Southwest Airlines 2013 Annual Report Download - page 42

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relations. Failure to do so presents the potential for (i) delays in achieving expected synergies and other benefits
of integration or (ii) labor disputes that could adversely affect the Company’s operations and costs. In addition,
disputes regarding the integration of AirTran Employees could negatively affect the Company’s historically
positive Employee culture.
Pending operational integration of AirTran with the Company, it will be necessary to maintain a “fence”
between Southwest and AirTran Employee groups subject to CBAs, during which time the Company and
AirTran will continue to keep the Employee groups separate, each applying the terms of its own existing CBAs,
unless other terms have been negotiated.
The Company has incurred, and expects to continue to incur, substantial expenses related to the
acquisition and integration of AirTran’s business.
The Company has incurred, and expects to continue to incur, substantial integration and transition expenses
in connection with the acquisition of AirTran, including the necessary costs associated with integrating the
operations of Southwest and AirTran. There are a large number of processes, policies, procedures, operations,
technologies, and systems that must be integrated, including reservations, frequent flyer, ticketing/distribution,
maintenance, and flight operations. While the Company has assumed that a certain level of expenses will be
incurred, there are many factors beyond its control that could affect the total amount or the timing of the
integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to
estimate accurately. These expenses could, particularly in the near term, exceed the financial benefits the
Company expects to achieve from the acquisition, including the elimination of duplicative expenses and the
realization of economies of scale and cost savings. These integration expenses likely will continue to result in the
Company taking substantial charges against earnings in future periods, and the amount and timing of such
charges are uncertain at present.
The Company will need to continue certain branding or rebranding initiatives in connection with the
acquisition that may take a significant amount of time and involve substantial additional costs and that
may not be favorably received by Customers.
The Company may incur substantial additional costs in rebranding AirTran’s products and services, and it
may not be able to achieve or maintain brand name recognition or status under the Southwest brand that is
comparable to the recognition and status previously enjoyed by AirTran in any of AirTran’s markets. The failure
of any such rebranding initiative could adversely affect the Company’s ability to attract and retain Customers,
which could cause the Company not to realize some or all of the anticipated benefits contemplated to result from
the acquisition.
AirTran is currently subject to pending antitrust litigation, and if judgment were to be rendered against
AirTran in the litigation, such judgment could adversely affect the Company’s operating results.
A complaint alleging violations of federal antitrust laws and seeking certification as a class action was filed
against Delta Air Lines, Inc. and AirTran in the United States District Court for the Northern District of Georgia
in Atlanta on May 22, 2009. The complaint alleged, among other things, that AirTran attempted to monopolize
air travel in violation of Section 2 of the Sherman Act, and conspired with Delta in imposing $15-per-bag fees for
the first item of checked luggage in violation of Section 1 of the Sherman Act. The initial complaint sought treble
damages on behalf of a putative class of persons or entities in the United States who directly paid Delta and/or
AirTran such fees on domestic flights beginning December 5, 2008. After the filing of the May 2009 complaint,
various other nearly identical complaints also seeking certification as class actions were filed in federal district
courts in Atlanta, Georgia; Orlando, Florida; and Las Vegas, Nevada. All of the cases were consolidated before a
single federal district court judge in Atlanta. A Consolidated Amended Complaint was filed in the consolidated
action on February 1, 2010, which broadened the allegations to add claims that Delta and AirTran conspired to
reduce capacity on competitive routes and to raise prices in violation of Section 1 of the Sherman Act. In addition
to treble damages for the amount of first baggage fees paid to AirTran and to Delta, the Consolidated Amended
Complaint seeks injunctive relief against a broad range of alleged anticompetitive activities, as well as attorneys’
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