Southwest Airlines 2009 Annual Report Download - page 25

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Airport capacity constraints and air traffic control inefficiencies could limit the Company’s growth;
changes in or additional governmental regulation could increase the Company’s operating costs or
otherwise limit the Company’s ability to conduct business.
Almost all commercial service airports are owned and/or operated by units of local or state governments.
Airlines are largely dependent on these governmental entities to provide adequate airport facilities and capacity
at an affordable cost. Similarly, the federal government singularly controls all U.S. airspace, and airlines are
completely dependent on the FAA to operate that airspace in a safe, efficient, and affordable manner. As
discussed above under “Business — Regulation,” airlines are also subject to other extensive regulatory
requirements. These requirements often impose substantial costs on airlines. The Company’s results of
operations may be affected by changes in law and future actions taken by governmental agencies having
jurisdiction over its operations, including, but not limited to:
• Increases in airport rates and charges;
• Limitations on airport gate capacity or other use of airport facilities;
• Changes to the environmental regulations discussed above under “Business — Regulation”;
• Increases in taxes;
• Changes to laws that affect the services that can be offered by airlines in particular markets and at
particular airports;
• Restrictions on competitive practices;
• Changes in laws that increase costs for safety, security, or other Customer Service standards; and
• The adoption of more restrictive locally-imposed noise regulations.
Because expenses of a flight do not vary significantly with the number of passengers carried, a relatively
small change in the number of passengers can have a disproportionate effect on an airline’s operating and
financial results. Therefore, any general reduction in airline passenger traffic as a result of any of the factors
listed above could adversely affect the Company’s results of operations. In addition, when the airline industry
shrinks, airport operating costs are essentially unchanged and must be shared by the remaining operating carriers,
which can therefore increase the Company’s costs.
The airline industry is affected by many conditions that are beyond its control, which can impact the
Company’s business strategies.
In addition to the unpredictable economic conditions and fuel costs discussed above, the Company, like the
airline industry in general, is impacted by conditions that are largely outside of its control, including, among
others:
• Adverse weather and natural disasters;
• Outbreaks of disease;
• Changes in consumer preferences, perceptions, spending patterns, or demographic trends;
• Actual or potential disruptions in the air traffic control system;
• Changes in the competitive environment due to industry consolidation, industry bankruptcies, and other
factors;
• Air traffic congestion and other air traffic control issues; and
• Actual or threatened war, terrorist attacks, and political instability.
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