Southwest Airlines 2007 Annual Report Download - page 27

Following the terrorist attacks, commercial aviation
insurers significantly increased the premiums and reduced
the amount of war-risk coverage available to commercial
carriers. Through the 2003 Emergency Wartime Supple-
mental Appropriations Act, the federal government has
continued to provide supplemental, first-party, war-risk
insurance coverage to commercial carriers for renewable
60-day periods, at substantially lower premiums than pre-
vailing commercial rates and for levels of coverage not
available in the commercial market. The government-pro-
vided supplemental coverage from the Wartime Act is
currently set to expire on March 30, 2008. Although
another extension beyond this date is expected, if such
coverage is not extended by the government, the Company
could incur substantially higher insurance costs or unavail-
ability of adequate coverage in future periods.
Seasonality
The business of the Company is somewhat seasonal.
Quarterly operating income and, to a lesser extent, rev-
enues have historically tended to be lower in the first
quarter (January 1 - March 31) and fourth quarter
(October 1 - December 31).
Employees
At December 31, 2007, Southwest had 34,378
active full-time equivalent Employees, consisting of
13,885 flight, 2,079 maintenance, 13,921 ground, Cus-
tomer, and fleet service, and 4,493 management,
accounting, marketing, and clerical personnel.
Southwest has ten collective bargaining agreements, which covered approximately 82 percent of Southwest’s
Employees as of December 31, 2007. Southwest’s relations with labor unions are governed by the Railway Labor Act (the
“RLA”), which establishes the right of airline employees to organize and bargain collectively. Under the RLA, a
collective bargaining agreement between an airline and a labor union generally does not expire, but instead becomes
amendable as of a stated date. If either party wants to modify the terms of the agreement, it must notify the other party in
the manner required by the RLA and/or described in the agreement. After receipt of such notice, the parties must meet
for direct negotiations, and, if no agreement is reached, either party may request the National Mediation Board (the
“NMB”) to appoint a federal mediator. If no agreement is reached in mediation, the NMB may determine that an impasse
exists and offer binding arbitration to the parties. If either party rejects binding arbitration, a 30-day “cooling off” period
begins. At the end of this 30-day period, the parties may engage in “self-help,” unless a Presidential Emergency Board is
established to investigate and report on the dispute. The appointment of a Presidential Emergency Board maintains the
“status quo” for an additional 60 days. If the parties do not reach agreement during this period, the parties may then
engage in “self-help.” “Self-help” includes, among other things, a strike by the union or the airline’s imposition of any or
all of its proposed amendments and the hiring of new employees to replace any striking workers. The following table sets
forth the Company’s Employee groups and collective bargaining status:
Employee Group Represented by Agreement Amendable in
Pilots Southwest Airlines Pilots’
Association
Currently in negotiation
Flight Attendants Transportation Workers of America,
AFL-CIO (“TWU”)
June 2008
Ramp, Operations, Provisioning,
and Freight Agents
TWU Currently in negotiation
Stock Clerks International Brotherhood of
Teamsters (“Teamsters”)
August 2008
Mechanics Aircraft Mechanics Fraternal
Association (“AMFA”)
August 2008
Customer Service and Reservations
Agents
International Association of
Machinists and Aerospace Workers,
AFL-CIO
November 2008
Aircraft Appearance Technicians AMFA February 2009
Flight Dispatchers Southwest Airlines Employee
Association
December 2009
Flight Simulator Technicians Teamsters November 2011
Flight/Ground School Instructors
and Flight Crew Training
Instructors
Southwest Airlines Professional
Instructors Association
January 2013
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