Southwest Airlines 2010 Annual Report Download - page 30

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The Company may be unable to integrate AirTran’s business successfully and realize the anticipated
benefits of the merger.
The merger involves the combination of two companies that currently operate as independent public
companies. In addition, as discussed above under “Business – Company Operations – Cost Structure,” a key
component of the Company’s current business strategy is its low cost structure, which is, in part, facilitated by
the Company’s reliance upon a single aircraft type. The Company will be required to devote significant
management attention and resources to integrating the business practices and operations of AirTran. Potential
difficulties the Company may encounter as part of the integration process include the following:
• the inability to successfully combine the AirTran business with that of the Company in a manner that
permits the Company to achieve the net synergies and other benefits anticipated to result from the merger;
• the challenges associated with operating an aircraft type new to the Company, the Boeing 717;
• the challenge of integrating complex systems, technology, aircraft fleets, networks and other assets of the
Company in a seamless manner that minimizes any adverse impact on Customers, suppliers, Employees,
and other constituencies;
• integrating the Company’s workforce while maintaining focus on providing consistent, high quality
Customer Service; and
• potential unknown liabilities, liabilities that are significantly larger than the Company currently
anticipates and unforeseen increased expenses or delays associated with the merger, including one-time
cash costs to integrate AirTran’s business that may exceed the approximately $500 million of one-time
acquisition and integration costs that the Company currently anticipates.
In addition, the Company and AirTran have operated and, until the completion of the merger, will continue
to operate independently. It is possible that the integration process could result in:
• diversion of the attention of the Company’s management and other employees; and
• the disruption of, or the loss of momentum in, the Company’s ongoing business or inconsistencies in
standards, controls, procedures and policies,
any of which could adversely affect the Company’s ability to maintain relationships with customers, suppliers,
employees and other constituencies or the Company’s ability to achieve the anticipated benefits of the merger or
could reduce the Company’s earnings or otherwise adversely affect the business and financial results of the
Company following the merger.
The need to integrate AirTran’s workforce following the merger presents the potential for delay in
achieving expected synergies and other benefits, increased labor costs or labor disputes that could adversely
affect the Company’s operations.
The successful integration of AirTran and achievement of the anticipated benefits of the merger depend
significantly on integrating AirTran’s employees into the Company and on maintaining productive employee
relations. Failure to do so presents the potential for delays in achieving expected synergies and other benefits of
integration, increased labor costs and labor disputes that could adversely affect the Company’s operations. The
Company and AirTran are both highly unionized companies. The process for integrating labor groups in an
airline merger is governed by a combination of the Railway Labor Act (“RLA”), the McCaskill-Bond Act, and
where applicable, the existing provisions of each company’s collective bargaining agreements and union policies.
Under the McCaskill-Bond Act, seniority integration must be accomplished in a “fair and equitable” manner
consistent with the process set forth in Sections 3 and 13 of the Allegheny-Mohawk Labor Protective Provisions.
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