Southwest Airlines 1998 Annual Report Download - page 39

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39
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
In management’s experience, it is not always possible to obtain written certification of
Year 2000 compliance from third party vendors. Accordingly, in such cases, the
Company is basing its assessment on its own testing, other materials made available
by such vendors, and other publicly available information. Upon the conclusion of such
assessment, the Company will evaluate the need for contingency plans which may be
needed in the event any such vendor cannot demonstrate to the Company, on a timely
basis, its Year 2000 compliance.
The Company expects this evaluation and assessment will be an ongoing process
through the balance of 1999.
YEAR 2000 COSTS The Company has expensed $11.0 million ($7.1 million in 1998)
of costs incurred to date related to the Year 2000 issue. The total remaining cost of the
Year 2000 project is presently estimated at approximately $7 million, which will be
expensed as incurred.
RISK OF YEAR 2000 ISSUES The Company believes its project to convert its
computer systems to be Year 2000 ready will be completed in a timely manner and
Year 2000 issues will not have a material adverse effect on operations. However, it is
possible the Company’s or third parties’ systems and equipment could fail and result in
the reduction or suspension of the Company’s operations. The Company is currently in
the process of developing contingency plans related to internal business critical
systems and for those critical relationships with third parties. There can be no
guarantee, however, that the Company’s systems and equipment or third parties’
systems and equipment on which Southwest relies will be Year 2000 ready in a timely
manner or that contingency plans will mitigate the impact of any failure to complete
plans in a timely manner.