Southwest Airlines 2005 Annual Report Download - page 5

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With an estimated $10 billion in losses, 2005 was another difficult year for the U.S. airline industry. The glut
of seat capacity and unprecedented energy prices forced many struggling airlines into survival mode, resulting
in significant downsizing and numerous restructuring efforts. During 2005, additional airlines made the decision
to file fo r bank ruptcy p ro tecti on, in clud ing De lta an d Northwest . In tota l, the i ndust ry has lost mo re th an
$40 billion over the last five-year period.
In contrast, Southwest reported its 33rd year of consecutive profitability—a record unmatched in aviation
history. Although we were prepared for higher fuel costs with our protective fuel hedging program, it is the
People of Southwest who deserve the credit for this remarkable record. Especially over the last five years, our
industry has changed radically, and our Employees have had to overcome many challenges and adversities.
There are now many airlines competing in the low-cost, low-fare niche, trying to emulate our success story.
However, there is one thing they can never duplicate and that’s the Warrior Spirit of our Employees! At Southwest,
our People are the difference. Our Employees are passionate about operating a safe airline while providing low
fares and friendly service to our Customers, and they understand the importance of our Low-Cost Leadership.
Our Customers fly Southwest because we consistently deliver what they want—low fares, reliable service,
frequent and convenient flights to great destinations, comfortable cabins, great inflight experience, top-rated
frequent flyer program, hassle-free airports, and friendly Customer Service. As a result, Southwest earned the
number-one ranking in Customer Satisfaction for 2005, based on complaints per passenger carried as reported
to the D.O.T. Southwest is the largest carrier in the United States based on domestic enplaned passengers and
scheduled domestic departures. In addition, Southwest tends to dominate the markets we serve, ranking first
in market share in approximately 90 percent of our top 100 city pairs, and in the aggregate holds approximately
63 percent of the total market share in those markets.
2001 2002 2003 2004 20052001 2002 2003 2004
Operating Expenses Per Available Seat Mile
(ASM)
7.54¢
7.41¢
2005
7.60¢
7.77¢
7.94¢ 8.0¢
7.8¢
7.6¢
7.4¢
7.2¢
Operating Expenses Per ASM, Excluding Fuel
6.37¢
6.36¢
6.30¢
6.44¢ 6.47¢ 6.5¢
6.4¢
6.3¢
6.2¢
6.1¢
Passenger Revenues (in millions) and Distribution Method
$5,379
25%
$5,341 $5,741
24% 20%
59%
$6,280
39% 49% 54%
19% 18%
13%20% 16%
Internet
Passenger Revenues
Reservations Center
Travel Agency
12% 10%
65%
$7,279
15%
11%
9%11% 11%
Other
2001 2002 2003 2004 2005
SOUTHWEST AIRLINES CO. ANN UAL REPORT 20054