Southwest Airlines 2002 Annual Report Download - page 10

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Southwest airlines co. 2002 annual report 9
Rapid Rewards
In addition to our low fares, our Customers have the opportunity to receive Rapid Rewards. After purchasing and flying only eight roundtrips or
earning 16 credits (a one-way ticket equals one credit) in a 12-month period, Customers receive a roundtrip ticket for travel anywhere within our
system for up to a year. Since there are no restrictions on the number of Rapid Rewards seats and very few blackout dates, Customers can fly
virtually anytime to any Southwest destination. Rapid Rewards members can also transfer (but not sell) the award ticket to anyone with no additional
paperwork. Our Rapid Rewards program is simple and by far the most generous in the industry. In fact, our Rapid Rewards program won top honors as
frequent flyer Program of the Year in Inside Flyer magazine’s annual Freddie Awards. The awards for Best Customer Service, Best Award Redemption,
and Best Bonus Promotion among all frequent flyer programs were also earned by our program. Rapid Rewards members can also earn flight credits
by doing business with our preferred partners (Alamo, American Express, Budget, Diners Club, Dollar, Hertz, EarthLink, MCI, Nextel, Hilton, Hyatt,
Marriott, La Quinta, and Choice brand hotels) as well as through the use of the Southwest Airlines Rapid Rewards Visa card.
Cautious Growth
Steady, manageable growth has enabled Southwest to keep its debt under control and profits intact while still allowing the doubling of our
aircraft fleet in less than nine years. For the five years ended 2001, the average annual capacity growth was ten percent. In 2002, given the
massive uncertainties, the growth rate was slowed to just over five percent. Similar plans are currently in place for 2003, with estimated capacity
growth around four percent. Any growth in this treacherous environment is an accomplishment.
No new cities were added in 2002 and none are currently planned for 2003. However, new city-pairs were added, and existing service was
boosted in many markets, Baltimore/Washington in particular. New nonstop service was added from Chicago Midway (to Seattle, Oakland, San
Diego, and Los Angeles), Baltimore/Washington (to Los Angeles and San Jose), and Sacramento to Orange County. Our new markets have performed
exceptionally well, considering the difficult environment. When our earnings gain momentum, so will our capacity growth. Given the financial condition
of our competitors and the resultant downsizing, we are uniquely positioned to grow our route system. We have 413 Boeing 737 aircraft on either
firm order, option, or purchase right with The Boeing Company from 2003 through 2012. That results in an annualized growth rate over the next ten
years of roughly eight percent.
Net Income (in millions)
Excludes cumulative effect of change
in accounting principle of $22.1 million
1998 1999 2000 2001 2002
$600
$500
$400
$300
$200
$100
$433
$474
$625*
*
$511
$241
Average Daily Departures
1998 1999 2000 2001 2002
2,800
2,600
2,400
2,200
2,000
2,334
2,550
2,700
2,800 2,800
2.0
1.5
1.0
0.5
Customer Service
(Complaints per 100,000 Customers boarded)
For the year ending December 31, 2002
Excludes American Eagle Airlines
LUV
.33
ALK
.91
U
1.13
NWAC
1.45
DAL
1.37
CAL
1.41
AMR
1.29
UAL
1.71
AWA
1.63
*
*