Tammy Romo
Executive Vice President and Chief Financial Officer at Southwest Airlines
Thank you, Andrew, and hello, everyone. As Bob mentioned, just a few weeks ago, we presented our plans to transform Southwest to make our company even better, including outlining how these plans will restore our financial prosperity and drive sustainable shareholder value. We're focused on moving swiftly and deliberately to execute our plan, controlling what we can and adapting as needed. We have the right team in place, supported by our incredible people whose warrior spirit, hard work and continued focus will help us deliver these results. I am so appreciative of each and every one of our amazing and dedicated employees.
As Bob and Andrew spoke to the macro revenue and operational performance, I will start with our cost performance and then cover fleet, balance sheet and capital allocation updates. Looking at our cost performance, overall our third CASM-X increased 11.6% year-over-year on the better end of expectations. For the fourth quarter, we expect continued cost pressure, driven primarily by new labor contracts and overstaffing with additional pressure from the lower capacity, including over 0.5 point of unexpected unit cost headwind from flight cancellations associated with Hurricane Milton. We currently estimate our fourth quarter CASM-X to increase in the range of 11% to 13% year-over-year.
We are deliberately pursuing actions to mitigate cost inflation. Looking ahead, we are in a much more stable position. We have ratified all 12 of our labor contracts, creating better cost certainty over the next three years for our largest cost item. We've implemented voluntary leave and time-off programs that allow us to reduce our overstaffing impact. In addition, we outlined a cost plan at Investor Day aimed at enhancing cost efficiency, which includes improving efficiencies in our ground operations and optimizing our operations around our new labor rules.
As we shared, we expect savings from the opportunities we've identified to ramp over the next three years and reach over $500 million in run rate cost-savings in 2027. This demonstrates our commitment to drive efficiency and preserve or improve our relative cost performance. And again, benefits from the fleet monetization strategy would be incremental to these savings. Our third quarter fuel cost of $2.55 per gallon was in-line with our expectations and as we have seen, fuel prices come down recently. We now estimate fourth quarter fuel to be in the $2.25 to $2.35 per gallon range.
Turning to our fleet, this is one of the key areas where we're seeing our prudent planning and ability to adapt really pay-off. We came into the year expecting to receive 79 Boeing aircraft deliveries. In March, Boeing informed us we would receive 46. After going through a detailed process, we conservatively planned for 20 deliveries in April to reduce the risk of further operational impacts. As we close-out the year, we have received 19 aircraft and expect to receive one more, exactly in-line with our internal expectations.
In the third quarter, we pulled forward the retirement of six additional Dash 700s into 2024, bringing our count for this year to 3,700 Dash retirements and four Dash 800 lease returns for a total of 41 retirements. We shared our plans to opportunistically monetize the value of our fleet and order book at Investor Day. As a reminder, we are funding annual capacity growth of 1% to 2% over the next three years through our turn time, modernization and Red Eye flying, which results in access to more aircraft than we need to fund our capacity plans. Therefore, the combination of a favorable secondary market, our attractive aircraft pricing and the excess aircraft available in our order book provides us a unique opportunity to reduce our aircraft capex and drive earnings accretion.
We plan to capitalize on this opportunity through both sales and sale leasebacks. We will pursue our fleet monetization strategy with a focus on delivering a positive NPV across the portfolio of sale leaseback transactions. We're actively exploring the market and are encouraged by what we're seeing. And again, we consider our fleet strategy as incremental to our core business. As such, we provided additional breakout of the EBIT contribution in our supplemental third quarter earnings materials available on our Investor Relations website.
Given the complexity of the transaction, the competitive nature of the market and the fluidity of new aircraft deliveries, we are going to limit the level of detail provided on future transactions that we are planning. And of course, we'll update you as we close deal. Regardless, our plan comfortably supports all of our 2027 Investor Day financial targets without benefits from our fleet strategy. Ultimately, we remain committed to achieving our ROIC goal and in doing so, have committed to longer term capacity discipline. With this discipline and the plans we have outlined, we believe we are well-positioned to achieve ROIC greater than or equal to 15% in 2027, which is well in excess of our WAC.
Our expected capital spending for this year is approximately $2.1 billion, of which just under $1 billion is aircraft capex, excluding any impact from our fleet strategy. Obviously, there is a lot of uncertainty around future aircraft availability given continued challenges at Boeing. We have taken this risk into consideration in our 2025 contingency planning. While planning and replanning remain a challenge, our moderated capacity plan reduces our need for new aircraft, and we have a lot of flexibility to make further adjustments with planned retirements. Boeing production is something we're watching closely and we'll defer providing more detail on capex and additional 2025 guidance until we have a better line-of-sight to an updated order book.
Finally, our balance sheet remains a lasting competitive advantage and we continue to be the only airline with an investment-grade rating by all three rating agencies. We ended the third quarter in a net cash position with cash and short-term investments of $9.4 billion and a fully available revolving credit line of $1 billion for total liquidity of $10.4 billion, well in excess of our $8 billion of outstanding debt. We remain committed to providing significant returns to our shareholders through dividends and share repurchases. We have returned more than $13.7 billion through share repurchases and dividends since 2010, including $431 million in dividends to shareholders this year. As we announced at Investor Day, our Board authorized a $2.5 billion share repurchase program, which we expect to be significantly earnings-accretive. And as we announced this morning, we will soon be launching an initial ASR under this authorization.
So as we wrap up, I want to reiterate that we have a strong financial foundation and compelling plan to support our return to prosperity and strong shareholder returns. We have a comprehensive and measurable plan that we expect will enable us to cover our WAC in 2026, and achieve after-tax ROIC of at least 15% in 2027. There is a significant body of work underway, and we believe we are taking all the necessary steps to deliver.
And with that, I will turn it back over to Bob. Thank you.
