Southwest Airlines 2002 Annual Report Download - page 23

4 | SOUTHWEST AIRLINES CO. 2002 10-K
deicing fluid. Potential future regulatory develop-
ments pertaining to such things as control of
engine exhaust emissions from ground support
equipment and prevention of leaks from
underground aircraft fueling systems could
increase operating costs in the airline industry.
The Company does not believe, however, that
such environmental regulatory developments will
have a material impact on the Company’s capital
expenditures or otherwise adversely affect its
operations, operating costs, or competitive
position. Additionally, in conjunction with airport
authorities, other airlines, and state and local
environmental regulatory agencies, the Company
is undertaking voluntary investigation or remedi-
ation of soil or groundwater contamination at
several airport sites. While the full extent of any
contamination at such sites and the parties
responsible for such contamination have not
been determined, the Company does not believe
that any environmental liability associated with
such sites will have a material adverse effect on
the Company’s operations, costs, or profitability.
Customer Service Commitment. During 1999,
the airline transportation industry faced possible
legislation dealing with certain customer service
practices. As a compromise with Congress, the
industry, working with the Air Transport
Association, responded by adopting and filing
with the DOT written plans disclosing how it
would commit to improving performance.
Southwest Airlines formalized its dedication to
Customer Satisfaction by adopting its Customer
Service Commitment, a comprehensive plan
which embodies the Mission Statement of
Southwest Airlines: dedication to the highest
quality of Customer Service delivered with a
sense of warmth, friendliness, individual pride,
and Company Spirit. The Customer Service
Commitment can be reviewed by clicking on
“About SWA” at southwest.com. Congress is
expected to monitor the effects of the industry’s
plans, and there can be no assurance that
legislation will not be proposed in the future to
regulate airline customer service practices.
Marketing and Competition
Southwest focuses principally on point-to-point,
rather than hub-and-spoke, service in markets
with frequent, conveniently timed flights and low
fares. For example, Southwest’s average aircraft
trip stage length in 2002 was 548 miles with an
average duration of approximately 1.5 hours. At
yearend, Southwest served 338 nonstop city
pairs.
Southwest’s point-to-point route system, as
compared to hub-and-spoke, provides for more
direct nonstop routings for Customers and,
therefore, minimizes connections, delays, and
total trip time. Southwest focuses on nonstop,
not connecting, traffic. As a result, approximately
77 percent of the Company’s Customers fly
nonstop. In addition, Southwest serves many
conveniently located satellite or downtown
airports such as Dallas Love Field, Houston
Hobby, Chicago Midway, Baltimore-Washington
International, Burbank, Manchester, Oakland,
San Jose, Providence, Ft. Lauderdale/Hollywood
and Long Island airports, which are typically less
congested than other airlines’ hub airports and
enhance the Company’s ability to sustain high
Employee productivity and reliable ontime
performance. This operating strategy also permits
the Company to achieve high asset utilization.
Aircraft are scheduled to minimize the amount of
time the aircraft are at the gate, currently
approximately 25 minutes, thereby reducing the
number of aircraft and gate facilities that would
otherwise be required. Southwest does not
interline or offer joint fares with other airlines, nor
have any commuter feeder relationships.
Southwest employs a relatively simple fare
structure, featuring low, unrestricted, unlimited,
everyday coach fares, as well as even lower fares
available on a restricted basis. The Company
operates only one aircraft type, the Boeing 737,
which simplifies scheduling, maintenance, flight
operations, and training activities.
In January 1995, Southwest was the first major
airline to introduce a Ticketless Travel option,
eliminating the need to print and then process a
paper ticket altogether. Southwest also entered