Good day and welcome to the Southwest Airlines Third Quarter 2014 Conference Call. My name is Tom and I’ll be moderating today’s call. This call is being recorded and a replay will be available on the southwest.com in the Investor Relations section. At this time, I’d like to turn the call over to Ms. Marcy Brand, Senior Director of Investor Relations. Please go ahead, ma’am.

Thank you Tom, good morning everyone, and welcome to today’s call to discuss our third quarter results. Joining me on the call is Gary Kelly, our Chairman, President, and CEO; Tammy Romo, Senior Vice President of Finance, and CFO; Bob Jordan, Executive Vice President, Chief Commercial Officer, and President of AirTran Airways. We will begin with opening remarks from Gary followed by Tammy providing a review of our results and our current outlook. We will move to the Q&A portion of the call following Tammy’s remarks. 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 refer to this morning’s press release in the Investor Relations section of southwest.com for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. And with that, I’ll turn the call over to Gary for opening remarks.

Thank you Marcy and welcome everyone. Thank you for joining us on our third quarter 2014 earnings call. I know it’s a busy day for you all and glad you all can join us. I’m very pleased with our financial results. I’m very proud of our people, especially. Third quarter is a very busy season. Our people work hard every single day to sever our customers with safe, reliable, friendly, and low-cost air travel and sometimes under very challenging circumstances. So these results really were a testament to their very hard work. The transformative changes with a new rapid rewards program, the acquisition and integration of AirTran, the addition of the 737-800 model, and our fleet modernization program have also been very hard work. And again, my profound things to our people for working through those changes so magnificently and the stellar results, of course, are very obvious. One historic milestone achieved in third quarter was the launch of international service on July 1st. We talked about that in the second quarter earnings call in late July. And I’ll just say again it was flawless. I’m very proud of our people again for their hard work in what is a very exciting achievement. The customer and operational aspects of our international launch have been stellar. From a business or commercial perspective, our international results are in line with our expectations. I will admit to you all they are a drag on our results. Right now, we’ve got some work to do. And accordingly, our international footprint is quite modest. It’s about 1% of our capacity. And also just, we’d remind everyone that our growth plans in 2015 for international are modest as well. So we plan to manage our near-term – our near international expansion very carefully and very closely,…

All right, thank you Gary, and thanks to everyone for joining us today. We are very pleased to report another terrific quarter this morning again breaking many records. Net income, excluding special items, was a record $382 million, or $0.55 per share, which increased approximately 60% over last year. Our third quarter GAAP net income was also a record $329 million. Operating income was also a third quarter record at $649 million and we expanded our operating margin by almost 400 basis points to 13.5%. Our pre-tax to return on invested capital for the twelve months ended September 30was 19%, which on an after-tax basis was 12%, well exceeding our weighted average cost of capital. These strong results were driven by record revenues, lower fuel prices, our ongoing cost control efforts, and represents our sixth consecutive quarter on record profitability. For the nine months ended September 30, our profits have resulted in $256 million in profit sharing expense, which already exceeds full-year 2013’s contribution to the plans. This is a tremendous accomplishment by our people and I congratulate and thank them for their hard work. Our third quarter revenues reached record levels increasing 5.6% year-over-year to $4.8 billion, driven largely by record passenger revenues of $4.6 billion. Strong demand for travel resulted in record traffic and load factors despite 4% fewer trips and 2% fewer seats flown year-over-year. We also had a double-digit growth in corporate sales and our strong initiatives continue to significantly contribute to strong revenue momentum. On a unit basis, total operating revenues increased 4.5% compared to third quarter last year on a 1% increase in available seat miles. Passenger unit revenues increased almost 5% compared to third quarter last year with strong unit revenue improvement each month of the quarter. As we’ve previously discussed, our markets…

Thank you. We are now beginning with our first question, I’m sorry the question-and answer session will be conducted electronically. (Operator Instructions) And thank you for waiting. We will now begin with our first question from Hunter Kaey, with Wolf Research. Hunter Kaey – Wolfe Research: Hi, thank you, everybody. How are you?

Looks good. Hunter Kaey – Wolfe Research: Good. Have you seen any improvements or an improved ability to revenue manage after changing the no-show policy? I know it’s a small percentage of your customers that are impacted by that, but in those specific markets or those specific customers that were impacted by it, maybe it was more magnified in certain business markets at certain times of day or something like that. Have you found an improved ability to manage yields around tightening of the restrictions a little bit?

Well, it’s probably a little early to tell. I think it’s probably nuanced. It’s definitely helped us to identify empty seats and we’re having one or things to happen either the cancellations are happening in advance where we can resell the seats or that money is being forfeited. So it’s sort of the worst to both worlds would be if the customer cancelled at a very last minute where we can’t do anything about it and we go ahead and get the money back, but the revenue management over – Hunter, I can’t recall how you’ve been following us or the industry, but if you go back 30 years, we had over bookings that was substantially higher than what we have today. Today, the bookings that we would take for departure are very close to the number of seats that we have. So I can’t honestly say that we’ve seen with precision any additional improvement on that, there is bound to be some in there, but it will probably take us a little bit more time to see that. But the benefits are there, the revenue management right now is already very good in terms of the bookings versus the book load factor. This obviously will help, but I guess to give you an honest answer, I don’t know that I’ve seen anything, any evidence of that so far. Tammy have you?

The only thing I would add, Gary, is that we could see a nice benefit here just on the no show here in the third quarter, it was about close to $25 million here in the third quarter, but it is meaningful.

Yes, it’s meaningful. That’s more than what we get from our upgraded boarding product on a quarterly basis as a reference point. Hunter Kaey – Wolfe Research: Yes. That’s interesting. I’ve not been covering you for 30 years, but I think maybe Jamie Baker has that...

I don’t think you’re that older, are you? Hunter Kaey – Wolfe Research: I don’t. Believe it or not, I am over 30, but that’s nice of you. So, one other question on labor, Gary. Can you tell me what is important to you with a new pilot deal? And I am not asking you where you guys are far apart or where you’re close together. That’s a completely different question. But what’s important to you, Gary, as you sit down and negotiate with labor? Is it more healthcare contribution? Is it productivity? Can you talk to me about what you value out of the next CBA from the pilots?

Well, I wouldn’t saying were pilots. We’re… Hunter Kaey – Wolfe Research: Of course not, but I’m just referring to the pilots.

With a number of workgroups and all of them are important. I think the themes are consistent across which is Southwest has a very rich history, very meaningful purpose and we want to sustain that for the next generation. And that is we want to offer our customers great service at a low cost. And that’s what I want to work together with our union leaders to make sure that we sustain going forward. As you well know we have more low cost competition today than ever before in our history and we can’t claim the lowest cost although we are really close, we still can’t that. And I think that’s something that we need to continue to strive for. So that’s number one, that is an important objective, because taking care of Southwest Airline and sustaining our brand really is taking care of our people. So to further taking care of our people we have some wonderful opportunities where we can reward them further just like I described with the tentative agreement we have with the IAM. That’s what we want to achieve with these one of our work groups, do more for our people and find ways to strengthen Southwest Airlines by eliminating waste, improving our productivity, improving our efficiencies. And the nice thing is there are opportunities in every single work group to do to. Hunter Kaey – Wolfe Research: Thank you.

And we’ll take our next question form Savi Syth with Raymond James. Savi Syth – Raymond James & Associates, Inc.: Hey, good morning. What percentage of routes are under development if you exclude the AirTran routes you are taking over?

I don’t know if I can do that. The way we think about the percentage of routes in development I would say it’s about 15%. And I know Bob Jordan and his team have plans – already committed plans from next year, to grow that further. I think we get close to 20%, don’t we, Bob?

Yes we do.

So that’s more than we’d like, but it is directly tied to the AirTran acquisition and integration. In other words, absent that we wouldn’t have anywhere near that number of new markets, as a component of our system. So I don’t know that I can really piece it apart. Bob, do you have a different way of thinking about that.

No. The other thing that I think is important to point out is we are counting everything new is new. So, if you look at Love Field, even though we served these long-haul destinations through connections, now that we have new non-stops, those are counted as new markets. And when you think about that 15% grown to 20% as well. Savi Syth – Raymond James & Associates, Inc.: Okay.

And it takes a year or two for those to develop, even though we do expect a market like Dallas to mature much faster. So I would say where we are with the AirTran is probably split pretty even, the AirTran markets that are being converted and in these new markets like DCA and Dallas.

And, again, we’ve tried to be as transparent with those as possible. But even if you take a city like Flint, Michigan, it was converted from AirTran to Southwest, the routes that we fly – Memphis is probably the same example. The routes we fly to those cities are entirely different than what AirTran was flying before. There are some cases where we take a route that AirTran was flying, change the sign and make it Southwest. And one could imagine that that’s less risk than what I described with the Flint scenario, but you’ve got every flavor of all that going on. And I guess just, finally, just to wrap up the answer, the AirTran route system or what was previously AirTran capacity converted to Southwest, what that looks like today compared to when we bought AirTran is very different. We’ve closed 18 AirTran cities. We’ve opened 51 or converted – either opened or converted 51 of AirTran cities, but you can just envision that that’s a pretty different route system today compared to where they were in 2011. Savi Syth – Raymond James & Associates, Inc.: That’s helpful. And just looking at 2015, I understand not a lot of the capacity is going to be international. What level of capacity growth, have you massaged that number more as we look at 2015 that you will be adding to the domestic market?

We have and our focus will be on that question when we have our Investor Meeting next month. Today we’re going to focus on the third and the fourth quarter, of course, but, yes we’re working on finalizing our plans for 2015 as we speak. Savi Syth – Raymond James & Associates, Inc.: I’ll wait for that then. Maybe just, since I didn’t get an answer to that, may I ask? So once you do start flying out of Houston, what could you grow your international capacity at?

Well, Bob and I were talking earlier this morning our initial launch out of Houston. If you just look at – think about fourth quarter 2015, the capacity increased compared to fourth quarter 2014, assuming that Houston international is open all quarter will be very modest. So we’ll have just a handful of flights. It will not generate a significant amount of growth coming out of Houston international. It sounds like 1% or less. What is known is that the terminal will have five gates, and it’s estimated that the capacity of the five gates will be 25 daily departures. So I think it remains to be seen whether that’s the cap or whether we will be able to do more departures than that. And we will have four of those five gates under lease. So that at least gives you some idea what the potential is out of Houston. Savi Syth – Raymond James & Associates, Inc.: All right. Thank you very much.

We’ll take our next question from John Godyn with Morgan Stanley. John Godyn – Morgan Stanley & Company: Hi, thank you for taking my question. Tammy, when you pointed out the fuel volatility in a historical context, I couldn’t help but remember maybe some of the problems that airlines found themselves in when they were hedging and they had to put up cash collateral. I know that you have a lot of disclosures on this. They’re a bit complicated, but there are a bunch of disclosures in the K and the Q. I was hoping that you could maybe boil it down to a simple thought. Does the fuel volatility that we’ve seen to date create any cash collateral issues for you?

Nothing that we really couldn’t manage, we really shored up our any liquidity, our risk, with our aircraft collateral facility. And we currently have the full $1.2 billion in aircraft collateral available, should prices fall further. At least so far the any cash collateral that we have had to post has been very manageable. John Godyn – Morgan Stanley & Company: Got it. Okay. That’s very helpful. And then if we could talk a little bit about capital returns to shareholders. You obviously have a great leverage ratio versus peers. And a lot of airlines are now comping themselves to high quality industrials. Perhaps you have been comped to that group much longer than others. I just wonder, when are we reaching a point where we can perhaps commit to the marketplace that the vast majority of incremental free cash flow would be used for shareholder returns, buy backs, or what have you?

As you already said, we really have led the industry in shareholder returns, and certainly this year. We’re very proud of what we have deployed back to our shareholders. In terms of how we intend to deploy our capital going forward, we’ll certainly touch on our 2015 plan when we meet with you all in a couple of weeks. But certainly as the free cash flow levels that we have been enjoying, and our very, I think, manageable CapEx are requirements. Certainly our goal would be to continue to reward our shareholders through continued deployment of cash back to our shareholders.

The only thing that I would add is I think all I’m trying to do is respond to your desire to get more commitment from the company. So I think the scenario would be as long as we are continuing to hit our return on invested capital minimum target and especially in an environment where earnings are growing. The way that I would answer your question is through the dividend. And I don’t think that our dividend is fully matured, I think there are opportunities to grow it. I am not in anyways suggesting that there is a commitment from us that we will grow it. I am just saying that there are opportunities to consider that in the future. And that is – that clearly is an opportunity for us and obviously you all have seen a very serious commitment by us to increase it over the past three years. The share repurchases – I would just say by design and by definition are intended to give the company more flexibility and what’s going on in the world with fuel prices right now, a perfect example of that. The volatility is working in our direction. One of these days the volatility won’t work in our direction. So I think you understand that we have to make commitments wisely in this business. John Godyn – Morgan Stanley & Company: And as a philosophy, is there any reason why leverage needs to fall further?

Leverage no, not particularly. We’re comfortable with where our leverage sits today. We just actually on October 1st, we repaid $350 million in debt and certainly we’re likely refinanced at least a portion of that at some point in the future. And just one other note, back to just Gary’s comment on the dividend – because we do get questions on that, I just remind you that we have had very substantial increases in our dividends at our last two annual shareholder meetings. And at the time we increased those dividends, the yield was 1% to 1.2%, so just wanted to remind you of that.

Yes, the darn stocks gone up so much, it dropped the yield… John Godyn – Morgan Stanley & Company: It’s a high-quality problem. Thanks a lot.

And we’ll take our next question from Julie Yates with Credit Suisse. Julie Yates – Credit Suisse, LLC: Good afternoon and thanks for taking my question. ROXE continues to show very nice improvement. Is there anything you can share on how you are thinking about a new target? Or is that something we should stay tuned for the investor day?

Yes, we’ll dive into that. We are working on our plan for next year as we speak and we’re looking forward to diving into that topic more when we meet here in a few weeks. But, again, our target is at least 15% and we’ll talk to you more about next year’s plans when we meet.

And I would certainly echo 100% of what Tammy said. We’re always interested to hear feedback from you all as to your views. So we’re going to do more work between now and then and we’ve been giving it considerable thought. I know you’ll be glad to hear this. There is no thought that we would lower the target. I think all we’re talking about is now, since we’re in an environment where we are exceeding the minimum threshold, can we give you all some more precise guidance there. And we will be ready for that conversation in November.

And also just want to point out, too, obviously what we’re focused on when we’re setting our targets is our cost to capital clearly, and our cost to capital has averaged between 7% to 8% for a long of period. So certainly with a 19% return on invested capital, we are well exceeding our cost to capital and I’m very pleased with that performance. Julie Yates – Credit Suisse, LLC: Yes. Okay. And then a clarification on the commentary. Tammy Romo, you said choppy revenue trends in the fourth quarter and I imagine you just mean because of the comps and the shift in the timing of Thanksgiving. But I just wanted to clarify if there’s any other dynamics that we should be thinking about for the fourth quarter.

That’s primarily what I was referring to. Just as a reminder our trends for last year, if you go back to fourth quarter 2013, October was up compared to 2012 by roughly 2%. November was down about 5% and December was up 16% on a year-over-year basis. And, of course that was in part due to the timing of the holiday. So it’s, to your point, very choppy. But if you look at what we’re also focused on is our sequential trend and at least sequentially we’re not really seeing anything on in our trends. So at this point our outlook for the fourth quarter is good. Julie Yates – Credit Suisse: Great. Thank you very much.

We’ll take our next question from Michael Linenberg with Deutsche Bank. Michael Linenberg – Deutsche Bank AG: Hi, good afternoon, everyone. Hey, just a follow-up on John’s call about some of the counterparty positions. This is to you, Tammy. I think at the end of the June quarter you were just over $100 million that you had held from counterparties. And then just given the decline in fuel, do you have an estimate of what that swing is? Because you did mention that, I think you suggested that you are now posting with counterparties? And I am just asking so we can see how it impacted cash from quarter-to-quarter?

Sure. The market value of our fuel hedge portfolio at September 30 was a net asset of $53 million. So we did not have any collateral posted at that time. And as of Friday, the market value of our hedge portfolio was a net liability of $236 million, and we had approximately $100 million in cash collateral posted. Michael Linenberg – Deutsche Bank AG: Okay, that’s good then. And so it sounds,

And Michael, while Tammy was talking I was flipping through the press release. And if you look at the cash flow statement you do see that flip. Michael Linenberg – Deutsche Bank AG: Okay.

Even as of the end of the quarter, there is a $98 million cash outflow.

Yeah.

On that cash collateral received or paid to derivative counterparties. So yeah, I mean it has its plusses and minuses, but it’s all very manageable. Michael Linenberg – Deutsche Bank AG: Yes, and it’s nothing like the $1 billion-plus, maybe, that we saw back in 2008, 2009, where I think, you have now come up with a structure where you can use a letter of credit or aircraft. It’s de minimis relative to what we saw a few years back.

Yeah. And it was on $1 billion then, but it was a bigger number, there is no doubt about it. So I think, we’ve learned and…

Yes. Mike, we are…

We’ve got a really strong position.

We’re in good. I think we’re in good shape there. Michael Linenberg – Deutsche Bank AG: Yeah, I apologize for the hyperbole. And just one other quick one here. I know you’ve talked about the international service from Houston in the latter part of the year 2015. I did, it does look like you loaded a Houston-Aruba service starting this March. And when I saw that I thought, okay, the terminal is ready. Is that just taking advantage of a pre-clearance facility in Aruba? What’s…

That’s it. Michael Linenberg – Deutsche Bank AG: Okay, all right, perfect. Thank you.

And we’ll take our next question from Helane Becker with Cowen & Company. Helane R. Becker – Cowen & Co. LLC.: Thanks very much, operator. Hi guys, thank you for the time.

Hi, Helane. Helane R. Becker – Cowen & Co. LLC.: Hi. So here is one of my questions. With respect to your schedule adjustment that you did in August in an effort to improve on time performance because I guess when you were doing 10-minute turns your aircraft were a whole lot smaller so you were carrying fewer people relative to what you are doing now. Can you talk about how that’s improved your overall operations and where you stand relative to your goals for improving on time? Thanks.

But we’ve had a little over 60 days I guess with the, quote, new schedule, and I would say that is performing exactly as intended. We will need a little bit more experience to decide whether it needs more turning, but at times we’ve had some unusual spring like weather. We had the fire at the Chicago tower which disrupted our on-time performance because of a disruption in the operation. The tower is up and running since the October 13, the on-time performance and the weather has been pretty good and the on-time performance has been superb. So we’ve had very strong load factors this month and very strong on-time performance. So I am very happy now Mike Van De Ven already to add I don’t know if I would call it insurance, but more operational recoverability with our April schedule. So he is going to getting more help there from a scheduling perspective i.e., you will have more airplanes to recover with. Just to make sure that we get out of a pace of hopefully somewhere in the 83% to plus 85% range and then we’ll tune it from there, but I am very pleased with it and its working I think Mike pretty much as designed. Helane R. Becker – Cowen & Co. LLC.: Okay, great. And then I just have one follow-up question. Somebody asked me this yesterday and I didn’t really have a good – I didn’t have any answer. The question was when will you announce service to Hawaii?

We know why you didn’t have an answer to that question because you don’t know. And you know what, neither do I. Helane R. Becker – Cowen & Co. LLC.: That’s certainly fair. Thank you. See you in a few weeks.

I’m looking forward into it.

We’ll take our next question from Jamie Baker with JP Morgan. Jamie N. Baker – JP Morgan Chase & Co.: Hi, sorry about that, I was just adjusting my earpiece. I don’t want to myopically obsess on the immediate term but the stock has responded poorly to the 2% October revenue guide, particularly given the easier year-over-year comp relative to the month of September. Could you add any color on this? For example, what sort of pressures that perhaps that new routes are putting on RASM. And maybe if you had a same-store sales RASM guide that you could provide something that strips out, let’s say, LaGuardia and DCA, for example?

Well, nothing really Jam, if you look at there is really nothing unusual about standing out in our comp if you look at it. If you look at our performance from September relative to October, there is really nothing odd there in sequential. And again, there is some noise in the year-over-year comparison. So there – so aside from that, nothing really stands out. So I guess the only other thing I would point out is we do have sequentially few more ASMs and then of course another important point to note is the increasing stage length from just the riding and the flying, so but nothing really unusual. Jamie N. Baker – JP Morgan Chase & Co.: Okay. And for the follow-up similar question as to when I asked last quarter, you had and it relates to labor. You’ve had three more months to begin and better understand what the asks are from your flight attendants and pilots. You’ve had three more months to look around the industry, both here and aboard to see what labor efficiencies some competing airlines might have, that you don’t. How that process is going overall. And how confident should we be that renegotiated contracts and put material pressure on margins next year?

Well, again I’m pleased with the leadership that the IM has exhibited here and I think Tammy has already shared that the anticipated effects of that tentative agreement are already baked into our expectations going forward. So we got opportunities to do more for people and we’ve got opportunities to improve the efficiency of the company which benefits our people. So I’m very confident we are making good progress. I don’t, Jamie, I don’t know we’ve learned anything different or more in the last 90 days with respect to that point. But we have made progress from a negotiating standpoint with several of our new, new groups. I’m very pleased with that. Jamie N. Baker – JP Morgan Chase & Co.: Excellent, solid quarter, solid guide. Thank you both.

Thank you, Jamie.

We’ll take our next question from Duane Pfennigwerth with Evercore. Duane Pfennigwerth – Evercore Partners Inc.: Hi, thanks. Good afternoon. Just a follow-up to Jamie’s question, can you talk about how much sort of fare sale activity in Dallas is impacting that October RASM number?

As I mentioned earlier part of the sequentially is we are doing more flying as a result of our Wright Amendment flying. Yes, we did have introductory fares, but we’re seeing great high sales, but we’re seeing very high load factors. So, yes, nothing notable.

There are no issues. I think it is literally the sequential cost what’s normal to us. The year-over-year comps just have to be studied and understood if there is some question about that, but there is no change in trend in October. October was very strong, very high load factors, very good on-time performance, very solid yields. Duane Pfennigwerth – Evercore Partners Inc.: Appreciate that. And then just I wonder if you could quantify the number of idle aircraft, maybe non-productive aircraft that are also not spares in the fleet in 2014 versus your expectations for 2015. It seems like you’ll start to get some benefits from a more productive fleet next year.

The utilization is up in 2014 compared to 2013 at the same time that we were putting arguably more aircraft out-of-service to go through various transitions. And that schedule just proved to be a little too tight. So the on-time performance suffered. So there is a couple of things going on even in 2013, 2014 that are confusing and I think we’ll have an opportunity, Duane, in November to give you all better insights as to where we’ve been, where we are, and where we’re headed in 2015. The number that I have off the top of my head is about 20 airplanes, additional, out-of-service on average. So if you’ll just take that number with a grain of salt because it’s – I think that is a good representation of what the opportunity is in 2015, but we probably have a little bit more homework to do. I don’t recall any off the top of my head is the average for 2015 is 20 more in service than what we have here in 2014, but looking backwards, Duane, the number of in-service fell about 20 as you went from 2012, 2013 into 2014. And so that’s the opportunity going forward to restore into service with no change in the total fleet. That answers to your question? Duane Pfennigwerth – Evercore Partners Inc.: It does. Thanks very much. See you soon.

And we’ll take our next question from Glenn Engel with Bank of America. Glenn Engel – Bank of America Merrill Lynch: Good afternoon. A couple questions, please. One, fuel hedges, you indicated that it really is not going to have much of an impact in the fourth quarter, meaning they are not hurting your P&L. Does that $200 million loss result in an impact in your fuel cost per gallon next year?

We’ll give you – again we’ll discuss our 2015 guidance here in a couple of weeks, but at least so far, Glenn, we’re participating in 80% of the decline that we’ve seen. So and of course we’ll enjoying lower physical prices. So we’ll give you guidance here in a couple weeks as we discuss our plan in full. But at least so far everything looks pretty good. Our treasury team is doing I think a very nice job of managing our hedge book in this very volatile market. Again, we had a $0.05 gain here in the third quarter and we’re paying roughly market prices here in the fourth quarter. And so far we’re participating in the majority of the market decline.

Well, and again I wouldn’t call it a $200 million loss either. You understand the mark-to-market things that we deal with and you have to suffer with too in our reporting, but the projective settlement is not anywhere near what the mark-to-market is. So I think all that we could probably elaborate in November, but I think it’s all very manageable and who knows where prices were going to go from here. It is the other thing that I know you well know. So it flipped around in one quarter. It can flip the other way in another quarter or two as well. So that’s what the hedging portfolio is for is to try to position us, so that we can manage our total spend through all this volatility. Glenn Engel – Bank of America Merrill Lynch: Unfortunately, I have been doing this for 30 years. Head count is up 1.3%. Your trips are down 4%. Your fleet is down slightly. When do we start seeing productivity?

I think that somewhat relates to Duane’s earlier question. So in terms of the aircraft available for service, the productivity for the fleet this year looks pretty good except that the on-time performance suffered. The AirTran segment is under scheduled. I think we have been sharing that with you all frequently. In the Southwest segment arguably, at least for part of this year, it was quote overscheduled. So I think we definitely have opportunities to smooth all that out after the AirTran and integration that’s complete. And then you’ve got on the order of 20 aircraft out of service coming back into service, which will also be another productivity improvement, beginning in 2015 and again, we need to share that with you all in more detail in November. Glenn Engel – Bank of America Merrill Lynch: And actually…

2016 Glenn, is the year where I think, Tammy, things are pretty clean. So it is just another illustration for everyone that there is a lot of noise in the Southwest performance right now and just another illustration of how strong the results really are. So a lot of this noise gets cleaned up here in 2014. There is still some in 2015 and by the time it gets 2016 we’re clear of it. Glenn Engel – Bank of America Merrill Lynch: And, lastly, it seems like you purchased a whole bunch more used aircraft in the last three months. Is that going to be lifting what you think 2015 capacity growth is, some?

Glenn, we’ve been commenting all along that we’re managing to a flat fleet of $695. So all of that was part of the plan. So no, no new news there.

Yes, remember we’re retiring 88 717s in a – what 30-month period. So that’s all you’re seeing there.

Yes, we don’t have all of that, of course, perfectly time. But there were no new information there. We’ve been saying all along that we’re going to augment our firm deliveries from Boeing with aircraft from the pre-owned market. Glenn Engel – Bank of America Merrill Lynch: Okay, thank you very much.

Thank you.

And we have time for one more question. We will take our last question from Joe DeNardi with Stifel. Joseph W. DeNardi – Stifel, Nicolaus &Co.: Hi, good morning. Gary or Tammy, I am wondering if the success you’ve had with the change to your no-show policy. I can’t imagine that much impact on customer loyalty if that’s changed the way you think about your reservation change policy?

You mean our changed fee… Joseph W. DeNardi – Stifel, Nicolaus &Co.: Yes.

So I’ll just give you an answer before an explanation. I don’t think that there is any correlation. I think most reasonable people understands the fairness of a no-show policy. But if I am not going to show up, I can at least give the airline that the notice that they have the seat back for resell. I got to keep my money and use it again. I think that that is eminently fair. Most of the complaints I get from customers above that is they didn’t know. They didn’t realize that that policy was in effect. And they don’t like it. so I will – I am not going to try to argue with you that the customers don’t care about it, because they don’t like the no-show policy, those that stumble into it. But our customers, for the most part now have adapted well to that. And it’s very fair. Change fee is very different we and don’t have any plans to make a change to our policy. I would lump that in at least it would have answered, you know, about bag fees. So no plans to make any changes to either one of us. Joseph W. DeNardi – Stifel, Nicolaus &Co.: Okay. And then, Tammy, I think last quarter you talked about first quarter capacity up about 5%. I’m wondering if you have a similar outlook for second quarter now.

We are going to share all of that with you here in a couple of weeks. So, stay tuned on that. We’ll walk through our capacity plans in some detail. But really what we said you know for our 2015 is that we’re expecting our seat to increase about 3% and of course I assume year-over-year would exceed that because of the nature of that flying. It will be more longer haul and to the point Gary made earlier on utilization just to increase the utilization of the fleet.

And, again, I would just recap the overview right now for you all for 2015 is really nothing has changed. The fleet plans are unchanged. We’ll be roughly flat, maybe a few more units at the end of 2015. The seats are increasing simply because the gauge is increasing. We may end up with some increase in trips, but it won’t be very much. Where we’re expanding is as important to the conversation is anything which is its Dallas Love Field, and most of that you know, there is a few things that we may do that Love Field next year, but the vast majority you know. And I mentioned to you DCA. And then just again reemphasized with everyone that the most ambitious expansion for us is international and our international plants are very measured and will have only a modest impact on our capacity growth next year. So those are the headlines, those are not new. We’re in the final stages of completing our 2015 plan and anxious to share it with you all in a month.

Just to emphasize where the capacity is going is what’s important here for the first quarter virtually most of that capacity is going into Dallas Love Field.

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

Thanks, Tom. I just want to thank everyone again for joining us today and have 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. Linda Rutherford, Vice President Communication & Outreach.

Good afternoon, Tom. Good afternoon, everyone. I’d be happy to take your questions if you go ahead, Tom, and give them the instructions to be able to queue up and do that.

Yes, ma’am. (Operator Instructions) And we’ll take our first question from Jack Nicas with The Wall Street Journal. Jack Nicas – The Wall Street Journal: Thank you. Nice quarter everyone. I’d like to first latch on to that load factor, which I believe you say is a record and is pretty impressive compared to past quarter. Could you provide any more insight on what’s behind that? Is this simply a matter of supply and demand, the demand environment is that strong? Or have you guys been fiddling with your pricing, or seeing more business travelers et cetera. Hoping you can just give us a little more detail on how you’re feeling so many seats.

Well, thank you, Jack. We can try. I think it’s probably, unfortunately, not a simple answer because there’s so much change that’s going on within Southwest Airlines. We’ve changed our frequent flyer program. I think it’s far better and more popular. We have been aggressive in optimizing our route structure. So one thing that is really culminating here in 2014 is we’ve gotten rid of underperforming routes and we redeployed airplanes to better routes that clearly is a benefit here. The economy, at least in our view, has been more consistent, more stable, driving more confidence and more consistent travel demand. That’s showing up. The industry is not adding a lot of capacity as well. So supply demand obviously seems to be from an industry perspective and nice balance. We’ve had very few fare increases this year. So we’re trying very hard to hold the line on our own cost, pass those savings onto our customers. We want to be America’s low fare airline. And we had fare increase last week of a couple of bucks and that was, in my opinion, to cover the increase in the TSA tax. So if you don’t like that you can raise your congressman on that one. But overall, it’s been a healthy travel environment with a healthy economy and I think superb route management by our folks. I think just all the way around, our folks are doing a great job. I am proud that bags fly free – I can’t say it, but I am proud of it and no change fees. I think that make sure a very strong brand promise to our customers and break the load factors are also a result of that. Jack Nicas – The Wall Street Journal: Okay, terrific, thanks and one quick follow-up. You guys can probably tell that newspaper editors love the word Ebola right now, so I have to ask for them, have you seen any effect at all as far as you can tell on the bookings from the concern of Ebola in the U.S.?

None, negative, nada. And Tammy mentioned that in her remarks earlier, so to make sure we’re consistent. Jack Nicas – The Wall Street Journal: Okay.

And we have experienced with this in the past with other outbreaks and this is so few people have been effected in the United State, but in any of that giving you a straight answer to your question there is absolutely no evidence in any of our research that we’ve seen an impact from it. Jack Nicas – The Wall Street Journal: Okay thanks so much.

We’ll take our next question from Terry Maxim with The Dallas Morning News. Terry Maxim – The Dallas Morning News: Good afternoon.

Good afternoon. Terry Maxim – The Dallas Morning News: Could you elaborate on your comments on on-time? What sense do you think if you’ve got the problem licked and kind of follow-up on your comments that that further adjustments that might happen in April. What are you looking at there?

Terry, the changes went into effect in early August. So I don’t if August is such a clean month to try to analyze. If you move to September, we were hoping to get an on-time performance somewhere in the mid to high 80s and we ended up at 80%. I don’t believe those numbers have been published yet Mike, but that’s I am pretty sure Terry what you’re ultimately see when the DOT report comes out. That was on phase to be closer to 85% probably 84%, but for the Chicago situation. But 80% in September was the best performance of the year, it’s good for September factoring and the problems we had in Chicago and we watch this on a daily basis, we compare our on-time performance to our peers. And based on all these evaluative technique, I feel very good that the schedule changes are effective. We planned to do more as I’ve mentioned that I’m really happy with the performance we’re seeing, now. But Mike you’ve had record load factor days here in October with stellar on-time performance, we’ve had somehow OTP days of 90%, haven’t we?

That’s right.

Yes, so we haven’t seen that while [Kery] (ph) and so it is obvious if the schedule changes are having a positive effect as within that. Terry Maxim – The Dallas Morning News: Okay, just a follow-up question I would like to ask about the Wright amendment. You are talking about the very high load factors. Do you have a feeling about how those loads will be once the statement goes into affect or the introductory fares go away, and you’ve got your schedule fully up and we get into more normalized environment.

I will let Bob answer that. We do run higher load factors on our long-distance flights and Bob as, I think, you know lot about this question. If you look at the load factor, the last load factor I remember for our 800 fleet was almost 90%. So I’m not going to be surprised if we continue to hover around 90% on a long-haul routes. Love is a constrained market as well with only 20 gates. So any thoughts there Bob.

Yes, Terry, that’s exactly right. Our longer haul flying tends to be in that 90% or sometimes 90% plus range. So you’re going to have that added to Dallas just because of the flight mix is changing. We’re making sure that we’ve got really good fares, we’re making sure that we’ve got plenty of local seats available too. So we want to manage our connections of Dallas, because Love Field is constrained. So we want plenty of room for our local Dallas customers and our new Dallas customers. So to Gary’s point I wouldn’t be surprised if we, because of the longer haul flying, because of the constrains on the airport, because of demand that we continue to see high load factors in Dallas, higher than the system.

But Terry, I would like to pile on here and compliment Bob and his team. We can analyze why it is, what it is, but we don’t launch new routes and have this kind of performance. And they’ve done a wonderful job of managing the overall capacity of Dallas, so that you don’t benefit one route and hurt others. They’ve just done a masterful job. So some of the earlier questions that we had about our revenue trends whether Dallas is, and actually Dallas is performing exceptionally well. And I think that that is a large part due to the terrific design by our network planning folks.

Thank you. And we’ll take our next question from Andrea Ahles with The Fort Worth Star-Telegram Andrea Ahles – The Fort Worth Star-Telegram: Thank you for taking my question. The sort of piggy bag now Terry was actually with the right men and you’re seeing these load factors over 90% can you talk about that how operationally you’re able to handle that? Is it impacting your on-time at all as you get ready to ramp and add even more flights into Love Field in November?

Well, it’s one of those where I feel like we’re hitting on all cylinders. I think the commercial team has done a great job publishing the right routes with the right marketing support, the right revenue management support. And operationally Mike’s team has known this was coming. The airport was ready. The airport construction was finished and it is beautiful and operating just like we had hoped. Mike, any other thoughts?

No. I think you’re right.

On-time performance has been exceptionally strong and…

It’s been good. At Dallas we factored all those in. We factored the 800 in. We’ve got 10 times adjusted hopefully, appropriately for that and I feel like we’re executing very well.

Andrea, we’ve had to add staff obviously for 22 digital flights, but all that was well done and all the folks are trained, glad to be there and it’s just going really, really well. I’m very proud of everybody. Andrea Ahles – The Fort Worth Star-Telegram: So you’re not seeing any sort of impact on your on-time performance out of Love with the longer turn times?

No. No, Andrea, the on-time performance this month is after Chicago was back up and running, which just happened to be the same day that the Wright amendment launched, our on-time performance on a daily basis has been really, really good. Andrea Ahles – The Fort Worth Star-Telegram: All right. Thank you.

And we’ll take our next question from David Koenig with The Associated Press. David Koenig – The Associated Press: Hi, folks. Gary, in response to one of the analyst’s questions about hedging, you said that fuel volatility is working for you now, but might not in the future. So you have to consider that. I wondered, what about fuel volatility in fares? We’ve had this big drop in crude oil and jet fuel prices since about April, I guess. Should passengers expect to see that passed along to see that show up in lower fares?

Well, it’s a meaningful part of the cost structure. I think the biggest problem for us now, when we get into a period like this is what’s going to happen next. You remember 1999, crude oil, I think was down to $10 a barrel only to be followed with increases every single year for the next decade. It was just an unrepresented spike that took place. So that’s what worries me in an environment like this is what are the unintended consequences that flow from this. So, that’s said a different way. There’s no way that we can count on $80 crude oil going forward. I’m not willing to do that. So we’ll do our best to hedge and capture the best pricing that we can for our jet fuel purchases. And then for the first time since year 2000, we get our return on invested capital target, so I just hope that we continue in this. It’s not like we’re as an industry making money hand over fist. It’s far from that. So we’re finally realizing returns that one would expect from a high quality industrial company and I think we’ll certainly celebrate the fact that the energy prices are lower than they otherwise would be no question of that. David Koenig – The Associated Press: But couldn’t you respond quickly enough if the prices doesn’t stay at $80 and goes back to a $100 to $120, couldn’t you just turnaround and lays fairs back up to what’s going out?

Yes, and you’ve seen that and it doesn’t work. I’m sure you heard my complaint earlier about the increase in the TSA tax. That Bob Jordan and our revenue management folks are concerned about trying to pass that along. We would always see an impact from increasing fares. So whether it is ultimately revenue positive is a question of the strength of the demand at the time and many times it’s not very productive. So, I mean, if you go back to 2008, there was a very sharp spike in energy prices, all carriers tried to raise fares, five went bankrupt that aren’t here anymore. So no, the answer is absolutely not. You can’t count on that. So that’s a different way what I would not want to do to customers is take them through the same volatile ride with fares, lowered in one day, raised in the next day, I think that that would be absolutely the worst thing that we could do when we have absolutely no plan to do that. David Koenig – The Associated Press: Okay. Thanks.

We’ll take our next question from (indiscernible).

Thank you very much. To clarify these comments, are you locking in today’s few prices under call options or you waiting to see if prices continue to fall for jet fuel?

I just didn’t hear the first part of your question if you don’t mind in repeating it.

Of course, are you locking in today’s fuel prices under call options or are you going to wait for price to fall more before creating new hedge contract.

Well, let me let Tammy to answer that. The short answer is no we’re not. We don’t lock-in prices but let me let Tammy at least explain a little bit about our hedging.

Yes on just for 2015, we’re currently about 40% hedge for 2014. And that’s really been online with where we’ve been for 2015 for quite some time. So we’ve got positions out through 2018, they were 40% hedged. And on 2015, 2016, 2017 and then we have about a 5% position out in 2018.

Great, thank you.

And with those positions we don’t actually lock the price. We buy options that would cap the price. So more prices it does provide an opportunity for us buy more and obviously Tammy and her team will work and think about that.

Okay great thank you. And one other question would you be able to specify guidance for total revenue and perhaps operating margin numerically for the entire fourth quarter rather than month to month?

I guess the short answer, that is no. We’ve given guidance here on October but the trends at least so far look good.

Great, thank you very much.

We’ll take our next question from Mike Sasso with Bloomberg News Michael Sasso – Bloomberg News: Hi, good afternoon.

Hi. Michael Sasso – Bloomberg News: Given the JetBlue had a earlier sided some overcapacity, or falling yields in Latin America. And I guess the question is that you mentioned earlier that your international operations were kind of weighing on your results. So can you quantify, just talk about, is over capacity or falling yields in Latin America weighing on, how much is that weighing on your results if anything?

Thank you and I appreciate the opportunity to clarify a little bit. The conversion from AirTran of Southwest adds more flights in the former AirTran markets, and number one. Number two, it also adds, we’re also not fully connected to all of the Southwest Airlines route network, because we were facing in those flights to all of our locations gradually. So, for example, while we might have a nonstop flight from Baltimore to the Caribbean, if a customer was originating in Rochester, New York, they might not be able to get an international itinerary yet, whereas in the future they will. So we are facing in our international operations gradually and right now the financial performance isn’t what one would expect once those markets are mature. There is nothing unusual about this. There is nothing unexpected. It’s a brand new venture for us. It really has nothing in other words to do with macro issues or whether there is too much supply or too little supply. Those routes were performing very well on AirTran and I expect by this time next year, they will be performing very well on Southwest Airlines. With respect to your broader question – so that’s what’s going on within Southwest in other words. So that is simply a transition effort that we’ve got to work through and we’re working through it very well and I have every confidence that we’ll be where we need to be this time next year. Now with respect to whether there is too much capacity or concerns about us adding more flights, not on the routes that we’ve selected. So I mentioned that we’ll be serving Costa Rica. We’ve announced service between Baltimore/Washington and San Jose, Costa Rica beginning March 7 that as one flight a day each way. We are very confident that that flight will perform very, very well. So we don’t have a large amount of Southwest capacity in international. We don’t plan to have a lot more next year. So, none of these are concerns that we would share at Southwest.

And we have time for one final question. Today, we’ll take our last question from (indiscernible) with Flightglobal.

Hi guys. Thanks for taking my question. Gary, you mentioned just now that you plan to be adding a handful of international destinations this year. Most of this is going to be from Houston-Aruba? Or are you looking at elsewhere?

Well, we haven’t said yet, but clearly we do plan to launch service when the terminal is ready in Houston and so we’ll just need to stay tuned on that. But the handful really means probably three or four more new cities for Southwest Airlines service next year. So we’re excited about that. It won’t attract a lot of flights. It won’t be a lot of incremental capacity with obviously you’ll be – what we hope will be some exciting new destinations, so stay tuned.

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

Thanks Tom. We appreciate you all being with us. If you have any follow-up questions, the media can reach us at SWAmedia.com or through our direct line at 214-792-4847. Thanks so much.

And, ladies and gentlemen, this concludes today’s call. Thank you for joining.