Southwest Airlines 2014 Annual Report Download - page 60

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D.C. As a result of the acquisition, the Company estimates it achieved approximately $500 million in
net, pre-tax synergies during 2014 (excluding acquisition and integration expenses). In addition, the
acquisition also aided the Company’s expansion into near-international locations, such as the
Caribbean and Mexico, which led to the historic launch of Southwest international service during
second quarter 2014, and marked a significant achievement in the integration process. As
of December 31, 2014, all 52 AirTran 737-700 aircraft either have been converted to the Southwest
livery or have entered the conversion process and are expected to enter Southwest service during first
quarter 2015.
Fleet modernization
The Company is scheduled to be the launch customer for Boeing’s new, more fuel-efficient
737 MAX 8 aircraft, which is expected to enter service in 2017. The 737 MAX 8 is expected to reduce
fuel burn and CO2 emissions 20 percent, compared with the original Next-Generation 737s when they
first entered service. Southwest is also scheduled to be the launch customer for the Boeing 737 MAX
7 series aircraft, with deliveries expected to begin in 2019. Currently the Company has firm orders in
place for 170 MAX 8 aircraft and 30 MAX 7 aircraft. During 2014, the Company retired five Classic
(three 737-300 and two 737-500) aircraft from its fleet and intends to continue to replace these aircraft
as well as the 717-200 aircraft through its current order book with Boeing and through the purchase
and lease of additional pre-owned 737-700 aircraft from third parties. Following AirTran’s final
passenger service on December 28, 2014, the Company removed all remaining Boeing 717-200 aircraft
from service. As of December 31, 2014, 52 of AirTran’s 88 Boeing 717-200 aircraft had been
delivered to Delta pursuant to a lease/sublease agreement and 36 717-200 aircraft were undergoing or
awaiting conversion in preparation for delivery to Delta. See Note 7 to the Consolidated Financial
Statements for further information.
The continued incorporation of a larger aircraft, the Boeing 737-800, into Southwest’s fleet
To further support its fleet modernization efforts, the Company received a total of 33 Boeing
737-800s during 2014. As of December 31, 2014, the Company’s fleet included 85 737-800s. The
Boeing 737-800 (i) is better suited for certain potential new destinations, including near-international
locations, (ii) provides the Company with the opportunity to generate additional revenue by replacing
current aircraft on specified routes and locations that are restricted due to space constraints or slot
controls, and (iii) operates at a lower unit cost than other aircraft in the Company’s existing fleet.
International Capabilities and New Reservation System
The Company launched Southwest’s international service on July 1, 2014, with its inaugural
flights to three Caribbean destinations, Aruba, Nassau, and Montego Bay, followed by service to Cabo
San Lucas/Los Cabos and Cancun which commenced on August 10, 2014, and service to the two
remaining AirTran international destinations, Mexico City and Punta Cana, which commenced on
November 2, 2014. During third quarter 2014, the Company filed an application with the U.S.
Department of Transportation to add its first destination in Central America with daily roundtrip
service between Baltimore/Washington Thurgood Marshall International Airport (BWI) and Juan
Santamaria International Airport (SJO) in San Jose, Costa Rica, beginning March 7, 2015. In addition,
during fourth quarter 2014, the Company filed applications with the U.S. Department of Transportation
to provide daily, nonstop service between John Wayne Airport, Orange County (SNA) and Licenciado
Gustavo Diaz Ordaz International Airport (PVR) in Puerto Vallarta, Mexico, beginning June 7, 2015,
as well as daily nonstop service between Houston’s William P. Hobby Airport and Philip S. W.
Goldson International Airport in Belize City, Belize beginning in October 2015. The service to Belize,
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