Southwest Airlines 2008 Annual Report Download - page 26

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incremental cost includes direct passenger costs such
as fuel, food, and other operational costs, but does
not include any contribution to overhead or profit.
Revenue from the sale of credits to business partners
and associated with future travel is deferred and
recognized when the ultimate free travel award is
flown or the credits expire unused. The liability for
free travel awards earned but not used at
December 31, 2008 and 2007 was not material to
Southwest’s business.
Cashless Cabin
During 2008, Southwest introduced “Cashless
Cabin” for the purchase of food and beverages
without cash. All Southwest aircraft are now
equipped with handheld devices that enable Flight
Attendants to accept credit and debit cards onboard
the aircraft, and cash is no longer accepted. Cashless
Cabin is intended to enhance Customer Service by
appealing to the increasing number of Customers
traveling without cash and increasing efficiencies. In
addition, it allows for ancillary revenues through an
increased offering of food and beverage services.
Southwest.com; GDS Participation and Corporate
Travel Account Efforts
Southwest was the first major airline to
introduce a Ticketless travel option, eliminating the
need to print and then process a paper ticket
altogether, and the first to offer Ticketless travel
through Southwest’s web site at
www.southwest.com. For the year ended
December 31, 2008, more than 89 percent of
Southwest’s Customers chose the Ticketless travel
option, and nearly 78 percent of Southwest’s
passenger revenues came through its web site
(including SWABiz revenues), which has become a
vital part of Southwest’s distribution strategy.
Southwest continues to explore selling tickets
through channels in addition to its own reservation
system, web site, and the Sabre System and is also
continuing its efforts to provide travel agent and
professional travel manager partners with increased
and cost effective access to its fares and inventory.
Southwest is party to an agreement with Travelport’s
Galileo, which includes Worldspan, another of
Travelport’s global distribution systems, pursuant to
which Southwest intends that all of its published
fares and inventory, with the exception of
Southwest’s exclusive web fares, will eventually be
available to Galileo-connected travel agencies in
North America.
RNP
In support of the FAA’s Roadmap for
Performance-Based Navigation, Southwest has made a
commitment to invest $175 million over the next
several years to implement Required Navigation
Performance (“RNP”) procedures at the airports it
serves. RNP is one of the cornerstones for the FAA’s
Next Generation Air Traffic Control System and
combines GPS (Global Positioning System), the
capabilities of advanced aircraft avionics, and new
flight procedures for the purpose of achieving safer,
more efficient, and environmentally friendly flight
operations. RNP procedures are designed to reduce
fuel consumption, improve safety, and minimize
emissions and noise, while simultaneously taking
advantage of the high-performance characteristics that
exist in an airline’s fleet. Southwest, the FAA, and an
aviation consulting firm have been working together to
gain Air Traffic Control support of RNP to train
Southwest’s pilots on RNP, equip Southwest’s entire
fleet to be RNP capable, and produce RNP charted
procedures. In January 2009, Southwest activated
autothrottles and VNAV (vertical navigation) on its
aircraft for the first time in Southwest history,
representing the first step in Southwest’s automation
transformation. VNAV is also expected to provide
more nearterm benefits such as significant savings in
fuel costs and reductions in fuel emissions.
Codesharing
In 2008, Southwest announced its intention to
enter into codeshare relationships with two different
airlines — Canadian carrier WestJet and Mexican
carrier Volaris. The Company and WestJet currently
intend to announce codeshare flight schedules and
additional features regarding the relationship by late
2009. The Company and Volaris currently intend to
announce codeshare flight schedules and additional
features regarding the relationship by early 2010.
Certain details of these alliances are subject to
approvals by both the U.S. and Canadian/Mexican
governments. The Company is also continuing to
consider codeshare opportunities with other carriers,
both domestic and international. Southwest originally
implemented codesharing in domestic operations in
2005 with ATA Airlines. Southwest’s codeshare
arrangement with ATA terminated during 2008 as a
result of ATA’s bankruptcy.
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