southwest airlines

Southwest Airlines, Inc. (NYSE: LUV), based in Dallas, Texas, is a low-fare airline in the United States. It is the third-largest airline in the world by number of passengers carried and the largest in the United States by number of passengers carried domestically.^[1]

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.

Some of the incumbent airlines of the time (Braniff, Trans-Texas, and Continental Airlines) initiated legal action, and thus began a 3 year legal battle to keep Air Southwest on the ground. Air Southwest eventually prevailed in the United States Supreme Court, which ultimately upheld Air Southwest's right to fly in Texas. December 7, 1970, the date of the Supreme Court decision, is considered by many to be the de facto beginning of deregulation in the airline industry.^[2]

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 that had been obtained from Boeing on favorable terms, and a fourth aircraft was obtained in September of 1971.

Over time, Southwest has added improved 737 variants but has stayed within the Boeing 737 family to reduce 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 that covered the original Dallas-San Antonio-Houston triangle before returning to 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 of Denver and the proceeds used to make payroll and cover other expenses. Southwest continued to operate a schedule predicated on 4 aircraft but using only 3, 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 in commercial airline industry history. Southwest has used financial techniques 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.

Hedging fuel

Southwest has a longtime program to hedge fuel prices. Southwest has purchased fuel options for years in advance to smooth out fluctuations in fuel costs. Southwest substantially increased its hedging in 2001 in response to projections of increased crude oil prices. The use of these hedges helped Southwest maintain its profitability during the aftermath of the September 11, 2001 attacks and the oil shocks related to the Iraq War and later Hurricane Katrina. As of 2005, Southwest is currently paying 50% of the market price for its fuel; however, the price Southwest pays will increase as hedges from 2001 and 2002 expire and new hedges at higher prices take effect. Southwest has hedges of varying percentages and prices in place through 2009.

The Wright Amendment

Main article: Wright Amendment

After the opening 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 DFW, 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 left one loophole, that aircraft configured with 56 or fewer seats are exempt from the Wright Amendment. 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 E-jets.

Southwest's efforts to repeal or even alter the Wright Amendment had been met with opposition from American Airlines and DFW 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. As of 2006, Southwest does not operate any nonstops from Love Field to cities in the Shelby Amendment states, and does not serve any airport in Kansas. Southwest does, however, offer service between Dallas Love Field and Birmingham, AL, and Jackson, MS, via connections at Houston, which it couldn't do prior to the enactment of the Shelby Amendment.

Since late 2004, Southwest has been 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 of 2005.

At a June 15, 2006 joint press conference held by the City of Dallas, the City of Ft. Worth, DFW 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, which must be signed by the President in order to become effective. Highlights of the agreement are the immediate elimination of through-ticketing prohibitions, and unrestricted flights to domestic destinations 8 years after the legislation takes effect.

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.

Flights

Main article: Southwest Airlines destinations

Current Service

Southwest is one of the few airlines to depart from the more traditional "Hub-and-Spoke" flight routing system. It has notably large operations in certain airports. These include Maryland's BWI Airport, Chicago's Midway Airport, Houston's Hobby Airport, Las Vegas' McCarran International Airport, Nashville International Airport, Oakland International Airport, Sky Harbor International Airport in Phoenix, and San Diego International Airport. Southwest also has large operations at Orlando International Airport and Tampa International Airport, where it handles a large amount of tourist traffic to various cities throughout the eastern United States. Currently, Southwest serves 63 cities in 32 states.

As part of its effort to control costs, Southwest tries to utilize secondary airports which generally have lower costs and are more convenient to travelers than the major airports at some destinations. For example, Southwest flies to Fort Lauderdale-Hollywood International Airport in South Florida, Love Field in Dallas, Manchester-Boston Regional Airport and T. F. Green Airport in Providence, Rhode Island, Midway Airport in Chicago, and Oakland International Airport and Mineta San Jose International Airport in the Bay Area instead of Miami International Airport, DFW International, Logan International Airport in Boston, O'Hare International, and San Francisco International respectively.

Southwest makes exceptions where necessary, and flies into some larger airports in major cities, such as Los Angeles International, Phoenix Sky Harbor International Airport, Philadelphia International, Cleveland Hopkins International Airport, Seattle-Tacoma International and Pittsburgh International.

Southwest withdrew from San Francisco International and Houston George Bush Intercontinental in favor of utilizing smaller airports with fewer operations nearby. It also once served Stapleton International Airport in Denver but withdrew in 1986 because of congestion caused by limited space between the runways. Southwest returned to Denver in 2006 with service to the new Denver International Airport.

Markets Lacking Southwest Service

Due to intense competition from near-monopoly airlines such as United, Northwest, 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 to LaGuardia Airport instead of directly through the three main New York Area airports (Newark Liberty International, JFK International, or LaGuardia). Other large cities without Southwest service include Minneapolis / St. Paul, Charlotte, Atlanta, Cincinnati, Memphis, and Milwaukee.

Top Ten Airports

New service

Washington-Dulles

On October 5, 2006, Southwest started operations at Washington-Dulles Airport (IAD) with 12 daily flights from two gates in Concourse B. The new service is as follows:

• Dulles to Chicago-MDW = 7 daily departures
• Dulles to Las Vegas = 1 daily departure
• Dulles to Orlando = 2 daily departures
• Dulles to Tampa Bay = 2 daily departures

Southwest announced plans to begin Dulles service earlier this year, but kept destinations secret until July 13th. The official announcement can be found here.

The Southwest Effect

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.), they 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 utilization. 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), while Canada's WestJet is using Southwest's modus operandi in that country. New Zealand's Freedom Air and Thailand's Nok Air are other examples of airlines that are based on Southwest's system.

Morris Air

One airline influenced by Southwest was Morris Air, founded by June Morris and David Neeleman and based in Utah and operating in the northwest 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, he then left the airline. When his non-compete agreement expired, Neeleman founded jetBlue, 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. ^[4]

ATA Airlines

ATA Airlines, one of Southwest Airlines main competitors in the Chicago market 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.

Southwest also 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. (Some years earlier, Southwest had a short-lived traditional codeshare arrangement with Icelandair at Baltimore-Washington International Thurgood Marshall Airport.)

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 continues, with some internal controversy, to expand.

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.

Distinct customer service philosophy

The experience of flying on Southwest is quite different from that of most other U.S. airlines. Tickets must be bought from the airline itself, and can't be purchased through a travel agent or through common online venues like Orbitz or Travelocity. The airline's tickets can be bought over the phone or online at the company's website which features Web only fare discounts. Unlike other major airlines, Southwest reservations can be changed at will, without penalty (save the potentially additional cost of the new reservation). This makes Southwest a very flexible service for customers.

Southwest Experience

Customers are not assigned seats; rather, they are assigned to a "boarding group" depending on their check-in time (earlier check-ins get to board earlier), and are left to find their own seats on the plane. In May 2006, it was announced in a shareholders meeting that they were weighing the costs of adopting an assigned-seating system in 2008, as part of a reservations-technology overhaul now under way. Meal service is less than on historically full service airlines, with shorter flights receiving just a single small snack and soft drink, and longer flights 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. Although there is no video entertainment, Southwest is known for colorful boarding announcements and crews that burst out in song.

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.

Since August 2006, Southwest has considered putting assigned seating in place. This may be put into effect as early as 2008. Currently, Rapid Rewards members are being surveyed about such ideas.

Rapid Rewards

Southwest's frequent flier program is called Rapid Rewards. Currently, customers receive one credit per each one-way ticket (even though the flight may have stopovers). Previously a .5 credit bonus was offered 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 late 2005. Double Rapid Rewards credits used to be awarded for online booking, but this policy was eventually modified in early 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. Therefore, by booking one's flight online, and using a SWA partner for one's hotel stay and car rental, one may receive 3 Southwest Rapid Rewards credits per trip. This arrangement has consistently proved popular with frequent fliers, and has won numerous Freddy Awards over the years. After recent program modifications it is unknown how the customer base will be impacted and whether the airline will continue to earn Freddy Awards.

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, you could use the award, provided you were not flying on one of the five blackout dates.

In early 2006, Southwest expanded its codeshare agreement with ATA Airlines and will allow redemption of award tickets on Hawaii flights at the rate of two awards per round trip flight. Details on the Hawaii codeshare will be disclosed in the 3rd Quarter 2006. Travelers can also earn twice the normal number of credits 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".

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

"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. 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 scotch 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, which 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 former corporate secretary Colleen Barrett, who has been with the company since day one. Southwest's CFO is Laura Wright.

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.^[5]

Southwest is the basis of the American version of the reality show Airline.

Fleet

Southwest's current fleet is entirely made up of Boeing 737 aircraft. 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.^[6]

As of August 2006, Southwest has an average fleet age of 9.5 years.^[7], and fly an average of about 7 flights per day. The average aircraft trip length is 619 miles with an average duration of one hour and 46 minutes. This means the daily utilization of each plane is 12 hours and 30 minutes.^[8]

Southwest's seats are no narrower than any other operator of 737s in the United States. JetBlue, United Airlines and a few other competitors operate the Airbus A320 series, a slightly wider aircraft which therefore typically has slightly wider seats. Due to Southwest's generous seat pitch (the front-to-back distance between rows of seats) and leather seats, many travelers find their seating superior to that of other 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.

Currently, Southwest is purchasing only the 737-700, since the 737-300 and the 737-500 are out of production.

Southwest is the world's largest operator of the 737. Their current active fleet is over 450 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.

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' 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 [2] 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.

All of the 737-700 series aircraft, have been fitted with winglets have "Southwest.com" written on the outer faces of the winglets. 737s with the original livery or any of the special liveries do not have this writing at this time.

Additionally, Southwest will install Blended Winglets on up to 90 of its 737-300 aircraft beginning in early 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 II. The artwork on the nose of each aircraft simply states "Shamu".

• 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)
• California One: (1995) The flag of the state of California applied across the aircraft. (N609SW)
• Silver One: (1996) 25th Anniversary aircraft. (N629SW, Original, 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). (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)
• 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 has also taken delivery of the 5,000th 737 produced (February 13, 2006). (N230WN)
• Southwest has also taken delivery of the 2,000th "Next Generation" 737 produced. (N248WN)

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 and Nevada One have been repainted to match.

Incidents and accidents

Southwest has had three 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 Bob Hope Airport, Burbank, California, injuring 43. The incident resulted in the dismissal of the pilots.

• On August 11, 2000, passenger Jonathan Burton broke through the cockpit door aboard Southwest Airlines Flight 1763 while enroute from Las Vegas to Salt Lake City. Burton was restrained by other passengers, in defense of themselves, and ultimately died of the resulting injuries [3][4] [5].

• On December 8, 2005, Southwest Airlines Flight 1248 skidded off a runway upon landing at Midway Airport, Chicago, 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.

References

1. ^ http://www.bts.gov/press_releases/2006/bts013_06/html/bts013_06.html#table_03
2. ^ http://www.southwest.com/travel_center/wright_timeline.html#timeline
3. ^ http://www.southwest.com/about_swa/press/factsheet.html#Top%20Ten%20Airports
4. ^ Peterson, Barbara (2004). Blue Streak: Inside jetBlue, the Upstart that Rocked an Industry. Portfolio Hardcover. ISBN 1-59184-058-9.
5. ^ http://seattletimes.nwsource.com/html/businesstechnology/2001980855_southwestair16.html
6. ^ http://www.boeing.com/commercial/737family/background.html
7. ^ http://www.airfleets.net/ageflotte/Southwest%20Airlines.htm
8. ^ http://www.southwest.com/about_swa/press/factsheet.html#Fleet

External links

• Southwest Airlines homepage
• Southwest Airlines Seating Charts and Seat Reviews
• Southwest Airlines Fleet Age
• Southwest Airlines' Yahoo! Finance Profile
• Southwest Rapid Rewards Bonus Miles Promotions