Southwest Airlines Media Conference Transcript & Recording on Returning To Service Boeing 737 MAX 8 Aircraft

Southwest Airlines Media Conference Call

Thursday, November 19, 2020, 8:00 AM Eastern

CORPORATE PARTICIPANTS

Linda Rutherford - Senior VP and Chief Communications Officer

Gary Kelly - Chairman and CEO

Alan Kasher - Senior VP: Air Operations

Tom Nealon - President

Ryan Green - Senior VP and Chief Marketing Officer

Landon Nitschke - Senior VP: Technical Operations

PRESENTATION

Operator
Good morning, and welcome to the Southwest Airlines Media Conference Call. All participants will be in a listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Linda Rutherford. Ms. Rutherford, please go ahead.

Linda Rutherford
Thank you, Anita, and good morning, everyone. Thanks for joining us so early, especially to those of you on the west coast who are dialing in. With the FAA rescinding the MAX grounding order, per completion of outlined FAA requirements, we wanted to provide some time this morning to answer any immediate questions that you all have regarding our next steps. I can see that a lot of regulars have joined us this morning, and we're grateful for your investment in this important topic.

So you all know the drill of our quarterly results calls, but let me quickly overview our time together this morning. You'll have an opportunity to queue up to ask questions after we hear a few opening thoughts, first from Gary Kelly, our Chairman and CEO, then Captain Alan Kasher, Senior Vice President: Air Operations, and Tom Nealon, our President. We have other executive experts in the room from marketing and commercial, as well as our technical operations and flight operations groups. If any of them chime in, we'll ask them to identify themselves before speaking, as we will with Gary, Alan, and Tom, so that you have the quickest attribution for whoever is talking. I'll be back in a few moments to give you some instructions for how to queue up and ask questions, but thank you again for being here. And with that, we'll get started. Gary?

Gary Kelly
Thank you, Linda, and I'll just add my warm welcome, and thanks to all of you for joining this morning. Well, obviously yesterday's MAX announcements from the FAA were very welcome, and now we have a clear path ahead to put the MAX back into the air and service to support the mission of Southwest Airlines. Of course above all things in the process ahead, safety is our top priority, and that is in every discussion and every step and everything that we do at Southwest Airlines. I've been in regular contact, of course, with our Southwest experts on this airplane. And I have been engaging directly with both the FAA and Boeing throughout this extensive process.

We have a superb executive leadership team, they've approved our plans to implement the training required for our pilots, installed a new software on our MAX airplanes, execute maintenance checks, perform readiness flights for all of the 34 MAX aircraft already in the fleet. And then, of course, we've got a team of Southwest experts from across the airline. They're ready to implement this detailed and comprehensive plan to get the MAX back into our flight schedule.

And of course, we've all said this, we've said it many times before, if any of our senior leaders have any cause for doubt about the safety of any part of our fleet, those planes would not fly. And as any responsible airline would have, we have a number of checks and balances to ensure the safety of our flight operations. So our goal today is primarily to provide you all an overview of the task ahead, and the assumptions that we're using for our timelines and the plans that we have to engage our employees and our customers on this journey. Alan Kasher is our Senior Vice President of Air Operations. Captain Kasher, would you take us through these plans, sir?

Alan Kasher
Thank you, sir. And I'll reiterate that confidence in our teams, Gary, by reminding everyone that Southwest has 50 years of operating the Boeing 737. Our pilots, engineers, dispatchers, are all highly experienced with respect to the 737. Specifically, to the MAX, our pilots flew approximately 90,000 hours on the MAX aircraft prior to the grounding, and that's nearly 40,000 flights. Our MAX working team and operational leaders have all renewed the new software enhancements designed for this aircraft.

They've assessed the revised operational procedures and the new training requirements for our pilots. So we have three to four months of work ahead of us in this and soon, we'll begin to transition the 34 aircraft from an active storage program where we've maintained prepared to move back towards scheduled service. And return to service is expected to happen no sooner than approximately the second quarter of next year. That can only happen, of course, after we install and test the software upgrades, conduct complete maintenance checks, operate multiple readiness flights with every MAX, and that's well before our customers board these aircraft.

Specific to training, every active pilot will have both computer-based training and will undergo additional flight training in one of the nine 737 MAX flight simulators that we have certified, and will be ready for flight training, and that will be with the updated software. Those nine MAX sims that we have now alongside 15 other 737-800 and 737-700 simulators, this gives us one of the largest 737 MAX simulator fleets in the world. With the required changes outlined by the FAA, we are confident we believe the MAX will be amongst the most reviewed, tested, commercial aircraft in the world. We have confidence in our ability to operate the MAX according to these requirements. And Tom, to you, sir.

Tom Nealon
Thank you, Alan. Good morning, everybody. So, I'm just going to reiterate, you know, everything we do at Southwest has honestly always centered around safety. And with that, we certainly hope to bring comfort to our customers. And I think that you get to find that a lot of ways, in like a narrow sense, you get to find that as physical comfort. You know, how you feel about your leg room or where you sit on the plane. But I think it also can be defined as, you know, with an emotional dimension and the sense of comfort that comes with choice and with flexibility. And our customers come to Southwest, and again and again, we hear this a lot, because of the way our people and our policies make them feel, whether they're buying a ticket, flying with us, or just reflecting back on their experiences.

I think Alan did a great job of detailing our approach to bring the MAX back into service, and it certainly aligns with our 50-year focus on safety. And we want our customers to have a very clear understanding of each step that we're taking, so they're comfortable with our plans and have the individual flexibility to decide when they will board a MAX. How each customer feels about making a reservation on a 737 MAX 8 or flying on a MAX is an expression of personal comfort that we know is going to be different for every person, especially here at the outset as we return to the service process.

And I think ahead of your questions, I'd like to quickly walk you through some of the ways that we intend to communicate and empower our customers with information and flexibility as they shop for flights, make a purchase, check in, and so on. So first off, know that southwest.com is our hub for all information on how Southwest customers can expect the 737 MAX 8 aircraft to fit into our schedule and our service.

We have a new Resource Center on the website, I'd like you to take a look at that. It's got a lot of great content, and that'll be the primary source of our communication. We're going to be enhancing our flexibility to allow customers booked on a 737 MAX 8 to request and change as they approach their departure date. So, if they prefer to travel on a 737-700 or 800, they can do so. So that's subject to available seats, of course, but we want them to know that there will be no fare difference as we change itineraries, as long as their itinerary begins and ends in the same airports as original plans.

I point out closer to departure date because, as most of you know, Southwest does not have specific routes or airports where the MAX is assigned. Our aircraft moved throughout the system, and right now with our schedule influx, you know, more than ever, we'll certainly want to get closer to travel days to confirm the type of aircraft scheduled to operate the specific flight. And we certainly don't want to surprise people at the gate or onboard if they prefer not to fly on the MAX.

If a customer ultimately chooses not to travel, they can request a refund on refundable fares, and reservations with non-refundable tickets will mirror our best in industry flexibility. And that's just opposed to our credit in the name of the ticketed customer for up to a year from the original date of purchase. And no one else does this, and we feel great about that. So hopefully that gives you a framework for how we're approaching this, and of course, we'll continue to communicate more details as we get closer to bringing the MAX into our schedule. So Linda, with that, back to you.

Linda Rutherford
Thank you all very much. We'd like to be able to take your questions, so you'll just need to dial star and then one to let us know if you have a question. Time permitting, we'd like to get through all of your questions if we can. So we'll pause for just a few seconds to allow the list to populate. Again, it's star one to ask a question, and I'll turn it over to Anita to begin introducing each of you.

Operator
Our first question today comes from Mary Schlangenstein with Bloomberg News. Please go ahead.

Mary Schlangenstein
Hi, good morning. Hey, Tom, can I get you to talk a little bit more about a couple of things. One is, when somebody is booking a flight, will Southwest have something that shows them definitively that they would potentially be on a MAX? I realize what you said about planes may change close to departure. But is there any warning that you'll give them in advance that they could potentially be on a MAX?

Tom Nealon
Yeah--.

Mary Schlangenstein
--And then my second question is, would you--how close to departure can they change a flight and get like a refund or whatever? I mean, could they wait until they get to the gate, and suddenly decide they don't want to fly and they want a refund?

Tom Nealon
Yeah, so I'll take the second one first. So, even today, you know, barring the MAX situation, you know, if you ever want to get away or any fare, you can change that up to 10 minutes before the flights and still have a travel voucher. So, that's no different. In terms of how close to--well, actually, I guess your first question is, will people have visibility? And they will have visibility to the aircraft that's scheduled for that flight. Now as you know, we swap aircrafts a lot operationally, right? It's just kind of part of the operation; that's part of the beauty of having a ubiquitous fleet.

So, you know, obviously you'd be scheduled on a 700 or an 800 or a MAX 8, and day of operation that could change. So we need to, you know, be flexible with people, because that could certainly be the case. You know, we just don't segment or segregate the aircraft like other carriers do. So there is, you know, a chance that I could be booked on an 800 and I show up and I'm flying on a MAX 8 because some operational consideration. But you know, if that's the case, then we'll be flexible, allow customers to change their flight.

Gary Kelly
And Tom, that designation of that equipment is not new.

Tom Nealon
No, that designation--so, you know, when you book a flight, you see what aircraft is scheduled for that flight. And that's not new, and that's visible on the website as you go through the booking process. So, again, not new, and we'll call it out very clearly as a 737 MAX 8. There's no hiding the ball. It is what it is, and we're proud of it.

Mary Schlangenstein
And do you anticipate that you would be making any sort of announcements in the gate area, or will the flight crew make any comments about the MAX at all before the flight?

Tom Nealon
No, I don't think we do that anymore than we do for, you know, a 700 or an 800. You know, I think as we begin to fly the MAX 8s and service, I don't think there's a need for us making announcements about it. But you will see our crew, our pilots, you know, in front of the airport-- the airplane, rather, welcoming passengers, and you know, answering questions  they may have. But you know, I don't see us making announcements, right, to the customers about this, no.

Mary Schlangenstein
Thank you.

Tom Nealon
Uh-huh. Good to hear from you, Mary.

Operator
The next question comes from Alison Sider with Wall Street Journal. Please go ahead.

Alison Sider
Hi, good morning.

Tom Nealon
Good morning.

Alison Sider
I remember last year you all talked a little bit about some--you know, some surveys you had done of customers, you know, trying to get a sense of how people felt about flying on the MAX. At the time, I think you said that, you know, most people seem to feel pretty okay about it. Yeah, just curious if you've updated those. I know people have like a lot of other concerns about flying right now, and maybe it's been moved to the bottom of the list. Just curious if you've had any more recent feedback.

Tom Nealon
Want me to take a crack at that?

Gary Kelly
Please.

Tom Nealon
Well, Alison, as you'd expect, the pandemic has certainly overshadowed the question of the safety of the MAX, so on and so forth. But you know, we have continued with the COVID research we're doing. You know, we continue to do the research, probably a little less frequently. But on the customer comfort with the MAX, it's just clearly not as big of an issue now as it was a year ago, certainly, but you know, a lot's happened. But you know, as far as what we know now, you know, there is a minority of customers who are just not comfortable yet.

And what we hear is the MAX proves itself out--as it has been in-service for a longer period of time, what we're hearing is they'll begin to gain confidence. But you know, this minority of customers--and you know, I think people just need to get on the plane and experience, and I think that--that's kind of what we're hearing, is they want to experience it, they want others to fly it and see the aircraft in service. But you know, there's a pretty--I wouldn't say--let me back that up. There's a minority, but that also suggests there's a majority of people who do have confidence, that who are comfortable flying on the MAX.

Gary Kelly
And you know, I think there's also a recognition that it's undergone an exhaustive review process and a very thorough vetting of not just the changes but also the piloting of the airplanes. And I think there is a pretty good understanding about the process that's involved with reintroducing the airplane into service, so I think that also has helped to boost confidence over time.

Tom Nealon
And I think--if I could get down to that, Gary, you know, when you do the research, there's the qualitative and there's the quantitative, the quantitative being the empirical data and the surveys, and that kind of stuff. What's much more interesting is the qualitative in the comments, the commentary you hear. And the words we continue to hear, there are several prevailing themes. One is trust, and they have tremendous trust in Southwest to do the right thing. We hear that again and again. This is not like a commercial I'm giving. That's what we hear from research and we see it in the comments, and we see it in the empirical.

What we also hear is confidence. And they have tremendous confidence just because we're famous for being 737-centric. So, they have confidence in our pilots. And I guess the third thing we hear is, hey, if I'm not feeling good about it, I'm still trustable and they still have confidence by knowing we've changed, right? So, confidence, competence, and change. So those are, I'd say, is kind of the discovery of three C's there. There you go.

Gary Kelly
Yeah.

Alison Sider
Thanks.

Operator
Our next question comes from Leslie Josephs with CNBC. Please go ahead.

Leslie Josephs
Hi. Good morning, everybody. Just curious how--

Gary Kelly
--Good morning--.

Leslie Josephs
--Are you going to be referring to this plane as the MAX indefinitely? You know on the phone, in some of their communications starting to say dash 8 or dash 9 in some cases, and will that--will it be the MAX on your website, seat back safety cards, and things like that? And also if I could just ask you, are you planning any sort of outreach to customers, you've heard American Airlines is doing something like that, some Q&A with pilots, or maybe some familiarization tours on the ground, in airports, anything like that in the work? Thanks.

Tom Nealon
Well, let me take a first crack at it. If I don't get all your questions, let me know. But in terms of, you know the branding and the name, you know, we bought the 737 MAX-8, and we're proud of the 737 MAX-8. And it's been through, you know, more evaluation and oversight than anything you could possibly imagine. So we're very proud of the plane, and I think our customers are smart.

And you know, you could try to do a marketing deal and change the branding and this and that. But you know, people know what they're flying, and we can be proud we're flying--we are proud we're flying. So, you know, we don't tend to change the name. Now, over time, that could certainly evolve, just as any brand or any product name could evolve. But you know, our intent is not to change the name and try and disguise anything. We're proud of the aircraft, and we're proud of flying it, and that's how we're going to refer to it. That was the first question you asked, what was the second question?

Ryan Green
Linda, I think it's--

Leslie Josephs
If you're planning any sort of familiarization for passengers or customers either on the ground at airports so they can see the MAX. They could have questions for pilots or mechanics or Southwest, or both, or something like that?

Tom Nealon
Really the outreach plan, communications plan.

Leslie Josephs
Yes.

Ryan Green
Yeah. So this is Ryan Green. We're really housing all of that information--it's hard to get out to tens of millions of customers and do a lot of that face-to-face. So what we're planning to do is we'll house all of that content in FAQs, and we'll update it as questions come in from customers. And we'll put all that in our Resource Center on Southwest Airlines--or on southwest.com. And it's there today, and we'll continue to update that and refine it as we get closer to putting the aircraft back in service.

Leslie Josephs
Okay, thanks. And just one follow-up on the branding thing. If it does change to a dash 8 or some other format of the name, would that be led by Boeing, or is that a Southwest decision? Who makes that call?

Gary Kelly
Boeing. I mean, Boeing named the airplane. I think Tom's point is, again, it's just back to trust. And nobody's trying to hide anything, it's quite the opposite. We want to be very transparent, and we all know that people have questions about this airplane. So--but over time, if Boeing chooses to change the model number, model name, or whatever it might be, then that's what it will be. You know, so we're--we're not necessarily trying to market an airplane. For us, it's the 737. Every pilot in our company can operate every piece of equipment in the fleet. So, to us, it's all about the Boeing and then the 737. Obviously, the MAX has a unique, you know, challenge here, getting reintroduced into service, but that'll be up to Boeing.

Leslie Josephs
Okay. So for the foreseeable future, it'll be the MAX on your website, for consumer-facing things, at least?

Gary Kelly
Absolutely, absolutely.

Leslie Josephs
Thank you.

Operator
The next question comes from Traci Rucinski with Reuters. Please go ahead.

Traci Rucinski
Hi, good morning. Could you--

Gary Kelly
--Good morning.

Traci Rucinski
Do the warning notices that you sent yesterday to the Mechanics Association impacted all the maintenance schedules that you'd mapped out for the MAX's return to service?

Gary Kelly
Oh, no. No, in other words, we've got our schedule. And we'll make sure that we have the resources to execute our schedule. And as a practical matter, we have far more resources than we need to execute our schedule right now. Now, our tech ops folks do a fantastic job, and they will be very busy. But--and you understand, we're trying every way possible to avoid any furloughs. So, that's still a work-in-progress. But sort answer is no, we'll have plenty of resources to do the work that we're scheduled to do here.

Traci Rucinski
Okay. Thanks, Gary. And just, what are the next steps with the pilots in terms of nailing down the training?

Alan Kasher
Want me to take that?

Gary Kelly
Please.

Alan Kasher
This is--excuse me, this is Alan Kasher. So, there's a series of steps to prepare for training. So, once we get operator-specific information to update our manuals and the respective checklists and so. on, we will package that all up as well as they training footprints, which we've been keeping up to date based on draft guidance to date, which align nicely with the final guidance per Boeing and the FAA with AD. We'll do safety risk management on that, which we'll submit it to our local FAA office for review and approval. Then we will begin to train our initial cadre of trainers. And then, subsequent to that, we will train the trainers. So that will be all of our instructors that will be conducting the training. And then when that's complete, we will do the bid period where our pilots will select their preferences for the training. And then the following month commence the training, which will take two to three months to complete.

Traci Rucinski
Thank you.

Gary Kelly
And I think the key there is--and Alan, probably a difference from other MAX operators is for us, we're going to train every pilot. You know, I think we just can't reiterate that enough. So we have plenty of MAX sim capacity, intentionally, to be able to do that. But we won't have any revenue flights until we have every single pilot trained. And that's--as far as I know, Alan, that's very different than any other operator.

Alan Kasher
Yes, sir. One other noteworthy point is, in addition to the training required by the FAA which is both computer-based training and flight simulator training, we are running for a third time the training that was used to initially introduce the MAX to our fleet. So, there will be that training, which is called differences training. There will be the computer-based training associated with the FAA's Airworthiness Directives, and then the simulator training. So, a lot of focus on making sure that our pilots are going to be very comfortable reintroducing the aircraft back to service, not only these new procedures that--and the changes, but a refresher of the original training when we introduce the aircraft.

Gary Kelly
You know, I'm excited about the work plan. And Ryan mentioned, you know, our communication approach with our customers. And the nice thing about this taking several months is we'll learn things. We'll get feedback from customers and we'll get feedback from employees, and we want everybody to be as comfortable as they can be. We're all very comfortable, and our senior pilots are comfortable. We want to make sure everyone is as comfortable as possible. So, there's--I think, a real significant advantage to approaching it the way that we are.

Operator
The next question comes from Kyle Arnold with Dallas Morning News. Please go ahead.

Kyle Arnold
Good morning, gentlemen. Have you heard from the group members, pilots, or flight attendants if they are reluctant about the plane? Separate question, have you had any contact with Boeing yet about when you're going to start getting deliveries of those MAX jets that they weren't able to get out before the grounding?

Gary Kelly
Kyle, we may have missed your first question. Why don't we take up the--I think we all heard the Boeing question, and we might get you to repeat your first question. But yeah, we're in--I don't know that there's anything new to report--to update you on or to report to you today. We've been in conversations with Boeing throughout this process. And then as we--you know, if it's related to the delays and deliveries of the MAX, they're contractually not in compliance.

So, there are discussions about that. As you know, we had a settlement with Boeing for 2019. We're having conversations with them on the same topic here for 2020. I think our--you know, my main focus at this point is the 34 airplanes that we operated that are in our possession, that our tech ops folks have been maintaining the past 18 months. And we're absolutely in conversations with Boeing about what to do with the airplanes that had been built. But I don't think, Alan, we have anything to report on that today.

Alan Kasher
No, sir.

Gary Kelly
So those discussions are continuing. And it's somewhat complicated, quite frankly. We're talking to them about the MAX 7 and getting it certified, and settling up on the MAX, and so a number  of issues. The other obvious point here is with the pandemic, we don't need to grow the fleet. And you know, we're in a position where if we choose, we could reject air orders at this point. So, no report today, but those are very important and live conversations that are underway. So just nothing to update you all on today. So if you'll just repeat your first question. I think--at least I missed it, I don't know if anybody else caught it.

Kyle Anderson
Yeah, sorry, early in the morning my voice might just not be working as well. Have you heard from any pilots or flight attendants, any reluctance to fly on the MAX, and what will you do if that comes up?

Gary Kelly
Well, Alan obviously has much more frequent contact with our pilots. But yeah, I've talked to a lot of pilots, and so has Tom, as more lay people in this, after the grounding in March of '19. And I have not met one pilot--and I've talked to thousands of them, and not met one who was not or is not confident in the MAX. Not one. And--

Tom Nealon
--I was going to say the same thing. It's interesting--and Alan, you have the pilots and the flight attendants within your organization, but what's interesting to me is exact same thing Gary said, where you don't hear pilots expressing any concern. In fact, they're like, let's get going. You ask the question to the flight attendants and their response is, "I trust our pilots."

Alan Kasher
Right.

Tom Nealon
That's exactly what you hear. If our pilots are good, we're good. And our pilots are good.

Alan Kasher
Yeah, this is Alan Kasher. I second what both Gary and Tom have shared. I think it's noteworthy, every one of our pilots comes to Dallas to our flight training center. And in every one of those training events, there is a leader from our flight operations leadership team. And they not only are--it's a two-way communication to start off with, day one. And it's feedback from the frontline, and up, and also our leaders sharing any relevant information. And we're seeing absolutely no feedback of any concerns.

Similarly, with the flight attendants going through recurrent training, we're getting no feedback from there. And of course, our vice presidents over flight operations and over in-flight, you know, comms and communication, two-way channels, incoming information as well, and it's all consistent. There are no concerns. The last thing I would add in that space is, we have a recurring meeting with all of Southwest Airlines' union leadership on the MAX. And we update our plans, we--you know it's a good exchange of information. And in the most recent meeting, as I have in prior meetings, I asked for feedback from the union leaders, if they had any concerns or if they would voice any concerns on behalf of their work grounds. And it's thumbs up confidence from all.

Gary Kelly
So, Kyle, I'd make just a couple of other quick comments. I do think that the report is a real tribute to the communication that comes from flight operations' leadership on this. So, you know, what we're sharing with you all today, we've been sharing with the public and certainly with our people throughout this process. And the other thing I would want you to know is that Alan's responsibilities include not just our pilots but also our flight attendants also is his responsibility.

So, he has first-hand knowledge, if you will, with these work groups, and of course Tom and I do, too. But no, our people are ready to go. I think they're ready to get going on this again. And the experience that we had with real MAXs, real flights, real people, real customers, it is a fantastic airplane. It's a wonderful ride. It's 40% quieter, obviously the economics are superb, and it's just a great customer experience. So, I think there's a lot to look forward to here, quite frankly.

Operator
The next question comes from Ned Russell with TPG. Please go ahead.

Ned Russell
Hi, thank you for taking my question. I was wondering if you could talk a little about the plans for when the MAX actually returns to service. Are you going to introduce one or two aircraft out of Dallas? Do you think it's going to be a fleet of aircraft all at once in routes across the country? Do you have any plans along those lines?

Gary Kelly
I suppose what you'll see from us--and everybody chime in here, but you'll see several things. Number one is, we'll have a number of flights prior to revenue service. And I suspect, Alan, those will start next month. And so, you know, you'll see airplanes moving. You'll see me on airplanes, you'll see Alan, and Tom, and others. We won't have customers on them. So you'll see that, and then our tech ops leadership is here. So you'll be introducing airplanes--you'll get them--it's sort of like an automobile, it goes through a make-ready process, which is really dumbing it down, I realize. But you'll be able to introduce how many units a week?

Landon Nitschke
Yeah, we could produce up to eight units a week. And of course, we'll be monitoring the reliability of these aircraft as we kind of exercise them through this system.

Gary Kelly
And this is Landon--

Landon Nitschke
--Oh, sorry. Landon Nitschke, Technical Operations.

Gary Kelly
Senior Vice President. So then, by the time we get to April, you all want to talk about plans for the flight schedule at that point, for revenue service?

Ryan Green
Yeah. So we'll--again, it's Ryan Green, again. So once we have completed all those readiness flights and we are comfortable that, you know, we've tested everything on those airplanes, we'll publish them in the flight schedule. Right now, we're thinking that that's going to be in the April timeframe. as we get closer to that point, we'll actually publish it and put those aircraft in the schedule. Whether that is one a week, or we'll put them all in at one time, we're still working through what those plans are. We've got plenty of time here to do that as we're getting all the pilots trained and bringing them out of service--or bringing them out of storage.

Gary Kelly
But like I said a different way, we haven't concluded that we can't put all 34 into service--

Ryan Green
--Exactly--.

Gary Kelly
--At once, at all. But you know, that's one of the things that we'll--we can make that decision later. And we've got--and again, to be blunt about it, the pandemic sort of makes this a pretty casual decision in some ways, because we have a surplus of aircraft right now. And it's not like the business needs us to rush these airplanes into service all at once. But again, I'm anxious to get them back flying. And there are technical reasons why we want them moving at a pretty good rate. It doesn't necessarily mean they all have to launch on the same day, but to be determined.

Ned Russell
Great. Thank you.

Operator
The next question comes from David Koenig with Associated Press. Please go ahead.

David Koenig
Sorry, I was on mute. Good morning, all. Gary, and--

Gary Kelly
--Good morning.

David Koenig
Good morning. Gary and Ryan's comments there, just helped answer the question I had, which was going to be, you know, how the rate of the recovery from the pandemic--which I think we're still unsure about, how that's going to affect when you put these planes back in the schedule. You know, at least second quarter is kind of--is pretty broad, you know, and I wondered if you're just holding these out as long as you possibly can until you absolutely need them. Anything more you can say about whether, you know, the pandemic timing is going to affect when you put them back in the schedule?

Gary Kelly
David, I would say, the right way to think about this is--the straight answer to your question is no, we're not trying to hold them out. We do have a process we want to go through. There is work to do. I mean, there's work to do to develop materials, to develop training, to deploy the training. We've got work to do to get the airplanes back into service. And then once they start moving, there's work to maintain the movement, even before they're in commercial service. I think we're only planning out that we don't have to make the decision right now as to when we publish, when they fly, how many fly, all of that we can decide later. So there's no--again, I have no desire to delay any of this.

Tom Nealon
Can I just chip in on that? So--

Gary Kelly
--Please--.

Tom Nealon
--You know, what tech ops is doing, what Landon described, and the training their products are going through and the confidence we have in it, you know, we're actually convinced safety is  like a non-issue. We're are thrilled with the aircraft. I want to get them back in service quickly, just because customer experience is incredible, right? Why get them back in service? Because it's efficient, and there's real fuel savings, maintenance savings.

So there's a lot of reasons why I'd get them back into service, we're just going to have to pace it with our tech ops work and with our flight ops training work. But you know, we'll begin to feed it into the system, you know, very much as Ryan described. But there is no hesitancy to get this back into service. This is a great aircraft that we want, that our customers are going to love. So, we're anxious.

Gary Kelly
Now, in the pandemic aspect here, we've got a pretty good line of sight to, obviously, how things are going to wrap up here for November, pretty good line of sight for December. And honestly, I'm not real optimistic that the first quarter is going to improve much from the current levels of demand, and all that means is that we've got a bunch of surplus airplanes. And I would assume if we are--right now, our materials show that we need about 135 days, ish, from where we are until we'll be having revenue flights. So that puts you into the, you know, first week of April. And at that point in time, again, I'm assuming that we'll still have less flights than what our fleet could support.

And then, that simply means that if we put the 34 airplanes in, there'll be 34 other airplanes that Landon's team will take out, and presumably would be our older 700s, because they're the least efficient, etcetera. So there's, you know, some airlines things like that that we'll want to work through and do smartly. And certain airplanes we might want to fly less because we avoid some incremental maintenance costs, as an example. So, it's a pretty sophisticated process that they go through. But I'm with Tom, I think for a lot of reasons we want to get these airplanes up and running, and I know our employees do too.

Tom Nealon
These are the best aircraft we've had in service.

Gary Kelly
Yeah, separately. Absolutely, in a time when we're losing money, we would certainly from a business perspective like to have them out there contributing.

David Koenig
Okay. Thank you.

Operator
The next question comes from Pilar Wolfsteller from FlightGlobal. Please go ahead.

Pilar Wolfsteller
Hi, thanks very much. So, I have a couple of questions. You mentioned that all the pilots you spoke to are excited about the aircraft. Now, yesterday the union put out a pretty strongly- worded statement about some of the safety issues that were not taken into account. Can you address those?

Tom Nealon
Alan, you want to?

Alan Kasher
Yeah, sure. This is Alan Kasher, again. So, I think you may be referring to the--there were some recommendations that were made by A4A, SWAPA, the--our pilot union had submitted some recommendations during the comment period on the Flight Standardization Board report for the 737 MAX. Those--you know; those were addressed very well in the FAA's response in the AD. So, every comment, including those that were cited by SWAPA, were responded to and adjudicated by the FAA in their response.

And you know, we--SWAPA's position on those particular issues was a slight variant but not totally different than what came from the industry. And it was not so much as a safety-related issue, it was playing the--and specifically from Southwest's perspective and our contribution on this, it was just pointing to the FAA on guidance. But again, their justification for where they finalized is--you know, it's a public document, the AD is. And I would refer you to that to--it really addresses what the SWAPA's concerns are. And we're very comfortable where that landed. Quite frankly, it is not--the difference is where it is today from the new procedures is very minor differences from where it has been since the onset. And those procedures of the MAX are very similar to those that are in the NG.

Pilar Wolfsteller
Okay. My second question is, you mentioned just a couple of minutes ago that you have a good line of sight for demand into the first quarter. Is there anything you can tell us about sort of the Thanksgiving-Christmas timeframe that's different from--?

Gary Kelly
--Well, yeah. I'd say we've got a line of sight to November and December. my first quarter comment was a guess. And it is based on what's happened so far over the last nine months. It's based on some assumptions about when a vaccine will be introduced. Obviously, that news is more encouraging. But we've been guessing all along, by the way, that it would be sometime around year-end. And guess what? It sounds like it's going to be sometime around year-end. And then what happens from there, timewise, is anybody's guess.

But we have to obviously get to the vaccine first. But I'm assuming that not a lot whole lot will change in the first quarter. First of all, it will be wintertime. And we've already seen seasonally the uptick in the cases, and that's concerning. And we've already shared that we've seen an impact on our bookings, which no one at this company is shocked about that. So--so, hopefully that answers your question. But I think that for purposes of the holidays, you mentioned Thanksgiving and Christmas, yeah, there's natural--there should be a natural uplift with people traveling then. And we're certainly seeing that reflected in the bookings, and that's reflected in  all of our financial guidance that we've provided.

A natural concern then, from that, that I have, that Tom has, is that, well, once you get into January, which is one of the two softest months historically of the year, seasonally, without that holiday support and with the pandemic, and with it being winter time, I feel we'd be crazy to assume that it's going to be a really good month. You know, so, we just have a ways to go here, to fight our way through this pandemic. I think everybody is resilient, and you know, geared up for that. And we've got plenty of cash to fund our losses, to get ourselves through 2021. And we're all looking ahead, when this pandemic is crushed--and it probably won't be in the first quarter.

Pilar Wolfsteller
Okay, one final tiny little question, sorry. In your Q3 call, you did mention that you are looking a little bit more to perhaps looking towards an Airbus or another manufacturer for future fleet plans. Has this changed--you know, has the returning of the MAX changed anything on that timeline or on those considerations?

Gary Kelly
Yeah, well, thank you for that. And you know, again, just to provide hopefully a little color on that--that's not new news. We said last year that we were going to give the Airbus A220 a really good look. And the pandemic hit, obviously changed our priorities quite a bit. So, we're in a different place as a company because we're not crawling, we have surplus airplanes. My only point is very straightforward--which again, that's not new news. We need two sizes of aircraft. We need roughly a 150-seater and we need a 175-seater. So, we have we think the best airplane in the world going forward with the 175-seater and the MAX 8. I'm very confident about that. The MAX 7 has not been certified yet, and we are continuing to negotiate with Boeing on that airplane. And the alternative to that airplane remains the Airbus A220.

So, that's all I was sharing, that we're not settled yet on our future with the MAX 7. So--and again, that's not different than where we have been over the last couple of years, so there's really no new news there. The only new news is that we're still not done in that evaluation process. And the other thing that I tried to clarify is that our focus. So I don't give you all the wrong tangent here, our focus is working with Boeing. So, we are actively engaged in looking at the A220 at this point. That's not to see that we won't be, but right now we're simply focused on our discussions with Boeing and the MAX 7.

Operator
The next question comes from Chris Van Cleave with CBS News. Please go ahead.

Kris Van Cleave
Hi, Gary. Hello, everyone. Thanks for doing the call. Two quick questions--

Gary Kelly
--Hey, Kris--.

Kris Van Cleave
--One, have you seen any impact in your Thanksgiving booking given the push from public health officials, state, and local leaders telling people not to travel for Thanksgiving. That's question one.

Gary Kelly
It's still marginal, but yeah, I think Tom's shared that we've seen a kick-up, if you will, in--it's mainly cancellations, but do you want to provide color there?

Tom Nealon
You know, honestly, it's not that different than what we talked about in the earnings call, where we gave guidance on--like last week in the 8K. You know, we are seeing--you know, actually on the earnings call, what I said was, you know, at this point, even with the increase in cadence, we're not seeing what we'd expect to be the corresponding increase in cancellations, like we saw earlier in late June-July. That's what we said in late October, because that's what we're seeing. With the 8K, we did disclose that we're starting to see more cancellations--closer in cancellations, which is not unexpected.

In fact, I was shocked that we weren't seeing cancellations earlier in the cycle. But you know, what I'd tell you is, our holiday bookings, whether it's Thanksgiving or Christmas, we're still building those factors. We are seeing cancellations, but we're continuing to build those factors, so I think we're going to have, you know, a good holiday season. But that's kind of where we are. And I agree with Gary, you know, beyond December, it's really hard to tell, what's going to happen is, as the case count continues to accelerate. But--so hopefully that should--

Gary Kelly
--And Kris, to give you a little more context, November with the holiday will be a better month than what October was, and that's even with some of the spike in cancellations. Which again, I think both Tom and I have tried to reiterate, we're not shocked at that. But you can tell as the cancellation rate has ticked up compared to where we were but even with that, we're still looking at a better month. It'll be a huge drop from a year ago, you know, so, it's not going to come anywhere close to what 2019 did. And then our--based on everything we can see right now, December is the same report. Yes, the cancellations are up, but it still looks like it will be in line with what we're seeing here for November, and maybe slightly improved from November.

Kris Van Cleave
Okay, great. Second question, you talked about how proud you are of the MAX. Do you see-- particularly as we move out of the pandemic as you've got some older aircraft, do you see a day where you do another MAX order?

Gary Kelly
Oh yeah. I mean, the max is all Boeing is building. I mean--and you heard the A220, you know, the Airbus A220 question. So, unless we go to Airbus, that's all we're going to buy. And you know, we're--I think, Kris, the way to envision this is, we had an order and a plan. And then you get into the MAX grounding, and that had some impact on our quote plans, not directly on our order. And now you've had the pandemic, which is throwing everything way off, and Boeing is not in compliance with our contract because of the significant MAX delays. So it kind of puts the whole order into play, and we're working through that.

But right--as I said earlier, we're committed to the MAX 8, as a 175-seater. We are convinced it is the best airplane in the world in that segment. So, now, in terms of growing the fleet with the pandemic and all of that, those are a little bit different questions. But you know, airlines and airplanes have very long planning cycles. So you know, we had orders with Boeing many years into the future, and all of that is continually revisited as time goes by. So yeah, all that is under review as we speak. You shouldn't expect us to increment our fleet in the near-term. There's no need for any airplanes certainly in 2021, other than just managing our fleet in terms of retirement.

Kris Van Cleave
Thank you.

Operator
The next question comes from Ariel Plasencia with WFAA Channel 8. Please go ahead.

Ariel Plasencia
Hey, good morning, everyone. Thanks so much for taking my question.

Gary Kelly
You bet.

Ariel Plasencia
You talked about before how there's going to be a group of people who are too nervous to fly, and you said that's a personal decision they're going to have to make. We've talked about pilots doing extensive training as well as software upgrades. Are there any other changes and updates to this aircraft that you would tell those worried customers that would maybe put them at ease?

Gary Kelly
Well--and I'll let Alan and Tom answer too. But Ariel, I think that the thing that has made Southwest so successful over five decades is our expertise, our focus, the lack of compromise on safety. We fly one airplane type and always have, except for a short time when we flew Boeing 727s, we've always operated the Boeing 737. And we are the recognized expert, from an airline perspective, in the world, on operating this airplane. Every pilot that we hire was a captain. So we don't have apprentices in the cockpit, we have two seasoned aviators. And on top of all of that, we have company-specific procedures and training that is world class.

And--so, let me let you pick it up from there. I think that those are sort of foundational to your point. And if you didn't catch it, Alan did mention that the changes in the cockpit, aside from the software, are relatively modest. And--which hopefully is also comforting. In other words, we've been very successful for 50 years in the world's most successful airplane. And what's  comforting to know is there are radical changes required to maintain our safety expectations. So, you know--.

Alan Kasher
--Yeah, this is Alan. Thank you, Gary. The only--I think the other two things that I would add--I'll start first with, the aircraft has had such an extensive review. And that review has gone far beyond the initial issue, which was software. So it has had essentially an end-to-end review. And not just with the FAA, there have been multiple agencies involved from across the globe. There have been agencies that were set up that are United States Air Force, NASA, Volpe, FAA. There's never been an aircraft that has been reviewed to the extent that this aircraft has. So, I think that's a key point in all of this.

Gary Kelly
Absolutely.

Alan Kasher
The second thing I would add is, you know, our training footprints have only increased over the years. We haven't gone after training, to look to consolidate or reduce the amount of training seeking cost reductions. We've been continuously investing in our training, with our simulators, with our other training devices. We were the first customer to receive from CAE something called a Cockpit Procedure Trainer. Very advanced training device that falls between more of a static-type visualization and the simulator.

So, on top of that, we were the first airline to introduce what's called extended envelope training. So this takes what is the traditional envelope of training for an airline pilot, which is essentially operating within the normal envelope. And it takes the pilots and crews, takes them out to the edge and beyond, and then back into recovery. So this was turning mandated several years ago, and we were proud to be the first to introduce. And it is the level of training that the industry has never had. And it's just another layer of confidence for our crews and the confidence that we have in our crew to safely operate the aircraft.

Gary Kelly
Yeah, you all should come see our flight training center. I mean, and just with this, the investment that Alan is talking about. It is very, very impressive. I can't imagine that there's a flight training center in the world that is better.

Alan Kasher
I would agree.

Tom Nealon
Another thing I might add, from a customer perspective, so that's the technical piece. And Alan and his team are all over this thing. It really is impressive. From a customer perspective, the last round of research we did was in the fall, late summer fall. And the question we asked of the customers--we asked a lot of questions, but one question was, you know, with the FAA approval of the Max 8, what is your willingness to fly on Southwest Airlines? And you know, the answer came back pretty positive in terms of, there's no impact, I'm not less willing to fly or I'm actually more willing to fly. It's overnight, for some, right, which is pretty darn positive.

And it really does come back--that's the quantitative thing. It does come back to, qualitatively, what are the words they use to describe Southwest? And it's the same thing I said before, it's confidence, competence, and trust. You know, a lot of that's just built in because of what they won't talk to you about. But there's a tremendous amount of equity we have with our customers in terms of their confidence, and that's just what the latest research said.

Gary Kelly
And when you get down--and Ariel, I don't know how much you know about the changes that were made, but for a lay person like me, the changes that were made to the software made total sense. And because we have a good understanding of how the software--it was extremely rare that it didn't work properly. But the changes that were made make perfect sense.

And for those that study it, understand that, well, this addresses the issue. And even though there was an exhaustive review done, out of everything else it came back to, that's what we need to change to enhance the safety here, and that was done. And that's why our pilots are so confident about this. They know the airplanes, they know the previous generation airplane, they know this airplane. They know what was not as well done with the software and now has been fixed, and they're very, very confident.

Ariel Plasencia
Thank y'all so much for laying that out for me. I appreciate it.

Gary Kelly
Sure.

Operator
The next question is a follow-up from Mary Schlangenstein with Bloomberg News. Please go ahead.

Gary Kelly
Is that fair? Did we get through all of them? We need to talk about these rules.

Mary Schlangenstein
Hey, Gary, I wanted to ask you to just go back to where you're talking with Boeing about potential future deliveries under your order. And then you said you don't need any new planes for--certainly for 2021. Does that mean that you won't take the 48 you were planning on? And can you talk about the timeline that you potentially see the recent agreement with Boeing on future deliveries?

Gary Kelly
Yeah, thanks, Mary, for letting me clarify. Yeah, I was just talking about, right now we've got 734 airplanes in the fleet. We don't need to increase our fleet size. That's really all I was speaking to. No, we'll definitely want to take more airplanes from Boeing to replace airplanes that we want to retire. We're in a retirement phase and have been for decades. So, yeah, we want more airplanes, we just don't need to increment the fleet.

We haven't concluded yet that we need to decrease the fleet size. So, that's also an open question. If demand is going to be persistently depressed, well then we can retire and not need to take airplanes as replacements. So all of those--I think we all understand what an uncertain environment we're living in. But that's what I meant, I just meant that we don't need to go out and negotiate an order with Boeing so that we can increase the fleet here in the near-term.

Mary Schlangenstein
Okay. And anything on a potential timeline that you'll reach an agreement with them, with Boeing?

Gary Kelly
I'm anxious to reach an agreement, you know. So, it's done when it's done. Boeing is anxious to deliver airplanes, and we're anxious to kind of get all the economics settled and have some visibility into where we're going with the MAX 7. And so, I think we're both motivated to get this done. And GE make engines and maintains engines, so they're a player in all of this too. So, it's a big deal. And you know, we've been talking for a long time, as you know. And I know you're very interested in this question, so, I just don't--I'm sorry I don't have anything more to report today. But I don't want this to go on for another six months, I'll tell you that. But I can't tell you that it's, you know, something that we'll--that we have to have wrapped up tomorrow, either.

Operator
The next question is a follow-up from Leslie Josephs with CNBC. Please go ahead.

Leslie Josephs
Hi. I was just wondering if very quickly you could run through the maintenance things that have to happen, and how long they take just to get them out of--they're in Victorville, still, in terms of that. And then, what you need to do to get them flying commercially, or at least--?

Gary Kelly
Landon, or Mark, do you guys want to cover that?

Landon Nitschke
Yeah, I can take that. Thanks, Leslie. This is Landon Nitschke from tech ops, again, alongside Mark Wibben here, who is our Vice president of Engineering and Tech Ops, so he can help out. So, I think the question was, you know, what do we have to do to kind of bring them back into the fleet. But first, it's important to know that we maintain these aircraft each and every day while they're in Victorville in storage. And I'm strictly talking the 34 that we own, at this time.

To bring them out of the fleet, it takes about 280-ish hours, Mark, to actually de-preserve the aircraft, exercise the aircraft, work with Alan's pilots, and do ground checks and that sort of thing. And then we will transfer the aircraft, fly the aircraft ferry to one of our main hangar cities. And we will do a make-ready check, we will reinstall emergency equipment, and then perform any maintenance that is required at that time. But the aircraft will leave Victorville with all of the ADs accomplished in the documents. In fact, Leslie, we have a small team--we deployed a  small team yesterday, actually the day before to start that process. So we do have mechanics in Victorville, Southwest mechanics in Victorville working the aircraft as we speak.

Leslie Josephs
Got it. Thank you.

Landon Nitschke
Thank you for the question.

Operator
Due to time constraints, that is our last question for the day. I would now like to turn the conference back over to Linda Rutherford. Thank you.

Linda Rutherford
Thank you, Anita, and appreciate everyone's time this morning. You all know that our media team stands ready to assist you if you have any other follow-up questions. Our digital newsroom is swamedia.com, and you'll find resources and additional contact information there as well. Again, it's swamedia.com. Thank you all again, and have a great day.

Operator
This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.