Southwest Airlines 2014 Annual Report Download - page 16

2014, all 88 of AirTran’s Boeing 717-200 aircraft had been removed from service and 52 had been
delivered to Delta. From a fleet management perspective, this transition allows the Company to
minimize the impact of this transaction on operations, as the Boeing 717 capacity lost is expected to be
replaced through the capacity gained as a result of (i) the Company’s extension of the retirement dates
for a portion of its 737-300 and 737-500 aircraft and (ii) deliveries from Boeing of new 737 aircraft or
deliveries of used 737 aircraft from other sources. Transitioning the Boeing 717 aircraft out of the
Company’s fleet avoids added complexity to the Company’s operations, as the Company has
historically operated an all-Boeing 737 fleet. Replacement of the Boeing 717 aircraft capacity with
Boeing 737 capacity provides revenue opportunities with more seats per aircraft, while costing
approximately the same amount to fly on a per-trip basis as the smaller Boeing 717 aircraft.
Continued Incorporation of the Larger Boeing 737-800 into the Southwest Fleet
To further support its fleet modernization efforts, during 2014, the Company continued to
incorporate the Boeing 737-800 into the Southwest fleet. The 737-800’s all coach seating configuration
of 175 offers significantly more Customer seating capacity than Southwest’s other aircraft. In addition
to the 737-800’s added seating capacity, its configuration includes The Boeing Company’s Sky
Interior, which features a quieter cabin, improved operational security features, and LED reading and
ceiling lighting. In addition, the domestic airline industry has experienced a decline in short-haul flying
since 2000, and the 737-800 allows the Company to adjust its route network to allow for more long-
haul flying. The Company expects the 737-800 will continue to enable it to (i) more economically
serve long-haul routes; (ii) improve scheduling flexibility and more economically serve high-demand,
slot-controlled, and gate-restricted airports by adding seats to such markets without increasing the
number of flights; and (iii) boost fuel efficiency to reduce overall unit costs. Additionally, the
Company expects the 737-800 will enable Southwest to profitably expand to new destinations,
including extended routes over water, and potentially fly to more distant markets such as Hawaii,
Alaska, Canada, and other near-international locations. The Company has taken delivery of 85 Boeing
737-800 aircraft from 2012 through 2014 and currently expects to take delivery of an additional
19 Boeing 737-800s during 2015. The Company’s fleet composition and delivery schedule is discussed
in more detail below under “Properties - Aircraft.”
International Capabilities and New Reservation System
In January 2014, the Company launched an international reservation system and, as discussed
above under “Company Operations - International Service,” began selling its inaugural international
daily nonstop service to be flown by Southwest aircraft beginning July 1, 2014. The Company worked
with Amadeus IT Group to launch Amadeus’ Altéa reservations solution to support the Company’s
international service.
After the successful launch of the Amadeus Altéa international reservation system, the
Company announced in May 2014 that it selected Amadeus’ Altéa reservations solution as the
Company’s future single reservation system for both domestic and international reservations. This
single reservation system is expected to be delivered over a multi-year period.
Continued Growth of Southwest’s Rapid Rewards Frequent Flyer Program
Southwest’s Rapid Rewards frequent flyer program enables members to earn points for every
dollar spent. The amount of points earned under the program is based on the fare and fare class
purchased, with higher fare products (e.g., Business Select) earning more points than lower fare
products (e.g., Wanna Get Away). Each fare class is associated with a points earning multiplier, and
points for flights are calculated by multiplying the fare for the flight by the fare class multiplier.
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