Southwest Airlines 2012 Annual Report Download - page 3

Boeing 737-800s: In our efforts to modernize our fleet, we began 737-800 flying in
March 2012 and ended the year with 34 -800s in our fleet. We are very excited about
the benefits this new aircraft type brings to Southwest with more than 20 percent
additional seat capacity per aircraft than on a 737-700. We can operate the -800 at a
lower unit cost than the -700, which lends itself well to longhaul and capacity-
constrained, high-demand markets, as well as potential new longhaul markets like
Hawaii, Alaska, Canada, Mexico, and the Caribbean.
New reservation system and international capabilities: We intend to replace our
existing reservation system with a comprehensive system that would provide the
ability for Southwest to serve international destinations and allow for other Customer
Service, revenue management, and schedule production capabilities. In 2012, we
selected Amadeus to implement the reservation solution to support international
service on Southwest in 2014. We plan to complete the full deployment of a new
reservation system beyond 2014. We received FAA approval to conduct operations,
under certain circumstances, outside the continental United States and announced
service to San Juan, Puerto Rico, beginning in April 2013. We also received Houston
City Council approval to design and build a five-gate international terminal with a U.S.
customs facility at Houston’s William P. Hobby Airport.
In December 2012, we announced new 2013 revenue streams, including the first
phase of a new origin and destination revenue management system, more aggressive
network optimization, and new ancillary offerings. These offerings include increases in
existing service charges, selling open A1 through A15 premium boarding positions at
the gate, and a new policy associated with restricted tickets that are not canceled
(or changed) prior to departure.
Collectively, we expect our strategic initiatives and new revenue streams to
contribute the majority of the planned $1.1 billion year-over-year revenue increase in
2013. In addition, we intend to aggressively manage our invested capital base. While
the fleet modernization plans provide significant growth potential, we do not plan to
grow the fleet until earnings are expected to generate sufficient returns on capital. All
told, our 2013 goal remains a 15 percent pre-tax return on invested capital.
Southwest Airlines is the nation’s largest airline in terms of domestic passengers
boarded2, and, including AirTran, we operate the largest fleet of Boeing aircraft in the
world. Thanks to our Employees who deliver world-class Customer Service every day,
we once again led the domestic airline industry in Customer Satisfaction in 20123.
Southwest has ranked on FORTUNE magazine’s Most Admired list every year since
1994, and we were thrilled to uphold that record with our recent recognition as the
Seventh Most Admired Company in the World! We were the highest ranking airline
and the only commercial airline to make the Top Ten.
2As measured by the number of originating domestic passengers boarded and based on data available from the
U.S. Department of Transportation (DOT), as of Sept. 30, 2012.
3From the 2012 yearend DOT Air Travel Consumer Report issued February 2013. Top ranking is for Southwest
Airlines only.