Southwest Airlines 2015 Annual Report Download - page 56

• Pilots, represented by the Southwest Airlines Pilots’ Association, reached a tentative
collective bargaining agreement with the Company, which was announced September 17,
2015. The Pilots failed to ratify this agreement, as announced by the Company on
November 4, 2015, and the parties will continue negotiations.
• Ramp, Operations, Provisioning, and Freight Agents, represented by the Transport Workers
Union Local 555, reached a tentative collective bargaining agreement with the Company,
which was announced on December 29, 2015. The agreement has been presented to members
for ratification and the vote will be closed in first quarter 2016.
2015 Compared with 2014
Operating Revenues
Passenger revenues for 2015 increased by $641 million, or 3.6 percent, compared with 2014. Holding
load factor and yield constant, the increase was primarily attributable to a 7.2 percent increase in
capacity as strong Customer demand for low-fare air travel enabled the Company to fill the additional
seats, as evidenced by a Company record annual load factor of 83.6 percent. On a unit basis, Passenger
revenue decreased 3.4 percent, year-over-year, largely driven by a 4.7 percent decrease in passenger
revenue yield, year-over-year.
Freight revenues for 2015 increased by $4 million, or 2.3 percent, compared with 2014, primarily due
to increased pounds shipped. Based on current trends, the Company currently expects Freight revenues
in first quarter 2016 to be comparable to fourth quarter 2015.
The Company recorded a Special revenue adjustment during 2015 of $172 million. This adjustment
represented a one-time non-cash reduction to the deferred revenue liability as a result of the July 2015
amended Agreement with Chase and the resulting change in accounting methodology. The adjustment
is classified as a special item and thus excluded from the Company’s non-GAAP financial results. See
Note 1 to the Consolidated Financial Statements and the Note Regarding Use of Non-GAAP Financial
Measures for further information.
Other revenues for 2015 increased by $398 million, or 51.6 percent, compared with 2014, primarily as
a result of the July 2015 amended Agreement with Chase and the resulting change in accounting
methodology. The Agreement resulted in an acceleration of the timing of revenue recognition on a
prospective basis beginning July 1, 2015, as well as a change in classification. The transportation
element of the consideration received is now allocated a lower relative value, resulting in a reduction in
the revenues classified as Passenger on a prospective basis, and the higher relative value associated
with the non-transportation elements results in an increase in the portion of revenues classified as
Other within the Consolidated Statement of Income; however, the precise revenue impact for future
periods is not determinable until the volume of future transactions for the period is known. Ancillary
revenues increased slightly year-over-year, primarily due to an increase in EarlyBird Check-in®and
A1-15 select boarding positions sold at the gate, which was partially offset by the decrease in revenues
from the termination of AirTran passenger service and related ancillary fees.
While some yield softness has continued into January, demand for low-fare air travel, thus far, remains
strong. Based on favorable booking and revenue trends, and including the estimated $110 million first
quarter 2016 effect of the amended Agreement with Chase, the Company is currently expecting first
quarter 2016 operating unit revenues to be flat with first quarter 2015. See Note 1 to the Consolidated
Financial Statements for further information.
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