Southwest Airlines 2013 Annual Report Download - page 2

While we did not achieve our ontime performance and baggage handling goals in 2013,
we did not lose focus on providing best-in-class Customer Service, once again, leading the
domestic airline industry in Customer Satisfaction in 20133. Southwest received numerous
other awards and recognitions during 2013, including Best Domestic Airline for Customer
Service by Executive Travel Magazine’s Leading Edge Awards, Brand of the Year in the Value
Airline Category by the Harris Poll, and the top ranking by InsideFlyer Magazine for Best
Customer Service and Best Loyalty Credit Card.
We are now in the fourth year of a bold five-year strategic plan that began in 2011. We
believe our five Strategic Initiatives are transformative with the potential to drive more revenue,
reduce unit costs, and make Southwest more competitive. The world has changed dramatically
since 2000. Our competitors took draconian measures, including massive layoffs and pay cuts,
to adjust to today’s economic realities and have been given new life through the use of federal
bankruptcy laws. Thanks to the hard work and extraordinary efforts of our Southwest Warriors,
Southwest has adjusted through incredible Teamwork and unwavering resolve to execute our
strategic plan. We have survived the onslaught of challenges to remain profitable for 41
consecutive years, remain the nation’s largest airline in terms of domestic originating
passengers boarded4, and operate the largest Boeing fleet in the world. The transformation
hasn’t been easy, but it was necessary, and we made significant and successful progress in
2013:
AirTran Integration: We achieved approximately $400 million in annual net pre-tax synergies
in 2013 (excluding acquisition and integration expenses), as planned. Since 2011, we have
converted 17 of the 52 AirTran Boeing 737-700s to the Southwest Evolve configuration, and
the remaining are scheduled to be converted this year. During 2013, we converted 12 AirTran
stations to Southwest operations, and by yearend, introduced Southwest service in all
remaining domestic AirTran markets. We continued to optimize the combined Southwest and
AirTran networks, enabled by connecting the networks in April 2013. With our international
reservation system launched in January 2014, we remain on track to convert AirTran’s seven
international markets, along with its remaining domestic markets, by the end of this year. As
planned, this will allow us to complete the AirTran integration and retire the brand by the end of
2014.
Fleet Modernization: We completed the 143-seat Evolve retrofit of 372 Boeing 737-700
aircraft and 78 Boeing 737-300 aircraft in the Southwest fleet. All Southwest -700s and -800s
are now equipped with Row 44 technology, enabling access to satellite-based WiFi, and we
became the first and only carrier to offer gate-to-gate connectivity. We also launched free live
TV through 2014, compliments of DISH; movies and television on demand; a new WiFi portal;
and an iMessaging feature for iOS users. We transitioned 13 of the 88 AirTran Boeing 717-
200s to Delta, and we replaced the flying with Boeing 737 aircraft, which are larger gauge and
cost approximately the same amount to fly on a per-trip basis as the smaller Boeing 717
aircraft. The remaining Boeing 717s are scheduled to be removed from the AirTran network by
the end of 2014 and transitioned to Delta through 2015. In order to manage our fleet needs as
3From the 2013 yearend DOT Air Travel Consumer Report issued February 2014. Top ranking is for Southwest Airlines only.
4As measured by the number of originating domestic passengers boarded and based on data available from the U.S.
Department of Transportation (DOT), as of September 30, 2013.