Southwest Airlines 2014 Annual Report Download - page 64

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Company’s unionized Employee groups that are currently in negotiations on collective-bargaining
agreements:
Employee Group
Approximate Number
of Employees Representatives Amendable Date
Southwest Pilots 7,500
Southwest Airlines Pilots’ Association
(“SWAPA”) August 2012
Southwest Flight Attendants 11,850
Transportation Workers of America,
AFL-CIO, Local 556 (“TWU 556”) May 2013
Southwest Ramp, Operations,
Provisioning, Freight Agents 10,000
Transportation Workers of America,
AFL-CIO, Local 555 (“TWU 555”) June 2011
Southwest Material Specialists
(formerly known as Stock Clerks) 250
International Brotherhood of
Teamsters, Local 19 (“IBT 19”) August 2013
Southwest Mechanics 2,100
Aircraft Mechanics Fraternal
Association (“AMFA”) August 2012
Southwest Facilities Maintenance
Technicians 40 AMFA N/A
Fuel and oil expense for 2014 decreased by $470 million, or 8.2 percent, compared with 2013.
On a per ASM basis, Fuel and oil expense for 2014 decreased 8.6 percent, compared with 2013.
Excluding the impact of fuel hedge accounting, both the dollar and per ASM decreases were primarily
attributable to lower jet fuel prices. The Company’s average economic jet fuel price per gallon
decreased 6.4 percent year-over-year, from $3.12 for 2013 to $2.92 for 2014. In addition, fuel
efficiency improved slightly due to the Company’s fleet modernization efforts, as fuel gallons
consumed decreased 0.9 percent, compared with 2013, while year-over-year capacity increased
0.5 percent. As a result of the Company’s fuel hedging program, the Company recognized
net gains totaling $28 million in Fuel and oil expense for 2014, compared to
net losses totaling $118 million for 2013. These totals include cash settlements realized from the
settlement of fuel derivative contracts totaling $56 million received from counterparties for 2014,
compared to $34 million paid to counterparties for 2013, although such totals exclude gains and/or
losses recognized from hedge ineffectiveness and from derivatives that do not qualify for hedge
accounting. These impacts are recorded as a component of Other (gains) losses, net. See Note 10 to the
Consolidated Financial Statements.
As of January 16, 2015, as a result of the significant decline in fuel prices during the second half of
2014, the Company had reduced its fuel hedging position for future years, and the Company had derivative
contracts in place, on an economic basis, related to expected future fuel consumption as follows:
Average percent of estimated fuel consumption covered by
fuel derivative contracts at varying WTI/Brent Crude Oil,
Period Heating Oil, and Gulf Coast Jet Fuel-equivalent price levels
2015 (1) —
2016 Approx. 10%
2017 Approx. 30%
2018 (1) —
(1) In response to the precipitous decline in oil and jet fuel prices during the second half of 2014, the Company took
action to offset its 2015 and 2018 fuel derivative portfolios and is now effectively unhedged at current price levels.
While the Company still holds derivative contracts as of December 31, 2014, that will settle during 2015 and 2018,
the majority of the losses associated with those contracts are substantially locked in. However, if market prices were
to increase or decrease significantly related to the 2015 positions prior to these contracts settling, the losses incurred
at settlement could be slightly lower or higher than currently expected amounts during that period.
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