Southwest Airlines 2008 Annual Report Download - page 10

Download and view the complete annual report

Please find page 10 of the 2008 Southwest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

cost structure, both including and excluding fuel. Nevertheless, we will not stand still and have intensity in our
efforts to protect our Low-Cost Leadership and nancial strength. In addition, we are not letting up on our
ongoing efforts to grow revenues and initiatives to continue delivering a topnotch Customer Experience
that woos new Customers and keeps loyal Customers coming back.
The Operational Zone: The Route Map
During the year, we increased our all–Boeing 737 eet by a net 17 aircraft to end the year
with 537 aircraft. We adjusted our growth plans throughout the year to proactively adapt to
a rapidly changing environment, ending 2008 with year-over-year available seat mile
growth of nearly four percent and approximately 3,200 daily departures.
Soaring fuel prices and a deepening recession compelled us to reset our growth
plans. The rapidly changing environment in 2008 called for a much more aggressive
pruning of nonproductive ights. With improved scheduling tools and techniques,
we can more frequently optimize our
schedules, shifting capacity to routes
with higher demand. These
schedule optimizations allowed us
to add service in places where Customers
demanded it. Denver continued to be the fastest city growth
in the Company’s history, and in 2008, we added nonstop ights to 13 destinations
to bring the Mile High City to 115 daily ights to 32 nonstop destinations at yearend.
Based on the uncertain economic environment, Southwest has halted its eet growth plans for 2009. We currently plan to
accept 13 new Boeing 737-700s in 2009 and plan to reduce the eet by 15 aircraft to end the year with 535 aircraft, essentially
at with 2008. Our 2009–2014 future Boeing orders include 104 rm orders, 62 options, and 54 purchase rights.
Although we are planning for a four percent available seat mile reduction in 2009 compared to 2008, through continued
schedule optimization, we will add new service throughout our system, including Minneapolis/St. Paul beginning March 8, 2009,
with eight daily ights to Chicago’s Midway Airport.
Our codeshare operations with ATA Airlines (ATA) ended on April 3, 2008, when ATA ceased operations and led for bankruptcy.
In November 2008, Southwest made a $7.5 million bid in the U.S. Bankruptcy Court overseeing ATA’s reorganization seeking the
rights to 14 operating authorizations or “slots” at New York’s LaGuardia Airport that are currently held by ATA. These 14 slots
would permit an operation of up to seven daily roundtrip ights at LaGuardia. Once the court approves the ATA reorganization
plan and the transaction is complete, Southwest intends to initiate service from LaGuardia in 2009.
Our intentions to enter into international codeshare agreements with WestJet for service to Canada and Volaris for service to
Mexico were announced in 2008. Plans are to begin selling codeshare ights to Canada by fall 2009. The Volaris codeshare
ights are expected to follow in 2010. These agreements are designed to allow Southwest to prudently grow to international
destinations, even in this volatile environment. Even before the ights begin, Southwest will begin distributing WestJet and
Volaris ights via southwest.com.
We now provide more attractive direct and connecting flights to medium and longhaul destinations as a result of the repeal
of the Wright Amendment. In 2008, we realized an annual revenue benefit of nearly $170 million from our ability to offer
$11,023
20082004 2005 2006 2007
Operating Revenues (in millions)
$9,086
$9,861
$6,530
$7,584
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
20082004 2005 2006 2007
Operating Revenues Per Available Seat Mile
9.81¢
10.67¢
9.90¢
8.50¢
8.90¢
11.0¢
10.5¢
10.0¢
9.5¢
9.0¢
8.5¢
9.10¢
7.97¢ 8.05¢
8.80¢
20082004 2005 2006 2007
Operating Expenses Per Available Seat Mile
10.24¢
11¢
10¢
9¢
8¢
7¢
9
20082004 2005 2006 2007
Operating Expenses Per Available Seat Mile
Excluding Fuel and Related Taxes
6.40¢
6.54¢
6.34¢ 6.34¢
6.64¢ 6.7¢
6.6¢
6.5¢
6.4¢
6.3¢