Southwest Airlines 2005 Annual Report Download - page 12

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fa ced due to the hurri canes thi s past su mmer and
higher energ y costs, we are very ple ased wit h these
res ults. Overall , our revenue growth was very hea lthy
in 2005, parti cularly in the fourth qu arter, and we
are encoura ged by our revenue tren ds so far in ear ly
2006. Dema nd for low fare s strengthened t hrou ghout
2005, and we achieved a Company-record lo ad
fa cto r of 70.7 pe rcent. Revenue yields also improved
with only modest fa re increases, re affirmin g our Low
Fare Lea dership posi tion. Our ATA cod eshare
revenue was ju st unde r $50 milli on in 2005, which
exceede d our init ial estimates. The combination of
stron ger reven ues, an excellent hedge position, a nd
lower uni t costs, excludi ng fuel, all contrib ute d to
our imp roved fin ancial performance.
In recog nition of Southwest’s profit able growth,
stro ng c as h f lows , a nd ou r stro ng b al an ce s he et ,
o u r B o a rd o f D i r e c t o r s r e ce n t l y a u t h o r i z e d a
$ 3 0 0 mi llion sto ck repurchase pro gram. This
authori zation refle cts the Board’s co nfidence i n our
financi al stabil ity and our growth opportunities.
Route Expansion
We opened two new cities in 2005, Pittsburgh and
Ft. Myers, and have been very pleased with their
performance. In addition to these expansion efforts,
we continue to grow our flourishing network. With
33 new 737-700 Boeing aircraft deliveries and the
retirement of our last five Boeing 737-200s, we
increased our year-over-year capacity in 2005 by
nearly 11 percent.
Following the devastation of Hurricane Katrina,
we have continued to rebuild our New Orleans service
and will be back up to 18 daily flights in March 2006,
with more to come. We achieved a major milestone
as Las Vegas McCarren International Airport became
our first airport with more than 200 daily departures.
We also made progress in our efforts to repeal the
Wr ig ht A me nd me nt . As a re su lt of t he e na ct me nt
o f a 200 5 fe de ral tran sp or ta ti on ap pro pr iat i on s
bi ll containing language that lifted the Wright
A m e n d m e n t re s t r i c t i o n o n t h e s t a te o f M i s s o u r i ,
2001 2002 2003 2004 2005
Fleet Size (at yearend) Boeing 737-700 Firm Orders and Options
500
400
300
200
100
355 375 388
417 445
Firm Orders 33 29
56
6
–
20– 20
–
–
7 25
177
177
217
317
68
32
33 51
Options
Type
Purchase Rights
Total
Total
2009-
2012
2006 2007 2008
2001 2002 2003 2004 2005
Aircraft Utilization (hours and minutes per day)
11:30
11:20
11:15
11:10
11:05
11:10
11:12
11:09
11:20
11:25
SOUTHWEST AIRLINES CO. ANN UAL REPORT 2005
we initiated nonstop service from Dallas Love Field
to St. Louis and Kansas City in December 2005.
We continued our efforts to expand Chicago Midway
service during 2005, growing year-over-year capacity
more than 40 percent. Chicago Midway is now tied
with Phoenix Sky Harbor Airport as our second busiest
airport at 200 daily flights. In December 2005, we
completed a transaction with ATA Airlines, Inc. to
acquire the leasehold rights to four additional gates at
Chicago Midway, in exchange for a $20 million reduction
in our debtor-in-possession loan to ATA. We also
enhanced our codeshare arrangement with ATA, subject
to certain conditions, all of which must be fulfilled by
February 28, 2006. In addition, we recently expanded
our codeshare agreement to include ATA flights from
DFW International Airport to Chicago Midway.
Looking forward into 2006, capacity growth is
projected to be approximately eight percent, with a
total of 33 planned Boeing 737-700 aircraft deliveries
for the year. Our 62nd city, Denver, opened on January 3,
2006, and is off to a great start. Denver is a rich
opportunity for growth and an exciting addition to
the Southwest route system.
While 2006 will undoubtedly be full of challenges,
we are financially well-positioned to aggressively
take advantage of growth opportunities. Our People
are adaptable and willing to change, and we are
confident they will continue to do whatever it takes
to keep Southwest on top.
“No other major airline has brought more value to more
budget-conscious business travelers than Southwest.
...[T]his airline juggernaut now ranks as the largest
carrier in the nation in terms of passengers carried. Once
the model that low-fare carriers aspired to, Southwest
has become the model for the entire airline industry....”
–Entrepreneur.com
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