Southwest Airlines 2014 Annual Report Download - page 28

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effect on the Company’s operations, costs, or profitability, nor has it experienced any such liability in
the past that has had a material adverse effect on its operations, costs, or profitability. Further
regulatory developments pertaining to the control of engine exhaust emissions from ground support
equipment could increase operating costs in the airline industry. The Company does not believe,
however, that pending environmental regulatory developments in this area will have a material effect
on the Company’s capital expenditures or otherwise materially adversely affect its operations,
operating costs, or competitive position.
The federal government, as well as several state and local governments, the governments of
other countries, and the United Nations’ International Civil Aviation Organization (the “ICAO”) are
considering legislative and regulatory proposals and voluntary measures to address climate change by
reducing green-house gas emissions. At the federal level, the Environmental Protection Agency (the
“EPA”) announced in September 2014 that it will propose an endangerment finding for greenhouse gas
emissions from aircraft sometime in 2015. The EPA would be required under the Clean Air Act to
regulate greenhouse gases from aircraft if it determines the emissions endanger public health or the
environment. In addition, along with its proposed endangerment finding, the EPA said that it will also
issue an advance notice of proposed rulemaking summarizing international efforts to regulate aircraft
emissions. The ICAO could adopt a carbon dioxide standard for aircraft by 2016 and possibly a larger
international framework for aviation emissions as world governments continue to negotiate a new
global climate accord. Regardless of the method of regulation, policy changes with regards to climate
change are possible, which could significantly increase operating costs in the airline industry and, as a
result, adversely affect operations.
The Airport Noise and Capacity Act of 1990 gives airport operators the right, under certain
circumstances, to implement local noise abatement programs, so long as they do not unreasonably
interfere with interstate or foreign commerce or the national air transportation system. Some airports
have established airport restrictions to limit noise, including restrictions on aircraft types to be used and
limits on the number of hourly or daily operations or the time of operations. These types of restrictions
can cause curtailments in service or increases in operating costs and could limit the ability of air
carriers to expand operations at the affected airports.
As part of its commitment to corporate sustainability, the Company has published the
Southwest One ReportTM describing the Company’s sustainability strategies, which include efforts to
reduce greenhouse gas emissions and address other environmental matters such as energy and water
conservation, waste minimization, and recycling. As discussed above under “Operating Strategies and
Initiatives - Cost Containment,” the Company has also committed significant resources towards
implementation of RNP procedures, which are designed to conserve fuel and reduce carbon emissions.
In addition, the Company’s “Green Team” targets areas of environmental improvement in all aspects
of the Company’s business, while at the same time remaining true to the Company’s low-cost
philosophy.
International Regulation
All international air service is subject to certain federal requirements and approvals, as well as
the regulatory requirements of the appropriate authorities of the foreign countries involved. The
Company has obtained the necessary economic authority from the DOT, as well as FAA approvals, to
conduct operations, under certain circumstances, to points outside of the continental United States. To
the extent the Company seeks to serve additional foreign destinations in the future, it will be required
to obtain necessary authority from the DOT and approvals from the FAA, as well as any applicable
foreign government or other authority.
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