Southwest Airlines 2014 Annual Report Download - page 41
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• actions and decisions that create difficulties in obtaining operating permits and approvals;
• changes to environmental regulations;
• new or increased taxes or fees, such as the July 2014 increased Transportation Security Fee
discussed above under “Regulation - Aviation Taxes”;
• changes to laws that affect the services that can be offered by airlines in particular markets
and at particular airports;
• restrictions on competitive practices;
• changes in laws that increase costs for safety, security, compliance, or other Customer
Service standards, such as the FAA regulations with respect to Pilot flight/duty time
limitations and rest requirements discussed above under “Business - Regulation”;
• changes in laws that may limit the Company’s ability to enter into fuel derivative contracts
to hedge against increases in fuel prices;
• changes in laws that may limit or regulate the Company’s ability to promote the
Company’s business or fares; and
• the adoption of more restrictive locally-imposed noise regulations.
Because expenses of a flight do not vary significantly with the number of passengers carried, a
relatively small change in the number of passengers can have a disproportionate effect on an airline’s
operating and financial results. Therefore, any general reduction in airline passenger traffic as a result
of any of the factors listed above could adversely affect the Company’s results of operations. In
addition, in instances where the airline industry shrinks, many airport operating costs are essentially
unchanged and must be shared by the remaining operating carriers, which can therefore increase the
Company’s costs.
The airline industry is affected by many conditions that are beyond its control, which can impact
the Company’s business strategies and results of operations.
In addition to the unpredictable economic conditions and fuel costs discussed above, the
Company, like the airline industry in general, is affected by conditions that are largely unforeseeable
and outside of its control, including, among others:
• adverse weather and natural disasters;
• outbreaks of disease;
• changes in consumer preferences, perceptions, spending patterns, or demographic trends
(including, without limitation, changes in government travel patterns due to government
shutdowns or sequestration);
• actual or potential disruptions in the air traffic control system (including, without
limitation, as a result of potential FAA budget cuts due to government shutdowns or
sequestration);
• changes in the competitive environment due to industry consolidation, industry
bankruptcies, and other factors;
• air traffic congestion and other air traffic control issues; and
• actual or threatened war, terrorist attacks, and political instability.
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