Southwest Airlines 2010 Annual Report Download - page 23

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DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
Some statements in this Form 10-K (or otherwise made by the Company or on the Company’s behalf from
time to time in other reports, filings with the SEC, news releases, conferences, Internet postings, or otherwise)
that are not historical facts may be “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on, and include
statements about, the Company’s estimates, expectations, beliefs, intentions, or strategies for the future, and the
assumptions underlying these forward-looking statements. Specific forward-looking statements can be identified
by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such
as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should,” and similar expressions.
While management believes these forward-looking statements are reasonable as and when made, forward-
looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult
to predict. Therefore, actual results may differ materially from what is expressed in or indicated by the
Company’s forward-looking statements or from historical experience or the Company’s present expectations.
Factors that could cause these differences include, but are not limited to, those set forth below under “Risk
Factors.”
Caution should be taken not to place undue reliance on the Company’s forward-looking statements, which
represent the Company’s views only as of the date this report is filed. The Company undertakes no obligation to
update publicly or revise any forward-looking statement, whether as a result of new information, future events, or
otherwise.
Item 1A. Risk Factors
General Company Risk Factors
The Company’s business has continued to be significantly impacted by fuel prices, which can be extremely
volatile; therefore, the Company’s strategic plans and future profitability are likely to be impacted by the
Company’s ability to effectively address fuel prices.
Fuel price volatility continues to present one of the Company’s most significant challenges, as (i) the cost of
fuel, which has been at historically high levels over the last few years, is largely unpredictable; and (ii) airlines
are inherently dependent upon energy to operate; therefore, even a small change in market fuel prices can
significantly affect profitability. Fuel prices are unpredictable, in part, because of many external factors that are
beyond the Company’s control. For example, fuel prices can be impacted by political and economic factors, such
as (i) dependency on foreign imports of crude oil and the potential for hostilities or other conflicts in oil
producing areas; (ii) limited refining capacity; (iii) changes in governmental policies on fuel production,
transportation, and marketing; and (iv) changes in exchange rates. Likewise, the Company’s ability to react to
fuel price volatility can be affected by factors outside of its control. For example, the Company’s profitability is
affected in part by its ability to increase fares in reaction to fuel price increases; however, fare increases are
difficult to implement in difficult economic environments when low fares are often used to stimulate traffic. The
Company’s ability to increase fares can also be limited by factors such as its low fares reputation, the portion of
its Customer base that purchases travel for leisure purposes, the competitive nature of the airline industry
generally, and the risk that higher fares will drive a decrease in demand.
Jet fuel and oil consumed for 2010 and 2009 represented approximately 33 percent and 30 percent of the
Company’s operating expenses, respectively, and constituted the second largest expense incurred by the
Company in both years. As a result, the price of fuel has impacted, and could continue to impact, the timing and
nature of the Company’s growth plans and strategic initiatives.
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