Southwest Airlines 2013 Annual Report Download - page 27

The Airport Noise and Capacity Act of 1990 gives airport operators the right, under certain circumstances,
to implement local noise abatement programs, so long as they do not unreasonably interfere with interstate or
foreign commerce or the national air transportation system. Some airports have established airport restrictions to
limit noise, including restrictions on aircraft types to be used and limits on the number of hourly or daily
operations or the time of operations. These types of restrictions can cause curtailments in service or increases in
operating costs and could limit the ability of air carriers to expand operations at the affected airports.
As part of its commitment to corporate sustainability, the Company has published the Southwest One
ReportTM describing the Company’s sustainability strategies, which include efforts to reduce greenhouse gas
emissions and address other environmental matters such as energy and water conservation, waste minimization,
and recycling. As discussed above under “Operating Strategies and Initiatives — Cost Containment,” the
Company has also committed significant resources towards implementation of RNP procedures, which are
designed to conserve fuel and reduce carbon emissions. In addition, the Company’s “Green Team” targets areas
of environmental improvement in all aspects of the Company’s business, while at the same time remaining true
to the Company’s low-cost philosophy.
International Regulation
All international service is subject to certain federal requirements and approvals, as well as the regulatory
requirements of the appropriate authorities of the foreign countries involved. Southwest and AirTran have
obtained the necessary economic authority from the DOT, as well as FAA approvals, to conduct operations,
under certain circumstances, outside of the continental United States. To the extent the Company seeks to serve
additional international routes in the future, it will be required to obtain necessary authority from the DOT and
approvals from the FAA, as well as any applicable foreign government or other authority.
Moreover, CBP is the federal enforcement agency of the U.S. Department of Homeland Security charged
with facilitating international trade, collecting import duties, and enforcing U.S. regulations with respect to trade,
customs, and immigration. As the Company expands its international flight offerings, CBP will become an
increasingly important federal presence. For instance, arriving international flights may only land at CBP-
designated airports, and CBP officers must be present and in sufficient quantities to effectively process and
inspect arriving international passengers and cargo. Thus, CBP personnel and CBP-mandated procedures can
affect the Company’s operations, costs, and Customer experience. The Company will make significant
investments in facilities, equipment, and technologies at certain airports in order to improve the Customer
experience and to assist CBP with the inspection and processing duties; however, the Company is not able to
predict the impact, if any, that various CBP measures or the lack of CBP resources will have on Company
revenues and costs, either in the short term or the long term.
Insurance
The Company carries insurance of types customary in the airline industry and in amounts deemed adequate
to protect the Company and its property and to comply both with federal regulations and certain of the
Company’s credit and lease agreements. The policies principally provide coverage for public and passenger
liability, property damage, cargo and baggage liability, loss or damage to aircraft, engines, and spare parts, and
workers’ compensation.
Through the 2003 Emergency Wartime Supplemental Appropriations Act (the “Wartime Act”), the federal
government has provided war-risk insurance coverage to commercial carriers, including for losses from
terrorism, for passengers, third parties (ground damage), and the aircraft hull. The government-provided
supplemental coverage from the Wartime Act is currently set to expire on September 30, 2014. It is uncertain
whether further extensions will be granted. The withdrawal of government support of airline war-risk insurance
would require the Company to obtain war-risk insurance coverage commercially. Such commercial insurance
could have material differences in coverage than currently provided by the U.S. government and may not be
adequate to protect the Company’s risk of loss from future acts of terrorism.
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