Southwest CEO in Trump administrator, pulling out prospects, no longer free bags
00:00 Speaker a
Southwest Airlines has extended guidance for the whole year for 2025 and 2026, taking macroeconomic uncertainty as an example. The company said it is difficult to predict given the recent and short-term booking trends. The carrier also plans to reduce flight capacity in the second half of the year. Southwest Airlines CEO Bob Jordan and my brief morning co-host Brad Smith joined us immediately. Bob, I’m glad to contact us. I want to understand the extent to which these results are driven by economic uncertainty caused by tariff policies. If you have to put percentages on top, is your results driven by uncertainty caused by these tariffs?
00:57 Bob Jordan
Well, first of all, I’m proud of the first quarter execution. We have achieved great business results. We we really beat our cost plan. Our income turned out very well. So all our moves are on track. So the company is doing a good job, but no, we are affected by the demand side of tariffs and then the erosion of consumer confidence. When we started in January and met expectations in the first and second quarters. Since then, the first quarter has dropped by about three points. The second quarter fell by about six points compared to what we thought in January. So this gives you a good indication of the level of impact on demand and how quickly demand decreases.
02:22 Brad Smith
So with that in mind, Bob, as you think, you and your airline peers do predict the next 60 to 90 days of booking look in this environment, just bring us into modeling, and the growth of you and the team.
03:01 Bob Jordan
Well, first of all, you have to get into something like this with a strong position. We have a strong balance sheet. We have net cash, not net debt. Our location is very good. Our capacity is already low for the rest of the year. So you have to be prepared because ultimately looking for it, it is difficult to predict the look of your booking. Another thing is that we have a very strong change plan, cost leverage, a lot of revenue leverage. Well, in the past quarter, we opened Expedia as a distribution channel. We started optimizing and dynamically priced quickly reward redemption. You know, here in a few weeks next month, we have UH bags and our luggage fee will be online. We are preparing extra legroom for the allocated seats. Next month, we start revamping our first aircraft. So the good thing is that Southwest Airlines is that we have a plan and a series of plans that will fight this environment that is unique to the Southwest. Therefore, our location is very good. You know, macros are going to do whatever the macros are going to do, we focus on what we can control, which is executing our plans, doing strong operations, and then really controlling our cost base.
05:02 Brad Smith
In this, what is the reality of capability control you are now evaluating, because it seems that other members of the industry are using it as one of its levers, which may be able to fly the cost of flying out of the equation, at least in this intermediate uncertainty.
05:31 Bob Jordan
We already have a capacity plan for 2025. We plan to grow 1% to 2%. We lowered another 1.5 points in the third quarter and fourth quarter, which did make those lower demand fly. And you want to do this earlier because if you do this earlier, you can come up with the costs associated with these. So, our capacity is very low this year and all of this growth is funded by the initiative. Now, we now take five minutes per turn in 19 stations. This is basically effective in creating additional new aircraft, which is funding our growth. So all growth is funded by the initiative, but no, our growth rate is very low, which makes perfect sense in this uncertain demand environment.
06:49 Speaker a
Bob, we have heard from several other CEOs in the week, both in our programming and other networking reports, and other CEOs, especially other retailers, have been meeting with President Trump at the White House, talking about the negative effects of these tariffs. Have you arranged a call with the White House? What does your COM look like in an administrative officer?
07:29 Bob Jordan
No, we are talking to the UH government in many ways. Well, work is being implemented that really modernizes the air traffic control system, which will help the industry as a whole in terms of efficiency. But, no, we often talk to the government on this and other topics.
08:11 Brad Smith
You know, with that in mind, what do you hear from the government of air travel security? And we know that for some of the headlines consumers will see in so many flight publics, it does plug in reality again, well, yes, of course, we certainly have to keep our heads spinning around, but there are a lot of air travel experience requirements during flight hours, and the pilot must achieve the flight time of the plane during flight time, and even make the plane fly. Then, for all safety mechanisms for passengers and on the way to suit everyone else’s travel experience. How do you feel about what consumers in the first quarter now and some unfortunate headlines around Air Aviation’s headlines in the first quarter of this year?
09:30 Bob Jordan
Well, from the start of you, air travel is the safest form of travel on the planet. And then it starts from there. You know, of course there are opportunities for improvement. Uh, but it’s a very, very safe way to transport, safer than ten years ago, and safer than twenty years ago. What we really need is investment in air traffic control systems. This is both staffing and then modernizing the use of the system. I’ve spoken with UH Secretary Duffy, who focused on modernizing the air traffic control system and obtained funds to achieve this goal, stabilized the funds and then made real progress in modernizing the system, which is very encouraging. We need to lead the world in an efficient way that we can use the systems available.
10:47 Brad Smith
You know, Bob, I want to go back to what you mentioned just now, I know we have limited time so we have to fire quickly here, but you mentioned the bag fee. This cheers everyone’s ears up here. Why is this the decision to make the move now? And how many additives are there in the financial performance you projected?
11:17 Bob Jordan
OK, this is a bunch of stuff. It introduces a new Basic Economic Expo. This is a bag fee. It is introduced to the now expired flight points. It is introducing additional leg rooms to earn more income. Therefore, the entire portfolio is expected to generate an increment of 1.8 billion euros from the plan here in 2025, while EBIT in 2026 generates 4.3 billion. Therefore, it makes great sense in terms of contributions to the financial aspects of the business. Ultimately, we have to provide the product that our customers want and must meet the financial returns that shareholders expect. With the bag fee, the benefit is to give our customers, especially our most loyal customers, the products they see in many cases will actually be better. They will have access to the seat map. Credit card holders will receive a free package. Customers at the uh uh level will receive free bags. So, in many cases, this is actually better for many of our customers. But no, you have to push the right level of income production. We have been leading the industry with our financial performance and we will lead the industry again.
13:25 Speaker a
Bob has 30 seconds left. There is evidence in consumer sentiment data that consumers and your customers want the most is to eliminate these tariffs. What information do you have about the government’s information about these tariffs?
13:45 Bob Jordan
Well, you know, tariffs, focus on the impact of pricing on tariffs. I think the biggest thing at the moment is the impact on economic uncertainty and consumer uncertainty. This is the biggest impact of horror at present. Whether we need this uncertainty to go away so that we can return to the right level and correct the trend in terms of travel. Travel is very important to the economy, and this level of uncertainty makes it difficult to predict and very difficult for the economy.
14:33 Brad Smith
Bob, we used to be in the studio. You are not a person facing heights. You told me the seats would get smaller, bigger, what happened?
14:48 Bob Jordan
No, the seats are getting smaller and smaller. I promise you. We will have great seating and spacing for everyone. We’re just adding now part of the aircraft that’s premium extra legroom. I can’t wait for that day. We will be sold in the third quarter and operate in the first quarter of 2026. Again, we start to revamp those planes next week.
