Welcome, everybody. It is right at noon, so we will start with an on-time departure here. For anyone I haven't met, I'm Ryan Martinez, Vice President of Investor Relations at Southwest. On behalf of our Southwest team, I wanna welcome you to our 2021 Investor Day. It's no small feat to have an in-person meeting like this. Nice to be back together with you all. Thank you to our friends here at the New York Stock Exchange for hosting us in this beautiful room. We really appreciate that as well. Thank you to everyone joining us here on the webcast. It's an exciting time at Southwest, and we filed our presentation slides this morning in a Form 8-K. I'm sure you've been through those.
No doubt you saw that we've been busy building upon our strong foundation from our first 50 years and busy planning to set ourselves up for success post-pandemic. We've got a great afternoon in store for you, and you'll hear from Gary Kelly, our Chairman, CEO, and soon-to-be Executive Chairman, Bob Jordan, our EVP and incoming CEO, Tammy Romo, EVP and Chief Financial Officer, Andrew Watterson, our EVP and Chief Commercial Officer, and Mike Van de Ven, our President and Chief Operating Officer. Following our prepared remarks, we'll take a short break. Our webcast listeners will hear some music, and we'll reassemble for a Q&A panel. We have a contingent of other Southwest officers with us, most of them sitting in the back today, so thank you all for being here.
If you haven't already, you may wanna introduce yourselves and chat with them during the break. Of course, I wanna thank our Southwest Investor Relations team and all of our helpers. That's Lauren, Micah, Caroline, Molly, Megan, Renata, and Kelly. It takes a village to put on one of these things. If you need anything, just let them know. I wanna mention that our presentation today will include forward-looking statements, and of course, those are based on our intent, expectations, and projections. They're not guarantees of future performance, and a variety of factors could cause actual results to differ materially. Please see our investor relations section of southwest.com for more information. Now let's get on with it. I have the pleasure of welcoming our first speaker, a man who needs no introduction, Mr. Gary Kelly.
Thank you all very much. Thanks for being here. It is obviously a pleasure to be back in person, and we've got good news this morning that we are very pleased to be able to share with you all as well. It's great to see everybody. With that, let's get going here. I think the last time that we were together for an Investor Day up here was 2016, and at that point in time, we were realizing significant value from strategic initiatives that we had laid out years before. In 2015, we had just delivered a return on invested capital of 32.7%, which was well above our 15% target that we had established years before.
Our goal for that year, 2016, was to be in line with that, and ultimately, we closed that year out at a 30% pretax ROIC. Bob is gonna talk about those initiatives and summarize them in more detail, but I think the main thing I wanted to point out to you all is that we set out to do it, and they worked. They drove a step change in our profits and our return and our value creation, and certainly improved the opportunities going forward. The 2016 plans for the ensuing five years called for more exciting initiatives. We realized many historic accomplishments. We've replaced our reservation system in the last five years. We've expanded our international footprint. We retired the 737 Classic fleet. We launched the 737 MAX.
We deployed significant new technologies. We got ETOPS certification and launched Hawaii service. We rolled out our Southwest Business function and implemented four global distribution systems. During the pandemic, as you all well know, which was not planned in 2016, but we rolled out 18 new destinations to our route network, and we closed zero destinations during the pandemic. If you go back to 2019, even with the MAX grounding, I'll just remind you that we had record earnings that year. Coming into 2020, we were so excited. We had a phenomenal plan and really felt like we were destined to have an all-time, across the board, record year. We had great momentum. We all know what happened.
Fortunately, we were very, very well prepared for the unexpected. I'm very proud of our team. We've managed very well through this crisis. Happy to share today that we expect to be profitable this fourth quarter, 2021. With any luck, last quarter was our last losing quarter going forward, and that's, of course, as usual, barring any unforeseen events or any kind of trend changes that we don't anticipate. We've got a plan for 2022 that our leaders are going to share that call for profits each quarter. Just as we've tried to do for you all in the past, today our leadership team has a great plan for 2022 and beyond. We've got tangible, exciting value-creating initiatives.
We've got a lot of exciting opportunities to grow our network, but our immediate priority, of course, is to restore our current network to the current destinations with the frequencies that are appropriate. Right now, as things are recovering, we've got some work to do there. I just wanna say that over 50 years, our people have done an absolutely magnificent job of building this company. I think, without a doubt, it's the most successful airline in aviation history. We believe that we're perfectly situated for the current environment. We have dramatic competitive advantages. We have industry-leading performances. Our balance sheet, our liquidity, our brand, our low cost, low fare business model, our fleet, our route network, our frequent flyer program, our vast customer base, but most of all, our people, and our culture, and our hospitality.
No one can match all that, and many can't match any of those aspects individually. I would steal from our marketing team and say that we are a category of one. I think what is fun for me, we're starting our second half-century here in 2022. It's fitting that we've got new leadership. We've got incoming CEO Bob Jordan. You're gonna get to know Bob a lot more. Many of you already know him well. He is very experienced. He is a 33-year Southwest veteran. It's kind of a youth movement going into the 61-year-old guys, but he is very well qualified, very well prepared. He is a phenomenal leader, and is gonna take Southwest Airlines to even greater heights.
I'm excited that I'll get to continue on serving Southwest Airlines and our shareholders as chairman for many years, I hope. With that, here's my friend and our next CEO number six for Southwest Airlines, Bob Jordan.
Well, good morning or good afternoon, everybody. Gary, you did not have to mention the 61, but it may explain the glasses I've gotta have to read the presentation here. Hey, it's good to be with everybody. Thanks so much for doing this. As Gary mentioned, our last Investor Day was 2016. Despite all the planning challenges we all know about here in the pandemic, it's a good time to get together and just talk about where we're going.
We recently refreshed our five-year strategy and initiatives, and I think they're gonna drive significant value. Just as important, I'm gonna talk to you a little bit about where we are with ESG and DEI. You know, we entered the pandemic with an unmatched financial record and unmatched domestic market share and relevance. We managed really well, in my mind, through the pandemic. We increased our market position, our competitive position, and our market breadth, and especially our balance sheet strength. I expect in 2022 to be better in terms of recoverability and profitability, but it's also gonna be a choppy year. We all know that. It's gonna be choppy, and it's gonna be a rebuilding year for us.
We've got 50 years of incredible success driving significant value for our shareholders, and in 2022, we're doubling down on the basics that got us to where we are as a company. We are positioning ourselves to grow again, and we have plans to get back to superior financial performance and to drive value creation in the years ahead, which we're all interested in, of course. If you look at our purpose and our vision, our purpose is simple and it's very focused. It's to connect people to what's important in their lives through friendly, reliable, and low-cost air travel. Our vision is very aspirational. It is to be the world's most loved, most efficient, and most profitable airline.
For some companies, those are just words on a page, but for us, they're much more than that. They really guide and provide clear direction to us as we intend to grow the company and outperform the industry in the years ahead. We've got a really unique set of strengths, a lot of strengths, and a consistent track record of industry outperformance and unmatched string of profitability, 47 consecutive years through 2019. The nation's largest point-to-point route network. Low fares delivered with completely unmatched hospitality. Market strength being number one in half of the top 50 domestic markets. A world-renowned culture that, of course, starts with our people, and they are the best people in the industry, I can assure you of that.
An unmatched string of top customer service rankings and in our point-to-point network, and in our all-Boeing 737 fleet that just underpinned our efficient low-cost operation. Our principles are clear, they endure, and they carry us into the future, and we're gonna be talking about that where we go. Just talking about some past initiatives as Gary did. The industry is really competitive, and it's important to have a strong set of initiatives to drive revenue growth and returns. If you look back at our past initiatives, they drove significant value in the five years leading up to the pandemic. What I love is that they realized the value that we told you about and that we communicated.
I'm not gonna take you through all of these on this page, or in any detail, but they are the acquisition of AirTran, the addition of the 737-800 and fleet modernization, the launch of a brand-new Rapid Rewards loyalty program, launch of international service. The replacement of our RES system. In total, these drove well over $1 billion in additional EBIT and our after-tax average after-tax ROIC 2015-2019 was 18.8% or about 11 points higher than our average weighted cost of capital. If you look at this chart, the next chart, just looking at WACC. I love this chart because it makes the point. You can see value creation here and 11 percentage point spread of ROIC over WACC.
If you take the years 2015 - 2019, our value creation outperformed the broader market, the industrials average, and the average for consumer discretionary companies. The point is that our proven track record of creating value for our shareholders and our tremendous momentum coming into the pandemic. We just came into the pandemic in a number one, a terrific spot, and number two, doing exactly what we said. Now, let me take you through our focus areas, and I wanna take you through a renewed set of initiatives through 2026. We recently refined our strategic priorities for the next five years, and our focus is on reinforcing the tremendous strengths that we have as a company. As we continue to recover from the pandemic, we're focused on a number of things.
Number one, reinvigorating our winning culture, which includes enhancing our employee experience. Two, winning more customers and growing revenues. That includes restoring the route network, which is extremely important, and modernizing our customer experience. Three, modernize the operation. Just looking for ways that we can work to enable our terrific employees, and they are terrific, to work smarter and more efficiently. Number four, maintain our low-cost advantage by regaining our historic productivity levels and then evaluating new efficiency opportunities. We have new opportunities. Then five, of course, our DEI and ESG efforts, which includes specific plans and targets, and I will talk to you about those here in just a few minutes. Now turning to 2022, which is again going to be a, I think, a continued rebuilding, transition, choppy year, we are focused on five basics.
To me, these are just blocking and tackling as we rebuild the airline next year. First, execute our hiring plan. This has been the gating factor as we spool up flying in this COVID environment. Second, focus on our people and our culture, engaging and supporting our folks in what has been really, it's just been a tough 19 months here leading up to today, but we really need to engage and support them. Third, regain our historic operational reliability and efficiency. We're making really good progress here following some ramp-up challenges. Fourth, restore our customer service advantage. We're also making really good progress here in my mind, and we ran a really reliable operation for our customers in November, and especially over Thanksgiving.
I think across the 5 days of Thanksgiving, our on-time performance was 90% or better, which is just tremendous. Fifth, return to consistent profitability, and we're obviously talking a lot about that here today. And although the pandemic and the environment has made it difficult to forecast because we're still emerging, we believe we have a good plan to be solidly profitable in 2022, and that includes all quarters. And that builds on the profit that we now expect to have this quarter as we hopefully turn the corner on losses that we've experienced since early 2020. In addition to these basics, restoring our pre-pandemic route network is key, and Andrew's gonna talk a lot about that.
Aside from getting properly staffed, adding back depth and frequency is the best way to restore our operational reliability and our efficiency, and we plan to make significant progress here in 2022. Now talking about new initiatives, and I'm very excited about these, and they're very meaningful. We've got several revenue initiatives on the horizon, in addition to our fleet modernization. Our GDS expansion and Southwest Business efforts to grow our domestic business market share are fully in place, and Dave Harvey and his team have done a wonderful job, and there are very encouraging early signs there.
Now to announce today, and Andrew's gonna talk more about this, we are launching a new fare product and the modernization of our revenue management system, which combined represent a material boost in our revenue opportunity, by further leveraging our new RES system, to increase yields without simply relying on raising fares. I'm also pleased to announce today a new co-brand loyalty agreement with our partner, Chase, that provides significant revenue opportunity and improvement beginning here in the fourth quarter. I'm very pleased with the improved economics of the new agreement and further convinced that our loyalty program will drive significant benefits in the years ahead, all while remaining a generous program for our customers. Combined, I've got to just stop and just say a huge thanks to our partner at Chase.
They've been a terrific partner for years and, I'm just really pleased that we're able to come to this new agreement. Combined, the incremental EBIT contribution from all of those initiatives is estimated to be $1 billion-$1.5 billion in that range in 2023, significantly above and beyond what we were expecting from the recovery of business travel. We expect roughly half of that EBIT to be delivered in 2022. We also have two prominent initiatives in the area of diversity, equity, and inclusion and ESG. While those aren't driven completely by financial benefits alone, they are equally as important to us, and we're putting the same focus and the same resources behind them. I'm gonna cover those initiatives in detail, and then Tammy and Andrew will cover the rest of the initiatives.
Looking at DE&I, last year, we set specific goals to further enhance and improve in the area of DE&I at Southwest Airlines, including doubling the percentage of racial diversity and increasing gender diversity in our senior leadership team by 2025, a board of directors commitment to increase their diverse representation also by 2025, a focus in hiring and talent development to ensure that we have diverse pipelines, which is key to making progress over time, and a commitment to a diverse candidate slate for leadership positions. I'm just really proud of the teams that are working on these things and the progress that they've made already, because it's important, number one, and ultimately it'll strengthen our company, and it will strengthen our culture. Turning to environmental sustainability, I'm also really proud of the team.
We've made a lot of progress in this area during COVID, and I'm just really proud of the specificity of the plans, especially through 2030. Through 2030, we plan to grow the airline while remaining carbon neutral each year as compared to 2019, which will reduce our carbon emissions intensity by 20% by 2030 versus 2019 levels. Again, that's driven primarily by fleet modernization and other fuel conservation efforts. We also have a goal to replace 10% of jet fuel with sustainable aviation fuel by 2030, and so far we have partnerships with producers and specific offtake agreements in place to do that. In addition to carbon offset programs recently provided to our customers, we are committed to purchasing additional offsets to bridge the gap to our 2030 goal if that's needed.
Long term, we're committed to being carbon neutral by 2050, and our specific plans through 2030 provide real and tangible progress as we explore emerging technologies around carbon sequestration. We recently pledged $10 million to Yale University's Center for Natural Carbon Capture for research and technology and to find solutions to reduce net greenhouse gas emissions. In addition to being the right thing to do for the planet, this initiative has significant financial benefits to the company, and it's just a true win-win. You can tell we've been really busy in this space despite the pandemic, and I'm just really proud of the team for the specific and meaningful progress here. Last, as Gary mentioned, I just wanted to talk for a second about the CEO transition.
It's a joy to be as a 34-year veteran of Southwest Airlines. It's a joy not only to work for Southwest and see all that's happened, but it's a joy to be asked to lead such an iconic and wonderful company with wonderful people. I don't take it for granted, and I love this company, and I love our people, and I'm just truly humbled, and I'm excited to take on this new role here in February first. Gary and I are working very closely together. As he mentioned, the transition is nearly complete. I'm running the majority of the day-to-day, obviously with Gary's help. As Gary transitions to the Executive Chairman role, we are completely aligned in terms of the direction of the company.
There are things, of course, that we wanna work on, but this is not a change to Southwest Airlines, 90 degrees out of the direction. We're extremely aligned. We're not reinventing the company post-pandemic. It's quite the opposite. It's about building on the recent successes we've had to further strengthen the company, reestablish growth with the 737, and provide meaningful initiatives to overcome the competitive challenges that we see. In my mind, in 2022, it's simply about executing on the basics through what I think and we all think will be a choppy year. I just wanna stop and express my gratitude to my friend, Gary Kelly. He's been my sponsor, my mentor for 34 years. You couldn't have a better one. He's my friend.
Our whole Southwest team, myself included, respect you beyond anything that we can tell you. We love you, my friend, and it's a joy to follow you in this position. With that, I will turn it over to Tammy.
Thank you, Bob. It's really great to be with everyone today, and I wanna thank all of our webcast listeners for joining in as well. I'd also like to give Mr. Ryan Martinez a big shout-out, our VP of Investor Relations. Just wanna thank him, and I wanna thank our mighty investor relations team again for all of the great work. There are a lot of other folks that are in the room, and also back at the office who have worked incredibly hard on today's presentation as well.
I just wanna give the entire Southwest team a shout-out. There's never been a more challenging environment, and I know that's true for all of you as well. Just an enormous thank you.
I'd like to begin by saying that I am pleased with our outlook. We've come a long way from a couple years and I'm just delighted about that. It has improved substantially for fourth quarter, which I will cover here in a minute. It is obviously very difficult to have precision with our forecast in this type of environment, as I know all of you in this room can appreciate with the jobs that you do. However, we must still plan to the best of our abilities, and I just wanna thank our tremendous planning teams for their incredible efforts and for the countless, and I mean countless, financial scenarios produced since this pandemic began.
While mindful that our plans may change, I am excited that we have refreshed our strategy with new initiatives that we believe will continue to support growth and getting back to our pre-pandemic stellar Southwest performance. Based on the plan that we have worked for months and now developed for 2022, I am pleased that we expect to be solidly profitable next year. That said, any number of external factors may change and impact this plan, but we were cautious in our assumptions about travel demand, future COVID waves, and anticipated cost inflation. We are prepared to adjust and do our best to protect that profitability. Our revenue initiatives that Bob covered will certainly help us do that. I am very proud of the Southwest team for their commitment to our company and their ability to be flexible and adjust to whatever the challenge.
Jumping in now, I will cover our fourth quarter trends and guidance update that we issued in our 8-K this morning. Based on bookings in place, I'm pleased to share our fourth quarter operating revenue outlook has improved from our last update. We have revised our revenue range to down 10% to down 15% versus fourth quarter 2019. Our load factor is still expected to be in the 80% - 85% range. We still expect our capacity will decline approximately 8% versus fourth quarter 2019. October operating revenues came in at the better end of our guidance range of down 20% to down 30% versus October 2019. That is due to a quicker recovery of leisure and business demand, as well as yields following the Delta variant wave.
The strength in leisure demand and fares continued into November, and Thanksgiving holiday traffic and trends were solid. We were also pleased with business demand and fares throughout November, which exceeded our expectations. For this month, based on current trends, leisure bookings continue to come in above expectations for December travel, including the holiday period. We expect managed business revenues to recover to down 55% to down 60% versus 2019 levels in December, which is slightly ahead of our prior expectation. Now, that is assuming we do not see a material impact from the latest COVID wave, which we don't currently see in our bookings.
It is important to note that we were trending toward the better end of our revenue guidance before we secured our new Chase agreement, and the additional benefit from Chase results in our renewed outlook better than our original guidance range. Moving to our cost, the energy markets remained very volatile as oil continued to fall slightly last week in response to various news reports on the spread of the Omicron variant. As a result, we are now estimating our fuel cost per gallon to be in the $2.15-$2.25 range. For our CASM, excluding fuel, profit-sharing, and special items, we continue to expect fourth quarter to increase in the range of 8%-12% as compared with fourth quarter 2019. Overall, we are pleased with the improvement in our fuel costs and revenue trends.
When we include the benefit of our recent co-brand credit card agreement with Chase, we are now expecting a fourth quarter profit excluding special items. I want to emphasize that even without the benefit of Chase, we expect to be profitable in fourth quarter, assuming current trends hold. We were profitable in November and expect to be profitable in December, based on current trends. As I shift to our historical financial performance for a moment, I will remind you that in 2018, we produced the highest net margin in the U.S. airline industry. In 2019, we lagged only one U.S. airline in net margin, despite a roughly 2-point net margin deficit, due to the negative financial impact from the MAX grounding. These years leading up to the pandemic represented a very competitive domestic environment, and, due to the MAX situation, we were unable to grow in 2019.
Despite that, our results led the industry. We have produced an unprecedented 47 years of consecutive profitability, and no U.S. airline came into the pandemic in a better position than Southwest. As we managed through the devastating impact from the pandemic, we had three primary focal points to protect our financial performance and preserve the jobs of our people, strengthen our liquidity, lower cash burn and spend, and pursue additional revenue sources. We raised $15.6 billion of liquidity and received $7.2 billion in government support that bolstered our cash reserves. We significantly deferred costs and spending and enacted temporary cost-cutting measures, and this delivered a total of $8 billion in reduced cash outlays and spending in 2020. We reallocated idle aircraft and employees to pursue 18 new airports where travel demand existed and that also fit well within our network.
We launched our GDS expansion. I am very pleased with the way our teams have worked together to address these important areas, which ultimately achieved our goals and strengthened our financial position relative to the industry. Coming into the pandemic, we had modest levels of debt and a healthy financial position, which demonstrated our preparedness. We knew that was key to maintaining a fortress balance sheet. Even after the actions we took to raise liquidity, our balance sheet is in better shape than the industry balance sheets prior to the pandemic. We have a very strong cash balance of $16 billion, in addition to our fully available $1 billion revolving credit facility. In addition, we have maintained our investment-grade rating by all three credit agencies. I'm looking at you over there, Betsy. Thank you.
Our leverage went from a modest 24% to a manageable 56% as a result of our efforts to strengthen liquidity. Our unencumbered assets went from a little more than $13 billion to over $11 billion, reflecting additional aircraft secured, and this excludes the significant value from our frequent flyer program. At the end of the day, we increased our net cash position by $3.4 billion from the end of 2019 to the end of third quarter 2021. The growth in our net cash position was better than all U.S. airlines. In fact, in several cases, our peers' net debt increased. We have an investment-grade balance sheet compared with the competition, with a very healthy cash position. This puts us in a unique and strong position in 2022 as the industry comes out of the pandemic.
I will talk more about priorities for capital allocation in a few minutes, but we believe our modest levels of debts are a key differentiator in our revenue trajectory and optionality to invest in the business and grow. Many of you are familiar with this slide, but I think it's still worth noting that another key competitive advantage over the years has been our ability to sustain a healthy and competitive cost position relative to our peers. Looking at just the past 4 years, our business model and all Boeing 737 fleet and a point-to-point high utilization route network have continued to provide us with a substantial structural unit cost advantage. Turning to our costs going forward, we are focused on restoring our pre-pandemic productivity levels back to roughly where they were in 2018.
We are most focused in a few key areas aircraft productivity, how many ASMs we fly per aircraft, people productivity, how many employees we need per aircraft in total, including frontline and non-frontline employees, airport productivity, how many flights we operate per day per airport gate, and fuel productivity or efficiency, how many ASMs can we get from one gallon of jet fuel? Let me go into each of those a bit more. On fuel productivity, we are on a great path and well ahead of 2018 levels. We have plans in place also to continue improving. So we feel good there. Most notably from our MAX deliveries and the retirement of older 737-700s.
On the other three, aircraft people and airport productivity, we are not where we need to be due to the choppiness of the pandemic environment. A primary driver of restoring pre-pandemic productivity is, of course, the restoration of our network, in particular, depth and frequency in short and medium-haul markets, which Andrew will cover. Another focus area we have is modernizing our operation to enable running at a more optimal level, which Mike will cover. When we net all of this together, we continue to expect higher CASM ex inflation in 2022, with CASM ex expected to moderate back to the low single-digit range in 2023 and beyond on a year-over-year basis. I'll provide a little more depth on this shortly.
On the fuel price side, we have a very solid fuel hedging position for 2022, a good hedge in place for 2023, and we have begun building our fuel hedging position for 2024. As we have historically, our plan is to continue adding to our future year positions in 2023 and beyond over time to build the best fuel hedge we can for a reasonable fuel hedging premium expense. Our 2022 fuel hedge covers roughly 60% of our expected fuel consumption. At current market prices, our 2022 fuel hedge would provide a fuel hedge benefit per gallon of about $0.10 with a fuel hedge premium expense of about $0.05 per gallon. You can see here we have much more substantial fuel hedging benefits at a Brent crude oil price of $80 per barrel and above.
The current value of our entire fuel hedge portfolio is around $650 million, with more than half of that benefit expected in 2022. Our operational focus for 2022 is to align our network to our staffing levels, and we have already moderated our first quarter capacity and just published our flight schedule today out through early June. Our efforts to hire 5,000 employees this year is going well, and we intend to add at least 8,000 employees to our workforce next year. However, we are being cautious given the tight labor market, and it will take us a while to staff up. With that in mind, we expect our 2022 capacity to be in the range of -3% to +2% as compared with 2019.
We will continue to evaluate our capacity plans and adjust as needed as we move throughout the year, which is why we have provided you with a five-point range in our full year guidance. We are not providing first quarter operating revenue guidance today. We will do so as part of our January earnings call. That will allow us to monitor potential impacts from new variants or changes in case counts over the holidays. Thus far, our first quarter bookings remain on track with expectations, and we have not seen any noticeable impact from the most recent Omicron variant. Keep in mind that we are pretty early, though, in the booking curve for January, as we typically rely on business travel demand, which books closer in.
Based on falling energy prices and current hedging positions, our fuel price per gallon is expected to be in the $2.05-$2.15 range for both first quarter and full year 2022. As I previously covered, we expect continued higher than normal CASM ex inflation in 2022. We anticipate 5-6 points of unit cost headwinds next year from running at sub-optimal productivity levels and flying less capacity than we could be based on our fleet. The impact of lower productivity and flying less capacity are each roughly half of the 5-6-point impact and will persist until we can better match resources with flying activity and restore productivity to pre-pandemic levels. We also have some structural cost increases like GDS fees and increased minimum wage, both of which are incremental to pre-pandemic costs.
Of course, the GDS fees come with increased revenue. All considered, we expect CASM ex to increase in the 8%-12% range for full year 2022 as compared with 2019. Our debt repayments next year are modest at roughly $450 million. For our capital spending, should we exercise all of our 2022 options as planned and including 2023 progress payments, our total CapEx would be approximately $5 billion. We believe this is a prudent use of our capital. However, we are currently only committed to 72 firm orders next year, so excluding the 42 outstanding options next year, our total CapEx would be approximately $2.8 billion. Our leadership team has spent a lot of time thinking about and shaping what Southwest could look like post-pandemic.
Based on what we know today, 2022 will continue to be a transition year, and it is hard to know what time period will represent a true post-pandemic environment. These financial targets are meant to represent a longer-term post-pandemic framework for how we think about our business. We will be managing to these annual targets. Mid-single-digit capacity growth as long as demand supports that growth. Low single-digit CASM ex growth in line with our pre-pandemic unit cost inflation rate. RASM growth in excess of CASM growth, powered by our robust set of strategic initiatives, not simply relying on base business improvement. Expand net margin and maintain industry-leading status. Deliver after-tax return on invested capital well in excess of our weighted average cost of capital.
All-in capital spending is in the range of $3.5 billion on average, which includes our fleet replacement needs in addition to growth aircraft and investments in technologies and facilities. We haven't solidified our fleet mix over the next 5 years, but we are in a great position with the ability to take dash sevens or dash eights as we firm up capacity plans and depending on the focus of our network in any given year. In addition, at the board's discretion, we would like to reinstate a healthy dividend in 2023 and utilize share repurchases beyond that as it makes sense. Of course, both will be based on free cash flow and debt repayments. Keep in mind, we have roughly $5 billion in scheduled debt maturities in 2023 and 2025 combined.
As Bob covered, we have specific ESG targets in the area of environmental sustainability and diversity, equity, and inclusion. For our CASM ex target, low single-digit inflation is in line with the 10 years leading up to the pandemic when smoothing out the impact of labor negotiations. Of course, that was also on average ASM growth in the mid-single-digit range over that timeframe. Our ability to achieve these targets in 2023 will depend on these factors, getting properly staffed, restoration of the network, and ongoing stability in travel demand trends. With that in mind, you can see here that we have a significant number of options for MAX 7s or MAX 8s over the next several years. We plan to retire, on average, 30-35 aircraft each year to refresh our fleet.
That said, if needed, we can flex that even higher. The fleet replacement provides us a variety of benefits, including significantly lower maintenance expense in the first 5-7 years, less out of service downtime for better reliability, and 14% better fuel efficiency. Our Boeing order book gives us flexibility to support our growth aspirations and navigate through the uncertainties of the pandemic. It also gives us flexibility in terms of capital spending, and as an example, aircraft capital spending could range from $1 billion-$2.5 billion annually in 2023 through 2026, depending on how we execute our order book. We are in a great position with regard to our order book today. On that note, I'll stop here, and I will just end by thanking you all for joining us today.
It's really great to see you all and be with you more than ever. With that, I'm gonna turn it over to Andrew to discuss our exciting network and our revenue growth opportunities.
Good afternoon, and thank you, Tammy, very much for that introduction. What I'd like to do is cover the commercial side for you. I'm gonna go over what we did during the pandemic, both to indicate that we've been busy with our initiatives that have been talked about, but also expect to convince you that the same dynamic, the same decision-making we did during the pandemic carries forward to what we have planned for the restoration and our future initiatives. I'll start with our points of strength. We have the nation's largest point-to-point network, with unmatched market share and relevance. Southwest has the number one market share in roughly half of the top 50 U.S. travel markets, measured as a percentage of O&D passengers.
Those are the customers that are going to and from those cities, not passing through, because the customers who bought a ticket to go to or from is what defines relevance, not someone who's just merely passing through. In addition to those number one positions, we also have a number two position in eight of the top 50 markets, which gives us a significant relevance in over 30 markets, of the top 50. This is market share, not for market share's sake, but this market share is a reflection of customers' choice. Customers who've chosen to fly Southwest Airlines in these markets, which indicates a level of repurchase. They bought us for traveling for business. They bought us for traveling for vacation, to visit friends and relatives. They get our credit card.
They make their credit card top of wallet. It's a self-reinforcing cycle that we have of this repeat business model we have, repeat purchase business model we have. It's powered by low fares, high service, significant hospitality driven by our people, as well as customer-friendly policies. It really builds upon itself in a self-reinforcing cycle. If I go to the next page, I'll give you a little overview of what we did during the pandemic, which you've likely heard about, is on the left-hand side, you see demand was down significantly in 2020 in our core markets. Therefore, capacity was too high at that level of demand.
Matching supply and demand, as Tammy talked about, is what we did during the pandemic, which would have left us with idle assets, our people being our most important asset, but also our aircraft. What we did is we looked for places to redeploy these assets in order to reduce our cash burn during the pandemic. As Tammy told you, that was successful. We put them into what we call these new revenue pools. It's the 18 markets we've talked about, but other sources that I'll go through in a moment. That is in general how we match supply and demand while keeping our people and planes busy. On the next page, we show kind of what that resulted in, and that resulted in us having a much increased breadth of our network by 32%.
We've talked about the reallocation of 92 aircraft that we used for our Hawaii expansion and the 18 new cities, new airports. However, if you factor in the other new flying, which is in the far right column here, it's roughly 125 aircraft that we repurposed within our network to maintain improved cash burn. In Hawaii, we've significantly increased our flying by 177% in two years. That's the left-hand column there. We added four new mainland gateways to Hawaii, Los Angeles, Las Vegas, Long Beach, and Phoenix. We added 18 new routes that connected the mainland United States with Hawaii. For more to the middle, our 18 new cities, we have a specific focus of how we look at them in terms of complementing our pre-pandemic network.
Nine of those airports are attractive leisure destinations with service from established cities where we have a strong presence and an existing customer base. These are markets like Bozeman, Steamboat Springs, Santa Barbara, and the beach destinations you see. Six of the airports are more points of origin, where we can generate local traffic that we can connect to the rest of the Southwest network, such as Colorado Springs, Syracuse, and Jackson. The remaining three are what we call co-terminal airports in metro areas where we already have a large presence at another airport, and therefore a large customer base that already knows us in these cities. Now, all of these markets are performing in line with our expectations, and we expect them to continue to mature over the next several years.
The last category on the right is one we've talked about less, but we have leveraged our route network to launch 70 new routes since June of 2020 in pre-pandemic existing markets. In fact, 58 of our existing airports, the pre-existing airports, have received new nonstop service during that timeframe, building to our distinction of having more nonstop markets than any other airline. Think of these three categories of the uses of those aircraft that we redeployed. In the next page, I'll give you some insights into, you know, how we chose them and what we did. You can see we leverage our points of strength, and you can really see these in these charts, hopefully. You can see for the Hawaii expansion, we connected mainland markets to Hawaii from mainland markets where we were number one in the market share I talked about earlier.
For those of you who know, the industry-wide from the mainland to Hawaii, 80% of trips have an origin on the mainland. It's a really heavily mainland point of sale. You look at all those markets. Every single market we added is a market where Southwest Airlines was number one in the mainland side, and therefore, if any airline should be flying that route, it's Southwest Airlines. Very much we're flying from uphill position. For the new 18 markets there in the middle, you see 71% were added from places where we're number one, 22% for number two, and the rest below that was often Chicago. In Chicago, we're number three. However, we have a very large customer base nonetheless in Chicago.
All these places where these new ATCs are flying from are places where Southwest already has a customer base. We don't need to go and sell to them. We just need to let them know that we have new destinations to get more of their share of wallet. On the right-hand side, you can see the same thing with these new markets that we are more connecting existing dots. Almost 80% of those were places we had a number one position. Once again, much lower risk and really looking for more in share of wallet from existing customers. Obviously, looking for new customers in those situations where we added new dots that's powered by the origin side, where we already had a very strong customer base.
This is a fundamental point about how we went about this that I hope to show you as we go into restoration, and we will take this same approach of flying from points of strength, which allows for a much lower risk expansion. The next page is what we also worked on during the pandemic as we continued our multi-year investment in Southwest Business. As Gary talked about and Bob, Dave Harvey and team led the expansion into our GDS systems that we've talked about a lot. Also during this period of time, we've expanded our sales team and other offerings we've given these customers. We've nearly doubled the number of business contracts we have under management, and we've also grown business through our direct channels at the same time.
As far as the GDS, as Tammy mentioned, we're live on three platforms, Amadeus, Travelport, and Sabre. This is a big opportunity and a company-specific initiative for Southwest Airlines. Right now, we're at full participation, industry standard agreements with GDS functionality for our business customers. In terms of opportunities for this effort, relative to our domestic market share, which is at 20%, for our domestic market share, and the GDS we're much lower penetrated. We have an opportunity to get a bigger share of this market, which was in 2019, a little bit less than $12 billion of domestic spend were concentrated in the top 100 business travel buyers.
As business travel rebounds, if we eventually get anywhere near our domestic market share from the small percentage we are today, that's a significant upside opportunity for the company. As we know, 80%-90% of business travel domestically is flown as coach, and we have the best and most consistent coach product in the industry. On the right-hand side, you see the positive reaction from corporate travel managers, the people in the organizations that are tasked with procuring travel on behalf of the company. You can see their ratings, how we've moved along from over the last few years.
Now, I don't wanna brag of being number four out of four on any kind of measurement, but I think if you look at the progress, it shows that our efforts are being recognized by those who buy and contract for travel, which I believe foreshadows increased business, increased share of their business, as we get out of the pandemic. This is especially relevant because these are the people that are responsible for deciding who's on the shelf for their travelers. In today's corporate travel environment, it's often the traveler, he or she books for themselves and chooses for themselves. So when we're on the shelf, so to speak, well, we're much beloved by consumers. A lot of these people that are traveling already love us in their personal life, and now they can buy us for their professional life as well.
We think it's a very big opportunity where our attributes, pre-existing attributes, really will power a good expansion of our market share here. Now, let's move on to the network, and talk about that a bit. As I mentioned earlier, our network breadth increased quite a bit during the pandemic. You can see we expanded in 32% the O&Ds offered. That means travel from city A to city B, no matter how you get there. While our paths between there or the itineraries only increased about 5%. This big increase in the O&Ds is something that is a significant enhancement to our network and one we intend to keep post-pandemic.
The difference between those two numbers, though, is characterized by the 22% decrease in depth when looking at summer of 2021 versus summer of 2019, and that's what we intend to restore. You think about the uses of aircraft going forward in 2022 and beyond, we plan to begin restoring our pre-pandemic network, which will mostly come in the form of depth. Now we'll have some carryover capacity growth in 2022 from what we started in 2020 with the new airports, Hawaii and the connecting dots. On the right-hand side, you can see a chart which is illustrative, but you can see how much of the carryover is kind of above the line from Hawaii and the other new flying.
On the bottom end, you can see the decrease that comes from the same store markets that have been down as a result of the reduction in demand, particularly business demand in our pre-existing network. We hope to restore about more than half of our pre-pandemic peak day trips by summer of 2022. In the next slide, I'm gonna go into more of restoration and characterize that for you, which hopefully should look just like a chart you saw earlier about our pandemic expansion. Looking at the network restoration more specifically, we plan to add back the vast majority of the flights and frequencies in markets where Southwest had the number one market share. The same dynamic as discussed earlier.
This is important and that our future aircraft deliveries will be focused in lower risk markets where we already have a strong customer base. These restoration opportunities will support continued travel demand recovery, in particular with business demand, where we have the added benefit of improving the overall reliability operation at the same time. When we looked at this restoration, what we did is we looked at each of these cities where we were the hometown carrier, we had this leading position, both the top fifty and others, and we defined a relevant network. Adam Decaire and our network planning team looked at each one and said, "What is a network that allows for business travel, leisure travel, visiting friends and relatives," and built that back up city by city.
Some cities ended up with a little bit less capacity, some ended up with a bit more capacity than pre-pandemic, but all restored to a relevant network that supports and defends our position as a leader. As you look at the map here, 98% of the capacity will touch the triangles you see on the map. I caution you, it's not just these cities. It means one end of that trip will touch that city. To give you an example, Columbus, Ohio, you saw on a previous chart where we're leading airline, but it doesn't show up here.
Well, Columbus, Ohio, we've already added into it during the pandemic to Sarasota and Austin, yet we've not yet restored the depth we had, particularly in business markets such as Atlanta, Baltimore, Midway, and Tampa, and also need to come back a little bit in Orlando. As we restore Columbus's trips to the triangles you see here, it will result in Columbus being fully restored itself and having a relevant network. We plan to be back in all of our points of strength, but you can see how concentrated it is going to these bigger cities right here. Now to make the point, to beat the dead horse a little bit more, the city pair look at this.
Just to give you an idea of what it looks like, you see on the far left some markets where we were number one prior to the pandemic. Pretty good frequency sets. In one of the worst areas of the pandemic, we got down to pretty low, maintained essential service for our customers and our communities. Now in late December, we'll be back to these frequencies you see here as we build back our short-haul network. It won't mirror exactly what we had pre-pandemic, but you can get an idea of what we're thinking about as we rebuild these markets. In the right-hand side, you can see another stat giving you an idea.
This is about depth, and these are about markets where we have a leading position, so much lower risk, and we're able to moderate the capacity growth as we see demand come back since it revolves around depth into preexisting markets. Now let's turn to sort of, looking forward. You know, looking at our revenue initiatives, you can see that historically we've had a pretty full pipeline of initiatives to drive revenue growth. Bob showed you some of the initiatives, and many of them are represented here. Just as they drove value before, we plan to do that again in the future. The first one I've talked about, network restoration. Number two, the maturation. We're probably done with new airports for a while, allow these to mature.
I've covered the Southwest Business and GDS one, and then we have three other initiatives we'll talk about as well, a new fare product, the modernization of our revenue management system, and our new co-brand credit card agreement. Beyond the timeframe that you see here, we're already working on that next step of initiatives for 2024 and beyond because we must keep our revenue initiative pipeline full in order to meet the revenue targets Tammy laid out earlier and not rely on just base business improvement. Let's go into a step-by-step with these initiatives. I've provided a lot of detail on restoration, so I won't spend a lot of time on that or maturation, but I will like to point out that these, all these efforts are related. These are not random or standalone initiatives. They're designed to be mutually reinforcing.
The network restoration, as we restore the network, it will have a benefit for the Southwest Business and GDS initiative because as we bring back density and frequency, it'll help the that group sell more of our product. It'll help the new fare product, which we'll talk about in a little bit, which should have some business market relevance, and it'll also help Mike in reestablishing the pre-pandemic efficiency of our operation. All these are related to each other. Moving to the next page, these new capabilities are more about driving additional demand and improving yields.
I've already talked about Southwest Business and GDS, but I'd also like to mention about our new fare product, which is essentially a new fare offering, as a fourth column to be displayed on our website, along with what you see today, which is the Business Select, Anytime, and Wanna Get Away columns. For competitive reasons, we will provide any details closer to product launch expected in mid-2022. We believe this will better segment our fare structure in line with the buying habits and needs of our customers while allowing us to generate more revenue. We will not be penalizing customers in terms of their fares and our product offerings. That does not lead to repeat purchase, which is what powers our business model. We have opportunities to help close the gap between our existing fare products and fares.
We know there's significant opportunity here. I would encourage you to think about this as being above Wanna Get Away. This would be an upsell that will be for enhanced attributes. Not taking something away and reselling it to a customer, but an enhancement to our Wanna Get Away lower product for which customers will happily pay a little bit more. We expect this to be attractive to business customers as well as leisure, and we intend to offer it across our channels. More to come, towards the middle of 2022. Now the next one's about optimization of what we already have, and the first of these two is a revenue management system.
We're currently live and running a pilot on a subset of travel dates, and we're being cautious to monitor results and progressively expand the dates that are being managed by our new system. We started pre-pandemic with a request for information from a subset of vendors. We evaluated on paper these vendors, and then from that selected a subset for proof of concept. During 2020, we ran simulations day by day using these selected vendors to see how their system would have done in 2019 compared to our in-house system. From that, we down-selected two pilot systems, which in last year and this year we implemented in Southwest Airlines. These are in production. They are not kind of a going to happen systems.
They're in production today, and they are managing travel dates. What we're doing is for each of these two systems, we will have them manage all the flights on a specific departure date, and then that'll allow us to do an AB test versus our in-house system on an analogous travel date. Throughout the year, we'll progressively add more travel dates under management by these new systems that ultimately allow us to choose sometime next year the system which best enhances and best maximizes revenue, which will then become the go-forward system for us.
It's more of a progressive move of flights from old system to potential new systems, which is not too different from our res system approach, where we kind of bled down one system and brought up the other, which resulted in a seamless cut over that was subsequently copied by other airlines. At the end, this system will give us better capabilities to forecast demand and optimize demand and yields. We're also happy to announce the extension of our co-brand card agreement with Chase into 2030. We're excited about this deal with Chase, which reflects the strength of our industry-leading brand and our repurchase model that I mentioned earlier.
You know, back in March of 2011, Ryan Green in our marketing department came up with the all-new Rapid Rewards that Bob highlighted earlier. It was an extremely well-designed loyalty program that complemented the Southwest Airlines value proposition and brand. As Southwest Airlines size and scope and brand has gained strength over the years since, it's acted as a multiplier. Once again, our initiatives working together, and that's made the product and the loyalty program even more valuable. Chase sees that, and as a result, we get a very good deal. Of course, the terms with Chase are confidential, but this extension will provide incremental revenue to the fourth quarter of 2021 and beyond, and improves the strength of our Rapid Rewards program.
To wrap up, we'll be focused on lower capacity additions over the next several years, and this is already underway. In addition, we have a portfolio of new revenue initiatives that are also already underway, not in development. Those are expected to provide significant financial value beginning next year, which Bob and Tammy outlined earlier. We will continue to build our future pipeline of initiatives, which is important for our ability to drive the necessary revenue to meet the growth targets Tammy outlined earlier. Some of these future initiatives are already in planning for 2024 and beyond, such as an opportunity to grow our Southwest Vacations offering over many years and leverage our market leadership, I opened up with, in certain markets to expand our overall travel offering beyond what we have today.
With that overview, I'll turn it over to Mike to talk about our operation. I thank you very much for your time and attendance today.
All right. Well, hey, thanks, Andrew. I appreciate that. Good afternoon, everyone. As you might imagine, we are focused more than ever on our operation. Running an efficient and a reliable operation is a source of pride for all of us, and it really has been a cornerstone of our success for the last 50 years. I wanted to spend just a couple of minutes today talking about the state of the operation, and then transition a bit into how we are approaching the operational modernization efforts that Bob had mentioned. Our modernization efforts, they're an important part of our foundation, and they're going to support our efforts to achieve that longer-term CASMx target that Tammy covered earlier.
Before I jump right into the state of the operation, I do want to provide everyone some context over what we've accomplished the last 21 months. We came into this pandemic, and we were operating roughly 3,600 flights a day, and that was back in February 2020. We went into shutdown mode immediately, and within a month, we had dropped to less than 2,000 flights a day. We had load factors at that time around the 10%-20% range. In that environment, it's pretty easy to run a nearly 100% on time airline with the flights we operated. We ended up spending the next several months after that just accommodating our customers' disrupted travel plans.
We created extended leave and voluntary separation packages that addressed our excess staffing. We implemented a lot of cleaning and other COVID-related policies and protocols. All of that resulted in a pretty stable operation, and we stayed at those significantly depressed flight levels through about February of 2021 until our leisure demand began to grow and surge. By March of 2021, our trips were still down roughly 32% from our 2019 levels, and our active FTEs were actually only down 6%, and that was primarily from our voluntary separation program. At that point, we were adequately staffed, and we were ready to add capacity. We ended up having a flurry of activity to get ready for those summer schedules. We began recalling our people from their extended leaves.
We began the process of restaffing our recruiting and our training functions. We started bringing our aircraft back from their parking and storage programs. We completed our MAX return to service pilot training requirements, and then we also obtained our ETOPS authorization for the MAX 8 fleet to support Andrew's Hawaii flight additions. Our trips grew rapidly into the summer, but even during the summer, we were still down around 12%-16% over those summer months in terms of trips as compared to 2019. Our active FTEs trends were down at similar levels, so they were down 10%-11% over that same period. We had planned our performance with that activity of growth largely relying on historical staffing and forecasting models.
In retrospect, I don't think we left enough cushion to account for the impact of this COVID environment would have on our staffing internally as well as staffing for those third parties that support the airline industry. We also had an increased rate of attrition, and then the overall tempo of activities in the airport were slower. We were just overscheduled in that environment. We had three primary challenges over the summer. First, and Andrew talked a bit about it, was a network breadth. The network that we operated over the summer was unique, and it was different from the network that we had operated going into the pandemic.
The additional cities that Andrew talked about, and he mentioned all these, they contributed to a significant increase in our O&D itineraries. They were offered with a decrease in our market frequencies, and that drove our load factors very high, going into and out of our largest cities, and it limited our recovery options to mitigate any extended delays. Second, the turns were more complex. As you all know, we had a higher percentage of leisure travel during the summer with that strong demand. That created a much increased level of transfer activities, both bags and customers, at these larger cities. Given the network breadth, the transfer activities, they spanned across a greater number of flights than we're normally used to seeing.
Those increased activities required more resources in terms of staffing, and especially on the ramp. More transfer drivers and more ramp agents to staff more gates. Lastly, putting all that together with the staffing environment, the Delta variant certainly impacted our staffing resources. We had sick rates and quarantines over the summer and into the fall. Our attrition levels were elevated. They were offsetting some of our hiring velocity, and we just had a higher percentage of inactive employees than our historical averages. The staffing issues, they weren't unique to Southwest Airlines. The same thing was true for the hotel providers, other third-party providers, concessionary services that you may see at the airport.
We ended up utilizing a significant amount of overtime for our crews and our airport staffs over a long summer and fall, and that really did take a toll on our people. If you combine all of that with the weather challenges throughout the summer and the October 8 event, it has been an unusually difficult operating environment. As a result of that, we did adjust our fourth quarter and our first quarter flight schedules. We lowered capacity by roughly 6%-8% across those six months to better match for staffing, for our current hiring throughput and the higher attrition rates and the increased leaves and the sick time. That moderated capacity, along with our continued focus on hiring, it's certainly helping.
In November was the first full month where all of those changes and res results came together, and we ended the month of November slightly over 80% in terms of our on-time performance. In that peak Thanksgiving week travel period, those were our highest flight levels. That was our best performance. We had very, very heavy loads. We had a flight schedule that peaked at 3,662 flights a day. Our on-time performance and our bag handling bested our five-year averages. Our November trends thus far are continuing into December, and we seem to have our flight activity and our staffing resources aligned as we're moving into the first quarter.
As Andrew mentioned going forward, the restoration of our network, it's just as important for the operations as it is for our commercial needs. Our number one dependency on that is having staffing in place to support it. We have a dedicated project team that is reporting on our staffing progress each week, and they're forecasting staffing levels from the application process for positions through the hiring and the background check and the training processes. They're comparing those to those new hires that we're getting to attrition and attendance levels, and we're forecasting future airport and crew staffing levels necessary to support the published schedules. Our most critical need at this point are to supplement our station staffing, and that's primarily in ramp-specific locations, and as well as our crew instructor group.
Those are the groups that govern the rate where we can train flight crews. We've made good progress on both of those fronts to date to operate our first quarter schedules, and we are going to be very mindful of our staffing resources as we go forward. We wanna make sure that we have adequate cushion in place to absorb the unexpected. We run a very reliable operation in 2022. I'll just spend the balance of my time then talking about our network a bit and how we're approaching the modernization to our operation. I love this snapshot of our network in 2019, that upper left slide. I really enjoy looking at that because it's unique. It is the only network like that in the world.
No one can acquire it, and it would probably take someone several decades to build it from scratch. It's not well understood by most, and yet it's probably one of the most significant competitive advantages that we have. The network that we operated in 2021, it has similar lines there that we had in 2019, but it has, as Andrew mentioned, 18 more locations, so it was wider in terms of locations, and it was thinner in terms of frequencies. As a result, most of those irregular ops plays that we were running for the last 50 years just weren't viable or as viable in that environment.
It wasn't the point-to-point network that we had built our operating model around, and there was just simply too much time between flights and too few options to get our customers and our crews to where they needed to be, if our operating tempo was disrupted. The network restoration that Andrew talks about will certainly enhance our recovery options, and it will certainly improve our reliability. We do enjoy tremendous operating and competitive advantages with a restored point-to-point network and our all Boeing 737 fleet. The airplanes we have are interchangeable, the crews are interchangeable. There are more nonstop markets. We have exponentially more ways to get a disrupted passenger crew from, say, Seattle to Orlando than anyone else.
No one is as experienced as operating the 737 in Southwest Airlines, and we're the largest 737 operator in the world. All of that culminates in a very strong sense of customer and company pride, high customer satisfaction, and significant and sustainable cost advantages. In terms of costs, it's really hard, really difficult to create what I would call sustainable cost advantages. You know, paying low wages or maybe reducing pitch to add more seats, they just generally aren't sustainable as cost advantages. Now, using your supply chain could be a way, and being the largest Boeing and GE customer is a way to get that for a fleet and all of its engines. It turns out, for an airline, planes and engines are pretty important things.
We have a competitive advantage with our ownership and operating costs that come from the most fuel-efficient aircraft available, and there is a significant and sustainable and competitive cost advantage there. Another advantage is, and we've talked about, is the network. Our point-to-point network gives us, yet again, a significant and sustainable and a competitive cost advantage. If you would compare each airline in nonstop markets and look at what they have scheduled for their block and their turn times in those markets, and if you would adjust those for the gauge of the airplanes, you'd find that legacy carriers have about 20 minutes more time scheduled than Southwest Airlines does to complete those missions. That low-cost carriers have 10 minutes more, and even the ultra-low-cost carriers have 5 minutes more on average.
That all results in a more productive fleet. We can fly more trips, we can carry more customers per day than per aircraft than our competitors. A highly productive, fuel-efficient fleet, combined with low airframe and engine ownership costs and operating costs, is a very, very solid cost advantage as we move forward. There is still more that we can do to further improve our cost positions. First, I will just say that every airline has this cost optimal network design, and that's the point at which the cost of recovering from an irregular operation crosses the cost of operating a schedule as it was published. With our current network design standards, we believe that our cost optimal OTP is somewhere in the eighties. We moved into that performance the last six months of 2019.
We operated in that area through May 2021, and the summer operation certainly moved us below that target. Scenario 1 on the slide is just a representation of that. Our hiring activity, as well as the reductions in our flight schedules, are bringing us closer to our cost optimal OTP, and we wanna be able to consistently operate in that zone as we move forward to 2022. Second, there are longer-term opportunities to structurally shift that cost optimal operational design lower. Said really another way, it's just a way to produce the same operational reliability at a lower cost level, and that's what's depicted there in scenario 2. Our plan to get there is through our modernization efforts. Modernization is a continuous journey for us.
We've made numerous investments over the last several years, and we've got a really strong foundation to build on. We've made investments in our facilities, like our network ops center, our station command centers, and those give our operating teams better situational awareness and visibility to real-time events. We've expanded our crew training facilities. We expanded our aircraft capabilities with ETOPS. We've introduced self-service customer initiatives, and we began modernizing individual components of critical operating and decision support systems, which you'll see there with our maintenance system and our OpsSuite implementation. Over the next five years, we will have a laser focus on continuing to modernize the operation.
In terms of modernizing our system infrastructure, the critical components are our MAX 7 entry into service, improving our workflow management systems, enhancing our flight tracking and aircraft movement and control systems. They need to be able to process and exchange real-time information throughout an integrated operating environment. Those systems, as those projects come online, then we'll be able to mobilize that information and deliver that real-time information to our customers' employees using the tools that they have on hand. Think things like electronic logbooks, digitizing the flight turn process, creating real-time crew communication avenues through apps and iPads, having better information to customers in the airport to support their own self-service opportunities.
With systems then that can communicate and to exchange information more efficiently, then our ability to optimize our efforts with better decision support tools will result in yet additional efficiency. We can improve our load planning and reduce reworks. We can optimize our flight planning for the most recent winds and air traffic control conditions. We can enhance our regular operations recovery tools. We can involve our maintenance programs with better information. Over the next five years, those efforts will allow us to support efficient network growth and support our CASM-ex growth into the low single digits, as Tammy has communicated, if not even better. I'm very confident in our ability to execute this modernization plan. We have very experienced and dedicated teams that are solely focused on its execution.
With that, Bob, I think I'll turn it back over to you.
Thank you, Mike, and thanks, everybody. We've given you an awful lot of information in 90 minutes, so thank you for hanging with us. We've got a break coming, I promise you that. I hope you can see, despite the pandemic and just the challenges of planning and focusing on the pandemic, that the leadership team has been really busy, not just on managing the pandemic, but looking forward in our plans. I'm just really proud of the leadership team. I'm really proud of the people of Southwest Airlines. It's just, again, an honor to be part of this company and to be asked to lead this great company, Southwest Airlines. I'm just really excited about the future.
I hope you can tell from our leadership team. We are all truly excited about where we can go. We know what we stand for. We know ourselves. While there are things to work on, as you've seen, we are not reinventing the company. We've got a terrific track record of delivering for our employees, our customers, our shareholders, and I am just totally confident that will continue. There's no doubt the pandemic has been hard. It's been hard on our employees, our customers, the country, our shareholders, and the nation.
I'm happy that we are emerging, but we are positioned as a company to emerge even better coming out of the pandemic and to take even more advantage, which I'm very excited about. Again, I'm just truly grateful to stand in front of you and be the incoming CEO. I'm grateful for Gary Kelly, that he's staying on as our Executive Chairman. I've been with Southwest for 30, depending on how you count it, 34+ years, entering my 35th year. I mentioned before, I love this company, I love our people, and I know firsthand that there is nothing that the people of Southwest Airlines cannot do. It's an honor to lead them and to serve with them.
With that, Ryan, I think we are prepared to take a 10-minute break. Any instructions? Be back at 1:40 P.M. All right. Thank you all so much for your attention this morning.
Hey guys, we're gonna get started with Q&A if you don't mind grabbing your seats. It's probably bad form to like scroll Twitter.
Sorry, did I sit down before you?
Oh, dearie. Such a gentleman.
They're very gracious, so.
I'm glad.
All right, guys, we're gonna go ahead and get ready if you don't mind taking your seats, please.
Not completely. Are you ready?
All right, well, we're back. Thank you guys for sticking around. We're gonna start the Q&A now. If you don't mind, for the folks in the room, if you'll just raise your hand, we've got a few mic runners. Ravi, I saw your hand go up first, so we're gonna come to you first. Just raise your hand, wait for the mic, and then that way the webcast can pick it up. We have an event right after this, so we'll have to have a hard stop at 3:00 P.M., but let's just fit in as many as we can. Thanks.
Great. Thanks, Ryan. Ravi Shanker, Morgan Stanley. Tammy, if I can start with you, what does solidly profitable mean? Kind of, if you can kind of frame that, in terms of the matching for us. And maybe for you again, or for anybody else, what does the flywheel on the modernization and the cost actions look like if the top line is not what you expect? Again, outside of your control, whether it's the pandemic or something else, what can you accelerate on the cost side and the modernization side, to protect profitability, through 2023?
Thanks, Ravi. Thanks for your question. Yeah, obviously, in a tough environment to give precise guidance for next year. We love doing that for you all normally, but I'm sure you can appreciate, with everything going on, it's a little tougher to pin that down. You know, we covered our costs pretty extensively. Yeah, we've got some cost headwinds coming into 2022 as we discussed. I do think some of those will obviously moderate as we add capacity and work through some of the productivity efficiencies. Very pleased with all the revenue initiatives that Andrew took us through.
You know, clearly for 2022, that's gonna be a transition year for us and you know, clearly we've got our eyes set on recovering back to pre-pandemic profitability levels. Just acknowledging that next year's gonna be a transition year for us, which you know, implies with some of the cost hurdles that you know, we it'd be challenging to get back to that for next year. So we'll we'll get through the holiday season and provide you a little more revenue guidance 'cause that's obviously what we didn't fill in the blank for you here today. So we'll give you more guidance on first quarter and try to give you as much color as we can on how we expect the full year evolving then.
Just think of it more as a transition year, not quite back to pre-pandemic levels. We're gonna work real hard for you.
Well, what I really like is that there, it's not sort of just trust us. We've got very specific things. Obviously, as you ramp out of the pandemic here, we have, we just are inefficient, and we have inefficiencies built in. You know, we're not flying all of our aircraft or they're flying on insufficiency. That's gonna come back to us. As we restore the network, we get staffed, and we add frequencies and depth, we'll get back that efficiency, and we're committed to getting back to the pre-pandemic efficiency levels as well. I love that we didn't spend a ton of time on it. We will more as we over time, as we provide more detailed plans.
Mike's initiative around modernizing the operation, and he could talk a little more there. Our employees are terrifically efficient. There's work to do, again, to become more efficient coming out of the pandemic, but it's not just that. We're a large and complex company. We have, I think there's software that we can work on. There are ways that we think about how we utilize data, how we move people appropriately to the aircraft, how we think about the turn, and we'll go on and on about some of those as they become more specific. I love the fact that we have opportunities. We're a very efficient company, but we have opportunities to become even more efficient, particularly in the operations area.
This focus on modernizing the operation is real and will pay off for us. Jamie?
Hey, thanks. Jamie Baker with JPMorgan. Two-part question for Tammy, and then one quickly for Mike. Tammy, you know, the guide for RASM to exceed CASM is obviously a laudable, you know, goal for any airline. I'm not interpreting that as guidance per se, but maybe this is an offshoot of Ravi's question. Is maintaining RASM in excess of CASM something that you expect to manipulate the market and your growth rate to achieve? Or is it more something that you're just sort of hoping naturally happens given a, you know, reasonably robust U.S. economy? Second, the long-term CASM CAGR, does that envision recast union contracts?
I'll take your last question first. We are, you know, incorporating inflation, but it doesn't incorporate an accrual, per se, of labor contracts. We are expecting higher inflation next year, as I think you can all appreciate, with the tight labor market and so forth. The targets that we shared are, you know, longer-term targets. As Bob touched on, we really have to get our operating leverage back, you know, as we restore the network. That's gonna be extremely helpful for us in getting our CASM back to more normalized levels, with more normal levels of inflation.
It's a little bit sloppy here as we've really geared up the hiring machine and restarted the airline, but we'll work our way through that, you know. The targets we were giving you know, obviously, are more long-term. As always, we'll try to manage all of that the best we can. I think we have a long history of doing that. We do wanna grow the airline but balance that with the targets that we've shared with you today. We have very real, tangible revenue initiatives that we're already starting to deliver on here in the fourth quarter, as we've shared with you. We're really excited about those. It's a very solid plan that I think we have on the revenue.
We believe in the base business, but we don't wanna leave that to chance, if you will. We have a very rich set of initiatives that, between just core base business growth and the initiatives that we have, you know, that we think that we have a reasonable plan to achieve RASM growth in excess of CASM.
Quickly for Mike, I liked the slide about relative turn time performance. You may recall in the last earnings call, I asked you and Gary about the fabled 10-minute turn. It's something that's been on my mind. What drives the bulk of the Southwest benefit on that slide? I mean, the 20-minute difference between you and the legacies, I assume, is almost entirely driven by just their hub construct. If you were to compare yourselves, I don't know if Hartford or Pittsburgh might be a reasonable example, is it something in your work rules? Would your turn times also be superior there? Or is it more the detriment that others pay because of more of a bias towards hubs? Thanks.
Yeah. Well, so yeah, I agree with you, though. I think the majority of the legacy differences are definitely the hub and the connecting activity. You know, for as long as I've been at Southwest Airlines, we have been very proud of the turn. You bring it back to 10-minute turn. There is a lot of pride at Southwest Airlines about if you work out at the airport, you're the best of the best because you can turn airplanes faster than everyone else. I would say that most of our technology in terms of the operation, and most of our labor contracts that we have are structured around being able to be a high frequency, point-to-point network.
The other thing that I would also argue is that you get out across these the top 50 airports that Andrew were talking about. Every single one of those people at those top 50 airports are Southwest Airlines employees that are trained and focused and buy in to just what you and I are talking about here. I'm not sure that is the case as you go across the labor spectrum. I think that is going to be sustainable for us for a while.
I would also say the hub penalty would also apply in those outstations because the aircraft, when it's in the non-hub location, has to return back at the hub at the right time for the output connectivity. Often the ground time in the outstation will be more than required to turn the aircraft because of that.
Helane?
Okay.
I guess I get to choose who talks next. What power I have up here. Thanks.
Thanks, Gary. Helane Becker with Cowen. So two questions maybe for Andrew here. The first question is, when you think about airfares, and you know, you talked about the four fares that you have on the website now, how do you think about the difference between the highest fare you have and the lowest fare you have, and where the new fare comes in? You said between maybe Wanna Get Away and the next one up, but how do you think about the percent differences of those?
For my follow-up comment, question, what do you think a successful credit card outcome would be from the new credit card agreement, either in uptake or revenue generation or top of wallet, or how should we think about those two numbers?
Well, I'll disappoint you on the second one first. We won't give details about the financial benefit from that. That's an updated relationship between us and Chase. The attractiveness of the program is based on the features that we offer direct to the consumer, which to some extent has not changed by this relationship with Chase. I think the new destinations we've just offered, as well as the updated benefits of the credit card that were recently launched over the last couple of months is what we hope to attract new customers to the credit card.
That's what drives us to the consumer benefit with the credit card engagement, which is separate from our relationship with Chase, which as I mentioned, unfortunately, we can't give you the details of. As regards the fare products, it's Wanna Get Away, Anytime and Business Select are our current offerings. We intend to have a new one. As I mentioned, it's above Wanna Get Away. We will also look to change a little bit of the features of some of the other fare products when we launch in around mid-year. Over time, we'll work with them. The idea is to have more gradual upsells.
If you go back in time, the jump from Wanna Get Away to Anytime, which is a full fare product that was mostly geared towards businesses, was a big jump. Over the pandemic, we have made some technology and pricing changes such that the buy-up is more modest in between. Our goal is to have four fare products with more modest buy-ups in between each of the fare products. That level of buy-up will be determined kind of on a market basis. We may start with whatever it is, but it'll be dynamic, and it'll move as we see customer demand move.
The idea is you'd have consistency, integrity across the four, that the Business Select will be more than one below it, and Wanna Get Away will always be the smallest, but that the gap in between will be based on customer uptake as we look to optimize revenue by modifying that buy-up.
Savi?
Thanks. Savanthi Syth from Raymond James. A couple of questions and probably for Tammy. I was kind of curious, you know, you talked about your unencumbered assets not having the loyalty program, and you've seen some kind of creative ways to raise cash against the loyalty program in the industry. If you had that tool early on, like or last April, would you have chosen, you know, would that have been a better tool than the kind of the equity or convert that was done? I was just kind of curious as to your view on how good or bad a tool that is in a downturn. The second question is more of a clarification. On the CASM ex, you talk about a 5-6-point drag.
Maybe not all of that goes away in 2023, but theoretically, could 2023 or, you know, you could see it be flattened down just as some of those drags go away. Is that a possibility or am I thinking about that incorrectly? I realize there's a lot of moving parts.
Yeah, on your CASM question, yeah, clearly a lot of moving parts. The 5- to 6-point headwind that I shared with you that will carry into 2022, half of it is capacity, so obviously it will depend on how fast we can add back the capacity. The other half was getting back to our historical productivity levels. You know, we're anticipating that we'll have normal inflationary pressures beyond 2022, but all the work that Mike was sharing with you, I think is really key to help us really drive efficiencies in the business.
We're gonna be working really hard on that, and that's gonna be a key focus for us over the next number of years. We know things certainly have to come together here for 2023. But if you go back historically, you know, we have seen kind of a normal inflation call it 2%-3%. We're gonna work really hard to improve our productivity back to 2022. Don't know that we can offset all of that normal inflationary pressure beyond 2022. And that really is in line with what we've seen historically.
On the first question that you had, you know, we certainly value our frequent flyer program has tremendous value, obviously, and we do like to keep all that close to the vest. That really was a last resort for us. Clearly it's a tool that we could use. I hope we never have to use it. In terms of pecking order, that was kind of at the bottom of the list for us because that's obviously very valuable information that we want to keep proprietary. We considered everything early. Obviously, we had to move very quickly. We wanted to move fast and really break the back of the liquidity question, which I think we did.
I feel like with our leverage, it's very manageable at 56%. No, it really wasn't a serious consideration for us last year, but obviously a tool that we have in our toolkit, which I hope we never have to use.
I guess, kind of just for clarification is, in the past, you didn't want to use it because you'd lose it, you'd lose the loyalty program. This, I think the industry has shown that you can hold on to the loyalty program and monetize that.
Yeah.
Is that a better way to raise it than equity or the convert, or is that still a better-
I think it's better, but the converts at the amounts that we issued, we were very comfortable with the converts. Now it depends on what the scenario is, obviously. Maintaining an investment-grade balance sheet was obviously a key consideration for us as well. We were just trying to balance and come out the end with a equity structure and capital structure that we felt very comfortable with and that was balanced. For us, I think it made sense because we were at a time where, you know, there were obviously a lot of uncertainties. We'll manage through that.
Yeah. Savi Syth, while you can do that, when you have access to traditional markets, I think it just makes a lot more sense to go that route. I wanna come back to the cost question just for a minute because there's obviously a lot of focus on our 8-12 guide and all that. What I love is just getting back to basics is what it's gonna take us to get back to the cost levels that, and productivity and efficiency levels. It's really all about there's a lot of choppiness. We have underutilized aircraft and other resources. We're gonna grow back into those as we restore the network over 2022, and it's gonna take us into 2023 to do that.
The majority of that'll come home to us simply because of the fact that we're restoring the network. It doesn't take extraordinary activity or projects to get a lot of that back in place. I feel very confident about our ability to get back to our historic productivity and efficiency. It's just gonna take us a little beyond 2022 simply because it's gonna take us beyond 2022 to get the network restored.
Savi, at the end of the day, obviously what we're trying to do longer term is maintain our competitive cost advantage that we've enjoyed forever. We feel that with the initiatives that we have, you know, we're determined to do that.
David.
Thanks. Maybe just one more coming back to you on Tammy cost, a two-part question. You've already called out 5-6 points of inefficiency in that guide. I think there's probably elevated training costs. I would assume some of that is transitory. As we think about the year-over-year for 2023, could we see 2023 outperform on that versus low single-digit that we're looking for over the next five years? Maybe one quick one for Andrew, just on the 1 to 1.5. I appreciate you can't give us the details of each bucket, but if you could just think, help us think about the sizing of the buckets. Is there one that drives the lion's share or is it pretty equal weighted? Thanks so much.
Yeah. Obviously, the most significant category of our cost structure is salary, wages, and benefits. I think you all understand it's a very tight labor market. We have already taken actions to raise, for example, the minimum wage. In terms of our salary, wages, and benefits, you know, we're gonna be competitive in the marketplace. That's really the part of the question that makes it a little bit challenging here to answer 'cause we don't know exactly what that equilibrium is as we think about 2022. Wherever that lands, you know, I think that will be more likely structural.
To your point, beyond that, we would be assuming that we would get to more normal inflationary pressures. Obviously we'll wanna try to offset that with getting back to 2018 productivity, our 2018 productivity targets. That's, as Bob said, we have a lot of confidence we'll get back to 2018 productivity. That's the key focus for us, and we've got a lot of initiatives backing that up. I think, you know, the inflation, you all are probably in just as good a position to gauge that as we are. Obviously we're going to try to offset that to the degree we can over the longer term with all the initiatives and improvement opportunities that we believe we have in front of us.
I would say we're not gonna break out the four revenue initiatives. You know, the Chase does drive a significant portion of it, but my recollection is the largest of the four is not two times bigger than the smallest, so they're all meaty initiatives.
Yes, sir.
Thanks. Myles Walton, UBS. Maybe, Andrew, to just follow up on that, are any of the four outside of the Chase really active in 2022 to a material extent, such that doesn't it just isolate and suggest that the Chase is half of the 1 to 1.5?
No, the revenue management systems I mentioned, they're live in production. There's 2 systems, and they're managing a subset of the dates for 2022 travel, so they will have a benefit in 2022. The new fare product will be active a little bit before mid-year next year. Then the Southwest Business is ongoing and is in market right now. All of these 4 initiatives I would count on as being in market and benefiting 2022 from early on in the year.
Okay. Maybe just one other follow-up for you on the pilot programs you have on the revenue management side. Can you give us any quantification of that back testing of how much better it would have been had you had one of these other systems you were evaluating?
The way we set the test system was more to be able to compare them to each other versus quantify the benefit. It gives us some insight that there was some level of benefit, but it was designed to help us down select the two finalists. We set up the experiment to compare to each other more than overall the benefit. Now in the pilot we're doing right now, we've designed the experiments to be able to quantify the upside benefit onto itself from being in the marketplace for us. As we go throughout 2022, that's what gives us the opportunity to kind of to quantify it even better. Right now we can affirm they are doing no harm.
Once the travel date is passed, it's managing, then you can go backward and look, and compare it to the analogous state with the current system to get the absolute benefit. We have a good range from the experiment, but it's not definitive yet.
What I wanna go back to, sorry, is I'm gonna say exactly the same thing that Andrew said, but I just wanna iterate it, which is a lot of times as you're talking about revenue initiatives, we're laying out a program and value. They're very early on. They may even be conceptual in terms of what we think we wanna do, five-year value determination. We're confident that we will deliver value, but there's a lot of work to do just to get them to the starting line in terms of what you do. Here, what I love is the plan that we've laid out. They are, in the case of Chase, obviously complete.
In the case of others, like, the fare product, as Andrew mentioned, and revenue management, they're well underway, and they deliver here, or deliver into 2022. In Southwest Business, obviously, we talked about all the work Dave Harvey and his team have done. The groundwork there is to get into all the GDSs, form the team, build the team around the sales force, et cetera. That's all done. What I love is the fact that all of these are well underway, which also helps you understand what the quantification could do, and then it could be, and in the case of Chase, we're effectively done. Which is the reason that you see the value that we're talking about is 23.
It's not 26, and also half of that value or so, approximately half comes home in 2022. I love the fact that the plan is very concrete, and it's closer in terms of its deliverability.
Yes, sir. Dan.
Thanks, Gary. Dan McKenzie with Seaport Global. A question for Andrew. I'm wondering if you could speak to pent-up demand, and if you could just help us put that into context, what it means, how you're thinking about it, searches, fare searches versus fares booked. You know, what did that look like in 2019? What does it look like today? So sort of the look-to-book ratio. You know, how does that inform you about how you're thinking about 2022?
I'll kind of divide that into business and leisure, if you will. If we, as well as looking at the top line. Obviously every day, we look at our overall funnel from the very top of the shopping visits to our website down to the transactions we have. Then on a year over two year basis, our web shopping visits are up. They are up more than our capacity compared to our capacity as well. Searching for travel exceeds capacity in the marketplace, which is a good sign, too especially concentrate in leisure time frames, as one might imagine. We feel pretty good about consistent customer demand on that.
Obviously, the year-over-year amount changes by the different promotions we have in market. We see the biggest differential driver in website traffic are the promotions we're running. Our own company-led levers is what we see are pretty effective. Usually when you have a company initiative, email campaigns, marketing campaigns, and you're not getting traction, that's an environmental worry. Now we see the direct line to the traction we're getting, and so we feel very comfortable about the consumer readiness to purchase. On the business side, that's always a big question about what's gonna happen with business. If you look at what's happening right now, what's come back first are internal meetings and conventions.
If we go back a year, people were opining that those things are going away, they're never coming back. Las Vegas conventions are doing quite well right now, and so we see a lot of companies that have not opened their campuses are fine to send their employees to conventions and meetings. Conventions and meetings has come back nicely. A lot of companies, while they're not necessarily receiving lots of visitors, will meet amongst themselves and travel between their own offices. We see the fact that those hypothesized late movers as far as travel purposes for businesses were actually the first to come back would lead one to believe that there's an appetite for travel once you're able to go visit customers and others.
Are the searches above 2019 levels? Are there any? You know, as you look at the, you know, look-to-book ratio, are there impediments today to getting more people to book besides, you know, the pandemic here?
What we measure is shopping visits. It's... You come to our site, but then you put in, "I wanna go from A to B," and it's a session you look at. We won't, like, triple count you if you look at 3 different flights and stuff like that. Shopping visits are up on a year-over-year basis. The conversion rate is more akin to the price elasticity you see in the moment, which is mostly leisure. The conversion rate is really driven by the price point at point in time. We see no other real driver of conversion differential versus 2019.
Okay. Thank you.
Yes, sir.
Thanks. David Vernon for Bernstein. Thanks very much for hosting us today. It's great to see you live. First question is on sort of top-down guidance. You've laid out a pretty clear picture of CapEx kind of well above pre-pandemic levels. What we haven't really heard yet is when do you expect to get the operating margins maybe back to that 2019, 2018 level? And is the target we're shooting for back to that level, something higher? How do we think about kind of the rate of change in terms of when the investments that we're putting in over the next couple of years is gonna get us back to that level of pre-pandemic profitability?
Yes. I'll try to break that down in a couple of parts. The investments that we are making here for 2022, you know, certainly they're first for our growth needs and our replacement needs. We, you know, we think that's a prudent use of our capital here for 2022. As we've already talked about, because of the virus, this 2022 looks to be another transition year for us. 2023, we should be positioned well, assuming really no unforeseen events here, to have our network fully restored. At some point, it may take us to the end of 2023.
That's really what we need, if you're tracking me on the CASM side, because we've made all of these investments, to your point, and we really need to restore our network to at least the levels that we had in 2019. That's a key piece for us, as we look ahead and try to plan for the future. We very much have a desire to grow here, because we have made investments for many years, and we wanna leverage those investments. Really the pacing item for us here in 2021 and into 2022 is more just we really had to restart the hiring machine. We're well into that process.
We feel good about how we're tracking against our targets on hiring here as we are closing out the year, and we think we have a good hiring plan for next year. That is gonna be key for us in terms of leveraging the investments that are past investments as well as our investments that we plan to make for 2022. A piece of our investments for next year, our CapEx, is actually investing in the operations. That's probably close to $400 million-$500 million that we're investing in the operations, which we believe there are gonna be benefits associated with those investments as we move forward as well.
Appre-
Yeah, I mean, just to be simple, I mean, obviously, yeah, the goal is to return to margin expansion and industry-leading margins. I think that the biggest question is just it's because a lot of this counts on getting back to normal, a lot of which is restoring the network. The restoration of the network, which helps us take our costs back to normal, get our efficiency back to normal. It just takes us beyond 2022 to get there. I can't tell you exactly how far into 2023, which I think it just pushes some of those goals out to that period. I have confidence in those goals.
It's just gonna take us a little bit of time to get there, primarily in my mind, because it's gonna take us time to get the network restored, which is the key piece of that opportunity.
You have the wave.
Oh, yeah. You got, yeah, as Gary just mentioned, you've got the unknown wave, COVID wave impact here in, I mean, currently, as we all know about Omicron and then into 2022. I think we all are hopeful that those waves are successively smaller or less and less as we've seen up to this point of time. It's just hard to predict for 2022 at this point.
Totally appreciate the uncertainty and thanks for taking a cut at least trying to frame the timing for us. Second question would be around this apparent tension between the breadth of your network and the depth of your network, right? Obviously, making decisions to go ahead and utilize aircraft during the downturn when leisure demand is there, it's jump ball, you gotta run after it. As we start to come out of it, as we start to think of more normal operations, why does it make sense to fly to Myrtle Beach? If you didn't need it before the crisis, why do you need it after? Why does it make sense to fly to Chicago and to Midway when that asset could just be adding depth into Midway instead of down the street of Chicago?
Yeah. I'll let-
If you could just talk to that maybe as a panel, that would be very helpful.
You bet. There's a lot of factors there. Obviously, Andrew's the expert. I'll let Andrew jump in, and I'll try not to take too long with context. As we all know, revenues are down, flying is down 90%. As Andrew mentioned, one of the goals is to go seek revenue pools. You look for revenues in any place that you can find, which led to the opening of the 18 cities, Hawaii expansion, and a number of other things that we put aircraft to work. As you come back out of that and you begin to have other opportunities, we're not back to normal, but obviously there's strength, and we need to restore the network depth and the frequencies and the network for our customers and for our employees.
You got a couple of options. You can sort of manage that over time. You could absolutely shut the 18 down and put those aircraft back to work. I'd say two things. The 18 cities are working, number one. They're performing and they're contributing, and so there's not a financial reason to do that. Number two. Just from a consumer and customer perspective, we don't go into markets to then exit them when we have other better opportunities or things to do. We go in to commit to the community. We go in to commit as an airline to the routes, and so we're committed to the 18 cities. Obviously, we've had over time a few that we've come into and out of that they haven't worked.
The vast majority, that's not the case, and the 18 cities, again, are working. We just have some time here where we need to put the aircraft that we're taking next year, up to the 114, and put them to work. Andrew's got a great plan to restore, even though it's going to take us into 2023, to restore a meaningful portion of that, of that depth and network, frequency in 2022, beginning in March, and then a meaningful amount restored into the summer. Just in terms of thinking about, it's one thing to think about ASM restoration, what you do, and then trip restoration.
Andrew, you can fill in if you want, but I think we will make a meaningful dent in restoring the network into the summer of 2022. Yeah, Andrew, if you don't mind.
I think I'd pick up that last point and go with, as I mentioned, we expect to have a good portion of the trips restored in the summer 2022, which would help with the efficiency and reliability stuff that Bob talked about. Fundamentally, you still have to match supply and demand. The markets where we have traditionally had density are business markets. As Tammy outlined, business travel we still expect to be down 55%-60% in December versus 2019. Started the year down 90%, so that's great progress. You can't. If we were to try to go restore all the density right now, the demand's not there for business travel. Our plan is to pace back this density restoration as business travel comes back.
How fast business travel will come back is one of the big unknowns for the industry, as Tammy talked about. We have flexibility of what to do with these aircraft, but as they come on board, we will then be able to put them into density markets if we see demand is pacing towards restoration, particular business travel is pacing towards restoration, you know, industry-wide, but also in accounting for our company-specific initiatives, which we think could lead us to outpace on business restoration. It's all about supply and demand, of getting back to that density to drive efficiency. If we went for efficiency right away, supply and demand would be mismatched.
Mike? I'm trying to swap sides. I'm trying to be fair. Two here, two there. Two here, two there.
Yeah. Mike Linenberg here with Deutsche Bank. Andrew, I just wanna go back to and maybe Tammy, you had mentioned this with Jamie, but just, you know, over time, the assumption is that RASM outpaces CASM. I'm curious, underlying that, are you assuming that we do see a full business travel recovery, say, by, you know, 2025, 2026? And/or is it conceivable that, you know, at the back end of this, your share of corporate travel is higher than what it was going in? Because, as Andrew, you mentioned, you know, various business initiatives. I mean, you're gonna be a much bigger player in the high yield GDS distribution channels, et cetera.
Do you wanna start?
Yeah. I'm happy to start, and you can jump in. I think that's conceivable in my opinion, and Andrew can make sure he has the same opinion here. Certainly over the five years, as Andrew already mentioned, we've seen nice improvement on the business side. Of course, here, you know, we'll have to see if this most recent wave will slow down the restart of returning to the office. I think that's the biggest question mark we have here. Over some period of time, I think that's very reasonable. Based on the trajectory that we saw kind of coming into this wave, even here with where we are this year, we've seen some nice improvements.
I don't think we'll close the gap on that in 2022, but getting within kind of 15% doesn't seem unreasonable as we close the year out. You know, it's tough to know that for sure, but we would expect to close the gap here in 2022. The good news is, of course, one of the investments that we did not turn off during the pandemic was GDS. We believe we have a very significant opportunity there to increase our market share with the corporate business traveler with the product that we offer. I think that positions us well and is unique to Southwest as you think about how we might compare to the overall industry recovery.
Hopefully, all the stars will align for us there, and we'll continue to see some improvement. Andrew, any-
Yeah. I
To add?
Separating the two things. Our RASM trajectory versus base business. If you look at some of our initiatives, you have the Chase agreement, which RASM for that would move differentially to base business, so it's disconnected. The fare product, we're getting customers to willingly pay more for more product, which will likely be mostly intangible, so that would move separately from the base business. The Southwest Business, changing the composition of traveler would allow us to have RASM move disconnected from the base business, so to speak. Those three can move differential from the base business trajectory. As far as business travel, there is, you know, hypothesized impact from COVID practices that would lead to a cap on business travel.
I think if you were to look over history, there's always been a lag for business travel return after recession, regardless of whether there's a health impact involved in there. It would be normal for it to take time for corporates to reestablish travel budgets and for business travel to come fully back. I'd also say that, you know, leisure travel is closely associated with price as the price elasticity of leisure travel, whereas business travel, as you know, is less price elastic, but it is income elastic. When the economy gets bigger and corporate incomes get bigger, corporations tend to budget more nominally for travel. It's more of a changing that factor.
You could have less travel for a given level of corporate profits, yet still nominally get back to 2019 levels of corporate traffic. It's a question then of composition change at a very small, you know, modest level industry-wide, which is much easier to adjust to than, say, a failure to get back to 2019 nominal levels. I think that environment of nominal return to nominal levels of travel at some point and our company-specific initiatives to get, you know, more share than we went into it, even if it's a modest increase, I think puts us in a good spot to have RASM differential to base business growth.
Great. Just one quick one, Andrew. After you know, the last year and a half with 18 new cities, over the next 5 years, since it's gonna be so much focused on restoring the network and more about, you know, depth versus breadth, could we go a few years with Southwest not announcing a new city or airport?
The man at the end of the table told me never to say never. I will focus on restoration for the next couple of years, but I'll never say never.
Great. Thank you.
Yes, sir.
Hi, everyone. Thank you. This is Conor Cunningham from MKM Partners. Your fleet growth calls for double-digit growth in 2022, but capacity is gonna be flattish, give or take. You called 2022 a transition year a fair bit of times today. Why don't you transition your fleet a little bit more aggressively in terms of retirements rather than doing the minimum of 30? I think that's implied in the fleet right now.
Well, I think we... Great question. We have a just to add to a number of things. Obviously, we have a tremendous agreement with Boeing, and you wanna take advantage of that. We have a lot of flexibility, so we still have, I think there's still a number of those, I believe 42 that are options. Obviously, we're not committed to 72 firm, and that could change. Our intent is to take the 114, but we're not committed to the 114 at this point. We have a lot of flexibility in terms of how we use the fleet. I think we're planning on 20 retirements at this point. It could be more, because from a financial perspective, that makes sense as well. We're not committed, obviously, to the 28.
It could be more. That's the plan, though. The main thing is 2022 is a set-up year for 2023 and beyond. I put a lot of that into it's choppy and it's getting ready to rebuild the business. We need the aircraft to rebuild the business, to bring the network back, to restore depth, to restore frequencies. We need the 114 net, the retirements to do that. It may not all occur in 2022, obviously. It's gonna take 2022 and 2023 as we get staffed. To me, it's just part of the slop or the chop or whatever you wanna call it there in 2022 as we set ourselves up to take advantage and rebuild the network. Again, we have lots of flexibility.
It moderates post-2022 as well.
Okay. Then, I think you're net up 80 aircraft next year. I'm just curious where you are in terms of hiring, for all those positions. How many more people do you need to have now, than you do by the end of the year?
Just in, and then anybody else wants to chime in, go right ahead. Obviously, there's been an all-out focus on hiring and staffing. That's every company, right? You know, you go into a restaurant, you go any place, and obviously, there's a lot of hiring focus. We committed to our plan for the fall was about 5,000 hiring, and we were, I believe, right around 80% of that. We've had a little higher attrition than we would have expected. I suspect we'll end 2021 netting a little bit less than we expected in terms of what the 5,000 would have yielded. We've made tremendous progress. If you go all the way back to where we were, you forget now just a bit in terms of where the year's been.
I mean, it was, we were getting vaccinated, but it was February, March before we were still unsure about exactly what the summer demand could yield, before we really turned the hiring machine back on, began to recall folks. It really took through the summer and really deep into the end of the summer to begin to even add, because we had to rebuild our entire recruiting, staffing, hiring teams. So they've just done a wonderful job getting all that back in place to be able to come close to hitting that 5,000 in 2021 number. The plans next year are to add about 8,000 to the workforce at Southwest. That would sort of align with our aircraft and network restoration and all of our plans.
I feel good about the 8,000. Obviously, it depends on the market. You know, a lot of things are moving, how many people come back into the market, what wages do. The plan is to add about 8,000 to the Southwest family next year.
Wayne?
Hey, Brandon Oglenski from Barclays. I just wanted to follow up actually from that question, because if you do take out the $5 billion of CapEx next year, it looks like you're converting all those 42 options. If I just compare it to where you were in 2019, especially with the grounded MAX fleet, it looks like your net capacity just in the fleet could be up 10%-15% in 2023 relative to 2019. I guess kind of a 3-part question around that. A, is this like a very bullish read-through that you guys are prepping for what could be maybe even a better demand recovery, or do you see share opportunities incrementally within what you're doing? Number two, what's the CASM hit? Because it sounds like you're hiring in advance of, you know-
Right.
-deploying all that fleet. Lastly, I guess it's more around again, could CASM or ASMs be up that degree in twenty-
You wanna talk about ASMs real quick, and I'll come back.
I'll take the part about the share. The restoration is in markets we had before. The share that would have happened was in the past. Into the 18 new cities and into Hawaii that we've just done, those were the net new adds. We restore our network, we end up with more share, but it's a consequence of what we've already done, not what we're proposing to do. What we're proposing to do is go back in the network we had before. As I mentioned, about 125 aircraft is what we use for that breadth expansion, which by definition would be into someone else's market, so to speak, in the past, and now it's all about, you know, shoring up what we had before.
It's lower risk, and it's more about keeping the share we had versus acquiring new share.
It's bullish.
Mm-hmm.
Did you guys wanna comment on the CASM drag as well as you gear up for that capacity?
Going back to my comments earlier, the inefficiencies that I were referring to are the fact that we aren't flying all the aircraft that we could as we ramp back up, bring on all of the new employees that we're hiring. Hopefully, all of that will match up. In terms of the aircraft, just keep in mind, though, there really isn't much of a CASM drag with the way we've pulled together our fleet plan. In other words, we don't have to make any of those decisions today.
Should we be in a position where we want to bring on the deliveries, we could certainly retire more aircraft. As Bob mentioned earlier, we don't have to make that decision today. We are in a position that if we want to park those airplanes temporarily, there wouldn't be a CASM drag, per se, for 2022. If all the stars align and based on what we're seeing this year, there's robust leisure demand, hopefully business demand returns, we'll have the aircraft that we need for our growth aspirations for 2023. If we find ourselves with too many airplanes, we can simply retire them.
We just simply don't have to make that decision today, and there isn't a CASM drag, if you will. It's very, very minimal to really have that insurance so that we're ready to go should the demand be there for us.
Yeah, if I didn't answer your question fully, if we see the restoration of business travel to anywhere close, you know, to the levels before, even haircutting it for any kind of COVID impact, plussing up for our initiatives, that's the markets to which these aircraft are destined for the most part. As long as that returns, then there will be substantial demand and sufficient demand for these aircraft. If it doesn't, as Tammy said, we have flexibility, but I think it's a reasonable hypothesis, you get close to your pre-pandemic levels of activity, at least on a nominal level, therefore, you can fill up these aircraft at good yields.
You know, hopefully, as we've taken you through the day here, I know it was a tremendous amount of information here, but one of the key words, and it's a word that I love, is flexibility. 'Cause we are in an uncertain environment, and we can pivot very quickly to whatever the environment dictates. Certainly, the fleet aspect is one where we've spent a lot of time planning so that we do have the flexibility that we need. Certainly, we wanna bring on those aircraft because they are more efficient and it's a key also. We've had a lot of CASM questions here today.
I think you all understand our fleet modernization efforts, but that's obviously a key, too, for us going forward in terms of controlling our CASM-ex.
Just, we're all answering your question, right? There's just one last thing to tag on. Tammy loves flexibility, I like opportunity as well. We've got the aircraft. We got a lot of things to do. We added these 18 cities. They're working for us. We've expanded Hawaii, it's working for us. You don't wanna claw any of that back because it's working. We've got the aircraft that are coming next year, the majority of which will be put into restoring the network because we need to do that.
Especially restoring the short haul, we believe that it may take a while, but the business demand is going to come back as well, number one, and it's gonna come back to us because we've set ourselves up for expanding our part of the business market with the GDS work. Beyond that. Again, with our fortress balance sheet and the way that we have exited the pandemic in terrific shape, we're gonna have opportunities beyond that. We want the aircraft and other assets, the people to be able to take advantage, 'cause I'm a believer that we will have opportunities beyond those. Again, you know, if that doesn't materialize, you get all kinds of things can happen, and we have the fleet flexibility that Tammy talked about.
I'm a believer, as always, that we have opportunities here at Southwest.
Thank you.
Wayne.
Hey, thanks. Thanks for hosting. I wanted to ask about if there's any strategic daylight, no pun intended, between the two of you there with the white and blue in the background, specifically on seats and bags. As I sit here in a middle seat, you know, I would have preferred an aisle seat. I would have paid you in advance for that aisle seat, but I needed to be here at a certain time, and what was available was a middle seat. Is there any thought to seats specifically for the dots on the map that aren't those blue dots where I think it clearly would enhance your value proposition?
Then in bags, as you play back this year, I think one of the things that was most interesting to me was talking about the operational impact of too many connecting bags. Clearly there's a way to limit or reduce-
Yeah.
the number of connecting bags. I guess just if you would.
Yeah.
apologize for putting you on the spot between the two of you there, but is there any strategic daylight?
It's not putting us on. We've been on this point before. No, Gary, obviously, whatever you wanna say as well, my friend. I think if you think about the fundamental advantages of Southwest Airlines, we're efficient. We have a terrific operation. We have wonderful people. We have terrific service. I believe we hire people who love to put others first and serve, and all of that stuff. None of that's changing. That's the fundamental heart of Southwest Airlines. When you think about the things that are important to us in terms of how we, particularly how we think about our customer and consumer, no bag fees, no change fees, they are not changing. 100% absolute, those will not change.
As you look forward with some of the priorities, and I articulated them very quickly, there are things, I mentioned in passing our customer experience. There are things to work on in terms of how we interact with our customers, what you can do on the, on your app and on the phone, and how we think about operational modernization and the deployment of software. There are things like that I'm sure we may have different thoughts about how to approach those. Those are relatively minor because they don't change the fundamentals of Southwest Airlines. If you get really specifically to something like seats, and you're a long way from an aisle seat, by the way. You know, I put those kinds of things into the never say never.
There's no work going on things like assigned seating at all. I don't know that I put it into the never, you know, the absolutely never, like no bag fees, and those change fees, because a lot of that comes down to customer, preference and consumer preference. If there was a point that our customers, whether it's a demand in terms of what they expect or say there was a demand in terms of, because of the markets we serve, or at some point we may have code share agreements, whatever those are, that we had to come back through and evaluate. Again, I'm narrowly talking about the one example of assigned seating as an example. Could we take that up? Well, absolutely we would, because we wanna be relevant to our customers. There's no work going on there.
I think the daylight between us is, yeah, there's some, but it's really small, and it's absolutely none of the fundamentals. My favorite quote about no bag fees, no change fees comes from, for those of you who remember our CMO at the time, Kevin Krone. He. When we were debating just what our customers want, and he said, "Well, you know, when you travel, I think it's reasonable that you take your clothes along." That's you know, sort of, it sort of settled the you know, the idea of ever even thinking about things like bag fees. No bag fees, no change fees, period. Gary, I don't know what you'd like to answer.
I just wanna get credit for not saying one thing. Because I win a bet if I don't say anything. It's not over yet.
I do have a follow-up.
I'll say something if you want.
If that's okay. Noted. I do have a follow-up. On the small cities, the 18 small cities, and we think about Destin, right? Nobody acts in isolation. A lot of other airlines had the same idea. If you think about Destin, which was sort of operationally swamped as an airport, what learnings do you take with you from the way this summer played out with respect to how you plan some of those smaller markets?
O'Hare's not small. Miami's not small. So it's a portfolio of cities. If you look at all those 18 new airports and draw the line back to where it started, they started in places where we have large customer bases. It wasn't us necessarily, you know, trespassing in someone else's zone, so to speak. They were from our cities. People wanted to go there. There were, I think this last summer, a lot of supply chain type issues in the airport world that made for a kind of more difficult travel experience. Bozeman, Montana, they ran out of rental cars 'cause people were staying longer than normal, and so they ran out. Maui ran out of rental cars and accommodations.
The pent-up demand for leisure travel was there this summer, but not everywhere was open. New York didn't have a lot of tourists. I think as we go into next summer.
that tourism desire can be filled more broadly overseas, equally throughout the United States. I think you'll see less of the bursting at seams you had at select airports, like a Destin or a Maui and stuff like that. It'll be more evenly distributed, and I expect a much better, you know, experience for the customer and also, financial return.
You know, I'll just add in, too. Also, a lot of these smaller airports, like the ones that you had mentioned there, they have contractors who support all the airlines out there. All the airlines make these individual decisions. Here comes the traffic, and then there's just more lead time for the contractors to get staffed up to support all the airlines. You ask about learning. One learning is, as we're thinking about those things, make sure that we are coordinated with the contractors. Make sure they have enough lead time to support our activity. Then the second thing that we have, a lot of flexibility in our labor contracts, and if we want to, we can always go put our own people in there, if it's an opportunity.
Andrew has a tendency to start small in a lot of these locations, and they grow up. If we can see that, we would take a different approach.
Okay, Ryan said we have time for three more questions, and he said I could say something. After that, and then I'll hand it back to Ryan. Yes, sir.
Let's see. I'm Paul Raman, U.S. Global. I have a couple of questions. One of your fleet, what percent is owned, what percent's leased, and what do you see as the pros and cons of each of those strategies? The second is your thoughts on oil hedging or fuel hedging. What price you would really increase, decrease? What are your thoughts? The forward curve has come off quite a bit in the last two or three weeks, especially looking out about four years. Those two issues.
Yes. So on your hedging opportunity, as I took you through, we are starting to build out. We have a nice hedge in for next year, got a decent one in the following year and working on beyond that. So yes, as always, we really are more programmatic with our hedging program. Having said that, we certainly look to be opportunistic when we can. So with the dip here, you know, that could provide some opportunities for us. Just keep in mind, the market's been also very volatile. It's really a balance of what the crude prices are with volatility. We certainly have a desire to build a hedge at, you know, a premium that makes sense.
Hopefully we'll have some opportunities there to continue building that. We really have been more programmatic with our hedge book. In terms of your question, owned versus leased. We largely own the majority of our fleet, which is owned, which has long been a practice for us at Southwest, so small percentage leased.
Are you concerned about competitors who have a lease fleet who may have gotten quite a few concessions over the last 18 months?
No, I am not. We have a very cost-efficient order book from Boeing, as we've talked a lot about here today. Our desire is to execute on that order book. I do like opportunity, Bob, but I'm the CFO, so I have to have flexibility in my pocket here. Our goal is to always execute that order book with plans to retire 30-35 aircraft per year. We've got flexibility if we need it.
Yes, sir. In the back.
You all are a big part of Boeing's production schedule over the next year or two. It's a two-part question. If you decide to exercise all those options, do you have commitments that you can do that or might you have to work with them? Secondly, is the 737 MAX a different production line, and is that what partly gives your confidence? 'Cause most of your orders are skewed there.
Yeah. Mike, did you wanna take that?
What did you say about the production line, the very last part of the question?
I'm asking, are the MAX? Are the 737 MAX? You're ordering mostly 7s in the order book. The options are both.
Okay. I got it.
Is that produced differently so that when you did that order before and you worked with them, they were able to align that production, or is that just part of the whole thing that they're producing?
Yeah. That is one of the great things about our order book and just our relationship with Boeing we are a big part of their production line, absolutely. We're the largest operator of the 737 in the world, and just the economics of our order book make us want to take those airplanes, whether they're for growth or whether they're for replacing existing airplanes. It was important for us as we went through that order book to make sure that we had access to those delivery positions. Tammy, I feel really comfortable that they're firm positions or they're options, that we'll have access to those delivery positions and that we will get the airplanes.
With respect to your question on whether the MAX 7 or the MAX 8 are produced on the same line with the same process. The airplanes are almost identical to one another, except that the fuselage on the 8 is just a little bit longer than the fuselage on the 7. I don't think that adds any complexity to our order book also.
Yes, I agree with all of that, Mike. Then one other thing too with our order book, you know, we've talked about our fleet modernization efforts, that obviously it will be instrumental too in our ESG efforts.
Yes, sir. Last question. You don't win a prize, sorry. Not yet.
Thank you very much for taking my question. Stephen Trent from Citi, and I appreciate the time today. I just had a quick question on your thoughts on capital allocation. I was intrigued to see, you know, the dividend and share buyback comment, you know, for 2023. How are you thinking about that versus maybe doing something more like, you know, Allegiant's investment in Viva Aerobus? And then how are you thinking about the optics of paying a dividend again from a political perspective?
Well, now I'll let Tammy chime in about obviously optimal capital allocation. You know, under CARES and PSP, we have a time limit before we can pay dividends, and we wanna get back to a dividend here as quickly as possible, which was Tammy's comment. Sort of to your question about the political implications, obviously that would be after the CARES Act expiration, which allows us to do that. I think if you think about share buybacks, it all comes down to free cash flow. You gotta have free cash flow to do that and the allocation of that between other investments. But you know, our desire to get back to share buybacks as well.
Again, it just sort of depends on where we are at the time in terms of free cash flow. Tammy, on just an optimal allocation.
Yeah, no, not a lot to add to that, Bob. I thought that was great. It really is just, I think, a balanced approach. Clearly for 2022, we have some higher CapEx needs, which we've taken through and spent a lot of our time today talking about, which we think is prudent given our growth plan. Again, we want to execute our order book first and foremost. With the CARES Act restrictions, to your point, it's that I think that really emphasizes that even more for 2022. First grow the business, and then beyond that, you know, obviously, our desire is to get back to the dividend and then balance that with share repurchases, again, based on free cash flow.
All of that is, I guess, my third favorite word, Bob, is balance. We'll wanna balance all of those objectives, as we've done over our past 50 years.
I think the middle between flexibility and opportunity is balance, Tammy. Thank you.
You have to separate these two. All right, that was our last question.
Thank you.
Ryan said, I get to say something. I think he can tell that if I don't say something, my head will explode up here. I really enjoyed, you know, the afternoon with you all, and the questions are wonderful. I think you have great insights into Southwest and the opportunity here. Just tie into my overview comments. Number one, we think we have an unbelievable opportunity here, and it's going to require some very basic blocking and tackling and execution, which I think you all are very clear on. We wanna be aggressive, and this is a bullish scenario in our opinion. We think we are perfectly situated for this scenario.
We're low cost, we're low fare, we're a consumer favorite, and we are also, I would argue to you, the number one business airline in the country, even though we haven't tapped into the managed corporate travel for 50 years. We think we have an enormous opportunity there, and we wanna take full advantage of it. I don't think that. I appreciate the question on the tension. I don't think that there is a significant tension between restoring and maintaining the breadth that we've achieved. I think all of that can be managed along the lines that Andrew was describing.
The other thing I wanted to be sure that you knew is that every year we have a revenue goal, and we evaluate whether we need to prune some markets out in lieu of better performing markets, and that will absolutely be the case. Normally, Andrew, I think we'd have maybe 5% of our route system, quote, under development. For those of you who have followed us a long time, you'll remember that stat. Well, now, I mean, what would you call it? 25%?
Yeah.
It's some gigantic number that has not matured yet, and I'm a little nervous about that. We'll pay close attention to it. As I think has been very well articulated, all these new markets are performing very well, and you'd hate to make that investment only to walk away from it, 'cause I'm very confident that they are going to pay off. We could put a lot of the frequencies back into place now, and they would not perform. We're betting a little bit on the come here, and we're talking in terms about restoring the network. I think all this is gonna come together pretty nicely. The other thing I would just remind everybody, and I've said this often. We can plan right now, but we are not very good at forecasting.
There's just too much uncertainty in the world. We have factored in a significant penalty in 2022 in our plan for more COVID suffering. If that doesn't materialize, we'll do better. On the cost side of things, you could definitely sense the caution with committing to rosy cost pictures post-2022, and I think it's really simple. The only way we get from here to there is by hiring. The hiring environment is the most difficult we have ever seen. Once again, I think we're loathe to predict or forecast when that is all going to smooth its way out. We can't fulfill our aggressive plans without getting the incremental hires that we need, and we only want good people as well.
Just understand that is driving wage rate inflation, and that trickles through our wage scales as well. We're facing a fair amount of inflation, but the only way to get to the kind of opportunities that we have, which is superior to sitting still, is to hire people and fight our way through this cost challenge. Finally, I think with respect to some of the profits and capital allocation, our goal for 2022 is certainly to beat our cost of capital. I think, again, we're a little bit reluctant to forecast returns to 2019 levels, knowing that we've got a ragged overall scenario still.
Until that smooths out, I don't think we're comfortable in trying to give you that kind of precision. I think it is absolutely the kind of goal that we would wanna set for ourselves for 2023, and then we'll need to prove in 2022, you know, that that's a realistic goal. On the capital side of things, we, as a leadership team, have a lot of experience here with Southwest, so we're not changing our philosophy about how we think about capital. Number one, Tammy said it four times, that we'll grow the airline first. Herb always wanted to have a relatively modest dividend commitment, which under our leadership, we've increased until, you know, the pandemic hit.
We'll probably start modestly and then work our way back to something that is sensible there. If we can afford it, we'll do share repurchases. None of that philosophically has changed. There are opponents to shareholder returns, and we're respectful of that, but our view has not changed. We've managed this company very well, as you all know, we came into this environment with the lowest debt to total capital in the history of the company, and along the way, we're able to return capital to shareholders extraordinarily well. We feel like that's a great balance act as well. We feel like we're well positioned to continue managing that. First, we gotta hire people, we gotta restore our capacity, we gotta hit the profit goals, et cetera, et cetera.
Hopefully all that, I'd be delighted, and you all would too, if all that falls into place in 2023. Again, with that, I will hand it back over to Ryan.
All right. Well, thank you for that wonderful wrap-up. I just wanna add my thanks to everyone for joining. I hope you feel very informed. If you don't, I'll be back in the office next week, and I'll inform you more. Thanks for joining. Happy holidays. This concludes our event and our webcast.
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