Good day and welcome to the Southwest Airlines Fourth Quarter and Annual 2020 Conference Call. My name is Chad and I will be moderating today's call. This call is being recorded and a replay will be available on Southwest.com in the Investor Relations section. After today's prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] At this time, I'd like to turn the call over to Mr. Ryan Martinez, Managing Director of Investor Relations. Please go ahead sir.

Thank you, Chad and I appreciate everyone joining us for our call today. In just a moment, we will share our prepared remarks and then open it up for Q&A. First, you will hear a comprehensive update from our Chairman of the Board and CEO, Gary Kelly; Chief Operating Officer, Mike Van de Ven; our President, Tom Nealon; and Executive Vice President and CFO, Tammy Romo. A few reminders. 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 fourth quarter results which we excluded from our trends for non-GAAP purposes and we will reference those non-GAAP results in our remarks. And we have more information in our press release this morning regarding forward-looking statements, non-GAAP reconciliations to GAAP results, and other important risk factors. You can find our release and other helpful resources on our Investor Relations website. So, let's get started and I will turn it over to Gary.

Thank you, Ryan and good morning everybody and thanks for joining us for our fourth quarter 2020 call. We closed out the year as expected with no surprises. And even Southwest is not immune to COVID-19 and we recognized our first annual loss since 1972. It was a big one and with non-GAAP losses coming in at $3.5 billion. But having said that, we were and remain very well-prepared to weather this continuing storm and especially, important is that we want to emerge on top in the airline industry. We have the strongest liquidity. We have $14.3 billion including $13.3 billion in cash and equivalents, $12 billion in unencumbered assets, and that doesn't include our frequent flyer program. We have the strongest balance sheet and pre-pandemic debt to total capital was a company record low at 24%. We have investment-grade credit ratings, and we have cash well in excess of our outstanding debt. Third, we have the best business model. We have an unprecedented run of 47 years of profitability and that was built on low cost and low fares and coupled with great service. And that in turn has resulted in unprecedented job security especially unprecedented for an airline going on 50 years without a furlough, without a pay cut, and the only major airline to avoid all of that during this pandemic. And I'm very, very proud of that. We have the best operation. And as evidenced by the Wall Street Journal's annual ranking of airline performances it was released this week was Southwest as number one. And finally, we have the best customer service and I base that on numerous brand surveys and my expectation that once again we will be at the top of the industry in terms of the United States DOT Customer Satisfaction Index…

Well, thanks, Gary and I'd be happy to. As Gary was mentioning in terms of our operation, the fourth quarter was exceptional. We built significant momentum throughout the quarter. The MAX was approved to return to service. We received much needed government support and that allowed us to pivot away from those time-consuming discussions about furloughs and concessions and job security. We were able to grow our city portfolio and the vaccines rollout began. And beneath all of those things, Southwest produced our overall best quarterly operational performance in our history. And as Gary mentioned, I too have just -- I'm very proud and very grateful to our people. There's tremendous activity associated with all those items I just mentioned. And in addition to those things though our people still go to work every day and they deal with day-to-day issues of a pandemic environment and yet they never lose their focus on our customers, on our company or each other. And they are just a great team. So for the fourth quarter, our on-time performance of 93% was industry-leading and the best in our history. We finished the year at 86% and that was the best since 2003. Our baggage handling was equally as impressive with just over two bags per 1000 carried being damaged or mishandled. So if you flip that around that's about a 99.8% accuracy rate. And again, the best in our history and in the top tier in the industry. That reliability coupled with our hospitality produced Net Promoter Scores in the mid-70s for the fourth quarter and for the year. So again, the best performance in our history. And we do expect to lead the industry once more with the lowest DOT customer complaint ratio when those are published. So to cap it all…

Okay. Very good, Mike. Thank you. Well, good morning, everybody. And I also really want to start by thanking all of our frontline employees. What a year, what a result and really proud of what we've accomplished with the team. In prior calls, I've always made a point of recognizing our commercial teams our network planning, revenue management, the marketing folks, Southwest business, the customer relations team and they deserve that again. I mean what they're doing is absolutely incredible. But I also do want to recognize a few teams. They are always in that ground that if they aren't there nothing else happens. Our technology teams, our finance teams, our strategy teams and so many others. So they've done incredible work over the past year, honestly that I cannot even imagine or envision. So thanks so much for what you're doing. So I do want to provide a quick recap of our fourth quarter revenue performance. And then I'll cover our near-term trends and guidance for the first quarter. So our fourth quarter operating revenue was down 65% year-over-year, which is a modest sequential improvement compared with the 68% decline that we experienced in the third quarter. Fourth quarter passengers declined 64% year-over-year and our average fares were down 14%, which is a favorable comp to fares being down 20% in the third quarter. We did see some pockets of sequential yield in premium which was encouraging. Our fourth quarter load factor was 54%, which was up from 45% in the third quarter. And this was driven, primarily by a boost in the December load factor at 60%. And as you all know you look at our CCAP on December 1. And this is all on fourth quarter capacity was down 41% year-over-year. Just a few monthly performance highlights…

All right. Thank you, Tom, and hello everyone. I'll round out today's comments with an overview of our cost performance, fleet, liquidity and cash burn before we open it up for Q&A. Before I start, I'd be remiss if I did not acknowledge our wonderful team of Southwest warriors for their incredible efforts over the past year as we all dealt with the unimaginable impacts of this pandemic. The effects of the pandemic resulted in our first annual loss since 1972, ending our streak of 47 consecutive years of profitability, a record unmatched in aviation history. Our 2020 net loss was $3.1 billion. Excluding special items, our annual net loss was $3.5 billion or a $6.22 loss per diluted share. The biggest drivers of 2020 special items were payroll support proceeds of $2.3 billion that were an offset to salary wages and benefits which was offset by $1.4 billion in accruals for our voluntary separation and extended emergency time-off programs as well as $222 million gain from sale-leaseback transactions. While our bottom line results were disheartening, we made great progress last year in reacting to the pandemic and cutting costs, reducing capacity and significantly bolstering our liquidity. For fourth quarter, our overall cost performance was strong as we continued to meticulously manage spending. Excluding special items, our operating cost decreased 37% year-over-year to $3.2 billion and increased 7% year-over-year on a unit basis. Fuel expense was the largest driver of the year-over-year decrease, down 67% with gallon consumption down 45% and price per gallon down 40%. Our fourth quarter fuel price was at the midpoint of our guidance range at $1.25 per gallon, down $0.84 year-over-year. Following three quarters of lower fuel prices, energy market prices have increased recently. We currently expect a sequential increase of roughly $100 million in…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Savi Syth with Raymond James. Please go ahead.

Hey. Good afternoon. Tammy, this might be for you. As we get back to a bit more of a sustained demand recovery, what are your targets for liquidity levels, debt, CapEx? As you think about the priorities for cash as we get to more of a stable path to a recovery?

Yes. Hey, Savi, how are you? I'll start with liquidity, because, obviously, as we manage through this pandemic, I think that's goal number one. So, of course, our goal there is to maintain sufficient liquidity. And it's tough to predict as we've been saying exactly when we'll hit an inflection point, but we intend to maintain a high level of cash until we are comfortably past the pandemic. In the current environment, we have agreed with our Board that a cash target for now of at least $10 billion is reasonable. And we can go down from there post pandemic as we return to profitability and repay debt. One thing for sure, this crisis has certainly reinforced our long-term imperative to maintain a strong balance sheet and manage our debt. And, of course, we'll want to satisfy the adequate reserves for investments as we prepare for the recovery and our future growth. As always, we'll want to maintain adequate liquidity to weather a crisis, which seems to happen once a decade. As we set our targets here post pandemic, we'll want to be mindful that a large portion of our working capital is advance ticket purchases, which may not serve as a definite source of liquidity when we're in a crisis. So there are a lot of factors to consider with regard to liquidity and we'll continue to be thoughtful as we work together to maintain the financial health of Southwest. And as we manage through that on the CapEx side, I think, we've done an incredible job so far, but we want to be well positioned for the recovery and that we'll have some level of CapEx that we'll need to spend to continue to be prepared for the future. As I've already stated, we have very minimal requirements this year. And we'll want to manage that into next year, while at the same time, we'll want to continue to invest in projects that are important for our future, such as our GDS capabilities that Tom took you through. So, we're going to continue to manage that, but as our profitability returns to normal levels, I would expect our CapEx to return more to normal levels. And we're just going to have to manage that here as we go.

Helpful. And if I might just have a quick follow-up on the comment on ATL. Just kind of curious your current sales, how much of that is coming from credits versus kind of new cash and how that compares to a more of a normal environment?

Yes. So just to give you just a little insight of what --- where our ATL balance is to help there, at the end of -- at the end of 2020, our ATL balance was about $7 billion. And the current -- we had a current liability of $3.8 billion and a non-current liability of $3.3 billion, about $4 billion of that was from our loyalty program or a little more. And about $2 billion represented travel credits that we've already issued. And then we had about $522 million that consisted of tickets, and with the remainder being things like gift cards and our early bird revenues, et cetera. So that hopefully, Savi will give you a little bit of help as you're thinking about what the breakdown might be ahead.

I guess, in terms of usage though, are you seeing a lot heavier -- I'm guessing you're seeing a lot heavier use of credits in current purchases? That's what I was kind of curious.

Yes. During the fourth quarter, we had the credit redemptions, that was about 18% of our non-loyalty sales during the fourth quarter. And our hope, Savi, is that that would return to something more normal like 5%.

Perfect. All right. Great. Thank you. Very helpful.

And the next question will come from Hunter Keay with Wolfe Research. Please go ahead.

Hi everyone. Good afternoon. Tammy, can you elaborate a little bit on the CapEx plans. You said -- I think you said $5.5 billion out. Can you bracket in the CapEx high and low possibilities for 2022, 2023? And also if you would how that ties to your fleet count outlook both high and low?

Yes. Sure. As I said earlier, as we return to profitability, I would expect our CapEx to return to more normal levels. And if you go back historically, I'm going to call that about $2 billion. And I'm not saying today that's our guidance yet. We're still, as I said earlier, working with Boeing to restructure our order book. So, we haven't really locked that down yet. Obviously, we want to see how the demand environment evolves. And then also we do -- we will be focused on renewing our fleet and we'll want to pick up with our fleet modernization efforts. So, as Gary said at the beginning, it's all a balancing act. So, -- but I would expect our CapEx levels to pick up as we get past the pandemic to more normal levels that you've seen in the past. But right now I'm just not prepared to give you exact guidance because we haven't locked down our delivery book with Boeing. And as you know our largest -- the largest portion of our CapEx goes to aircraft. And -- but we'll want to continue to invest in technologies and our facilities and so forth. And as I've said already, in total, we're below $500 million. So, we may need to pick that up here at some point because we certainly want to be prepared and ready when we see that rebound in demand.

And Hunter I'll just pile on here very quickly. I think that's a very fair question. And we -- I'm just not comfortable that we have an answer to that yet. So, it's -- nobody likes the answer it depends. Obviously, you already acknowledge that there's a high-low kind of a scenario. So, we owe you that bracketing. One of the things that I want us to do this year is to not think that we're starting over as a company, but there are some start-up-like aspects to this environment. And we're well-funded. We've got a lot of -- we've got a lot of institutional capabilities. We've got a lot of opportunities. We just don't have a lot of current demand. So, we don't want to behave as if we're going out of business and there are things that we would definitely like to invest in outside of the fleet which Tammy was referring to. So, all that, I want us to relook at, re-baseline our capital plan, and it really applies to both. It's not just aircraft, but it will also be the non-aircraft category. What we've been focused on so far obviously is survival and making sure that we screw down the spending that we're taking care of the health and welfare of our people and our customers. And those very appropriate questions you have aren't -- they're not pressing for 2020 and 2021, but soon they'll be important. I think the most pressing thing just to reiterate what Tammy said is that we are in a retirement phase. So, we will need to make some judgments about whether we want to keep airplanes longer, whether we want to stick with our pre-pandemic plan about retirements, whether we need to follow through with replacing. There is great opportunity with fleet modernization. So, those are all good questions. And then finally, Mike and Tammy are working with Boeing as you all know and we're right in the middle of that negotiation. That obviously factors in to answering your question. So, that's not complete yet either. So, there's work to be done there and we owe you an answer. We're just not quite ready to offer it up yet.

Yes. No understood. Thank you. And then as you think about re-baselining things the operation and even for -- it's a fleet question too. How do you think about Hawaii now in light of what's happening with COVID and with the MAX? What does the MAX give you in Hawaii that the NGs don't?

I think we're more enthused about a lot of things as we emerge from this and Hawaii is certainly one of those. But I don't know, if I'm exactly on point but -- with the way you're thinking about it, but we -- and maybe that's all you were looking for. I mean, we're -- we think the MAX will be better to serve the market and then the MAX seven is also a factor in the way we're thinking about Hawaii. So, I think we're going to do -- we're off to a great start there. Yes, I think we're going to do extraordinarily well. Tom, I don't know, if you or Mike want to --

Actually, Andrew and I were just talking about this before we came in. I just want to --

Yes. Certainly, the MAX gives us certainly a better cost performance. So, immediately, the contribution of that sector of our network improves with the improved aircraft. Also, the NGs have payload restrictions going westbound and the high wind time of the year which is actually right now. So demand -- so the aircraft right now, so we're not really having to restrict the payloads. But normally, we would have to restrict the payloads this time of the year with the NG. The MAX with the greater range will be able to go full year-round to all the airfields we service. So that will also be an increment to our business gates in Hawaii.

Thank you.

Actually, just back to demand for a second, we haven't really talked about demand. The whole story is demand in my mind. We can talk about lots of stuff that's all demand and the Hawaii demand is actually pretty darn strong. And what we've seen is Hawaii, they've gone through I'm not sure how many executive orders we've actually had out of Hawaii. I think 12, 13 something like that, a lot of executive orders with different ways of managing through the quarantines and such. The pre-cleared program that they've put in place now that several carriers are leveraging it really does make the experience pretty straightforward. And the demand for Hawaii is actually very, very solid. So we think there's a tremendous amount of opportunity there. We're excited about Long Beach, what we're doing there. We're excited about opening up the San Diego service that was delayed. I guess, it was initially last fall Andrew, we just started that up. So I think the upside for us in Hawaii continues to be really significant. So, excited about that and the MAX eight as makes it even better. So, it actually expands the territory we can cover as well. So, new cities with that so.

Thanks.

Good to hear from you, Hunter.

And our next question will come from Duane Pfennigwerth with Evercore. Please go ahead.

Hey. Thanks. Good afternoon. Gary, I wanted to ask you about your recent leadership role at A4A. How does your involvement potentially change the posture at A4A? And how might priorities change given you're coming from a position of strength?

Duane, we're -- we have one boat. And obviously, I never take my Southwest hat off, but this is my second stint as chair. So I think, we all understand how this works. It's a relatively small association. We have some new members. So, there's some administrative things to be addressed and some team building, if there's such a thing among competitors to do. But basically, we need to arrive at a strategy that we can all agree to. And then logic would tell you then there's things that we can't agree to. And then therefore that falls outside of the scope of what the association would work for -- or work on. So I don't know that it's so much driven by Southwest business, or our strength, or weaknesses so much as it is just what I'll try to do to lead the organization in a fair-handed way to be as productive as we can. I think the A4A is a very talented organization. We've been members since I think 1990. There was a time -- therefore there was a time that we were not members. So it's a long horizon. We think it's better to be -- have a seat at the table and be a part of that as opposed to not. And I thought the association did a great job in 2020 in particular. You got a new administration, which is a task in and of itself, as well as another stimulus that's being bandied about. So there's plenty of work to be done, and I'm looking forward -- I was honored to be asked to do it, and happy to volunteer, and I'll be spending more time in Washington as a consequence of that.

I appreciate you biting on that and the thoughts. Just for my follow-up and maybe you covered it and obviously everybody is trying to ask the same flavor question in 20 different ways. But given the cost savings that you have locked in and the fleet mix benefits when you get back to 2019 capacity levels how much better do you think your CASM profile will be? Thanks for taking the question.

Yes. I'll let Tammy give you -- she is working on that and she no doubt can give you a more thoughtful answer. But I -- the way you asked the question is a good way to do it. I was really very pleased with the operational performance in 2020. And we got a bounce - the ball bounced our way in some ways because we were underutilizing the fleet. We had longer turn times. You had lower load factors and some things like that. But it doesn't really reveal all the work that Mike and Andrew and the rest of the organization has been working on to improve our operational performance. What was intended to be addressed in 2020 and 2021 is further efficiency efforts with the schedule. And that's the real magic here in terms of being able to improve our cost effectiveness. And so I think we're all curious -- I'm just not ready to -- I don't really know what 2019 capacity looks like. We are horribly inefficient right now and still doing a pretty good job relative to our peers. So what we've got to do is get back to some kind of aircraft productivity and efficiency and then layer on top of that our initiatives that we had planned to see where we get. I'm very enthused about the progress we've made with the cost so far. I think you got this from Tammy's update. But basically if you strip out fuel the costs are -- they don't vary much from fourth quarter to first quarter which is pretty darn encouraging. So we've definitely stripped out a lot of costs. I think in terms of a lot of the more discretionary investment like programs and projects especially that were technology driven. We feel like we've gained significant efficiencies there post pandemic compared to where we were before. So good for us. And so I think a lot of those things should stick. Then you just get down to, are you going to have 85% load factors again? Are we going to have a dense scheduling opportunity again? Can we improve the turn and the ground time and continue on with some of the block time efficiencies that we were realizing? And if we can do all that I think we'll beat 2019 costs handily quite frankly. But that's in fairness I think that's speculative right now. I think we have a long way to go. Right now it's taking more people and more airplanes to produce an ASM than any of us like and far more than what it was in 2019. So I'm more determined to get us back there than I am so worried about what all the arithmetic adds up to. So that's -- Tammy, I don't know how you would answer that question.

Yes. I don't know that I have really a whole lot more to add to that. But in addition to the opportunities to improve our efficiency as Gary took you through we have delivered some permanent cost takeouts such as our voluntary separation program. And we have accelerated the retirement of some aircraft here in 2019. And I think we have a proven track record on just the overall cost management side. So we'll continue to work hard there through the recovery. I did just want to note fuel because obviously part of that is dependent on fuel which has spiked recently. So we'll just continue to manage costs at a pace that I think makes sense relative to the capacity that we're adding back. The MAX return to surface will also be a factor. But as you all know, there's a lot of efficiencies that we're going to gain, as we start bringing the MAX back and replacing our older aircraft, given the significant efficiency of the MAX. And so we -- again, it's hard to commit to a specific CASM at a specific ASM level. That is time-based. So we're not going to give guidance there. But we do believe, we could hit 2019 CASM levels as Gary said, even while our ASMs are down. So, again just, as I said in my remarks, very proud of what everybody has done. Everybody's just rallied together here to reduce our costs and we're going to carry that on here, until we get to the other side of this pandemic.

And I know you -- I'm sure you didn't take it this way Duane, but I wasn't criticizing what we're doing or complaining about our efficiency right now. It is what it is. So we have very thin demand. And we've done an outstanding job of sustaining a viable network, but it is not nearly as -- what we're forced to do is, far less efficient than what we know we can do. And I'm a little afraid that some of our -- well, I think trying to make a commitment on cost right now is getting the cost before the horse. So we need to know what demand is. We need to schedule to that. We need to make it as efficient as we can and then strive to get back to the level of efficiency that we had with our schedule back in 2019 and then add some. As Tammy said, there's some overhead and things we've taken out, but it's going to be all about the schedule. I think we're set up beautifully, to be able to execute better in the future on cost. And I think, we're all anxious to get there. When we'll hit that? Don't know. But I think we're set up as well as any of our competitors. In fact, I would argue we're set up better.

Appreciate the thoughtful response.

The next question is from Jamie Baker with JPMorgan. Please go ahead.

Hi, good afternoon everybody. Gary, Duane's question is actually a good segue into mine. The good news obviously is that Southwest entered the crisis with an outstanding cost structure and your competitors didn't for the most part. The bad news and I guess, that's my question, is it bad news in your mind that some of your competitors are at least targeting pretty significant cost reductions, in their cases getting back to 2019 CASM but on significantly less capacity. So, if your cost advantage narrows, what do you think this actually means for Southwest? I know, Tammy sort of deflected the question in her remarks. And if memory serves, I did ask you a variant of this back in the 2007 time frame during the bankruptcy era. So, I'd love to hear your updated thoughts.

Well -- and of course, relative to the last 13 to 20 years, our cost to manage has narrowed. And so I think your question then and my concerns then proved to be valid. I don't know what they're going to be able to do. I think, at least in terms of what I'm seeing right now, our costs are stickier as we shrink. We don't outsource a lot of stuff as you know, which is much easier to shed, and so we are more fixed and sticky on the way down. I think, several of you all have noted that as we grow back that will be to our advantage. So we'll see margin expansion because, we won't have the variable cost to attach to that as the revenue volumes come back. That's one of the reasons I wanted to point out the operational performance for 2020. As we -- it's all about the operation, when you get right down to it when it comes to cost. And we had tremendous learnings from 2020, just the fact that, I mean we could quantify the value of an on-time performance point, much more scientifically than what we've been able to do in the past. And it's things that we've all learned, if not in school then in our early years that when you have poor quality or you have waste, it is very expensive. So we've got a lot of wonderful learnings from that and a lot of good tools and techniques to apply with a lot of good initiatives coming forward. I know I'm being a little bit redundant. So those are things that I know. If our cost advantage narrows, I think I could point to the last 10 to 20 years and say, we're still really good. And it's more than just that. It's the five things that I mentioned that Herb was so proud of 25 years ago. It's the strong balance sheet. It's the strong liquidity. It's the great culture that we have, the excellent customer service coupled with having a low-cost structure and a low fare brand. It's all those things combined. So I don't see us losing that. We certainly won't lose it in the near-term. And the advantage is narrowed. My theory -- and you and I have talked about this. My theory is that those are going to ebb and flow and there may be a point in time where it will widen again. So it's kind of incumbent upon us to continue to innovate and look for those opportunities where we can beat the rest of the crowd.

Gary, I promise not to ask the question for the next 13 years. Thanks. And that's my only question for today. Take care.

Well, we'll see how this looks in 2034.

Statute of limitations. All right. Take care.

Ladies and gentlemen, we have time for one more question. We'll take our last question from Brandon Oglenski with Barclays. Please go ahead.

So, Gary, I guess I just want -- it's been a great discussion thus far. What is the focus for you looking forward? Is it getting back to full employment, getting back to the full schedule? Obviously, reaching cash breakeven is important but what about reaching prior profitability levels because you guys did drop to 60% to 70% of man hours to get to breakeven? What about returning back to margins and return on invested capital are those still important as well?

Oh, yes, absolutely. And I think we'll just need to -- right now it's all theory right? It's just so theoretical because we're mired in this pandemic. So I hope you'll forgive me, skirting the question a bit here because what we really urge our leaders to do is focus on the next 30, 60, 90 days. It's just like having a patient in intensive care. So to be fair to your question, again, it links back to some of the earlier questions I was trying to answer from Hunter and Duane. If we get to the point, where our demand is roughly what it was in 2019, I think there's an easier way to formulate answers to your questions. If we've got a new normal that is significantly less than that, maybe we're breaking even and making a profit, but our traffic levels are 70% of what they used to be there's not a lot we can do in the near-term to honestly commit to you that, yes, we'll get back to the same return on capital there. I don't think it's possible at 70%. If we get back to 100% of customer volumes then it is a matter of where fares at that point, what's the mix of business and leisure. We can get wonky on all those things but it's just so far -- it's so theoretical from where we are today. My -- so I will answer your question. My focus is real simple and that's why I crafted my opening remarks the way I did. We need to strike the right balance here and we need to be realistic. We know that we can't generate the traffic we need unless we boost our flying. There is no reason to boost our flying if the traffic…

Well thank you for speaking the truth Gary.

Okay. Well that wraps up the analyst portion of our call today. I know we shared a lot of information. Thank you all for the great questions. And if you have any others, feel free to give me a call. Thank you all for joining and have a great day.

And thank you. Ladies and gentlemen, we'll now begin with our media portion of today's call. I'd like to first introduce Ms. Linda Rutherford, Senior Vice President and Chief Communications Officer.

Well thank you, Chad. I'd like to welcome members of the media to our call today. And I think we can get right to the Q&A portion. So Chad, if you would give them inspections on how to queue up for a question we'll get started.

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

Hi, thanks so much. I wanted to see what you're hearing or if you're picking up anything about sort of additional requests for government aid, when the existing PSP expires at the end of March. You've said that you won't -- you don't plan to furlough any employees through the end of this year, regardless and just curious, if you see the industry kind of maintaining the same united front on the federal aid question, if not every airline equally needs the aid?

Yes. Great question, Alison. So I'll just speak for Southwest at this point, because I don't have input from all of the member airlines within Airlines for America. But at this point, we would like to have a seat at the table. I know that unions have reached out like they did last year, urging leaders in the administration and Congress to provide more relief. We -- I will just -- I know you know this, but I'll just acknowledge that the theory with the second payroll support program was to simply extend what was done the first time, which was through September for another 6 months. And the payroll support program in rough dollars was $25 billion the first time around. Well it was far less than that here the second time around. And we're staring down another -- in terms of cash flow $1 billion losing quarter here in the first quarter, just like we had in the fourth quarter with higher fuel prices. So this has certainly not ended and it's anybody's guess what the second quarter will be. So this is all about protecting jobs. And we're the only airline to promise no job losses or pay cuts in 2020. We lived up to that. We promised the same thing again here in 2021. That doesn't mean that we won't have risk and concerns beyond this. So we're not promising this indefinitely. And all airlines are alike. So I think the short answer is it's too early to give you a specific answer, but it's definitely something that I'm glad the administration is looking at. I'm glad that Congress is looking at it. And I'm glad that we'll have a seat at the table here.

Thank you.

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

Hey, everyone. Thanks for taking my question. The CDC said this week that it is actively looking at mandating COVID-19 test for domestic travel. Has it approached Southwest or A4A about this possibility?

I'll speak for Gary. But Tom do you -- go ahead.

Well I mean just to give you a few thoughts. I mean certainly the international stuff kicked in this past Tuesday the requirements there. And it was actually -- I wouldn't say it was a nonevent for us. We have your fairly underweight there if you will compared to OAs but that wasn't a problem for us. With respect to coming into the U.S. it's not clear -- first of all it's not clear if when, what, how we'd be asked to do that. But it's certainly something that we're thinking about. If it were something similar to what's being required internationally how would we do that domestically? And right now the international is -- it's a pretty manual process because it's sprung upon all of us so quickly so you got to get the technology and to scale that domestically. Well I will say what I think if that's -- if you don't mind. I think if we're ultimately going to be doing a domestic testing type of -- or type of protocol or regimen. I really don't think you want this being done by airport, by airline, by city, by state. I think as we say in Texas, that could be a real go rodeo. I mean it's going to be a real challenging thing for customers to navigate all of that if it's not consistent across the country. So I think that if we are going to do something, which by the way I don't think our government affairs team, our operations team or our customer experience team have really been given any indications coming. We're reading the same things you're reading the CDC. And we're anticipating hearing something from somebody but we're thinking about it. They want to figure it out fairly quickly. So our technology teams and CX teams customer experience is what CX is are thinking through how might we do that if it did in fact come to fruition but nothing known at this point.

Yes. And I'm -- so specific to your question I'm not aware that the CDC has reached out to us. By extension I'm not aware that they've reached out to the Airlines for America. But yes, I think it would be a mistake. It's very costly. As Tammy was pointing out in an earlier interview to administer the test, we don't have adequate testing capacity for the country in the first place. Where our emphasis needs to be is on the two vaccines that are available and getting them rolled out and getting the country vaccinated. And I would hate for us to take our eye off of that ball. But I would just make the argument that why pick on air travel? If you want to test people test them but test them before they go to the grocery store. Test them before they go to a restaurant. Test them before they go to a sporting event. I think it's been well recognized that the air cabin is extremely clean and healthy and safe. And with the new administration mandating mask in the transportation sector, that's what we need the most which is hygiene, wearing mask, social distancing, which should now better extend in the airport and beyond. That's the right approach here. And I just think with the millions of customers who fly or ride buses or trains or whatever, it's just unrealistic to expect that we can efficiently and effectively do testing on a large scale.

Well if I could just follow up. I think that part of the concern may be the spread of the new variants which are now in this country and there have been really strong messages from leaders in Europe for example discouraging travel. Do you see any kind of messaging like that coming either from the government or the industry out of concern that the progress that we have made so far could really just be -- could go out the window if these new strains go -- like today there was a case discovered in South Carolina. So if it's contained in South Carolina that's better than if it reaches California, for example.

Well, no, that's a different question and a fair question. So and the answer is, no. No one has reached out to us about what we might need to do in that kind of a scenario. It's something that needs to be discussed quite frankly. But to your point, I don't know that testing would be an effective means to try to address that. I don't know what your experience has been, but my experience in trying to get access to test through friends and family is extremely difficult. And that's before now you would mandate that you want more test administered. I just think it's wholly impractical. And obviously we -- selfishly we hope that we don't get to a point where we're prohibited from flying, but that's a different question and something obviously that needs to be addressed. But fortunately at this point, we're not dealing with a significant threat from these different strains.

That’s helpful. Thank you.

We have time for one more question and that question comes from Dawn Gilbertson with USA Today. Please go ahead.

Hi. Thanks so much for taking my call. Switching gears for a second. You guys now that you're filling your planes, just seeing a lot of chatter about when are you going to bring back regular food and drink service. Could someone walk me through the thought process there and any kind of timetable especially including the sale of alcohol? Thank you very much.

Well, we're -- at this point, we went back to selling the full middle seat to the full plane. We thought at that point with the surge it probably made sense for us not to be having a lot of interactions between the flight attendants and the passengers which is what's required for the alcohol which by the way is what people care about more than anything else is selling alcohol, which is not a huge surprise. So we're working through that at this point with our customer experience team and our provisioning team and operations and in-flight team are working through when does it make sense for us to do it? It very well can be sometime in the first quarter. I think a lot of it really does have to do though with what we're seeing in terms of case counts. And I just looked at the case counts before coming into the call and every state pretty much, I shouldn't say every I think there were one or two that were still going up. Case counts are down, hospitalizations are down and so on and so forth. And that certainly has a bearing on how we think about it. And so I'd say it's still a work in process. Our intent is to bring it back. We'd love to have it back in time for spring break. That is to be decided to be chosen and determined. But Mike, do you have anything you want to add on that?

No, Dawn. It really is just a -- it's just an opportunity for us to limit face-to-face conversations with flight attendants and customers and people mingling throughout the cabin. And I think that does help reduce the risk and help us distance people more. At some point in time, as Tom mentioned, it's going to be the right time to start bringing that back. Hopefully, that's sometime toward the middle of the year. The other thing though that we've been very accommodating with for customers if they want to bring food or colas from the airports onto the airplane, we're very accommodating with that.

But Tom and Mike have both covered it, but it's just to reemphasize. It is all about the health. I mean that's the only reason that we discontinued the service is to limit the face-to-face interaction. And obviously, we're encouraging people to keep their mask on. So those are the only reasons.

The only thing I'd add, Dawn, is it's kind of interesting. Our customers miss their drinks and our flight attendants actually miss the engagement with our customers. That's the fun part of the job and that's where the person kind of sparkles through and they really miss it. So when we think it's time and it's safe. We can't wait to do it.

We're coming into the winter with the discounts coming up. I think our folks made exactly the right choice, which is to not do it right now. And you can tell by all three of our answers that we're continuing to talk about it, but it's not a high priority for us to get it back and in service here until we're comfortable.

Okay. Thank you.

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

Thank you, Chad and thank you for joining us today. If you all have any other questions you can certainly follow up with our communications group at 214-792-4847 or using our online newsroom at www.swamedia.com. Thank you all very much.

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