Southwest Airlines 2014 Annual Report Download - page 66

decreased 9.6 percent, compared with 2013. On both a dollar and per ASM basis, approximately
70 percent of the decrease was attributable to the completion of the Evolve aircraft interior retrofit
program during 2013, and the majority of the remaining decrease was attributable to lower engine and
avionics repair expense as a result of the 717-200 aircraft transitioning out of the Company’s fleet. The
Company currently expects Maintenance materials and repairs expense per ASM for first quarter 2015
to be comparable to fourth quarter 2014.
Aircraft rentals expense for 2014 decreased by $66 million, or 18.3 percent, compared with
2013. On a per ASM basis, Aircraft rentals expense decreased 21.4 percent, compared with 2013. On
both a dollar and per ASM basis, the decrease primarily was due to the transition of leased 717-200
aircraft out of the Company’s fleet for conversion and delivery to Delta. The Company currently
expects Aircraft rentals expense per ASM for first quarter 2015 to decrease, compared with fourth
quarter 2014.
Landing fees and other rentals expense for 2014 increased by $8 million, or 0.7 percent,
compared with 2013. On a per ASM basis, Landing fees and other rentals expense for 2014 were flat,
compared with 2013. The dollar increase was primarily due to heavier landing weights for the
-800 aircraft. The Company currently expects Landing fees and other rentals expense per ASM for first
quarter 2015 to increase, compared with first quarter 2014.
Depreciation and amortization expense for 2014 increased by $71 million, or 8.2 percent,
compared with 2013. On a per ASM basis, Depreciation and amortization expense increased
9.1 percent, compared with 2013. On both a dollar and per ASM basis, approximately half the increase
was attributable to technology projects that have been placed into service over the last twelve months
and approximately half was due to the purchase of new and used aircraft over the last twelve months.
The Company currently expects Depreciation and amortization expense per ASM for first quarter 2015
to increase slightly, compared with first quarter 2014.
The Company incurred $126 million in Acquisition and integration costs in 2014, which
primarily consisted of expense associated with the removal of the remaining B717 fleet from service
during December 2014 (See Note 7 for further information), B717 fleet conversion costs, fleet
integration, Employee training, facility integration, and technology integration projects. During 2013,
the Company recorded $86 million in Acquisition and integration expense, which primarily consisted
of B717 fleet conversion costs, fleet integration, Employee training, technology integration projects,
and facility integration expenses.
Other operating expenses for 2014 increased by $79 million, or 3.7 percent, compared with
2013. On a per ASM basis, Other operating expenses for 2014 increased 3.1 percent, compared with
2013. On both a dollar and per ASM basis, approximately 40 percent of the increase was the result of
higher contract programming and consulting expenses, 20 percent of the increase was the result of
maintenance agreement contract rate increases, and the remainder of the increase was due to
individually insignificant items. The Company currently expects Other operating expenses per ASM
for first quarter 2015 to be comparable with fourth quarter 2014.
Through the 2003 Emergency Wartime Supplemental Appropriations Act, the federal
government has provided renewable, supplemental, first-party war-risk insurance coverage to
commercial carriers. The government-provided supplemental coverage from the Wartime Act expired
on September 30, 2014. However, the Company proactively canceled its FAA provided War Risk
Insurance coverage on May 15, 2014, and effective the same date, purchased comparable coverage via
the commercial insurance marketplace.
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