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Southwest Airlines Co. (NYSE: LUV) is an American low-fare airline based in Dallas, Texas, with its largest focus city at Las Vegas' McCarran International Airport. It is the largest airline in the United States by number of passengers carried domestically per year and (as of December 31, 2007) also the largest airline in the world by number of passengers carried.[1] It is also the 6th largest U.S. airline by revenue.[2] It also maintains the fourth-largest fleet of aircraft among all of the world's commercial airlines (Tied 4th place with Northwest Airlines)
Southwest Airlines has carried more customers than any other U.S. airline since August 2006 for combined domestic and international passengers according to the U.S. Department of Transportation’s Bureau of Transportation Statistics.[3] Southwest Airlines is one of the world's most profitable airlines and in January 2008, posted a profit for the 35th consecutive year.[4]
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.(Dallas, Houston, San Antonio)[5]
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.[6] The decision became final on December 7, 1970, when the U.S. Supreme Court declined to review the case without comment.[7] 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.[8]
Southwest Airlines founder Herb Kelleher studied California-based 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,[9] 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. In 1972, one plane was sold for a profit after flight schedule reductions.
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.
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.[10]
Southwest turned its first annual profit in 1973, and has done so every year since — a record unmatched by any other commercial airline.[11] 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.
Southwest hired its first African-American pilot, Louis Freeman, in 1980. In 1992, he was named the first African-American chief pilot of any major U.S. airline.[12]
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/gallon
- 2005 - 103.3 cents/gallon
- 2006 - 153.0 cents/gallon
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[13] 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.[14] 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.[15]
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.[16] In 2006, 70 percent of flight bookings and 73 percent of revenue was generated from bookings on southwest.com. As of June 2007, 69 percent of Southwest passengers checked in for their flights online or at a kiosk.[16]
Alleged violations of safety requirements
On March 6, 2008, Federal Aviation Administration (FAA) inspectors submitted documents to the United States Congress, alleging that Southwest allowed 117 of its aircraft to fly carrying passengers despite the fact that the planes were "not airworthy" according to air safety investigators.[17] In some cases the planes were allowed to fly for up to 30 months after the inspection deadlines had passed, rendering them unfit to fly. Records indicate that thousands of passengers were flown on aircraft deemed unsafe by federal standards. Southwest declined comment at the time, and US Representative James Oberstar advised a hearing would be held. [18]
On March 12, 2008, Southwest Airlines voluntarily grounded 44 planes to check if they needed further inspection. Federal Aviation Administration claims that Southwest Airlines flew almost 60,000 flights without fuselage inspection. Southwest Airlines could be facing a 10.2 million dollar fine if they violated FAA regulations. There have also been rumors that the FAA knew about Southwest Airlines violations but decide not to fine the airline because it would disrupt the service of Southwest.[19]
The Wright Amendment
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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.[20] 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,[21] while Southwest contended that repeal of the Wright Amendment would be beneficial to both Love Field and DFW.[11] 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 has actively sought 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 President George W. Bush 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 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
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Southwest Airlines currently flies to 64 destinations throughout the United States. The airline added its 64th destination on August 26, 2007 when it resumed service from San Francisco, California.
Current service
Southwest does not use the more traditional "hub and spoke" flight routing system of most other major airlines, preferring instead the "Point to Point" system. Currently, Southwest serves 64 cities in 32 states, with more than 3,300 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.[22] 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.[23]
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 and West Palm Beach 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 Intercontinental in Houston, and Logan International Airport in Boston, respectively. Southwest also serves the New York Metropolitan area at Long Island MacArthur Airport.
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, Orlando International Airport, Detroit Metropolitan Airport, Philadelphia International, Denver International Airport, Cleveland Hopkins International Airport, Seattle-Tacoma International and Pittsburgh International. In the Baltimore-Washington market, Southwest has limited flights into one major airport (Washington Dulles International Airport) while maintaining their east-coast focus city at the region's other major airport, Baltimore-Washington International Airport. In the Los Angeles market Southwest flies to both the major city airport, Los Angeles International (LAX), and to three of the four secondary airports, Burbank-Bob Hope Airport, John Wayne Airport, and LA/Ontario International Airport (it does not serve Long Beach Airport). With the restoration of service out of San Francisco International Airport on August 26, 2007, Southwest now serves all three airports in the San Francisco Bay Area; the other two being Oakland International Airport and San Jose International Airport.
Southwest withdrew from Houston Intercontinental in favor of using smaller airports with fewer operations nearby. Besides Houston (Intercontinental) and Denver (Stapleton International), the airline has withdrawn completely from airports in Beaumont, Texas and Detroit, Michigan (Detroit City Airport).
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. Southwest is expanding its Denver service faster than it has at any previous Southwest city[24] at the cost of service to Orlando, Kansas City and Baltimore.[25]
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 694 flights total in the state, 370 of which are intra-California.
Markets lacking Southwest service
Due to intense competition from airlines such as Delta, Northwest, Continental and others,[citation needed] some markets are not cost-effective for Southwest. New York City-area flights are serviced from Long Island MacArthur Airport 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. Southwest lost codeshare service to Washington-Reagan on November 28, 2007 and also New York-LaGuardia on January 7, 2008, as ATA Airlines discontinued service to those cites.
With the exception of Florida, the southeastern part of the U.S. route map geographically has a large string of voids. There are only four cities in the whole region - Birmingham, Nashville, Raleigh/Durham and Jackson. Another void also persists in the mid northern part of the US stretching from Wisconsin to Montana/Wyoming and also Alaska. According to the airline's route map, 15 or so states are without Southwest service in their cities.
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.[26]
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 well within range of Mexico, Central America, Canada, and the Caribbean with their 737-700 aircraft.[citation needed] CEO Gary Kelly stated in June of 2007 that because of shrinking profits, the airline will likely slow its rate of expansion.[27]
Top ten airports
The following airports, as of November 16, 2007, are the top ten most served by Southwest Airlines:[16]
New service
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.[28]
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.
Southwest also announced that they will be participating in Disney's Magical Express program in Orlando, FL. The program allows passengers to check their bags through from their home airport through to their rooms at a Walt Disney World resort.[29]
Effective March 17, 2008
- Daily nonstop service between Austin, TX (AUS) and Philadelphia, PA (PHL) begins.[30]
- Daily nonstop service between St. Louis, MO (STL) and Philadelphia, PA (PHL) begins.[30]
- Daily nonstop service between San Antonio, TX (SAT) and Philadelphia, PA (PHL) begins.[30]
Effective April 4, 2008
- Daily nonstop service between San Diego, CA (SAN) and Denver, CO (DEN) begins.[31]
Effective May 10, 2008
- Daily nonstop service between Los Angeles, CA (LAX) and Denver, CO (DEN) begins.[32]
- Daily nonstop service between Philadelphia, PA (PHL) and Denver, CO (DEN) begins.[32]
- Daily nonstop service between Raleigh/Durham, NC (RDU) and Denver, CO (DEN) begins.[32]
- Daily nonstop service between St. Louis, MO (STL) and Denver, CO (DEN) begins.[32]
- Daily nonstop service between San Antonio, TX (SAT) and Denver, CO (DEN) begins.[32]
- Daily nonstop service between San Jose, CA (SJC) and Denver, CO (DEN) begins.[32]
- Daily nonstop service between Austin, TX (AUS) and Fort Lauderdale, FL (FLL) begins.[32]
- Daily nonstop service between Manchester, NH (MHT) and Fort Lauderdale, FL (FLL) begins.[32]
- Daily nonstop service between Jacksonville, FL (JAX) and Las Vegas, NV (LAS) begins.[32]
- Daily nonstop service between Norfolk, VA (ORF) and Nashville, TN (BNA) begins.[32]
- Daily nonstop service between Austin, TX (AUS) and Oakland, CA (OAK) begins.[32]
International service
Southwest Airlines has set a goal to codeshare with ATA and begin international codeshare services or ticket for international flights in 2009. Destinations served by ATA may include Canada, the Caribbean, and Mexico. In 2010, Southwest plans to partner with other carriers for transatlantic and transpacific flights. European service may be operated by ATA in cooperation with Southwest.[33][34]
The Southwest Effect
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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 as well as Canada's WestJet, are some 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 New Zealand's Freedom Air, Malaysia's AirAsia (the first and biggest LCC in Asia), Qantas's Jetstar (although Jetstar now operates two aircraft types) 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.[35]
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[36] 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, 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. On November 8, 2007, Global Aero Logistics, parent company of ATA, formally announced to Southwest Airlines that its code-share passengers would be flying upon North American Airlines crewed aircraft for a portion of the 2007 Christmas season.
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
Southwest experience
Tickets cannot be purchased through common online venues like Orbitz or Travelocity; a minority are booked through travel agents. Most of Southwest's 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 additional cost. 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 groups" 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. As of November 8, 2007 Southwest has implemented an update to their Boarding Procedure in which passengers are now assigned their Boarding letter (A, B or C) along with a number which provides them a specific place in line (Example: A32). The idea behind this is to allow customers to not have to wait in line and spend their time relaxing or catching up on work. They have also introduced Business Select fares, which adds a guaranteed "A" group boarding pass, extra Rapid Rewards credit, and a drink. 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 Seat-Sniper.com and CheckinSooner.com. Southwest has not embraced this practice and in fact sued one company (boardfirst.com) in federal district court in Dallas for impermissible commercial use of its website and succeeded in getting the company shut down in October 2007.
Southwest historically allowed 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. Starting January 29, 2008, passengers will be able to check up to two bags for free. A third bag will be accepted for a $25 charge.
Prior to the 2000s, Southwest served smaller meals than the meals served by full service airlines (now often called "legacy airlines"), with shorter flights receiving single small snacks and soft drinks, and longer flights (with a duration of about 3 hours or more) meriting "Snack Pack"s of prepackaged goods. In the 2000s these meals in a bag typically exceed the food served on full-service airlines like United Airlines or American Airlines.[citation needed] Southwest also offers free in-flight beverages (excluding alcohol). 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.[37]
Southwest maintained 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. 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 Freddie 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.
Advertisements
The company has employed humor in its advertising. Slogans 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.[38]
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 Southwest Airlines television commercial, “Flight Attendant,” was named in Adweek’s ‘Best Spots’ in August 2006.
"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.
Employment
The President of Southwest is 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 will resign his position as Chairman effective May 2008. Colleen Barrett will leave her post on the Board of Directors and Corporate Secretary in May 2008 and President in July 2008. Both will remain active employees of Southwest Airlines.
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.[39]
Organized labor
Although Southwest is considered a "low fare" airline, it is heavily unionized when compared to other airlines.[40] The Southwest Airline Pilots' Association, a union not affiliated with the Air Line Pilots Association, International, represents the airline's pilots.[41] The Aircraft Maintenance Technicians' are represented by the Aircraft Mechanics Fraternal Association (AMFA).[42]
Customer Service Agents and Reservation Agents are represented by the International Association of Machinists and Aerospace Workers Union (IAM). Flight Attendants, Ramp agents and Operations agents are represented by the Transport Workers Union (TWU). Flight Dispatchers are represented by the Southwest Airlines Employee Association (SAEA).
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
Current fleet
The Southwest Airlines fleet consists of the following 525 aircraft as of March 10, 2008:
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.[43]
As of March 2008, Southwest has an average fleet age of 9.7 years,[44] and fly an average of about 7 flights per day. The average aircraft trip length is 633 miles (1,019 km) with an average duration of one hour and 48 minutes. This means the daily utilization of each plane is, on average, 12 hours and 36 minutes.[16]
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, Virgin America, US Airways, Skybus Airlines and several other competitors. Southwest's seat pitch averages between 32 and 33 inches (840 mm), which compares to average of 31 to 32 inches (810 mm) for U.S. domestic airlines. However, rival low-fare carrier JetBlue Airways offers from 32 inches (810 mm) to 36 inches.[45]
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. All three versions of the Boeing 737 that Southwest operates use (HUD) Heads Up Display in the flight deck. This technology consists of a glass panel which folds down on the Captain's side, and displays primary flight information as a hologram.
Since production of the 737-300 and 737-500 has ended, recent Southwest orders have been exclusively for the 737-700 model. Retirements of some older 737-300 models commenced in December of 2007 from its original count of 194.
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
Livery
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 appeared in white on the beige portion of the tail. (Although, on the original three 737-200s, from June of 1971, on the left side of the plane, 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 N21SW. On the right side, the word Southwest was in the same place as today, but also had the word Airlines painted on the upper rear portion of the fuselage.N20SW.
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. As of November 16, 2007, Southwest had nearly completed updating the fleet.[16]
Almost all of Southwest's 737-700s 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.[16]
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)
- Nolan Ryan Express: (1998) Commemorative sticker dedicated to famous Texas pitcher Nolan Ryan who is MLB's all-time strikeout leader with 5,714 strikeouts. (N742SW)
- 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 three major incidents of note and has never had a passenger fatality due to an accident.
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