Southwest Airlines 2012 Annual Report Download - page 39

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The airline industry is affected by many conditions that are beyond its control, which can impact the
Company’s business strategies.
In addition to the unpredictable economic conditions and fuel costs discussed above, the Company, like the
airline industry in general, is affected by conditions that are largely unforeseeable and outside of its control,
including, among others:
• adverse weather and natural disasters;
• outbreaks of disease;
• changes in consumer preferences, perceptions, spending patterns, or demographic trends;
• actual or potential disruptions in the air traffic control system;
• changes in the competitive environment due to industry consolidation, industry bankruptcies, and
other factors;
• air traffic congestion and other air traffic control issues; and
• actual or threatened war, terrorist attacks, and political instability.
The airline industry is intensely competitive.
As discussed in more detail above under “Business — Competition,” the airline industry is intensely
competitive. The Company’s primary competitors include other major domestic airlines, as well as regional and
new entrant airlines, surface transportation, and alternatives to transportation such as videoconferencing and the
Internet. The Company’s revenues are sensitive to the actions of other carriers with respect to pricing, routes,
frequent flyer programs, scheduling, capacity, Customer Service, comfort and amenities, cost structure, aircraft
fleet, and codesharing and similar activities.
Risk Factors Related to the Company’s Acquisition and Integration of AirTran
The Company may be unable to effectively complete the integration of AirTran’s business and realize the
anticipated benefits of the acquisition. In addition, delays in integration could cause anticipated synergies
to take longer to realize than currently anticipated.
The Company must 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 anticipated net synergies and other anticipated benefits of the
acquisition;
• the inability to successfully maintain passenger unit revenues upon converting AirTran into the
Southwest business model;
• the challenges currently associated with operating an aircraft type new to the Company, the Boeing 717;
• the challenges associated with an expanded or new presence in more congested airports and markets;
• the challenges associated with new international operations, including compliance with international
laws;
• the challenges associated with integrating complex systems, technology, aircraft fleets, networks,
facilities, and other assets of the Company in a seamless manner that minimizes any adverse impact
on Customers, suppliers, Employees, and other constituencies;
31