25JUL13

Richard Anderson [opening statement]
With the benefits achieved with our new pilot agreement, we have the flexibility we need to both accelerate our fleet restructuring and improve pilot productivity as we vary our capacity by season. The agreement enables us to up-gauge our domestic fleet by acquiring 717s and two-class regional jets which will replace more than 200 50-seat aircraft over the next few years.

Paul Jacobson [opening statement]
The retirement of the 50-seat regional jets is one of the single biggest opportunity costs we have. The up-gauging strategy will improve our efficiency by lowering our unit costs while simultaneously improving our product while maintaining our capacity discipline. Secondly, we are aligning our head count with our reduced capacity and recently had over 2,000 employees elect to participate in our voluntary early retirement program. These employees will retire by the end of the year with limited backfill, which will continue to result in improved productivity.

Ed Bastian [answering a question from UBS on CASM ex-fuel]
And I’d say the other thing, Kevin, there that we did not necessarily forecast or see coming as clearly is the opportunity we had with our pilots to do the contract early. It’s going to pay significant dividends over time as it will have a big cost return to it, not just in terms of improved productivity, but the ability to fairly substantially restructure the domestic fleet. But that those costs came in right away so that’s in our September guidance as well, and that was another big piece.

24OCT13

Operator
We’ll take our next question from Mary Jane Credeur with Bloomberg News.

Mary Jane Credeur - Bloomberg News
Hi, folks. Can you talk a little bit about how you’re going to afford that new pilot contract?

Richard Anderson
Hi, Mary Jane, this is Richard. Sorry for not saying hello. When you look at the overall value that we’re going to create as a result of unlocking the ability to refleet plus the productivity that has been built into that agreement, we’re confident that it will be an important part of our ability to get to unit cost over the next couple of years to improve our margins and our return on invested capital.

Glen Hauenstein
And, Mary Jane, this is Ed. One additional thing, we also reduced the profit sharing going forward and that’s an important part of helping to fund that cost growth.

Mary Jane Credeur - Bloomberg News
Sure. Okay. Thank you.

Operator
We’ll take our next question from...