Southwest Airlines 2008 Annual Report Download - page 24

providing one-stop or connecting service through the
hub. Point-to-point service allows for more direct
nonstop routing than the hub and spoke system,
minimizing connections, delays, and total trip time.
As a result, approximately 78 percent of Southwest’s
Customers fly nonstop. Southwest’s average aircraft
trip stage length in 2008 was 636 miles with an
average duration of approximately 1.8 hours, as
compared to an average aircraft trip stage length of
629 miles and an average duration of approximately
1.8 hours in 2007. Point-to-point service also enables
Southwest to provide its markets with frequent,
conveniently timed flights and low fares. Examples
of markets offering frequent daily flights are: Dallas
Love Field to Houston Hobby, 30 weekday
roundtrips; Phoenix to Las Vegas, 17 weekday
roundtrips; and Los Angeles International to
Oakland, 18 weekday roundtrips. Southwest
complements these high-frequency shorthaul routes
with longhaul nonstop service between markets such
as Phoenix and Tampa Bay, Las Vegas and Orlando,
Nashville and Oakland, and San Diego and
Baltimore. During 2008, Southwest’s schedule
optimization capabilities allowed it to reduce flight
frequency on less profitable routes and reallocate
capacity to potentially more rewarding markets.
Southwest serves many conveniently located
secondary or downtown airports such as Dallas Love
Field, Houston Hobby, Chicago Midway, Baltimore-
Washington International, Burbank, Manchester,
Oakland, San Jose, Providence, Ft. Lauderdale/
Hollywood, and Long Island Islip airports, which are
typically less congested than other airlines’ hub
airports. This operating strategy enables Southwest to
achieve high asset utilization because aircraft can be
scheduled to minimize the amount of time they are
on the ground. This in turn reduces the number of
aircraft and gate facilities that would otherwise be
required. Southwest is also able to simplify
scheduling, maintenance, flight operations, and
training activities by operating only one aircraft type,
the Boeing 737. All of these strategies enhance
Southwest’s ability to sustain high Employee
productivity and reliable ontime performance.
Fare Structure and No Hidden Fees Marketing
Campaign
Southwest employs a relatively simple fare
structure, featuring low, unrestricted, unlimited,
everyday coach fares, as well as even lower fares
available on a restricted basis. As of January 13, 2009,
Southwest’s highest non-codeshare, one-way
unrestricted walkup fare offered was $503 for its longest
flights. Substantially lower walkup fares are generally
available on Southwest’s short and medium haul flights.
Since November 2007, Southwest’s fares have been
bundled into three major fare columns: “Business
Select,” “Anytime,” and “Wanna Get Away,” with the
goal of making it easier for Customers to choose the
fare they want. Southwest’s “Business Select” offering
was developed to increase options and improve
productivity for the business traveler. Customers who
purchase the Business Select fare are allowed to be
among the first Customers to board the aircraft. They
also receive extra Rapid Rewards frequent flyer credit
for the flight and a free drink. Southwest’s “Business
Select” program contributed approximately $73 million
in revenues during 2008.
During 2008, in response to skyrocketing fuel
prices, virtually all other U.S. airlines began charging
additional fees for items such as first or second
checked bags, seat selection, fuel surcharges, snacks,
curb-side checkin, and telephone reservations. In
response, Southwest adopted a No Hidden Fees
marketing campaign to highlight Southwest’s
prioritization of high value Customer Service. As part
of the campaign, Southwest launched radio, print,
television, and billboard advertisements to promote
Southwest’s point of differentiation.
Enhanced Boarding Method and Updated Gate
Design and Priority Security Lane
During fourth quarter 2007, Southwest
introduced an enhanced boarding method, which was
designed to significantly reduce the time a Customer
spends standing in line at the gate. The enhanced
boarding process automatically reserves a place for a
Customer in the Customer’s boarding group at the
time of check-in by assigning a specific position
number within the A, B, or C boarding group.
Customers then board the aircraft in that numerical
order. The enhanced boarding method also allows for
future enhancements, such as product customization
and additional incentives for business and leisure
travelers.
During 2008, Southwest completed modification
of substantially all of its gate areas with columns and
signage that facilitate the new boarding process. The
“extreme gate makeover” was also designed to
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