10 (Executive Town Hall)

Today's SWAPA Number is 10. That's the number of subject matter experts and executives that were on the town hall that took place on July 28th. So for this episode, we are providing you an opportunity to hear that town hall in case you missed the live event, during which we posed questions ranging from SWAPA's relationship with the company to where we are with implementation to the status of our move through the strategic plan. It truly had so much in it that we felt it worthy of a second listen.

Four questions did not get addressed on air as we ran out of time and can be found below. 

It seems there are many more 4 day trips and 4 day reserve blocks in elitt then ever before. I know there is a cap on the percentage of 4 days but it seems to be growing each month. What is causing this? 

The number of 4-day pairings in the system has increased from ~18% to 20% of the pairing mix which is due to a multitude of reasons, but the increase in ELITT is a combination of vacation shifting to drop more, training bidding + a longer training footprint this year which can lead to two pairings being dropped on each side (whereas the last contract they optimized to the lowest cost/trip pull). Each category is unique, but the upgrade schedule this year has been aggressive so some bases see a full month of pulls to send Pilots to training. In addition, Crew Planning has increased the number of blank lines which means more 4-day pairings get pulled from blank lines for the above reasons that then fall directly into MOT and ELITT opening.  

 How much does it cost to have the ELITT Red-Filter to actually work?  

“Cost" may be difficult to pin down, but there will be additional filtering available across systems in CWA between now and ongoing modernization efforts. Some of the disconnect right now is that there is the contractual definition of "red-eye" which encompasses flights that operate across 0200 domicile time, whereas there are "enterprise red-eyes" that launch after 0200 domicile time, so the CWA system doesn't flag those as "red-eye". We've said multiple times that this is causing confusion and hopefully we'll make progress over time with additional filtering logic that will include all variations of red-eye operations. 

 If a SWAPA rep were to seek and be hired for a job at HQ SWA, would one open up at SWAPA? Do we have any language in our bylaws to prohibit this or anything planned? 

 Short answer: yes, a position would open up, but no, we don't have anything on the books that stops someone from taking that job in the first place. 

The mechanism is our Constitution that defines membership classes based on who you work for and in what capacity. If a Pilot moves into a management, executive, or supervisory role at Southwest, they're no longer classified as an Active Member — they become an Executive Member. Executive Members aren't eligible to hold elected or appointed positions in SWAPA, period. So in the event that job offer is accepted, that person is no longer eligible to serve at SWAPA in any capacity. The vacancy gets filled the same way we fill any other vacancy as outlined in the Constitution. 

 While we don't have an enforceable rule that says SWAPA personnel can't apply for or accept a management job at Southwest like you’re describing, Section 10, Appendix A of the Policy Manual speaks to the Code of Ethics and Conduct Policy. This 'pledge' in paragraph IV says (in part) that no individual covered by this policy may accept a supervisory position within Southwest Airlines or its subsidiaries for a period of at least twenty-four (24) months following the completion of SWAPA service. 

 So it’s not a fully closed loop. It's a fair thing to raise, and it's exactly the kind of item our Constitution Review Committee reviews every year before the May Board meeting. If the membership wants stronger language here, that's the process to bring it forward, and we'd encourage anyone who feels strongly about it to push it through their Domicile Rep for attention. 

 Regarding sick leave buyback, is this something the company really wants, the membership, or a combination of both? 

 We can’t speak for the Company, but from the membership side, the appetite for a sick leave buyback was seen in Leading Edge 2.0 back in March. The open ended in person interviews we conducted and the online surveys revealed the membership’s interest in such a program, characterized best as “tell me more about it.” 

 The Benefits and Leaves Survey sought to gain more insight from the membership. The Education was a deep dive into the pros, cons, industry comparisons, and it’s potential relationship with disability and sick accrual. The polling results will drill down exactly where the membership is sitting – including what the parameters are for having one at all.

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Transcript

Amy Robinson:

Today's SWAPA Number is 10. That's the number of subject matter experts and executives that were on the town hall that took place on July 28th. So for this episode, we are providing you an opportunity to hear that town hall in case you missed the live event, during which we post questions ranging from SWAPA's relationship with the Company to where we are with implementation to the status of our move through the strategic plan. It truly had so much in it that we felt it worthy of a second listen.

Hi everyone, and welcome to the SWAPA Town Hall for July 28th, 2026. I'm Amy Robinson, your host, and I join today by your executive officers, President Jody Reven, Vice President Kevin Hornburg, and Second Vice President Hank Ketchum. You'll also be hearing from several committee members such as NC Chair Kurt Heidemann, Contract Admin Committee Chair Dave Kudish, Scheduling and Analytics Chair Scott Plyler, and Manager Meagan Nelan, Negotiating Committee member Dan O'Connor, and Economic and Financial Analysis Committee members, Greg Auld and Erich Schnitzler. Let's go ahead and get started today and talk about SWAPA's strategic plan. We've made a lot of calm around it in the last few months. And so where did we start at the beginning of the year looking to achieve and how is it going? I'll go ahead and kick that off over to you, Jody.

Jody Reven:

Well, first of all, there's a ton of work that's been done past administrations in this with the overall mindset of a strategic plan should drive the budget. The strategic plan should be went through with work from our, like I said, our predecessors and went through and interviewed all the committees for best practices, talked to the committee chairs, put those all into a hodgepodge of information. And then luckily when Kevin Hornberg came on the scene, it was one of those, "Hey, Kevin, I'm going to like for you to hand this off to you while we're focusing on other stuff." Hank's been doing a ton of work with the budget and all things finance. And Kevin did a great job putting that all together in a cohesive document, presenting it to the board, bringing in some outside sources to tell us the how of how we're going to accomplish these things.

And like our national airline policy, it was adopted. So now we have that framework and Kevin, I'll let him talk to, but Kevin's also done a lot of work in putting milestones together and we're on track on those milestones thanks to Kevin. So go ahead.

Kevin Hornburg:

Yeah, thanks Jody. Real quick, before we get too far, I want to kind of address the elephant in the room here, which is we're having a town hall that we haven't done in a while. And there's a side letter open right now for vote. A lot of the membership may be wondering, did we set this up just to talk about the side letter? We did not. This is part of an ongoing effort to do more of these as we continue down the path going to section six. It would be weird not to talk about it today, but that will not be the focus unless there are a lot of questions about it. So yeah, for the strategic plan, we've broken into three phases, a foundational phase, our implementation phase and a final preparation. Right now, we're still building out the team. We're going to make sure they're all trained.

Hank's making sure it's funded. And that will go all the way through the beginning of the year. We'll start transitioning into final preparation for negotiations. At the same time, we're getting all the membership input through the SEP process, which we'll talk a little bit more about later. And then we're looking at outside the industry or outside our company at the broader industry. Delta's in negotiations already. We'll be tracking how they progress as well as other carriers. And then we're going to be looking at the Company financials also. Q2 just was announced that it was a fairly strong quarter despite the fuel headwinds that were there. And we're going to make sure that that continues progressing along in the companies on a strong financial foot as we head into section six negotiations also.

Hank Ketchum:

And on the finance side, and Kevin, you mentioned it, you've got your strategic plan, you create that plan, you have to fund that plan, and then you have to go out and execute that plan. So right now we're in the funding phase. We're very busy at work developing our budgets for 2027, but you have to back up several years and go back to really the last cycle and lessons learned from that cycle. And our membership might remember that we created the SPC reserve fund back then. And really what we saw back in the last cycle during the contract 2020 negotiations was pressure that was put on the budget during the cycle really came from the SOS. We call it now, it was called the SPC back then, which is our strike and operational support committee. As that pressure ramps up, that puts pressure on the budget and then also our outreach activities as well.

And then negotiations. As you get deeper into negotiations, the team is traveling. More time on the road, you're adding more resources in there. So you have to make sure that all those things are funded. We created that reserve fund to be able to do that. If our membership remembers last time around, we had to raise our dues to 1.31% for that 13-month period. We didn't want to do that again. So we're very well-prepared going into this negotiating cycle. Our net assets today are sitting over $61 million. Our long-term reserve fund's over $41 million. Our SPC reserve fund is over $6 million. And we have a capital reserve fund that's over $3 million. So we feel like we're very adequately funded to address our capital needs in terms of facilities as we grow and making sure our staff and committees have a place to sit, a desk to work at and computers to use.

And then also our SPC reserve fund is there. As those SOS activities start ramping up, things that our membership can look forward to in the 2027 budget is using those surplus funds to help after we've applied the surplus or the surplus funds from those reserve funds to be able to produce a balanced budget for our membership. So we've been very prudent about our fiscal management. We've kept our expenses low. We're unlike other unions. You look at APA that's in contract negotiation six months prior, they go to one and a half percent dues and they stay there through the cycle. You've got Alpha at 1.8% dues. They're coming down a little bit off of that, but still we're in a very unique situation where we do all this at 1% dues.

So right now we're in the part of the cycle. We started a couple months ago where we started working with our committees and developing their requests to really create that strategic footprint to address the strategic needs that Kevin's been working on and the entire union, Jody's support as well, and making sure that we have the funding in place to go ahead and execute our plan as we approach 2027 and that opener in July.

The other thing we have to do is make sure we're ready on the staff side. So it's not only committees, it's staff. We have a growing pilot group, added a bunch of pilots to our ranks last year. We'll add 1,171 to our ranks this year. Probably a similar footprint next year. So we have to make sure that our committees are ready to address those needs, but also that we have a staff behind them that can answer the calls when our pilots need help. So those are all the things we're working on and expect to see more here in the coming months, of course, in September and then into October as the membership gets a chance to look at the budget and vote on the budget.

Amy Robinson:

I was going to say we're going to hear more from you in September for sure, Hank.

Hank Ketchum:

Absolutely.

Amy Robinson:

Okay. I think that's a good point to kind of pivot to a follow-up. Let's talk now a little bit about our relationship with the Company. It's been kind of touch and go at times, and so let's go ahead and have you speak a little bit to that.

Jody Reven:

Yeah, I think one of the things that we've talked about for a long time, and in fact it was even a quote that they attributed to Herb Keller when he said, "You get the union that you deserve." And we kind of saw that. We've all been here through some rough patches. Kevin got a warn notice. We've been on the team for quite a while. I led the team through concession talks as an NC chair. It's kind of a, would you say a new jet, new day once we got the contract. And so I care more about results and I think everybody up at this table cares more about results than rhetoric and being the tough guy. So with that, what we have seen is trying to have a more collaborative approach until we're proven otherwise. We haven't been proven otherwise. So there's certainly certain levels at the Company that we've had challenge with over the years, labor relations being one of them, a certain level of mid-level management.

But what we've been able to do through collaboration with some of our peers a little bit higher up, say the VP of flat ops and above, is to get some pretty good results. We've settled several mediations and arbitrations. I mean, frankly, there's some people that work here that wouldn't work here right now had we not had those relationships. If we were taking a dump on our predecessor or our counterparts at the Company and then ask them to save somebody's job, how do you think that would go? So we think it's a good approach for now until we're proven otherwise. We've sat down with Justin Jones and the C-suite and opened up some dialogue there. And so I think it's going fairly well. Any other different takeaways?

Kevin Hornburg:

Yeah, I think that's fair, but we're also not naive to the fact of what's happened in the past. We've seen the delays, we've seen all that happen in the past, and we are very aware that that could happen again. We've also seen the Company 24 months ago, Elliot showed up. They changed the business model very quickly because the approach was very directive and they got the job done. They can do that in our next round of negotiations if they want to, and we're going to make sure that they put the resources behind it.

Jody Reven:

That's a great point.

Hank Ketchum:

Yeah. One of the things we're focusing on too, and we did during Elliot's involvement with the Company, we're kind of critical of where the business was and felt it needed to go in a different direction. Elliot was able to come in and make changes on the board. And also the C-suite went out and executed a great plan. And we're seeing the results of that today, very positive results. So we're continuing to look at that as we open section six. Kevin, you touched on it earlier. We want to make sure that the Company's on strong financial footing and that producing great results. And we saw that in the second quarter. Number two in the industry and operating margin at 6.7%. So it was an impressive showing and we hope to see that continue going forward, have our profit sharing restored and continue to build on that.

Amy Robinson:

All right, I think so that pretty much covers us and the Company at large. And we're going to talk about contract 2029 here in a little bit, but we still have some implementation of contract 2020 left to go. So let's recap that and discuss what's left. And I think a good person to go through all of that is someone who was part of the team that negotiated the scheduling rewrite and has also worn a few hats on the scheduling and analytics and contract admin teams the past few years. Dan O'Connor, can you go ahead and give us an update on all things implementation?

Dan O'Connor:

Thanks, Amy. I just want to give a 41,000 foot view of where we're at with contract 2020 implementation items. Obviously the bottom line is we're getting there. Obviously this is a rewrite, especially in the scheduling section. So there's not only a lot of new program that needed to happen for new provisions and processes, but there's quite a few processes from the old contract that had modifications. So a lot of programming touches obviously, and it's pretty big lift. Looking at this list subjectively, I would say, but most pilots probably agree, a lot of the bigger ticket items have been programmed and implemented, pay overrides, release to check-in, ELA changes. Maybe one of the notable exceptions on there is probably the vacation bidding process that will be implemented next year for 2028 vacation bidding. But most of the bigger items have been implemented. That being said, you can see from the list there, there's still several that are being worked on now.

The work does go on, Red Eye Reserve there. GDO automation for GDO placement, that sort of thing. Red Eye Reserve being coming this fourth quarter now. So the bottom line is the work is ongoing. There are weekly meetings at different levels on a lot of the things still to come. And I will point out just because something is green on this list and it says it's implemented, the work has not stopped, particularly some of these like RPP, the reserve profit process, and also on trading bid. Obviously there's still improvements on that. There's still ongoing work on that implementation, and I think there's still several improvements on that process still to come. So bottom line is we're getting there. I won't go through every item on this list and more everybody, but if you do have a question about something specific on here, please write it in and we'll try to answer that during the Q&A part of this.

Amy Robinson:

All right, thank you. That did cover a lot of the topics in implementation, but several of those do tend to fall in the scheduling world. And we'd like to hear from Scheduling and Analytics Committee Chair Scott Playler and walk us through what's going on on your end.

Scott Plyler:

Hi, thanks, Amy. Yeah, we do continue to work on all of the implementation items. Meagan Nelan, she's on the call as well. She's leading a lot of the requirements reviews that we go collaborate with IT over at Southwest. We've probably helped them in hundreds of cases where they were about to program something incorrectly if we hadn't stepped in there. It doesn't mean they get everything right, but because we've created that relationship with them, it's definitely helped to resolve some of the issues a lot quicker and also get things on the docket that aren't necessarily in the contract, but need to be done like PNZ toggle, for instance.

If you want to put on, I can give a real quick overview of what's been going on this summer and then what we have looking forward to in the schedule going forward as well. And then we can get to the questions on specific scheduling items a little bit later.

So looking at the schedule outlook, everybody's seen that it's been a little bit of a rough summer for on-time performance. It's been about 65%. The Company's had a big emphasis on the completion factor over the summer, and that's driven just some of the longer duty days and then some of the reassignments. We've had about 16% reassignment rates right now, which is driving a leg change override. We also have premium has been going out. About 10% of all duty periods have been for premium open time, and quite amazingly 7% of all executed duty periods have been a voluntary double time. Along with that, we have 15 JAs and 1,688 overnight JAs where you get extended an extra day. So it's been kind of a busy schedule for the summer. If you look at the chart there, it's about to fall off. The blue line is what the actual schedule has been in terms of a block per hard line.

And then the orange is what SWAPA projects where a status or a normal place would be. So anytime the blue line goes above the orange line, that means we're looking at more premium, more VDT, and potentially some other issues. August schedule actually drops off right after August 3rd pretty precipitously, about 250 flights a day to 700 flights a day, depending on which day of the week. So we'll probably see a little bit of drying up with the VDT in premium, but also probably a little bit of shorter on the duty days and reroutes. I want to point out though that in October, this ramps up quite significantly. Part of this is the network is going back up to the similar levels to the summer, which is why we're hiring so many and doing so many upgrades right now. So we anticipate that we're going to see a return to the premium of VDT for October pretty much through the holidays.

So that's our update for now.

Amy Robinson:

Thank you, Scott. Okay. Implementation and scheduling cover do cover a lot of ground, and I do think it's an appropriate follow-up to go over outstanding grievances and settlements. And so to speak to that, let's go ahead and talk to contract admin chair Dave Kudish. Thanks,

Dave Kudish:

Andy. Just a quick update from us. The total number of outstanding grievances under the current CBA is 14. Those are 14 CBA interpretation cases. So far under this contract, we've settled 19 grievances. And just to give a frame of reference, under the last contract in the first two years, we had 155 grievances filed. So I think that speaks to the strength of the language and also the collaboration we're experiencing with the Company most of the time. So just for the membership to realize that when we file a grievance, that's the end of a fairly long process of pre-grievance dispute resolution. So the vast majority of cases are settled well before we get to the point where we actually have to file a grievance.

And that's the reason why a lot of times when members write to us and they're kind of wondering why it seems to take so long to get back to them on an issue is because we are going through that free resolution process and that can take, it depends on the meeting cadence, but it can take up to two months to get to the point where we are truly at an impasse and it's time to file a grievance and then move forward with the next step.

In terms of just a couple of recent settlements, I mean there's more than this, but I think the ones that are probably of the most interest to the membership, we had a military monthly base earnings grievance that was getting fairly close to going to arbitration that we settled. That was related to short-term military leaves not counting towards your pre-disability earnings. So that had a big impact on people that went out on disability. So that was settled for the impacted members and will be settled moving forward for anyone else that would be impacted by that. Another one that has some broader applicability is the temporary living expenses for displaced pilots. That was primarily centered around hotel reimbursements for pilots that are on wrap and then were assigned a trip. And then they still had the hotel room that they had to pay for, and that was being denied and we got that favorably settled.

And then of course the membership is probably well aware of the deadhead seat assignment and premium seating grievance that was from a little further back. In terms of SBOAs that are on the horizon, probably the next one that is on the books currently is regarding using your uniform allotment to purchase luggage. We are scheduled in early September to take that to arbitration. We're in the prep now. We do have some indications that that may settle prior to arbitration, but nevertheless, we're preparing to arbitrate it. Another one that is near and dear to our hearts that is coming up at some point, and it's not hard scheduled yet, but we're getting close to scheduling is the pre-board denials. Some of the membership probably remembers that we had grieved that issue under the previous CBA. We reached a settlement. And then under the new CBA, it's still happening. So we were forced to file a new grievance on that issue that we will likely have to take to arbitration.

And then another one that is, it's actually not grieved yet, but it's coming up a lot and it's going to be grieved I think this week because we are at the point in the grievance resolution process where we're just not going to agree on the interpretation is regarding overrides on deadheads that pilots are released from. The Company has kind of changed. I would say they changed their interpretation on those, so there'll be a grievance on that. It's overrides when you're released, taking the overrides away that you were due at the time of release.

I think just in closing remarks, probably our biggest challenge as the contract admin department is getting the right issue in front of the right person at the Company. There's a lot of, I think Jody kind of mentioned it where the Company is not just one monolithic thing. There's different departments that we deal with and certain departments are more collaborative than others. And so if we can get the issue in front of the right audience, a lot of times we can get it solved prior to actually ever having to file a grievance. And then the last thing I'll say is there's oftentimes we actually in recent history have not had to actually arbitrate things. We call it settling on the courthouse steps. And a lot of times the reason for that is because the first time when somebody that's really objectively looking at the issue is just prior to arbitration.

Before that point, it's been people that can sometimes be emotionally involved with the issue, and so they just are not able to just be objective about it. And when you get to the point where you're about to arbitrate, that's where you get more objective eyes on it. And a lot of times we can get that settlement. That's really it for my remarks. Amy, back to you.

Amy Robinson:

Thanks, Dave. I think this is probably a good place to go ahead and switch gears a little bit and talk about something that we honestly can't talk enough about. And that's the Sarvy education poll process or SEP process. Obviously we in COM have been very tight at the hip with the SMEs as we move through each of the phases, but the negotiating committee has definitely been really deep in the trenches on this one. So that probably warrants an assessment of how all of those things are going from NC Chair Kurt Heidemann. Kurt.

Kurt Heidemann:

Thanks, Amy. I want to say thanks to everybody that's on the call today. This is great to see everybody showing up for this. That type of engagement is exactly what we're looking for in the SEP process. We just finished out our third cycle. We already completed section one, quality of life and just finished leaves and benefits. This week is a quiet week publicly, but behind the scenes, we're busy starting up the next blank sheet survey for retirement and expenses. Meetings are being held among SMEs regularly. We're engaged with comm, trying to figure out what are the issues that the membership highlights. We can anticipate some, but ultimately it comes down to what you tell us in those blank sheet surveys. And that's where that decides where the direction of the education goes. And then it explains or it drives where we're going to ask the questions.

One thing I will say, I do follow a lot of the discussions on social media and emails from the membership. I do know there's some angst out there when it comes to things like the regular plan. And what I do want to say is we're going to ask about third rail issues. We have to, we have to do our due diligence. If you weren't here back in 2017, 18, 19 when we did the first SEP, we did ask those questions. And that's not to say that we want to get rid of any of those things. Let's take the regular plan. I know that three of the four people on the NC right now are members of the regular plan. We have a vested interest in that. So it's not that we are planning to do anything negatively with it, but we need the data so that we can be objective and present it to the Company, to the board to set where we need to drive the deal so that it meets our pilot's needs.

And that's really what it comes down to.

The only other thing I'll say is we're going to start hitting the scheduling issues after we do the retirements and expenses. You'll see that for a couple sessions cycles in the fall. We're going to brief the board early in September on the soft topics and then the scheduling topics going into the December board meeting. Rolling into next year, we have some time set aside to talk about a second fleet type. We sort of had a brief discussion about that early on a couple cycles ago, but we'll dig in deep. I think a lot of us are anticipating the Company's going to make a move, but even if they don't, it's still a worthy conversation to have prior to entering section six in July of next year.

And then next spring, that's when we'll really start focusing on the contract comparisons and the economics of the deal. The market will be moving by then, and so we want to present the membership with the most accurate and up-to-date information we can. And so that's basically what I have to say about SEP. I'm sure we'll talk more about that and some other things in the Q&A. So thank you, Amy.

Amy Robinson:

Of course. And since we are talking about SEP nearing the halfway point, I don't think there could be enough said to say participation is key. That definitely need to happen. But since I have you, and it does make sense to go ahead and ask you and Greg from the Economics and Financial Analysis Committee about some current events. And I think the biggest one is probably, as Kevin mentioned earlier, side letter four and middle seat override. There's been a lot of communication and discussion on this in the past couple of weeks. Do you have any parting thoughts before the vote closes on Thursday?

Kurt Heidemann:

Number one, I think the most important thing is to vote. I think a high turnout shows the Company that we are unified and that we are engaged, and it tells the Company that they're not going to get anything past us. So whether you vote yes, whether you vote no, the important thing is to vote. Beyond that, I would say that this deal was presented to us as an opportunity when assigned seats came on the scene after we signed contract 2020, thanks to what Elliot was doing. I think Kevin mentioned how or Hank mentioned how Elliot was being much more directive in their control over Southwest. So that assigned seating came on when none of us really expected it. We had very limited language because again, it was not something that the Company had brought on for a long time. And so we did have some language, but it wasn't great. This is our first opportunity with leverage to begin to carve out some more benefits for our members.

The only thing I'll say is, I'll let Greg talk about the economics of it, but I will say that from a negotiating perspective, soft money trumps rates over the long haul. In the last few years, pilot wages have become a commodity. The industry has consolidated onto rates of pay. We are 1% above United's 900 rates right now, or we will be very shortly a couple percent above that at the beginning of next year. We are above Delta plus one right now. So anything we can do to find soft money is going to pay off in the long run. Work rules, overrides. I think we all see the advantage of LCO and some of the other things we've achieved in 2020. And that's my perspective. I understand why other people see the dollar value as the flat simple number to compare, but that's just sort of my perspective.

I'll turn it over to Greg if he has anything more he'd like to talk about with the economics.

Greg Auld:

Sure. Yeah, thanks, Kurt. Some time ago when the Company came to us with the proposal of adding two seats and of course triggering the reopener, SWAP asked our committee, the EFA committee, to take a look at the potential value of the additional two seats. And so we set out to just looking at the data that we had available and trying to frame the value of two additional seats. And remember, we're talking about the Company's plan is to fill in the extra seats in the exit rows with ELR seats and maintain two by two seating in the last row. That's their current plan right now, and that's what they'll do going forward if the 177 seat issue is not approved by the membership. If they do approve the additional two seats, then they'll fill in, they'll go to three by three in the last row of the max eights and 800s.

So how to value that, how to figure out what that might be worth. Well, the Company has about a 77, give or take percent load factor. It was just under 80% For Q2. So we know that all the flights, of course, aren't full, so we had to figure out what number of flights might be affected by having the two additional seats. So you focus on flights that are booked at 171, 172 or greater. Ferry those would have the benefit of being able to sell one or two additional seats. So you look at the actual yearly schedule for 2026, there's about 640,000 max eight or 800 flights that depart in the peak hours of the day between 7:00 AM and 7:00 PM. And then you figure out, well, what percentage of those might be affected by this? And by factoring in the system load factor, multiply that by a one or one and a half, two seats you think might be available by an average ticket price. And we came up with a number that was around $20 million, give or take, all within the margin error that we could expect.

When we did the other side of the equation, with the middle seat override, how much TFP has paid in deadheads and the percentage that we have seen. And that has gone up just a little bit in Q2, what percentage of deadheads we might see going forward, and multiply that out by the override and by, again, the average TFP value. It turns out that both of those numbers are really close. The revenue available, I should say the pilot share of that revenue, which would be around three, $4 million. And the value of the middle seat override also worked out to be around three or $4 million. So from the economic standpoint, that's the information we turned back over to the NC and they went forward with their negotiations.

And if we want to get into more detail on that, we can handle that in the Q&A. That's all I've got.

Amy Robinson:

Thanks, Greg. Before we carry on, execs, do you have anything to follow up on any of that on side letter four?

Jody Reven:

No. Again, we're not here to make this all about side letter four or sell letter. We brought the NC in once upon a time when the Company was interested in us, and then we didn't have much interest at the time back when Elliot was... We were kind of waiting to see how the dust settled. Then they came back to us again recently and they had talked about the seat map. Of course, we couldn't ignore the revenue. And we don't want to repeat the sins of the past where we did an 800, the side letter six, and we actually got no revenue for it. So we tasked the ENFA to look at these values that Greg was just talking about. The board came together, was briefed by the NC, and we sent them there with the direction to negotiate. And one of the things they talked about that could be on the table was this middle seat override.

And it kind of got there because of this polling cycle, the timing was fairly good. During the Deadhead discussion, I believe it was 90% of pilots said, "I don't want to sit in the middle seat." So the Company said, "Hey, that's something they could do." There were quite a few little parts of the side letter that they didn't quite want to agree with. We want to make it temporary. And if we dropped down below the level of seats, then the override went away. And the board said, "Absolutely not." So NC got to where it needed to be. And the board agreed almost unanimously we need to send this out for the members' consideration. And I agree. So anything to add?

Hank Ketchum:

No, just what Kurt said, just get out and vote, whether it's a yes or a no. The engagement's what we're looking for. And read all the material, make an educated vote and just vote.

Amy Robinson:

Awesome.

Hank Ketchum:

Nothing to add.

Amy Robinson:

Okay. We've covered a lot of ground, but we do have some questions in the live chats and that we've gotten some that we received prior to that we're going to read today as well. So I'll go ahead and get into some of those and I'll make sure to give them to people that are not appropriate so that we can make this really confusing and fun for everyone.

Jody Reven:

Sounds like a hoot. All right, here we go.

Amy Robinson:

So let's start with the first one is, "What is the plan to fix ELIT? 17 of 31 days in Baltimore currently cannot be traded off with the Company open time due to the reclassification of red-eyes with domicile days rather than duty periods." I think that's probably a Scott question.

Scott Plyler:

Yeah, I can answer that one. The question says that it's due to the red-eyes and doing it by domicile days, and that is part of it, but particularly in Baltimore, taking a look at that for August, we all know that the inventory that comes into ELIT comes from the blank line drops. They don't hold anything out from the first round lines, but anything that comes from vacation training overlap drops in the blank lines falls into the ELIT inventory. For August, in particular in Baltimore, we had 184 blank lines and we had 121 vacations. So that's like a 65% vacation rate. Normally you would see about a 42% vacation rate. Part of that is due to planning overloading August instead of the summer with the vacations to meet our distribution limits. And then also some of it is due to, we've had a lot of upgrades.

Baltimore is one of the more junior bases on the captain side. So we had a lot of extra vacations there, probably about 40, 45 extra vacations in Baltimore in particular. So that means you probably had at least another almost a hundred duty periods pulled due to... I'm sorry, probably had another hundred pairings dropped on top of what you would normally have. So having that massive amount of inventory is what caused there to be very high negative numbers. I did see it was like a negative 18, negative 33, right at ELET start. That's not due to the red-eye component going to domicile days. There was at most on any one day, there was four of the red-eye pairings that ended with red-eye. So that would contribute four to the duties to cover under domicile days. So the biggest part of it is because of the vacation overlap.

The second part of it is because of the domicile days. On some days that probably caused there to be an additional four duties to cover out of the 28 on any given day. So it contributed to it. It contributed to other days going red probably faster than before. But overall, the massive negative numbers right at ELIT opening had more to do with the massive amount of inventory.

Amy Robinson:

Thank you, Scott. Okay. Our next one is a question that was emailed in to us and it's, "I would like to know what the union is going to do to mitigate displacements in the future." And this is from Brian M. I'll let Jody take that one.

Jody Reven:

Yeah, I'll start with this from a 40,000-foot view, and then if there's anybody from SAC or anybody wants to weigh in. But the short answer is you are going to tell us what we're going to do to mitigate displacements. I mean, obviously the Company makes business decisions about where they put those aircraft. Our contract is set up in a seniority-based system. I hear this, "Well, I don't want to subrogate seniority." This is one side of the argument. Well, we subrogate seniority all over the contract and trip trade giveaway and ELIT and the cap itself. And we do it based on this idea of fairness. So you saw in this polling cycle that already went out, we talked about the problem, and this is part of the SAP process. We talked about the problem we're trying to fix. We educated folks on how the displacements, and then what SAC did and other folks in ENFA is they said, "Hey, these are some things that could mitigate. Are these acceptable to you to put into the CBA to mitigate that?"

Because it will happen again. We'll open another base. There will be displacements again as the APL triggers and we have to have another base, et cetera. And so I guess we're looking forward to that in this SEP process. What is it that you guys want to do? And then the other part is we defend the contract. So as Kudish just talked about, there were some mitigation things we had in there for pay for displacements and that type of thing that in the beginning, some of the good idea folks at the Company and different cost centers thought, "Well, we just won't pay that." Or, "Hey, I'm getting rubbed the wrong way because the guys are turning in these receipts to me and they could have checked out of the hotel." Well, that's not what the CBA says.

So defending the contract is another part of that. So I think I've talked enough on that. If anybody else wants to jump in.

Kevin Hornburg:

We've also done... It's about using the right tool at the right time. So we grieved and won or settled that grievance about the hotel displacements, but we also had implementation actually move up a little bit early. And the displacements was 50% domicile ride of return. The Company implemented 100% domicile right of return before. And that's helping some people get back. And it's not as much as we'd like, especially not in Denver. And then like you said, the SCP is built to inform next contract when we can change additional things to help with the displacements. But it's a complicated issue because there's average pairing links across domiciles. There's TFP disparity across domiciles and where you potentially willing to give up some things across domiciles to make displacements less likely. And there may be more from Scott or somebody else or you got anything?

Hank Ketchum:

Turn to Scott if he has anything to add.

Scott Plyler:

Well, like you said, it has to do a lot with what the membership actually asks us to do through the SEP process. And pretty much all the solutions require some sort of membership vote or side letter to do whether we've talked to a lot of other airlines getting prepped for this next round of negotiations and potentially for other negotiations and things like temporary domiciles, base swaps, how they actually do right of return. Do they even do displacements? How they all handle that. So there's lots of ideas out there. It's just a matter of which one the membership directs us to do through the board of directors.

Jody Reven:

That's a good point.

Amy Robinson:

Okay. This next one I think is going to be Scott as well. "So can you address how the Company is able to not count three and four-day trips toward the contractual maximums allowed in monthly line construction, but does count them for duties to cover limits?" So this is from Todd R.

Scott Plyler:

Yep, that's a good question, kind of timely. So just a quick history review. This particular red-eye language in both ELIT and in the planning sections comes back from a side letter in 2012. It got repeated in contract 2016, and then it's made its way into contract 2020. A big part of the issue here is, and I want to say that that side letter is what got us the calendar day average daily guarantee, which is what made some of these red-eye trips where you just do two duty periods, but you get paid 19.5 or three duty periods to get paid 20, 26. That's where that came from, was from that particular side letter. The whole point of doing that calendar day ADG was to discourage them from building inefficient pairings. And that kind of leads us into, well, what are we doing with red-eyes now?

Well, Elliot came in and they forced the red-eyes to start a lot sooner than was necessary than we were anticipating or even the crew planning was anticipating. They didn't have a lot of the technology built out. We're still waiting for red-eye reserves. And therefore they started doing the red-eyes all with the red-eye at the very end of the pairing, which creates the calendar day ADG and makes it very nice paying pairings, but also contributes to ELIT as well. So not having that Red Eye reserve, we have a lot more of those pairings. Once we do get Red Eye Reserve, we'll start more of the pairings with the Red Eye at the beginning and you won't have as much of the calendar day ADG going on. We won't have having less duty periods than calendar days on a lot of the pairings.

That will mitigate some of what's going on there, but that's the way it was negotiated in 2012. And seeing how we didn't have red-eyes yet, even when we were doing the rewrite for 2020, it was kind of hard to anticipate exactly how the Company was going to build them. I will say they really do not like having to pay the additional average daily guarantee. That's why you're seeing the red-eyes evolve. And once they get the red-eye reserve probably in October now, you'll see the red-eyes evolve even more and we'll have less of a problem because we'll have less of the red-eyes having less duty periods than the number of domicile days.

Amy Robinson:

Okay. Thank you, Scott. Our next question I think we'll send to Kurt. "What are the implications if we pursue improvements to the regular plan? I'm afraid that we will have negative consequences for that plan that have been overlooked while seeking improvements." This is from John C.

Kurt Heidemann:

Thanks, Amy. I'll say that the question is a valid question, and I think the question is being asked at the incorrect time. Right now, we are in the data gathering phase of the SEP process. We understand that the regular plan is the grandfathered plan. We understand the legal implications of that. What we don't understand is what's the membership's appetite for going beyond the regular plan? And what path would that look like? Whether it's a sub-med plan, whether it's regular plan plus, whether it's modifying the current regular plan, whether it's whatever the case may be, that's where we want to find out where the membership is at. Once we understand what their interest is, then we will do the proper legal due diligence to make sure that whatever we do doesn't compromise or invalidate what we find. Like I mentioned, all of us recognize the value of it.

Most of us personally recognize the value as regular plan participants. So I recognize it's a concern. We are not going to go ahead and invalidate it or put it at risk in any way, shape, or form. And we're a step one of a multistep process to get improvements to our benefits plans in contract 2029. And this is just the first step.

Amy Robinson:

Okay. Thank you, Kurt. Our next question is for one of the execs. "With the vote for 177 seats, are the negotiated terms enough? Looking back at the way we allowed the same price structure between the 700 and 800, this current side letter negotiation feels similar to the negative aspects of old. The wording and promise back then says there will be negotiated new pay rates, not a possible override, and easily not paid out for many different scenarios. If the Company pursues Max 9s or even the 10s, they can use that as an extreme advantage for revenue with seat layouts while also using the extra space for tiered seating like first class while still abiding by the 177 seats."

Jody Reven:

Well, I think probably the end of that question is probably more the appropriate place to start because we already kind of covered lessons learned for the 800 and for the additional revenue for all the additional gauge. But we're talking about two seats here. So the reopener language says for anything above 175. So that scenario, if you're going to put 175 seats in a Max 9 or a Max 10, if that made good business sense, we're still just talking about two seats because they could do that today. It's a common type rating. The Max 9 or 10, just exploring that a little further. Right now we have SIMs at capacity in the building. So a Max 9 or Max 10 present day would trigger 1G, which is also another reopener, which you can't put that into service without swap as agreement.

So really long answer to say we're just talking about two seats and without going into all the business problems the max nine or 10 would have within our network. Anything to add?

Hank Ketchum:

Yeah, the only other thing I would add is, and you hit on it's two seats, it's not a lot of revenue. The EFA's done the analysis on that, and you're looking at the two most least desirable seats in the aircraft. So if you add those two rows to the back of the aircraft, the three and three, you're talking about selling two middle seats that are up against the lavatories. So you also look at our anemic load factor, 76.8%. Likelihood of those seats being sold diminishes. They're going to sell on certain peak times and peak days of the week and certain routes. We did all the analytics. I'm very sensitive to the side letter that was negotiated for the 800. One of the reasons I actually ended up applying for the NC back in 2015. We got our 0% on that. This is not that. This is not that at all. It's two seats and just not a lot of revenue.

Amy Robinson:

Okay. I think our next question kind of references something Kurt said earlier, but I'm going to go ahead and put it out there for either the execs or Kurt. "How can you say soft money trumps pay rates when it ignores current CBA language? Only 5% of pilots are projected to receive MSO when every member would benefit from pay rates."

Jody Reven:

Yeah, I think that's very true. And I wouldn't say it ignores CBA language. It does a couple things. It is true that it's not a pay rate. And for that reason, it did not have to go out to the membership. But what we kind of felt like as a team is that's a technicality. So the membership does deserve to vote on this. The override does have our traditional revenue take. And the other thing I would say is in the past, the Company has said, "Well, we can't talk about that thing." For instance, an override because it's not a rate, because it's not specifically outlined in those terms of section one, which I kind of like the precedent. So if the Company comes to us with something else and they say, "Hey, we can't talk about this, benefit your displacement," for instance. "We can't talk about that here."

This just triggered by the reopener. We can point and go, "Well, you did back then when we did overrides." So I hope that answers the question. I don't think this is ignoring in any way. We're very aware about what the reopener language was. The part that says you cannot put this into service without swap as agreement. Our team literally added that in there. So we're very well aware of what the section one implication is.

Amy Robinson:

Another question comes up. "Why won't Southwest allow pilots to change our deadhead seats 24 hours prior to the flight instead of the current six hours and no change in side letter four?"

Kurt Heidemann:

I can answer that, Amy.

Amy Robinson:

Okay.

Kurt Heidemann:

That was a requirement that they had in their programming of the assigned seats. And unfortunately, that goes back to what I said earlier in my opening remarks, which is the language that we have in deadhead standards is minimal. And we all wish that it were better than it was, but it was a placeholder language that we established when assigned seats were beyond comprehension at Southwest Airlines. If you think back to 2023, '22, nobody realistically though that was coming. Bob Jordan was going every chance he could get saying, "80% of our passengers love to give it up and bags are always going to fly free," until they didn't. So the language that we had in there was limited. It did say that the Company would not put us in a non-premium seat or a middle seat or the last row unless they were the only seats available.

So based on that, that is the toehold of language from which we have established that we have the right to ELR, that we have an opportunity for MSO, and the fact that we've included training bus rides, which are not deadheads. So the fact that we've gotten that, I'm not trying to pat ourselves on the back, but it gave us at least an in. That six-hour limit is in no way part of the language, and it was not an opportunity here to get that to happen. The reason that they didn't entertain a change that here is it would've required programming changes, a tech touch. And we all know that they're behind enough on some of their tech issues that they did not have extra resources that they could devote to changing the window for our pilots. That said, I'm in touch with scheduling and with safety, and we work through the fatigue side of the house, and that's been brought up on fatigue as an issue.

And we are trying to work at that angle as well. It was also registered in this SAP process for quality of life. We do have data on that and how important it is to our membership as a whole. So it is something that we're looking at and we do have a plan to address it. And as Kevin mentioned early on, it's using the right lever and the right avenue at the right time, and this just wasn't it for us.

Amy Robinson:

Our next question came in and it says, "If I understand correctly, the Company has decided not to pay the one TFP for refused boarding with the crew, with the reasoning being the cost. What would be the recourse if they decided not to pay the MSO due to cost? Is this not a direct violation of the existing CBA?

Jody Reven:

So first misunderstanding there, there was a grievance before over deadhead pre-board, and the settlement of the deadhead was two TFP, not one TFP. And that was a grievance settlement, not CBA language. And so when the new CBA came along, they still kept paying that for a time, and then they stopped. And we do disagree with that. We do feel like, and that is still an open grievance item. MSO, on the other hand, will be in the language of the CBA, and it will be paid stackable just like any other override. So that would not be in question. So there is no CBA language that you can read that says if you're denied pre-board, you'll get two TFP. It's just a grievance settlement from the past.

Amy Robinson:

So let's go ahead and carry forward with the next question. Why does it seem that the prevailing assumption within SWAPA that if side letter four is voted down by the membership, that the negotiations for the two additional seats with the Company will be over?

Kevin Hornburg:

I'll take that one, Amy.

Amy Robinson:

Okay.

Kevin Hornburg:

The business plan that they've put together for moving the two back row seats into the two exit row seats, at some point that conversion will be complete and they don't have a mixed fleet anymore. There's some operational chaos that happens if they move 800s and maxes around. That won't be there anymore. And so their desire to put those two seats in may not be there in the future. Additionally, Bob Jordan and others have hinted at they want to go to a segmented cabin at some point. Any sort of segmented cabin takes us below the 175 threshold. So if any of those things happen, they don't need 177 anymore. And we're a year out from the early opener. It's a year and a half out from amendable date. So just we're looking at the timelines going, they probably won't come back and ask again. And that's it.

Hank Ketchum:

Yeah. And Kevin touched on it. There's three drivers here. One of the drivers is the passenger inconvenience. So they're having with the mixed fleet, you've got to move passengers around. They've already selected their seats. They go to the gate and then they've got to move around. And sometimes it's family. So the other driver's revenue. We've talked about the revenue piece of it. And then the third driver is the maintenance aspect. So tech ops on overnights has to pull the two, put three in, and then deal with the last row. This change moving from 175 to 177 just saves them time, saves them on maintenance expenses, and it's a temporary thing. Once the fleet's configured, they likely wouldn't be interested in talking about this anymore.

Amy Robinson:

The next question I think is for Scott. "Is the SAC reviewing pairings before they go to bid? And if so, what's your current view on pairing quality?"

Scott Plyler:

Yeah. That's a great question. We have a relationship with crew planning, though it's kind of on and off again sometimes. They do provide us with some collaboration data three months out based on the current network schedule, though that often changes. We do provide inputs based on that for standing input is more turns, more turn lines, more commutable pairings. As far as the production side, basically when the vacancy comes out is when they start working on the production lines for the month of that vacancy. So they have a little over a week and a half, sometimes maybe two weeks to do the pairings. Depending on who is actually building the pairings and lines for production, we might get a summary of what they're looking at and possibly a decision between this pairing set versus that pairing set just based on summary data. But we do not have a review of the actual pairings once they go into that production schedule.

So we don't really have that. That's something we had in our contract 2020 proposal, was to have more control and more say in the actual production pairings and lines beyond just what the basic parameters are. But unfortunately, due to some unfortunate events during negotiation, we had to come off of that position.

As far as I'm concerned, I think that we do need to have control of building the pairings and the lines. Notably, Alaska builds their own pairings and lines. JetBlue does that as well, and we should probably be looking into getting that in the next contract.

Amy Robinson:

All right. Thank you, Scott. So this next question is for EFA. "Did Southwest bid poorly for the spirit slots at LaGuardia or are they directing capital elsewhere? The second quarter report said we're only netting six aircraft this year, so the majority of the cash is still being returned to investors versus reinvesting in growth."

Greg Auld:

I could start with that and Eric can jump in as well. So did they bid poorly for slots at LJ? They didn't. I'm not aware of what their bid was. JetBlue won that bid and narrowly outbid Frontier for that. But Southwest has said repeatedly regarding their expansion and their network configuration, it's all about focusing on points of strength. They call out places like Nashville, like San Diego, like Austin, things like that. So LaGuardia does not fit into that template of looking at a point of strength. So it was easy to see why they did not focus on trying to win a bid for the empty slots at LaGuardia.

Amy Robinson:

Anything to add to that, Eric?

Erich Schnitzler:

Yeah, I would just add that the Company has repeatedly said they're focusing on their initiatives, the bag fees and extra legroom seating, all these initiatives that you've seen that are generating all of our premium revenue. And that's where the companies can continue to focus. Bob and Andrew and Justin repeatedly went over that during the conference call. And that's kind of where our focus lies. As Greg said, it's the focus cities. It's making sure the roots are making money. You probably saw in the March schedule change, we cut back a little bit on Hawaii, and that's because we are putting those airplanes to use in more profitable cities. So that's kind of where the folks with the Company is for right now. And as Greg said, we don't know if they put a bid in or not, but obviously it looks like JetBlue has won that and is going to be adding some flying there.

Greg Auld:

Hey, and I'll just address the second half of the question I forgot to earlier. Regarding the return of cash to investors, there were no shareholder returns or shareholder share buybacks in the second quarter, although there's still 450 million I think is what the current authorization rate authorizes. And of course they have the quarterly dividend. They do return cash. The netting of six aircraft, this is the plan And to keep, the Company has said repeatedly they need to earn their right to grow. And the way they're measuring that right to grow is when it's a financial term when they're weighted average cost of capital, when their ROIC exceeds their weighted average cost of capital, then they felt like they've earned their right to grow. They're getting close to that metric now, but are not ready to break out for growth that we have seen in the last decade or two.

So the six aircraft makes sense for the current expansion plans.

Amy Robinson:

Hank, did you have anything you'd like to add to that?

Hank Ketchum:

Yeah, I wrote the article a couple months ago just kind of criticizing the Company for doing a lot of share repos, and then also issuing debt on top of that. I was happy to see that in this quarter, as Greg said, $88 million dividend paid, no share repos. We do have 450 million left on the ASR. So going forward, I think the person who wrote in the question was also looking, are we returning money to shareholders versus growing? Company is investing in growth. CapEx was a little over $800 million in Q2. They'll continue to buy aircraft as they're being delivered, but they're also selling airplanes. So we're only netting the six aircraft because the aircraft market's very lucrative right now. We can actually go out and sell airplanes, make a decent amount of money on them. That helps to offset the CapEx with the amount of money that we're spending to buy new aircraft.

Those new aircraft are delivered and they're very efficient. They save us on maintenance costs, they're very fuel efficient, and their dispatch reliability's very high. So those are all good things. We like to see the Company investing in fleet and a modern fleet and driving costs lower. And that'll lead to increased profitability down the road, especially as we look to the Company likely having the youngest fleet in the industry not too many years down the road.

Amy Robinson:

Okay. Thank you for that. Our next question is, "Can we please add technology for pilots to select a seat preference of window versus aisle? And can we add a preference to avoid first row seating? And then the next statement is we absolutely need to get rid of the six-hour, one-hour limit. Deadheading can sometimes be terrible and we need technology improvements." One of the execs, you want to take that at Kevin?

Kevin Hornburg:

Yeah, it's been addressed a little bit already and we understand that this is a pain point for the pilots and we will be addressing it. We tried to capture data through the SCP process. We've talked to flight ops leadership about this. It's a tech touch and we will be working on getting that implemented. We don't have a mechanism right now to get it changed right now, but it's definitely on our radar to get improved.

Amy Robinson:

Our next question is probably for [inaudible 01:02:54], Scott again. "I've noticed several Dallas PM trips that pair a long overnight, 15 plus hours with a short overnight less than 11 hours. Can we push for more three and four day trips with all 13 plus hour overnights?"

Jody Reven:

I think before they weigh in, I'll say that this type of preference is something that we pull quite a bit. What's your priority? What's the most important thing to you? LinkedIn overnight, downtown, all that type of thing. And so depending on as you start to stretch the number of days off, et cetera, and have our contractual protections, a long overnight somewhere kind of starts to necessitate a little bit shorter one somewhere else. Scott, do you want to add to that? Definitely something we could pursue in the next CBA after we hear what all the CBA inputs are and the racking stacking.

Scott Plyler:

Yeah, that's definitely something to look at as, I hate to use it because people don't like it, but you squeeze the balloon. There's only so many things you can do with the duty periods and the pairing construction and you start to have to do trade-offs. So we will be doing the SEP process in September and October for planning, and we can certainly add some parameters in for that. Specifically to these pairings without actually looking at what they are, one possible explanation might be it's in a station that doesn't have a whole lot of overnighting aircraft, maybe not a whole lot of traffic. Maybe is it overnights in say Corpus Christi or Hayden where you just don't have that many options on having a. Maybe there is no real option between flights to have a 13-hour overnight and therefore the differences between an 11-hour overnight or something else.

We saw that in Houston with San Jose, Costa Rica. It was always a complaint of our Costa Rica commuters that the overnights were 12 hours or less all the time. So it could just be because of the way the network build is with that, but we can also poll on where you want that, where the pilot group wants that in the order of priorities of how to do the pairing construction.

Amy Robinson:

All right. Thank you, Scott. Okay. Our next question is speaking of new bases, at what point are we going to say we have enough board members to represent the pilots?

Jody Reven:

I think that's a plant, so I'm going to let Kevin take that.

Kevin Hornburg:

I'll take it. All right. So it's always a point of contention how big the board is. We're 29 large right now. We do not control how many people are on our board because it's tied to the number of bases. It would take a restructuring of the board. And at this point, anytime you say restructure, no one can even get past the conceptual idea of what a restructure would look like or how we would do it. And we polled about it a year ago and the membership said, "We don't want to change the structure right now. We want the representation at the local level with two board members for every base, two local domicile reps for every base. And as we see maybe over the next five years, we'll see that it's unsustainable if the Company keeps on growing bases and we'll have to readdress it."

But for now, we're at two per base and we're going to stay there until there's a grassroots effort to change it because the membership already said they don't want to change it.

Amy Robinson:

So I'm somewhat new to this. Could you please ask Scott to elaborate on the term squeeze the balloon?

Jody Reven:

Just if there's a restriction in one part of the CBA that we had this situation and I'll let Scott, I'm sure Scott will have a more intelligent example, but this idea of a long call, short call reserve, but we need to keep our current open time timeline intact and those two things aren't possible at the same time necessary without changing one or the other. So the number of days off that you have, if you want to stretch out a trip into another day, longer overnights, those numbers of days off become more difficult. Any other way you would say that, Scott, without getting in trouble?

Scott Plyler:

I though that was Damien asking the question.

Erich Schnitzler:

Probably.

Scott Plyler:

Yeah, but everything comes with a cost as you put things into DPOS to take the question seriously. Everything comes at a cost when you're doing the parent construction. So if you want to have shorter duty days, then you're going to wind up having a lower density and probably a lot more 19-5s. If you want to increase your duty hour ratio, the DHR to 0.8, we did modeling on that before the last contract. Well, since that increases the cost of sit times, then it's going to drive more aircraft swaps. So there's always something that when you push it to do one thing, you're probably going to get a little bit more of another. The issue more that SAC has is that we would like to have more visibility into what those various things actually do. We want to be able to do the runs for ourselves.

Maybe that's just so you have to prove it to yourself. We're pilots and we're very curious, but I think that's part of the issue we're having right now is that we make our requests and we're just up to the mercy of crew planning to attempt to actually do them.

I know that they are doing some of the runs, but optimizing other parameters to make the things happen that we're asking for is something that we definitely have an interest in. I've said it before. I've said it many times within SWAPA. I really think we need to have a pilot within crew planning or end in crew scheduling. And right now we don't currently have anyone there at all. And crew planning and crew scheduling aren't even under the VP of flight ops. So I think that's definitely an issue and I think that would go a long way for us to be optimizing pairings for what pilots are looking for while we're still could get the Company the costs that they're looking for.

Amy Robinson:

Okay, thank you. Our next question is, "Any movement of a straight pay for early departure meals? The inconsistency base-to-base in the gray area of hotel meals available are causing more trouble for pilot coordinators and chiefs than necessary. Also, lobby time versus scheduled push time would be a better trigger." Kurt or one of the execs wants to take that one.

Kevin Hornburg:

This is something we talk about all the time, and we would love to get any discretion out of going through chief pilot's hands. And this is one where they're starting to make some movement there. We don't have a resolution yet, but I don't know how close, but we're hopefully going to get to the point where it is. If it's under a certain threshold, it's going to be approved.

Amy Robinson:

Okay.

Jody Reven:

Yeah. We've been hearing for the last six months that the chiefs were going to be instructed and Concur was going to be reprogrammed, that a third per diem would not even be scrutinized. Anything above that would be on a case by case. They agreed right after implementation that there was no maximum. And so they're trying to find something where some chiefs, for instance, Orlando has way more of these than anybody else because of the timing of their pairings. And so different parts of the different bases don't really have the issue. Orlando seems to run into it a lot. And so it's something we bring up at every bimonthly and it's almost, it's just right there. It's so close.

Amy Robinson:

All right.

Jody Reven:

Until then the grievance grows and the numbers on the list grow. And so we'd like to get this off our plate. If you're watching, get this off our plate.

Amy Robinson:

Okay. All right. This one is back to Scott. "With the addition of personal net-zero. Has there been any looks at when a pilot's ELIT into a longer trip generated at a net-zero that it becomes a personal net zero instead?"

Scott Plyler:

Well, I like the idea. Just to start out with PNZ being a new thing with this contract, literally just started this year, and we've had over 3,300 of them issued, and 2,300 have actually been used. So it's been a popular addition, getting some of your time back on top of getting the pay. I think they're also using it over in contract admin to settle some issues as well where you've lost some of your time. We are working on getting the PNZ toggle programmed in there, not something that's actually in the contract, but because of our relationship with IT, we're getting that done. As far as using that as your own, literally a personal net-zero or generating a personal net-zero when you trade down, that's certainly something we could look at. Going back to the trade-offs, we might have to take a look at how that's going to do things.

Well, if you're taking that for yourself, then there's probably not going to be a whole lot of net-zero for anybody else within the system. But just something to think about, but definitely something for us to explore during the SEP process come this fall.

Amy Robinson:

Okay, great. The next one I think is for Kurt, and it's, "How do you come up with the questions for the surveys and polls?"

Greg Auld:

Actually, Kurt pitched that to me. So that should pop up there. So I'll go ahead and take that one. Maybe people don't realize this, but swap a polling and EFA are the same person. I'm a member of the EFA, but I'm effectively, I'm a one-man swap of polling shop. What that means is I do the administration of the poll, but the writing and the curating and the approval process of the poll is worth talking about just here for a second. The SAP process is we're building now like we did on the cycle we did in 2017 through 2019. We did 16 cycles of SAP polling. For those that remember that, if you're new to the Company, you might be surprised at how much polling we did on just getting ready for contract 2020. We've truncated that down now to, I think it's nine or 10, help me, Kurt, if I got that wrong, cycles and they're a little bit more abbreviated, but the process is still the same. We do blank sheet polling first in which we ask roughly a dozen questions of anything we can think about macro level.

What benefits would you like that we're no longer in the CPA? Or what other functions of retirement would you like to see? What other expenses would you like covered? Things like that. And we actually use the history of the blank sheet polling we did several years ago as kind of a library to help create those blank sheet questions. We analyze those responses and turn those into major themes that come out of the blank sheets. And then that goes over to the folks and it gets distributed to the SMEs and COM shepherds this process to get all that education written. It's amazing what they do in a short amount of time to get all those issues addressed. And the Library of Education on every topic is amazing.

Out of that and out of the questions of the blank sheets is what then gets distilled into the follow-on polls. And we just finished a 40-something question follow-on poll on leave of absence and benefits, and we'll do that again. And the results of those polls go back to the SMEs, go to the board of directors to help set the ultimate table positions for the NC.

Last thing I'll say about the SEP polling is it's been remarkably effective. We actually are getting greater response both in rate and numbers to the individual topics in this cycle than we got in contract 2020. So that's great to see. And the other thing that we hear about as SEP polling, is because we send it to the membership, how do we know that therefore only a certain subset will choose to answer that?

So how do we know we're getting a representative sample of polling? And the way we validate that is we do a lot of sentiment polling through phone polling as well, which is to a scientifically selected demographic sample of the membership. And when we sentiment polling and we see the same sentiment questions that we do in our other web polling tell us those are very congruent and they tell us that the SEP polling and the other web-based polling we do, we have a lot of confidence in because it matches the phone polling. A lot of words there, but I hope that answers your question.

Amy Robinson:

Okay. Thank you, Greg. Our next one is back to Scott again. "Why are there so many four-day trips in our schedules now and is there potential to reduce them in the future? And is assigned [inaudible 01:16:24] a senior Baltimore first officer who cannot afford four-day trips in his schedule?"

Scott Plyler:

Right. Well, four-day trips are not the most popular except when you're bidding for a vacation or if they're truly commutable. And we certainly recognize that crew planning likes the four-day trips because it helps them distribute out rig. If they have a duty period minimum, 5.0 duty day, having a longer pairing with the other three duties allows them to get that up to average daily guarantee a little bit easier. It allows for better solutions for them. So it's mostly a give and take in negotiations about having four days versus not having four days. Again, the main reason that pilots and the SAC thinks they're useful is mainly for vacation overlap. But beyond that, we certainly recognize that most pilots would prefer not to do four days. They would rather have a denser three days. Something again that we would like to explore more by getting our hands and getting access to the DPOS programming and to see how that works out.

We did have less four days in our initial proposal for contract 2020. And in order to get the limitations by domicile, which we didn't have in the last contract, and the minimum parameters for other things like turns and two days and commutables, we had to back off on that in order to get that accomplished. So definitely understand where you're coming from. As a person who lives in a base, I certainly am not a fan of four days. I'm actually going to go fly again in August, and I certainly was not bidding for those as well. So I definitely understand what you're saying and something we can, again, be looking at in the SEP polling as well as pushing in our crew planning meetings for lower pairing length.

Amy Robinson:

Great. Thank you, Scott. The next question is, not sure if this is appropriate here, but has the Company shared any hiring or upgrade numbers for 2027? Hank, do you want to take that one?

Hank Ketchum:

Yeah, they haven't shared exact numbers with us, but we think that the footprint looks pretty similar to this year, probably in that 800 to 1,000 pilot range.

Amy Robinson:

Okay.

Jody Reven:

One of the things that was briefed at the quarterly business review that we were all at, the chief house there as well, was just the change in philosophy of current VP of flight ops saying, "Hey, we can't get behind again. We can't get ourselves in a situation where we have our training center overloaded." So they'd rather be a little bit overmanned and scheduling for the peaks instead of the troughs and have that inefficiency there than to fall behind again and not be able to take advantage of an opportunity. So at least it did sound a lot like next year looks a lot like this year, but there's no official numbers yet that we've been privy to.

Hank Ketchum:

And they're always looking at pilot supply too like we are. I think probably last cycle they paid more attention to it now going forward and they're always concerned is pilot shortage going to rear its ugly head again in their view. So to Jody's point, I think they're always making sure that we keep our staffing levels high, keep the training center productive, keep the sims full, keep the instructors working and the output. The other thing is you can look at deliveries and depending on which way the economy goes next year, you can see some growth in there or you could see what they've done this year. They've pulled a little bit of capacity back. It'll probably be in that 2 to 3% realm, but we think that steady hiring going forward.

Amy Robinson:

Okay. The next one I believe is either Jody, Kevin, probably. What company actions would have to take place for SWAPA to change its collaborative approach with a company and how would the membership know that a change has occurred?

Kevin Hornburg:

I don't think there's going to be a single thing that happens or a single trigger, but we know when we go engage with flight ops leadership and above that we can get things done. And when that stops happening, we would have to change our tactics as well or our approach. And we know that getting into the negotiation cycle, it's going to be different. They have gotten rid of all of their previous negotiators that were in the room last time and they replaced them with lawyers. We know that's a different dynamic that's going to go on in there. We know that the pace is not going to be fast. And we know that when certain levels of the Company get involved, then things move faster through labor relations. So we're cognizant of all that. We're watching it. And we know that we have to bring the membership along appropriately because we're not going to be jumping up and down on July 1st, the first day we're opening contracts.

We'll see how it goes, see if they're prepared or not, and adjust as we go forward after that.

Jody Reven:

I'd just add that this isn't just a three-person decision. We do deal with them week in and week out, and we have been getting some pretty good results at the higher levels, but we brief our board and are in contact with our core board constantly. We have a monthly touchpoint now. We're talking to them, we give them a weekly report about what's going on. So the board would start to see this and shape how we deal with a company as well. In the past, I mentioned earlier, Herb's quote, "You get the union you deserve." When people collaborate with us, I think you can find that we're collaborative. Some people at the Company might say, "Oh, that guy's a jerk." And other people at the Company would say, "All right, deal with him." We act accordingly. So when people collaborate with us, we're capable of doing that as well.

Amy Robinson:

Okay. The next question, I believe probably NC, but potentially the execs. Can the Company offer a sick leave buyback outside of the CBA as long as it does not impact the CBA in things such as sick leave accrual rate and sick bank cap?

Jody Reven:

I would say it would be a violation of the CBA to offer that something within somebody that's in the bargaining unit. It would have to be negotiated. So if you're staying in the bargaining unit, then I don't believe they could offer something like that. For them to unilaterally offer something that they give you at retirement, still arguably something that needs to be negotiated with the CBA in regard to the terms, et cetera.

Amy Robinson:

We have about five minutes left. Just want to let everybody know if we don't get to your question, we'll get your questions answered later. If we don't get your question on air, we will get them answered and we will make sure that you have access to that a little bit later.

Jody Reven:

Let me add one more to the last one, because it's something we're working on with a company present. So in the past, we've had retired pilots that have gone on or bearing nearing retirement or even in disability that have gone on to become a flight instructor. And they have offered some form of exchange for sick leave to go on to the new CBA. We're actually working through an issue right now, and it looks like it's going to be very favorable where somebody that has been on a claim has decided they might want to go and be a flight instructor. And the Company's working with us right now on solidifying, hey, we need for them to keep their current benefit on their claim. And the Company's been really helpful in doing that of late as best they can with it being a great big old company.

So that otherwise it wouldn't make sense. Why would I leave a very lucrative loss of license situation to go and do a job where I had to give up all of that? So we've been able to make that case for the Company and it looks like it's going to work out.

Amy Robinson:

Okay. I'm going to ask, I probably have time for a couple more questions, so I'm going to throw a couple more out there. The next one is, "Have there been any updates on excess NEC flowing into the market-based cash balance plan for 2027? And when this is approved, will it be something we can opt into or opt out of?"

Kevin Hornburg:

There's no updates. We're still waiting on IRS approval. Remember, it's just the 415C excess cash that would flow in. 401A17 excess cash would still come as cash or go into non-qual plans. And no, the way it is set up, there will not be an opt-in or an opt-out for that particular program. You can manage how much spill cash you produce, but there are some consequences. It's a nuanced discussion, but there will not be individual choice for that particular provision once it's approved. Another reminder, when it's approved, it has to be done on a calendar plan basis or calendar year basis. So it would have to get approval in pretty soon in order to take place on January 1st, 2027. If that doesn't happen, it wouldn't take place until January 1st, 2028.

Amy Robinson:

Okay. Okay. Our next question is, I'm going to go ahead and give this over to Dan O'Connor. If San Diego becomes the next base, would it be considered a code domicile base with Los Angeles similar to what American Airlines has done with Los Angeles, Orange County, and San Diego?

Dan O'Connor:

Quick answer is no. So there is some language in section nine in the CBA that allows code terminals specifically for Chicago, Houston, and Dallas. Of course, we ceased operations at Intercontinental and at O'Hare, and DFW's not open, so we're not using any of that language. And that was not supposed to be until 2028 anyways. And furthermore, it says if the Company is interested in any other city combinations, they'd have to come to SWAPA and they'd have to go for approval for that to the board. So if they did open it as a base, a domicile, then it would be on its own at this point.

Amy Robinson:

Okay. I think we've pretty much reached the end of our questions, but as I mentioned earlier, any that don't get addressed, we will certainly make sure they get addressed later. Do you guys have a wrap up you'd like to give for everybody before we get ready to sign off?

Jody Reven:

I'd just like to put in another poll for those that weren't here under the last negotiating cycle to make sure that you participate in the SEP, participate in the votes that come out, make a good educated vote on your own. I give an example of earlier we were talking a little bit about times that we subvert our seniority and we make that decision as a group. Early on in our careers, there was a vote on first come, first serve, and the captains kind of didn't show up as much as the FOs did. And the captain and the FOs carried the vote and we went to random, I believe, instead of seniority. So just an example, you may feel like your voice isn't heard, but that's the way to make it heard. Make sure you get out and vote. It also helps with the Company, helps with pattern bargaining for other folks to see that the pilots of Southwest Airlines show up when it's time to vote.

Amy Robinson:

With that, we're at time. So I do want to thank everybody for joining us on the call today, both our presenters and also everyone who attended to listen. Thank you all for joining.