Southwest Airlines 2008 Annual Report Download - page 7

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A-List. In 2008, Business Select produced nearly $75 million in incremental revenue.
Business Select and our Rapid Rewards A-List both appeal to frequent business travelers
who are looking to remove hassle from their travel experiences—— and they are rewarded for
their loyalty with additional perks! One of the additional benets is access to the new Fly By™
security lanes that were established in 15 airports during 2008, with a goal of rollout in the
majority of Southwest airports during therst half of 2009. These “fast lanes” appeal to the
busy traveler, helping to make navigation through the airport, even during peak travel times,
a less-harried experience. During 2008, we improved our ontime performance from the year
prior and held the best ontime performance record among major airlines as classied by the
U.S. Department of Transportation (“DOT”) in 2008; our baggage handling numbers
improved, despite the high number of bags we carry compared to our competitors; and our
dispatch reliability was exceptional and industry-leading (according to results published in
the DOT's February 2009 Air Travel Consumer Report). Furthermore, Southwest placedrst
in Customer Service with the fewest complaints per 100,000 Customers boarded for all of
2008, thus retaining the elite status of holding the best cumulative Customer Service
satisfaction record for the last 18 years that DOT has been reporting these statistics.
The Money Zone: Our Financial Performance
Stifled demand, extremely volatile energy prices, and a deeper worldwide recession
than anyone predicted presented an unprecedented 2008 environment and ultimately
challenged our earnings goal for the year. Thanks to the extraordinary efforts and Warrior
Spirit of our People, we were able to persevere to report our 36th consecutive year of
profitability.
We continued to transform our business model to create more value for our Customers
and Shareholders. We celebrated many operational successes throughout 2008 and
enhanced our already exceptional Brand and Customer Experience. With one full year of our
new boarding system and Business Select product offering, the Customer response has
been overwhelmingly favorable. We made signicant advancements in our revenue
management and network optimization capabilities, allowing us to continue to t our
Customers’ needs with a variety of low fares and frequent ights. These initiatives—— along
with modest fare increases—— brought in hundreds of millions in additional revenue, resulting
in a record annual revenue performance in 2008 (and year-over-year unit revenue growth of
7.8 percent), despite a depressed demand environment. Also, we continued to make
improvements on the technology side to lay the foundation for improved Customer Service,
a new southwest.com, a new Rapid Rewards program, and international codeshare
agreements with WestJet to Canada and Volaris to Mexico. We are very proud of our revenue
results and are making great progress toward our goal of growing annual revenues by more
than $1.5 billion from our 2007 baseline.
Despite hundreds of millions of incremental revenue production, we fell short of our
nancial goals. Our 2008 unit costs, excluding special items, rose 11.3 percent year-over-
year, driven primarily by more than a 30 percent increase from 2007 in our economic jet fuel
price per gallon. Our People continued their heroic efforts to keep productivity levels high.
With the challenges before them in 2008, they fully embraced “Every One Matters,” an
internal rally cry to be more productive, make each Customer encounter matter, and do
everything possible to increase revenue per ight. Efforts continue to more effectively
utilize our eet through optimized ight schedules. Our Employees per aircraft remained at
66 at yearend, down from 85 just ve years ago.
2004 2005 2006 2007 2008
11:36
Aircraft Utilization (hours and minutes per day)
11:45
11:35
11:25
11:15
11:05
11:34
11:41
11:20 11:25
2004 2005 2006 2007 2008
537
Fleet Size (at yearend)
600
500
400
300
200
481 520
417 445
–
Boeing 737-700 Firm Orders,
Options, and Purchase Rights
*Currently plan to reduce fleet by 15 aircraft,
resulting in a 2009 net reduction of 2 aircraft
(as of January 22, 2009)
Firm Orders 13 10
10
10
–
–––
52
71
10
54
177
54
220
104
62
13* 20
Options
Purchase Rights
Total
Total
2012-
2018
2009 2010 2011
6SOUTHWEST AIRLINES CO. ANNUAL REPORT 2008
6