Southwest Airlines 2013 Annual Report Download - page 29

presence in key markets Southwest did not previously serve, (iii) extend service to smaller domestic cities
Southwest did not previously serve, and (iv) provide access to the Commonwealth of Puerto Rico and key near-
international markets in the Caribbean and Mexico.
Customer Service, Comfort, and Amenities
Southwest and AirTran also compete with other airlines in areas of Customer Service such as ontime
performance, passenger amenities, flight equipment type, and comfort. According to statistics published by the
DOT, Southwest consistently ranks at or near the top among domestic carriers in Customer Satisfaction for
having the lowest Customer complaint ratio. Some airlines, including AirTran, have more seating options and
associated passenger amenities than does Southwest, including first-class, business class, and other premium
seating and related amenities. Additionally, some major U.S. airlines have announced plans to add a significant
number of new aircraft to their fleets. Such efforts could provide cost benefits to these airlines through fleet
simplification, improved fuel efficiencies, and lower maintenance costs. Additionally, such new aircraft could
have newer and different passenger amenities than those contained in the Company’s existing fleet. The
Company is addressing this competitive factor with its fleet modernization initiatives, which are discussed above
under “Operating Strategies and Initiatives — Fleet Modernization” and “Operating Strategies and Initiatives —
Continued Incorporation of the Larger Boeing 737-800 into the Southwest Fleet.”
Other Forms of Competition
The airline industry is subject to varying degrees of competition from surface transportation by
automobiles, buses, and trains. Inconveniences and delays associated with air travel security measures can
increase surface competition. In addition, surface competition can be significant during economic downturns
when consumers cut back on discretionary spending and fewer choose to fly. Because of the relatively high
percentage of shorthaul travel provided by Southwest, it is particularly exposed to competition from surface
transportation in these instances. The airline industry is also subject to competition from alternatives to travel
such as videoconferencing and the Internet, which can increase in the event of travel inconveniences and
economic downturns. The Company is subject to the risk that air travel inconveniences and economic downturns
may, in some cases, result in permanent changes to consumer behavior in favor of surface transportation and
electronic communications.
Seasonality
The Company’s business is somewhat seasonal. Generally, in most markets the Company serves, demand
for air travel is greater during the summer months, and therefore, revenues in the airline industry tend to be
stronger in the second (April 1 — June 30) and third (July 1 — September 30) quarters of the year than in the
first (January 1 — March 31) and fourth (October 1 — December 31) quarters of the year. As a result, in many
cases, the Company’s results of operations reflect this seasonality. Factors that could alter this seasonality
include, among others, the price of fuel, general economic conditions, extreme or severe weather, fears of
terrorism or war, or changes in the competitive environment. Therefore, the Company’s quarterly operating
results are not necessarily indicative of operating results for the entire year and historical operating results in a
quarterly or annual period are not necessarily indicative of future operating results.
Employees
At December 31, 2013, the Company had 44,831 active fulltime equivalent Employees, consisting of 19,003
flight, 2,689 maintenance, 15,464 ground, Customer, and fleet service, and 7,675 management, finance,
marketing, and clerical personnel (associated with non-operational departments). Approximately 83 percent of
these Employees were represented by labor unions. The Railway Labor Act establishes the right of airline
employees to organize and bargain collectively. Under the Railway Labor Act, collective-bargaining agreements
between an airline and a labor union generally do not expire, but instead become amendable as of an agreed date.
By the amendable date, if either party wishes to modify the terms of the agreement, it must notify the other party
in the manner required by the Railway Labor Act and/or described in the agreement. After receipt of the notice,
the parties must meet for direct negotiations. If no agreement is reached, either party may request the National
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