Southwest Airlines 2009 Annual Report Download - page 11

Download and view the complete annual report

Please find page 11 of the 2009 Southwest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

designed to increase unit revenues and to reduce capital spending and operating costs. The Company also
continued its efforts to implement longer-term strategies and initiatives to enhance Customer Service and
improve future revenues.
Network Optimization
During 2009, the Company continued to aggressively evaluate and optimize its network through continual
adjustments to its flight schedule, and, for only the second time in the Company’s history, it reduced capacity
year-over-year on a net basis. Although the Company reduced overall available seat miles, the schedule
optimization process better matched the Company’s flights with expected demand during a period of difficult
economic and industry conditions. By reducing certain unprofitable flights in its system, the Company was able
to redeploy capacity to new and more productive markets.
Low Fare Commitment; Aggressive Promotion of Low Fare Brand
The Company employs a relatively simple fare structure, featuring low, unrestricted, unlimited, everyday
coach fares, as well as even lower fares available on a restricted basis. The Company generally offers
substantially lower walkup fares on its short and medium haul flights. During 2009, the Company enhanced its
revenue management structure and techniques to allow it to offer an increased variety of low fare options in
response to the economy’s negative effect on demand.
The Company bundles fares into three major categories: “Wanna Get Away®,” “Anytime™,” and “Business
Select™,” with the goal of making it easier for Customers to choose the fare they prefer. “Wanna Get Away”
fares are generally the lowest fares and are subject to advance purchase requirements. They are also
non-refundable, but may be applied to future travel on Southwest Airlines. “Anytime” fares are refundable and
changeable and may also be applied toward future travel on Southwest Airlines. “Business Select” fares are also
refundable and changeable, but include additional perks such as priority boarding, bonus frequent flyer credit,
priority security access in select airports, and one complimentary adult beverage (for Customers of legal drinking
age). The Company’s “Business Select” program contributed approximately $72 million in revenues during
2009.
During 2009, the Company continued to aggressively underscore and promote its low fare brand with
marketing campaigns designed to address the difficult economy head-on and promote the points of differentiation
between the Company and its competitors. In June, the Company introduced its “Grab Your Bag. It’s On™”
campaign in order to connect with its Customers in a positive way during difficult economic times. The
campaign encouraged Customers to move forward and take control of their business with the help of the
Company’s low fare advantage and “can do” attitude. In the fall, the Company launched its “Bags Fly Free™”
campaign to publicize the differences between the Company and its competitors, virtually all of which charge
additional fees for items such as first or second checked bags, seat selection, fuel surcharges, snacks, curb-side
checkin, and telephone reservations. The “Bags Fly Free” campaign educates consumers about the potential
impact of bag fees on the consumer’s total trip cost when flying on other airlines, which can be a particularly
unwelcome surprise during difficult economic times. The Company also promoted targeted fare sales, which
stimulated demand and resulted in Company-record load factors in every month from July through December
2009.
Revenue Enhancement Initiatives
During 2009, the Company implemented various programs and processes to boost near-term revenues and
create additional opportunities for revenue growth.
Enhancements to Southwest.com. In March, the Company launched a new and improved
southwest.com website, which has provided access to additional southwest.com products and services and is
also intended to lay the foundation for future revenue-generating opportunities. The enhanced website
allows Customers who access southwest.com from their web-enabled mobile or handheld devices to book
3