Southwest Airlines 2011 Annual Report Download - page 21

travel; (iii) fares may not increase after purchase; (iv) baggage fees must be disclosed to the passenger at the time
of booking; (v) the same baggage allowances and fees must apply throughout a passenger’s trip; (vi) baggage
fees must be disclosed on e-ticket confirmations; and (vii) passengers must be promptly notified in the event of
delays of more than 30 minutes or if there is a cancellation or diversion of their flight.
In July 2011, the DOT proposed new rules that would require airlines to report more information to the
DOT on the amount and types of fees collected from passengers, as well as the number of checked bags and
mishandled wheelchairs. The proposal would revise current reporting requirements to increase data collection on
the amount airlines receive from different, specific types of fees. The proposed rule would require airlines to
report 18 categories of fee revenue. The DOT has not taken final action in this proceeding.
Aviation Taxes
The statutory authority for the federal government to collect most types of aviation taxes, which are used,
in part, to finance the nation’s airport and air traffic control systems, and the authority of the FAA to expend
those funds must be periodically reauthorized by the U.S. Congress. Since September 30, 2007, this authority has
been extended by Congress through a series of short-term extensions, with the most recent extension set to expire
on February 17, 2012. On February 6, 2012, Congress passed the FAA Modernization and Reform Act of 2012,
which the President is expected to sign into law prior to February 17, 2012. This legislation will extend most
commercial aviation taxes through September 30, 2015. In addition to FAA-related taxes, there are additional
federal taxes related to the Department of Homeland Security. These taxes do not need to be reauthorized
periodically. In an effort to reduce the federal deficit, Congress may consider creating a new tax on commercial
aviation or increasing an existing tax during the upcoming year. The White House has proposed increasing the
security fee assessed on passengers as well as creating a new aircraft departure tax of $100 per flight to help pay
for deficit reduction.
The Wright Amendment
Section 29 of the International Air Transportation Competition Act of 1979, as amended (commonly
known as the “Wright Amendment”), prohibited the carriage of non-stop and through passengers on commercial
flights between Dallas Love Field and all states outside of Texas, with the exception of the following states (the
“Wright Amendment States”): Alabama, Arkansas, Kansas, Louisiana, Mississippi, Missouri, New Mexico, and
Oklahoma. Originally, the Wright Amendment permitted an airline to offer flights between Dallas Love Field
and the Wright Amendment States only to the extent the airline did not offer or provide any through service or
ticketing with another air carrier at Dallas Love Field and did not market service to or from Dallas Love Field
and any point outside of a Wright Amendment State. In other words, a Customer could not purchase a single
ticket between Dallas Love Field and any destination other than a Wright Amendment State. These restrictions
did not apply to flights operated with aircraft having 56 or fewer passenger seats. The Wright Amendment also
did not restrict Southwest’s intrastate Texas flights or its air service to or from points other than Dallas Love
Field.
In 2006, the Company entered into an agreement with the City of Dallas, the City of Fort Worth, American
Airlines, Inc., and the DFW International Airport Board, pursuant to which the five parties sought enactment of
legislation to amend the Wright Amendment. Congress responded by passing the Wright Amendment Reform
Act of 2006, which immediately repealed the original through service and ticketing restrictions by allowing the
purchase of a single ticket between Dallas Love Field and any U.S. destination (while still requiring the
Customer to make a stop in a Wright Amendment State), and reduced the maximum number of gates available
for commercial air service at Dallas Love Field from 32 to 20. The Company currently has access to 16 gates at
Dallas Love Field. Pursuant to the Wright Amendment Reform Act and local agreements with the City of Dallas
with respect to gates, the Company can expand scheduled service from Dallas Love Field. The Wright
Amendment Reform Act also provides for substantial repeal of the remainder of the Wright Amendment in 2014.
At such time Southwest will be able to fly to any U.S. destination from Dallas Love Field unless such destination
is restricted or otherwise limited by law. Nonstop international service from Dallas Love Field will continue to be
prohibited.
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