Southwest Airlines 2007 Annual Report Download - page 22

powers or through the appropriate U.S. Attorney, also
has the power to bring proceedings for the imposition and
collection of fines for violation of the Federal Aviation
Regulations.
The Company is subject to various other federal,
state, and local laws and regulations relating to occupa-
tional safety and health, including Occupational Safety
and Health Administration and Food and Drug Admin-
istration regulations.
Security Regulation
Following the terrorist attacks on September 11,
2001, Congress enacted the Aviation and Transportation
Security Act (the “Aviation Security Act”). The Avia-
tion Security Act established the Transportation Security
Administration (the “TSA”), a division of the
U.S. Department of Homeland Security that is respon-
sible for certain civil aviation security matters. The Avi-
ation Security Act also mandated, among other things,
improved flight deck security, deployment of federal air
marshals onboard flights, improved airport perimeter
access security, airline crew security training, enhanced
security screening of passengers, baggage, cargo, mail,
employees, and vendors, enhanced training and qualifi-
cations of security screening personnel, additional pro-
vision of passenger data to U.S. Customs and Border
Protection, and enhanced background checks. Under the
Aviation Security Act, substantially all security screeners
at airports are federal employees, and significant other
elements of airline and airport security are overseen and
performed by federal employees, including federal secu-
rity managers, federal law enforcement officers, and fed-
eral air marshals.
Enhanced security measures have impacted the
Company’s business. In particular, they have had a sig-
nificant impact on the airport experience for passengers.
For example, in the third quarter of 2006, the TSA
mandated new security measures in response to a terrorist
plot uncovered by authorities in London. These rules,
which primarily regulate the types of liquid items that can
be carried onboard aircraft, have had a negative impact on
air travel, especially on shorthaul routes and with business
travelers. Although the TSA has relaxed some of its
requirements, 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 made significant invest-
ments to address the impact of these types of regulations,
including investments in facilities, equipment, and tech-
nology to process Customers efficiently and restore the
airport experience. The Company’s Automated Boarding
Passes and self service kiosks have reduced the number of
lines in which a Customer must wait. In addition, the
Company’s gate readers at all of its airports have
improved the boarding reconciliation process. The Com-
pany also offers baggage checkin through self service
kiosks at certain airport locations, as well as Internet
checkin and transfer boarding passes at the time of
checkin.
Enhanced security measures have also impacted the
Company’s business through the imposition of security
fees on the Company’s Customers and on the Company.
Under the Aviation Security Act, funding for passenger
security is provided in part by a $2.50 per enplanement
security fee, subject to a maximum of $5.00 per one-way
trip. The Aviation Security Act also allows the TSA to
assess an Aviation Security Infrastructure Fee (“ASIF”)
on each airline. Southwest’s ASIF liability was originally
set at $24 million per year. Effective in 2005, the TSA
unilaterally increased the amount to $50 million. South-
west and 22 other airlines are joined in litigation pres-
ently pending in the U.S. Court of Appeals against the
TSA to challenge that increase.
Environmental Regulation
The Airport Noise and Capacity Act of 1990 gives
airport operators the right, under certain circumstances,
to implement local noise abatement programs, so long as
they do not unreasonably interfere with interstate or
foreign commerce or the national air transportation sys-
tem. Some airports have established airport restrictions to
limit noise, including restrictions on aircraft types to be
used, and limits on the number of hourly or daily oper-
ations or the time of operations. These types of restric-
tions can cause curtailments in service or increases in
operating costs and could limit the ability of Southwest to
expand its operations at the affected airports.
The Company is subject to various other federal,
state, and local laws and regulations relating to the pro-
tection of the environment, including the discharge or
disposal of materials such as chemicals, hazardous waste,
and aircraft deicing fluid. Regulatory developments per-
taining to such things as control of engine exhaust
emissions from ground support equipment and preven-
tion of leaks from underground aircraft fueling systems
could increase operating costs in the airline industry. The
Company does not believe, however, that presently pend-
ing 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. However, legislation has been
introduced in the U.S. Congress to regulate so-called
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