Southwest Airlines 2011 Annual Report Download - page 53

Each of these initiatives is expected to contribute significant incremental revenues once fully implemented.
The Company currently believes the acquisition of AirTran has the potential to yield net annual synergies of
more than $400 million in 2013, not including acquisition and integration costs. The Company incurred $134
million in acquisition and integration expenses in 2011. Excluding acquisition and integration expenses estimated
to total approximately $500 million through 2014, the transaction was modestly accretive to the Company’s
earnings in 2011, excluding special items, is expected to be accretive in 2012, and is expected to be strongly
accretive thereafter, upon full realization of the estimated net synergies. In addition, although Southwest and
AirTran currently continue to operate as two separate airlines, the two carriers remain complementary with little
route overlap. Strategically, both carriers have placed an emphasis on outstanding Customer Service, high quality
low-cost operations, solid low-fare brands, and strong Employee cultures.
The Company continues to make progress with the integration of AirTran into its operations and existing
processes. The Company has moved the vast majority of AirTran’s headquarters functions from Orlando to
Dallas and expects to have approval from the FAA to achieve a single operating certificate in the first quarter of
2012. The Company has begun converting space in airports where both carriers operate and plans to begin
converting AirTran’s fleet to the Southwest livery beginning in the first quarter of 2012. The Company has begun
“optimizing” AirTran’s network, and is also planning to launch booking tools in 2012 to allow Customers of both
airlines to book flights on either carrier via southwest.com or airtran.com and to integrate the frequent flyer
programs of the carriers.
Also, in fourth quarter 2011, the Company announced that the Southwest Airlines Pilots’ Association
(“SWAPA”), the union representing Southwest Pilots, the Air Line Pilots Association (“ALPA”), the union
representing the pilots of AirTran, and the Company reached an agreement to integrate the two Pilot groups’
seniority lists. The agreement was approved by SWAPA’s Board of Directors and ALPA’s Master Executive
Council and was ratified by the membership of each union. In December 2011, the Transportation Workers of
America, AFL-CIO, Local 556 (“TWU 556”), the union that represents Southwest Flight Attendants, the
Association of Flight Attendants (“AFA”), the union that represents AirTran Flight Attendants, and the Company
reached an agreement to integrate the two Flight Attendant groups’ seniority lists. TWU 556’s Executive Board
and AFA’s Master Executive Council both approved the agreement. The agreement was ratified by the respective
memberships in January 2012. The Aircraft Mechanics Fraternal Association (“AMFA”), the union representing
Southwest Aircraft Mechanics, the International Brotherhood of Teamsters, Local 528 (“IBT 528”), the union
representing the AirTran Mechanics, and the Company reached a tentative agreement subject to a ratification
vote by the unions’ respective memberships. The agreement would integrate the two groups’ seniority lists and
also create a single labor agreement. The membership of each union is currently considering the tentative
agreement. The Transportation Workers of America, AFL-CIO Local 557 (“TWU 557”), the union representing
Southwest Flight Instructors, an Employee Committee representing the Flight Instructors of AirTran, and the
Company reached an agreement to integrate the two groups’ seniority lists. TWU 557’s Executive Committee
and the Employee Committee representing the AirTran Flight Instructors voted to pass the agreement forward to
their respective members. The agreement was ratified by the respective memberships in January 2012.
Aside from the new destinations provided by the acquisition of AirTran, Southwest began service to three
new markets during 2011—Charleston, South Carolina, Greenville/Spartanburg, South Carolina, and the New
York-New Jersey area through Newark’s Liberty International Airport. The Company has also announced
Southwest will begin service to Atlanta, Georgia during first quarter 2012. Atlanta is currently AirTran’s largest
hub, and the Company will enhance AirTran’s existing service utilizing Southwest aircraft and connecting this
important destination to Southwest’s vast domestic network. The efforts underway to fully integrate AirTran’s
network and schedule with Southwest’s are expected to be a multi-year undertaking, but one that the Company
believes will yield significant financial benefits.
At the current time, the Company plans to continue its route network and schedule optimization efforts, but
does not intend to grow its overall fleet size for 2012. The Company currently expects to receive 33 737-800
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