Southwest Airlines 2012 Annual Report Download - page 23

and AirTran systems over to the new TRAX system during 2013 and 2014. The Company also intends to
continue to devote significant technology resources to (i) implement connecting capabilities between the
Southwest and AirTran reservations systems, (ii) introduce the first phase of a new revenue management system,
and (iii) implement a new reservation system that will allow the Company to add international destinations and
improve revenue management and Customer Service functionality.
Regulation
The airline industry is heavily regulated, especially by the federal government. Examples of regulations
affecting the Company and/or the industry are discussed below.
Economic and Operational Regulation
The U.S. Department of Transportation
The U.S. Department of Transportation (the “DOT”) regulates aviation safety, as well as economic,
consumer protection, and civil rights matters. The DOT may impose civil penalties on air carriers for violating its
regulations.
To provide passenger transportation in the United States, a domestic airline is required to hold an Air
Carrier Certificate issued by the DOT. A certificate is unlimited in duration, and the Company’s certificate
generally permits it to operate among any points within the United States and its territories and possessions.
Additional DOT authority, in the form of a certificate or exemption from certificate requirements, is required for
a U.S. airline to serve foreign destinations either with its own aircraft or via codesharing with another airline. The
DOT also has jurisdiction over international tariffs and pricing in certain markets. The DOT may revoke a
certificate or exemption, in whole or in part, for intentional failure to comply with federal aviation statutes,
regulations, orders, or the terms of the certificate itself.
The DOT’s consumer protection and enforcement activities relate to areas such as unfair and deceptive
practices and unfair competition by air carriers, deceptive airline advertising (e.g., fare, on-time performance,
schedule, and codesharing), and violations of rules concerning denied boarding compensation, ticket refunds, and
baggage liability requirements. The DOT is also charged with prohibiting discrimination by airlines and focuses
on ensuring that individuals with disabilities obtain nondiscriminatory access to the air transportation system and
that the public is not subjected to unlawful discrimination by airlines on the basis of race, religion, national
origin, or sex during the course of their air transportation.
Under the above-described authority, the DOT adopted a so-called “Passenger Protection Rule,” which
addresses, among other matters, tarmac delays and chronically delayed flights (i.e., flights that operate at least 10
times a month and arrive more than 30 minutes late more than 50 percent of the time during that month). Under
the Passenger Protection Rule, U.S. passenger airlines are required to adopt contingency plans that include the
following: (i) the assurance that no domestic flight will remain on the airport tarmac for more than three hours
unless the pilot-in-command determines there is a safety-related or security-related impediment to deplaning
passengers or air traffic control advises the pilot-in-command that returning to the gate or permitting passengers
to disembark elsewhere would significantly disrupt airport operations; (ii) the assurance that air carriers will
provide adequate food and potable drinking water no later than two hours after the aircraft leaves the gate (in the
case of departure) or touches down (in the case of arrival) if the aircraft remains on the tarmac, unless the pilot-
in-command determines that safety or security considerations preclude such service; and (iii) the assurance of
operable lavatories, as well as adequate medical attention, if needed. Air carriers are required to publish their
contingency plans on their websites.
The Passenger Protection Rule also subjects airlines to potential DOT enforcement action for unfair and
deceptive practices in the event of chronically delayed flights. Airlines are required to (i) display ontime
performance on their websites; (ii) adopt customer service plans, publish those plans on their website, and audit
their own compliance with their plans; (iii) designate an employee to monitor the performance of their flights;
15