Southwest Airlines 2015 Annual Report Download - page 34

The timely and effective execution of the Company’s strategic plans could be negatively affected by
(i) the Company’s ability to timely and effectively implement, transition, and maintain related
information technology systems and infrastructure; (ii) the Company’s ability to effectively balance its
investment of incremental operating expenses and capital expenditures related to its strategies against
the need to effectively control costs; and (iii) the Company’s dependence on third parties with respect
to its strategic plans.
Instability of credit, capital, and energy markets can result in pressure on the Company’s credit
ratings and can also negatively affect the Company’s ability to obtain financing on acceptable
terms and the Company’s liquidity generally.
While the Company’s credit rating is “investment grade,” factors such as future unfavorable economic
conditions, a significant decline in demand for air travel, or instability of the credit, capital, and energy
markets could result in future pressure on credit ratings, which could negatively affect (i) the
Company’s ability to obtain financing on acceptable terms, (ii) the Company’s liquidity generally, and
(iii) the availability and cost of insurance. A credit rating downgrade could subject the Company to
credit rating triggers related to its credit card transaction processing agreements, the pricing related to
any funds drawn under its revolving credit facility, and some of its hedging counterparty agreements.
The potential effect of credit rating downgrades is discussed in more detail below under “Quantitative
and Qualitative Disclosures About Market Risk.”
The airline industry has faced on-going security concerns and related cost burdens; further
threatened or actual terrorist attacks, or other hostilities, could significantly harm the airline
industry and the Company’s operations.
Terrorist attacks, actual and threatened, have from time to time materially adversely affected the
demand for air travel and also have resulted in increased safety and security costs for the Company and
the airline industry generally. Safety measures create delays and inconveniences and can, in particular,
reduce the Company’s competitiveness against surface transportation for short-haul routes. Additional
terrorist attacks, even if not made directly on the airline industry, or the fear of such attacks or other
hostilities (including elevated national threat warnings or selective cancellation or redirection of flights
due to terror threats) would likely have a further significant negative impact on the Company and the
airline industry.
Airport capacity constraints and air traffic control inefficiencies could limit the Company’s
growth; changes in or additional governmental regulation could increase the Company’s
operating costs or otherwise limit the Company’s ability to conduct business.
Almost all commercial service airports are owned and/or operated by units of local or state
governments. Airlines are largely dependent on these governmental entities to provide adequate airport
facilities and capacity at an affordable cost. Similarly, the federal government singularly controls all
U.S. airspace, and airlines are completely dependent on the FAA operating that airspace in a safe and
efficient manner. The air traffic control system, which is operated by the FAA, could continue to face
airspace and/or airport congestion challenges in the future, which could limit the Company’s
opportunities for growth. As discussed above under “Business—Regulation,” airlines are also subject
to other extensive regulatory requirements. These requirements often impose substantial costs on
airlines. The Company’s strategic plans and results of operations could be negatively affected by
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