Welcome to the Southwest Airlines First Quarter 2013 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 today's call to discuss our first quarter results. Joining me on the call is Gary Kelly, our Chairman, President and CEO; Tammy Romo, Senior Vice President, Finance and CFO; Bob Jordan, Executive Vice President and Chief Commercial Officer and President of AirTran Airways, who is actually joining us on the phone from Atlanta; Mike Van De Ven, Executive Vice President and COO; and Ron Ricks, Executive Vice President and Chief Legal and Regulatory Officer. Today's call will begin with opening comments from Gary, followed by Tammy providing a review of our first quarter results and current outlook. We will move to the Q&A portion of the call following Tammy's remarks, and all of our executives joining the call today will be available to take your questions. Please be advised that today's call will include forward-looking statements. 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 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 with that, Gary, I will turn it over to you for opening remarks.

Thank you, Marcy, and good morning, everybody, and thanks for joining us on our first quarter 2013 earnings call. We're off to a very solid start in 2013. Essentially, right on plan. We had record traffic and revenue performances in the quarter. Until March, at least, we had a very stable revenue environment dating back to last fall, and that was despite all the noise surrounding personal income tax increases and the whole federal sequestration. We did hit a soft patch in March. That's continued on into April. I would attribute that to the above noise and along with the timing of the Easter and Passover holidays. So we are seeing booking strength return for May and June. And assuming that these May, June trends continue, they should be strong months. We have wild swings in jet fuel prices already since the beginning of the year. Prices have dropped from our first quarter peak over $0.50 a gallon, and fortunately, this has roughly offset the revenue softness that we've been experiencing of late. And so assuming that these fuel cost trends also continue along with the May, June booking trends, we'll have a very strong second quarter. There's much frustration, of course, with the FAA's implementation of sequestration. All that's in the news. And the Airlines for America, which is our trade association, is already in litigation over this. And the furloughs, of course, just started Sunday. So there's not a whole lot more to add at this early point, other than it just needs to end very quickly. I want to thank the Southwest Airlines people for an excellent start to 2013. There are a number of initiatives that are contributing to the first quarter results. There are a number that are still under construction. Our top priority in terms of deliverables this year was connecting the separate route networks of Southwest and AirTran, and that was done, of course, it's done on time, done schedule, and it seems to be producing significant incremental bookings for future travel. The network connectivity, of course, sets the stage for us to aggressively optimize the networks this year. We've already opened up 6 new Southwest cities as of April 14 -- 5, in fact, on April 14, as a part of our optimization efforts. And we announced that we will de-hub AirTran's Atlanta operation with what will end up being essentially the same number of daily departures just scheduled on a point-to-point basis, and that will happen in November. That will be a tremendous amount of work for our Atlanta AirTran ground operations employees, and I want to extend to them a special thanks for all of their very hard work and excellent results. And with that very quick overview, I'd like to turn the call over to Tammy Romo, our CFO.

Thank you, Gary, and thanks to everyone for joining us today. Our first quarter 2013 net income, excluding special items, was $53 million or $0.07 per diluted share. And that was ahead, of course, the First Call's consensus estimate of $0.02, and that was primarily due to our cost coming in better than we expected, which I'll cover here in just a minute. Our revenue -- and just a note on the profit, that was a significant improvement over first quarter 2012's $18 million net loss, which was driven by record profit in March. Our revenue performance for the quarter was strong on relatively flat year-over-year available seat miles, and our operating revenues were a first quarter record of $4.1 billion, largely driven by record passenger revenues of $3.8 billion. On a unit basis, our passenger revenues grew 1.8% year-over-year. As Gary mentioned, our trends were steady through February, and our January and February PRASM were each up over 2%, and that was followed by a flat year-over-year March unit revenue performance. Our unit revenue trends remain stable and on plan. But of course, March was negatively impacted by softer yielding traffic, weather and weakness in close-in bookings, which was more than offset -- which more than offset the benefit from Easter travel. Although a little softer than we expected, it's worth noting that our year-over-year March PRASM outperformed the industry on a capacity adjusted basis. Despite an increased number of fees per trip, our first quarter load factor was relatively in line with first quarter last year, driven -- largely driven by more aggressive sales activity this year. Although we experienced yield pressure, our passenger revenue yield was also a first quarter record, increasing 2.1%. Our yields benefited from 3 targeted fare increases implemented in first quarter and, thus…

[Operator Instructions] We'll now begin with our first question, and it comes from Duane Pfennigwerth with Evercore Partners.

Just on Atlanta, as we look at Atlanta through the rest of this year, are you continuing to cut on a combined basis?

I think the flight activity -- I'm going to let Bob tune this up, Duane. So Bob, you can chime in here in a second. But essentially, the flight activity is relatively flat, as I recall, between the various schedules that we already have published and what we are anticipating publishing for November. The big change here in November is very straightforward. We're moving off of the hub-and-spoke. The current hub has an early-morning bank, and it has a late-evening bank. It is not timed well. In fact, it is timed poorly for local traffic needs. So this will be a significant change for our product offering to and from Atlanta when we move through this in November. And that's the substance of the change. We'll have -- it's all -- for the most part, the majority of the flights are still AirTran, and that will be the case in November. Remember that we still have, by that time, we'll still have 70-plus 717s and they are scheduled in and out of Atlanta. But this will set the stage, obviously, for the AirTran operation to fold into Southwest operation late next year. So Bob, anything you'd like to add?

Yes. Just real quick. Gary, you're exactly right. We have about 175 flights a day today, and the November schedule will be just slightly less than that, but that's really seasonality. So we'll continue to have in the 170, 175 kind of range. AirTran has banks at 8 and 10 a.m. and 8 and 10 p.m., and they have a significant number of flights after 9 p.m., which you know aren't really when our customers want them or need them, particularly our business passengers. They peak at about 30 flights or 30 aircraft on the ground during those peaks, and the new Southwest schedule in November will have a maximum of about 20 aircraft on the ground at any one time. So it just lets us put the flight smoothly across the day, really lined up in terms of when our customers want the flights.

And of course, the other thing we'll be focused on, Duane, is local traffic. So this is actually bringing more competition to the market, with more flights in the meat of the day, and with an objective and an expectation that we will be generating more local travelers than what AirTran has been doing.

Okay. And then just on capital deployment. As you approach the end of this stock repurchase authorization, how should we be thinking about the capital returns going forward? And as you maybe think about growth beyond '14, how do we think about balancing growth versus continued capital deployment?

Well, I think, it's a little premature for us to give you a specific answer because we're not going to provide any new information on our share repurchase or dividend policy today. But directionally, we want to continue to have as our priority to hit our return on capital target and continue to enhance shareholder value through those 2 mechanisms, and also put the airline in a position where it can grow the fleet and pursue attractive expansion opportunities. So we want to balance -- I think, the takeaway, Duane, is we want to try to balance all of those. But clearly, the #1 priority has to be sustaining our profitability and at levels that meet our return on invested capital target.

We will take our next question from Jamie Baker with JPMorgan. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Gary, a question on the challenges that our government is currently posing for Southwest. On one hand, you obviously have sequestration. Your competition intends to respond by pulling down 50 theaters, but that's not an option for you. Next, we have the budget proposal, $100 departure tax. It seems to me that the impact of higher segment fees and PFCs would also weigh a bit more heavily on your passenger base than, say, United's. And of course, yours is the only network where automotive substitution is a meaningful threat, not across the entire network, of course. Maybe these problems go away, but if they don't, how do we think about Southwest responding? And I'm thinking longer term here. Does this impact how you select markets? Does it drive you towards the 737-900? Does it force you to rethink certain ancillary fees? Any thoughts on that?

Well, I think if the world changes, Jamie, of course, we're going to have to continue to adjust. The good thing about Southwest is we are in a transformative, not just phase, but of mindset. So if those challenges become real, I feel like we've got the leadership team and the people at Southwest to respond. I think you bring up hypothetically all the kinds of questions that we would want to pursue. On the short-haul aspect of the question, though, we've already aggressively begun to rotate Southwest out of an all short-haul airline into a longer-haul airline. And there's -- you know everything that we've been doing, and you know everything that we have planned through 2015. I think the ancillary fee element of your question, we're going to continue to -- regardless of what happens, I think we're going to continue to evaluate whether we have the right mix and match of fares and fees, so that in and of itself, I think, is going to continue. Ron Ricks is here with us, and if we need to get in more specifics, he can certainly assist here. But basically, at this stage, you have a budget proposal from the administration, and there is nothing before Congress at this point. So we're a long way away from those taxes. And obviously, the AirTran -- or the Airlines for America and along with Southwest will definitely not be supportive of that kind of an increase on an industry that's already overtaxed. You didn't speak -- address directly to the FAA sequestration or maybe I missed it? But is there any comment that you were looking for there, Jamie? Jamie N. Baker - JP Morgan Chase & Co, Research Division: Not in particular. I mean, that kind of folds into the short-haul question. Actually, the follow-up that I would ask, and please don't let me stop you from adding more on ATC. But on the short-haul issue, ASMs per gallon rose to a record level in the quarter, declining short-haul activity, which you identified the drivers, 737-8s obviously drive the metric higher as does the Evolve interior, as will the exit of 717s later this year. So I know you normally don't guide on this metric, but perhaps you could give a little color. I mean, can you get above 75 ASMs per gallon by year end, for example? I can get you there, but you have to make a lot of assumptions on stage length and stuff like that. It's kind of a wishy-washy analysis. I'd rather fall back on yours in this case.

Well, let me just say this, I -- we can -- you know what is happening in our current results. I think we can explain those very well. In addition to all of the mechanical changes that are taking place with the fleet, in other words, bigger gauge, retiring smaller gauge, adding seats to the 700s, Mike Van De Ven and his ops team also has fuel conservation initiatives on top of that. So I feel very good about the momentum we've got. What I don't have in my mind, Tammy, is a prediction about where we might be a year from now.

And just one thing, Jamie. I just want to make sure, we're -- the first quarter 2012 fuel consumption PRASM, that actually declined 3% year-over-year, and we would expect that trend, for all the reasons Gary just pointed out to you, to continue. We haven't given a prediction for that, though.

So we've got more available seat miles per gallon. So I think we're all square. So I think yes, it should continue to improve. I just don't -- I don't have a ready forecast in my mind...

Yes, we haven't provided one yet. But it will...

But we can come back with one.

And we'll take our next question from Jim Parker with Raymond James. James D. Parker - Raymond James & Associates, Inc., Research Division: Gary, Tammy just reiterated, I think, your goal and your expectation on the reaching ROIC of 15% by the end of this year. And I think you said in the previous call, when you get to 15% ROIC, that you're going to reconsider capacity growth. I'm curious if your capacity discipline is independent of the industry? Is your capacity discipline largely based on benefits to Southwest or benefits to the industry, which, in turn, impacts Southwest as the largest carrier?

Jim, I'm not sure I understand the nuance in your question, so I'll give an answer and you can redirect. But clearly, we're going -- our duty is to manage Southwest Airlines, and I almost feel silly saying that to you. I know you know that. We'll be looking at opportunities that we think will be successful within the industry. And it, well, said a different way, we'll want to factor in the competitive environment of us adding flights in new markets. So we have our sights on some expansion opportunities where we believe that we will be successful competitively and we'll be able to expand and hit our return on capital. So I'm not sure exactly where your thought is headed beyond that. James D. Parker - Raymond James & Associates, Inc., Research Division: Well, my thought is, are you inclined, perhaps, to increase capacity that certainly enhance the Southwest profitability in a near-term basis, but perhaps causes the industry some detriment, or causes the industry to say, "Hey, we need to start expanding capacity." And this capacity discipline becomes unraveled a bit for the industry?

Well, I think that all of that is factored into -- yes, I would just say that our expansion thoughts would have a long-term view, not a short-term view. James D. Parker - Raymond James & Associates, Inc., Research Division: That benefits the industry as well?

I think our duty here is going to be solely Southwest Airlines because in the end, that has to come back to either a positive or a negative effect on us for us to care. In other words, we've been a disruptive force for 5 decades, and because we had a competitive advantage to bring to the marketplace, whether that was good or bad for our competitors. So I don't see us changing that mindset.

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

Gary, I just wanted to ask you a question about something you actually said with respect to ancillaries. You've been really opposed to some of the fees that some of your other airlines, I guess, peers, charged. But I noticed the change in your ads to kind of focus on more soft ads, rather than the harder hitting Bags Fly Free ads. So is that kind of a way of starting to move towards other fees? Or is that like too much that I'm reading into it?

I think it's reading too much into it. And of course, there has been a lot of speculation. The nice thing about our current campaign, which has been out since March, is that it -- people noticed. It's created a lot of discussion and mostly fans of our new ad campaign, but of course, there's always going to be those that don't care for it. But I think we just have a challenge at Southwest because there's so much to sell. And a lot has changed at Southwest Airlines since 2006, and we really did want to have a fresh approach and create re-awareness, if you will, and perhaps, retrial from those who are thinking of us the way we were 10 years ago, we just have a whole different customer experience. So rather than focusing on one feature, like Bags Fly Free or our All-New Rapid Rewards program, we now have an array of things that we want to message to our customers. So this is more anthemic. I've read that this is unique for Southwest. It is not. We've done anthem campaigns before, and I would just point you to our Freedom campaign in the 1990s. We're not changing the essence of Southwest. We still are low fare, we still have Bags Fly Free, there's just a lot more to Southwest Airlines than not charging for bags. So that's where we're headed with the campaign. And as usual, this is more art than science, and the campaign will -- it will go somewhere. So it will either resonate with our customers and drive the kind of reaction and benefit that we want. And if not, then we'll obviously evolve the campaign.

Okay. And then, I just want to follow that up with one unrelated question with respect to employee productivity. You're flying more aircraft with fewer people. And I just wonder, is there a room for additional productivity improvements, or is that starting to peak?

Yes, ma'am. So we are flying more airplanes with fewer employees is...

That's a better way to say it.

There was a slight improvement in productivity, if you will, there. I think there's going to be a little bit of messiness in some of those metrics over the next couple of years, simply because there are a lot of flights at AirTran where the work is contracted out and the headcount are not in that statistic. And when we move, at least, some of the work in the Southwest Airlines, it may change the headcount. I think that your fundamental question is, are there -- forgetting some of this arithmetic, are there opportunities to improve? And the answer is, absolutely yes. And we already, of course, have very good -- harkening back to Jamie Baker's earlier question, we not only have opportunities to improve the available seat miles per gallon, but we have the same kind of opportunities apply for available seat miles per person. So we'll not only look for improvements with our current initiatives, but we'll be looking for new initiatives where we can improve our productivity going forward, and immediate objective that we added for our 2013 plan that we shared with you all last December, so in other words, this is not new -- breaking news, but it's just to remind you, as we do feel like we've got opportunities to improve our productivity within our corporate overhead, and that is something that we are working strenuously on here kind of behind the scenes, if you will, in 2013. There are opportunities to centralize and consolidate, and I think significantly improve some of our overhead functions. And I'm very pleased with that, and I want our headquarters folks to be leading this effort for the rest of the company.

We'll take our next question from John Godyn with Morgan Stanley.

I have 2. Gary, I just wanted to follow up on Helane's line of questioning. It sounds like you're pretty sort of familiar that people are sort of trying very hard to read between the lines of everything that you say and Southwest does, and to see if there are any cues for fee initiatives that are going to surprise us, whether it's bag fees or not, and I was hoping that you could just sort of address the issue, I guess, kind of directly. As we look at the next couple of years, is Southwest an organization that's positioning itself for future where fees and other ancillary revenues, and they might not be bag fees, but they are potentially big, play a major role in driving revenue? Or is that just not, is that whole line of questioning, just going down the wrong path?

Well, it is and it isn't. There is no -- I'll try to be consistent with what I said before. And if I'm not, you catch me, John. But there's no intent here to change the positioning of Southwest Airlines brand with this ad campaign. Our brand includes Bags Fly Free. Period. Now what we are busy doing in Southwest Airlines is to create capabilities, so that in the future we can make tactical decisions much easier than what it takes us today. And that includes -- the easiest example there would be our reservation system technology, which we will replace and adding the capabilities to be international. What I have said, and I'll repeat, is that our brand is not built around not charging for a bag. That's not who we are. We're a low-fare airline with -- that highly values customer service. And so that is the primary filter that we'll want to have. There was a time where Southwest was very proud of the fact that we never had an advanced purchase fare. And of course, over 3 decades, things change, and now, customers don't care about that. So we'll -- I don't want us to be pinned down into perpetuity on what we might or might not do, and I want us to be sure that we have the capabilities to make those kinds of choices in the future. But beyond that, no. There is no change that is imminent with this ad campaign.

And Gary, just to follow-up, it's not just the ad campaign. I mean, we saw the recent hire from Spirit, so there is a lot of cues that I think I hear about, at least, that people try to pick up on. So just forgetting about bag fees for a second, though, when you kind of think about the opportunity in front of Southwest over the next few years, do you see non-passenger revenue playing a much more meaningful role in some capacity over the next few years than it does today in the revenue profile?

John, today? No. So talking about 2013, no. We think that we have the best combination of features and fares, only then -- the only element to that is, you know and we know that there are things we are building that we want to be able to do. And again, I'll use international capabilities as the example there. I wish we could do international now, in other words. So I would certainly supplement what we're currently doing by saying, yes, we want that. The -- where the world is 3 years from now, we don't know. I mean, for all we know, customers will say, 3 years from now, we want you to separate out bag fees. And if that's the way the world goes and that's what customers want, we need to be in a position where we can react to that. But that's not where we are today. All the research that we have shows that we would negatively impact our revenues by close to $1 billion a year through the defection of current customers if we charge for bags, which is about as direct as I can be. I'm not willing to sit here and tell you that, that will be the case 3 years from now or 5 years from now. And if customer attitudes change, well then, we just need to be in a position where we change, too. By extension, I don't think that ancillary revenues in today's environment are the answer to hitting our earnings target. I think the answer is, we must optimize our route network. Period. That is the #1 objective, and that's why that's the #1 deliverable for 2013. We have very significant opportunities to drive unit revenue improvement from where we are by eliminating underperforming routes and redeploying that aircraft and managing our capacity very, very carefully. That is the #1 opportunity that will dwarf any ancillary fee idea.

That's really helpful. And if I could just ask for clarification on guidance. This might be better for Tammy. But you reiterated the 15% ROIC target goal this year. Revenue has clearly been softer than the 4% to 5% that you were talking about at the Investor Day, for no fault of your own. But is the right way to think about it, as we model this, that the lower fuel that we're now forecasting through the end of the year should trade-off one-for-one with revenue and we should adjust down that RASM, that 45% RASM target that you had spoken to? Is that the right framework, or do you think it's going to net even more positive? Can you just help me kind of think about that?

At this point, of course, we don't know what fuel's going to do. We're clearly trying to maximize our revenue. But clearly, a lot of that depends on the economy and factors that are outside of our control. But certainly, to the extent we can control it, we're still focused on maximizing revenue. But certainly, at the end of the day, our goal is the 15% ROIC and at least, thus far, the revenue weakness has been roughly offset by the decline in fuel prices.

So we should try our best to kind of make that adjustment but hit 15% ROIC by the end of the year, that's how you would think about it?

The 15% is our goal.

We'll take our next question from David Fintzen with Barclays.

A question for Gary. I mean, just going to your point about the network reallocation being the big lever, I'm curious. Now that you have a little bit of time with codeshare under your belt, obviously for a very limited time, but at least a little bit, I'm curious how you're seeing sort of the international connectivity develop relative to domestic, and how does that play into schedule sort of November and beyond? Is that another -- is that codeshare working in a way that lets you sort of use your international as a bigger lever to reallocate the network? Or just curious how that's trending?

Not really. And -- so let me just give you -- and Tammy may want to share with you more specifics. I know she shared some information about the incremental bookings from connections. But the -- we're seeing a very strong response, first of all, to the new itineraries that we've published, because we have been able to connect the network. So that's argument number one. And again, I'll defer to Tammy to share with you maybe how much that is. What we are not comfortable with yet is concluding how many of those bookings are incremental, simply because we would admit that an itinerary, a codeshare itinerary could simply be now occupying a seat that got squeezed out and got displaced, that we would've carried anyway on other itineraries. So I'm sure you're familiar with that concept. When you move now over into international, the international routes, as a whole, are performing very, very well. They were -- are 100% AirTran. As you know, Southwest flies no international routes. The total capacity deployed in international as a percentage of our total network, I want to say, is 1%. It is a very, very small component of our capacity. So at least in the near-term, even if we were to double the flying in that market, it's still going to be relatively insignificant. Now AirTran has been, under -- our management, has been reallocating some of its flying. It has allocated some of its flying to new international markets, and I think we'll continue to do that. And there's a lot of tactical reasons for that. One is, we're pursuing route authorities, and as they become available, we apply for them. If you get them, you got to fly them. So you have those kinds of things. But for the most part, there aren't a lot of changes that you should expect within AirTran international. It will be 2014, of course, before Southwest is in that position. And it's no secret, so I'll just repeat it. Houston Hobby is a very good international expansion opportunity. It will not happen during AirTran's flying, so it will be 2015 at the earliest that those facilities will be ready. But clearly, that will be -- that's an expansion opportunity that Southwest will be prepared for and will have our eye on. So that's, at least, one example of how we're thinking about international in the near-term.

That's incredibly helpful. I would be curious if there's anything Tammy can add, just in terms of more tactically how to think about sort of codeshare run rates, and then how to think about it over the bulk? We start to see the benefit in May, just to help kind of guide our RASM thinking.

Before Tammy answers, let me just make one clarification. The -- and just to be sure, you know what I was trying to say there. The international flying is relatively small, but it does connect into the codeshare. So those itineraries are out there for sale, and that's included in the total numbers that Tammy's going to talk about here.

Right, right.

Yes. And as I mentioned, of course, the bookings continue to be strong and from connecting itineraries and our ability to sell each airline, the AirTran and Southwest flights, our daily bookings are averaging over $3 million in revenue per day. But as Gary pointed out, that is not all incremental. And I guess the best guidance we can give you really goes back to the synergies that we've provided, all of that is baked into our synergy number. And of course, the fact that they are so strong gives us further confidence that we'll achieve our synergy target of $400 million.

We'll take our next question from Bob McAdoo with Imperial Capital.

Kind of wanted to go back and just a very quick little question, kind of back to the earlier question-and-answer portion about -- where you're talking about de-hubbing Atlanta. And I understand the concept and obviously, it makes a lot of sense what you're doing in terms of spreading it out and having shorter peaks, or not so tall peaks or however you want to say it. But the other piece of that, that I wanted to kind of understand is, as we start to watch the last few changes, it becomes clearer that there are a number of cities that, as AirTran disappears, say, from a Rochester or a Flint or whatever, the service from Rochester or Flint into Atlanta also disappears. And I wonder, is that a part of the de-hubbing process as well in terms of reducing the number of cities that you use to actually serve Atlanta, because like Buffalo and other places that are up there by Rochester? Should we think that those are also going to not have service and that...

Yes. Bob, I think you are -- I think you were thinking about it correctly. And I'll queue up Bob Jordan, too, because he'll remember better where we've been and where we are and where we're headed here. But it's a conversion process taking place over 36 months, first of all. There were cities, Bob McAdoo, that were eliminated from the AirTran route network last year. And so that -- you could say that, that impaired their hub performance to some degree already. Now some of those -- back to the previous question on international, some of that flying that was feeding the Atlanta hub was redeployed to international route opportunities, and we think wisely so. But the -- but if you just looked at the performance in the Atlanta hub, we're still not satisfied with it and, obviously, believe that the solution is to make this conversion to the point-to-point system. Now one little factoid that I've enjoyed as an example is, if you remember all the Wright Amendment deals and how that compromise was reached, Southwest can't fly at the DFW without giving up things at Love Fields. So AirTran had, when we bought them, nonstop DFW to Atlanta service. We're carrying more customers between Dallas and Atlanta now without nonstop service. So that's the power of the Southwest network. And so I am very comfortable that -- and I'm pretty sure your Rochester example is accurate, that we -- yes, we will not necessarily have nonstop service to Atlanta, but we're plugged in now to San Antonio and of course, the Dallas example and often Texas just to think about close to home here, and that is driving a significant amount of traffic, whether it's on native Southwest or whether it's on the Southwest-AirTran combo. And so I think there's every reason to believe that our strategies going to work and work well.

Okay. Well, I was just trying to think about that as compared to something like Denver where it seems like you're kind of hooking up every possible city into Denver. But here, there's a lot of cities where there's been this history and it's being unhooked, and I was just trying to get that in my head as to where this was all headed.

Again, your question is -- all questions here are very good. But the thing that's a bit different about Denver as compared to what you're seeing with the AirTran Atlanta is that Denver doesn't really have a Rochester. So Rochester and Flint and Grand Rapids, and a number of -- Des Moines, a number of these cities are very small by typical Southwest standards, and you don't have a good example in Chicago or Denver or Phoenix, et cetera, so we're trying to make these new cities work. And just because they're not flying to AirTran doesn't mean that -- I'm sorry, to Atlanta, doesn't mean that they won't work within the Southwest system. But Atlanta could be a large "hub-like operation" like Chicago Midway for us someday. But right now, I think we're very happy with evolving at this point-to-point network system first, and then obviously, with the hope and the desire that we can grow it from there.

We'll take our next question from Michael Linenberg with Deutsche Bank.

Gary, just 2 questions here. On the Atlanta, as you go from the hub to the point-to-point, you'd probably very likely will need less gates. My sense is that there'll be less planes on the ground. Is there an opportunity there to maybe reduce the footprint with the infrastructure? I know you just indicated that you aren't still satisfied with Atlanta, and I think some of that may have to do with costs and the fact that you're carrying a decent amount of overhead there. Is there anything on that front that could bring down the cost fees?

Mike, I don't think that that's a major item. The footprint, just the physical footprint of a 717 is going to be different than a 737. So in terms of just square footage, we could probably -- we would probably have less gates anyway, if you're following my math there. But no, I don't -- first of all, Atlanta, as it exists today, is a very cost-effective airport. It's gigantic. It gets congested at times, but its costs are low. So I would certainly not complain to you about the cost "burden" of the Atlanta Airport per se. We're always looking for opportunities to optimize our fixed costs like that, so we'll be looking at that. But that is not anything that I have in my mind. And Mike is here with me. I don't think that we're going to be giving up or talking to the airport about giving up any space at all.

Okay. And then just my second, the -- I believe you said it's -- what is it? $3 million per day from the connecting itineraries with AirTran?

Mike, that's correct.

Is that -- okay, Tammy, is that $3 million, is that a gross number or would that be net of...

That is correct, Mike, and that was the point we're making. Of course, not all of that is incremental and again, but we've factored all of that into our synergy target or guidance of $400 million.

Okay. When I meant net, though, I know you were saying that maybe some of those passengers were ones that maybe had previously flown over the system. But I'm thinking more about like forgone service fees or bag fees. Is that in that number, or would that take that number down some? And I guess, that'll be very hard to estimate with that...

Yes, that's not included in that. That's not included in our number.

But Mike, I would quickly add that Southwest has consistently outperformed AirTran on a unit revenue basis. So I don't think that's -- you asked a good question that we'll want to think through, but I don't think that's a material piece of the analysis here. I think the bigger question is -- I think the bigger question of the $3 million incremental, well, our folks obviously are doing work to determine how much is incremental, so we have some read on that. I just am not comfortable that there's enough history for us to draw meaningful conclusions yet. But you can give it a substantial haircut. It's still a gigantic number, so...

Yes. And again, it's still early on, but my guess is it'd probably 1/3, maybe of that, but we want to get a little more history under our belt here.

Yes, I'd be happy with that.

Yes. That's all factored into the synergy target.

You can't -- that's a very big number. I won't be disappointed.

We'll go next to Glenn Engel with Bank of America Merrill Lynch.

A couple of questions. One, did you give out a number on what's the close-in bookings were percentage this year versus a year ago?

No, not yet, Glenn, but I'm happy to provide that. Our mix of close-in passengers for first quarter was 21%.

And last year was?

Last year was the same, exactly. And that's up a little bit from fourth quarter.

And how much at-risk is left in the ancillary fees of AirTran?

Say it one more time?

AirTran is charging fees. Those will eventually go. How much at-risk is that left?

Oh, how much is left, okay.

Just what? In terms of what the AirTran? Those were in the $30 million range, Glenn.

In the quarter.

That's correct.

And Glenn, I think I know where you're headed with your question. That's initially why we bought AirTran. I think they were generating about $300 million a year in fees that -- fees that we don't charge. And so yes, we were trying to figure out how we transition from AirTran to Southwest and keep the profit wheels on. And it's just we haven't had a problem with it. So the -- I think, again, we've been pretty pleased with the revenue conversion process here.

Yes. And I think we've been managing that really well. So just the other components, what I gave you was just the bag fees in total. It was closer to $50 million. But just keep in mind, too, Glenn, that we're continuing to increase other fees on our side. And again, I'll just point you back to what I reported on earlier. We recognized a 5% increase in various fees, which contributed to $69 million in other revenues, and that includes -- that included some of our incremental ancillary revenue opportunities like the A1 through A15 premium boarding. So I think we're managing through that pretty well.

And I think, Tammy that -- Glenn, if this is helpful, I think the AirTran footprint, if you will, has shrunk about 25% since we initially acquired them. So all the 717s are still flying, of course, in AirTran, and there's 88 of those. And we've moved 18 or 19 airplanes, or will have moved I guess that many airplanes by the end of this year. So we'll have 30-some-odd 737s that are left to be converted next year, if that gives you a little bit of help there.

And finally, why isn't the revenue synergies translating into RASM outperformance relative to the industry? And when would you expect that to happen?

Well, I'll start giving you my view and Tammy may have a little bit different view. The opportunity to improve revenues from just fundamental market share gains or fare increases is really optimizing the network. So our network is sub-optimized, and I do think that, that is a drag. What is offsetting that drag is the list of initiatives benefits that Tammy walked through. One reason that she has been saying that we're still determined to hit our return target for this year is because the step-up in the unit revenue trend improvement is really second half-loaded. So the real power this year in driving the revenues is going to come from connecting the networks, and then secondly, optimizing the networks. It looks like -- I believe all these numbers are very solid, so it looks like we're seeing very solid gains from the -800s; we're seeing very solid gains from the Evolve seating; they are literally outperforming the 137-seater version by the actual number of additional seats. So In other words, there -- on average, there are 6 more passengers on the Evolve flights and there are 38 more passengers on the -800 flights. So they look very, very strong. And that is absolutely a revenue contribution. That is just irrefutable. The other piece that is very easy to monitor is the frequent flyer program. We know exactly what we're getting from our partnerships there, and the cash flow has been very, very strong. So it just suggests that there is perhaps some under -- some other underlying weakness that is offsetting. But in any event, our trends until March were real stable. Month in, month out, we were sort of up 15% [ph]. While we've got all these things going on within AirTran to get it converted, actually, Glenn, I'm pretty pleased with that.

And I don't have a lot to add to that, Glenn. The only other thing I would just point out again or emphasize is just the connection of the networks through codeshare here in April. We, of course, just operate -- just started operating all of that this month. And as I mentioned earlier, we've realized $70 million in net synergies from the AirTran acquisition, and only about maybe 50% of that related to revenues. So just to emphasize the point, there's still, we believe, significant revenue synergies to come.

We'll take our last question from Jeff Kauffman with Sterne Agee. Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division: Unfortunately, I think I know what your answer's going to be. But we recently had a consolidation of 2 carriers you compete with materially in the Southern U.S. They filed to plan a reorganization. You talked about adjusting capacity for Southwest. As you're looking at the competitive landscape now that the major consolidations are done, how do you see this changing the way you're thinking about your capacity over the next year? So have you already planned for this? Or now that the plan of reorganization has been filed, do you view the competitive landscape a little differently in Phoenix, Dallas and some of the East Coast cities you operate out of?

I'm not sure why you said unfortunately, but you'll have to tell me. Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division: Fair point.

Well, sure. I mean, the major inputs into our thinking about the future, there's 3 of them. There's the economy, there are fuel prices and there's our competition. So it is an input. It is not the input. Whatever we do, we need to achieve our objectives. We want to take care of our people, we want to take care of our customers, we want to take care of our shareholders. We've got to hit our profitability target. Period. And if there are competitive changes in the industry that help facilitate that and also lead to growth opportunities, I think that's fantastic. But there's a lot said and written about consolidation. Bankruptcy is a separate issue, although they do get connected in a sense. I think the great discipline here on the industry has been fuel, it's taken the industry years to be adjusted to $3.29 jet fuel per gallon. The industry is healthier today because it has gotten itself adjusted, and bankruptcy has been one of the techniques to get its cost down. But what that all leads to in the next generation, I don't know. It is clearly a mature industry compared to where it's been the last 25 years. And you have a lot of coverage of a variety of players, you've got low-cost players, you've got so-called full-service players and again, you've got very, very high fuel prices. So -- but we're going to be disciplined, we're going to manage our capacity, we're going to be making whatever adjustments we need to make to hit our return on invested capital target.

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

Thank you, Tom, and thank you all, again, for joining us today. We are available this afternoon if you have any additional questions, if we weren't able to get to all of them today. So again, thanks for joining us, and have a great day.

And ladies and gentlemen, we will now begin our media portion of today's call. I'd like to introduce first, Ms. Linda Rutherford, Vice President of Communications and Strategic Outreach.

Hello there. How's everybody doing? Tom, if you would go ahead and give our folks some instructions to be able to queue up for questions, we'll get started.

[Operator Instructions] And we'll take our first question from Sheryl Jean with Dallas Morning News.

I just have a couple of questions about the FAA sequestration issues. Up until today, I believe, Southwest has been saying flights have not been significantly affected. Is that still true as of today?

Yes. The vast majority of our flights are operating on time. What has happened to us since Sunday, it does not live up to the dire predictions that the FAA made last week, which would grind the entire system to a halt, so we certainly haven't seen that. Rather than put out a dire warning to all of our customers, we already have a customer feature in place where we notify them of their flight, specifically if it's going to be delayed. We do see that our on-time performance is impacted since Sunday, but so far, we've been able to manage it. I think the problem, Sheryl, that I've tried to describe today is that -- and just to be very clear, we were not advised of the FAA as to what their plans were going to be until last week. So there's 5 days before the Sunday imposition of the furloughs. At that point in time, we were not advised as to exactly what they were going to do. So we couldn't tell you what city, what time of day or what flights. And of course, being from Dallas, you know the story of the American Airlines airplanes that ended up at Love Field. I can assure you, when those flights launched from their origin, they had no idea they would be redirected to Dallas Love Field. So it is that kind of uncertainty that we face, one could say, almost on every flight. The number of flights that are being impacted today are relatively few, but there are definitely some impacts that we're seeing. And they have predicted that they're going to make it worse, and I think that's our primary concern is that, that not be allowed to happen.

So do you feel -- and this has come up with some other airline officials, do you feel that FAA still today is not communicating enough information or quick enough information on the staffing issues?

Well, they are hard-working people, okay. So they -- I think given the mandate they've been given, I do think that they are trying hard, and our ops folks tell me that they are getting better. But I think the -- so it's not for a lack of effort, but no, we don't have enough information to plan at all. And the other thing that you should know is that we cannot coordinate with our competitors. It's against the law. So there is no way for us to easily make adjustments to schedule flight activity because we can't talk each other, number one; number two, we also don't know what the airspace capacity is going to be. We actually start the morning with very strong on-time performance, again, as an illustration. And then throughout the day, what we've experienced, especially Tuesday and yesterday, and what we seemed to be experiencing today is, as the day evolves, we get surprises during the day, we're told to hold on the ground or we're told to have an alternative routing, and that's a real challenge for an airline. Again, having said all that, the vast majority of our flights are still operating on time, just as we have them scheduled.

And we'll take our next question from Andrea Ahles with the Fort Worth Star-Telegram.

During the call, you mentioned an example of the fact that Southwest is now carrying more passengers to Atlanta from Dallas than they did when you first bought AirTran, when AirTran was running nonstop service out of DFW airport. I was wondering, are there any other cities where you're seeing that occurring out of the Dallas market, and is that factoring into your plan when you think about what sort of flights you're actually going to be running out of Love Field when the Wright Amendment restrictions lift in 2014?

Well -- so Bob Jordan, I'll ask you to answer the first part of the question. Andrea, if you don't mind, I'll answer your second question first. That is absolutely how we plan. So in other words, we look -- we have flights, we see where people are flying. Most people fly on us nonstop. But if we have a significant number of customers that are flying to a destination on a one-stop basis, that becomes an obvious opportunity for us to put in a nonstop flight. I remember vividly back in the early 1990s, we were the number -- as an example, we were the #1 carrier between Houston and Las Vegas, and we had no nonstop flights in that market. So we do today, and so absolutely, we'll be looking at Love Field from that kind of an opportunity perspective. We know exactly where people are flying on us today beyond the Wright Amendment restrictions, and all of those will be very good ideas for nonstop flights. And Bob, do you want to talk about Atlanta, please, sir?

Yes, absolutely. And just to add and just to talk about the strength of both the Southwest network and the Southwest brand in terms of what we're seeing with AirTran. Maybe just a couple of things to add to that Dallas example. In just 30 days here, the first 30 days of having full up co-chair, actually less than 30 days, southwest.com has actually become the largest distribution point for AirTran flights. So we're actually distributing more AirTran through southwest.com than through airtran.com, which is just an incredible thing. It just points to the strength of the brand and the website as well. And then on the network side, I think the best example there is the strength that we've seen in the growth of local traffic in Atlanta, and that's even before we really optimize the Atlanta network, which you'll see here in November. So we picked up somewhere in the -- in terms of the comparison of connecting traffic to local traffic in Atlanta, we picked up about 8 points of local traffic. So about 8 fewer points of connection and 8 more points of local without a dramatic change in the network there. So as Gary pointed out earlier, I'm just really optimistic about continuing to win local traffic by just simply offering flights at the time that our folks in Atlanta want them, which is really the whole point behind the November schedule change.

Right, right. And another way to say that, in other words is, the schedule that we have today and the one that we have had with AirTran is not very good. It's not as competitive as it needs to be to attract local traffic. So the fact that we've been able to drive that increase in local traffic, I agree with Bob's points 100%. So that's very encouraging.

We'll take our next question from Andy Compart with Aviation Week.

I just wanted to follow up on the Atlanta stuff. You started touching on it there. Can you tell me, first of all, what the percentage of connecting traffic is in Atlanta for AirTran and I guess combined right now? And then, what do you expect that will be after you make this change in November?

Bob, I vaguely recall what it is. Do you know off the top of your head?

Well, I think I can give you, yes, a couple of points of reference. AirTran, at the time that we acquired AirTran, it was roughly 60% connect in Atlanta, which is pretty typical for a hub. Sometimes even more. A city with a lot of connections for us, so for example, Chicago, is going to be much closer to 40%. And I think we said today in Atlanta that, that 60% has moved down to about 52%, 53%, so we've already seen a big increase in locals. But you'll continue to see that shift towards local traffic. And I would expect that it will ultimately end up closer, again, to a Baltimore, Chicago kind, which would be 40% or just south of 40%.

Yes, that's -- I would agree with all of that.

And again, along those lines, in places where you have a lot of operations, you do make some allowances for connections even though it's not typically a hub-and-spoke. Is what Atlanta will be like? Will it be like a Midway that will make some allowances in the schedule to foster some connections?

Yes, absolutely. In other words, the way to think about it is we're simply making it Southwest. And no 2 cities are exactly alike, but they all trend towards having a dominant component of local or nonstop traffic, they have some relatively small component of true traffic, and then there's generally a 20% to 30% mix of connecting traffic. That's the way Chicago looks, that's the way Houston looks. All -- said a different way, Bob, to my recollection, we don't have a city that looks like a hub-and-spoke.

Yes, we do not. I think the best way to think of it maybe, particularly when you're AirTran and you have one dominant hub, is you start with the need to connect and you build the schedule around that. And that's why you end up with a lot of flights after 9 p.m., before 7 a.m. And a Southwest style city, you start with the local traffic and the demands of the customers and when they want the flights, and to the greatest extent, the connections then kind of fall out of that. So it's just the reverse. One example I was looking at are -- just as an easy one, our Atlanta to Kansas City operation. In today's schedule, AirTran serves that at 10 a.m., 3 p.m. and 9 p.m. So not very good timings, particularly for our business customers. And in November schedule, those flights will be timed at 8 a.m., noon and 6 p.m. So there's a much, much better flight time in terms of folks in Atlanta that want an early-morning flight and then a reasonable time to connect back out. So you -- and you'll see those kinds of improvements all across the board in our markets in Atlanta.

That's great. That's a great example.

We'll take our last question from Ghim-Lay Yeo with FLIGHT GLOBAL.

Just a little quick question about the No Show fee that you mentioned in your earnings release today. Do you have more details on that? And how is that expected to help you with the revenue?

There is really not much -- it's really simple and that's helpful. There's really not a lot of details. It's not a fee. It is -- you forfeit your fare if you don't cancel it. And there are -- we're not -- we don't have change fees. I see that several of our competitors have moved to a $200 change fee, and at Southwest, it's 0. So all we need our customers to do is to cancel their reservation, which puts us in the position of finding a replacement customer for that seat. And that is -- that's what every other airline does, and it's really time for us to do that as well. So that change will go into effect with bookings after May 10, I believe, for flights in September. But it's not a fee.

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

Thank you all. Folks, if you have any follow-up questions, you can call the Communications Department at (214)792-4847. Thank you all for being with us today.

This does conclude today's call. Thank you for joining. You may now disconnect.

Thank you, Tom. Great job.

Thank you, sir.