Southwest Airlines 2014 Annual Report Download - page 31

Customer Service, Comfort, and Amenities
Southwest also competes with other airlines in areas of Customer Service such as ontime
performance, passenger amenities, flight equipment type, and comfort. According to statistics
published by the DOT, Southwest consistently ranks at or near the top among domestic carriers in
Customer Satisfaction for having the lowest Customer complaint ratio. Some airlines have more
seating options and associated passenger amenities than does Southwest, including first-class, business
class, and other premium seating and related amenities. Additionally, some major U.S. airlines have
announced plans to add a significant number of new aircraft to their fleets. Such efforts could provide
cost benefits to these airlines through fleet simplification, improved fuel efficiencies, and lower
maintenance costs. Additionally, such new aircraft could have newer and different passenger amenities
than those contained in the Company’s existing fleet. The Company is addressing this competitive
factor with its fleet modernization initiatives, which are discussed above under “Operating Strategies
and Initiatives - Fleet Modernization” and “Operating Strategies and Initiatives - Continued
Incorporation of the Larger Boeing 737-800 into the Southwest Fleet.”
Other Forms of Competition
The airline industry is subject to varying degrees of competition from surface transportation by
automobiles, buses, and trains. Inconveniences and delays associated with air travel security measures
can increase surface competition. In addition, surface competition can be significant during economic
downturns when consumers cut back on discretionary spending and fewer choose to fly, or when
gasoline prices are lower, making surface transportation a less expensive option. Because of the
relatively high percentage of short-haul travel provided by Southwest, it is particularly exposed to
competition from surface transportation in these instances. The airline industry is also subject to
competition from alternatives to travel such as videoconferencing and the Internet, which can increase
in the event of travel inconveniences and economic downturns. The Company is subject to the risk that
air travel inconveniences and economic downturns may, in some cases, result in permanent changes to
consumer behavior in favor of surface transportation and electronic communications.
Seasonality
The Company’s business is seasonal. Generally, in most markets the Company serves, demand
for air travel is greater during the summer months, and therefore, revenues in the airline industry tend
to be stronger in the second (April 1 - June 30) and third (July 1 - September 30) quarters of the year
than in the first (January 1 - March 31) and fourth (October 1 - December 31) quarters of the year. As a
result, in many cases, the Company’s results of operations reflect this seasonality. Factors that could
alter this seasonality include, among others, the price of fuel, general economic conditions, extreme or
severe weather, fears of terrorism or war, or changes in the competitive environment. Therefore, the
Company’s quarterly operating results are not necessarily indicative of operating results for the entire
year and historical operating results in a quarterly or annual period are not necessarily indicative of
future operating results.
Employees
At December 31, 2014, the Company had 46,278 active fulltime equivalent Employees,
consisting of 20,013 flight, 2,632 maintenance, 15,739 ground, Customer, and fleet service, and 7,894
management, technology, finance, marketing, and clerical personnel (associated with non-operational
departments). Approximately 83 percent of these Employees were represented by labor unions. The
Railway Labor Act establishes the right of airline employees to organize and bargain collectively.
Under the Railway Labor Act, collective-bargaining agreements between an airline and a labor union
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