Southwest Airlines 2013 Annual Report Download - page 3

we transition the Boeing 717 fleet to Delta and retire Classic Boeing 737 aircraft, we revised
our future Boeing delivery schedule and augmented our Boeing deliveries with pre-owned
aircraft.
We also announced that Southwest will be the launch customer for the Boeing 737 MAX
7 series, with deliveries beginning in 2019, following the expected delivery of the Boeing 737
MAX 8 beginning in 2017. We believe the Boeing 737 MAX will have the lowest operating unit
costs in the single-aisle segment and provide benefits with an engine/airframe combination that
is uniquely designed to optimize operating performance. With intentional focus on careful
capital management, our restructured delivery schedule deferred $1 billion in aircraft capital
spending over the next five years to beyond 2018.
Boeing 737-800s: We ended 2013 with 52 Boeing 737-800s in our fleet, and have 52 more on
order for 2014 and 2015, combined. We have 170 Boeing 737 MAX 8 scheduled for delivery in
2017 through 2024. With 20 percent more seating capacity, we can operate the -800 at a lower
unit cost than the -700, and better serve longhaul and capacity-constrained, high-demand
markets, as well as potential new longhaul markets to Mexico, the Caribbean, Central America,
northern South America, Canada, Alaska, and Hawaii. Overall, our fleet modernization efforts
and the addition of -800s to our fleet contributed approximately $300 million to our 2013 profit
before taxes.
International Capabilities and New Reservation System: We launched our inaugural
Southwest service outside the continental United States in April 2013 to San Juan, Puerto
Rico. In January 2014, we deployed our international reservation system and began selling
Southwest’s first international service to Aruba, The Bahamas, and Jamaica, scheduled to fly
July 1, 2014. By the end of this year, we intend to convert AirTran service from Cancun, Los
Cabos, and Mexico City, Mexico, and Punta Cana, Dominican Republic, to the Southwest
route network. We broke ground on the five-gate international terminal at Houston’s William P.
Hobby Airport, planned to open in late 2015. And, we have future plans to bring Southwest
near-international service to Fort Lauderdale-Hollywood International Airport with the airport’s
design and construction of a new five-gate Concourse A with an international processing
facility. Over the next several years, we intend to replace our existing reservation systems 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.
Rapid Rewards®Frequent Flyer Program: To date, the program has exceeded our
expectations with respect to growth in Rapid Rewards Memberships, Member flight activity,
Southwest’s co-branded Chase®Visa credit card holders, points sold to business partners, and
points purchased by program Members. Customers are now able to transfer their loyalty
rewards between Southwest’s Rapid Rewards and AirTran’s A+ Rewards frequent flyer
programs, providing Members the benefit of the combined network for redemption. We intend
to merge the AirTran frequent flyer program into Rapid Rewards by the end of 2014. In 2013,
we also continued to grow our Rapid Rewards partnership portfolio by adding new points
earning opportunities within and beyond the travel industry. Based on results thus far, we
believe our award-winning program will drive hundreds of millions in incremental annual
revenues, as compared to our legacy frequent flyer program.