Southwest Airlines 2008 Annual Report Download - page 28

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passenger liability, property damage, cargo and
baggage liability, loss or damage to aircraft, engines,
and spare parts, and workers’ compensation.
Following the terrorist attacks of September 11,
2001, commercial aviation insurers significantly
increased the premiums and reduced the amount of
war-risk coverage available to commercial carriers.
Through the 2003 Emergency Wartime Supplemental
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 prevailing commercial rates and for
levels of coverage not available in the commercial
market. The government-provided supplemental
coverage from the Wartime Act is currently set to
expire on March 31, 2009. Although another extension
beyond this date is expected, if such coverage is not
extended by the government, Southwest could incur
substantially higher insurance costs or unavailability of
adequate coverage in future periods.
Seasonality
Southwest’s business is somewhat seasonal.
Quarterly operating income and, to a lesser extent,
revenues 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, 2008, Southwest had 35,499
active fulltime equivalent Employees, consisting of
15,483 flight, 2,528 maintenance, 12,365 ground,
Customer, and fleet service, and 5,123 management,
accounting, marketing, and clerical personnel.
The Railway Labor Act (“RLA”) establishes the right of airline employees to organize and bargain
collectively. As of December 31, 2008, approximately 77 percent of Southwest’s employees were represented by
labor unions, all of which are under ten different collective-bargaining agreements. Under the RLA, collective-
bargaining agreements between an airline and a labor union generally do not expire, but instead becomes
amendable as of an agreed date. By the amendable date, if either party wishes 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. 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 (“PEB”) is established to
investigate and report on the dispute. The appointment of a PEB 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 Southwest’s Employee groups and status of the collective bargaining agreements:
Employee Group Representatives Status of Agreement
Pilots Southwest Airlines Pilots’ Association
(“SWAPA”)
Currently in negotiations
Flight Attendants Transportation Workers of America,
AFL-CIO (“TWU 556”)
Currently in negotiations
Ramp, Operations, Provisioning,
Freight Agents
Transportation Workers of America,
AFL-CIO, Local 555 (“TWU 555”)
Currently in mediation
Customer Service Agents,
Reservations Agents
International Association of Machinists
and Aerospace Workers, AFL-CIO
(“IAM”)
Currently in negotiations
Stock Clerks International Brotherhood of
Teamsters, Local 19 (“IBT Local 19”)
Currently in negotiations
Mechanics Aircraft Mechanics Fraternal
Association (“AMFA”)
Agreement (ratified January 29,
2009)
Amendable August 2012
Aircraft Appearance Technicians AMFA Amendable February 2009
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