Southwest Airlines 2014 Annual Report Download - page 23

Management Information Systems
The Company has continued its commitment to technology improvements to support its
ongoing operations and initiatives. The Company has invested in significant technology necessary to
support several of its initiatives, including (i) the implementation of connecting capabilities between
the Southwest and AirTran reservation systems, which helped enable the Company to fully complete
the process of integrating Southwest’s and AirTran’s network and operations, (ii) Southwest’s Rapid
Rewards frequent flyer program, (iii) the continued incorporation of the Boeing 737-800 aircraft into
the Company’s fleet, (iv) enhancements to the southwest.com website, (v) WiFi implementation and
live television connectivity, and (vi) new reservation system technology to support Southwest’s
international itineraries. In addition, during 2014, the Company 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.
The Company intends to continue to devote significant technology resources towards, among
other things, (i) the development of new systems to improve both revenue management and network
optimization capabilities, (ii) replacement of Southwest’s existing domestic reservation system with the
comprehensive Amadeus’ Altéa reservations solution, and (iii) a new suite of operational tools that the
Company expects will improve operational management.
Regulation
The airline industry is heavily regulated, especially by the federal government, and there are a
significant number of governmental agencies and legislative bodies that have the ability to directly or
indirectly affect the Company and/or the airline industry financially and/or operationally. Examples of
regulations affecting the Company and/or the airline industry, imposed by several of these
governmental agencies and legislative bodies, are discussed below.
Economic and Operational Regulation
Consumer Protection Regulation by the U.S. Department of Transportation
The U.S. Department of Transportation (the “DOT”) regulates aviation safety, as well as
economic operating authority and consumer protection. The DOT may impose civil penalties on air
carriers for violating its regulations.
To provide passenger transportation in the United States, a domestic airline is required to hold
both a Certificate of Public Convenience & Necessity from the DOT and an Air Carrier Operating
Certificate from the FAA, an agency within the DOT. A Certificate of Public Convenience &
Necessity is unlimited in duration, and the Company’s certificate generally permits it to operate among
any points within the United States and its territories and possessions. Additional DOT authority, in the
form of a certificate or exemption from certificate requirements, is required for a U.S. airline to serve
foreign destinations either with its own aircraft or via codesharing with another airline. The DOT also
has jurisdiction over international tariffs and pricing in certain markets. The DOT may revoke a
certificate or exemption, in whole or in part, for intentional failure to comply with federal aviation
statutes, regulations, orders, or the terms of the certificate itself.
The DOT’s consumer protection and enforcement activities relate to areas such as unfair and
deceptive practices and unfair competition by air carriers, deceptive airline advertising (e.g., fare,
ontime performance, schedule, and codesharing), and violations of rules concerning denied boarding
compensation, ticket refunds, and baggage liability requirements. The DOT is also charged with
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