Southwest Airlines 2007 Annual Report Download - page 32

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In 2007, the Company announced a reduction in its planned growth rate for fourth quarter 2007 and for full year
2008. A portion of this growth slowdown will be achieved through changes in the Company’s aircraft deliveries from
Boeing. In 2008, the Company also plans to return from lease or sell a total of 22 aircraft. In total, at December 31, 2007,
the Company had firm orders, options and purchase rights for the purchase of Boeing 737 aircraft as follows:
Firm Orders, Options and Purchase Rights for Boeing 737-700 Aircraft
Delivery Year Firm Orders Options Purchase Rights Total
The Boeing Company
2008 ..................................... 29 — — 29
2009 ..................................... 20 8 — 28*
2010 ..................................... 10 24 — 34
2011 ..................................... 10 22 — 32
2012 ..................................... 10 30 — 40
2013 ..................................... 19 — — 19
2014 ..................................... 10 — — 10
2008-2014 ................................. — — 54 54
Total ..................................... 108 84 54 246
* The Company exercised one option in January 2008, bring 2009 firm orders and options to 21 and 7, respectively.
Ground Facilities and Services
Southwest leases terminal passenger service facilities
at each of the airports it serves, to which it has made
various leasehold improvements. The Company leases the
land and structures on a long-term basis for its mainte-
nance centers (located at Dallas Love Field, Houston
Hobby, Phoenix Sky Harbor, and Chicago Midway), its
flight training center at Dallas Love Field (which houses
seven 737 simulators), and its corporate headquarters,
also located at Dallas Love Field. As of December 31,
2007, the Company operated six reservation centers. The
reservation centers located in Chicago, Albuquerque, and
Oklahoma City occupy leased space. The Company owns
its Houston, Phoenix, and San Antonio reservation
centers.
The Company performs substantially all line main-
tenance on its aircraft and provides ground support ser-
vices at most of the airports it serves. However, the
Company has arrangements with certain aircraft main-
tenance firms for major component inspections and
repairs for its airframes and engines, which comprise
the majority of the Company’s annual aircraft mainte-
nance costs.
Item 3. Legal Proceedings
The Company is subject to various legal proceedings
and claims arising in the ordinary course of business,
including, but not limited to, examinations by the Inter-
nal Revenue Service (IRS). The IRS regularly examines
the Company’s federal income tax returns and, in the
course of those examinations, proposes adjustments to the
Company’s federal income tax liability reported on such
returns. It is the Company’s practice to vigorously contest
those proposed adjustments that it deems lacking merit.
The Company’s management does not expect the out-
come in any of its currently ongoing legal proceedings or
the outcome of any proposed adjustments presented to
date by the IRS, individually or collectively, will have a
material adverse effect on the Company’s financial con-
dition, results of operations, or cash flows.
Item 4. Submission of Matters to a Vote of Security
Holders
None to be reported.
13