Southwest Airlines 2010 Annual Report Download - page 34

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The application of the acquisition method of accounting will likely result in the Company recording a
significant amount of goodwill, which could result in significant future impairment charges and negatively
affect the Company’s financial results.
Applicable acquisition accounting rules require that to the extent the purchase price exceeds the net fair
value of AirTran’s tangible and intangible assets and liabilities, the Company would record such excess as
goodwill on its Consolidated Balance Sheet. Goodwill is not amortized, but is tested for impairment at least
annually. Impairment charges could be recorded in the Company’s results of operations as a result of, among
other items, extreme fuel price volatility, a significant decline in the fair value of certain tangible or intangible
assets, unfavorable trends in forecasted results of operations and cash flows and the uncertain economic
environment, as well as other uncertainties. The Company can provide no assurance that a significant impairment
charge will not occur in one or more future periods. Any such charges may materially negatively affect the
Company’s financial results.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Aircraft
The Company operated a total of 548 Boeing 737 aircraft as of December 31, 2010, of which 92 and 5 were
under operating and capital leases, respectively. The remaining 451 aircraft were owned.
The following table details information on the 548 aircraft in the Company’s fleet as of December 31, 2010:
737 Type Seats
Average Age
(Yrs)
Number of
Aircraft
Number
Owned (1)
Number
Leased
-300 ............................... 137 19 171 104 67
-500 ............................... 122 20 25 16 9
-700 ............................... 137 7 352 331 21
Totals .............................. 548 451 97
(1) As discussed further in Note 7 to the Consolidated Financial Statements, 128 of the Company’s aircraft
have been pledged as collateral.
In total, at January 19, 2011, the Company had firm orders, options and purchase rights for the purchase of
Boeing 737-700 and 737-800 aircraft as follows:
28