Southwest Airlines 2003 Annual Report Download - page 3

2Southwest Airlines Co. 2003 Annual Report
To Our Shareholders:
Just as promised in our 2002 Annual Report, in the year 2003
Southwest Airlines kept “MOVING AHEAD.”
While the airline industry, as a whole, reported more than
$5 billion (excluding special items) in 2003 losses:
1. Southwest produced its 31st consecutive year of profitability, an
airline industry record that has also generated unprecedented
airline industry job security and exceptional Profitsharing for our
marvelous Employees, as well as exceptional investment returns
for our Shareholders, including Employee-Shareholders.
2. Southwest’s annual profits increased from $198 million in 2002,
excluding special items ($241 million, including special items), to
$298 million, excluding special items ($442 million including special
items, such as industrywide government war relief grants).
3. Southwest expanded its fleet by a net of 13 new 737-700s and
increased our Available Seat Miles by 4.2 percent.
4. Southwest continued to equip our new aircraft deliveries, and to
refurbish our existing fleet, with our fresh and most attractive
Canyon Blue aircraft livery; all leather interiors in Canyon Blue
and Saddle Tan; new design seats affording superb personal
comfort; and aesthetic Blended Winglets, which improve aircraft
performance by extending range, saving fuel, and reducing
engine maintenance costs and takeoff noise.
5. Southwest retained its leadership in Customer Satisfaction, again
receiving the fewest Customer complaints per 100,000 Customers
carried, as reflected in DOT statistics compiled from reports
furnished to DOT by the largest domestic air carriers.
6. Southwest was selected: In FORTUNE magazine, as one of
our nation’s Most Admired Companies • In Business Ethics
magazine’s listing of the “100 Best Corporate Citizens” in America
•InHISPANIC magazine’s listing of the “2003 Hispanic
Corporate 100” • The “Best Low Cost Airline” at the 2003
Official Airline Guide Airline of the Year awards • By Air Transport
World magazine as its “Airline of the Year” • By Inside Flyer
magazine as having the Best Customer Service, Best Bonus
Promotion, and Best Award Redemption of any frequent flyer
program (Southwest’s Rapid Rewards) • As featured airline in
the A&E Network series AIRLINE •ForGlobal Finance
magazine’s “Experts’ List of the World’s Most Socially
Responsible Companies.”
We intend to keep “MOVING FURTHER AHEAD” in
2004, expanding our fleet by a net of 29 new 737-700s and our
Available Seat Miles by almost eight percent, while utilizing
our proportionally unsurpassed financial strength ($1.87 billion
in cash and an unsecured revolving credit line of $575 million at
yearend 2003), continued low costs per Available Seat Mile, leading
Customer Satisfaction record, and superb Employee esprit de
corps to prevail over the 2004 uncertainties with respect to: fuel
price levels (we are over 80 percent hedged for the year with prices
capped at approximately $24 per barrel of crude oil); the rate of
U.S. economic recovery and attendant expansion of Customer
demand; a potential substantial expansion in capacity by competitive
air carriers; and any exogenous events adversely affecting the
domestic airline industry.
In May of 2004, we will commence air service to Philadelphia,
the largest metropolitan area in the U.S. not now served, directly or
indirectly, by Southwest. We have also announced that in light of
Southwest’s strong cash position, investment-grade balance sheet,
and desire to maximize Employee-Shareholder and non-Employee-
Shareholder value that Southwest intends to use the very significant
present and anticipated proceeds from the exercise of our
outstanding stock options for the repurchase, from time to time,
of up to $300 million of our common stock in the open market.
For more than three decades, the wisdom, farsightedness,
goodwill, and camaraderie of our People have produced a remarkable
airline providing remarkable psychic and financial rewards for all of our
Employees. We thank them for their understanding and their goodness,
which have produced greatness for Southwest and for them.
January 20, 2004
Most sincerely,