Southwest Airlines 2006 Annual Report Download - page 11

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S O U T H W E S T A I RL I N E S C O . A N N U A L R E P O R T 2 0 0 6
Southwest Airlines returned
significant service in 2006 to
hurricane-ravaged New Orleans.
Our commitment to help rebuild
and renew this great American
city is unwavering. We were the
last airline to leave New Orleans
during the natural disaster and
the first airline to return full-
time service. We will continue
to add flights as more and more
Americans return to laissez les
bon temps rouler!
has been able to duplicate our success. At the end of 2006, our fulltime equivalent Employees per aircraft of 68 represented
the lowest level since 1972.
In addition to being the most productive airline of any Major U.S. carrier, Southwest has the best fuel hedge program in
the airline industry. Since 2000, the Company has saved more than $2 billion in fuel costs through our fuel hedge program.
Although we currently expect fuel headwinds in 2007 of more than $400 million, we have insured ourselves against further
Passenger tries to open
overhead bin then notices coin slot,
puts in money to open it.
Passenger wants to recline seat. Sees
coin slot on armrest, deposits money.
Passenger tries to lower window shade,
sees another coin slot.
VO: Tired of being nickeled and dimed
by other airlines?
catastrophic energy price increases by putting fuel derivative contracts in place for about 95 percent of our 2007 expected
jet fuel needs at $50 per barrel of crude oil. We also have protection in 2008 with fuel derivative contracts for 65 percent of
our anticipated fuel needs at $49 per barrel. We continue to opportunistically build positions for future years and currently
have fuel derivative contracts in place for 50 percent of expected fuel needs at $51 per barrel in 2009; more than
25 percent at $63 per barrel in 2010; 15 percent at $64 per barrel in 2011; and 15 percent at $63 per barrel in 2012.
In addition to fuel price protection, Southwest is working hard to reduce fuel consumption. We have installed blended
winglets on our entire 737-700 fleet and plan to install winglets on a significant portion of our 737-300 fleet, beginning in
first quarter 2007.
As a result of prudent risk management, conservative planning, and discipline, our balance sheet has never been stronger.
After the five most difficult years in the airline industry, we continue to retain an investment-grade credit rating and have
ample liquidity and access to capital. We ended 2006 with $1.8 billion in cash, including shortterm investments, and have a
fully available unsecured revolving credit line of $600 million. We also had approximately $600 million in cash deposits at
Boeing for future aircraft deliveries. Our unmortgaged assets have a value of more than $9 billion, and our debt to total
capital is under 35 percent, including aircraft leases as debt.
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