Categories Earnings Call Transcripts, Industrials

Southwest Airlines Co (LUV) Q2 2021 Earnings Call Transcript

LUV Earnings Call - Final Transcript

Southwest Airlines Co  (NYSE: LUV) Q2 2021 earnings call dated Jul. 22, 2021.

Corporate Participants:

Ryan MartinezManaging Director of Investor Relations

Gary C. KellyChairman of the Board & Chief Executive Officer

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

Tammy RomoExecutive Vice President and Chief Financial Officer

Tom NealonPresident

Mike G. Van de VenChief Operating Officer

Linda Rutherford — Executive Vice President People & Communications and Chief Communications Officer

Analysts:

Hunter KeayWolfe Research — Analyst

Ravi ShankerMorgan Stanley — Analyst

Stephen TrentCiti — Analyst

Duane PfennigwerthEvercore ISI — Analyst

Catherine O’BrienGoldman Sachs — Analyst

Savanthi SythRaymond James — Analyst

Helane BeckerCowen — Analyst

Alison SiderThe Wall Street Journal — Analyst

Tracy RucinskiReuters — Analyst

Leslie JosephCNBC — Analyst

David KoenigAssociated Press — Analyst

David SlotnickThe Points Guy — Analyst

Dawn GilbertsonUSA Today — Analyst

Mary SchlangensteinBloomberg News — Analyst

Presentation:

Operator

Good day, and welcome to the Southwest Airlines Second Quarter 2021 Conference Call. My name is Chad, and I will be moderating today’s call. [Operator Instructions]

At this time, I would like to turn the call over to Mr. Ryan Martinez, Managing Director of Investor Relations. Please go ahead, sir.

Ryan MartinezManaging Director of Investor Relations

Thank you, Chad, and thank you all for joining us today. In just a moment, we will share some brief remarks and then open it up for Q&A. And you will hear from our Chairman of the Board and CEO, Gary Kelly; Executive Vice President and Incoming CEO, Bob Jordan; Executive Vice President and CFO, Tammy Romo; President, Tom Nealon; and Chief Operating Officer, Mike Van de Ven. We also have a few other senior executives with us for Q&A, including Andrew Watterson, Executive Vice President and Chief Commercial Officer.

We will make forward-looking statements today, which are based on our current expectations of future performance, and our actual results could differ substantially from these expectations. And we also had several special items in our first quarter results, which we excluded from our trends for non-GAAP purposes and we will reference those non-GAAP results in our remarks. So please see our press release from this morning and our website for more information on both topics, our cautionary statement, and a lot of helpful information about our results and trends.

And before we get started, I want to let you all know that we are planning an investor event in December, and I will send out more information soon, so stay tuned for that. So Gary, over to you.

Gary C. KellyChairman of the Board & Chief Executive Officer

Thank you, Ryan, and good morning, everybody, and thank you all for joining us for our second quarter earnings call. We are obviously very delighted at the turnaround in our business from the previous four quarters of $1 billion losses and our revenues nearly doubled in the second quarter from first quarter levels and that was on a capacity bump of 44%. Our revenues were much stronger than we had been forecasting just 90 days ago and all of that are course flowed through to better margins and better cash. Yesterday’s cash was over $17 billion and that’s plus a $1 billion line of credit, well in excess of our $11.4 billion of debt. So while our bookings and revenue trends are even better than the month of June and certainly better than the second quarter as a whole, we are very well prepared to manage and muddle our way through if the Delta variant affects our business. And so far, we’re not detecting any impact at all. Again, very strong bookings and revenue trends in the third quarter.

So, right now, I’m very pleased with all of that, very pleased with our revenue, our July business, and the outlook for the rest of the quarter. This has been a long struggle to get to this point of profitability in the month of June. Pandemic, of course, turned everybody’s world upside down and it’s still not completely right side up but I must thank our employees once again for their heroic and very hard work. Normal summer demand is always the challenge to manage and it’s of course even more so here in 2021, especially in June when we had technology issues and bad weather combined, it made it very difficult. Things are much better in July, still not where I want us to be, but we’ll continue to improve and I’m very confident that we will adjust as necessary and if necessary.

So our mediate focus is on running a very high-quality on-time airline and then gradually restoring our traditional efficiencies that are attendant with our low-fare point-to-point high utilization business model. And given the revenue recovery, obviously, our next focus is to sustain our profitability that we’ve achieved here in June and maintain stability going forward. Next year, we plan to resume new aircraft deliveries with the desire to restore our route network as needed to pre-pandemic levels. And clearly, the network restoration will depend upon travel demand, which may in-turn depend upon the state of the pandemic. So, worst case, we’ll reduce our growth and early retire our oldest aircraft, which will be accretive to earnings with the trade out with the MAX. So we’re very well positioned and very well prepared to manage pretty much any scenario here in the next couple of years.

So things aren’t back to normal yet, but clearly, all they have stabilized and are much improved, and we’re at a point now where we can actually plan and work on managing and spend less time on surviving the intensive care unit. And then finally, I did want to congratulate and welcome Bob Jordan. He will be our next CEO come February 1 of next year and the reception so far has been terrific. The transition work is well underway, Bob is very busy and he may comment on that, but it’s going very, very well. Very proud of Bob, he is going to do a terrific job and I’m going to hang around to support our team in any way that I can.

So with that, Bob, let me just turn it over to you.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

All right, Gary. Hey, thank you, and good morning, everybody. It’s really good to be with you today and I’m looking forward to reconnecting with many of you over the next few months as I begin to attain more investor relations activities. I’m going to make just a few brief remarks, but I’m just — as Gary said, I’m just super excited for the opportunity to serve Southwest as the next CEO beginning in February. And I am very glad that Gary will continue to serve as Executive Chair. Many of you know, Gary has been my mentor and friend for over three decades and the two of us along with Tom and Mike are already working very hard to ensure that the transition will be a smooth and orderly one.

Since the announcement on June 23rd, I’ve had the chance to visit and talk with hundreds of our employees around the company. As an example, I was in it — got to spend the day in Atlanta yesterday with our wonderful team there and I’m just amazed by their spirit, their enthusiasm, their heart for each other and for our customers, and I’m just energized by being with them. I’m also focused on continuing to work with our leadership as we continue to lead through the pandemic recovery, and as we start to work on our 2022 planning efforts as we evaluate the post-pandemic environment and the many, many opportunities that are ahead of us here at Southwest.

I’ve been part of the strategy here as we develop our strategy each year, and I’m very confident about our purpose and vision and where we are headed and I will be very purposeful in how we plan for the next several years. Our strategy is sound. We are a low fare, low cost, growth airline that prides ourselves in terrific customer service and being a great place to work for our employees. That business model and our people have been the enduring strength for 50 years now and we’ve enjoyed unparalleled success in the airline industry. We now have the nation’s most robust point-to-point network and we have at least a decade’s worth of attractive growth opportunities in front of us with the Boeing 737.

Our customer and brand rankings remain really high year after year and our commitment to transparency continues with no bag fees and no change fees, we are committed to that. We have opportunities in the pipeline to continue enhancing the customer experience as just one example and that will be our focus. Along with our commitments to both diversity and leadership and — in the workplace and to environmental sustainability. We will remain focused on maintaining our strong financial position and our investment-grade balance sheet. As always we will balance our commercial opportunities, our operational flexibility and reliability, and our financial performance. You know we want new itineraries for our customers. We want growth, opportunities, and job security for employees, and we want to create significant value and returns for our shareholders. That formula has worked so well for Southwest through decades and I expect that it will be — continue to be what works for us for decades to come. We have a very deep bench of terrific leaders here at Southwest that are ready to lead for the future, and as a team, we are all very aligned on the future of Southwest Airlines. But I want to say, above all, it’s our people that bring our vision and our purpose to life every single day, and I’m just honored to serve them and support them on a daily basis.

And with that, I will turn it over to you, Tammy.

Tammy RomoExecutive Vice President and Chief Financial Officer

Thank you, Bob, and hello, everyone. I will provide a quick overview of our overall financial results and some color on our outlook. On a GAAP basis, we generated a $348 million profit in the second quarter, or $0.57 per diluted share. In addition to improving revenue trends, the primary driver of our GAAP profit for the quarter was the $724 million of PSP proceeds that offset a sizable portion of salaries, wages, and benefits expenses. Excluding this temporary PSP benefit and our usual has related special items, our non-GAAP net loss was $206 million, or a $0.35 loss per diluted share. Second quarter operating revenues, non-fuel operating cost, fuel cost, and available seat miles were all within our most recent guidance ranges, and I am pleased with our overall financial performance in second quarter.

With the strong pent-up summer demand and a solid cost performance, June marked a key milestone as we generated both, average daily core cash flow and profits as we had hoped. This is our first monthly profit since February 2020 when soon after the negative financial impact of the pandemic began to impact our results. And this is excluding the benefits of PSP proceeds, which is more reflective of our base business. These second quarter results, though not where we need to be, represent a significant recovery for our business and are a testament to our amazing employees who are simply the best in the industry and make us proud each and every day. And by all indications, it appears that we outperformed the industry again in the second quarter.

We provided a lot of color in our press release regarding revenue and cost trends. I will just add that our trips flown are estimated to be down 11% in third quarter compared to third quarter of 2019. And as such, we have several cost categories that are expected to continue to trend lower than 2019 levels, such as maintenance expense, advertising expense, technology expenses and passenger and personnel-related expenses. These cost categories are expected to ramp up as trips and passengers increase and as we resume a more normal investment agenda moving forward. We are mindful of the tight job market as well as general inflationary pressures. We expect to have wage rate inflation beyond our normal annual wage rate increases as we want to be competitive to retain and attract talent. Including the decision to increase the minimum hourly wage to $15 per hour across all workgroups, we now estimate $5 million to $10 million of additional salary wages and benefits cost pressure in third quarter and approximately $15 million in the fourth quarter.

We are also mindful of bottlenecks shortages in ramp-up inconsistencies across the travel industry as we restart after more than a year of little activity and we are not immune. That said, we will continue our focus on ramping up costs along with flight activity as efficiently as possible while being nimble to adjust and add where needed. We are hopeful to generate net income again in third and fourth quarter on a GAAP and non-GAAP basis, and our ability to do so will largely be dependent on the revenue environment which Tom will cover in a minute. But, based on our current revenue outlook and even with the additional cost pressures we noted, our third quarter bottom-line outlook is over $200 million better than it was back in April.

We had flight schedules currently out through early January and we will continue evaluating growth opportunities and fleet and capacity decisions to construct the most efficient route network for 2022, being mindful that our network has evolved from what it was pre-pandemic. With leisure travel levels where they are today, it is easy to forget that less than six months ago the environment was drastically different. Over the past year, we were most focused on raising capital and building liquidity, minimizing significant cash burn and drastically cutting capacity and cost, and the changes that we made to our network are producing the revenue we had hoped or even better than hoped, and we are now evolving our focus areas.

First, we are focused on managing through the current environment with adequate resources to deliver a reliable operation. We then need to optimize our cost profile with our route network in 2022, and beyond that, we’ll be focused on producing sustainable levels of profitabilities, margins, and returns. We plan to continue managing the business culture and at least for the remainder of this year, but we have begun the 2022 planning process at a very high level. Although I don’t have any specifics to share with you today, I can reaffirm that we have tremendous flexibility, perhaps the most flexibility we have ever had going into any year in my nearly 30 years at Southwest. We have flexibility with our cost-efficient Boeing order book with a significant number of MAX options remaining in 2022. We have flexibility in terms of where to deploy our aircraft in the network and how much capacity to fly in 2022. And we have a strong cash balance, modest debt requirement, and discretion over how quickly we want to resume non-aircraft investments in 2022. So, we have flexibility with our capital. And aside from our people, our biggest core strength is our balance sheet and financial preparedness, even coming out of this pandemic.

So, with that, I will turn it over to Tom.

Tom NealonPresident

Okay, well, thank you, Tammy. Good morning, everybody. While our second quarter operating revenue performance was very much in line with our expectations, we saw improving monthly trends throughout the quarter in both leisure demand and yields, and we also saw a steady improvement in business demand, which I’ll talk about in just a minute. And we’re also pleased to see broad-based improvement across the entire network, so this was not a concentrated improvement in certain regions or cities, but it really was across the entire system which was terrific to see. June’s leisure or passenger traffic was actually higher than June 2019 levels and June’s passenger fares were in line with June 2019 levels, very much as we expected. And we also saw significant improvement in business travel revenues as well, improving from down 77% in May to down 69% in June versus 2019. Just keep in mind that, on our Q1 call, we reported that our business revenues were down 88%, so throughout the second quarter we saw a very steady sequential improvement in business travel from the first quarter. And just to you know when I talk about business revenue, I’m really referring to manage business travel.

In terms of third quarter trends, we’re continuing to see strong leisure travel throughout the summer, and as I said, June’s leisure traffic performance exceeded 2019 numbers and we’re seeing that strength continue into July. In fact, we’re estimating that both leisure traffic and fares will trend higher in July relative to 2019 based on trends that we’ve seen so far. We’re also seeing continued improvements in close in demand and yields for business travel as well. So in total that results in an improving July revenue outlook of down 10% to 15% versus 2019. In our earnings release, we also introduced our August revenue outlook down 12% to 17% versus 2019. We are estimating August has a one to two-point headwind compared to August of last year and this is simply due to the calendar shift that pushes all of Labor Day in the September. I think that when you adjust for the calendar shift, we are pleased with the way the booking curve is shaping up for the month and demand and fares are also shaping up really nicely for August, and this is very consistent with our expectations as we move from our highest leisure demand month which is July by the way into August.

Now with respect to business travel, the recovery path is less clear but it’s also clearly improving. So, if you look back to Q1 and then to every month in Q2, we’ve seen consistent sequential improvements over the past six months. So, we’re encouraged by what we’re seeing and we’re expecting continuation of steady weekly improvements in business bookings. It’s also very clear that more and more companies return to the office you’re seeing that and we’re seeing that, and without doubt, we’re also seen the corporate travel restrictions are beginning to be relaxed or removed altogether which is great to see. And as you’d expect, we’re doing plenty of our own surveys with our travel management company partners and our business customers, so we’re talking with them frequently, we’re talking with them directly, and we’re very encouraged to hear from them, but we’re also probably more encouraged to actually by what we’re seeing in terms of travel activity.

So business volumes and fares were both down in the second quarter, but both showed improvement in April, May, and June, and we are expecting sequential improvements in Q3 as well, but we do expect overall yields will continue to be pressured in the third quarter versus 2019. The booking curve graph for business as you know is naturally closer in, so now it’s mostly about improving volumes as the booking window tightens up. And I will say that and I’ll just reiterate what Gary said, the guidance that we’re giving today doesn’t include any impact from the delta variant. What I will say is that we have not seen any impact in the Delta variant at this point. So our outlook is based on trends that we’re currently seeing, all of which by the way are very encouraging.

Just a quick comment or two on our Rapid Rewards in ancillary business, we had a great quarter. We saw another strong performance in Q2 in both our Rapid Rewards loyalty program as well as in our Chase co-brand credit card program, and we have more Rapid Reward members today than we did in Q2 of 2019. In June, it was actually the highest, new member acquisition month in the history of the program, which was terrific to see. And our co-brand credit card program is larger now than it was pre-pandemic, in retail sales for the second quarter were up nearly double digits versus 2019, and the spend per card also beat Q2 2019 levels. So as you can imagine, we continue to be very, very pleased with the strength and performance of our loyalty in card programs.

Our ancillary revenue trends, such as upgraded boarding and early-bird also performed extraordinarily well in the second quarter, which is what we expect to see as load factors improved to historic levels. Just a quick comment on our GDS initiatives, which continue to roll out, and as you know, we’ve already gone live with Travelport and Amadeus, and we’ll be going live on Sabre on July 26, which is this coming Monday. This is a big accomplishment. It has been a tremendous amount of work. It’s a big deal and creates a big opportunity for us and this does complete the implementation phase of our industry-standard GDS works. So we now have a full array of distribution channels, which gives our business customers a channel of choice, whether it’s a GDS platform or a direct connect ATI channel or our Sawbiz self-service platform.

So, without a doubt, our Southwest business team is pretty energized and pretty charged up. They’ve had a great product to sell. We’re in the right channels and they are really focused on driving new business. And now that the barrier is removed, I think it is a big opportunity for us to win more business, both from existing customers, which by the way we have a lot of this under index as well as new customers and this is a tough sell for us before moving to industry-standard GDS platforms. So I think we’re in a great position. We have a great business product. We have a great value. As of Monday, we’ll be in all the managed travel distribution channels. We have a great sales team. So I’m looking forward to all the products we’re going to make here.

Just a quick comment on the network Tammy alluded to it, but before I wrap up, I just want to talk about that for a second give it just a bit of perspective I’m sure we’ll get into in Q&A. And as you’ve seen, we’ve made some pretty meaningful changes and additions to our network since the pandemic began 14, 15 months ago. And over the past year, we’ve announced service to 18 new airports, and at this point 15 of the 18 are now up and running. And all the new markets are either performing within our expectations or ahead of our expectations and each one is a very strong, very natural addition to our network that we want to do for quite some period of time. And as you know, new stations have a development curve, we understand that we get that, and we are very pleased with where these stations are at this point, they will have the time to develop. And as I said, all of them are meeting or exceeding our expectations.

And we also had the objective, and again Tammy alluded to this of restoring many of our pre-pandemic routes and all the frequencies, while also maturing in the new markets. So in terms of aircraft investments, our 18 new airports represent nearly 100 non-stock markets and over 280 new trips per day. And by the end of the year, they all utilize roughly 55 aircraft. And with our recent additions to Y [Phonetic], which really is the culmination of the original plan, which is suspended because of the pandemic, we’re at 37 trips per day from the Mainland, U.S. to Hawaii with nearly 40 interline trips per day and that utilizes roughly 37 aircraft. So we’ve committed substantial amounts of aircraft to the new city opportunities and to Hawaii, and both investments are paying off and meeting our expectations, it was the right decision. Our Boeing order book gives us a tremendous amount of optionality and that allows us to fund our current network investments, while also allowing us to pursue the planned restoration of our network, all of which we are working through in our 2022 planning process that Tammy just alluded to.

So I’d say, I think that we are very, very well-positioned for the future, and with that, I’m going to turn it over to my friend, Mike, to talk about the operation.

Mike G. Van de VenChief Operating Officer

Well, hey, thanks, Tom, and welcome, everyone. From an operational perspective, I would say this is a pivotal quarter for us. We moved from I would describe managing and moderating our operation in the first quarter to really an acceleration focus in the second quarter. If you would compare just March to June those two months, we added about 650 additional daily trips, so that’s a 25% increase. And then our customer and bag volumes far surpassed that, they were up nearly double that with a 45% increase between those two months. And that it’s just a monumental increase and it’s we’ve done in a short period of time. And inside an airport environment that I would say is really still adapting and everything in that environment seems to take a bit more time today.

Our travel mix, as you know, has been reported as primary leisure, so our PreCheck customers from a TSA perspective were down over 10% from — as compared to June 2019. If you go out to the airport restaurants, a lot of them have reduced hours or staffing levels, so there are longer lines. The third-party providers for wheelchair services have been able to scale with customer demand. The hotel stay [Phonetic] services are less frequent, and of course, the airport is one of the last experiences across the country or [Indecipherable] required throughout their travel day. And considering all that, that’s just a tough environment to live in every day and I am tremendously proud of our employees, they continue to answer the call and they really are Southwest warriors.

And in fact, they produced a very solid second quarter operation. So in the midst of that increasing customer value, we also launched a service to seven new cities. We rolled out our new maintenance IT system. We launched Hawaii service from Las Vegas and Los Angeles and Phoenix. We expanded our existing Hawaii service and we accomplished all of that while delivering an on-time performance of 76.3% and that was right in line with our 2017 through 2019 results pre-COVID. The bag handling remained exceptional. It was our best quarterly performance. It was outside of last year’s second quarter when travel demand was really low. And we’ll continue to lead the industry with the lowest customer complaint ratio to the DOT for all the marketing carriers. So just again, just very, very proud of our employees.

Now June was our most difficult month of the quarter. Our April and May outperformed previous years in all of our key operational metrics. And even with the customer volume increase, June was off to a solid start. Mid-month we did run into a combination of technology issues, followed by a week of weather challenges across our entire network. And those introduced some extreme delays into the network and it caused significant crew availability concerns, as well as delays and cancellations that impacted our customers and that dropped our OTP to 62.4% for June and we need to and we will do better than that moving forward.

As we move through July, whether it’s still a bit of a concern as is the overall tempo of the airport environment, but the entire industry is feeling the impact of those things and that’s reflected in the overall industry OTP thus far in July. We expect our operational reliability to continually improve from our June performance. We use planning models that require an adequate level of airplanes and people and facilities to run our schedules. As we entered into the second quarter, we had all those resources aligned and we were on track until roughly mid-June and so there are a couple of focus areas for the operation as we move forward. First, the passenger demand is very strong and our load factors going in and out of our large cities are 90-plus percent most days and we’re still ramping up the operation and we have 16 fewer flights than we did in June of 2019, which for us means there are fewer ways to re-accommodate customers when we have delays or cancellations. Our higher volumes and fewer re-accommodation options translate for us into a longer operating day.

So we’re adding staffing in several of our large cities to have additional resources to cover those longer operating days and reduce the need for premium pay. We’ve increased our minimum starting pay to $15 an hour to better source applicants for those positions and we’re offering premium pay for our employees to pick up open shifts on our scheduled time off just in the meantime.

The second thing that we’re focused on is sourcing flight instructors, so we can ensure that we can support the training needs for our pilots returning from extended time off, as well as our recurrent training needs as we continue to add flying to the network throughout this year and then set ourselves up for 2022. It feels really good to finally be in a position where we can add flights and pick up our operating momentum. It was a bit messy as we throttled down our activity and it doesn’t surprise me that it’s a bit messy as we’re accelerating it, but you know our employees just navigate those — through those things heroically. They have great hearts for our customers and for each other and I’m just so proud and thankful for their efforts every day.

And with that, Ryan, I think I’ll turn it back over to you.

Ryan MartinezManaging Director of Investor Relations

Thank you, Mike. Chad, we’ll turn it over to you, to give instructions on how to queue up for analyst questions.

Questions and Answers:

Operator

[Operator Instructions] And the first question will come from Hunter Keay with Wolfe Research. Please go ahead.

Hunter KeayWolfe Research — Analyst

Hey, everybody. Thanks for getting me on. I this is a probably a couple for Tammy, but I’m not sure. So the first one is where are you right now on average daily utilization and when do you plan to get back to 2019 levels?

Tammy RomoExecutive Vice President and Chief Financial Officer

Yes. Yeah, I can take that. So where our utilization is currently around 11 hours per day roughly, and in terms of just getting back, we’re working through our schedule as we look into 2022. So, we’re hoping to get back more in line with levels in 2019, but we’re not too terribly far off either. Obviously, a lot of that will just continue to be based on demand and as Tom said to do largely a function of how quickly we see corporate demand returning.

Tom NealonPresident

We still have 139 airplanes in storage as well.

Tammy RomoExecutive Vice President and Chief Financial Officer

Yeah, absolutely.

Tom NealonPresident

The total fleet in addition just to what schedule, we still have some slush in there which…

Tammy RomoExecutive Vice President and Chief Financial Officer

Yeah. Good point.

Tom NealonPresident

We’ll try to wring out.

Tammy RomoExecutive Vice President and Chief Financial Officer

Yes, indeed.

Tom NealonPresident

With the future schedules. Obviously, correlating with what Mike was describing, which is making sure we have the proper resources to support the additional flight activity.

Hunter KeayWolfe Research — Analyst

I got you. And then you sort of in the same vein on that. I know you said you’re going to continue to evaluate with the 44 options. Given the ESG benefit you highlighted, is it fair to assume that the bar is very high for you not to exercise those meaning whether it’s COVID related or whatever things would have probably got a lot worse for you not to exercise those options, is that a fair default to think about it?

Tammy RomoExecutive Vice President and Chief Financial Officer

I think that is absolutely fair. As pointed out, we have a very cost-efficient Boeing order book. Obviously, we have a very strong balance sheet with ample cash and we can — there is a strong ROI on those options, either way and obviously, we’re hoping we can continue to grow the airline here but it is not — it’s a compelling business case for us to retire the older -700. So I think that is a fair assumption.

Hunter KeayWolfe Research — Analyst

Thank you.

Operator

And the next question will be from Ravi Shanker with Morgan Stanley. Please go ahead.

Ravi ShankerMorgan Stanley — Analyst

Thank you. Good afternoon, everyone. Maybe so I have the question on corporate. I think you said that your June corporate was down 69% and that’s a pretty nice step up from where it was a couple of months before that. I think some of the legacy peers are down a little bit less than that. So I’m just wondering if that’s kind of normal given your mix of business and kind of how do you see that trending over the next several months given that you are now complete with all your GDS integration? Thanks.

Tom NealonPresident

Well. So, this is Tom. What we’re seeing is — I think we’re seeing something very similar actually to what I’m hearing and reading from the other carriers as they report. But just to give you some context roughly call it 30% of our passengers or so are business travelers and 35% of our revenues is generated by business travel. And I think that the opportunity for us, I think it kind of gets to your point, to answer your question. We have a lot more opportunity to drive a lot more depth within the current accounts we have with GDS. So I think that you’ll see that begin to drive up our Southwest business numbers, if you will, but very consistently, we’re seeing about 5 points of improvement in Southwest business bookings each month over the past four or five months. We said, I guess, was in the first first quarter call, Ryan, we said that we– our expectation with Southwest business or business travel will be down about 50% by year-end. If you just kind of extrapolate where we are right now, we would beat that. I think our expectation would probably be at 50% by the end of this quarter. And certainly beat that’s by the end of the year assuming things keep going.

So I’m not sure that we’re behind our competitors or not to be honest with you. I feel like going from down to 88%, to down to 69% on the path towards down 50% by the end of the quarter is pretty much in line with the market. But I think we’re going to see more and more penetration with the GDS implementations and again we just under index significantly in these big accounts. So that’s an opportunity for us.

Gary C. KellyChairman of the Board & Chief Executive Officer

So I’m not going to say anything different than what Tom said. It’s probably unnecessary for me to say anything but just offer you my own opinion which is we’re using the corporate accounts that we know as a proxy. And so our total business travel is far beyond this proxy, and I think one could assume that there are smaller companies, maybe sole proprietors or what have you, but our frequent flyer credits and there just other inputs that we look at it would suggest that that is a conservative number. So I agree with Tom. We’re the largest airline in the country, we carry more people than any other airline. I think we carry more business travelers than any other airline. So I find it hard to believe that we’re inconsistent with anybody else, but admittedly we here– we have the same numbers that you hear. And we just can’t– we’re out serving people, we can’t be for sure what their purpose of travel is, but our frequent flyers, those flight credits are down, far less than 69% which is some indication, of course it could be a business person who is traveling for personal reasons. We just don’t know, but probably it’s more information than you wanted, but I can’t imagine that were out of step with anybody else in the industry.

Ravi ShankerMorgan Stanley — Analyst

No, that’s great color. And that makes lot of sense. Maybe a follow-up for Tammy. Kind of just given some of the labor issues that are hitting virtually every industry and every company out there. Maybe you can talk about kind of what the– what Southwest’s seeing on the ground and maybe some of the initiatives that you guys are taking to make sure that you guys are fully staffed for back half of the year. Thank you.

Tammy RomoExecutive Vice President and Chief Financial Officer

Yes, I’ll chime in there and Mike may want to chime in as well. But, yes we are– so, couple of things. As I already mentioned, we are increasing salaries across our system. The minimum wage there. So we think that will certainly be helpful. We are– and just to kind of step back, we’re actually staffed appropriately coming into the quarter. Now there are some locations where we’re wanting to boost our hiring and we’ll continue our efforts there.

And then as we also mentioned, we have recalled our employees that were on the voluntary leave programs and we will recall all of those employees by the end of third quarter, certainly by the end of the year. So we– Southwest is known as one of the best employers in Americas. So we don’t anticipate any issues there on the hiring front. So we will– as we ramp up capacity here, make those decisions, we’ll be able to hire employees that we need, but those are a few of the things that we’re doing. Mike, anything that you wanted to add to that.

Michael G. Van de VenChief Operating Officer

Yeah, no, I don’t have much. I would say that across the network. We’re appropriately staffed, we’ve got pockets where we need more people, we’ve got pockets where we have too many people. One of the great things that we can do and that we are doing is we can incent people temporarily to go to fill in where we’re short. So we’re doing that in our large locations, and as Tammy mentioned, we have a handful of our large locations where we have very aggressive recruiting efforts going on. And as Tammy mentioned, with our $15 minimum pay increase, we have really good pay packages with our union contracts out there and we feel like we’ll be able to get those people as we ramp up the network.

Tom NealonPresident

And you know we’ve just gotten back into the game. So I don’t know when you started trying to recruit and hire, Mike, but it’s can’t be that…

Michael G. Van de VenChief Operating Officer

Yeah, months ago.

Tom NealonPresident

So it is more challenging. So we acknowledge that and I am worried about it but I agree with Tammy, and Mike moved the minimums up to $15 bucks an hour which will certainly help. The pilots, flight attendants, we’re not sensing that we’re going to have any problem there.

Mike G. Van de VenChief Operating Officer

Yeah.

Tom NealonPresident

I think it’s more just hiring in our ground operations where there’s just a lot of competition for that pool of potential employees so.

Michael G. Van de VenChief Operating Officer

It’s interesting too that the staffing challenges a lot of times that we find ourselves having aren’t our problems. It’s the industry, it’s everything around the industry, whether it’s van drivers, or maid services to clean hotel rooms, or people to work at restaurants, and it just makes that entire environment difficult for our employees or customers to navigate through.

Ravi ShankerMorgan Stanley — Analyst

Very good. Thank you.

Operator

The next question will come from Stephen Trent from Citi. Please go ahead.

Stephen TrentCiti — Analyst

Hi. Good afternoon, everybody, and thanks for taking my question. Just a very quick one from me. Any sense whether, not just you guys, but any sense whether you think the industry might need to step up its IT spend post-pandemic, not only in terms of facilitating customer interface but also considering cybersecurity you have this a few months ago it is Southeast pipeline incident. I had two or three people tell me today that your website happened to be down, I don’t know if that’s true, but I’d just love to hear your thoughts.

Tom NealonPresident

Well, I guess, I’ll take that one. This is Tom.

Stephen TrentCiti — Analyst

Hey, Tom.

Tom NealonPresident

I think that — I think we’re all struggling, not just airlines but I think every company is struggling, trying to figure out where to invest in cybersecurity dollars, whats elements will most exposed, where is the biggest risk, how you defend against that and it’s kind of a moving target. But that is a real source of focus I noted, I’m sure it is for our competitors as well. It certainly is for me in my role. And so we’re spending a lot of time on cybersecurity. I think that the — I think that’s the primary and I think that this is a network that is so technology-dependent and so network-dependent that I think that’s an area of investment that everyone is probably investing more. And if I think beyond that, I think every company has their own business strategy and their own set of technology requirements for that. But the big common thing I think is just the cybersecurity investment spend is very important, it’s very real and it’s significant and it’s hard.

Gary C. KellyChairman of the Board & Chief Executive Officer

So this is pile on the Tom’s comment and actually I’m stealing his words, but we are very technology-dependent as an industry. It’s probably stating the obvious. But that does suggest that we need to be top drawer when it comes to our technology and obviously the cyber risk everyone is aware of and it is sort of a bottomless pit when it kind of comes down to how much does one need to do. But not really trying to speak for the industry, I’m just talking for us, but absolutely we view ourselves as a technology company. We have an excellent team. We have ample dollars allocated for that effort. And one thing that the pandemic has done for us is it’s made us a lot more efficient with our technology investment and management and it’s enabled a lot within the workforce as well. So I feel like we’re better than ever at Southwest and you can be sure that we’re going to continue to make that a higher strategic focus.

Tom NealonPresident

Gary, if you don’t mind, since you just said we view ourselves as a technology company and an airline and service company, but we just did have an outage. So I think rather than wait for the question on it or not address, let me tell you that how we feel about that and what happened. So just to be really clear, we did have a technology outage which was pretty impactful, in fact, it really hindered Mike in the operation in a very significant way just…

Michael G. Van de VenChief Operating Officer

Back in June.

Tom NealonPresident

Yeah, back in June and it really clogged things up and just made for a very rough situation. And I just wanted you guys to know that — first of all, it was not a cyber security issue. It was not a hardware failure. It was not engineering failure or architectural issue, it was a human error. And it was something that was a mistake made and we’re dealing with it and it was not a structural issue or investment level issue. It was just a simple human error and we feel terrible about that. We got to be better than that. And especially if you’re going to be so dependent upon technology you can’t have mistakes like that, but this was not a failure of technology if you will is a human mistake. So we’ll do better, but I just wanted to get that out to before the question was after.

Stephen TrentCiti — Analyst

Okay.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

Well. I got you. Stephen, you mentioned one — this is Bob, customer experience investment is just an example of IT and I’ll just chime in for a second because it is on kind of on my list of focus items I’d like to look at for ’22 and beyond. Because they’re just win-win. I typically tend to be things that probably low spend, you can put more and more decisions and transactions at the hand — in the hands of our customers on mobile devices, especially when we have things like a regular operations, the ability to handle it that way, give them choices with outstanding in line, making a call to our wonderful CSNS employees as an example. Those are just terrific things that I would love to look at and we will look at because more and more customers and our employees expect that they will be able to manage their lives, interruptions on their mobile devices and it’s just good all the way around because the — it’s good for our customers because then they can handle more and more things via self-service and it’s good for us because it moves those transactions from potentially long lines or a long phone call, wait time into a much shorter handling period. So it is a focus of something that I would like to look at it or just how we can continue to take our terrific customer experience to an even greater level.

Stephen TrentCiti — Analyst

That was super helpful. Thanks very much, everybody.

Operator

The next question will be from Duane Pfennigwerth with Evercore ISI. Please go ahead.

Duane PfennigwerthEvercore ISI — Analyst

Hey, thanks for the time. Question for Gary and Bob, and not sure if you all intended Bob to have pesky analyst questions at this point, but can you give us a sense for any differences in priorities, leadership styles, or relative strength? Appreciate you two have worked together for a long time, but maybe you could highlight some differences or preview some differences.

Gary C. KellyChairman of the Board & Chief Executive Officer

I think the biggest difference is that Bob is an aggie and I’m not. And other than that, we’re sort of joined at the hip. But a Bob mentioned in his remarks, that he has been a part of this and he’s been a part of it for a long, long time, 33 years is a long time. He is had a number of different executive jobs. So I think you all should just know that he’s been a part of coming up with and defining our purpose and our vision and translating that into a strategy and he has been a huge part of the execution. But at the same time, what we’ve got to be careful here is the task of a leader is to have the wisdom to know what to change and what not to change. And at the same time, I need to — selfishly, I need to empower him and get out of his way. So I had a good teacher in Herb Kelleher, he was executive chair for me and I wasn’t necessarily thinking at the time that, okay, well, I need to learn from this because I’ll do it someday, but fortunately, I have lived through that and I do have a good idea of what I need to do to support him. But Bob, it’s really more of a question for you.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

Yeah. And we have been able to work through that whole idea longhorn thing. It’s taken two of the three decades, but we got there. No, I’m just kidding. But, yeah, I think a couple of things, one, at the end of the day as a CEO, you cannot do it all yourself. It’s all about the team and we have a wonderful team of leaders here and I think we’re both very passionate about focusing on that, developing our team, developing our leaders, developing the quote-unquote the next generation of leaders, and preparing people and so I think that I feel like we’re very similar in that way. Again, in the same way, that Gary invested me — invested in me and many others for decades as a patient point in mind to be able to continue to do that because it’s all about not just what we can do as we have this change. It’s about what we can do to set Southwest Airlines up for success for 20 and 30 and even more years.

On the staff front, in addition to that, I think our staff is again very similar. We’re very collaborative. We love bringing the team into the conversation and decisioning. If there is a difference probably I — and this could be good and bad, I probably a little more of a driver, maybe a little more on patient sometimes to get which is probably the way a lot of my assignments over the years have been to go do things, go get the AirTran integration underway and push to do through completion as an example. So that can be a benefit in terms of driving and getting things accomplished in our plan, but I also have to work on sometimes slowing down, being collaborative, you can just make sure we make wise decisions here as we as a course we will.

As the how we would approach the plan and our strategic plan, in particular, were very similar. I think there as you know, we’re very focused on things like GDS and modernizing the fleet. Plans change though. You complete a set of things and you roll into the next set of things and you want to be very thoughtful about what those are. We want to be again collaborative with our team about developing that set of next strategic initiatives. And so, we will work as part of our ’22 planning to think about that next set of things. I mentioned this upfront I’m focused around things that are just maybe part of what is an expectation today. So our customers expect us to work with them and engage with them and produce the customer experience that is maybe again terrific.

Our employees are just terrific, but they expect a lot of things to be quick, delivered over mobile platforms, easy to resolve, even in [Indecipherable]

Situation. Our employees expect the same thing and they want it to be very easy to work with Southwest Airlines. Managing their shifts off their iPhone, for example. And so I’ll be very focused on some of those things. The other and again this is a focus of both, Gary and myself and our whole team is that I’m very focused on our diversity commitments. We like some of that our next — last year we have things that we need to focus on, in particular, our diversity in our senior leadership group and so you will likely hear me talking a lot about that.

As Tom mentioned, we have a lot of focus in our sustainability commitments. And so, plans change over time, they always do that the initiatives we have on the table right now are what I and Gary know those we’re involved in 10 years ago and so they’re always going to see that. But we’re going to make sound judgments. We’re going to develop the team. We’re going to stand by the principles that make Southwest Airlines great, our business model, our people, balancing our results with our operation and with our customer experience and so maybe long-winded answer but I think we have generally a lot of similarities and how we approach the business and the problems and our people.

Duane PfennigwerthEvercore ISI — Analyst

I appreciate that perspective from you both. Maybe just a quick follow-up with respect to the labor availability tightness you’re seeing frontline ground ops. Can you comment if that’s broad-based versus specific regions and how do you think about solving what may prove to be a transitory cost issue with permanent solutions or how do you — what’s your view on sort of transitory versus sort of fixed? Thank you.

Gary C. KellyChairman of the Board & Chief Executive Officer

You might want to comment on that?

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

You bet, Yeah, the — it in its complicated question because there are so many factors. I’ve mentioned, I was in Atlanta yesterday so you could see the hiring of labor complexity first-hand there. So I think you’re at multiple things. You’re in a broad-based market with supply shortages. So they’re just not enough people to build the jobs that are open. I might just add that I think I’ve heard, we went into the pandemic with open — a lot of open jobs here in the U.S. and I think we have had 9 million or 10 million folks exit the workforce at this point. So we all see the help wanted signs everywhere. So you’re competing in a market that is just tougher. As an example, we are getting fewer applications per open position than we are used to. So it’s just going to take a lot of vigor around the focus on hiring.

Some of the differences are regional. I would say they’re more about how to triage critical positions. So we have places where it’s more critical to the operation than others. For example, we are really — we’ve got a full press on the hire on the Denver ramp as an example because there are needs there. We have a full press to hire flight instructors because we have plenty of pipelines of pilots we feel like, but we need to get them trained. We have folks coming off of the XTO and it just takes time to train and get them back into the workforce. So there needs to rebuild our training capacity just like our hiring capacity. So, I think I would tell you the — its I’m probably more focused on this being a broad-based problem in terms of just labor availability than a narrow issue in terms of a specific job.

The biggest question to me, I think we’re fighting our way through because we’ll get through rebuilding, recruiting teams, and training teams and that’s short term, those are short-term issues. Yet how long does this persist? Do we plan against this being a three-month issue as the folks are really going to return to the workforce, for example, once school starts, or are we planning against a multi-year issue where it’s going to be folks coming back into the workforce very slowly? And that’s a difficult question, which means you just have to be nimble in your planning how we think about bringing aircraft to the schedule which I’m very pleased we have the flexibility, how you think about planning your schedules and how you think about staffing your schedules. The last thing we want to do is put a schedule out there that we cannot staff and so there’s a lot of focus on this. I will tell you it is — if it’s not the number one focus right now, it is 1A which is getting a hiring in place and our staffing in place.

Gary C. KellyChairman of the Board & Chief Executive Officer

And the good news is there are techniques, Duane, to do what Bob described and that is the philosophy that we’re going with, but I’m sure you going in this. I mean the effort per higher is I don’t know what, Bob, double, what it used to be.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

At least double.

Gary C. KellyChairman of the Board & Chief Executive Officer

So and that’s money and so all of that I think that’s what Bob means and in addition to just how do you plan the next schedule. Mike, anything you want to add?

Michael G. Van de VenChief Operating Officer

Not now much. I would say for me in the operation I would say that there are six to eight big locations in big cities there if I could snap my fingers and we can go add ramp agents to those locations that’s what we want to go do. I think we’ve got a great package to offer them and so we get that in front of them. I think it will be very successful doing that. But there is just to be transparent with you, there are also frustrations that people have to go through to get on the ramp. There are background checks. There is bagging in the airports. There was driving out to the airports. So those are the things that we have to overcome with the compensation package and career and benefits and travel privileges and I think we’ll be really successful at that, but it might take us six months or so to kind of get into the swing and thing.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

And that is contrasted, Mike, to like Amazon.

Michael G. Van de VenChief Operating Officer

Right.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

It doesn’t require near the — they don’t have to and obviously, we do so.

Duane PfennigwerthEvercore ISI — Analyst

Okay, thank you.

Operator

The next question will be from Catherine O’Brien with Goldman Sachs. Please go ahead.

Catherine O’BrienGoldman Sachs — Analyst

Good afternoon, everyone. Thanks so much for the time. Maybe just coming back to the discussion we had earlier on fleet you’ve placed a couple of incremental orders for aircraft since the pandemic, including one since we last spoke last quarter. It will looks like some pretty attractive economics. Not asking for capacity guidance which I know will also be influenced by retirements as you noted. But off of that 2019 base that was still impacted by the MAX grounding, how should we be thinking about your ability to produce ASMs based on the MAX return to service and these incremental deliveries over the next couple of years? Thanks for any color.

Gary C. KellyChairman of the Board & Chief Executive Officer

I think the — and I’m sure there are several thoughts in the room here. I think that the company you’re talking about technology and physical plant and facilities and things like that, I think the company is very well prepared to increase volume. We are very — so to me, you kind of think about it, if we want to grow, we need airplanes, we need airports, we need money and we need people. Those are sort of the four big categories we’ve got. And that the Boeing deal, as I mentioned to you all back in the first quarter, that is a huge strategic positioning for us. I’m very, very pleased with that, so check. I think the airport capacity that we have around the country is in great shape and where it’s not, for the most part, we have a line of sight to address it. Number two, so I’d check that one, we’ve got money. We’ve — and as I was trying to share with you all in my introductory remarks, we have more money right now than I thought we would three months ago or six months ago. So I’m feeling really good about the balance sheet and our liquidity. And I think you’re down to what we’ve been talking about for last 15 minutes which is people resources and that I think will be our constraint. So I hope that answers your question, but I’ll just open it up.

Tom NealonPresident

I think the thing I would add. Catherine, this is Tom. The thing I’d add is assuming you get past the people the strength piece of it, in terms of how we want to use this capacity. And by the way, I think back to Hunter’s question, it seems to me we would take those aircraft because we want to retire you still you can retire, you’ve got to — it’s in PV positive all kinds even better customer experience that all works. So I don’t think there is a fear or concern of us taking too much aircraft and being stuck, right. So we have plenty of flexibility, the ability to retain and keep growing, but I guess what I’m really getting at is our ability to produce good ASMs and productive ASMs and that will be somewhat in fact largely dependent upon when that business traffic begin to come back and let me explain why. The composition of our network, our point-to-point network, it’s our principle around the point-to-point network is not changed with the pandemic. How that’s been executed over the past year it’s been shifted a little bit just by virtue on the environment.

But our philosophy is very same, so we do want to get back to the pre-pandemic mix of direct versus connecting flights, call it 75/25 historically. We’re a little bit skewed off of that probably, I don’t know 72/28 or something like that. So we want to get back to that. We also want to get back to our mix of short, medium, long-haul flying, call it rough terms, 40-40-20 short, medium, long, as percents. And right now it’s more like 30-40-30 because those short-haul flights those are the business-driven flights and the business traffic wasn’t there we needed to create leisure capacity they came from short-haul. So as business comes back, you’ll begin to see us just reinstate that kind of fly.

So there are many, many productive uses of the capacity. And again the capacity — if the demand does not show up, we have the ability to retire 737-700s, right, and just continue to improve the fleet. So I think we’ve got in fact either Mike said this or Tammy said this, or we’ve all said this, the flexibility we have on the upside to downside is really positive. It’s really strong.

Michael G. Van de VenChief Operating Officer

Yeah, I think the redeployment and you all check me on this, but the redeployment, just to try to go back to where we were in 2015, that’s 15% of our route system is our recall, that we have reallocated from, call it more business-oriented markets, i.e. short into the longer more leisure-oriented. So, I think that speaks somewhat to what you’re describing. But the other thing I would comment on 2019, in 2019, we weren’t close two providing the network that we want it, because we were constrained in that scenario by the fleet. And so we are already trying to get back to where we were plus and all of this is as we’ve all said, it’s all dependent upon demand materializing like we’re thinking. But, yeah, I think we’ve got a great opportunity, and as long as we can get I think at this point the people will be able to deliver.

Catherine O’BrienGoldman Sachs — Analyst

That’s great. Thank you so much for the color. And I think Gary someone needs for retirement presence to get you that recipe for capacity growth on a pillow or something. That was great like that. If I could just maybe sneak one more modeling type question shorter-term in. Looking through the monthly revenue forecast we see August stepped down a little bit from July, I think there is some holiday movement in there, as you mentioned, and perhaps the second half of August is a little bit more back-to-school given your kind of South and Southeast parts of your network. If that’s right on the return-to-school driving a little bit less leisure demand while corporate still depressed, would it follow that September should also see a sequential step down in performance versus August, or are there other factors at play? Thank you so much for the time.

Tom NealonPresident

Well, you’re asking good questions. I think that the — first of all, I think the calendar shift from two points from August to September, it’s just that it’s a calendar shift, it doesn’t really belie the underlying strength of the business. So August is performing well very. So I’m not concerned about August, there are no red flags in August, but it does have the natural seasonality. The first half is strong leisure, the second half it’s back-to-school and that’s where the business travel begins to kick in and pick up the slack and that kind of thing so we’re waiting to see that. We feel pretty good about that.

In terms of September, we did something this year that was really creatives. I’m kind of smiling at Andrew right now because he and his team soared this out and work through it, but we had a 50th-anniversary sale that was really all about driving leisure demand in the back half of September. September, call it, second week of September through November 3rd or some such date. But it’s basically trying to fill in upfront the leisure bookings early, secure a nice and solid foundation book of business. And from that point forward throughout the rest of the September and October if you’re able to begin to manage just the remaining booking window if you will.

So that has worked really well. In fact, the 50th-anniversary sale is a three days sale. I think two of the three days Andrew we’re two of the top or in fact number one and number two in terms of our history over 50 years of bookings. All right. So this thing really worked. The point being we have a very solid foundation of leisure bookings in place for September. I’m very curious to see what’s going to happen with business travel post-Labor Day. Everything we’re sensing, feeling, hearing, is suggesting that you’re going to see it begin to come back. What I’m really encouraged by is I think I’d be quick, I’m taking too much time, of the top 50 or so corporate travel accounts, seven are professional services consulting firms, they’re all traveling. The lockdowns are removed, so they are traveling and that’s a big deal for us and that’s just beginning to generate more and more. So I think it’s beginning to pick up some steam. So I’m non-plus by the August issue raised. I don’t think that’s an issue. September, we’ve built a good solid book of leisure and I feel good about where we are.

Tammy RomoExecutive Vice President and Chief Financial Officer

Yeah. And Tom there and the only other thoughts that I’ll just tag on really quickly is we’ve got some exciting things happening in just a few days as we turn on Saber. So obviously that…

Tom NealonPresident

Yeah.

Tammy RomoExecutive Vice President and Chief Financial Officer

Obviously, there’s going to be a ramp up, but we’re super excited about that and we think we’re uniquely positioned in that regard with respect to corporate business travel. So a lot to look forward to we’re really excited about it. And as I think Gary and Tom have already alluded to is you shouldn’t read anything different into our September forecast versus what you’re hearing like some of our competitors. We’re just — we’re coming out of a pandemic. It’s as simple as that, but we feel really good about where we’re headed.

Gary C. KellyChairman of the Board & Chief Executive Officer

Yeah, and we have just continued our sort of pandemic rhythm here of providing 60 days outlook but there — we are not — we don’t see anything that suggests that September is going to drop off. Well, I think that’s just to make sure that that comes through. We’re reluctant to provide a forecast yet because it’s just far enough out. But the August it’s just the timing of the holiday is all that is.

Operator

Next question will come from Savi Syth with Raymond James. Please go ahead.

Savanthi SythRaymond James — Analyst

Hey, good afternoon, everyone. Just a question on the cost side if I might ask again. If I take out the hopefully what are shorter-term rebuild, near-term pressures it looks like unit costs are flat to down 4% or so versus 2019 and capacity being back to 2019 levels. I was just wondering if this is a fair base level and I ask this because I know in 3Q ’19 I think that was about seven points of pressure from the MAX related grounding, so curious how we should think about what we — what’s been achieved in terms of getting costs out?

Tammy RomoExecutive Vice President and Chief Financial Officer

Yes, Savi, I can start and I’m sure others will want to chime in here as well. But I just to take you through our thought process here as we laid out for you in the release, absent the operational cost impacts that we called out our third quarter and non-fuel unit costs, excluding special items and profit-sharing, would be forecast to trend in line below — in line or below 2019 unit cost levels. So while most of these near-term cost pressures should be one-time or non-recurring as we move beyond this ramp-up period, we have always really considered getting back to 2019 unit cost level as sort of a point in time target and we’ve shared that sentiment with you I know before. As far as the cost base in 2019, we are — we were carrying extra employees as you pointed out due to the MAX grounding. However, when you think about that, the nominal cost of that was really overshadowed by the seven points of capacity that we were unable to fly back in 2019 that caused the outsized inflation.

So, if you fast forward to where we are today, we have a lower overall head count due to voluntary retirement, but just keep in mind, we’ve had two years of rate inflation for our employees. And as we’ve already covered with you, we’ve recall the vast majority of those employees from extended time off. The recalls will help us of course as we continue adding trips here in the third and the fourth quarter, but it does reduce the benefit from our voluntary leave programs by about $50 million in both third quarter as well as fourth quarter. And the other thing to consider is that we are now back to 2019 AS [Phonetic] levels and we are building toward 2019 trip levels as I pointed out earlier. So just — so we’ll have some noise here as we were too covered with you all. It’s just not as clean as we would like as we’re adding back in capacity and we’ll need to do some hiring as we’ve already covered with you all for our work — for many of our work group to support that trip growth in the second half and as we restore our network next year.

But, what I really wanted to get to is, as we get back to restoring our network and we kind of get in a rhythm here, we should have more operating leverage as we bring back on more capacity. So I think that’s a really key point for you all. We’re just — it’s just a little messy here, but that is obviously our goal. Our goal is to scale as efficiently as we can as we restore our network. So I think hopefully that’s helpful. We’re going to be really focused on our productivity metrics like employees per aircraft and we’re going to all work together just to be as efficient as we can and really go back to more of our history of having very highly productive employees and that will be anchored around our point-to-point network and our all Boeing 737 fleet. So I feel like our competitive cost advantages are very much intact and we’re going to work really hard to make sure that we scale efficiently and offset inflationary pressures which is not unique to Southwest as best we can.

Gary C. KellyChairman of the Board & Chief Executive Officer

That really Savi, I think Tammy’s last point is the important one, which is our — we want to strive, it ties in with Hunter’s initial question about aircraft productivity to schedule efficiency and that will be somewhat dependent upon demand and how many flights we can put in. But 2018, 2019 coming into 2020, we have great momentum running the operation. We had great plans to improve the turnaround times and improve our efficiency and we have not yet had a chance to test those out. I’m very excited about that opportunity. So I think that’s really key and it’s guesswork is to when we’re going to have the opportunity to actually do that. We’ll need more airplanes. We need more flights. We — all the things that we’ve been talking about all morning here so that will be…

Savanthi SythRaymond James — Analyst

If I might make sure I understood that and if I kind of there’s a lot of moving parts clearly, but it’s more of a realistic way to think about a sustainable level and there’ll be inflation beyond that, but maybe getting to slightly below 2019 is a realistic view on once things have normalized.

Gary C. KellyChairman of the Board & Chief Executive Officer

Well, I’d be shooting from the hip to answer that question. I think we can be — I could be thoughtful in answering that, Tammy may already know the answer. But 2019 was not optimized either and as you — we have pointed out, I think the question is if it were, what would that benchmark be and how realistic is that given the inflation so.

Tammy RomoExecutive Vice President and Chief Financial Officer

Yes, I agree, Gary. And sorry, just we’re not ready to provide fourth-quarter guidance and we’ll be meeting later this year and we’ll be more prepared at that point to lay out a plan for 2022, but I’ll try to just provide you just a couple of points just to give you a little color. We do — just to be clear that we do expect the current cost inflation and salary wages and benefits from our operational strain to be temporary. And here in the near term, we anticipate some ongoing cost pressure and other cost categories as we ramp up our flying and that’s obviously like maintenance airport and other operating costs. So there’ll be some costs that come back on as we add capacity as we cover. And then there’ll be some choppiness too as we bring back our flying. Just looking ahead to the fourth quarter as an example, our maintenance costs will be a burden more in fourth quarter due to just bringing the -700 that Gary mentioned [Indecipherable]

Storage and back into service and we’re realizing airport cost pressures as well. And then the inflation we’ve already covered. So again, I think it really goes back to as we scale up we’ll have more operating leverage and we’ll — I think the key here is to get back to those 2019 productivity levels. So again, a lot of moving parts and as we get through the year and have more visibility into next year, we’ll be prepared to give you key a better guidance there.

Savanthi SythRaymond James — Analyst

Appreciate all the color. Thank you.

Operator

We have time for one more question and we’ll take our last question from Helane Becker with Cowen. Please go ahead.

Helane BeckerCowen — Analyst

Thank you very much, operator, for squeezing me, and thank you, guys. So I have two questions. One is you talked about the level of credit card acquisitions and I guess the June quarter and I’m wondering if you can say what you attribute that too. Why you’re seeing such a strong recovery in that area versus maybe what you would have expected pre-pandemic?

Gary C. KellyChairman of the Board & Chief Executive Officer

Yes, well, it’s pretty simple actually. When we have a lot more people traveling, so you have the opportunity to get them to sign up and we also market it really hard. We had a very aggressive 60,000 point offer out there, sign-up offer, and with more people being out there, it’s just that much more appealing I guess. It’s easier to get more people sign up, but it’s also just a great card. I mean it’s as part of the Rapid Rewards program, which is an incredible program. There’s no blackout dates, the points never expire, and on and on. It’s just a very, very valuable card in the form of currency and it’s performing extraordinarily well. It’s not going to get into the Chase performance numbers but we are performing very, very well. So I think obviously as just people being out there traveling again and being able to acquire and we have market is pretty hard.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

I think the market [Indecipherable] is flush.

Gary C. KellyChairman of the Board & Chief Executive Officer

Yeah, as well. When they’re out, they want to spend money.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

And I think that’s right.

Gary C. KellyChairman of the Board & Chief Executive Officer

You get a credit card, but no, we’ve been very pleased with that.

Helane BeckerCowen — Analyst

Okay, that was great.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

That’s question number one?

Helane BeckerCowen — Analyst

Yes, no, and then the other question is you talked about environmental issues and culture and diversity and things like that. And I thought you know you’ve got a pretty good and the company is got a pretty good track record. Tammy isn’t the first CFO that’s a female and Colleen back in the day with Presidents. So you have had to try a really good track record of supporting, I think all of checking on this box a young fuel-efficient fleet and diversity at every level, and I’m just kind of wondering what you’re thinking — two things, what you’re thinking you need to do to maybe get more credit for it? And then second, how we should measure you against that?

Gary C. KellyChairman of the Board & Chief Executive Officer

Bob, you want to?

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

Yeah, Helane, I think it’s — yes, you’re right. We have — I think we have a really good track record and what you saw for us last year we came out with commitments that were really around diversity, in particular, racial diversity in our senior leadership group. So I think what you find is as you look at our broad employee base, we are very diverse. So particularly on the front line, I think I would — my guess would be that our diversity in our overall workforce particularly at the front line for the most part matches what you would see here in the United States. So I think that’s — I think we’re in really good shape in there.

Gary C. KellyChairman of the Board & Chief Executive Officer

Yeah.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

But as you move sort of up the leadership chain here and again I’m taking about our senior leadership, it is hard to argue that we don’t have some work to do. We have terrific leaders. We have a terrific pipeline of leaders and it’s really just about making sure that as we think about our succession planning and our long-term pipelines that those are diverse. We — our hiring practices focus on thinking about diversity as a component where do we recruit, how do we think about hiring and how we choose to hire. And then again, because if you just took our senior leadership group as an example where we do have some work to do I would argue, and that was part of our goal stated last year. It’s a long succession pipeline to move from a kind of an entry-level leadership position ultimately into a senior leadership position that may be decade, a decade-long process. So it is very focused on, to be honest, that the process as we used to think about how we hire and how we recruit and where we hire now and where we recruit and then how we think about just improving our diversity in senior leadership and then again that depends on the pipelines. We’re looking at things like just classic sponsorship and mentorship programs which we all do.

And so, again, I wouldn’t take that as while we have a big issue. I think we historically — you’re right, we I think produced really good results, but there is improvement that we — I think we need to focus on there.

Helane BeckerCowen — Analyst

That’s very helpful. Thank you.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

You’re welcome. I’m looking forward to being with you at the conference here in a month or so by the way.

Helane BeckerCowen — Analyst

Thanks. Looking forward to it as well.

Gary C. KellyChairman of the Board & Chief Executive Officer

All right. Well, that wraps up the analyst portion of our Q&A. I appreciate everybody joining us this morning. And if you have any follow-up questions, please give our Investor Relations team a call. Thanks so much and have a good day.

Operator

Ladies and gentlemen, we will now begin with our media portion of today’s call. I’d like to first introduce Ms. Linda Rutherford, Executive Vice President, People and Communications.

Linda RutherfordExecutive Vice President People & Communications and Chief Communications Officer

Chad, thank you very much. We’ll get underway with our media Q&A. If you go ahead and give them some instructions to queue up for questions.

Operator

[Operator Instructions] Thank you. And our first question will be from Alison Sider with The Wall Street Journal. Please go ahead.

Alison SiderThe Wall Street Journal — Analyst

Hey, thanks so much. I was wondering if I guess with the benefit of hindsight if there is anything you would do differently in planning for this summer or any additional sort of coordination there might have been between kind of the network side and the operation side. Just as you look back at if you had the opportunity if you kind of replan in the summer all over again if you do anything differently?

Gary C. KellyChairman of the Board & Chief Executive Officer

Well, Alison, I I’ll think that on. We — only with the benefit of hindsight by the way, because the schedule was very well planned. It was very well coordinated between our financial objectives, our commercial opportunity, and our operational capabilities. It was very well planned. It was plan based on our historic modeling of what kind of resources we need for what kind of activity, which we have 50 years of experience doing. And we included some cushion for lack of a better word. So turn times as an example, we’re actually planned to be higher than what we would otherwise expect.

And in hindsight, there are some elements of our plan that were too tight that being one of them at some of our locations. If you were listening to the analyst call, Mike mentioned its eight largest airports. So, weather, we factored in weather as best we could and the weather was more spring-like in June in particular than normal and so that kind of whacked us. So that’s out of our control. Technology are a one-off thing and those are the two headline issues for June. If we get to July, I think we are in the middle of the pack, most days, Mike. So we’re not first in the industry, we’re not last. So the industry is simply operating slower and I think we want to be — we can see some elements of where that’s manifesting. What we do know is we have a different network than two years ago. We have a much higher proportion of consumers traveling. That has translated into much heavier baggage loads and also buying itineraries that are more complex, i.e. connecting, which also translates into more connecting bags. So we can see things today that we would not have known when we put the schedule into effect. I can assure you we’ll be factoring that in prospectively.

So that’s the one very tangible thing that I’ve seen so far. And again you’ve got experts in the room here that I — that may want to chime in. But the overall allegation that we were understaffed is not true, that is incorrect. Meaning that it wasn’t under-staffing that’s led to delays. The problem becomes — the delays whatever those reason for is puts pressure on the staffing, because the days are longer or as Mike was describing how flight crews end up diverted and in the wrong place and out of position and so do airplanes. So getting the airline back on the tracks, obviously, is job one. And — but our people have done a phenomenal job. They’re working very hard. Mark described — Mike described some of the challenges in the environment. It’s just — I blame it on the pandemic, it’s messy. It’s messy coming in. It’s certainly messy coming out. Anything you guys want to add?

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

I’ll just — I’ll throw something in here, Allison. So, our point to point network is such a different model than most other airlines out there. And the way that we are able to absorb some significant events in that kind of a model is we would generally cancel a flight, get the airline back on time, and then we would re-accommodate customers through other alternatives that we had and we do that very successfully year-in and year-out. The biggest change that I think we faced this year with 2020 hindsight is we can’t absorb those significant advances as efficiently this year as we did in the past because we don’t have as much frequency in our network today that we did yesterday, but we will in the future. And so what that is causing us to do is to run those flights a little bit later and it extends the operating day. And so that’s really the crux of the issue and the resolve for that is as we grow the network and add flights back that solves itself. And then also we’re going to come into a period of time where we don’t have the thunderstorms and these pop-up weather events that we do here in June and July. So I feel like the worst part of all that is behind us and given all the information that we had, as Gary said, we were planned appropriately well, just not able to absorb those significant events like we could in the past. Saying all of that, we’re roughly in the middle of the pack in terms of dealing with those things today.

Gary C. KellyChairman of the Board & Chief Executive Officer

And Alison, and I agree with Mike’s point on our network, but even having said that, we had no problems with this quote new network until mid-June. No problem whatsoever and we had great on-time performance all the way through May. So, yes, I will admit to you and I take full responsibility for it. I was surprised. I wasn’t surprised with the impact of the technology outages had, but we took quite an effort to work our way through the second half of June and the weather events and we’re closer to normal here in July although we’re not satisfied with where we are. But long answer to your question, but it is complicated. I will say that it’s been 24×7 because it’s not obviously the customer service that we want to offer our customers, but I think the worst clearly the worst of it’s behind us in June.

Alison SiderThe Wall Street Journal — Analyst

Thanks for all that detail. I appreciate it.

Operator

And the next question will come from Tracy Rucinski with Reuters. Please go ahead.

Tracy RucinskiReuters — Analyst

Hi, everyone. Thanks for taking my question. I was wondering if you have any updates on steps that you’re taking to address unruly passengers and better-equipped crew to deal with bad behavior in flight?

Michael G. Van de VenChief Operating Officer

Yes, so, Tracy, this is Mike. So our flight attendants they have really good training on handling passenger disruptions and just how to de-escalate events and we have recurrent training with respect to that. And I think they do a very, very good job with that. But as you mentioned, there has been a marked increase in what I would say our abusive customer behaviors and that’s throughout the whole industry and I know that it’s a small subset of travelers to be sure, but we haven’t experienced these kinds of violent outbreaks before. And I can understand from a customers’ perspective maybe how some of that frustration builds up, but just there isn’t — we have no tolerance for customers to take out that frustration on our people or anyone else for that matter, and especially, if those are in physically threatening or assaulting manners. And so, we try to be as hospitable as we can as part of our operating philosophy day in and day out, but we do have a responsibility to inform customers of the Federal mask mandate, and we do participate in the enforcement of that mask mandate by reporting abusive and threatening behaviors to authorities. We have been very vocal with our unions about having these authorities follow up and be as aggressive as they can on these abusive customers. And in addition to that, we will add customers to our restricted travel list if they are abusing our employees.

Tracy RucinskiReuters — Analyst

Will you make self-defense classes mandatory for flight attendants?

Michael G. Van de VenChief Operating Officer

We have different defense mechanisms, defense classes that we are — defense techniques that we talk [Indecipherable] that are already part of our recurrent training in our flight classes.

Tracy RucinskiReuters — Analyst

Okay, thank you.

Operator

The next question will be from Leslie Joseph with CNBC. Please go ahead.

Leslie JosephCNBC — Analyst

Hi, thanks for taking my question. I was wondering what your expectations are for labor costs for the next few years and especially if you start renegotiating some contracts with some other group?

Mike G. Van de VenChief Operating Officer

You know, Leslie, I think we have paid — there has been a law in 2019, and 2020, and 2021 getting through this pandemic, but I think as the economy recovers and the business in the United States grows back up to what everybody thinks they’re going to be, I think we’ll have the same type of labor pressures going forward as we did in the past. And generally, those are wage rate increases or scale increases that are along the lines of inflation or GDP growth, and I think we’ll have those going forward.

Gary C. KellyChairman of the Board & Chief Executive Officer

I think the important thing to note and Mike said I’ll just restate it in a little bit different way is, we’re coming off of $5 billion worth of losses and we lost money again here in the second quarter. We are hoping to make money in the third quarter. So in that kind of environment you kind of question the wisdom of increasing cost further. And I think our point is real simple which is, no, we want to take care of our people. We want to continue to reward them. They’ve gotten us through this pandemic, they’ve got a set up for prosperity once again as we work our way out of this, and we’re certainly looking forward to concluding negotiations where we can reward our people going forward. The exact amount, which I don’t know if you were driving for that, the exact amount certainly for our contract employees is negotiated and we wouldn’t speak to that but the main thing is we want to get those done so that we can reward our employees.

Leslie JosephCNBC — Analyst

Okay. And in the near term, are you seeing any benefit or near and medium-term to having more junior employees join. I know the flow is higher now, but maybe lower rates in some of the senior people that left?

Gary C. KellyChairman of the Board & Chief Executive Officer

Yes, there is always — the growth is always a help because of that average wage rate effect. So, yes, as we’re hiring, which is an element of growth, whether we actually literally grow or not, if we’re hiring people will get some benefit there but that does — that’s not really are driving, that’s not a strategic or even much of a tactical objective of ours, that’s just the arithmetic the way that works out. I don’t know, Tim, if you have an off the top of your head what that effect might be, but just remember that for over a year we weren’t hiring anybody. It was going the other way. So we’re just now getting back into the hiring mode and I couldn’t tell you how many people we’ve actually hired here recently but it is not that many.

Tammy RomoExecutive Vice President and Chief Financial Officer

Yes, not much to add there, Gary, that’s exactly right. We were just now really getting up the hiring machine, but just in terms of the contracts that we have with our employees, we only — while our low cost we don’t achieve those certainly on the backs of our employees and just looking here at the current year, we would estimate rate increases and a couple of hundred million dollars for the full year this year, just based on the current contractual increases. So, it’s not like wages are standing still, our rates embedded in the contracts and which is what Mike was referring to as the step increases and so that is the call it couple of hundred million that I was referring to.

Gary C. KellyChairman of the Board & Chief Executive Officer

That our employees that are not under union contracts they’ve got merit increases last year. They will get them — this they’ve had them this year and we’re having promotions and promotional increases. So we are — I think our folks are doing a good job of taking care of our people.

Leslie JosephCNBC — Analyst

Thank you.

Operator

The next question will be from David Koenig with the Associated Press. Please go ahead.

David KoenigAssociated Press — Analyst

Yes, hi. Good afternoon, everybody. I just have a follow-up to Alison Sider’s question. You mentioned in the release and Tammy mentioned it here that you’re going to save less money than you had previously expected because you’re calling people back from leave a little earlier than you had thought. So, I wonder do you feel now like you waited too long before recalling people, did that contribute to what’s happened over the summer?

Michael G. Van de VenChief Operating Officer

No.

Gary C. KellyChairman of the Board & Chief Executive Officer

Hey, David. We’ve recalled everybody, I think, probably in the March, April time frame, we have about 400 pilots left on EXTO and they’re coming back to the company here between October and March, but we — before the summer started, we had all of our people recalled.

Michael G. Van de VenChief Operating Officer

Well, we have nearly — yeah, we have nearly everybody back here in the next month or so. I mean the — I don’t — no, I feel like we began the recall — because we know the schedule far in advance…

Gary C. KellyChairman of the Board & Chief Executive Officer

Far in advance and we know our training capacity…

Michael G. Van de VenChief Operating Officer

Right.

Gary C. KellyChairman of the Board & Chief Executive Officer

Far in advance. So all of that — the output of that is how many flights can you fly.

Michael G. Van de VenChief Operating Officer

Right.

Gary C. KellyChairman of the Board & Chief Executive Officer

And so, no, there is no implication at all that we need to do, that we should have recalled people earlier.

David KoenigAssociated Press — Analyst

Okay, thank you.

Operator

And the next question will be from David Slotnick with The Points Guy. Please go ahead.

David SlotnickThe Points Guy — Analyst

Hi, thanks for taking the question. I’m just wondering about the Delta variant. It sounds from everything that we’ve been hearing over the last two weeks like it hasn’t been affecting bookings and airlines aren’t really seeing any consequence from that yet. What I’m wondering is, what red flags are you looking out for, what signs are you looking out for that there is damage if that ends up happening?

Gary C. KellyChairman of the Board & Chief Executive Officer

Well, I guess transaction as we’re just looking at bookings straight-up are the bookings coming in or not. So that’s kind of real-time, but prospectively we’re looking back and trying to understand what is the customer sentiment and our customers beginning to be less willing to travel or not because of Delta variant. And be honest with you, we have not seen that. Although, it’s very, very modestly but almost statistically insignificant, to be honest with you. So, we’re looking at the customer sentiment, but we’re also certain looking at current bookings as well as forward bookings in the trends of the trends and they are still the solid trend. So yeah, you will really have not seen, if we did, we’d share that with you, but we are just not seeing at this point any issue or any impact from the Delta variant.

Tom NealonPresident

And I think further to that, our folks try to stay very well informed and we are aware like you are that the case counts have ticked up. We are locally at least we’re hearing predictions that the cases will rise significantly in the fall. Hope not, but we’re reading that too, but it’s not just the airline activity. You look more broadly and there is no indication anywhere that I see that activity is being diminished because of the increase in the case counts. So, so far so good. I’m worried about it just like your question implies and I think what I’ve tried to share is that we’ve got to be very nimble and very flexible here and we are very well prepared. If things do soften up, we are ready and we will adjust accordingly.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

And I think the last thing is watching all the data as Gary mentioned, the big question is also where I think we all feel like it’s the getting the vaccines out there and the vaccine efficacy is what drove the surge in demand and bookings starting in maybe late February and then the surge in demand here in the summer. The question would be, is the Delta variant or whatever variant comes in the future somehow changing the efficacy of the vaccines and there is no — as far as I know, there is no evidence of that. I mean, the story is go get vaccinated. Because if you are vaccinated, it’s working. I might — I think in the town hall that President Biden had yesterday the report was that of all the recent death and all of this is unfortunate I think 99.5% of the folks were not vaccinated. So I think we’re also looking at is somehow the variant changing the efficacy of the vaccines and so far it is not.

David SlotnickThe Points Guy — Analyst

Appreciate the insight. Thank you.

Operator

The next question will come from Dawn Gilbertson with the USA Today. Please go ahead.

Dawn GilbertsonUSA Today — Analyst

Hi, good morning. Ali asked the gist of my question about the operation, but I do have a couple of follow-ups on that front is although is a question on the mask mandate. Bob, you mentioned in your remarks, you were talking about fewer flights to re-accommodate people. I wrote down the number 16, did you mean 16% or can you — what’s that statistic?

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

It was percent.

Gary C. KellyChairman of the Board & Chief Executive Officer

Yeah.

Dawn GilbertsonUSA Today — Analyst

Percent, okay.

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

Dawn, I heard the same thing you’d heard in, yeah. You just left off percent.

Gary C. KellyChairman of the Board & Chief Executive Officer

I’m sorry.

Dawn GilbertsonUSA Today — Analyst

Okay, because I know it wasn’t 16 years. And then…

Robert E. JordanExecutive Vice President and Incoming Chief Executive Officer

It was actually Mike, but that’s okay.

Dawn GilbertsonUSA Today — Analyst

Sorry, I meant, yes, sorry. And then on-time performance, what is it so far in July? You said in the middle of the pack. And basically, I guess the question is, when can travelers expect? I know you said the worst is behind you, but when can travelers expect you guys to get back to normal operationally or at least to your standards operationally?

Gary C. KellyChairman of the Board & Chief Executive Officer

You will — it’s 67 month-to-date here in July at this point in time A14. And that’s when I say 67% that means, yeah, they were arriving within 14 minutes of the scheduled arrival time. We’re closer in the ’80s there if you just expand that to those 30 minutes. So I think from a customer perspective, we’re still offering a decent experience. It’s not what we want because it’s taking them a little bit longer to get to the destinations than what we would like them to. I think that as some of these weather events and these thunderstorms disappear here in the August and September timeframe and then I think just the natural trends are for our load factors to tailor off just a bit that will give us more recovery options than we have today. And so I expect us to be better here, we’re better in July than we were in June. I think will be better in August than we were in July. And hopefully here by the end of the third quarter into the fourth quarter we’ll be back to where we wanted to be.

Dawn GilbertsonUSA Today — Analyst

Okay. And then the follow-up question, I know this is for Gary or Bob, or whomever. On the mask mandate, the September 13th expiration date, do you expect that to be lifted or extended and what is your stance on that? Thank you.

Gary C. KellyChairman of the Board & Chief Executive Officer

Well, I’ll take that one. That — well, that’s a political question to a degree. So I don’t know whether the mandate will be extended or not. What we have been consistently advocating is that we follow up the CDC guidelines, which is if you are vaccinated there is no mask required. And if you are not vaccinated, then you should wear the mask. And unless that changes from the CDC, we wouldn’t advocate from Southwest’s perspective or the A4A for that matter extending the mask mandate. You’ve got the Delta variant now that is somewhat new information at this point. So I’m sure that is being very carefully thought through and studied. But I’m not aware of any effort underway to extend the mask mandate and we at least at this — as of today, we’re not advocating in extension.

Dawn GilbertsonUSA Today — Analyst

Thanks very much, sir.

Operator

We have time for one more question. We’ll take our last question from Mary Schlangenstein with Bloomberg News. Please go ahead.

Mary SchlangensteinBloomberg News — Analyst

Hi. I wanted to go back to the issue of the unruly passengers just real quickly and ask I’m — would Southwest advocate for more of those passengers to face criminal prosecutions versus civil penalties and do you think that would have any impact on the level of disruptions?

Gary C. KellyChairman of the Board & Chief Executive Officer

Well, Mary I just — I have a hard time tolerating any passenger that physically abuses our employees. That feels criminals to me and I think that is criminal.

Michael G. Van de VenChief Operating Officer

If it’s a criminal activity that is [Indecipherable] to have criminal prosecution.

Gary C. KellyChairman of the Board & Chief Executive Officer

And so there are extreme cases out there that is occurring and I think that we will be for whatever the full enforcement and letter of the law, whatever is available we would be in support of that.

Mary SchlangensteinBloomberg News — Analyst

Okay. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Rutherford for any closing remarks.

Linda RutherfordExecutive Vice President People & Communications and Chief Communications Officer

Thank you so much, Chad. Thank you all for joining us today. If you have follow-up questions, you can reach out to our communications team and you know that we’re always on at www.swamedia.com. Thank you all very much.

Operator

[Operator Closing Remarks]

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