Southwest Airlines 2001 Annual Report Download - page 2

February 1, 2002
“Are you guys ready? Okay. Let’s roll.” – Todd Beamer
These heroic words, flung into the macabre face of impending tragedy, were a luminous reflection of the iron character,
unquenchable spirit, and inspiring altruism of a noble team leader and player. Todd Beamer’s words and actions, in the scarifying
context of the horrific events of September 11, helped to galvanize America into a state of “terrible, swift resolve.”
The airline industry was shut down on September 11 — and many of our planes, crews, and Customers were required to land, and
thereafter stay, in unintended places. Communicating with, and taking care of, those Customers, crews, and aircraft, as well as
passengers reserved on flights cancelled, was a herculean task. As the passenger carriers resumed service, reuniting planes and
crews “legal to fly” into a coherent passenger schedule was another hugely complex and enormously difficult undertaking. And
the FAA and the DOT, reacting swiftly and well to the crisis, were engaged in the process of issuing a veritable cascade of new
Security Directives profoundly changing the manner in which Customers, luggage, and airplanes were protected and cleared for
flight, thus compelling probably 1,000,000 airline employees to learn, and apply, new security procedures on a daily and,
sometimes, hourly basis. Meanwhile, much of our industry was simultaneously and furiously absorbed in: (i) borrowing as much
cash as quickly as it could; (ii) deferring or canceling scheduled new aircraft deliveries; (iii) determining how many flights it should
cut and how many employees it should lay off, furlough, or put on unpaid leave; (iv) speculating how low its fares might have to
be in order to induce passengers to fly, in the aftermath of a devastating terrorist attack occurring in the midst of a recession;
and (v) pondering the imponderables of: (a) what new business models it might adopt in radically changed circumstances;
(b) the vagaries of Chapter 11 proceedings; and (c) how long its tenuous future might be. For the airline industry, this was not
merely Dante’s purgatory. It was, indeed, Dante’s pure “hell,” created in one amazing and tragic day.
Southwest was well poised, financially, to withstand the potentially devastating hammer blow of September 11. Why? Because
for several decades our leadership philosophy has been: we manage in good times so that our Company, and our People, can be
job secure and prosper through bad times. This philosophy served our People and our Company well during the holocaustic economic
catastrophe that afflicted the airline industry from 1990 – 94, when the industry, as a totality, lost a cumulative $13 billion and
furloughed approximately 120,000 of its employees, while, during that same 1990 – 94 period, Southwest remained 100 percent
job secure and produced profits and Profitsharing for our Employees and Shareholders. Once again, after September 11,
our philosophy of managing in good times so as to do well in bad times proved a marvelous prophylactic for our Employees
and our Shareholders:
1. On September 11, Southwest had $1.0 billion in cash and cash equivalents on hand, enabling us to withstand the severe cash flow
drain suffered by all passenger airlines upon recommencement of air service post September 11. Liquidity is good, not bad!
2. On September 11, Southwest had the strongest balance sheet and the highest credit ratings in the American airline industry.
As a consequence, we were able to quickly borrow, at reasonable rates, $1.1 billion in order to ensure that we had enough cash on
hand to pay our bills; pay our Employees; fund our Employee Profitsharing commitments; make contractually obligated capital
expenditures; and guarantee the longevity of our Company and, thus, of our People’s livelihoods. A conservative balance sheet
and high credit ratings are good, not bad!
3. On September 11, Southwest had the lowest cost per Available Seat Mile (ASM) flown of any major passenger air carrier. In the
sparse ridership, very low-fare airline industry environment subsequent to September 11, our low costs enabled us to compete
effectively by offering extremely low fares, while simultaneously reestablishing a positive cash flow (more cash coming in than
going out) and, ultimately, even fourth quarter 2001 profitability. Low costs for producing an ASM are good, not bad!
On September 11, our Company had the financial wherewithal to withstand and overcome the dire economic emergency with
which it, and our nation, were threatened. But what about our Southwest People, as a whole? How would they respond in an
atmosphere of incredulity, fear, sadness, uncertainty, and grave economic jeopardy for themselves and their Company?
Here is how they responded:
“Are you guys ready? Okay. LET’S ROLL.”
While still grieving over the events and losses of September 11, our People returned to work with tears in their eyes but resolve
in their hearts. They speedily reassembled our airline, after it had been shut down, and got it flowing smoothly again. In a
national and Company emergency, they put aside petty complaints and miniscule concerns and both learned, and endured, the
multitude of complicated new security measures and procedures mandated by our federal government. And despite the stress
and strain of the post September 11 airline industry environment, they smiled, and cared, for their internal and external Customers,
while providing superb Customer Service in their usual spirited, joyful, open, warm-hearted, and humanitarian way.
SOUTHWEST AIRLINES CO. 2001 ANNUAL REPORT
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TO OUR SHAREHOLDERS: