Southwest Airlines 2015 Annual Report Download - page 61

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The Company incurred $39 million in Acquisition and integration costs in 2015, related to the AirTran
integration, compared with $126 million in 2014. This expense primarily consisted of Employee
training, facilities integration, and certain expenses associated with the grounding and conversion costs
resulting from the transition of B717s to Delta. The Company does not expect to incur any further
Acquisition and integration costs beyond 2015. See Note 7 to the Consolidated Financial Statements
for further information.
Other operating expenses for 2015 increased by $37 million, or 1.7 percent, compared with 2014. On a
per ASM basis, Other operating expenses for 2015 decreased 4.8 percent, compared with 2014, as the
dollar increases were more than offset by the 7.2 percent increase in capacity. On a dollar basis,
the increase was equally attributable to higher personnel expenses associated with travel costs of the
Company’s flight crew and credit card fees paid to third parties associated with the increase in
Passenger revenues. These and other smaller increases were partially offset by a decrease in security
expenses as a result of the repeal of the TSA Aviation Security Infrastructure Fee in October 2014 and
a litigation settlement received by the Company in the first quarter of 2015. The Company currently
expects Other operating expenses per ASM for first quarter 2016 to be comparable with fourth quarter
2015.
Other
Other (gains) losses, net, primarily includes amounts recorded as a result of the Company’s hedging
activities. See Note 10 to the Consolidated Financial Statements for further information on the
Company’s hedging activities. The following table displays the components of Other (gains) losses,
net, for the years ended December 31, 2015, and 2014:
Year ended December 31,
(in millions) 2015 2014
Mark-to-market impact from fuel contracts settling in future periods $ 373 $ 251
Ineffectiveness from fuel hedges settling in future periods (9) 5
Realized ineffectiveness and mark-to-market (gains) or losses 72 (4)
Premium cost of fuel contracts 124 62
Other (4) (5)
$ 556 $ 309
Income Taxes
The Company’s effective tax rate was approximately 37.3 percent for 2015, compared with 37.4
percent for 2014. On a non-GAAP basis, the Company currently projects a full year 2016 effective tax
rate of approximately 37 to 38 percent based on forecasted financial results. However, the Company’s
effective tax rate during interim periods of 2016 may differ significantly from this full-year estimate.
53