Southwest Airlines

Southwest Airlines

File:Southwest Airlines Logo.svg
IATA ICAO Callsign WN SWA SOUTHWEST
Founded	1971
Focus cities	McCarran International Airport Chicago Midway International Airport Phoenix Sky Harbor International Airport Baltimore-Washington International Airport Oakland International Airport William P. Hobby Airport Dallas Love Field Los Angeles International Airport Orlando International Airport San Diego International Airport
Frequent-flyer program	Rapid Rewards
Fleet size	502
Destinations	64
Parent company	Southwest Airlines Co.
Headquarters	Dallas, Texas
Key people	Gary C. Kelly (CEO) Herb Kelleher (Chairman) Laura Wright (CFO) Colleen Barrett (President)
Website	http://www.southwest.com

Southwest Airlines, Inc. (NYSE: LUV) is an American low-fare airline based in Dallas, Texas. It is the largest airline in the United States by number of passengers carried domestically for any one year and the second largest airline in the world by number of passengers carried. It also maintains the fourth-largest fleet of aircraft among all of the world's commercial airlines.

Southwest Airlines carried more customers than any other U.S. airline in August 2006, making it the first time that Southwest Airlines has topped the monthly list for combined domestic and international passengers, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics. Southwest Airlines is one of the world's most profitable airlines and in January 2007, posted a profit for the 34th consecutive year. Its reputation for low prices and a laid-back atmosphere have made it an icon of pop culture.

History

Southwest Airlines was originally incorporated to serve three cities in Texas as Air Southwest on March 15, 1967, by Rollin King and Herb Kelleher. According to frequently-cited legend, King described the concept to Kelleher over dinner by drawing on a paper napkin a triangle symbolizing the routes.

Some of the incumbent airlines of the time (Braniff, Trans-Texas, and Continental Airlines) initiated legal action, and thus began a three-year legal battle to keep Air Southwest on the ground. Air Southwest eventually prevailed in the Texas Supreme Court, which ultimately upheld Air Southwest's right to fly in Texas. The decision became final on December 7, 1970, when the U.S. Supreme Court declined to review the case without comment. That date is considered by many to be the de facto beginning of deregulation in the airline industry.

The story of Southwest's legal fight was turned into a children's book, Gumwrappers and Goggles by Winifred Barnum in 1983. In the story, TJ Love, a small jet, is taken to court by two larger jets to keep him from their hangar, and then to try and stop him from flying at all. Taken to court, TJ Love's right to fly is upheld after an impassioned plea from The Lawyer. While no company names are mentioned in the book, TJ Love's colors are those of Southwest Airlines, and the two other jets are colored in Braniff and Continental's colors. The Lawyer is designed to resemble Herb Kelleher. The book was adapted into a stage musical, Show your Spirit, sponsored by Southwest Airlines, and played only in towns serviced by the airline.

Southwest Airlines founder Herb Kelleher studied Pacific Southwest Airlines extensively and used many of the airline's ideas to form the corporate culture at Southwest, and even on early flights used the same "Long Legs And Short Nights" theme for stewardesses on board typical Southwest Airlines flights.

The airline adopted the first profit-sharing plan in the U.S. airline industry in 1973. Through this plan and others, employees own about 10 percent of the company stock.

The airline is about 87 percent unionized. The pilots are represented by the Southwest Airlines Pilots' Association, a union separate from the much larger ALPA union.

First flights

In early 1971, Air Southwest changed its name to Southwest Airlines, and the first flight was on June 18, 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio, short hops with no-frills service and a simple fare structure, features that became the basis for Southwest's popularity and rapid growth in the coming years.

The start of service in June 1971 was accomplished with three 737-200 aircraft; a fourth was added in September of the same year.

Over time, Southwest has added improved 737 variants but has stayed within the Boeing 737 family to hold down operating costs. Because this technique simplified training, maintenance, and ground operations, it revolutionized the industry's approach to building aircraft fleets.

In January 2005, Southwest retired its last 737-200, the oldest type in its fleet. To celebrate "putting the -200s to bed", selected employees donned Southwest pajamas for an early morning flight to celebrate the final landing at Dallas Love.

In February of 2005, Louis Freeman was recognized as having been Southwest Airlines' first African American pilot. He later became the first African American Chief Pilot of any major U.S. airline, in 1992.

Early losses and financial troubles

The rest of 1971 and 1972 saw operating losses. One of the four aircraft was sold to Frontier Airlines and the proceeds used to make payroll and cover other expenses. Southwest continued to operate a schedule predicated on four aircraft but using only three, and in so doing the "ten minute turn" was born, and was the standard ground time for many years.

Southwest turned its first annual profit in 1973, and has done so every year since — a record unmatched by any other commercial airline. Southwest has used financial techniques such as fuel hedging to bolster its profitability and counteract many of the fiscal disadvantages of operating an airline.

By 1979 Southwest served all of the cities currently served in Texas, plus Beaumont and interstate service began to New Orleans, Oklahoma City and Tulsa was added shortly thereafter. In 1981 Southwest co-launched the 737-300 with USAir. In 1982 the first expansion beyond the Texas area took Southwest to the West Coast, adding Phoenix, Las Vegas and San Diego. In 1984 the 737-300 was placed into service. Chicago Midway and St. Louis service began in March, 1985, spreading low-fare service into Midwest markets.

A Southwest plane at Portland International Airport

Hedging fuel

Southwest has a longtime program to hedge fuel prices. It has purchased fuel options years in advance to smooth out fluctuations in fuel costs.

In 2000, Southwest said it had "adjusted its hedging strategy" to "utilize financial derivative instruments... when it appears the Company can take advantage of market conditions." Additionally, the company hoped to "take advantage of historically low jet fuel prices." SEC statement Southwest's decision proved to be a prescient and, for a time, extremely profitable effort.

To lock in the low historical prices Southwest believed were occurring at that time, Southwest used a mixture of swaps and call options to secure fuel in future years while paying prices they believed were low. The company also stated that with this new strategy, it faced substantial risks if the oil prices continued to go down, but they did not. Previously, Southwest had been more interested in reducing volatility of oil prices. Now, they hoped to reap large gains from oil price appreciation.

In 2001, Southwest again substantially increased its hedging in response to projections of increased crude oil prices. The use of these hedges helped Southwest maintain its profitability during the oil shocks related to the Iraq War and later Hurricane Katrina.

According an annual report, here is the company's fuel hedge for forward years ("approximate" per barrel basis, as of mid-January): 2007 is 95% hedged at $50/barrel; 2008 is 65% hedged at $49/barrel; 2009 is over 50% hedged at $51/barrel; 2010 is over 25% hedged at $63/barrel; 2011 is over is 15% hedged at $64/barrel; 2012 is 15% hedged at $63/barrel.

According to its 2006 Annual Report, Southwest paid low prices for fuel thanks to the benefit of fuel hedges:

• 2004 - 82.8 cents
• 2005 - 103.3 cents
• 2006 - 153.0 cents

These are well below market rates, which Southwest factors into its low operating costs. However, this below-market oil cost will not continue forever; executives have said that Southwest faces increased exposure to the raw oil market every year. This is not a good sign for the airline, which is also facing tough competition from US legacy carriers that have lowered costs through bankruptcy. Southwest CEO Gary Kelly has decided to slow the airlines' growth as a response to this cost.

Risk managers find it difficult to endorse the style of profit-motivated energy trading Southwest did between 1999 and the early 2000s. Risk managers have suggested that rather than hedging business risk, (such as a hedge on weather to a farmer), Southwest was simply speculating on energy prices, without a formal rationale for doing so. As an airline company, the goal of "taking advantage" of the commodity market's flaws was quite unusual. Hedge or no hedge, the long-term speculative outcome does not lessen the marginal cost of monthly flight operations. If flights lost money at market prices, they still would be canceled to maximize shareholder value -- since, crucially, the fuel hedges could be sold for cash on the open market.

At present, Southwest has enjoyed much positive press (and a strong financial boost) from its energy trading skills. However, while most analysts agree that volatility hedges can be beneficial, speculative hedges are not widely supported as a continuing strategy for profits. The early 2000s hedges may in retrospect be an anomalous, lucky event and also a claim to fame for Southwest Airlines' reputation as a financially adept company.

Southwest.com

On March 16, 1995, Southwest became one of the first airlines to have a web site. Originally called the "Southwest Airlines Home Gate", customers could view schedules, a route map, and company information at http://www.iflyswa.com. The company later obtained the rights to its current home on the web, southwest.com, from an unaffiliated business. Southwest consistently rejects syndicating its fares to fare search sites such as expedia.com or orbitz.com.

Southwest.com is the number one airline web site for online revenue, according to PhoCusWright. Nielsen/Netratings also reports that Southwest.com is the largest airline site in terms of unique visitors. In 2006, 70 percent of flight bookings and 73 percent of revenue was generated from bookings on southwest.com. As of December 2006, 55 percent of Southwest passengers checked in for their flights online.

The Wright Amendment

Main article: Wright Amendment

A Southwest plane preparing to land at Lindbergh Field in San Diego. Complete elimination of the Wright Amendment would allow non-stop Southwest service from Dallas Love Field to as far west as California

After the opening of Dallas-Fort Worth Regional Airport, which was the original name of Dallas-Fort Worth International Airport in 1974, Southwest was the only airline to remain at Love Field.

When airline deregulation came in 1978, Southwest began planning to offer interstate service from Love Field. This caused a number of interest groups affiliated with Dallas-Ft. Worth Airport, including the city of Fort Worth, to push the Wright Amendment through Congress to restrict such flights. Under the restrictions of the amendment Southwest, and all other airlines, were barred from operating, or even ticketing passengers on flights from Love Field to destinations beyond the states immediately surrounding Texas. In effect, to travel through Love Field, a passenger and luggage would have to deplane and fly on a separate ticket, on a separate aircraft.

The Wright Amendment's restrictions didn't apply to aircraft configured with 56 or fewer seats. In 2000 Legend Airlines attempted to operate long distance business-class flights using older DC-9s with 56 seats, but did not have the resources to survive American's legal and marketing attacks, and quickly ceased operations. Southwest has not used the 56 seat loophole, even with its market strength at Love Field and the availability of more modern regional jets such as the CRJ-700/900 and the Embraer ERJ 145 family.

Southwest's efforts to repeal or even alter the Wright Amendment had been met with opposition from American Airlines and Dallas Ft. Worth International Airport. Both American Airlines and DFW contended that repeal of the Wright Amendment restrictions would cripple DFW, while Southwest contended that repeal of the Wright Amendment would be beneficial to both Love Field and DFW. Continental Airlines has a successful hub and spoke operation at Houston Bush Intercontinental Airport despite unrestricted competition from Southwest at Houston Hobby Airport.

In 1997, Southwest's effort began to pay off with the Shelby Amendment which added the states of Alabama, Mississippi, and Kansas to the list of permissible destination states. Southwest now offers service between Dallas Love Field and Jackson, MS, via a connection at Houston, which it couldn't do prior to the enactment of the Shelby Amendment.

Since late 2004, Southwest began actively seeking the full repeal of the Wright Amendment restrictions. In late 2005, Missouri was added to the list of permissible destination states via a transportation appropriations bill. New service from Love Field to St. Louis and Kansas City quickly started in December 2005.

At a June 15, 2006 joint press conference held by the City of Dallas, the City of Ft. Worth, Dallas-Ft. Worth Airport, American Airlines, and Southwest Airlines, the said parties announced a tentative agreement on how the Wright Amendment was to be phased out. Both the U.S. Senate and House of Representatives passed Wright-related legislation on September 29, 2006, and it was signed into law by the president on October 13, 2006. The new law became effective on October 16, 2006, when the FAA Administrator notified Congress that any new aviation operations occurring as a result of the new law could be accommodated without adverse effect to the airspace.

Southwest's tribute to Arizona undergoes maintenance at Portland International Airport

Southwest started selling tickets under the new law on October 19, 2006. Highlights of the agreement are the immediate elimination of through-ticketing prohibitions, and unrestricted flights to domestic destinations eight years after the legislation takes effect. This agreement was a resounding victory for Southwest Airlines because nationwide service became possible, and the law defined the maximum number of gates at Love Field. Southwest controls all of the Love Field gates except for the two each that American and Continental control. The future of the Legend Airlines terminal for use by commercial airlines is in doubt because of the limit on number of gates.

Southwest remains the dominant passenger airline at Love Field, maintains its headquarters, hangars, and flight simulators adjacent thereto, and reflects its ties to Love Field in its ticker symbol (LUV).

Despite the restrictions on its home base, Southwest proceeded to build a successful business on an unusual model: flying multiple short, quick trips into the secondary (more efficient and less costly) airports of major cities, using primarily only one aircraft type, the Boeing 737.

Destinations

Main article: Southwest Airlines destinations

Southwest Airlines currently flies to 63 destinations throughout the United States. The airline is adding its 64^th destination on August 26, 2007 when it begins service to San Francisco, California.

Current service

Ramp operations at William P. Hobby Airport, with a Boeing 737-300 parked at a gate

Southwest does not use the more traditional "hub and spoke" flight routing system of most major airlines, preferring instead the "Point to Point" system. Currently, Southwest serves 63 cities in 32 states, with more than 3,200 flights a day. It has notably large operations in certain airports. Las Vegas's McCarran International Airport has non-stop service to almost all of Southwest's locations. Other airports with large Southwest operations include Chicago Midway International Airport, Phoenix Sky Harbor International Airport, Baltimore-Washington International Airport, Orlando International Airport, Tampa International Airport and Houston's William P. Hobby Airport, with all of these airports operating non-stop flights to more than half of the Southwest system. An average of 80 percent of Southwest passengers are local passengers, meaning only 20 percent of all passengers are connecting passengers. This is significantly higher than most airlines, where passengers often connect in hub cities.

As part of its effort to control costs, Southwest tries to use secondary airports which generally have lower costs and may, or may not be, more convenient to travelers than the major airports to the same destinations. For example, Southwest flies to Midway Airport in Chicago, Fort Lauderdale-Hollywood International Airport in South Florida, Love Field in Dallas, Hobby Airport in Houston, Manchester-Boston Regional Airport in Manchester, New Hampshire, and T. F. Green Airport in Providence, Rhode Island, instead of O'Hare International Airport, Miami International Airport, DFW International, IAH International in Houston, and Logan International Airport in Boston, respectively. Southwest also serves the New York Metropolitan area at Long Island MacArthur Airport.

A Southwest plane prepares for its next flight at Bob Hope Airport in Burbank, California

Southwest makes exceptions to the philosophy of serving secondary airports by flying into some larger airports in major cities, such as Phoenix Sky Harbor International Airport, Detroit Metropolitan Airport, Baltimore-Washington International Airport, Philadelphia International, Cleveland Hopkins International Airport, Seattle-Tacoma International and Pittsburgh International. In the Los Angeles market Southwest flies to both the major city airport, Los Angeles International, and to three of the four secondary airports, Bob Hope Airport, John Wayne Airport, and LA/Ontario International Airport (it does not serve Long Beach Airport).

Southwest withdrew from San Francisco International and Houston George Bush Intercontinental in favor of using smaller airports with fewer operations nearby. In February 2007, Southwest announced its intent to return to San Francisco International Airport as its next city opening, beginning August 26, 2007. The airline also once served Stapleton International Airport in Denver but withdrew in 1986 because of excessive ATC delays during poor weather exacerbated by minimal separation between the runways. Southwest returned to Denver in 2006 with service to the new Denver International Airport. Besides Houston (Intercontinental) and Denver (Stapleton International), the airline has withdrawn completely from airports in Beaumont, Texas and Detroit, Michigan (Detroit City Airport).

On October 5, 2006, Southwest Airlines started operations at Washington-Dulles Airport (IAD) with 12 daily flights from two gates in Concourse B.

Southwest is the largest intra-state airline in California, with 674 flights total in the state, 355 of of which are intra-California.

Markets lacking Southwest service

Due to intense competition from near-monopoly airlines such as Delta, Northwest, Continental and others, some markets are not cost-effective for Southwest. New York City-area flights are serviced from Long Island MacArthur Airport or through Southwest's codeshare with ATA Airlines to New York-LaGuardia instead of directly through the three main New York-area airports (LaGuardia Airport, Kennedy (JFK) International, or Newark Liberty International). Other large cities without Southwest service include Atlanta, Charlotte, Cincinnati, Memphis, Milwaukee, and Minneapolis/St. Paul.

With the exception of Florida, the southeastern part of the U.S. route map geographically has a large string of voids. There are only three cities in the whole region - Birmingham, Nashville and Raleigh/Durham. Another void also persists in the mid northern part of the US stretching from Wisconsin to Montana/Wyoming and also Alaska.

For Seattle in 2005, Southwest proposed service to Boeing Field, which is a smaller airport closer to downtown than Seattle-Tacoma International Airport. However, King County leaders refused to allow a terminal to be built or service to begin.

At this time, Southwest does not serve any destinations outside the United States. While other low cost carriers such as AirTran, Frontier, and JetBlue have started to fly to international destinations, Southwest Airlines has not ruled out the possibility of an international market in the future, as they are within range of their 737-700 aircraft. CEO Gary Kelly stated in June of 2007 that because of shrinking profits, the airline will likely slow its rate of expansion.

Top ten destinations

The following airports, as of April 19, 2007, are the top ten most served by Southwest Airlines:

Southwest Airlines top ten destinations

City	Daily departures	Number of gates	Nonstop cities served	Service established
Las Vegas	231	21	53	1982
Chicago-Midway	223	29	47	1985
Phoenix	206	24	42	1982
Baltimore/Washington	178	26	39	1993
Oakland	142	11	20	1989
Houston-Hobby	140	17	28	1971
Dallas-Love Field	131	14	15	1971
Los Angeles (LAX)	120	11	19	1982
Orlando	108	12	34	1996
San Diego	95	10	15	1982

New service

On June 27, 2007, Southwest Airlines announced substantial additions to their route schedule, adding new nonstop flights (mainly out of Denver) which are slated to begin November 4, 2007.

On February 9, 2007, Southwest Airlines announced internally that it was planning to restart operations at San Francisco International Airport, a station the airline closed in 2001. Southwest CEO Gary Kelly has stated that the airline plans to commence service at SFO beginning in the "early fall" of 2007. On May 11, 2007, in an e-mail to Rapid Rewards members, Southwest announced that service to and from San Francisco would begin August 26th with eight daily nonstops to San Diego, seven to Las Vegas and three to Chicago's Midway Airport.

Effective August 4, 2007

• Daily nonstop service between Baltimore, MD (BWI) and Oklahoma City, OK (OKC) begins.

In addition to these new nonstops, Southwest Airlines is also increasing frequencies of 41 flights between cities they already serve. These additions will be in effect by August 4, 2007.

Effective August 26, 2007

• Daily nonstop service between Manchester, NH (MHT) and Phoenix, AZ (PHX) begins.
• Daily nonstop service between Chicago, IL (MDW) and San Francisco, CA (SFO) begins.
• Daily nonstop service between Las Vegas, NV (LAS) and San Francisco, CA (SFO) begins.
• Daily nonstop service between San Diego, CA (SAN) and San Francisco, CA (SFO) begins.

Effective November 4, 2007

• Daily nonstop service between Albuquerque, NM (ABQ) and Denver, CO (DEN) begins.
• Daily nonstop service between Amarillo, TX (AMA) and Denver, CO (DEN) begins.
• Daily nonstop service between Austin, TX (AUS) and Denver, CO (DEN) begins.
• Daily nonstop service between Oklahoma City, OK (OKC) and Denver, CO (DEN) begins.
• Daily nonstop service between Seattle/Tacoma, WA (SEA) and Denver, CO (DEN) begins.
• Daily nonstop service between Oakland, CA (OAK) and Tucson, AZ (TUS) begins.
• Daily nonstop service between Birmingham, AL (BHM) and New Orleans, LA (MSY) begins.

Discontinued service

Effective October 4, 2007

• Daily nonstop service between Cleveland, OH (CLE) and Phoenix, AZ (PHX) ends.
• Daily nonstop service between Santa Ana/Orange County, CA (SNA) and Chicago, IL (MDW) ends.

Effective November 4, 2007

• Daily nonstop service between Los Angeles, CA (LAX) and Baltimore, MD (BWI) ends.
• Daily nonstop service between Oakland, CA (OAK) and Baltimore, MD (BWI) ends.
• Daily nonstop service between Los Angeles, CA (LAX) and Philadelphia, PA (PHL) ends.
• Daily nonstop service between Oakland, CA (OAK) and Philadelphia, PA (PHL) ends.
• Daily nonstop service between Midland/Odessa, TX (MAF) and El Paso, TX (ELP) ends.

The Southwest Effect

Main article: The Southwest effect

A Southwest plane lands in Las Vegas, Nevada. Southwest and US Airways are the dominant carriers at McCarran International Airport

The success and profitability of Southwest's business model led to a common trend being named after the company: The Southwest Effect. Since Southwest's original mission in Texas was to make it less expensive than driving between two points (in the early 1970s, during the first major energy cost crisis in the U.S.), it developed a template for entering markets at rates that allowed the airline to be profitable, yet only on the basis of lean operations and high aircraft use. The key concept to the Southwest Effect is that when a low-fare carrier (or any aggressive and innovative company) enters a market, the market itself changes, and usually grows dramatically. For example, when fares drop by 50% from their historical averages, the number of new customers in that market may not just double, but actually quadruple, or more.

Southwest has been a major inspiration to other low-cost airlines, and its business model has been repeated many times around the world. Europe's easyJet and Ryanair are two of the best known airlines to follow Southwest's business strategy in that continent (though easyJet operates two different aircraft models today). Other airlines with a business model based on Southwest's system include Canada's WestJet, New Zealand's Freedom Air , and Malaysia's AirAsia (the first and biggest LCC in Asia) and Thailand's Nok Air.

Morris Air

One airline influenced by Southwest was Morris Air, founded by June Morris and David Neeleman, based in Utah and operating in the northwestern U.S. Southwest Airlines purchased Morris Air and absorbed the capital and routes into its inventory and service. David Neeleman worked with Southwest for a short period. When his non-compete agreement expired, Neeleman founded JetBlue Airways, a competing airline that also incorporates many principles and practices pioneered by Southwest, including building a positive, warm employee culture and operating a simple fleet.

TranStar Airlines

Southwest Airlines has mostly pursued a strategy of internal growth, rather than by acquisition of other airlines as commonly occurs. However, in addition to acquisition of Morris Air Transport (see above), Southwest did acquire competitor Muse Air in 1985, which operated McDonnell Douglas MD-80s. Muse Air was renamed TranStar Airlines.

Icelandair

In 1997, Southwest and Icelandair entered into interline and marketing agreements allowing for joint fares, coordinated schedules, and transfer of passenger luggage between the two airlines at Baltimore. Icelandair operated flights between Baltimore and Keflavik Airport in Iceland. Connecting service between several U.S. cities and several European cities appeared in the Southwest timetable The frequent flyer programs were not included in the agreement. This arrangement lasted for several years but is no longer in existence.

ATA Airlines

ATA Airlines, one of Southwest Airlines main competitors in the Chicago market, historically operated out of Midway Airport alongside Southwest. ATA declared bankruptcy, and in 2004, Southwest injected capital into ATA that (among other things) would have resulted in Southwest's 27.5% ownership stake in ATA upon their exit from Chapter 11 bankruptcy proceedings.

In a departure from its traditional "go it alone" strategy, Southwest entered into its first domestic codesharing arrangement with ATA, which enabled Southwest Airlines to serve ATA markets in Hawaii, Washington D.C., and New York City.

In late 2005, ATA secured $100 million in additional financing from the firm of Matlin Patterson, and Southwest's original deal with ATA was modified such that Southwest no longer retained the 27.5% stake (or any other financial interest) in ATA. The codeshare arrangement, however, continues to remain in place and has expanded, with some internal controversy, to include all of ATA's 17 destinations and all of Southwest's 63 destinations. In 2006, Southwest's pilot union approved a codeshare sideletter to their contract with limitations on the growth of this and other codeshare agreements. While these restrictions today are minor, outsourcing remains a growing concern in the unions current contract negotiations.

During 2006, Southwest Airlines began marketing ATA only flights. ATA's dependence on the Southwest network continued to grow in 2006, and today ATA offers over 70 flights a week to Hawaii from Southwest's hubs in PHX, LAS, LAX, ONT, and OAK. Additional connecting service is available to many other cities across the United States. Plans have been announced for ATA to offer exclusive international service for Southwest by 2010. Southwest today has taken over all ground operations for ATA at MDW, OAK, PHX, LAX, and LAS. These contracts provide that Southwest ramp personnel will now handle all ground operations (loading of aircraft, ground servicing, etc.) for ATA. The details of these contracts have not been made public but represent Southwest's and ATA's growing mutually beneficial codeshare relationship. Presently, there is no plan to open the ATA/Southwest codeshare to ATA's sister carriers; North American Airlines or World Airways, even though they are co-owned by the same corporate entity created from ATA Holdings.

Beginning in February 2005, ATA was run by John Denison, Southwest's former Chief Financial Officer. Effective January 1, 2007, Denison turned things over to Subodh Karnik, who is now President and Chief Executive Officer. Denison remains ATA's Chairman and Chairman of Global Aero Logistics Inc., the new name of ATA Holdings.

Corporate culture

Intertwined with Southwest's innovative business model has been a consistent emphasis on the value of people, both customers and employees. From the beginning of its operations, Southwest urged employees to have fun doing their work, and to make the experience of flying Southwest not only convenient but enjoyable.

Southwest experience

The experience of flying on Southwest is quite different from that of most other U.S. airlines from beginning to end.

Tickets cannot be purchased through common online venues like Orbitz or Travelocity, although a minority are booked through travel agents. However, most of Southwest tickets are issued directly by the airline over the phone or online at the company's website which features Web only fare discounts.

Unlike other major airlines, Southwest allows passengers to change reservations without penalty (save the potentially additional cost of the new ticket). While this provides flexibility to customers, Southwest does not allow same-day standby travel on a different flight (usually a free service at other airlines) without upgrading to maximum fare.

Customers are not assigned seats; rather, they are assigned to one of three "boarding group" depending on their check-in time (earlier check-ins get to board earlier), and are left to choose their own seats on the plane, which helps the airline to board passengers faster. At the May 2006 shareholders meeting, Southwest management announced a study of potentially adopting an assigned-seating system in 2008, as part of a reservations-technology overhaul now under way. Currently, Rapid Rewards members are being surveyed about such ideas and limited tests began at some markets.

As a result of the boarding policy, several independent companies have offered automatic check-in services for Southwest. These companies take customer's orders for check-in ahead of the 24 hour mark (when the airline makes a flight available for online check-in) and transmit the necessary data for check-in to Southwest as soon as the airline opens up online check-in for a particular flight. The result of this service is that people using it generally get the first boarding group (known as the "A" boarding group). These early check-in sites include CheckinSooner.com and boardfirst.com. Southwest has not embraced this practice and has sued boardfirst.com in federal court with trial set for fall 2007.

Southwest still allows three pieces of luggage to be checked in free as opposed to the limit of two on the domestic flights of some other U.S. airlines.

In the past, meal service was less than on full service airlines (now often called "legacy airlines"), with shorter flights receiving just a single small snack and soft drink, and longer flights (with a duration of about 3 hours or more) meriting a "Snack Pack" of prepackaged goods. In the post-9/11 era these meals in a bag typically exceed the food served on full-service airlines like United or American. Southwest also offers free inflight beverages (excluding alcoholic beverages). Although there is no video entertainment, Southwest is known for colorful boarding announcements and crews that burst out in song. The singing is unusual, and is quite popular among customers, but has been noted by some travel critics as being offensive and intrusive.

For all the leanness in comforts, which helped it pass through the post-9/11 travel slump as one of the few profitable major American airlines, Southwest manages to maintain excellent customer satisfaction ratings. In 2006, according to the Department of Transportation December year end operating statistics, Southwest ranked number one (lowest number of complaints) of all U.S. airlines for customer complaints, with 0.18 per 100,000 customers enplaned. Southwest Airlines has consistently received the fewest ratio of complaints per passengers boarded of all major U.S. carriers that have been reporting statistics to the Department of Transportation (DOT) since September 1987, which is when the DOT began tracking Customer Satisfaction statistics and publishing its Air Travel Consumer Report.

Rapid Rewards

Southwest's frequent flier program is called Rapid Rewards. Currently, customers receive one credit for each one-way trip (even though the flight may have stopovers). A free ticket, expiring after 11 months, is automatically issued when a member accumulates 16 credits in a 24-month period. Double Rapid Rewards credits used to be awarded for online booking, but this policy was modified at the end of 2003. At that time the bonus was reduced to .5 credit for each segment booked online, (i.e., each round-trip ticket booked online received a total of 3 Rapid Rewards credits). This was discontinued in April 2005. In addition, one-half credit is also earned for using a Southwest partner to book any car rental and/or hotel stay, regardless of whether a Southwest flight is involved. This arrangement has won numerous Freddy Awards over the years.

In February 2006, Southwest instituted capacity controls to redeeming its free tickets. This means that the airline limits the seats offered to frequent travelers using free certificates on each flight, whereas previously if there was a seat available, one could use the award, provided the passenger was not flying on one of the five blackout dates.

In early 2006, Southwest expanded its codeshare agreement with ATA Airlines and now allows redemption of award tickets on Hawaii flights at the rate of two awards per round trip flight. Southwest and ATA stress that reward availability to Hawaii will be very limited. Travelers can also earn twice the normal number of credits when they purchase airfare on Hawaii-bound flights.

Playful, effective advertising

The company, from inception, employed humor in its advertising. Examples include "Just Plane Smart," "The Somebody Else Up There Who Loves You" and "THE Low Fare Airline". The airline's current slogan is "A Symbol of Freedom". A select history of print and video ads are available on the company website[1].

Since the 1990s, Southwest has been running a television ad campaign based on the phrase "Wanna get away?" The commercials present comical, embarrassing situations in which people find themselves wanting to "get away". Most ads are accompanied by the sound clip "[ding] You are now free to move about the country"; self-parody of the in-flight announcement that "you are now free to move about the cabin".

The PA "ding" has become synonymous with Southwest Airlines, and inspired the name of an online ticket offer program, Ding!.

The Southwest Airlines television commercial, “Flight Attendant,” was named in Adweek’s ‘Best Spots’ in August 2006.

A Southwest plane at Chicago Midway International Airport

"Just Plane Smart"

Shortly after Southwest started using the "Just Plane Smart" motto, Stevens Aviation, who had been using "Plane Smart" for their motto, threatened a trademark lawsuit.

Instead of a lawsuit, the CEOs for both companies staged an arm wrestling match. Held at the now demolished Dallas Sportatorium (the famed wrestling facility) and set for two out of three rounds, the loser of each round was to pay $5,000 to the charity of their choice, with the winner gaining the use of the trademarked phrase. A promotional video was created showing the CEOs "training" for the bout (with CEO Herb Kelleher being helped up during a sit up where a cigarette and glass of whiskey (Wild Turkey 101) was waiting) and distributed among the employees and as a video press release along with the video of the match itself. Herb Kelleher lost the match for Southwest, with Stevens Aviation winning the rights to the phrase. Kurt Herwald, CEO of Stevens Aviation, immediately granted the use of "Just Plane Smart" to Southwest Airlines. The net result was both companies having use of the trademark, $15,000 going to charity and a healthy dose of goodwill publicity for both companies.

Colorful personalities

Southwest employees are generally well-known for friendliness, (for example, one pilot is known to greet passengers while playing the banjo); this is often attributed to a unique "love-based" corporate atmosphere that made chairman and founder Herb Kelleher a celebrity in the business world. The President of Southwest is corporate secretary Colleen Barrett, who has been with the company since day one. Southwest's CFO is Laura Wright. In July 2007, it was announced that Herb Kelleher and Colleen Barrett will resign their respective positions effective May 2008. Both will remain active employees of Southwest Airlines. Southwest has 1,133 married couples. In other words, 2,266 Southwest Employees have spouses who also work for the company.

Concerns attributed to labor unrest and complaints by the Transport Workers Union of America (TWU) representing Southwest flight attendants were reportedly a factor in the recent resignation of Kelleher's hand-picked replacement as CEO. Jim Parker resigned in July 2004 and was replaced by Chief Financial Officer Gary Kelly.

Organized labor

Although Southwest is considered a "low fare" airline, it is heavily unionized compared with other airlines. The Southwest Airline Pilots' Association, a union not affiliated with the Air Line Pilots Association, International, represents the airline's pilots.

Airline

The American version of the reality show Airline showcased Southwest Airlines passengers and employees in daily mishaps and life at some of Southwest's major airports (BWI, MDW, LAX, & HOU). The show premiered January 5, 2004 on the A&E Network, but was canceled after 70 episodes on December 15, 2005.

Fleet

File:Southwest Airlines Cabin.jpg

An example of a Southwest Boeing 737-700 with the airline's new leather seating

Current fleet

The Southwest Airlines fleet consists of the following aircraft as of June 28, 2007:

Aircraft	Total	Passengers (Economy)	Routes	Notes
Boeing 737-300	194	137	Short-medium haul	Launch customer
Boeing 737-500	25	122	Short haul	Launch customer
Boeing 737-700	283 (111 orders)	137	All routes	Launch customer All but 2 are fitted with blended winglets.

The airline operates more Boeing 737s in its fleet than any other airline in the world; Southwest is often cited as an example of an airline streamlining operations by having only one type of aircraft. However, Southwest operated leased 727-200 aircraft during the late-1970s and again in the mid-1980s and subsidiary TranStar Airlines operated DC-9s and MD-80s during the mid-1980s. Southwest has been a launch customer for all three of the Boeing 737 variants it currently operates, and was the first airline to put both the Model 500 and next-generation Model 700 into service. Southwest has a mix of old and new aircraft with both its "classic" and "next generation" 737 aircraft.

As of July 2007, Southwest has an average fleet age of 9.8 years, and fly an average of about 7 flights per day. The average aircraft trip length is 627 miles with an average duration of one hour and 49 minutes. This means the daily utilization of each plane is 12 hours and 30 minutes.

Southwest's seats are the same width as any other operator of 737s in the United States. However seats are approximately one inch narrower than Airbus A320 series operated by low cost carriers such as Frontier Airlines, JetBlue, US Airways, Skybus Airlines and several other competitors. Southwest's seat pitch averages between 32 and 33 inches, which compares to average of 31 to 32 inches for U.S. domestic airlines.

Southwest's 737-300 and 737-500 aircraft are not equipped with glass cockpit technology, as the 737-300s, 737-400s, and 737-500s of some other airlines are. Instead, the flight decks are fitted with analog gauges, more similar to those of the earlier 737-100 and 737-200 variants. Note the analog attitude deviation indicator (ADI) and horizontal situation indicator (HSI) (the blue-colored instrument and one below it) in this Southwest 737-3H4 and note the electronic versions of the same instruments (EADI and EHSI) in this United Airlines 737-322. There are electronic displays throughout the cockpit of the 737-700 and other "Next Generation" 737 variants, and Southwest has programmed their 737-7H4 models to emulate the appearance of the 737-300 and 737-500 for standardization purposes.

Since production of the 737-300 and 737-500 has ended, recent Southwest orders have been exclusively for the 737-700 model.

Southwest is the world's largest operator of the 737. Their current active fleet is over 500 aircraft. In terms of total 737 production (all models in history), deliveries of new aircraft from Boeing to Southwest accounts for approximately 9% of total production. Southwest has one of the largest fleets in North America.

Retired fleet

Southwest Airlines Retired Fleet

Aircraft	Year Retired	Replacement	Notes
Boeing 737-200	2005	Boeing 737-700	Southwest's first aircraft type

Livery

Southwest Boeing 737-500 in the old livery

Southwest Boeing 737-300 in the new livery

Southwest's original winglets meet Southwest's blue winglets at Tucson International Airport. Almost all of SWA's 737-700s have blended winglets installed

Southwest's original primary livery was beige and red, with orange on the tail end, and pinstripes of white separating each section of color. The word Southwest appears in white on the beige portion of the tail. (Although, on the original three 737-200s, from June of 1971, the word Southwest was placed along the upper rear portion of the fuselage, with the word Airlines painted on the tail where Southwest is today. Example: N21SW

Southwest introduced the Canyon Blue Fleet in 2001, its first primary livery change in its 30-year history. Spirit One was the first plane painted in the color scheme. The new livery replaces the primary beige color with canyon blue and changes the Southwest text and pinstripes to gold. The pinstripe along the plane is drawn in a more curved pattern instead of the straight horizontal line separating the colors in the original. The original livery is gradually being phased out, but three aircraft will remain in the original livery to commemorate Southwest's original three cities.

Almost all of Southwest's 737-700's have blended winglets, with a few exceptions, such as aircraft purchased from other carriers or corporations. The first planes to be fitted with the winglets remain in the plain colored winglet (matching the stripes on the fuselage), but later aircraft to be fitted have winglets with "SOUTHWEST.COM" written on them. All aircraft will eventually be repainted to the ".com" winglets. Special livery aircraft with winglets, such as Shamu, have plain white winglets.

Additionally, Southwest will install blended winglets on up to 90 of its 737-300 aircraft beginning in mid-January 2007, with AAR of Indianapolis, Indiana, accomplishing the work. The first modified aircraft, N368SW, resumed service on February 22, 2007.

Some Southwest planes feature special themes, rather than the normal livery. These theme planes have been given special names, usually ending in "One". Some of the most well-known examples are:

• Shamu: The three aircraft are painted to look like an Orca, with advertisements for SeaWorld. (N334SW), (N713SW), (N715SW)
  • The first aircraft to be painted in the "Shamu" scheme was N334SW (1988), a 737-300, and it was later followed by N507SW (Shamu II) and N501SW (Shamu III), both 737-500s. Subsequent to the retirement of Southwest's 737-200s, the 737-500s began to stay within a smaller geographic area formerly operated by the 737-200s, and as such, Sea World was no longer getting the optimal national exposure from these two aircraft. Two 737-700 aircraft, N713SW and N715SW, were repainted as the new Shamu aircraft, and both N501SW and N507SW were eventually repainted in Canyon Blue colors. All three current Shamu aircraft are no longer referred to as Shamu I, II, or III. The artwork on the nose of each aircraft simply states "Shamu". The overhead bins of these aircraft display ads for Sea World, except towards the front and back of the airplane, where the bins get smaller and are no longer uniform.
• The Spirit of Kitty Hawk: (1984) Livery and title introduced the Boeing 737-300 aircraft to the Southwest Airlines fleet. This plane is the oldest in Southwest's fleet. (N300SW)
• Lone Star One: (1990) The flag of the state of Texas applied across the aircraft. (N352SW)
• Arizona One: (1994) The flag of the state of Arizona applied across the aircraft. (N383SW)
• The June M. Morris: (1994) In honor of June Morris, Signature and Morris Air logo on the nose. Logo removed for Canyon Blue repaint. (N607SW, Original, Canyon Blue)
• California One: (1995) The flag of the state of California applied across the aircraft. (N609SW)
• Silver One: (1996) 25th Anniversary aircraft. Originally polished bare metal, it was later painted silver for easier maintenance. It was then re-painted with a silver metallic paint. This aircraft also featured silver seats, which were replaced to conform with the rest of the fleet for simplicity. Silver One also featured silver heart shaped drink stirrers.(N629SW, Original, Silver Paint, Canyon Blue)
• Triple Crown One: (1997) Livery dedicated to the employees of Southwest, in recognition of Southwest receiving five Triple Crown airline industry awards (best on-time record, best baggage handling, and fewest customer complaints). The overhead bins in Triple Crown One one are inscribed with the names of all employees that worked for Southwest at the time, in honor of their part in winning the award.(N647SW)
• Nevada One: (1999) The flag of the state of Nevada applied across the aircraft. (N727SW)
• New Mexico One: (2000) The flag of the state of New Mexico applied across the aircraft. (N781WN)
• Spirit One: (2001) 30th Anniversary aircraft. (First Aircraft in New Canyon Blue paint scheme) (N793SA)
• The Spirit of Hope: (2004) Dedicated to the Ronald McDonald House. Overhead bins are covered in artwork from kids at a Ronald McDonald House in Washington State. (N443WN), (The overhead bins)
• Maryland One: (2005) The flag of the state of Maryland applied across the aircraft. (N214WN)
• Slam Dunk One: (2005) Basketball superimposed on side of aircraft and a different NBA team logo on each overhead bin in the cabin, recognizing Southwest's partnership with the National Basketball Association. (N224WN)
• Southwest received both the 5,000th 737 produced (February 13, 2006) (N230WN) and the 2,000th "Next Generation" 737 produced (July 27, 2006) (N248WN). The 2,000th "Next Generation" 737 is marked as such in its livery, though the 5,000th 737 is not similarly marked.
• Southwest received their 500th 737 on June 28, 2007. This aircraft is marked to honor this milestone. (N281WN)

All special planes prior to Spirit One originally wore the standard beige, red and orange livery colors on the vertical stabilizer and rudder. Subsequent special editions—Maryland One and Slam Dunk One, so far—feature tails with the canyon blue color scheme, and all earlier specials, with the exception of Triple Crown One have been repainted to match.

Incidents and accidents

Southwest has had four major incidents of note, one involving a passenger fatality that happened due to the passenger's deliberate actions, and one involving a ground fatality.

• On March 5, 2000, Southwest Airlines Flight 1455 overran the runway upon landing at Burbank-Glendale-Pasadena Airport, now called Bob Hope Airport, Burbank, California, injuring 43. The incident resulted in the dismissal of the pilots, and the plane written off.
• On August 11, 2000, passenger Jonathan Burton broke through the cockpit door aboard Southwest Airlines Flight 1763 while en route from Las Vegas to Salt Lake City. In their own defense, the other passengers restrained Burton who later died of the resulting injuries.

• On December 8, 2005, Southwest Airlines Flight 1248 skidded off a runway upon landing at Chicago Midway International Airport, in heavy snow conditions. Joshua Woods, a young boy, was killed in a car struck by the plane after it had skidded into a street. There were also several minor injuries reported from passengers onboard the aircraft and on the ground. Aircraft involved was N471WN which later became N286WN after being repaired.
• On June 3, 2007, Southwest Airlines Flight 3050, Boeing 737-300 enroute from Sacramento to San Diego experienced a landing gear indication and diverted to Oakland, landing at 3:32pm. The nose-gear collapsed on landing. No injuries were reported, but all 119 passengers and crew were evacuated from the aircraft on the emergency slides. The aircraft remained at the departure end of Runway 29 in Oakland until approximately 12:30am, causing minor disruptions in service to that airport.

Awards and recognitions

• The American Brand Excellence Awards recognize leading national brands that best serve the needs of small- and medium-sized businesses. For 2007, Southwest Airlines came out tops in the Travel segment, based on a City Business Journals Network nationwide survey of 1,000 business decision-makers who evaluated 251 brands.
• Southwest Airlines’ Rapid Rewards program was honored in InsideFlyer magazine’s 2006 annual Freddie Awards for Best Program of the Year, Best Award Redemption, Best Award, Best Web Site, and Best Bonus Promotion Honors.
• For 2007, the eighth year in a row, Business Ethics magazine lists Southwest Airlines in its “100 Best Corporate Citizens,” a list that ranks public companies based on their corporate service to various stakeholder groups. Southwest is one of only 11 repeat winners that have made the list all eight years
• In 2005, The American Customer Satisfaction Index (ACSI) recognized Southwest Airlines as leading the industry in customer satisfaction. The ACSI, conducted by the University of Michigan, independently tracks customer satisfaction levels by measuring the household consumption experience.
• Since 2000, HISPANIC magazine has listed Southwest Airlines as Corporate 100 for leadership in providing opportunities for Hispanics and for supporting recruitment, scholarships, and minority vendor programs.
• The Express Delivery & Logistics Association honored Southwest Airlines as the “2006 Airline of the Year.”
• In 2005, American Small Business Travelers Alliance ranked Southwest Airlines as the "Best Airline Among Small Business Travelers."
• Southwest president Colleen Barrett was chosen as 2007's Tony Jannus Award winner, becoming the first woman to be honored in the 44-year history of the respected aviation award.
• Professional Women's magazine included Southwest Airlines in their 2006 ranking of the "Most Admired Companies Among Women."
• According to Institutional Investor magazine, Southwest Airlines ranked number one in the Consumer category among all airlines as the “Most Shareholder Friendly Company” based on the effectiveness of Southwest’s governance and investor relations as part of their overall efforts to maximize share holder value.
• Southwest Airlines took top honors in the ninth Business Travel News Annual Airlines Survey.

• In 2006, Southwest ranked in GIjobs.nets list of 50 military friendly employers. At number 37, Southwest was the only major commercial airline to make the list.
• In its January 2006 issue, Institutional Investor ranked Southwest CEO Gary Kelly as one of America's top CEO's. He was ranked best CEO in the airline sector.

References

• Southwest Airlines website