Southwest Airlines 2006 Annual Report Download - page 22

of a terrorist plot uncovered by authorities in London.
The stringent new rules, mostly regarding the types of
liquid items that can be carried onboard the aircraft, had a
negative impact on air travel beginning in mid-August,
especially on shorthaul routes and with business travelers.
Although the TSA has relaxed some of the requirements
for carryon luggage, the Company is not able to predict
the ongoing impact, if any, that these security changes
will have on passenger revenues, both in the shortterm
and the longterm.
The Company has invested significantly in facilities,
equipment, and technology to process Customers effi-
ciently and restore the airport experience. The Compa-
ny’s Automated Boarding Passes and E-Ticket Check-In
self service kiosks, which the Company has implemented
in all airports it serves, have reduced the number of lines
in which a Customer must wait. The Company has also
installed gate readers at all of its airports to improve the
boarding reconciliation process and offers baggage
checkin through E-Ticket Check-In kiosks at certain
airport locations, as well as Internet checkin and transfer
boarding passes at the time of checkin.
Environmental. The Airport Noise and Capacity
Act of 1990 gives airport operators the right, under
certain circumstances, to implement local noise abate-
ment programs, so long as they do not unreasonably
interfere with interstate or foreign commerce or the
national air transportation system. Some airports, includ-
ing San Diego and Orange County, California have
established airport restrictions to limit noise, including
restrictions on aircraft types to be used, and limits on the
number of hourly or daily operations or the time of such
operations. In some instances, these restrictions have
caused curtailments in service or increases in operating
costs, and such restrictions could limit the ability of
Southwest to expand its operations at the affected air-
ports. Local authorities at other airports may consider
adopting similar noise regulations, but such regulations
are subject to the provisions of the Airport Noise and
Capacity Act of 1990 and regulations promulgated
thereunder.
Operations at John Wayne Airport, Orange County,
California, are governed by the Airport’s Phase 2 Com-
mercial Airline Access Plan and Regulation (the
“Plan”). Pursuant to the Plan, each airline is allocated
total annual seat capacity to be operated at the airport,
subject to renewal/reallocation on an annual basis. Ser-
vice at this airport may be adjusted annually to meet these
requirements.
The Company is subject to various other federal,
state, and local laws and regulations relating to the
protection of the environment, including the discharge
or disposal of materials such as chemicals, hazardous
waste, and aircraft deicing fluid. 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 remediation of
soil or groundwater contamination at several airport sites.
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. From time to
time, the airline transportation industry has been faced
with possible legislation dealing with certain Customer
Service practices. As a compromise with Congress, the
industry, working with the Air Transport Association,
has responded by adopting and filing with the DOT
written plans disclosing how it would commit to improv-
ing performance. Southwest Airlines’ Customer Service
Commitment is 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 Southwest” at
www.southwest.com. The DOT and Congress monitor
the industry’s plans, and there can be no assurance that
legislation or regulations will not be proposed in the
future to regulate airline Customer Service practices.
Operations and Marketing
Operating Strategies. Southwest focuses princi-
pally on point-to-point, rather than hub-and-spoke, ser-
vice, providing its markets with frequent, conveniently
timed flights and low fares. Southwest’s average aircraft
trip stage length in 2006 was 622 miles with an average
duration of approximately 1.7 hours, as compared to an
average aircraft trip stage length of 607 miles and an
average duration of approximately 1.7 hours in 2005.
Examples of markets offering frequent daily flights are:
Dallas to Houston Hobby, 30 weekday roundtrips;
Phoenix to Las Vegas, 19 weekday roundtrips; and Los
Angeles International to Oakland, 22 weekday
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