Good day, and welcome to the Southwest Airlines Fourth Quarter 2011 Conference Call. My name is Tom, and I will 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, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Tom. Good morning, everyone, and welcome to our fourth quarter call. Joining me on the call today is Gary Kelly, Southwest's Chairman, President and Chief Executive Officer; Bob Jordan, Executive Vice President and Chief Commercial Officer and President of AirTran Airways; and Laura Wright, Senior Vice President, Finance and Chief Financial Officer. Today's call will begin with opening comments from Gary, followed by Laura, providing us a review of our fourth quarter results and current outlook and then Bob providing an update on the AirTran integration. As a quick reminder, Southwest's full year 2011 consolidated results include AirTran's results since the May 2 acquisition date. Prior-year consolidated results do not include AirTran. However, in order to provide what we believe to be more meaningful year-over-year comparisons on today's call, we will also be discussing specified results on a combined basis. Combined results is the sum of Southwest and AirTran's stand-alone results for all periods prior to the acquisition, without any retrospective application of purchase accounting. In addition, outlook commentary will be provided on a combined basis as compared to combined prior-year results, unless otherwise noted. We provided supplemental financial information on a combined basis for full year 2011 and for prior-year results in this morning's press release, along with related reconciliations. Please be advised that today's call will include forward-looking statements. Because these statements are based on the company's current content, expectations and projections, they are not guarantees of future performance and a variety of factors could cause actual results to differ materially. This call will also include references to results, excluding special items or non-GAAP results. Please reference 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. And now I'll turn the call over to Gary for opening remarks.

Thank you very much, Marcy, for that very thorough introduction, and thank you all for joining us this morning. We are obviously pleased to report a profit for the year that represents our 39th annual consecutive profit of $330 million, $0.43 a share x items. That's always a good thing in our tough business. We are very pleased to report a fourth quarter profit of $66 million or $0.09 a share x items, which is $0.01 better than Wall Street estimates. I want to thank all of our employees. 2011 was a very historic year for Southwest Airlines and for the most part, we accomplished what we set out to do and it's all due to their tremendous efforts. So I want to thank them first and foremost. We had an outstanding record revenue performance, and it helped blunt the very significant rise in jet fuel prices, 33% increase in jet fuel prices. But so far, at least our strong revenue momentum is continuing in the first quarter for the most part. That was really the story all year long in 2011, very strong revenue growth, but not quite sufficient to completely offset what ended up being about a $1.7 billion increase year-over-year in jet fuel costs. So the resulting decline in earnings, while it is explainable, it's certainly not satisfactory. Our plan for 2012 calls for a significant increase in revenues and profits, and that assumes -- use that word, that assumes that our revenue plans work and that we contain cost increases to manageable levels. And in particular, our outlook for fuel prices in 2012 is pretty benign, always subject to change. And that comes with a very quick caveat that we fully admit, that energy prices are something we just can't predict. We have no plans to…

Thank you, Gary, and good morning, everyone, or afternoon to some of you. Our fourth quarter GAAP's net income was $152 million or $0.20 per diluted share. Excluding special items, we reported earnings of $66 million or $0.09 per diluted share, including the anti-dilutive effect of our convertible debt. As Gary noted, this exceeded our first call census estimate by $0.01. Special items during the quarter consisted primarily of $107 million net related to noncash hedging gains and $21 million net of taxes for AirTran integration expenses, primarily related to consulting fees and our cancellation of XM radio. Our full year 2011 GAAP net income was $178 million or $0.23 per share. And excluding special items, our 2011 net income was $330 million or $0.43 per diluted share. Our pretax return on invested capital for 2011 was approximately 7%. And I agree with Gary, 2011 was a big year for Southwest and I would also like to thank all of the employees at Southwest and AirTran for their hard work and their many accomplishments in 2011 that enabled us to announce the results that we are telling you about today. On the revenue front, we had a strong fourth quarter revenue performance. We set a number of fourth quarter revenue records. Those included operating revenues, passenger revenues, passenger yield, passenger unit revenues and total unit revenues. Our operating revenues were $4.1 billion, and our passenger revenues were $3.9 billion, which was a $915 million increase or 31% up from last year's $2.9 billion Southwest-only results. About 2/3 of the passenger revenue growth was attributable to AirTran, and the remaining 1/3 or $300 million was organic growth at Southwest. On a combined basis, our passenger unit revenues grew 8.2% in the quarter versus last year, and our total unit revenues were…

Well, thank you, Laura, and thanks, everyone, for joining us on the call today. I'm very happy to report that overall, our AirTran integration is proceeding on track as planned and is on time. I want to begin by thanking everybody at both Southwest and AirTran for their hard work and dedication to the integration. They have kept their eye on the ball by running one of the best operations in the industry, while staying focused on the integration plan. In fact, 2011 was AirTran's best operational year ever, with on-time performance for the year at AirTran of 84.8%. And in December, which is typically a very tough month with winter weather, AirTran's on-time performance was 91.9% which is the best December ever, beating previous December by nearly 10 points. There was an equally strong performance in mishandled bags and complaints, so I'm just absolutely pleased with the people of AirTran for these results. On the integration front, optimizing our joint network continues to be a significant focus with scheduled publication lead times. Most of that doesn't really show up until 2012. But by improving overlap markets and repurposing less profitable flying now, we are creating the opportunities to improve our network returns, and some examples include our announcement during the fourth quarter of new 2012 AirTran service to Mexico City in Cabo San Lucas in AirTran -- I'm sorry, Southwest entry into Atlanta that begins next month with 15 daily flights ramping up to 18 daily flights by the summer. In total, based on our joint schedules currently published through August 12, we will serve 103 cities on our combined networks, providing significant revenue potential when we have the capacity and capability in place to connect the networks in 2012. We have completed 22 of 31 shared city transitions,…

[Operator Instructions] And we'll now begin our question and answer session. We'll take our first question from Bob McAdoo with Avondale Partners.

Guys, just a couple of quick ones. When we think about this flat capacity for 2012 in the context of adding 6 seats to airplanes and whatever, when you say flat, is that flat in ASMs? So therefore the plane miles is dropping? Is it flat in plain miles, therefore seat miles are increasing? How should we think about the word flat, given the changes that are going on in the fleet?

So Bob, when we say flat capacity, we're talking about available seat miles on a year-over-year basis. So certainly, we have more seats either being phased in, but we have airplanes being integrated, going through conversion at AirTran and we have and as we noted, we're actually going to be down net for the year, so that's flat ASMs.

Okay. And then the second thing is you talk about the nonfuel costs being up in this quarter and in this year, how much of that is what I guess you would call kind of normal inflation kind of things versus the fact that you'll have by the end of the year some AirTran airplanes that are converted? And I think we've all talked about how the AirTran system, when it's converted, will have higher costs and higher RASM. How much of it will be tied to the growth of -- the conversion of AirTran airplanes by the end of the year? Or how many AirTran airplanes would actually be potentially even converted by the end of the year? How far along would the process be?

So I'll answer the first question, then we can answer the second. So if you look on our 2012 plan, the impact of AirTran, I noted we have net synergies from the revenue and the costs so this the good guys, bad guys, that's about $200 million. So net-net, AirTran's integration is not creating the cost inflation that we talked about. It's primarily from inflation in our salaries, wages and benefits, which is contractual rate increases and step increases. We also are expecting some inflationary increases on the airport costs this year and maintenance. Those are really the 3 big drivers, but it's not being caused by the AirTran integration. Second question was the -- Bob, you were talking about the integration of the airplanes for 2012?

We currently have the plan of the aircraft integration and modification start, assuming again that we achieve SOC in March as planned. Those will start in late March, early April. The current plan is to begin and complete about 13 of those next year, put those back into the Southwest network of about 13 of the 737s. So from a capacity impact, those will be retrofitted with the new Evolve interior, so we'll move from 137 to 143. But on a capacity basis, it's a very modest impact. Those 13 aircraft moving from 137 to 143 have a very, very, very modest impact on the capacity change.

And we'll take our next question from Ray Neidl with Maxim Group.

Yes. Just looking at your program for the stock buyback. Is that because -- I know you had strong cash flow, but are you required to do that for the employee compensation stock that you give to them? And will that be permanent? Is that something you're going to keep up for the employees? And then regarding the debt buyback program, again you have strong cash flow, but you're doing that basically -- why would you buy back your debt? Or are you doing that basically because you're trying to keep your investment grade rating and you're not comfortable with your balance sheet, even though your debt-to-capitalization ratio is low?

The first question, which was the share buyback, it is not related to any of our employee stock program. No requirement. That was just a decision that our board made as we've done in the past based on excess cash and trying to enhance our shareholder returns. So second question was the...

The debt buyback.

Oh, the debt buyback. So those were really...

They're not really buybacks.

Not buybacks. We didn't go out in the market. They were debt maturities. Certainly, there was debt associated with AirTran that was called upon the acquisition that's included in there. But when we acquired AirTran, we were very clear that they had much, much more leverage and more debt than Southwest. So I think from day one, we announced our intent to, over the first couple of years, reduce the combined leverage after acquisitions. So we're just completing that plan.

Okay, that sounds logical. And just as a follow-up but different direction, with AMR going into bankruptcy, do you see any possible opportunities going into the FW?

No.

We'll take our next question from Bill Greene with Morgan Stanley.

Gary, a little over a month ago, maybe 2 months ago now, you did put out a memo to the employees just noting the huge changes the industry's gone through and sort of talked about the challenges that, that might have for Southwest. And as I was kind of thinking about that, I mean, think about your cost structure. What I kind of get challenged by is obviously, not much you can do in the long term on fuel. Your employees and your planes seem pretty productive. So I'm sort of, I guess, struck by the notion that maybe it suggests that we've got to kind of reassess compensation expectations. But maybe you can talk through a little bit of the logic at what you see happening there, what your hopes were to sort of achieve with this.

Well first of all, it was just -- as you well know, it was the truth. And it was really a reaction to the events across town, of course, but also a misunderstanding of whether it is an opportunity for Southwest or whether it presents more challenge. And so I was simply trying to address that. The fact is that our hey rates are higher now than anybody else in the industry by quite some margin. We make that up, obviously, by increased productivity. So we need to sustain that, and to the extent that we have become less productive in areas, which has happened. Things change over time, Bill, and we do have opportunities. We need to re-energize ourselves and then certainly to the extent that we still have waste that hasn't been wrung out in the company, we want to go and attack that. But I just challenge the premise that there's no opportunities left to improve productivity or improve our efficiencies or to eliminate waste because there are, and we can never be satisfied with that. Now we've got some fundamental opportunities from a, if you want to think about it as a policy perspective, to improve our productivity. We can refresh our fleet and certainly replace less efficient, less reliable aircraft with more efficient, more reliable aircraft, and that was a fundamental component of the fleet strategy that we announced roughly a week or so later. So I think that puts that into context. So we're certainly going to pursue those kinds of opportunities. In terms of scheduling airplanes on a daily basis, we've done a lot over the last couple of years to trim schedules, but there is available aircraft time if we can be more innovative and clever in finding ways to successfully market that time, especially late in the evening. So we have those kinds of basic opportunities as well.

Okay. Well one of the things that comes up a lot, obviously, is now that Americans and maybe we should revisit some of the consolidation stuff and you've seen in the press some suppositions that some of your peers are looking at that. What's the appetite at Southwest for further M&A? Obviously, you've got to get through the AirTran acquisition. But once that's done, sort of how do you think about what your long-term, I guess, comfort with further acquisitions is?

Well, I don't think we're comfortable in speculating what we might or might not do in terms of any kind of a deal. I think we would certainly admit that we have a strategy. It's an energetic one. We have a lot of work planned, certainly for not only 2012, but '13 and '14 and '15. And we'll only want to commit to work that we feel like we can do in a high quality way and in a successful way. Any time you contemplate a merger, obviously that is a huge undertaking and we're really busy with not only that, but with other things that we have. I would fully admit, and I certainly wouldn't want to try to be cute about this. A hub-and-spoke legacy carrier that has multiple aircraft type, it's not obvious how that would fit for a company like the Southwest Airlines. You know that. We know that. I think what we will clearly do and what we've admitted that we would do is we will pay close attention to any things that do become available, whether it's a simple route or whether it's other assets and we'll be on our toes to move on those if there's some good opportunities. But I can't give you a straight answer as to whether or not we would be seriously entertaining other M&A activity.

Just one clarification. Are you saying your hands are sort of tied right now or too full to sort of pursue anything, or you could, you have the bandwidth left if something became available to look at it?

I'm not answering that. So I think that we -- if you asked us if we were busy, I would say yes. But there's a lot going on, and we will always want to do that well and it would clearly be a factor in us contemplating adding anything else to our corporate to-do list. But I didn't go -- I didn't answer the question as to whether or not I thought we had the bandwidth for it. Priorities can be revisited, and so I don't think that -- I'm not comfortable speculating on what we might or might not to in that regard.

And we'll take our next question from Hunter Keay with Wolfe Trahan. Hunter K. Keay - Stifel, Nicolaus & Co., Inc., Research Division: So Gary, about 6 months ago you said you hit the point where you think you pushed fares as much as you could to be productive, but since then, obviously, the fare environment's gotten a lot better. And you've matched quite a few recent industry increases including one last week, so any value from capacity. So how does demand trend today stack up to what you were seeing then when you said you thought you pushed fares high enough? Is it better? Is it about the same? Is it worse? Is visibility better? Any kind of color on that will be great.

Hunter, I think the 6 months -- well, 6 months ago, when Laura and I put ourselves back in the August time period talking about our second quarter results and the current trends, we were a little confused at that point in time with what we were seeing demand-wise. I think since then, we've clarified with our third quarter and fourth quarter results that demand has actually continued to be quite strong. So we had a little midyear chop for whatever reason there. But third and fourth has just been very steady, very stable, very strong and that's what we’re seeing so far here in January. It's a very good environment. The macro environment, everything we read every day feels better than it did there when we were having the debt crisis, and I think everybody was spooked by a number of things that were going on there. So absolutely, things feel much more stable, much more consistent. Laura's already reported here this morning or this afternoon that we're looking at 7% to 8% unit revenues gains yet again here in January, so I'm feeling pretty good. Hunter K. Keay - Stifel, Nicolaus & Co., Inc., Research Division: Okay, that's great. And I wanted to just ask a quick one on the other revenue line. I realized there was some restatement, I should say, some reclassification of revenue but even factoring that in, I think you guys were expecting, if I'm not mistaken, mid- to high-single digit growth, but it came down about #10%. So I guess, what drove that above and beyond that reclassification? And is it possible that maybe we're starting to see some of that back fee revenue dissynergies sort of pop up there? And how should we think about modeling that going into next year?

No, Hunter, it was -- really, the difference from the guidance that we gave you was reclassifications. It was the reclassification we talked about, and it was also higher deferral percentages on our business partner income, which were actually up more than we expected, we're just deferring more of it into ATL, but we did not see any dissynergies in the numbers for the back fees that you're talking about. So it's really related to the accounting for the business partner income.

And we'll take our next question from Jamie Baker with JPMorgan. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Gary, I'm still trying to reconcile the generally bullish demand tone of this call with the fact that you have blocked several industry fare increases in recent months. This isn't a question about future pricing. I'm just trying to get a handle on what you've seen in the last 2 or 3 months. As Hunter pointed out you did take a long haul increase, but you've resisted attempts to move up fares in the kind of sub-1,500-mile market. How do we reconcile that fact with what you're saying? And would it be wrong to read into this that shorter haul demand might be under some pressure relative to longer haul?

Well, it's probably a similar answer to one I gave to Bill. I won't talk about pricing tactics either in the rearview mirror or going forward. We want to be the low fare leader. We're very pleased with our no-hidden-fees positioning. I think that's worked very, very well for us. And then it's down to managing market by market, and most markets have fairly significant competitive situations underway. But otherwise, I'm not comfortable giving any particular insight. I would say that with the exception of sort of the middle of the year, we've had a very strong revenue performance and a very strong revenue environment. We are, in 2012, about to begin managing quite a bit of churn in the AirTran, Southwest route systems. We're trying to pay very close attention to that. Overall, macro wise, we're feeling pretty good about the economy and our own performance. I think what we've all been -- don't lose sight of the fact that what Laura was reporting about the AirTran unit, and that the AirTran yields as a unit are up almost 20% at times. So these are just facts that I'm illustrating that while we didn't take the fare increase, we got a much higher yielding result through other techniques. So our balance -- as I've said, I'm very pleased with the fourth quarter revenue performance, very pleased with the customer satisfaction. We are managing very carefully this introduction of a brand-new frequent flier program, which I think here at this point in time is going exceptionally well. So all of those things are factors in the way we think about pricing at a macro level. But overall, again, the trends are good and obviously I'm hoping that, that translates into a strong revenue performance here in 2012. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Well as a follow-up to that, Gary, since we don't have the DOT data ourselves yet to answer this question, historically AirTran yields across the spectrum of stage length have been lower than yours, they've made up for it with bag fees and the tire loads. But in terms of sort of equalizing the yield performance between the 2 units, you said that AirTran is up 20%. What sort of a current differential, if you're aware of one, between Southwest pricing and AirTran pricing?

I don't think that there is a -- is or was a fundamental difference in the pricing structures. Now clearly, there are some differences. If one sits down and studies it market by market, of course we don't have complete overlap either with our systems. But I don't think you'll find a particularly different price fare structure, Jamie. And again, this is all public information. What is admittedly different been between the 2 companies is the mix. Mix of business and leisure, mix of connections and non-connections, mix of full-fare, discount. That is very different. And without using fare increases, we've been able to change that revenue management approach within AirTran, as we have already shared, and that's what's driving unit revenue growth at AirTran. But it's not a fair structure, per se. As Laura's saying, it's execution. So it's how we are utilizing that fare structure that we've been able to make some improvements. I think the Southwest -- I doubt that it's the Southwest brand per se, but it is sort of the Southwest approach and Southwest philosophies that are realizing some gains right now.

We'll take our next question from Helane Becker with Dahlman Rose. Helane Becker - Dahlman Rose & Company, LLC, Research Division: So 2 questions. One is, are you preparing for any or accruing for any wage rate increases for labor as the employees ratify their single less?

Well, I think the answer is no. Because as I'm thinking out loud, I'm looking to Bob and Laura here, that implies as a retroactive rate change and we don't do that. So we've done that in the past, but that's not currently in the works. Unless I'm just forgetting something...

But in terms of the cost guidance in our budgeting that we give you, we have expected -- we build into our forecast timing of when we expect some of those equalization to occur. So it's in our guidance, but not in the accruals.

Yes, yes, yes. I think the big difference is that where you know, for example the pilots, and then where we have a contract out or a proposal out for a ratification, you know what's planned. And so we have those raises and the timing of those raises in the forecast. But there is no catch-up retro, at least as far as I remember, or any group that has either ratified or is in the works, or any group that we hit or any plan for any group that we need to move through SLI in the future. So there's nothing to accrue.

But Helane, just to make sure we're all 3 understanding your question, we have -- the pilots, we have the deal. So we know exactly what pilots move to what pay rates and when. And as Laura mentioned in her remarks, we're phasing AirTran's integration into Southwest. And therefore, those labor rate changes are also phasing into Southwest between now and when we're done, which will be roughly 2014. Those are all forward-looking, so there's nothing to "accrue" in that sense. Helane Becker - Dahlman Rose & Company, LLC, Research Division: Okay. But the numbers that Laura's giving out for cost guidance includes the -- what you just said, the integrations and the phase-ins, right? So if I'm understanding...

Yes. Helane Becker - Dahlman Rose & Company, LLC, Research Division: Okay, perfect. And then my second question is with respect to the additional seats on the aircraft, is there any way -- I mean, I know capacity is going to be flat and so on. But is there any way to say what the ASM impact is from just adding those seats?

Sure. Helane Becker - Dahlman Rose & Company, LLC, Research Division: Sort of net of return.

We think we can get it to you. We can give you a full run rate when it's all in and as you know, they're phasing in so you get -- you don't get the full impact in your one. So we're -- if you give us some time, we can get you that.

Otherwise, we'll just shoot it to you. But -- and this somewhat ties into Bob McAdoo's question, the available seat mile forecast is almost literally flat in '12 compared to '11 for the full year. The trips, though, are down and they're down probably 3-plus percent. So it's everything that we've been discussing. You get more seats per departure and you may get a little bit longer distance being flown on average as well. But it's really the additional seats that's making up that gap in trips. And the aircraft fleet itself will be down 7 units, again, as we discussed by the end of the year.

Yes, [indiscernible] just looking here, it looks like it's about -- for the move to the Evolve interior for the aircraft that will be converted in 2012, it looks like it's about a 0.5-ish impact on capacity.

And we'll take our next question from Dan McKenzie with Rodman Renshaw. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: A couple of questions here. Southwest has done a lot of network restructuring and implemented a number of revenue initiatives over the past years, but margins still remain pretty frustrated by the high fuel prices. So I'm wondering how willing would you be to take even more aggressive steps, including shrinking the airline further, to hit targeted returns? And I guess, inclusive of the question is do you feel, at least internally, that based on the capacity plans that you have that you can hit the targeted returns that you've outlined in the past?

Well yes, I think I would agree with what I think you just said as a latter point. I think in the end, I think any management worth its salt has to do what it's got to do. And we're all obligated -- we have a duty to manage our shareholder value here and to hit our returns on investments. So there's some art in agreeing on what that target ought to be, but I think everyone generally agrees with our target of 15% on a pretax basis. So we're determined to do that, number one. Number two, I don't believe that the right way to achieve that is to shrink the fleet, mainly because we have so many opportunities. If we don't like the way our assets are deployed today, we have a lot of opportunities to deploy them in a different way. And I think that, that would -- strategically, it would be a mistake. It's very painful to downsize. There is a cost associated from a goodwill perspective with customers, with employees, with downsizing and so companies do that. Some companies are forced to do that. It's a tool that we have if we find that we need it. I think it is my least favorite tool. The nice thing for us is we're only in 72 cities right now and we are creating more capabilities to be able to serve even more markets very effectively. So that is our plan. And again as you know, our orientation is to fix our fuel cost issue and our profitability challenge and then grow the airline and do it in that way. But if we have to shrink, we have to shrink. But that's certainly not in the cards right now, Dan. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: Understood. And I guess going back to some of the market commentary, if I could focus on just one part of the country, Atlanta stands out as 11th largest city in the country but ranks first for capacity. And nearby Charlotte ranks as the #1 growth market in the United States for capacity versus just 4 years ago. So relative to the rest of the country, capacity at 2 nearby airports has not been particularly restructured, versus just about every other larger market in the country. And I guess given that, I'm wondering what you can share about how that impacts your view of your fifth-largest market, or at least that part of the country?

Well, I'm not sure that I have anything new to add to the discussion. We feel like, and so does AirTran, we feel like we can add value to the Atlanta discussion. We can win customers in Atlanta. We can take existing Southwest customers to Atlanta. We can certainly significantly restructure the AirTran schedule and take advantage of the Southwest network. And that's what we're focused on doing. We've had great success with that approach, especially here in Denver over the last 5 years. And we're the low-cost guy, we're the low-fare leader and we'll be something different in the market. I think the market is embracing that, and we're certainly excited with what we've heard so far. Charlotte, I don't have a whole lot to offer. There is a presence there by AirTran, which means by definition that we'll give it a good hard look. And we have not announced what our plans are one way or the other with Charlotte yet. So it's a little premature for me to address that. But Atlanta, we've been very open. You can't really acquire AirTran without having some idea about what you're going to do in Atlanta. We've shared that and we're about to get started.

And ladies and gentlemen, at this time we have time for one final question. We'll take our last question from Duane Pfennigwerth with Evercore Partners.

I'm wondering if you could talk about your overlap with American auto markets basis.

Well, we can...

What percent of your network overlaps with American capacity?

It's sort of a direct and indirect question, so if you look at it on an indirect basis, a lot. There's a lot of overlap in Dallas. There's a lot of overlap in Chicago, even though it's not the same airport. We have a lot of overlap with them in California. They have a large presence in New York. But those are the big hitters, I guess, South Florida as well. So there's plenty of overlap. There's plenty of opportunities to gain some share if they shrink. They have made dramatic changes to their route structure over the last 20 years, and Southwest has picked up a whole lot of business. So you know what is underway at Dallas Love Field? We're completely reconstructing the terminal. The Wright Amendment, of course, restrictions drop in 2014, which will allow for a more fair competition out of the North Texas area, too. So there are some things happening there. But, however...

Duane, if you look at the direct and indirect where you count Dallas and Chicago as common markets, it's about a 35% overlap with our capacity.

Okay. That's helpful. And then just do you have total capacity trends in your markets and in competing capacity trends in the fourth quarter and into the first quarter here?

I do have that. Let me get it real quick. Okay, so if we look at first quarter, the total seats in our direct markets are expected to be down about 3%. If you look at direct and indirect, it's the same number, down 3%. That compares to fourth quarter where competitor seats were down 2.6% in our direct markets and down 2.3% when you include indirect. So slightly better comparison in 1Q versus 4Q.

And at this time, ladies and gentlemen, I'd like to turn the call back over to Ms. Brand for any additional or closing remarks.

Thanks, Tom, and thanks, everyone, for joining us. Of course, as always, if you have any follow-up questions, Ryan [ph] and I are available. And I hope everyone has a great day.

And ladies and gentlemen, we will now begin our media portion of today's call. I'd like to first introduce Ms. Ginger Hardage, Senior Vice President of Culture and Communications.

Great. Thank you, Tom. We know that everyone's ready to now ask questions of Bob, Gary and Laura. So if you wouldn't mind just giving us the routine on how they queue up for calls, and we'll get that portion started right now.

[Operator Instructions] And ladies and gentlemen, we'll take our first question from Mary Schlangenstein with Bloomberg News.

I had just a couple of quick questions. Laura, I wanted to ask you, I think you talked about an annual hedging spend limit. Was that right or did I misunderstand that?

Yes, what I mentioned was prospectively as we get to what we call clean sheet years, it's our goal to have annual hedging premiums under $100 million.

Great. And the second question was, Gary, when you were talking about increasing productivity and eliminating waste and you mentioned potentially looking at some later flights in the day, is there any potential that you guys would start doing some stuff overnight? Or were you just talking about maybe more flights toward the end of your current day?

I'll let Bob answer that one.

Well Mary, we don't -- over the last few years, as we pruned out the unproductive flying in the schedule, a lot of that is really early in the day and really late in the day kind of flying for the most part. We have flights, you've heard this before that we just weren't covering our fuel costs, for example. As we've really worked the network and as hopefully we get some economic improvement here in 2012, it does look like there's a chance to begin to stretch the day back out just a bit, add some flying towards the end of the day and the beginning that we may have pruned out over time. I'm not talking about going back to 2007 or 2008, but it does look like we've got opportunities to stretch the day back out just a bit. The second thing, you asked about the overnight or red eye flying. One of the things that we can learn from AirTran is they actually did a fair amount of red eye flying; some of that actually pretty profitable. So the schedules that are in place out through August of this year, we have actually maintained a lot of that red eye flying in the AirTran schedule and are considering some of that for the combined schedules that we'll move forward. It's nothing dramatic. We're talking about 10 to 15 flights, not 50 or 75. But I don't think we've concluded it, so I would not rule out some modest red eye flying added to the mix. But again, it's a fairly small number of flights, and it would make a pretty small dent in our overall utilization and capacity.

Okay. And when you talk about just adding some back a little bit later in the day that you had pruned back, so are you talking about flights that generally wind up around 10 or later than that?

Oh no, we're talking about flights that generally earlier than that, this is a sort of -- and again, it's market by market, but a lot of this we've actually pulled out, 8:00, 8:30, 9:00 flights that just weren't enough in the heart of the day, so it really is market by market. But whether you look at your markets that are strong that can support the additional frequencies, and the planes are used up in the middle of the day, so their frequency would have to be added later, maybe 8:00 versus 5:00. And so we just go market by market, but we are looking at some modest add backs.

And we'll take our next question from Kelly Yamanouchi with the Atlanta Journal-Constitution.

I'm wondering for your Southwest service launch in Atlanta, how are bookings looking whether the load factors like in your mix of premium versus discount passengers for the Southwest branded service here?

Well the former, we can give you a little insight on. The latter you can't, and I'll at least speak to that. But bookings look normal. And with all new markets, we monitor them very closely and we use reference markets to get some idea. And it's pretty typical for a new city. We have some that are ahead of what you would think, some that are behind what you would think, but overall it looks fine. At this stage with advance bookings, these are all going to be leisure customers for the most part. They could be business customers who are willing to commit to advanced purchase restrictions. But you can't really get any kind of a read based on the booking as to what the purpose of the trip is. So we don't know, but they're all discount tickets right now. One other thing, Kelly, I would mention to you is that when we start a month, we probably have half of the bookings in place for the whole system for that month. So a lot has to happen the week of travel. And it appears to me that Atlanta's not going to be any different in that regard. The only other thing I would say is that just the nature of the itineraries that are being booked we tend to be, as you know, a point-to-point or a nonstop airline, and the bookings suggest that as well. So it looks very normal for Southwest city opening.

Great. And I'm wondering what kind of competitive response you see from Delta and whether that's better or worse than you expected?

Well, they're one of the largest airlines in the world, and with their #1 market that they serve and so I would expect them to be vigorous competitors and we thrive on competition.

And we have time for one more question. We'll take our last question from David Koenig with the Associated Press.

You've talked about first quarter demand, but I didn't hear you break it out between leisure and business travel demand. And I know it's early, is there anything you could say there, even about the first 18, 19 days of the month?

Yes, David, we didn't speak to that, but just talking about what we've seen so far, business travel looks very stable. I don't see it going up or down in terms of the fourth quarter performance. It does feel like we were still lagging in 2007, so it's pretty recession levels with respect to the business travel. But as we've been saying, it is a very healthy performance, the traffic and demand look really good. A lot of the changes that we've made seem to really be working well and in particular, the All-New Rapid Rewards program. So all indications are that business travel is holding up quite nicely. But I don't think we can give you any more insight about January. I would be surprised, based on the overall trends, to see any fundamental change in January. But I think the honest answer is we don't really have any insight into that yet. Was that our last question?

And yes, sir, it is. At this time, I'd hand the call back over to you for any closing or additional remarks.

Great. Well, thank you all so much for calling in today. If you think of additional questions as your stories develop, you know that we stand by and we'll be ready to get those answers for you. That number is 214-792-4847. Thank you so much for being of the call today, and hope everyone has a great day.

This does conclude today's conference call. Thank you for joining.