西南航空 (LUV) 2016 Q4 法說會逐字稿

Good day, and welcome to the Southwest Airlines fourth-quarter and annual 2016 conference call.

My name is Tom, and I'll be moderating today's call.

This call is being recorded, and a replay will be available on Southwest.com in the Investor Relations section.

At this time, I'd like to turn the call over to Ms. Marcy Brand, Managing Director of Investor Relations.

Please go ahead, ma'am.

Thank you, Tom.

Good morning, everyone.

Welcome to today's call to discuss our fourth-quarter and annual 2016 performance.

Please note, today's call will include forward-looking statements.

And because these statements are based on the Company's current intent, expectations, and projections, they are not guarantees of future performance, and a variety of factors could cause actual results to differ materially.

As this call will include references to non-GAAP results, excluding special items, please refer to this morning's press release in the Investor Relations section of Southwest.com for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results.

Joining me on the call today we have Gary Kelly, Chairman of the Board and Chief Executive Officer; Tom Nealon, President; Mike Van de Ven; Chief Operating Officer; Tammy Romo, Executive Vice President and Chief Financial Officer; and Bob Jordan, Executive Vice President and Chief Commercial Officer.

We will begin here shortly with Gary providing an overview of our performance, followed by Tammy providing a more detailed review of our fourth-quarter results and our current outlook.

Following Tammy's remarks, all of our call participants will be available to answer your questions.

We ask that you please limit yourself to one question and one follow-up, so that we can accommodate as many questions as possible.

At this time, I will now turn the call over to Gary.

Thank you, Marcy, and good morning, everybody, and thanks for joining us for our 2016 earnings call.

First, I want to thank all of our Southwest employees for their very hard work, and congratulate them on a superb year, one where we set a number of records, along with $586 million in profit sharing.

So congratulations to all of our folks.

Next, I want to welcome and acknowledge Tom Nealon, President of Southwest Airlines.

Tom, welcome.

Well, thank you, Gary, and good morning, everybody.

Well, first of all, I am very excited to be at Southwest.

I mean, very excited about the new role.

I have a lot of passion and a lot of energy for Southwest, and for the people and the culture of Southwest Airlines.

As you all know, this is a very special place.

We have tremendous momentum, we have a very clear purpose, and we have a very clear vision.

And I think we have a strategy that's going to help us achieve our vision over time.

I see my role as driving the execution and the implementation of our strategy.

I'm going to do this with Gary, I'll do it with Mike, and with the entire team here at Southwest.

So I'm very optimistic about our future, and we are moving forward.

Well, congratulations again, Tom, on your new role, and we're very excited to have Tom in this executive leadership role.

Likewise, I want to welcome and acknowledge Mike Van de Ven, our Chief Operating Officer.

Mike, welcome.

Well, thanks, Gary.

I also am really energized about my expanded role.

And I agree with Tom -- we've got a lot of momentum.

I really believe that our best days are ahead of us, and I look forward to working with Tom and Gary, and really the rest of our team, just to make that belief a reality.

I do know a lot of you all already.

I look forward to working with you guys a little bit closer, more closely in the future.

So thanks, Gary.

Well, congratulations to you as well, Mike.

And all three of us are very excited to be working more closely together.

Well, obviously we're very pleased to report another record year of earnings, record year of earnings per share.

This is our 44th consecutive year of profits, which of course is unprecedented in the airline industry.

But I'm not sure how many others in corporate America can say that they've been profitable for that many years.

My guess is, not many.

But it has certainly allowed us to take great care of our people, great care of our customers, great care of our shareholders, for over five decades.

And as you can imagine, we're very proud of that.

We're very pleased to end 2016 and begin this year on a strong note.

Average fourth-quarter 2016 fares were down year over year $5.51.

Unit revenues were down 2.9%.

But after two years of sequential declines, it feels like we're bottoming.

Plus, we've outperformed the industry since 2014.

We have a shot at flat unit revenues year over year here in the first quarter, although our current forecast is somewhat below that.

But that's our goal, and we will work hard to hit that first-quarter goal.

But regardless, we're seeing strength sequentially from fourth quarter to first quarter, and that of course, is a welcome change.

We have already announced that we've slowed our growth year over year in 2017.

Consistent with that, even though we're growing international at a pretty significant rate, it's on a very small base.

So the majority of our growth will be domestic.

Another thing to note is that the percentage of developing markets has dropped below 4%, and obviously that's providing us some strength going forward as well.

And really, that's the big news for this quarter, that business has strengthened.

Otherwise, our report is pretty much an update.

Our 2017 plans have been set for quite some time.

The vast majority of the work surrounding our initiatives for this year is complete.

So we'll be finishing up and deploying our new reservation system, our new international terminal in Fort Lauderdale, the new Boeing 737-8 aircraft as planned.

Along with that, we will be grounding and retiring the remaining classic fleet in the third quarter of this year.

We will launch international flights out of Fort Lauderdale in June, and at that time, will open up one new destination, which is Grand Cayman.

And in terms of route news for this year, we will also consolidate our Northeastern Ohio operations into Cleveland.

And we will consolidate our Southwest Ohio operations into Cincinnati, and Cincinnati will be our second new city for this year.

These airports are very close to Dayton and Akron-Canton, which will give us the opportunity to continue serving our customers in those cities, along with winning more customers.

So I'm very excited about our plans for 2017.

I'm delighted that our trends have strengthened, given that the current economic outlook is pretty good, as well as the current outlook for moderate energy prices.

We're hoping for another great year in 2017.

Balance sheet is strong, our liquidity is very strong, our CapEx plans are very manageable, and our goal is to continue rewarding our shareholders.

So Tammy, with that very quick overview, I'll turn it over to you to take us through the quarter.

Thanks, Gary, and I'm excited, too.

Welcome, everyone.

We are very pleased with the record profits we reported this morning for 2016.

Our earnings were a record $2.2 billion, with operating income of $3.8 billion.

Excluding special items, our 2016 net income was a record $2.4 billion, with record operating income that produced a very healthy 19.4% margin.

These results generated cash flows also at record levels, enabling us to deliver on our commitment to invest in our employees, our customers, and our shareholders.

We hit a return on invested capital of 30%, which is just an outstanding accomplishment for the year.

Before I jump into fourth-quarter results, I'd also like to congratulate our employees on our 44th consecutive year of profitability, and their 42nd consecutive year of profit sharing, which was $586 billion for 2016.

As you can see from our report this morning, we ended the year with a solid fourth-quarter performance.

Our fourth-quarter revenues were a record $5.1 billion, and unit revenues declined 2.9%, which was better than we expected at the beginning of the quarter.

Travel demand and closed-end yields ticked up following the election, and that carried through to the end of the year.

Business travel leading up to the December holiday was also better than we had expected early in the quarter.

The strength in demand resulted in a record fourth-quarter load factor performance of 84.4%.

And thus far, the fare environment has held here in January.

Based on these trends and current bookings, we are forecasting flat to down 1% RASM year over year, as Gary took you through here in the first quarter.

Considering our outperformance of the industry since 2014 and our 4% ASM growth in the first quarter, we are encouraged by the sequential improvement in our year-over-year RASM trends.

We also expect strength in other revenues to continue into the first quarter of 2017.

Turning to our cost performance, it was right in line with our expectations.

Unit costs, excluding special items, increased 2.9% year over year, largely driven by higher labor costs from union contracts ratified during 2016, as well as the accelerated depreciation associated with the retirement of our classic fleet.

Our economic jet fuel price per gallon increased 2% year over year to $2.07 for fourth quarter, which was driven by higher crude and heating oil prices.

Based on market prices last Friday and our current first-quarter hedge position, we expect our first-quarter fuel price per gallon to decline from fourth quarter to the $1.95 to $2 per gallon range.

And this estimate includes a hedging loss in the $0.25 to $0.30 range.

And for the full year of 2017, we currently estimate a fuel price per gallon in the $2 to $ 2.05 range, based on market, including roughly $0.20 to $0.25 in fuel hedging losses for each quarter beyond the first.

So just a few comments on our non-fuel costs.

Excluding our fuel-specialized items and profit sharing, our fourth-quarter unit costs increased 4.4% year over year, which was in line with our guidance.

Roughly 3.5 points of this increase was attributable to a new union agreement, which included an immediate snap-up in wages for our flight attendants and pilots during the fourth quarter.

An additional point was attributable to accelerated depreciation resulting from the retirement of our classic fleet.

As for our 2017 cost outlook, we anticipate year-over-year cost inflation to peak here in the first quarter due to the timing of labor rate increases, largely.

And with this in mind, our first-quarter CASM, excluding fuel special items and profit sharing, is estimated to increase in the 6% to 7% range year over year, with about 4 points of this increase related to labor contracts.

By the fourth quarter of this year, we expect our unit costs, excluding special items and profit sharing, to trail to roughly flat, year over year.

This brings full-year 2017 unit costs, excluding fuel special items and profit sharing, to an estimated increase of approximately 3% year over year, almost entirely driven by wage rate inflation.

Beyond 2017, we anticipate wage rate increases closer to inflationary-like levels, in accordance with the ratified agreements.

As ever, we remain focused on controlling spend through our operational investments and ongoing fleet modernization.

Turning to our balance sheet, it remains as strong as ever, with 3.3 billion in cash and short-term investments at year end.

Our leverage, including off-balance sheet aircraft leases, remains in the low- to mid-30% range, and we continue to be the only US airline with an investment-grade credit rating by all three credit agencies.

During fourth quarter, we repaid $352 million in debt and capital lease obligations, and retired the $110 million in convertible debt at maturity.

As expected, the majority of bond holders converted their bonds to shares of stock, resulting in our remittance of approximately $68 million in cash and $6 million in shares.

During fourth quarter, we entered into a $215 million secured term loan, and we issued $300 million in unsecured notes at a record 10-year low coupon rate of 3%.

In regards to our 2016 capital expenditures, we ended the year with $2 billion in CapEx, as expected, with technology and facility spend the most significant drivers outside of the $1.3 billion in aircraft CapEx.

Our estimated CapEx for 2017 is approximately $2.3 billion, with $1.3 billion of that for aircraft spend.

With record earnings and sustained balance sheet strength, our operating and free cash flows reached record levels, enabling us to return nearly $2 billion to shareholders through buybacks and dividends.

During fourth quarter, we completed the $250 million accelerated share repurchase launched in third quarter.

And we launched a new one, which we currently expect to complete in February.

We have $950 million remaining under our $2 billion authorization.

Since 2011, we have decreased our share count by more than 18% through over $5 billion in share buybacks.

And our Board of Directors declared our 161st consecutive dividend during fourth quarter.

So we have a decades-long history of upholding our commitment to return value back to our shareholders, which is a designation only we can claim in the US airline industry.

I'll give you a quick recap on fleet.

We ended the year with 723 aircraft in our fleet, as planned.

Based on our current firm orders for delivery and the 87 classics we will retire by the end of September, we intend to end this year with just over 700 aircraft in our fleet, and then grow our fleet to around 743 aircraft by the end of 2018.

We believe this level of fleet growth will allow us to continue to optimize and prudently expand our already robust network.

The 5.7% increase in capacity during 2016 was predominantly in our domestic markets, including our new City of Long Beach.

We continue to manage 2017 capacity growth of approximately 3.5%, with domestic growth accounting for roughly 2.5 points of that growth.

Domestic capacity growth has moderated from 2016 levels, from the highs of 5% to 6%, to levels more in line with GDP.

And we are -- I just wanted to point out, our LCCs are growing in the low- to mid-teens through the first half of 2017.

This is just -- keep in mind, that's a small part of the base.

So just in closing, I just wanted to thank our employees again for just a tremendous quarter and tremendous year.

And just can't thank them enough for their outstanding customer service.

With that overview, I'll turn it over to you, Tom, and we're ready to take questions.

Thank you.

(Operator Instructions)

We'll take our first question from Darryl Genovesi with UBS.

Great, thanks, guys.

Appreciate the time.

Gary, in your opening remarks there, I thought you said you were currently running -- and correct me if I misheard you -- but I think you said you were currently running below your RASM guidance, and you hope to get there by the end of the quarter.

Did I hear that right?

If we were to give you a point forecast today, it would fall within that range of down 1% to flat.

So right now, flat is at the top of the range.

So I'm really just repeating the obvious, but our goal is to get to flat RASM, and we'll see if we can do it.

Okay.

And I think the important point, though, is, what we're very comfortable in saying today is that the trends have improved, and that sequentially, they've also improved, just in the short period of time from fourth quarter to first quarter.

So obviously, that's a very welcome change.

Okay.

And I guess, would you characterize your guidance for the quarter as more or less a good run rate to use?

Or are there items in there related to the holiday shift -- both Christmas and Easter -- that may have impacted January and March within your guidance, that maybe we should be aware of?

You're just talking about beyond the first quarter?

Yes, within your guidance for flat to down 1%, I suspect there's probably some headwind in March.

And I guess, from the late Easter, I was hoping you could break that out.

And then similarly on the movement of Christmas holiday, that I think some characterized as likely to benefit January to some extent.

Yes, I'm going to let Tammy do that.

But the answer, I think, to your question is, it's not a straight line.

So yes, there's a lot of choppiness in the quarter.

Just trying to see our way through all the incomparabilities with periods, you have a holiday benefit, you have a holiday bogey.

And as I'm thinking out loud, Tammy -- I think there's some other things that are a little bit peculiar with the calendar change in January.

Moving two days from the leap year, you sort of pick up -- you don't have the same number of strong days.

A Tuesday doesn't equal a Sunday, as I'm sure you know.

But what other color commentary would you like to offer there?

Yes, I would be happy to jump in there.

We began January with positive year-over-year RASM trends due to the holiday return travel.

And as Gary was noting there, for January, you have a little bit of -- when you actually line up the calendar days, there's less peak days, if you will, in January this year versus last year.

But yes, January here is starting off very solid.

Comparing -- just walking through the quarter, February should have the cleanest or easiest comparisons of the quarter, with March being impacted by the Easter shift into April.

So those are the things you probably want to focus on as you're trending for the quarter, but our outlook at this juncture is solid.

Great, thank you.

And then if I could just ask Tom and Mike, if you had any particular objectives that you would highlight, with your expanded responsibilities, that you think you might be more focused on, where the Company might be focused on in the future than they have been in the past?

If you can take a shot at that, I'd appreciate it.

How about if I start?

This is Tom.

So I think about our priorities, I kind of break it into two categories or two buckets, if you will.

And Gary really hit on the first one, which is, we have work to do to get the classics retired and get the Max in.

We have work to do to get the new reservation system in, and that's all going great.

So things like that, that the work that's in progress now is a category of priorities.

From my perspective, the second category is very much focused on bringing our strategy and our vision to life, and there's a lot of work going on there.

So when I think about our vision statement, which you all know, it's very clearly a statement of our intent.

We intend to do this.

So we know it's going to take time, we're okay with that.

The business is very strong.

As I said earlier, we have a lot of momentum.

I feel very good about that.

And I think we have time to execute the strategy in a very structured, thoughtful way.

And there's all sorts of things that Mike and I are working on together.

Let me just give you an example or two of some of the things.

I'm certainly not going to disclose the strategy, but I'll give you a few examples of things.

So very clearly, we could do a better job of enabling our front-line employees with the tools and information that they need to do their job.

And that's a big deal in terms of driving efficiency, it's a big deal in terms of improving the customer experience, and to be honest with you, it's a pretty big deal in terms of improving the quality of life for our employees.

So we are very focused on that, there's work to do there.

I think when we think about our customer experience, we get tremendous praise and great feedback from our customers on our customer experience.

But there are areas there that we can do better at.

So just few examples.

I guess one I'd call out is, we have a very strong mobile customer experience today, which is a big deal for customers.

10 years ago, five years ago, not so much.

Today it's a very big deal.

I think ours is good.

I think ours is solid.

But there's a lot of enrichment and a lot of function and a lot of stuff we could bring to that.

So that's an example.

One of the things that Mike and I -- I'm hitting Mike on the shoulder here.

One of the things that Mike and I are working on together is to continue to build out the operational capabilities.

And we're driving for obviously reliability.

We're driving obviously for efficiency.

But the other thing we need to be building for is scale.

We need to make sure that the operating processes that we are putting in places scale as we grow.

And that's a big deal for us.

So that's some of the things that I'm focusing on personally.

Yes, I think you'll just hear Tom and I be really right on top of one another, in terms of what we think that our priorities are.

I may be just saying it a little bit different than Tom did, but for me, my first priority really is our people.

We've done a lot, as Tom mentioned and Gary has talked about, over the last several years, expanding our Company's capabilities.

And a lot of those changes are driving needs to change some of our older processes.

So focusing on us having efficient and coordinated processes, better tools for our people, where they can have information that they need at their finger tips, having better decision support tools to help our customers, and empowering them.

That is probably the number one priority that I have.

And then kind of two and three below that, Tom mentioned.

We have an operating infrastructure that we want to build the capabilities on.

Our network is really complex, and we've got a lot of opportunities, I think, to improve our operational reliability and our responsiveness in situations, if we can make these kinds of investments.

So we've got pretty critical focus areas probably in the maintenance system, our crew scheduling applications, our flight management systems and decision support tools.

And then lastly, we really are focusing on the cost.

I think that we do a really good job with service.

And I think as our Company has grown and we've got more challenges in the industry on the cost front, just to be focused on what we can do as a team, and execute better to be more competitive on the cost side of the business.

Great, thanks, guys.

Appreciate the overview.

We'll take our next question from Hunter Keay with Wolfe Research.

Hi.

Gary, I don't want to detract from the results of the quarter or the outlook, but I do want to come back to the domestic capacity guidance increase.

Your earnings release in October said you were going to go 2.0%, and now you're saying 2.5%.

This is my personal opinion -- I think we really need to hear from you that this is not going to turn into a repeat of what happened in 2015, with small increase after small increase.

I don't think anybody has an issue with Southwest growing 2.5% domestically.

But I think we need to hear -- or at least I need to hear this is not going back to 3%, and then 3.5% by the time the year ends.

Because if that dynamic repeats itself, I think it should be no surprise to anybody if the stock fails to work.

Tammy, do you want to address that?

Yes, so just to summarize your question, Hunter, just discussing why our domestic went from 2% to 2.5 points.

Really we just firmed up our capacity allocation.

And when it was all said and done, it was weighted heavier to domestic.

And that's really just a function of the additional seasonal international adjustments that we make, and really just working through the logistics of our classic fleet.

So it was just really firming up our capacity for the year.

So I think, Hunter, my answer is real straightforward.

We are not changing our fleet plan.

We've already committed to growing the system 3.5%.

Nothing has changed in our network plans for 2017 from October.

So I guess when we get down to the last half a point, things rounded differently, I don't really know.

So the only thing that we have firmed up since October is, we committed to open Grand Cayman, which we've announced.

And that capacity was already a component of our flying out of Fort Lauderdale.

In addition to that, we decided to consolidate in Cleveland, and then open and consolidate in Cincinnati.

And that is pretty much a net-neutral change in capacity.

So we're simply moving capacity from one location to the other.

Beyond those very basic things, I cannot recall any change at all that we have in our approach to scheduling capacity for 2017.

And I think importantly, when we look at the levers that we have to drive, given a fixed amount of airplanes -- which, those ins and outs also have not changed, to my recollection.

The only other lever that we have left is to either increase or decrease the daily utilization, and that also is unchanged.

So other than just reporting the component of domestic versus international, I was a little surprised this morning at the reaction to that, I will admit.

But in any event, I think my answer is, nothing has changed.

That's good, Gary, appreciate that.

I'm just getting a little deja vu again with the rounding, because that was a word that you guys used a lot again in 2015 as well, was rounding.

But you know as well as anybody the sensitivity around this type.

Given your market share and cost structure, you have the potential to be very disruptive.

So my follow-up question would be -- and thank you for that color -- are you prepared to use the word cap in the context of domestic capacity with the 2.5%, with the realization obviously that the system is still going to be unchanged at 3.5%?

No, I'm not.

But I think what I am saying is that there has been no change.

There is no change that I am considering at this time.

Something would have to happen for us to change.

But no, I would never make a commitment like that, because you just never know.

Something could happen.

But there's no effort underway to bring in more airplanes.

Even if we wanted to bring in more airplanes, I doubt that, that would even be physically possible, knowing what we know with the market.

We have no plans -- we're already published through June -- August, beg your pardon.

We have a June 4 schedule that takes us through August.

So the only thing left to tinker with would be the last four months of the year.

And so hopefully, I've answered your question.

But I do want to be clear that we're talking about 3.5% in growth, and that is system ASMs.

And the split of that is 2.5% and 1%.

But if you look at the domestic growth, if you just look at the increase in domestic compared to the domestic system, that's different arithmetic.

So this is the mix of the 3.5% -- it's 2.5% and 1%.

But international is growing 30%-some odd, if you're comparing it to the small international base.

And then likewise, the domestic increase compared to the domestic base is something like 3%.

But I think that the numbers that you all are referencing back to is the split of the 3.5%.

So 2.5 points versus 1 point.

Okay, yes, you answered the question.

Thank you, Gary.

We'll take our next question from Helane Becker with Cowen & Company.

Thanks, operator.

Hi, team.

Thanks for taking the time.

So I just have a couple of questions.

One, on the international, is it possible for you to break out revenue or actual ASMs, as opposed to just reporting them in one group?

Hi, Helane, how are you doing?

It's possible, but yes, we haven't provided that level of detail.

The international is about 3% of our network.

We've been pleased with the development.

Just to give you a little bit of color, we've been pleased with the development of those markets.

And if you just look at the international market as an entity, we are seeing positive year-over-year unit revenue growth, if you just look at the international markets.

But again, it's a small percentage of the total system.

Is there a point where you get big enough where that has to be broken out, even if just in your annual report?

Yes, absolutely.

It's more than 41, absolutely.

At a point, but we just aren't there yet, Helane.

Okay.

And then my other question is unrelated to that, is on maintenance.

Cost declines in the fourth quarter -- did something happen there in the fourth quarter that caused it to be down so much, or is that the accelerated retirement of the classics?

And should we expect that 11% decline for the rest of this year?

Yes, you've got it, Helane.

We are seeing a favorable impact of the retirement of the classics, and you'll see that continue into 2017 as we go through the year here.

So you've got it exactly right.

Okay, thank you.

We'll take our next question from Jack Atkins with Stephens.

Hi, good afternoon, everyone.

Thanks for taking my questions.

You bet.

Gary, I guess the first one for you, and it's on the regulatory front.

Could you just speak to what you're hearing out of Washington with regard to any potential changes in stance or positions from the new Administration relating either to your business or the industry overall?

I think obviously we're all aware of potential tax policy changes, which will benefit you guys.

But just curious to get your thoughts on what we might see in terms of regulatory changes over the next few years, and if that's a positive for your business or not?

Well, I think we're hoping for some positives here.

There's three themes we're very enthused about.

You've got the tax reform, you mentioned the regulatory reform, and then thirdly, infrastructure investments.

Which, I will admit, we're a little bit weary of, as to how that might either help or hurt us.

But clearly, our primary objective is to modernize the air traffic control system, which falls into infrastructure, and could have a huge benefit for aviation and for the traveling public.

But to answer your question, we probably know more than you do, but at this point, it is fair to say, is very early.

I have not met with Elaine Chao yet, and we are very enthused about her nomination, we're very enthused about working with her, but it's just very premature.

And I don't know that it's clear exactly what the Administration's focus will be in aviation.

I think there is this broad desire to roll back regulations, but I don't know that we know of anything that is specific.

Plan to spend more time in Washington here in the first quarter, and hopefully by April, may have a bit better read on that.

But we've looked at -- which is a broader corporate issue -- we've looked at the tax reform proposals, and we're quite excited about that, on the corporate front.

But that's just on income tax, so that doesn't really speak to the very heavy burden that we have for an aviation taxes, which we also want to take up with the Administration.

So that's a long answer to your question.

And I think the bottom line is, no, we don't know anything specific yet, but we sure like what we're hearing so far.

Well, that's very helpful insight though, Gary, thank you.

And then for my follow-up question, just a housekeeping item for Tammy.

The $109 million hedge asset for 2018-2019 that you referenced in the press release, could you maybe break that down in terms of what's tied to 2018 specifically?

Yes, for 2018, it's going to represent about $91 million of that $109 million that we reported in the press release.

Okay, great.

Thank you again for the time.

We'll take our next question from Savi Syth with Raymond James.

Hey, good afternoon.

Tammy, just to follow up on an earlier question, I was wondering if you could elaborate a little bit more on what the holiday drags that we should -- if you can quantify a little bit more the holiday benefits to January and maybe the drag to March?

Sure, Savi, I'd be happy to give you a little more color there.

As we said earlier, the holiday impact was better than we expected, due to the improvement in the yields and stronger business travel.

The holiday shift ended up impacting fourth-quarter RASM by about 0.5 point, which was better than what we were originally estimating, which was at 1.5 points.

And we estimate the January benefit is probably in the $20 million range.

And just as you're thinking about the quarter, again, just to remind you, we've got the Easter impact to March that will shift.

So hopefully, that provides you a little bit of color.

Any thoughts on the Easter one on that, Tammy?

Yes, the Easter impact was about -- it's probably in the same range, the $20 million range as well.

Great.

And then, if I might just throw on the capacity question a little bit.

You've had Love Field, and you've had low fuel, we have the classic retirement.

So there's been a lot of -- the capacity growth maybe hasn't been in the, quote-unquote, normalized range.

And as you look out, I was just curious to how you think about that, and what that level might be?

I know the fleet order looks like maybe 6% seat growth in 2018, and just some thoughts around that?

And if I may also, on the Max delivery, your comfort level on the timing of the delivery, and if there's any contingency plans if there are any delays around the delivery in 4Q?

Savi, I think you've characterized the last couple of years well.

If you go back over a little bit longer period of time, at least starting in 2012 -- 2012, 2013 and 2014, we had very modest, if any, capacity growth.

So with the opening up of Love Field, we were preparing for more aggressive growth in 2015 as a follow-on to that, along with the opening of the Houston International terminal.

And then the third major route theme in that time period was the acquisition of the slots from American, primarily at Reagan.

So we were comfortable with above -- with more aggressive growth in that time period, because we thought those were unique opportunities, and we thought they would be very profitable.

And all of that proved to be true.

So the 2016 experience was a follow-on to that build-up in 2015.

And now we get into 2017, which is choppy, as you mentioned, because of the accelerated retirement and the grounding of the classics.

So that will make for some choppiness.

I think in relation to that, 2018 will probably be a little choppy as well.

Trying to give capacity guidance beyond what we have published, I think, is very speculative.

We want to grow at a rate that will produce positive unit revenues, that is our goal.

And trying to tie that to a number or to GDP or anything else is somewhat nonsensical.

But in any event, I think we are on the record as saying that we intend that our future growth would be no more than what we've had here in 2016, which is pretty ambitious growth.

So I see it being low single-digits -- and that's just putting my thumb in the air.

But right now, we have fleet plans which are very flexible, which will allow us some rounding up or down.

And we -- of course, after this year, we won't have many retirements for several years, and we'll be able to really dramatically reduce our capital spending after 2018 also.

But hopefully, that's responsive to your question.

But we're not wedded here to any one growth number, much less willing to commit one way or the other what it would be in the future.

I think that would be a mistake.

But that, hopefully, should give you some ideas to the way we're thinking about it.

That's helpful.

And just on the Max?

The Max?

We're feeling really good.

Mike, would you like to speak to that?

Yes, as you know, we're going to plan to put that in revenue service after we retire the classics, and that would be at the end of the third quarter.

And from all of the discussions we've had with Boeing, that airplane is performing magnificently.

It is on schedule, and we expect to be able to execute exactly as we have planned.

And Mike, I think you're doing test flights already, right?

So that increases your comfort level -- is that fair?

Yes, we've already done a service-ready operational validation.

We've had the airplane down at Dallas.

We've flown in and with it, tested it within our system late last year.

And all of those tests, it just performed exceptionally well.

That's very helpful, thank you.

In addition to the airplane, obviously Boeing and GE need to do their parts, but then we have to be trained.

So that's the other moving piece of this.

And we believe we've got a full handle on that, and have all the training capacity in place, along with the hiring that Mike is going to need to support all that as well.

So I think everything is lined up very well.

As I mentioned in my introductory remarks, we have three major themes for this year.

And I don't know if putting a percentage to it is so literal, but my thought is that 90% of the work for the new reservation system, for the launch of international out of Fort Lauderdale, and for the Max -- is done.

So we're now down to that last 10%, and the deployment phase, and I think we're all feeling very good about all three of those.

Got it, very helpful.

Thanks, guys.

We'll take our next question from Brandon Oglenski with Barclays.

Hey, good afternoon, everyone.

Thanks for taking my question.

And Gary, I know some of the sell-side questions can sound a little arrogant.

But just keep in mind, we don't run money, we don't run companies.

So it is what it is.

But 50 basis points capacity is not that big a deal.

But maybe if we can look at a bigger picture.

Do you feel the network is over-earning today at your level of returns and margins?

And should we be thinking -- outside of the fleet transition this year, does growth ramp back up in 2018 and 2019, to really grow into a lower return profile and expand EBIT?

Or how do you view this business long term, given where your returns are today?

Well, a fair question.

And I would just offer up a couple of points.

I think it depends.

It depends on three major levers -- the economy, fuel prices and competition.

One thing that I don't think you all have focused on enough is the competitive environment within the Southwest route network.

So yes, we're growing and producing really stellar returns with this economic environment and this fuel price environment.

But it's also in the face of very significant other airline capacity.

So as I look at the fourth quarter, as an example, the markets that we serve, we grew 5%, as you all know.

That's what we reported.

But the competitors, against their base of service and our markets, grew much more than that.

It was well over 6%.

So there's a lot of capacity, which is not too shocking, given the fact that Southwest is the largest airline in the country, and we by definition serve the larger traffic pools.

So if our competitors are going to grow, they are going to grow, likely, in our markets.

But if you look at the growth of the rest of the carriers, I'll bet you 95% of their growth was in our markets.

And I mention that to you just to give you a sense of how resilient Southwest is to competition.

We have a great product, we have a great route network, we have low cost, we don't charge bag fees.

There are just a number of things that put us in a very competitive position.

I think that, that is the main factor for you to think about in answering that question.

I think that if you go back to what Tom and Mike were profiling, we're doing really well today, but we have ambitious plans to make Southwest only better in the future, with the customer experience, with our operation, but also to drive more efficiency.

And in completing that strategy, that should put us in a position where we can grow.

How fast we grow, I think we'll want to make that judgment on an annual basis, and maybe on a schedule-by-schedule basis.

But I think the overall returns, under the assumption that we can continue to produce positive unit revenues, will be dependent upon where fuel prices land.

And obviously that's been a main driver since 2014, and one of the reasons that we have these record returns on capital.

But my opinion on that is that I think we're going to continue to see pretty moderate energy prices over the next three to five years.

And we'll have hedging in place to protect against catastrophic increases, so that we can commit to some kind of a growth plan.

But I think the returns will be very dependent upon that.

And of course, we all know how cyclical the business could be.

Everything that we see says that the economy is going to continue to expand for a number of years.

But we will want to be careful in making commitments, just in case that proves to be wrong.

Well, I appreciate the answer.

As you look at your consistent results though, you look at your investment grade balance sheet, and then you look at your relative stock valuation, what is the market missing in Southwest stock?

And what can you guys do as a management team, as a Board, to really try to drive home that value for shareholders?

Well, we need to execute.

We are happy with the value that we've been returning to shareholders.

I think shareholders are as well.

I think the stock price performance has been very good over the last five years, so we're very pleased with that.

And well, we just want to continue.

I think the opportunities for us are to continue to fine-tune our customer experience and our revenue production.

And then we need to be aggressive in managing the cost, as Mike mentioned.

So I think that if -- I don't know that people are missing, but it's not just Southwest.

Every company intends to get better.

And I think what we have to do is demonstrate to our investors that we will, in fact, continue to get better and better and better, and through that, continue to be an industry leader, and drive superior returns.

We have a history of demonstrating that.

We have better tools and strengths in place today than we have ever had in our history.

Implementing a new reservation system this year is going to be a game changer.

It won't change the game in May, but over the course of time, over the next several years, we will have significant new technologies and tools that will be deployed that will make us even stronger.

So it's all about being the best-in-class and winning customers against our competition.

Our competition is better today than it ever has been, and we're going to continue to get better as well.

I appreciate it, thank you.

We'll take our next question from David Vernon with Bernstein.

Hey, guys, thanks a lot for taking the question.

Could you maybe, Gary, build on that a little bit and talk about the step up in non-aircraft-related CapEx for 2017?

And just give us a sense for where that money is going to go, how that's going to impact the business over the next couple years?

And then longer term, what you think about as the things you want to get done in the next five years from an investment perspective, and how that's going to affect the run rate of spending, or the outlook anyway?

Yes, sir, I'd be happy to.

Well, first of all, under the assumption that we continue on with the strategy that Tom and Mike and I are articulating here, which is to continue to operate an all Boeing 737 fleet, to continue our expansion in North America, and do that at a steady pace.

Under that basic scenario, it feels like this is a pretty peak level of CapEx, and especially given that we've accelerated these retirements, we have heavy spending to replace these retired airplanes here, especially in 2017.

So given that, it feels like this is a peak year.

The non-aircraft surge that we're seeing in addition to the airplanes in 2017, interesting for us, is real estate-oriented.

So Mike is building a new flight training center, which is a strategic move, and Mike can go into detail if you're interested in that.

But that's in the hundreds of millions.

We have other airport projects that we're investing in that are bumping up our real estate spending.

The technology spending, Tammy, I believe actually begins to level off in 2017, and that is largely because we are at the bulk of the spending for the reservation system is behind us.

And I would like for our technology spending to continue to be robust, but not at the levels that we have been spending.

So we've got a lot of technology desires here over the next several years, but that spending should be leveling out.

We also have a very significant technology investment underway that will complete in 2017, related to our maintenance record keeping, and that is tied directly into the new Max aircraft.

So those are just a couple of examples.

Future years, we'll have other technology projects that are being deferred right now, so we'll continue to have spending there.

But especially with the real estate, Tammy, I think that spending will come down.

And then obviously, as you are all well-aware, the aircraft spending will be significantly less after 2018.

Excellent, maybe Tammy, just to follow up on the quick question on the guidance, the 3% CASM guidance.

Does that include the training and any transitional costs that would be associated with either the limitation or the new reservation system or the fleet transition?

Or will there be some expectation of some special charges on top of that 3% guide?

It includes the costs associated with the transition to the new reservation system.

As you pointed out, there are some training costs that we will incur, but we've Incorporated all of that into our guidance.

So we are working through -- just on your question on special items, obviously those are always difficult to predict, if any.

We had some special items, as you know, last quarter associated with our classic fleet, just on some of the leases.

We bought out the equity on a few leases, because that is was what made the most sense to do, because we were working through how to most effectively retire those aircraft.

But short of that, I think normally what we anticipate going into any year would be just our normal fuel hedge adjustments to get to us the economic fuel prices.

Excellent.

Thanks so much for your time.

We'll take the next question from Joseph DeNardi with Stifel.

Thank you very much.

Hey, Gary, in a world where Delta, United and American have all decided that they need a basic economy fare to compete effectively against the ULCC competition, why does Southwest not need something like that?

Well, to be honest with you, I think it's more a question for them as to why they think they need one, as opposed to why we think we don't need one.

We have a very powerful brand, and Tom and Mike and I and all of our leaders are very strongly aligned on this.

There is a huge value in offering all of our customers, 100% of them, a great product.

So we like to say at Southwest there is no second class.

There is no second class.

In addition to that, we strive to keep the customer experience and just the product offering as simple as possible.

So any time we contemplate offering customers a choice, we debate that heavily.

Because complexity drives confusion, and it clouds the brand.

So what you have at Southwest is a very strong brand position in customers minds that we stand for friendliness, reliability and low fares.

The whole free bags and no change fees becomes a very powerful component out of all of that.

So we don't feel like we need it.

But let me just take the hypothetical.

So if we were to undertake a basic product, the only thing that we could do is take away from it.

We wouldn't let you make a change.

You would board last.

You couldn't take a bag.

You couldn't bring a carry-on.

Well, that complicates the message, and we've spent 45 years educating our customers as to what to expect when they come to Southwest.

I think that would be a huge mistake.

Now, that's me, that's talking for me.

I know Tom agrees with that, and I know that Mike degrees with that.

I'm not saying forevermore that Southwest would never undertake something like that, but we would have to have a darn good reason to pursue a route that way.

We don't have any plans to change our seating configuration and add bigger seats compared to littler seats.

It's just back to, we want everybody to have a great experience at Southwest -- and that is our greatest strength.

So we go into a market, you name the big city.

What is our biggest opportunity?

Our -- especially the -- well, all of them.

Every other competitor, they lavish attention on elite customers, and they ignore the rest.

And that is our biggest opportunity, because we don't ignore anybody.

And we just don't want to change that.

So now you look at our current results, competing against all array of competitors, and there's just no empirical evidence that we're missing anything.

And again, I'd just point to eight quarters worth of very strong performance relative to the group, and that's even in the face of our competitors adding a significant amount of capacity, overlapping us, and we're still producing these kinds of returns.

So I feel really good about where we are.

I'm excited that we're only going to make it better, and we certainly don't see a need to pursue a strategy like that.

Okay, thank you for that, Gary.

I think this is a question for Bob, if he's on the call.

Yes, Bob is here.

Yes, so we estimate you guys do conservatively about $1 billion in EBIT from miles sold associated with your credit card.

So feel free to comment on that, if you'd like.

But can you help us understand what that earnings stream would look like in a downturn?

If we just make an assumption as to what spend would do, and that's the downside?

Or do new card sign ups, and the rate you're selling the miles factor into that also?

Yes, I'm going to kick it back to Tammy for more of the detail.

But generally, we're seeing strength all across the board.

So that's card sign-ups, that's new members, that's retail strength.

Obviously a piece of the deal with Chase is dependent on spend on the card.

So as you see large fluctuations with the economy that would drive changes in things like retail spend, you're going to see some movement.

So of course, right now we're seeing upside there with the strength in retail spending on the card.

But generally, the story has been across a very long period of time now.

That business -- again, card acquisitions, new members, growth on spend in the card -- has continued to be very strong for a long period of time, and actually outpaced the base business.

But I'm going to kick it back to Tammy for a little more detail.

I understand your question and the interest in getting more details, but we're not going to provide any details, really, today, other than what we would normally provide.

But other than just to say our Rapid Rewards program has grown to be a very meaningful contribution to our revenue and bottom line since we launched it in 2012.

And as Bob commented on already, our membership -- gosh, Bob, its more than doubled.

Right.

Our co-brand credit card portfolio in spend has significantly accelerated.

So just all the way around, its been a tremendous success.

But today, we're not going to provide any more details.

The only thing I might offer up -- and I think it fits in with your earlier comment or question -- is that we think we've really got something here.

So we re-launched, completely redesigned the program, and launched that back in 2011.

And so now coming up on six years in March, six years later, we are ecstatic with the success that we have had, and really feel like our team nailed it.

So what's driving that?

Well, first of all the program itself, which is well-known.

It's all public, you know how it works.

And then second, is the overall brand of Southwest.

In other words, does a customer want to put their chips onto Southwest, take a Southwest credit card?

Yes, if they like Southwest.

Well, if we start tinkering with the brand, if we start offering basic economy, blah, blah, blah, it would risk the revenue stream and the loyalty that we have with that frequent flier base.

So you just gave us another argument of why we want to be very thoughtful about tinkering with any changes.

So my report to you is, we don't have any thoughts about any radical changes to the program.

And we also don't have any radical thoughts about changes to the brand.

So the growth that we've continued to see, I think, has been very significant and very exciting.

And obviously we're hopeful that, that's going to continue.

That's very helpful, Gary.

I would just say that I think the limited disclosures around the economics of the card program and the loyalty program make it very difficult for the investment community to recognize how valuable it is.

So I appreciate your time.

And I think that, that is a fair comment, and I know that Tammy is taking that into very serious consideration.

Thank you very much.

We have time for one final question, we'll take that question from Duane Pfennigwerth with Evercore ISI.

Hey, thanks for the time.

Can you hear me okay?

We can hear you.

That's great.

Not a telecom analyst, an airline analyst, so I figured out the phone.

You're good.

And thanks for letting me join this call.

So regarding the IT tools that you're implementing this year, and sort of scheduling variability, can you talk about where Southwest is today in terms of its ability to shape capacity by day of week, and perhaps seasonally within the month?

And how the tools you're implementing will change that, and what the timeline on those changes would be?

Yes, we can.

I have several experts here who would like to take that question.

I think it's really about incremental improvement.

So we have the ability today to shake capacity obviously within a day, within a week, and then across longer time periods.

So you see us vary the schedule.

As opposed to the old days when Southwest, for the most part, ran the same schedule every day, we do vary the schedule across the days of the week.

You also see us making more changes to the schedule post-publication.

So maybe not as much as others, we like to keep a fairly stable schedule for our customers, but we do go in and make post-publication changes.

So the tools that are coming are all about incremental change more than they are drastic change.

We will have the ability to make to include more variability within the day, more variability within a week, to add things like red eyes, if we were to choose to do that over a period of time.

And this will all layer on as we obviously win obviously one risk here in May, and then post that.

I do think we are going to walk into that carefully, because one of the things that I think that customers value about the brand is that we have a strong schedule offering, we have a fairly stable schedule offering.

So we'll walk into that over a period of time, post the one res implementation.

Duane, this is Mike.

And just to follow on with what Bob was talking about, Tom and I have been talking a little bit about some of the operational infrastructure investments that we need to have.

And so I think that we will have good commercial capabilities to have that kind of variation.

We also need the same kind of operational capabilities.

So we'll need to be able to vary our staffing at the airports, vary our staffing with our crewing systems, vary our maintenance programs with aircraft availability.

And those are some of the things -- when Tom was talking about us building an operating infrastructure that's scalable and gives us flexibility, those are the kinds of things that our investments and our infrastructure are designed to do for us.

And Duane, the other thing I would mention just strategically here.

We had decided before that when we deployed this new system, that we were going to focus on the basics.

And that really took on two forms.

Number one is, we wanted our technology resources focused on delivering a really good reservation system, period.

Secondly, we wanted to allow our front line the opportunity to get trained, and then become proficient on the basic replacement.

And so we opted not to be more aggressive in pushing for value-added changes that would complicate the technology deployment and it would complicate the change management, if you will.

Said a different way, we just need to get this reservation system replaced, and we need to do it really well, and it is a gigantic project.

So I'm under-promising for the benefits right now, but then the opportunity that you mention is something we will absolutely want to press for as a follow-on.

But the way to think about it here in 2017, and particularly in the second quarter, is that we are just replacing our reservation engine, and that is plenty.

And that's gone really well.

The release one was extraordinarily well done, and release two is virtually done as we speak.

And we'll be spooling up our training here in about 30 days.

So I think that it's all rolling out exactly like we had hoped and desired.

Okay, thanks for the time.

And that concludes the analyst portion of today's call.

Thank you for joining.

Ladies and gentlemen, we will now begin our media portion.

At this time, I'd like to introduce Ms. Linda Rutherford, Vice President and Chief Communications Officer.

Thank you, Tom.

And welcome to the members of our media who are on this afternoon's call.

We'll get started with the media Q&A portion, Tom, if you'll give them some instructions on how to queue up for questions.

Thank you, ma'am.

(Operator Instructions)

Thank you for your patience.

We'll take our first question from Susan Carey with The Wall Street Journal.

Afternoon.

Probably Tammy, this is for you.

Maybe I missed it in all of the release and such.

But there was a lot of discussion on the call about your 3.5% capacity year-over-year addition for 2017.

But what did you say, or did I miss it -- what's your 1Q capacity growth going to be?

Yes, you're just talking about our first quarter for this year, just to make sure?

Right.

We're growing our capacity about 4% year over year here in the first quarter.

4%, thank you.

We'll take our next question from David Koenig with the Associated Press.

Hi, I'm sorry if I missed this, and I know it's very early, but any color you can provide about the commentary on the pick-up in demand since the election?

Red state, blue state, business select versus want-to-get-away, by market, by market share of ULCCs -- anything?

No, I think, Dave, as you know, overall in the economy, it's very broad.

Economic activity picked up, the markets picked up.

I don't know that I can totally explain it.

I guess one could believe the theory that, first of all, there's certainty: now you know who the President is.

Second of all, there's some optimism about tax reform that would be a boost to the economy, and regulatory reform, et cetera.

So I think that we are just being swept up in this broader tide of optimism.

And it's not unique to Southwest either.

We've seen, or at least, we've heard from our competitors with their public comments that they've seen the same thing.

What was interesting to us -- and Tammy has mentioned this several times -- is the business travel that picked up in that between-holiday period, December before Christmas, which can be a really low travel period many years.

And for whatever reason, this year, it was pretty strong.

I don't know if that's the same effect, or whether it's something different -- you know, the calendar is always odd.

We actually saw a halloween business effect this year, which was kind of interesting, probably relative to the fact that the last couple of years, it was over the weekend.

But a lot of moms and dads will probably forego a business trip so they can stay home with their kids.

There's these things we run into, and they are curious.

But what has been pleasant for us is, since early November, the pick-up has been sustained.

We ended up with a record load factor for the quarter, and we're looking at very strong bookings here in the first quarter.

And at least with the traffic that we've seen so far through January, it has also been quite strong.

So that's -- unless you guys have some other theory, that's about the best I can come up with.

Tammy, do you have any other thoughts on that?

No, I think you captured it perfectly.

Okay, thank you.

We'll take our next question from Edward Russell with Flightglobal.

Hi, thank you for taking my question.

You mentioned that the Max is on track to arrive at the end of the third quarter.

Can you comment though about whether Southwest will be the first operator of the Max?

Other airlines have said they are going to debut their aircraft earlier, and just curious if you could comment on that?

Yes, I don't really know exactly what other airlines' delivery plans are or when they will be operating the airplane.

But as we've been on record with, we're going to operate the airplane as soon as we have the classics retired.

And that is because some of the training differences and some of the training challenges we would have between having titles go between a classic and a Max airplane.

So we'll have the classics retired at the end of the third quarter, and at that point in time, we'll launch service with the Max.

If another airline is operating before that, when then, they will be the first operator.

But before us, that doesn't concern me one way or the other.

Okay.

Do you anticipate Southwest to be the first to take the first delivery, if not being the first operator?

Yes, I consider Southwest Airlines is a launch customer for the Max.

We ordered the airplane.

It's the first one off the delivery line.

We're the ones that have done the service-ready operational validation for Boeing.

We're the ones that are working very closely with Boeing to make sure that it is operating as everyone intended.

And I feel like we are a major player in that.

You know, we get this question, by the way, so I know there's an interest in the answer, but we're not really focused on that.

We know that Boeing has built planes that are for Southwest, they've got our name on them.

So we don't need them for flying until October.

So aside from just readiness, when we get them, Mike, I don't think we care in the grander scheme of things.

But as Mike said, we're the launch customer, regardless of when we take the first delivery.

Great, thank you.

Yes, sir.

We have time for one more question.

We'll take our last question from Vinay Bhaskara with Airways.

Hi, everybody, good afternoon.

Hi.

So I just was wondering if you could provide a little bit of color on how you're thinking about your Max order?

And thinking specifically of some of the restricted airports that you're operating out of, like a Dallas Love or Chicago Midway.

Does the situation at those airports maybe position you to take a look at upgrading some of your Max orders to something like the Max 9, or even the Max 10X that's been bandied about in the press recently?

No, at this point, we are committed to the 8. We are the launch customer on the 7, which comes, Mike, in 2020?

2019.

2019, and so that's it.

We think that the 8 is the right airplane for us.

We'll use the Max 7, and it may prove to be a bigger player in our strategy longer term, but right now, our focus is more on the 8. And that's mainly because the 800 mix of our 700-plus airplane fleet is still a minority of the airplanes, and we'd like for it to play a bigger role.

So that will be the emphasis for a while.

We don't have any need at this point for a bigger-than-the-8 airplane, and there's not any effort within Southwest to exploring anything beyond just taking the Max 8, and then the Max 7.

Great, thanks.

And then if I could ask just one follow-up, or one additional question.

Could you maybe comment a little bit on the early performance that you're seeing on your Cuban routes?

Yes, it's early.

And the load factors look fine.

It is a weak part of the year seasonally.

And Bob, I've been actually pleasantly surprised at the demand from Cubans flying to the US and back, a lot of times with our international routes.

And again, you have to understand that we're new at this.

We've only been flying international about two and a half years.

A lot of our markets, we fill up the airplanes with US citizens going out for vacation and coming back.

And in this case, we're getting a fair amount of local traffic coming to the US as well.

But it's way too early to tell.

We need to go through a full annual cycle and see what this is like.

I get asked all the time about whether it's meeting our expectations.

I didn't have any expectations, because there hasn't been air service to Cuba for 50 years.

So the fact that we've got people on the airplanes, I think, is really good.

And just lastly, with the way we approach new markets, we're very well-prepared that the initial response could be rather weak.

And we have a lot of experience in being patient and stimulating the market and getting people to notice that we're there and change their travel habits.

And have a lot of success, of course, under our belt with that approach.

So I'm happy with the initial results.

They are nowhere near where we want them to be eventually.

But I, at this point, don't have any reason to believe that they can't get there.

Okay, thanks a bunch.

Yes, sir.

At this time, I'd like to turn the call back to Ms. Rutherford for any final remarks.

Thanks so much, Tom.

Thank you all for your time and questions this afternoon.

If you, as always, have any follow-up, you can reach a member of our communications group at 214-792-4847, or via the online news room at SWAmedia.com.

Thank you very much.

That concludes the call for today.

Thank you for joining.