Southwest Airlines 2007 Annual Report Download - page 8

blendedwinglets.Wealsoannouncedin2007ourplanstoworkwithNaverustoinstallRNP/RNAVtechnologyinoureet,
whichwillallowformoredirectightplansandreducedfuelburn.ThecombinedeffortofPilots,Dispatchers,Maintenance
andEngineering,RampAgents,andOperationsAgentsthatbeganinthefalltoraiseawarenessofthebenetsofgate
servicesandyingefcienciesresultedinimmediatefuelburnsavings.
 BecauseoftheCompany’scontinuedconservativeanddisciplinednancialplanning,ourbalancesheetremainsstrong.
Wecontinuetohaveaninvestment-gradecreditratingandhaveampleliquidityandaccesstocapital.Weended2007with
$2.8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 approximately 36 percent,
includingaircraftleasesasdebt.Whileournumberonepriorityistoprotablygrowourroutesystem,wealsohavetaken
opportunitiestooptimizeourcapitalstructuretofurtherenhanceShareholdervalue.In2007,Southwestrepurchased
66millionsharesofcommonstockfor$1billion.SinceJanuary2006,Southwesthasrepurchased$1.8billionofcommon
stockor116millionsharesthroughtheseboard-authorizedrepurchaseprograms.
 Althoughwehavefueland othercostpressures in2008,we will continueoureffortstoimprove productivityand
revenueproduction.Wehaveastatedgoalin2008togrowearningsperdilutedshare,excludingspecialitems,15percent
comparedto2007.Evenwithchallengingcostpressures,weremainamongtheindustry’slow-costleaders.However,we
cannotstandstill,andwemustovercomerisingcostsbyincreasingourrevenuecontributiontothebottomlinewhile
stayingtruetothelongtermvisionforSouthwest.
Growing the Business: Our Vision and Strategic Direction
ThelongtermvisionforSouthwestisveryclear.Wewanttooperatethesafest,mostreliable,mostefcientairlinein
theworld.Wewanttobethebestplacetowork;wewanttoofferCustomersthebestightschedulewiththemostights
totheplacestheywanttoy;wewanttodeliverthebestCustomerexperience;andweknowwemustearnexcellent
nancialreturnsforourEmployeesandourShareholders.Finally,wemustachieveallthiswhilestayingtruetoourlow-fare,
low-costBrandthatwemadefamous.
 Torealizethatvision,wemustachieveournancialgoals.In2007,weannouncedourplanstoupdateourstrategyto
betterequipustocompetewithmorelow-farecompetitionandovercomehigherfuelprices.Welaunchedseveralinitiativesto
enhanceourBrand,throughanimprovedCustomerAirportExperience,andincreaseourrevenueproduction.Weareexcited
aboutthechangesandbelievewewillappealtomorebusinessCustomersandstrengthenoverallCustomerloyalty.
 Aftermuchresearch,weimplementedournewCustomerboardingmethodinNovember2007.Theenhancedboarding
processimprovedourCustomerexperiencewithanewwaytoboardtheaircraftthatallowstravelerstobemoreproductive
whilewaitingfortheirights,withoutstandinginline.Atthesametime,webeganourExtremeGateMakeoverwithan
anticipatedcompletiondateofmid-year2008.Theupdatesincludeplusherseats,powerstationsforlaptops,additional
at-screenTVs,andotherelectronicequipmenttohelpmakebusinesstravelersmorerelaxedandproductive.Thegate
areaenhancementsalsofeatureafamilywaitingareawithchild-friendlyseatingandentertainment.Businessorpleasure,
wewanttomakeyourtimeattheairportmorecomfortableandproductive.
 Duringfourthquarter2007,wewerealsobusyenhancingourrevenuemanagementstructure,technology,techniques,
andprocesses.Asanexample,wenowhave15fareclassesversuseight,whichshouldincreasetherevenuepotentialfor
SouthwestbeginninginMarch2008.Alongwiththesefarechanges,ourwebsiteunderwentahomepagemakeover,andwe
modiedthefaredisplaytosimplifythechoicesforCustomersandmakeiteasiertounderstand.Amongthefareclasses
wasabrand-newproductcalledBusinessSelectTMthatallowsCustomerstobeamongthersttoboard,receiveextraRapid
Rewardscredit,andenjoyafreecocktailonboard.

To celebrate our “Summer of LUV”
in California, Southwest personnel
cruised around the business district
aboard colorful Segways promoting
new service to San Francisco.
2003 2004 2005 2006 2007
Fleet Size (at yearend)
Boeing 737-700 Firm Orders,
Options, and Purchase Rights
*Currently plan to reduce fleet by 22 aircraft,
bringing 2008 net additions to 7 aircraft.
**Exercised one option in January 2008,
bringing 2009 firm orders and options
to 21 and 7, respectively.
600
500
400
300
200
481 520
388 417 445
Firm Orders 29 20
28**
10
–
–––
52
49
824
54
155
54
246
108
84
29* 34
Options
Purchase Rights
Total
Total
2011-
2014
2008 2009 2010
2003 2004 2005 2006 2007
Aircraft Utilization (hours and minutes per day)
11:45
11:35
11:25
11:15
11:05
11:34
11:41
11:09
11:20 11:25
7
In a return to our ’70s roots, Southwest wrapped buses, street
cars, and transit shelters with a psychedelic “Summer of LUV”
look announcing new service to The City by the Bay.
SOUTHWEST AIRLINES CO. ANNUAL REPORT 2007