Southwest Airlines 2014 Annual Report Download - page 15

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• The Company continued to convert AirTran 737-700 aircraft to the Southwest livery.
As of December 31, 2014, 47 out of a total of 52 AirTran 737-700 aircraft had
completed the conversion process and re-entered service as Southwest aircraft. The
remaining five AirTran 737-700 aircraft have been removed from service to begin the
conversion process and are scheduled to re-enter service as Southwest aircraft in early
2015.
• The Company completed the integration of booking and frequent flyer functions into
southwest.com, referring all Customers who visit airtran.com to southwest.com. The
Company transferred AirTran Customers’ A+ Rewards account history and any
A+ Rewards credits that had not expired as of November 1, 2014, into Southwest
Rapid Rewards accounts.
Fleet Modernization
As discussed below, the Company has multiple efforts underway to replace its older aircraft
with newer aircraft that are less maintenance intensive and more fuel efficient and that also have a
greater range. The Company expects its long-term fleet modernization plan to provide substantial
flexibility to manage its fleet needs in a variety of economic conditions. The Company’s future aircraft
delivery schedule is set forth in more detail below under “Properties - Aircraft.”
The Boeing 737 MAX. The Company is scheduled to be the launch customer for the new
Boeing 737 MAX aircraft, which is designed to be more fuel efficient and environmentally friendly
than the Company’s current Boeing aircraft. The Company has placed firm orders for 170 of the
Boeing 737 MAX 8 aircraft and expects to begin to take delivery in 2017. Additionally, in 2013 the
Company placed a firm order for 30 of the Boeing 737 MAX 7 aircraft and expects to begin to take
delivery in 2019. The Company also has options to purchase an additional 191 Boeing 737 MAX
aircraft during the period from 2021 through 2027. The Company believes the 737 MAX will (i) have
the lowest operating unit costs in the single-aisle segment and (ii) benefit the Company with an engine/
airframe combination that is uniquely designed to optimize operating performance of the Company’s
fleet.
The Boeing Next-Generation 737. The Company has also expanded its orders for the Boeing
Next-Generation 737 aircraft. From 2012 through 2014, the Company purchased 78 Boeing Next-
Generation 737-800 aircraft and leased, from third parties, seven Boeing 737-800 aircraft.
Additionally, during the same time period, the Company acquired 24 pre-owned 737-700 aircraft from
third parties. Including the 737 MAX firm orders described above, the Company has overall total firm
orders with Boeing of 275 aircraft for 2015 through 2024. Additionally, for 2015 and 2016, combined,
as of December 31, 2014, the Company had agreed to acquire an additional 20 pre-owned 737-700
aircraft from third parties, 14 of which are expected to be leased aircraft. The orders from Boeing and
acquisitions from third parties are intended to predominately serve as replacement aircraft for older
737-300 and 737-500 aircraft continuing to be retired from the Company’s fleet and for 717-200
aircraft that the Company has transitioned out of its fleet. The Company also has options with Boeing
to purchase an additional 35 Boeing 737 Next-Generation aircraft during the period from 2016 through
2018.
Transition of Boeing 717 Aircraft. Pursuant to an agreement with Delta Air Lines, Inc. and
Boeing Capital Corp., during 2014, the Company continued transitioning AirTran’s Boeing 717-200
aircraft out of the Company’s fleet for delivery to Delta. Deliveries to Delta began in September 2013
and are expected to continue at the rate of approximately three aircraft per month. As of December 31,
7