Southwest Airlines 2001 Annual Report Download - page 4

This motto is a governing principle of Southwest Airlines.
The way we put it is this: We manage in good times so that our Employees (many of whom are our Shareholders) and our
Shareholders (many of whom are our Employees) will do well in bad times.
Throughout the Arab oil embargo of 1973 and its aftereffects, the sharp spike in jet fuel prices in 1979 – 1980, the recession of
the early 1980s, the airline industry “depression” of 1990 – 1994, and the recession and terrorist-plagued year of 2001:
1. Southwest has provided total job security, with no unpaid furloughs or reductions in pay and benefits, for its Employees;
2. Southwest has expanded its fleet and the amount of service it provides, furnishing new jobs for new hires and enhanced
seniority and the opportunity to move both around and up to its existing Employees;
3. Southwest has provided Profitsharing and funded 401(k) plans for its Employees; and
4. Southwest’s earnings have consistently followed a rising trend, propelling our stock price and total market value upward for
the benefit of our Shareholders (many of whom are our Employees).
The airline business is capital intensive (e.g., year 2001 Southwest expenditures for equipment and property — $1.0 billion);
fuel intensive (e.g., year 2001 Southwest expenses for fuel and oil — $770 million); People intensive (e.g., year 2001 Southwest
expenses for salaries, wages, and benefits — $1.9 billion); and intensely cyclical (e.g., airline industry losses 1990 – 1994 —
$13.0 billion; airline industry loss 2001 — $7.3 billion, after receipt of government grants). It is widely stated that in the 98 years
since the Wright brothers flew their first flight, the commercial passenger airline industry has, in the aggregate, produced a net
loss, rather than a net profit. During that same 98-year period, innumerable airlines have ceased operations and perished,
causing millions of people to lose their jobs.
In a business long noted among analysts and economists for its financial misfortunes and frequent vicissitudes, Southwest,
which flew its first full year in 1972, has achieved:
1. Twenty-nine consecutive years of profitability and Profitsharing, while expanding our ASMs flown by 24,651 percent (a record
unmatched in the history of the airline industry);
2. Thirty consecutive years of 100 percent job security while the number of our Employees has grown from 183 to 31,580 (a record
unmatched in the history of the airline industry);
3. An increase in the market value of our stock (of which our Employees, as a group, are the largest owners) of 138,656 percent
(a record unmatched in the history of the airline industry); and
4. Year in and year out, the best Customer Satisfaction statistics (a record unmatched in the history of the airline industry).
How was Southwest able to achieve these admirable and unprecedented airline industry records for the benefit of our People
(many of whom are our Shareholders), our Shareholders (many of whom are our People), and the American public? By adhering
to the motto:
BE PREPARED!
On September 11, Southwest had the lowest cost per available seat mile of any of the major air carriers; the strongest balance
sheet in the American airline industry; plenty of cash on hand; ample credit available; and the strongest, most resilient,
adaptable, united, Customer-focused, and willing Employees in the airline industry.
Southwest was prepared and, once again, that preparedness protected our Employees’ jobs, livelihoods, benefits, and
Profitsharing; that preparedness protected the investments of our Shareholders (including Employee Shareholders) in
Southwest’s stock; and that preparedness protected the American traveler as Southwest continued to operate 100 percent of its
flights post September 11.
Economic crises in the American airline industry occur at least once per decade. They always have and they always will.
The analysts and the economists are correct — the airline business, as a whole, is fraught with economic peril. It always has been,
and it always will be.
Southwest has surmounted each such crisis during the past 30 years by being prepared for it. We pledge to our Employees and
to our Shareholders that, for their benefit, their continued wellbeing, and their secure, prosperous futures, we will always:
BE PREPARED!
SOUTHWEST AIRLINES CO. 2001 ANNUAL REPORT
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BE PREPARED!