Southwest Airlines 2014 Annual Report Download - page 18

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was on November 1, 2014. After that time, the program ended and all remaining A+ Rewards accounts
were converted to Southwest’s Rapid Rewards frequent flyer program, and all remaining A+Rewards
credits were converted to Rapid Rewards points.
For the Company’s 2014 consolidated results, Customers of Southwest and AirTran redeemed
approximately 6.2 million flight awards, accounting for approximately 11.0 percent of revenue
passenger miles flown. For the Company’s 2013 consolidated results, Customers of Southwest and
AirTran redeemed approximately 5.4 million flight awards, accounting for approximately 9.5 percent
of revenue passenger miles flown. For the Company’s 2012 consolidated results, Customers of
Southwest and AirTran redeemed approximately 4.5 million flight awards, accounting for
approximately 9.0 percent of revenue passenger miles flown. The Company’s accounting policies with
respect to its frequent flyer programs are discussed in more detail in Note 1 to the Consolidated
Financial Statements.
Other Initiatives
Network Optimization and Revenue Management
The Company uses profitability management tools to manage capacity and route expansion
though optimization of its flight schedule to, among other things, better match demand in certain
markets. Using its profitability management tools, the Company continually adjusts the Company’s
network through the addition of new markets and routes, the adjustment of frequencies in existing
markets, and the exiting of certain unsustainable markets and redeployment of aircraft to other markets.
As part of its continuing network optimization efforts, the Company ceased operations in Branson,
Missouri; Key West, Florida; and Jackson, Mississippi in June 2014. The Company believes the
continued optimization and alignment of its flight schedule can continue to yield significant synergies
and other benefits. Over the next several years, the Company also plans to develop new systems to
improve both revenue management and network optimization capabilities.
Cost Containment
Over the last several years, the Company has undertaken a number of cost-containment
projects for the purpose of preserving Southwest’s low-cost advantage and low-fare brand. These have
included the fleet modernization and network optimization strategies discussed above. Among other
things, fleet modernization has contributed to lower maintenance and repair expenses, and network
optimization is enabling Employee scheduling efficiencies.
In addition, these cost-containment projects have included various fuel conservation and
carbon emission reduction initiatives such as the following:
• installation of blended winglets, which reduce drag and increase fuel efficiency, on all
Boeing 737-700 and 737-800 aircraft in Southwest’s fleet and on a majority of
Southwest’s 737-300 aircraft;
• upgrading of the Company’s 737-800 fleet during the 2014-2015 timeframe with
newly designed, split scimitar winglets;
• periodic engine washes;
• use of electric ground power for aircraft air and power at the gate and for ground
support equipment at select locations;
• deployment of auto-throttle and vertical navigation to maintain optimum cruising
speeds;
10