale and:

One-way fares as low as*:

Cancun, Mexico

$99

Montego Bay, Jamaica

$129

 

Effective Nov. 7, 2021, Southwest intends to resume once daily nonstop service between Houston (Hobby) and:

One-way fares as low as*:

Belize City, Belize

$99

*All international destinations served prior to April 2020 will resume operations by Nov. 7, 2021. Not all routes previously offered will be available.ย The number of seats, days, and markets for these fares are limited; blackout dates apply. Book from June 10, 2021, through June 11, 2021.ย 

**Service to Grand Cayman resumes Oct. 7, 2021, subject to border reopening.

Photo creds: @nortex.jets on Instagram.

New Nonstop Flights to Cancun

Southwest will serve Cancun nonstop from 17 airports in the U.S. as winter 2021/2022 begins. Starting Nov. 7, the airline will offer new, seasonal, daily service between Chicago (Oโ€™Hare) and Cancun, complementing the carrierโ€™s daily Cancun service from Chicago Midway Airport.

Fly nonstop between:

Initial service:

One-way fares as low as*:

Chicago (Oโ€™Hare) and Cancun

Daily

$129

*The number of seats, days, and markets for these fares are limited; blackout dates apply. Book from June 10, 2021, through June 11, 2021. See a full list of fares, fare rules, and terms and conditions below and atย Southwest.com.

On Nov. 13, Southwest will bring its first-ever international service to Kansas City with seasonal service on Saturdays between Kansas City and Cancun.

Escape to the Caribbean and Central America

Southwest continues responding to growing Customer demand for more access to beaches. Beginning Nov. 13, 2021, Southwest intends to launch seasonal service on Saturdays between Denver and Liberia, Costa Rica. The same day, the airline will begin Saturday-only service between both St. Louis and Buffalo/Niagara Falls and San Juan, Puerto Rico.

More Heart for Hawaii
As Southwest beginsย previously announced service this month to Hawaii from Los Angeles (LAX), Las Vegas, and Phoenix, the carrier is also adding new service between Sacramento and Kona on Mondays, Wednesdays, Fridays, and Sundays, starting Dec. 19, 2021.

NEW NONSTOP FLIGHTS THROUGHOUT THE UNITED STATES

Effective Oct. 7, 2021, Southwest will add daily nonstop service between:
Sacramentoย andย Palm Springs, Calif.

Effective Nov. 7, 2021, Southwest will add nonstop service between:
Washington, D.C. (Reagan National)ย andย Sarasota, Fla.ย (Daily)
New York (LaGuardia)ย andย Sarasota, Fla.ย (Sundays through Fridays)
Dallas (Love Field)ย andย Palm Springs, Calif. (Weekly on Sundays, plus peak travel days).

Southwest exercises 34 options for the new Boeing 737-7 MAX 7s

Southwest Airlines has announced it will exercise 34 options into firm orders for the Boeing 737-7 MAX 7. This brings the firm total to 234 aircraft.

In addition, Southwest also has 149 Boeing 737-8 MAX 8 on order through 2031.

The company will use the new aircraft to retire older 737s.

The airline filed this update:

Based on improving revenue trends and ongoing fleet modernization plans, the Company recently entered into a Supplemental Agreement with The Boeing Company (Boeing) to increase its 2022 firm orders by 34 Boeing 737 MAX 7 (MAX 7) aircraft (consisting of two 2022 options exercised and 32 options accelerated and exercised from later years), resulting in 234 firm orders for MAX 7 aircraft.
Additionally, the Company accelerated 32 options into 2023, 16 options into 2024, 16 options into 2025, and added 32 new options into 2026 through 2027, bringing the total firm and option order book to 660 aircraft.
The Company continues to estimate its 2021 total capital expenditures to be approximately $500 million, with minimal aircraft capital spending, and now expects its contractual aircraft capital spending to be approximately $1.5 billion in 20225, compared with its previous guidance of approximately $700 million.
Fleet and capacity plans will continue to evolve as the Company manages through this recovery period, and it will continue to evaluate its remaining 40 MAX options in 2022.
The Company continues to plan to retire 30 to 35 of its Boeing 737-700 aircraft annually, on average, over the next 10 to 15 years; however, with its cost-effective order book, the Company retains significant flexibility to manage its fleet size, including opportunities to accelerate fleet modernization efforts if growth opportunities do not materialize.
Additional information regarding the Company’s delivery schedule is included in the following table.

 

New 737 Delivery Schedule:

The Boeing Company
MAX 7
Firm Orders
MAX 8
Firm Orders
MAX 7 or 8 Options Additional MAX 8s Total
2021 โ€” 19 โ€” 9 28 (a)
2022 64 โ€” 40 โ€” 104
2023 30 โ€” 70 โ€” 100
2024 30 โ€” 56 โ€” 86
2025 30 โ€” 56 โ€” 86
2026 15 15 40 โ€” 70
2027 15 15 6 โ€” 36
2028 15 15 โ€” โ€” 30
2029 20 30 โ€” โ€” 50
2030 15 45 โ€” โ€” 60
2031 โ€” 10 โ€” โ€” 10
234 149 (b) 268 9 (c) 660
(a) Includes 20 737 MAX 8s delivered as of March 31, 2021, consisting of 12 owned and 8 leased aircraft.
(b) The Company has flexibility to designate firm orders or options as MAX 7 or MAX 8, upon written advance notification as stated in the contract.
(c) These 9 additional MAX 8 aircraft are leases from various third parties, including 8 leased MAX 8 aircraft delivered in first quarter 2021. The Company also received 7 leased MAX 8 aircraft in fourth quarter 2020, for a total of 16 MAX 8 operating leased aircraft from third parties in 2020 and 2021, combined.

Previously on March 29, 2021 the company issued this statement:

Southwest Airlines has announced the completion of its previously disclosed discussions with The Boeing Company (Boeing) regarding the restructuring of its delivery schedule for MAX aircraft. The Company has completed the multi-year evaluation of the successor aircraft to its Boeing 737-700 model, with the selection of the Boeing 737 MAX 7 aircraft. Southwest Airlinesยฎย and Boeing reached agreement on 100 firm orders for MAX 7 aircraft, with the first 30 scheduled to be delivered in 2022. This agreement underscores Southwest’s commitment to continued modernization of its fleet with more fuel-efficient and climate-friendly aircraft. It also positions Southwest to capitalize on growth opportunities, when they arise.

As part of the agreement, the Company also converted 70 MAX 8 firm orders to MAX 7 firm orders and added 155 MAX options for MAX 7 or MAX 8 aircraft for years 2022 through 2029. These order book additions and revisions result in a new total of 349 MAX firm orders (200 MAX 7 and 149 MAX 8) and 270 MAX options for MAX 7 or MAX 8 aircraft for years 2021 through 2031. The Company’s previous order book consisted of 249 MAX firm orders (30 MAX 7 and 219 MAX 8) and 115 MAX options for MAX 7 or MAX 8 aircraft for years 2021 through 2026. The Company continues to expect delivery of 28 MAX 8 aircraft in total this year (19 from Boeing and 9 from third-party lessors), as well as 17 737-700 retirements, ending 2021 with 69 MAX 8 aircraft and 729 total aircraft.

This announcement reinforces the Company’s confidence in the 737 MAX as the future of the Southwest fleet. This cost-effective order book with Boeing allows the Company to maintain the operational efficiencies of an all-Boeing 737 fleet to support its low-cost, point-to-point route network. The Company was the launch Customer of the MAX 8 and is scheduled to be the launch Customer of the MAX 7 after also launching prior 737 generations, including the -300, -500, and -700 series.

The Company expects more than half of the 737 MAX aircraft in its firm order book will replace a significant amount of its 462 737-700 aircraft over the next 10 to 15 years to support the modernization of its fleet, a key component of its environmental sustainability efforts. Southwest is proud of its fuel efficiency improvement of nearly 50 percent since 20002, and the billions of dollars in capital expenditures committed to the 737 MAX order book reinforces the airline’s commitment to further improve fuel efficiency and reduce carbon emissions.

The Company’s flight schedules are currently published and available for sale through August 16, 2021. The Company remains cautious in this uncertain environment where travel demand remains depressed due to the negative financial effects of the COVID-19 pandemic; as such, available seat mile (ASMs, or capacity) plans have not been refined beyond May 2021. The Company will continue to plan for multiple fleet and capacity scenarios; however, the refreshed 737 MAX order book and predominantly owned 737-700 fleet is intended to provide a high degree of flexibility for the Company to manage fleet retirements, growth opportunities, and capital spending in a variety of economic environments. Additional information regarding the Company’s delivery schedule is included in the accompanying table.

1

737 MAX 8 compared with the 737-800. MAX 7 is expected to produce comparable fuel efficiency improvement compared with the 737-700.

2

Measured as revenue ton miles per gallon from 2000 through 2019. A revenue ton mile is one ton of revenue traffic (passenger and cargo) transported one mile. See 2019 Southwest Airlines One Report for more information.

3

Net of progress payments made on undelivered MAX aircraft and previously agreed upon delivery credits provided by Boeing to the Company due to the settlement of 2020 estimated damages relating to the Federal Aviation Administration (FAA) grounding of the 737 MAX aircraft.

NEW 737 DELIVERY SCHEDULE

The Boeing Company

MAX 7

MAX 8

MAX 7 or 8

Additional

Firm Orders

Firm Orders

Options

MAX 8s

Total

2021

19

9

28

2022

30

42

72

2023

30

38

68

2024

30

40

70

2025

30

40

70

2026

15

15

40

70

2027

15

15

30

60

2028

15

15

30

60

2029

20

30

10

60

2030

15

45

60

2031

10

10

200

149

270

9

628

New 737 Delivery Schedule footnotes:

  1. The Company has flexibility to designate firm orders or options as MAX 7 or MAX 8, upon written advance notification as stated in the contract.
  2. The 9 additional MAX 8 aircraft shown above are leases to be acquired from various third parties. The Company also received 7 leased MAX 8 aircraft in fourth quarter 2020, for a total of 16 MAX 8 operating leased aircraft from third parties in 2020 and 2021, combined.

PREVIOUS 737 DELIVERY SCHEDULE

The Boeing Company

MAX 7

MAX 8

MAX 8

Additional

Firm Orders

Firm Orders

Options

MAX 8s

Total

2021

7

100

9

116

2022

27

14

41

2023

12

22

23

57

2024

11

30

23

64

2025

40

36

76

2026

19

19

30

219

115

9

373

Previous 737 Delivery Schedule footnote:

  1. The ‘Previous 737 Delivery Schedule’ shown above is for reference and comparative purposes only. It should no longer be relied upon. See ‘New 737 Delivery Schedule’ for the Company’s current aircraft order book.

 

Southwest Airlines returns to Costa Rica in June

Southwest Airlines Boeing 737-800 SSWL N8514F (msn 36975) PAE (Nick Dean). Image: 953136.

Southwest Airlines hasย announced a return of daily service to both international airports in Costa Rica: Liberia, Guanacaste (LIR), and the capital region, San Jose (SJO), beginning in June 2021.

DAILY SERVICE FROM HOUSTON (HOBBY) BEGINS JUNE 6, 2021
Southwest will resume daily nonstop service to Liberia, Guanacaste, Costa Rica (LIR), and San Jose, Costa Rica (SJO), on June 6, 2021.

SEASONAL SERVICE FROM BALTIMORE/WASHINGTON (BWI) BEGINS JUNE 12, 2021
The carrier will operate additional nonstop service for the summer season on Saturdays between Baltimore/Washington (BWI), and Liberia, Guanacaste, Costa Rica (LIR), beginning June 12, 2021.

Southwest Airlines is closely monitoring ongoing government restrictions for travel. Each state or country may require varying levels of documentation, testing, and potential verification of test results.

ADDITIONAL SERVICE IN DENVER, CHICAGO, ST. LOUIS, KANSAS CITY, AND ORANGE COUNTY/SANTA ANA
“New flights in our summer flight schedule also bring more Mile High Heart with additional nonstop service between Denver and the coastsโ€”with new or returning links to Savannah/Hilton Head, Sarasota/Bradenton, Norfolk/Virginia Beach, and additional flights to Long Beach, Calif., and Seattle,” Watterson added. “We’re bringing more flights in both Chicago airports, and we continue to spread our love across the Midwest with new flights in St. Louis and Kansas City, both of which are now linked nonstop to Orange County/Santa Ana.”

OUR SOUTHWEST HEART CONTINUES TO GROW
In 2020, Southwest added new service toย Hilo, Hawaii;ย Cozumel, Mexico;ย Miami;ย Palm Springs, Calif.;ย Steamboat Springs Colo.; andย Montroseย (Telluride/Crested Butte), Colo., continuing five decades of connecting Customers to the places and people they love. In 2021, Southwest began service to Chicagoย (O’Hare) andย Sarasota/Bradenton, both on Feb. 14; Savannah/Hilton Head andย Colorado Springs, both on March 11; Houstonย (Bush) andย Santa Barbara, Calif.,ย both on April 12; and Fresno, Calif.,ย on April 25. Southwest will begin service toย Destin/Fort Walton Beach on May 6;ย Myrtle Beach, S.C., on May 23; Bozeman, Mont.,ย on May 27; Jackson, Miss.,ย on June 6; and Eugene, Ore., on Aug. 29. The Company also has announced its intention to serve Bellingham, Wash., later this year.

On April 12, 2021 Southwest inaugurated service to Santa Barbara (below):

On April 25, 2021 Southwest inaugurated service to Fresno, California (below).

Top Copyright Photo: Southwest Airlines Boeing 737-800 SSWL N8514F (msn 36975) PAE (Nick Dean). Image: 953136.

Southwest aircraft slide show:

Southwest Airlines reports its first quarter 2021 financial results, reports on its fleet plans

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

  • First quarter net income ofย $116 million, orย $.19ย per diluted share, driven by aย $1.2 billionย offset of salaries, wages, and benefits expenses from the extended Payroll Support Program (PSP Extension) proceeds under the Consolidated Appropriations Act, 2021
  • Excluding special items1, first quarter net loss ofย $1.0 billion, orย $1.72ย loss per diluted share
  • First quarter operating revenues ofย $2.1 billion, down 51.5 percent year-over-year
  • Ended first quarter with liquidity2ย ofย $15.3 billion, well in excess of debt outstanding ofย $10.8 billion

Gary C. Kelly, Chairman of the Board and Chief Executive Officer, stated, “In first quarter, we benefited from temporary cost relief as a result of PSP Extension proceeds, which offset a portion of salaries, wages, and benefits expenses, resulting in first quarter 2021 net income ofย $116 million, orย $.19ย per diluted share. We remain grateful for this much-needed federal payroll support on the heels of substantial losses in 2020, and ongoing non-GAAP losses in first quarter 2021. The payroll support from the federal government has allowed Southwest to preserve its 50-year history without involuntary layoffs or furloughs, an achievement unprecedented in the U.S. airline industry. Excluding the benefit of PSP Extension proceeds and other special items, our first quarter 2021 net loss wasย $1.0 billion, orย $1.72ย loss per diluted share. While the pandemic is not over, we believe the worst is behind us, in terms of the severity of the negative impact on travel demand. Vaccinations are on the rise, and COVID-19 hospitalizations inย the United Statesย are down significantly from their peak inย January 2021. As a result, we are experiencing steady weekly improvements in domestic leisure bookings, which began inย mid-February 2021.

March 2021ย operating revenues decreased 9.7 percent, year-over-year, and decreased 53.5 percent compared withย March 2019, representing a significant improvement from relatively stagnant revenue levels experienced fromย September 2020ย throughย February 2021. Our current outlook for operating revenues indicates a sequential improvement from March toย April 2021, and again from April toย May 2021, based on improving bookings. We believe there is significant pent-up demand for leisure travel and are optimistic about summer 2021. In response, we are in the process of adding flights inย June 2021, and we currently expect June available seat miles (ASMs, or capacity) to be only slightly less thanย June 2019ย pre-pandemic levels.

“We had a solid cost performance in first quarter 2021, despite recently rising jet fuel prices. Spending levels in many cost categories remained muted due to the pandemic. We expect capacity-driven year-over-year cost increases in second quarter 2021, most notably as we return parked aircraft to revenue service and recall a portion of our Pilots, Flight Attendants, and Ground Operations Employees from extended time-off to support increased flight levels planned for summer 2021. We currently expect second quarter 2021 operating expenses, excluding fuel and oil expense, special items, and profitsharing, to increase in the range of 10 to 15 percent, year-over-year, but remain below second quarter 2019 levels3.

“Our liquidity is strong, and we remain the only U.S. airline with an investment-grade credit rating by all three rating agencies. As ofย March 31, 2021, our total liquidity wasย $15.3 billion, consisting of cash and short-term investments ofย $14.3 billionย and a fully available revolving credit facility ofย $1.0 billion. Average core cash burn4ย was approximatelyย $9 millionย per day inย March 2021, and approximatelyย $13 millionย per day in first quarter 2021. Including changes in working capitalโ€”most notably, cash flow from future bookingsโ€”average core cash flow turned positive inย March 2021, and we generated approximatelyย $4 millionย per day, as revenue and booking trends improved. Our average core cash burn in second quarter 2021 is currently estimated to be in the range ofย $2 millionย toย $4 millionย per day. Based on current booking trends and cost outlook, we are hopeful we can achieve breakeven average core cash flow, or better, byย June 2021.

Southwest Airlines Boeing 737-8 MAX 8 N8815L (msn 65473) BFI (Nick Dean). Image: 953374.

Above Copyright Photo: Southwest Airlines Boeing 737-8 MAX 8 N8815L (msn 65473) BFI (Nick Dean). Image: 953374.

We returned the Boeing 737 MAX (MAX) to revenue service onย March 11, 2021. To return the MAX to service, we satisfied applicable Federal Aviation Administration (FAA) requirements by modifying certain operating procedures; implementing enhanced Pilot training requirements; installing FAA-approved flight control software updates; and completing other required maintenance tasks specific to MAX aircraft, as well as completing more than 200 readiness flights. Also inย March 2021, as previously disclosed, we completed discussions with The Boeing Company (Boeing) regarding the restructuring of our delivery schedule for MAX aircraft, and added 100 firm orders for MAX 7 aircraft; converted 70 MAX 8 firm orders to MAX 7 firm orders; added 155 MAX options; and extended the order book through 2031. This cost-effective MAX order book allows us to maintain the operational efficiencies of an all-Boeing 737 fleet to support our low-cost, point-to-point route network; accelerate our commitment to fleet modernization with more climate-friendly aircraft; and capitalize on future growth opportunities.

“This year marks our 50th anniversary, and we celebrate what has made Southwest Airlines the most successful airline in the worldโ€”our Employees. We applaud our People for their unwavering focus on Hospitality, which has resulted in the U.S. airline industry’s top Customer Service ranking for 27 of the past 30 years5. Never has their resilience been more vital, as we work our way through the pandemic recovery while pursuing new airports and Customers.

“It is crucial that we continue managing our business prudently in the near-term, while also positioning ourselves to thrive and prosper, once again. We are increasingly optimistic about our future, and we are in the process of updating our strategic plan with a clear set of initiatives for the next five years. Among these initiatives are the aggressive expansion of our route network, having opened or announced 17 new airports since the pandemic began; the launch 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 that are aimed at improving upon our environmental stewardship and supporting our environmental sustainability goal to be carbon neutral by 2050. Being a good steward of the environment is not only good for our Planet, it is good for business, and it is the right thing to do for our Employees, Customers, and Shareholders.”

Revenue Results and Outlook
The Company’s first quarter 2021 operating revenues decreased 51.5 percent, year-over-year, toย $2.1 billion, as a result of negative impacts to passenger demand and bookings due to the pandemic. First quarter 2021 operating revenue per ASM (RASM, or unit revenues) wasย 8.86 cents, a decrease of 26.0 percent, primarily driven by a passenger revenue yield decrease of 28.4 percent and a load factor decline of 3.4 points, all year-over-year.

The Company began first quarter 2021 experiencing stalled demand and bookings in January, driven by a high level of COVID-19 cases, coupled with typical seasonal weakness. Inย mid-February 2021, the Company began experiencing a modest improvement in leisure passenger demand and bookings that accelerated inย March 2021. Passenger fares improved throughout March as close-in leisure demand held steady. Beach and other nature-inspired destinations continued to outperform other regions in first quarter 2021. Beginning inย March 2021, demand improvement was system-wide.

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

January 2021

February 2021

March 2021

1Q 2021

Operating revenue year-over-year

Down 65.5%

Down 65.7%

Down 9.7%

Down 51.5%

Previous estimation

Down ~66%

Down ~66%

Down 15% to 20%

(a)

Operating revenue compared with 2019

Down 65.1%

Down 64.0%

Down 53.5%

Down 60.1%

Previous estimation

Down ~65%

Down ~64%

Down 55% to 60%

(a)

Load factor

53.4%

63.9%

72.7%

64.3%

Previous estimation

~53%

~64%

65% to 70%

(a)

(a) No previous estimation provided.

Thus far, the Company continues to experience improvements in leisure passenger demand and bookings for April andย May 2021ย travel, with expectations of improving passenger traffic and fares compared withย March 2021. The Company continues to experience an increase in bookings farther out on the booking curve, with approximately 35 percent and 20 percent of anticipated bookings currently in place for June and July, respectively. These represent fairly typical future booking patterns; however, business travel continues to significantly lag leisure and is expected to have a significant negative impact on close-in demand and average passenger fares.

The following monthly table presents selected preliminary estimates of revenue and load factor for April andย May 2021:

Estimated
April 2021

Estimated
May 2021

Operating revenue compared with 2019 (a)

Down 40% to 45%

Down 35% to 40%

Previous estimation

Down 45% to 55%

(b)

Load factor

75% to 80%

75% to 80%

Previous estimation

70% to 75%

(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.

The Company achieved its goal of accepting corporate travel bookings in 2020 with Amadeus’s GDS platform and Travelport’s multiple GDS platforms: Apollo, Worldspan, and Galileo. Inย December 2020, the Company reached a full-participation GDS agreement with Sabre, anticipated to go live by Labor Day 2021. The Company also has an agreement with Airlines Reporting Corporation (ARC) to implement industry-standard processes to handle the settlement of tickets booked through Travelport and Amadeus channels. Once the new Sabre GDS connectivity is implemented, Sabre tickets are also expected to settle via ARC. The Company’s enhancement of its GDS channel strategy complements its expansion of direct connect via Airline Tariff Publishing Company’s (ATPCO) New Distribution Capability (NDC) Exchange and existing SWABIZยฎ options, with the goal of distributing its everyday low fares to more corporate travelers through their preferred channel.

Cost Performance and Outlook
First quarter 2021 total operating expenses decreased 57.3 percent, year-over-year, toย $1.9 billion. Excluding special items, first quarter 2021 operating expenses decreased 23.5 percent, year-over-year, toย $3.3 billion. Total operating expenses per ASM (CASM, or unit costs) decreased 34.9 percent, compared with first quarter 2020. Excluding special items, first quarter 2021 CASM increased 16.7 percent, year-over-year.

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

First Quarter

2021

2020

Economic fuel costs per gallon

$1.70

$1.90

Fuel hedging premium expense

$25 million

$24 million

Fuel hedging premium expense per gallon

$0.09

$0.05

Fuel hedging cash settlement gains per gallon

$0.01

โ€”

The Company continued to operate fewer of its oldest, least fuel-efficient Boeing 737-700 aircraft as a result of capacity reductions due to the pandemic, which resulted in a year-over-year improvement of 4.7 percent in ASMs per gallon (fuel efficiency) in first quarter 2021. While the Company expects to return more of its 737-700 aircraft to service to support planned capacity increases, second quarter 2021 fuel efficiency is currently estimated to be sequentially in line with first quarter 2021, on a nominal basis, also taking into account the return of its most fuel-efficient aircraft, the MAX, to service inย March 2021.

Based on the Company’s existing fuel derivative contracts and market prices as ofย April 15, 2021, the following table presents estimates of economic fuel costs per gallon6, including the estimated impact of fuel hedging premium expense and fuel derivative contracts, for second quarter and annual 2021 and prior year periods:

Second Quarter

Full Year

2021

2020

2021

2020

Economic fuel costs per gallon

$1.85 to $1.95

$1.33

$1.85 to $1.95

$1.49

Fuel hedging premium expense

$25 million

$24 million

$100 million

$98 million

Fuel hedging premium expense per gallon

$0.06

$0.12

(a)

$0.08

Fuel hedging cash settlement gains per gallon

$0.01

โ€”

โ€”

โ€”

(a) Due to continued uncertainty regarding available seat mile plans for annual 2021, the Company cannot reasonably provide an estimate for its full year 2021 fuel hedging premium expense per gallon.

As ofย April 15, 2021, the fair market value of the Company’s fuel derivative contracts for the remainder of 2021 was an asset of approximatelyย $44 million, and the fair market value of the fuel hedge portfolio settling in 2022 and beyond was an asset of approximatelyย $267 million. Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding fuel and oil expense, first quarter 2021 operating expenses decreased 60.2 percent, compared with first quarter 2020. The Company accruedย $24 millionย of profitsharing expense in first quarter 2021, compared with no profitsharing accrual in first quarter 2020. The Company’s first quarter 2021 net income included special items, the largest of which was a net benefit of approximatelyย $1.4 billion. This pre-tax benefit was comprised of approximatelyย $1.2 billionย in PSP Extension proceeds;ย $116 millionย related to the Employee Retention Tax Credit under the Coronavirus Aid, Relief, and Economic Security Act; andย $115 millionย due to the reversal of a portion of the Company’s previous accrual related to the costs for Employees who accepted the Company’s offer to participate in its voluntary extended leave program. Due to increasing passenger demand and bookings, the Company plans to increase flight activity in summer 2021โ€”by approximately 25 points of capacity from March toย June 2021, compared with respective 2019 levelsโ€”which has prompted the early recall of a portion of the Employees who elected this program. The Company now estimates annual 2021 cost savings from voluntary separation and extended leave programs to be in the range ofย $1.1 billionย toย $1.2 billionย compared with annual 2019, as compared with its previous estimation of approximatelyย $1.2 billion.

Excluding fuel and oil expense, special items, and profitsharing, first quarter 2021 operating expenses decreased 19.1 percent, compared with first quarter 2020, which represented the favorable end of the Company’s guidance range. The significant year-over-year decrease primarily was driven by the decline in variable, flight-driven expenses, such as salaries, wages, and benefits; maintenance expense; and landing fees; combined with the Company’s continued focus on cost management. As expected, the Company realized approximatelyย $412 millionย of cost savings in first quarter 2021 from voluntary separation and extended leave programs. On a unit basis, first quarter 2021 operating expenses, excluding fuel and oil expense, special items, and profitsharing expense, increased 23.4 percent, year-over-year, primarily driven by the significant reduction in capacity.

Excluding fuel and oil expense, special items, and profitsharing, second quarter 2021 operating expenses are expected to increase in the range of 10 to 15 percent, year-over-year3, which includes an estimatedย $325 millionย of salaries, wages, and benefits cost savings from voluntary separation and extended leave programs. Second quarter 2021 operating expenses, excluding fuel and oil expense, special items, and profitsharing, are also expected to increase compared with first quarter 2021, with 60 to 70 percent of the sequential increase attributable to variable, flight-driven expenses as capacity is expected to increase to near-2019 levels byย June 2021. These variable, flight-driven cost increases are primarily in salaries, wages, and benefits due to staffing increases; maintenance expense to return aircraft to revenue service, along with higher flight-driven maintenance expenses as flight levels increase; landing fees; and personnel, passenger, and revenue-related costs. In addition, the Company is experiencing cost increases primarily due to airport cost inflation; higher aircraft ownership costs due to MAX deliveries; and certain favorable tax and insurance settlements realized in first quarter 2021 operating expenses that are non-recurring in second quarter 2021. Despite increasing capacity and operating expenses, both sequentially and year-over-year, second quarter 2021 operating expenses are estimated to remain below second quarter 2019 levels.

Other expenses in first quarter 2021 increased byย $19 million, year-over-year, primarily due to an increase in interest expense driven by new debt issued during 2020, and lower interest income as a result of lower interest rates.

The Company’s first quarter 2021 effective tax rate was 21 percent, and the Company currently estimates its annual 2021 effective tax rate to be approximately 23 percent.

Liquidity and Capital Deployment
As of Marchย 31, 2021, the Company had approximatelyย $14.3 billionย in cash and short-term investments, and a fully available revolving secured credit facility ofย $1.0 billion. The Company currently has unencumbered assets with an estimated value of more thanย $11 billion, including aircraft value estimated in the range ofย $9 billionย toย $10 billion, and approximatelyย $2 billionย in non-aircraft assets such as spare engines, ground equipment, and real estate. In addition to the value from aircraft and other physical assets, the Company has significant value from its Rapid Rewardsยฎ loyalty program. As ofย April 21, 2021, the Company’s cash and short-term investments remained at approximatelyย $14.3 billion.

Net cash provided by operations during first quarter 2021 wasย $645 million, primarily driven by PSP Extension proceeds. First quarter 2021 capital expenditures wereย $95 million. The Company estimates its 2021 capital expenditures to be approximatelyย $500 million, primarily driven by technology, facilities, and operational investments. Based on the Company’s recently completed aircraft purchase agreement with Boeing, the Company estimates its total contractual aircraft capital expenditures for all years 2021 through 2026, which are associated with 169 MAX firm orders (135 MAX 7 and 34 MAX 8 aircraft), to be approximatelyย $5.1 billion. The Company currently estimates approximatelyย $700 millionย of aircraft capital expenditures in 2022, based on firm orders. The Company has not finalized its 2022 fleet or capital investment plans.

During first quarter 2021, the Company reached an agreement with the U.S. Department of Treasury (Treasury) and received approximatelyย $1.7 billionย in PSP Extension proceeds under the Consolidated Appropriations Act, 2021. The Company soon expects to receive approximatelyย $259 millionย as its final distribution pursuant to the PSP Extension, for a total of approximatelyย $2.0 billionย of proceeds under this program. In addition, the Company soon expects to reach agreement with Treasury to receive approximatelyย $1.9 billionย in payroll support proceeds under the American Rescue Plan Act of 2021 (PSP 3) in return for providing consideration to Treasury in the form of a promissory note and warrants.ย The Company intends to disclose additional details regarding PSP 3 after the agreement with Treasury is finalized.

As of Marchย 31, 2021, the Company had current and non-current debt obligations that totaledย $10.8 billion. The Company repaid approximatelyย $67 millionย in debt and finance lease obligations during first quarter 2021 and is scheduled to repay approximatelyย $153 millionย more in debt and finance lease obligations in 2021. Based on current debt outstanding and current market interest rates, the Company expects second quarter 2021 interest expense to be approximatelyย $115 million. As ofย March 31, 2021, the Company was in a net cash position7ย ofย $3.6 billion, and its adjusted debt8ย to invested capital (leverage) was 57 percent.

Fleet and Capacity
The Company ended first quarter 2021 with 730 aircraft in its fleet, including 61 MAX 8 aircraft. During first quarter 2021, the Company took delivery of 20 MAX 8 aircraft, comprised of 12 owned and 8 leased aircraft. The Company expects delivery of eight more MAX 8 aircraft in 2021. Also during first quarter 2021, the Company returned eight leased 737-700 aircraft to lessors and expects to retire up to nine more 737-700 aircraft in 2021. In response to capacity reductions due to the effects of the pandemic, 59 737-700 aircraft were in temporary storage as ofย March 31, 2021. In April, the Company also removed 32 of its MAX 8 aircraft from service due to a Boeing production issue related to the electrical power system on a subset of MAX aircraft. Upon learning of the issue, the Company immediately removed these aircraft from service, out of an abundance of caution, and is currently awaiting more guidance from Boeing and the FAA regarding the appropriate corrective actions. The Company is in the process of returning its stored 737-700 aircraft to revenue service to support flight schedules in summer 2021 and beyond.

The Company’s order book with Boeing includes a total of 349 MAX firm orders (200 MAX 7 and 149 MAX 8) and 270 MAX options (MAX 7 or MAX 8) for years 2021 through 2031. Additional information regarding the Company’s aircraft delivery schedule is included in the accompanying tables.

The Company’s first quarter 2021 capacity decreased 34.5 percent, year-over-year, in line with the Company’s guidance, due to capacity reductions in light of the decrease in passenger demand and bookings as a result of the pandemic. The following table presents capacity results for first quarter 2021:

January 2021

February 2021

March 2021

1Q 2021

ASMs year-over-year

Down 40.4%

Down 48.3%

Down 14.3%

Down 34.5%

Previous estimation

Down ~40%

Down ~48%

Down ~14%

Down ~35%

ASMs compared with 2019

Down 42.1%

Down 47.4%

Down 29.0%

Down 38.9%

Previous estimation

Down ~42%

Down ~47%

Down ~28%

Down ~38%

The Company estimates its second quarter 2021 capacity to increase approximately 90 percent, year-over-year, and decrease approximately 15 percent as compared with 2019, driven by improving passenger demand and bookings. The following table presents capacity estimates for second quarter 2021:

Estimated
April 2021

Estimated
May 2021

Estimated
June 2021

Estimated
2Q 2021

ASMs year-over-year

Up ~83%

Up ~127%

Up ~70%

Up ~90%

Previous estimation

(a)

Up ~118%

(b)

(b)

ASMs compared with 2019

Down ~24%

Down ~18%

Down ~4%

Down ~15%

Previous estimation

(a)

Down ~21%

(b)

(b)

(a) Remains unchanged from the previously provided estimation.

(b) No previous estimation provided.

Passenger demand and booking trends remain primarily leisure-oriented and inconsistent by region. Despite recent improvements in leisure demand, the Company remains cautious in this uncertain environment and continues to plan for multiple fleet and capacity scenarios. 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.

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Southwest Airlines continues its dedication to the environment through sustainable aviation fuel initiatives

Will become N8814K

Southwest Airlines announced today its ongoing support of the U.S. Department of Energy’sย National Renewable Energy Laboratoryย (NREL) to develop commercially viable and scalable sustainable aviation fuel (SAF).

Southwestยฎ has undertaken multiple efforts over the years to minimize its carbon footprint and the Company continues to seek opportunities to help mitigate emissions. NREL presents one of those opportunities, as Southwest intends to continue to support NREL’s work to develop low-carbon, low-cost, high-performance aviation fuels created from wet waste. Southwest plans to work with NREL to bridge a gap between the science behind SAF and the application of these sustainable fuels on a commercial level.

“We recognize the important role SAF will play in Southwest’s journey to achieve carbon neutrality by 2050โ€”a goal we’re dedicated to reaching,” saidย Stacy Malphurs, Vice President of Supply Chain Management & Environmental Sustainability. “By working with organizations like NREL, Southwest embraces a great opportunity to advance the crucial science that makes this technology possible, and more available. We’re excited to work with NREL toward commercially-viable SAF.”

According to NREL, itsย analysisย quantifies that U.S. wet waste, including food waste, could produce enough energy content to cover about 20% of U.S. jet fuel consumption. Conventional jet fuel is a primary source of greenhouse gas emissions in the aviation industryโ€”showing the value of creating low carbon or carbon-negative SAF (on a lifecycle carbon assessment basis) from low-cost wet waste is a step toward one day reducing reliance on traditional jet fuel.

NREL has demonstrated how to make SAF from wet waste that is compatible with existing jet engines,” said NREL scientist Derek Vardon. “It has the potential for a carbon negative footprint when diverting food waste from landfills.”

As a leading global citizen, Southwest remains dedicated to doing the right thing for its People, through its Performance, and in service to the Planet. Southwest recognizes conservation can be more impactful when we all work together for a more sustainable future.

Video:

Top Copyright Photo: Southwest Airlines Boeing 737-8 MAX 8 N1781B (N8814K) (msn 42664) BFI (Nick Dean). Image: 953456.

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