Southwest Airlines 2008 Annual Report Download - page 23

million per year. Effective in 2005, the TSA
unilaterally increased the amount to $50 million.
Southwest and 22 other airlines are joined in
litigation presently pending in the U.S. Court of
Appeals against the TSA to challenge that increase,
and a ruling is expected during 2009.
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 system. 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 operations or the time of
operations. These types of restrictions 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.
Southwest 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. Further
regulatory developments 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. Southwest
does not believe, however, that presently pending
environmental regulatory developments will have a
material impact on Southwest’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 “green house gas emissions.” The
legislation could impose additional costs or
restrictions on all transportation-related activities, the
impact of which is presently unpredictable.
Additionally, in conjunction with airport authorities,
other airlines, and state and local environmental
regulatory agencies, Southwest, as a normal course of
business, undertakes voluntary investigation or
remediation of soil or groundwater contamination at
several airport sites. Southwest does not believe that
any environmental liability associated with these
airport sites will have a material adverse effect on
Southwest’s operations, costs, or profitability, nor
has it experienced any such liability in the past that
has had a material adverse effect on its operations,
costs, or profitability.
Southwest has appointed a “Green Team” to
target areas of environmental improvement in all
aspects of Southwest’s business, while at the same
time remaining true to Southwest’s low cost
philosophy. As part of this initiative, during 2008,
Southwest published an Environmental Report
describing Southwest’s strategies to reduce greenhouse
gas emissions and addressing other environmental
matters such as waste management and recycling.
Regulation of Customer Service Practices
From time to time, the airline 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
commitments to improve performance. Southwest
Airlines’ Customer Service Commitment is a
comprehensive plan that 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
Southwest 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.
Operating Strategies and Marketing
During 2008, Southwest continued to implement
and promote initiatives designed to enhance
Customer Service and improve future revenues.
Southwest’s general operating strategies and specific
offerings and related initiatives are discussed below.
General Operating Strategies
Southwest focuses principally on point-to-point
service, rather than the hub-and-spoke service
provided by most major U.S. airlines. The
“hub-and-spoke” system concentrates most of an
airline’s operations at a limited number of hub cities
and serves most other destinations in the system by
4