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7JetSet7 Code: SWA
Status: Operational
Country: USA
Employees 55000
Web: southwest.com
Telephone: +1 (214) 792-4415
Fax: +1 (214) 792-3710

Click below for data links:
SWA-2005 9 MTHS
SWA-2009-02-ROW 44
SWA-2009-12 3Q STATS
SWA-2009-12-737-3H4 SCRAPPING
SWA-2010-08-WLD RPK-2009
SWA-2011-10 - NOSE TO NOSE - CQT
SWA-2011-12 737 MAX - A
SWA-2011-12 737 MAX - B
SWA-2012-04 - 737-800 INTRO
SWA-2013-01 - UPDATE-A
SWA-2013-01 - UPDATE-B
SWA-2013-07 - INCDT 737-7H4
SWA-2014-08 - TO CANCUN
SWA-2014-09 - NEW HEART
SWA-2015-03 - HOUSTON-ARUBA-A.jpg
SWA-2015-03 - HOUSTON-ARUBA-B.jpg
SWA-2015-03 - HOUSTON-ARUBA-C.jpg
SWA-2015-04 - TOP 25 WORLD TRAFFIC.jpg
SWA-2015-07 - 4th Top LCC.jpg
SWA-2015-08 - PIT to DAL.jpg
SWA-2016-01 - Little Rock to St Louis.jpg
SWA-2017-08 - Sacramento to Long Beach and to Spokane.jpg
SWA-2018-03 10000 737.jpg
SWA-2018-03 1st 737 Flight 1967-04.jpg
SWA-2018-04 737-700 Engine Failure.jpg
SWA-2018-04 737-700 INCDT.jpg
SWA-2018-09 BWI Maintenance.jpg
SWA-LOGO - NEW HEART - 2014-09


PO BOX 36611
DALLAS, TEXAS 75235-1611, USA

USA (United States of America) was established in 1776, it covers an area of 9,363,123 sq km, its population is 280 million, its capital city is Washington DC, and its official language is English.




JANUARY 1993: 1992 = +$103.6 MILLION (+$26.9 MILLION) (NET PROFIT): +22.1% (RPM) TRAFFIC, +22.8% PASSENGERS (PAX), +42.6% (FTK) FREIGHT TRAFFIC, 64.5% LF LOAD FACTOR (+3.4).






JANUARY 1994: 1993 = +$169.5 MILLION: +36.6% (RPM) TRAFFIC, +21% PASSENGERS (PAX), +28.7% (ASM) (CAPACITY), 68.4% LF LOAD FACTOR.

MAY 1994: +12 ORDERS 737-300 (6 IN 1995 & 6 IN 1996). TOTAL 737-300'S = 171.

JANUARY 1995: 1994 = +$179.3 MILLION: +148% (RPM) TRAFFIC.




JANUARY 1996: 4TH QUARTER = +$43.53 MILLION RECORD (+$20.34 MILLION)! 1995 = +$182.63 MILLION (+$179.33 MILLION)!










JULY 1996: (http://www.iflyswa.com).












1 737-300 DELIVERY.


















EMPLOYEES (1,000): 1 FED 94; 2 UAL 92; 3 AAL 86; 4 DAL 63; 5 DLH 58; 6 BAB 53; 7 NWA 48; 8 USA 42; 9 CAL 40; 10 AFA 36; 11 QAN 30 12 SIA 28; 13 KLM 27; 14 SWA 25; 15 TWA 25; 16 SVA 24.8.

NET ($ MILLION): 1 AMR 985 (1,016); 2 UAL 949 (533); 3 DAL 934 (248); 4 BAB 754 (876); 5 SIA 670 (731); 6 NWA 597 (536); 7 FED 583 (371); 8 USA 494 (263); 9 DLH 482 (371); 10 CAL 385 (319); 11 SWA 318 (207); 12 AFA 314 (-28); 13 ACN 308 (109).

(RPK) PASSENGER TRAFFIC (BILLION): 1 UAL 195; 2 AAL 172; 3 DAL 160; 4 NWA 116; 5 BAB 106; 6 JAL 77; 7 CAL 77; 8 DLH 71; 9 AFA 70; 10 USA 67; 11 QAN 59; 12 KLM 55; 13 SIA 55; 14 ANA 51; 16 SWA 46; 17 TWA 41; 18 KAL 40; 19 CAT 39; 20 ACN 37; 21 ALI 36; 22 TII 31.

PASSENGERS (PAX) (MILLION): 1 DAL 103; 2 UAL 84; 3 AAL 81; 4 USA 59; 5 NWA 55; 6 SWA 50; 7 ANA 41; 8 CAL 39; 9 DLH 35; 10 BAB 34.





1 UAL 123.3; 2 AAL 108.3; 3 DAL 102.6; 4 NWA 67.6; 5 CAL 49.7; 6 8. TWA 25.0; 9 AMW 16.2; 10 ASA 11.0.












JUNE 1999: 2 737-7H4'S (29798, N746SW; 29799, N747SA) DELIVERIES.

1 UAL 124.54; 2 AAL 108.87; 3 DAL 103.24; 4 BAB 72.08; 5 NWA 66.71; 6 CAL 50.94; 7 JAL 48.97; 8 DLH 46.88; 9 AFA 46.35; 10 USA 41.25; 11 SIA 35.88; 12 KLM 35.59; 13 QAN 35.22; 14 ANA 33.38; 15 SWA 31.43; 16 CAT 25.26; 17 TWA 24.42; 18 ACN 23.21; 19 ALI 22.10. (*AVW).








JANUARY 2000: 1999 = +$474.4 MILLION (+9.4%): 36.48 BILLION (RPM) (+16.1%), +11.2% (ASM), 69% LF (+2.9). USA TRAFFIC MARKET SHARE = 6.0% 7TH (5.4%).


+1 ORDER (2000-04) 737-700 LEASED.















PASSENGER TRAFFIC (RPK) (BILLION):10 USA 66.9; 11 SIA 64.5; 12 KLM 58.9; 13 SWA 58.7; 14 QAN 58.1; 15 ANA 56.7; 16 TWA 41.9.

NET PROFIT ($ MILLION): 1 DAL 1.285; 2 UAL 1,235; 3 AMR 985; 4 SIA 737; 4 SIA 737; 5 DLH 633; 6 SWA 474; 7 CAL 455; 8 FED 442; 9 AFA 340.

EMPLOYEES (1,000): 10 NWA 51.8; 11 CAL 44.1; 12 USA 41.6; 13 IBE 29.1; 14 SWA 27.7; 15 SIA 27.4; 16 KLM 27.3; 17 SAS 25.8.




1999 = +$474.38 MILLION (+$433.43 MILLION): 58.7 BILLION (RPK) (+16.1%); 69% LF; 100.65 MILLION (FTK) (+1.7%); 57.5 MILLION PAX (+9.3%); 27,653 EMPLOYEES (+7%).


1 SWA 877; 2 DAL 671; 3 UAL 505; 4 USA 450; 5 AAL 416; 6 CAL
408; 7 NWA 402; 8 AMW 223; 9 ASA 143; 10 TWA 118.



5 BAB 90.35 6 CAL 78.55; 7 AFA/DLH/JAL 67.38; 8 USA 56.07; 9 SIA 52.77; 10 SWA 50.48; 11 QAN 49.30; 12 KLM 45.91; 13 CAT 35.26.





10 USA 46.83; 11 SIA 43.99; 12 ACN 42.38; 13 SWA 42.23; 14 QAN 39.46; 15 KLM 37.49; 16 ANA 36.07; 17 CAT 29.27; 18 TII 26.25.




APRIL 2001: 29,274 EMPLOYEES.






1 UAL 61.5 (19.1%); 2 AAL 55.9 (17.4%); 3 DAL 51.2 (15.9%); 4 NWA 38.7 (12.1%); 5 CAL 32.2 (10.0%); 6 USA 24.9 (7.7%); 7 SWA 22.5 (7.0%); 8 TWA 12.1 (3.8%); 9 AMW 10.1 (3.1%); 10 ASA 6.2 (1.9%).


1 LAS VEGAS 11,423; 2 PHOENIX 9,279; 3 OAKLAND 8,861; 4 LOS ANGELES (LAX) 8,752; 5 DALLAS (LOVE) 7,249; 6 HOUSTON (HOU) (HOBBY) 7,213; 7 CHICAGO (MIDWAY) 7,205; 8 BALTIMORE 7,036; 9 SAN DIEGO 6,783; 10 SAN JOSE 5,385.




8 DLH 61.32; 9 USA 59.63; 10 JAL 55.73; 11 SWA 54.24; 12 SIA 53.02; 13 ACN 52.85; 14 KLM 45.30; 15 CAT 34.34.



JANUARY 2002: 2001 = +$511 MILLION (+$603 MILLION): 44.49 BILLION (RPM) (+5.4%); +9% (ASM); 68.1% LF (-2.4).


1 UAL 116.60; 2 AAL 106.15; 3 DAL 97.60; 4 NWA 73.11; 5 BAB 64.24; 6 AFA 59.54; 7 CAL 58.76; 8 DLH 56.76; 9 JAL 50.77; 10 USA 45.93; 11 SWA 44.50; 12 SIA 42.76; 13 QAN 42.14; 14 ACN 41.49; 15 KLM 35.76; 16 ANA 33.16; 17 CAT 27.81; 18 TII 27.43; 19 IBE 25.64; 20 KAL 23.73; 21 ALI 22.45; 22 MAS 22.29; 23 AMW 19.06; 24 VAA 17.65; 25 VAR 16.02; 26 CHI 16.00; 27 EAD 14.37; 28 SAS 14.26; 29 ANZ 13.54; 30 SAA 12.70; 31 SVA 12.56; 32 BEJ 12.39; 33 ASA 12.23; 34 JAS 10.06; 35 THY 9.35; 36 AMX 8.51; 37 PAL 8.36; 38 GIA 8.15; 39 CMA 7.99; 40 ELA 7.79; 41 GUL 7.65; 42 PIA 7.24; 43 AIN 7.10; 44 TAP 6.43; 45 EGP 5.53; 46 OLY 5.24; 47 AUL 5.06; 48 FIN 4.93; 49 IND 4.52; 50 CQT 4.51.








June 2002: Cleveland to Phoenix (Saturdays).

Southwest Airlines (SWA) 2001: +$511.15 Million (+$625.22 Million): 71.59 Billion (RPK) (+5.4%); 68.1% LF (-2.4); 64.45 Million PAX (+1.2%); 92.51 Million (FTK) (-8.8%); 31,580 employees (+7.9%).

2001 Top World Airlines by Passenger Traffic (RPK) (Billion):
1 UAL 187.67; 2 AAL 170.88; 3 DAL 163.66; 4 NWA 117.66; 5 BAB 106.27; 6 CAL 98.37; 7 AFA 94.42; 8 DLH 86.70; 9 JAL 84.27; 10 USA 73.93; 11 SWA 71.59; 12 SIA 69.15; 13 QAN 67.89; 14 ACN 67.03; 15 KLM 57.85; 16 ANA 56.90; 17 CAT 44.79; 18 TII 44.04; 19 IBE 41.30; 20 KAL 38.45; 21 MAS 38.31; 22 ALI 36.52; 23 SWS 32.98; 24 TWA 31.85; 25 AMW 30.69.

July 2002: 2001 = +$511.16 Million (+10%) (+$603.09). 2nd Q = +$102.3 Million (+$176 Million). 6 months = 36.13 Billion (RPK) (-.45%); +4.11% (ASK); 66..5% LF (-3); 35.96 Million PAX (-5.23%); 61.86 Million (FTK) (+39.33%).

Opens new 3 story Engineering & Maintenance facility, including space for additional airplanes.

August 2002: $156 Million maintenance service agreement extension through 2008 with Honeywell (SGC) for environmental control system (ECS) components and 425 auxiliary power units (APUs) for its 737's.

October 2002:

1st 6 months Top World Airlines Passenger Traffic Billion (RPK)
1 AAL 95.18; 2 UAL 84.56; 3 DAL 74.53; 4 NWA 56.50; 5 BAB 49.30; 6 AFA 48.21; 7 CAL 47.49; 8 DLH 42.06; 9 JAL 39.44; 10 SWA 36.03; 11 SIA 36.00; 12 ACN 33.69; 13 USA 33.06; 14 KLM 27.54; 15 CAT 23.07; 16 IBE 19.53; 17 KAL 16.47; 18 CHI 15.70; 19 AMW 15.20; 20 ALI 14.21; 21 EAD 13.45; 22 VAR 12.68; 23 GUN 12.49; 24 SAS 12.01; 25 BEJ 10.32.

November 2002: 5-year contract with Rockwell Collins to provide avionics maintenance and technical support for Southwest Airlines (SWA) 737's.

April 2003: Agreed in principle to license Sinex Aviation Technologies' FleetCycle Production Manager software application to automate 737 fleet maintenance processes.

4 orders (2004-02) 737-700 for total 119 on order with 17 deliveries in 2003, 25 2004, 24 2005, 22 2006, 25 2007, & 6 2008 with options for 294. Currently operates 376 737's.

June 2003: Orders 169/373 737-700 shipsets of blended winglets.

July 2003: 2002 = +$241 Million (+$511 Million): 73.08 Billion (RPK) (+2%); +5.5% (ASK); 65.9% LF (-2.2); 63 Million PAX (-2.2%); 206 Million (FTK) (+2.9%); 33,705 employeea (+6.7%).

1 (AAL) 195.81; 2 (UAL) 176.15; 3 (DAL) 152.66; 4 (NWA) 115.91; 5 (BAB) 99.71; 6 (AFA) 96.80; 7 (CAL) 95.51; 8 (DLH) Group 88.57; 9 (JAL) 83.54; 10 (QAN) 75.23; 11 (SWA) 73.05; 12 (SIA) 71.12; 13 (ACN) 69.42; 14 (USA) 69.42; 15 (KLM) 58.89; 16 (ANA) 52.97; 17 (CAT) 49.04; 18 (TII) 48.51; 19 (KAL) 41.80; 20 (IBE) 40.47; 21 (MAS) 36.90; 22 (AMW) 31.98; 23 (SAS) Group 30.91; 24 (EAD) 30.17; 25 (ALI) 29.84.

Confirms orders for 15 737-700's. It has now ordered 261/279 (132 delivered, +12 in 2003).

August 2003: Boeing has deployed a software capability with Southwest Airlines (SWA) that seamlessly integrates its secure business-to-business web portal, MyBoeingFleet.com, with the airline's intranet environment. The software allows (SWA) employees to view maintenance data on MyBoeingFleet.com using their (SWA) computer (ID)s and passwords. The pilot program with (SWA) is 1 of the 1st commercial applications of a single sign-on between secure web sites. The single sign-on is achieved using security assertion markup language (SAML), which enables disparate computing environments to exchange authentication and authorization information about users.

November 2003: Selected Honeywell (SGC) avionics for up to 196 new 737-700's it is purchasing.

January 2004: 2003 = +$442 Million (+83.4%) (+$241 Million): 77.29 Billion (RPK) (+5.65); 66.8% LF; 74.79 Million (PAX) (+3.1%); 155.27 Million (FTK) (+20.4%).

June 2004: 6-year contract with SmartSignal Corporation for 737-700 fleet engine monitoring.

July 2004: Gary Kelly (CEO) replaces James Parker, who resigned.

August 2004: 2-year contract to Kroll Background America to provide the airline with background checks on all employees and contractors, including pilots (FC), flight attendants (CA), security personnel, ground operations crews, plus ramp & reservation agents.

175th 737-700 delivery.

November 2004: Herb Kelleher 73 signed a new 3-year contract as Chairman.

December 2004: ATA Airlines (AAT) selected Southwest Airlines (SWA)'s $117 million bid for certain of its assets at Chicago Midway (MDW) over a broader but less valuable agreement it had initially struck with AirTran Airways (CQT) when it filed for Chapter 11 protection. (SWA) will pay (AAT) $40 Million to acquire leaseholds on 6 gates and a maintenance hangar at Midway. It will provide a further $40 Million in debtor-in-possession financing, which will be converted into a term loan upon (AAT)'s emergence from bankruptcy. In addition, (SWA) guaranteed payment of an (AAT) construction loan to the City of Chicago for $7 Million. Finally, (SWA) agreed to purchase for cash $30 Million of convertible preferred (AAT) stock in exchange for 27.5% of a reorganized (AAT). (SWA)'s bid includes a code share agreement with (AAT).

January 2005: 2004 = +$313 Million (-29.2%) (+$442 Million).

February 2005: Selected Rockwell Collins Flight Dynamics Head-up Guidance System 4000 for installation on its 737-700 fleet.

March 2005: Phoenix is Southwest Airlines (SWA)'s 2nd largest city operation, with 191 daily departures to 40 destinations. Now has begun operating from the D Concourse at Phoenix Sky Harbor Airport, which includes 8 new gates, a new 6-lane security checkpoint and new concessions. Together with the 16 gates in the C Concourse it occupies, (SWA) will use a total of 23 gates at this airport.

April 2004: Daryl Krause VP In-flight.

Selects PolyVista to implement and deploy its Discovery solution to "enhance the analysis capability of its existing pilot (FC) reporting program data through the addition of PolyVista's text and data-mining analysis solution."

June 2005: 31,011 employees (including 4,500 Flight Crew (FC)).

July 2005: In August, code share with ATA Airlines (AAT), Las Vegas to Honolulu.

Offered to spend $130 Million to construct facilities at Seattle's King County International Airport (Boeing Field) to allow it to transfer its operations from Seattle-Tacoma International.

August 2005: 31,011 employees (-5.6%).

October 2005: Budget carrier Southwest (SWA)'s profit nearly doubled, thanks to its system of securing supplies of jet fuel at low prices months in advance. Fuel hedging boosted (SWA)'s 3rd Q, quarterly profit from +$119m to +$227m (+90.8%). Excluding $87 million in unrealized gains associated with derivative instruments, the current-period profit was $174 million, a 46.2% rise over 2004.
CEO Gary Kelly noted that Southwest's fuel hedging program was critical to its success, accounting for a $295 million benefit that pushed it into the black. (SWA) says its fuel supplies for the 4th quarter of 2005 are 85% hedged at an average of $26 a barrel. Airlines in general have been suffering from high fuel costs since Hurricanes Katrina and Rita slammed into US oil refineries in the Gulf of Mexico region. Soaring fuel prices were the last straw in a series of financial woes that drove Delta (DAL) and Northwest (NWA) to seek bankruptcy protection last month, joining United (UAL) and US Airways (USA) which were already operating under Chapter 11.

Operating revenue rose 18.8% to $1.99 billion as (RPM)s traffic jumped +15.5% and average passenger fare climbed +5.4%. With a 3rd-quarter load factor of 74.9% LF (up +2.2 points), (RASM) increased 5.9% to 9.1 cents. Operating expenses grew +15.7% to $1.72 billion largely owing to a +36.4% jump in fuel costs and a +13.2% rise in labor costs. Operating profit totaled $273 million, up +42.9% from $191 million a year ago.

(SWA) does have a few hurdles to negotiate. Hurricanes Katrina and Rita and the subsequent closure of the New Orleans airport cost the carrier -$15 to -$20 million. Codeshare partner ATA (AAT) announced it will be discontinuing service from Chicago Midway to several markets, and the Boeing strike delayed airplane deliveries and will slow expected capacity growth in the current quarter.

But that will not stop (SWA) from expanding its service, Kelly said. "We have all kinds of things that we could pursue on the route development front. Our number one priority is to help rebuild New Orleans," he said during a conference call. In addition to its efforts on the Gulf Coast, the airline will be launching service at Denver International Airport early next year and already has nearly doubled its departures from Pittsburgh.

"We're the largest carrier at Midway, the largest carrier in California, the largest in Phoenix and Las Vegas. Denver fits in very well with our route structure," Kelly said.

For the year-to-date period, net income surged +79.1% to $462 million including unrealized gains. Operating revenue rose 14.8% to $5.6 billion and operating profit jumped +50.8% to $656 million from $435 million last year.

Southwest Airlines (SWA) went into Southwest Florida International Airport in Fort Myers, its newest destination, in a big way, operating 9 daily nonstop flights to the following destinations: Baltimore/Washington International Airport (2x-daily), Chicago Midway (3x-daily), Long Island/Islip (1x-daily), Orlando (3x-daily) and Philadelphia (1x-daily). (SWA) has 2 gates at the recently completed midfield terminal. (SWA) will add 2 daily flights from Houston to New Orleans on October 17th. This brings to 4 the total number of flights into New Orleans.

(SWA) said it will launch service to Denver International Airport (DIA) early next year, marking a return to the city after a 20-year absence. Schedules, fares and routes will be announced next week. "We'll have a modest start," (CEO) Gary Kelly said during a conference call to discuss the news. (SWA) served Denver Stapleton International Airport in 1983 to 1986. Stapleton was closed when (DIA) opened in 1995. In the past, (SWA) declined to operate at (DIA), United Airlines (UAL)'s 2nd-biggest hub, citing high costs. Yesterday, however, Kelly said the airport has done "a remarkable job in getting their costs down to levels that make sense to (SWA)." In a separate call to discuss 3rd-quarter results, he elaborated: "Denver's cost will not be close to the highest cost on our system in terms of airport cost. It's not just that they have come down, they have come down to quite reasonable levels. It's higher than we would like but the marketing opportunity is huge there." (SWA) said it is able to accelerate the start owing to airplane availability created by Hurricane Katrina-related schedule changes and the resumption of new airplane deliveries from Boeing following the settling of the strike there. Although United (UAL) certainly will be affected by the arrival of (SWA), the biggest impact may fall on another (LCC), Frontier Airlines (FRO), which makes (DIA) its home.

(SWA) will inaugurate its new Denver service on January 3 with 13 daily nonstop flights to 3 destinations. Chicago Midway will get 4 daily roundtrips, Las Vegas 5 and Phoenix 4. (SWA) will occupy 2 gates on the C concourse at Denver International Airport and start with approximately 40 local employees. "Denver is a market that has been a significant gap in (SWA)'s system for many years, and now we can connect Denver customers into our coast-to-coast operations," (CEO) Gary Kelly said. (SWA) also announced the addition of 49 new flights in 42 city-pairs, some of which will include New Orleans. Starting November 12, it will add nonstop roundtrips between New Orleans and Dallas Love Field, Nashville, Orlando, Tampa and Houston. Additionally, new service will begin from Las Vegas to Oklahoma City and Providence.

(SWA) has confirmed the destinations it will serve from the Denver International Airport. Service is expected to begin on January 3rd with a total of 13 daily nonstop flights: Chicago Midway = 4x-daily; Las Vegas = 5x-daily; Phoenix = 4x-daily. (SWA) announced the addition of 49 new flights on 42 routes as follows: Starting on November 12th: Las Vegas to Oklahoma City = 1 New daily flight; Las Vegas to Providence = 1 New daily flight; Las Vegas to Spokane = Increase from 1 to 2 flights daily; Las Vegas to St Louis = Increase from 1 to 2 flights a day; New Orleans to Dallas Love Field = 2 New daily flights; New Orleans to Houston Hobby = Increase from 4x- to 5x- daily; New Orleans to Nashville = 2x-daily flights; New Orleans to Orlando = 2x-daily flights; New Orleans to Tampa = 2x-daily flights; Starting on February 5th: Chicago Midway to Islip = Increase from 5x-to 7x-daily; Chicago Midway to Philadelphia = Increase from 7x- to 8x- daily; Chicago Midway to Sacramento = Increase from 1 to 2x-daily; Houston Hobby to Albuquerque = Increase from 2x- to 3x-daily; Houston Hobby to Fort Lauderdale = Increase from 1 to 2 flights a day; Houston Hobby to Philadelphia = Increase from 1x- to 2x-daily; Houston Hobby to Tampa = Increase from 1x- to 2x-daily; Kansas City to Indianapolis = Increase from 1x- to 2x-daily; Kansas City to San Diego = Increase from 1x- to 2x-daily; Kansas City to St Louis = Increase from 5x- to 6x-daily; Kansas City to Tampa = Increase from 1x- to 2x-daily; Las Vegas to Philadelphia = Increase from 1x- to 2x-daily; Las Vegas to Tucson = Increase from 5x-to 6x-daily; Nashville to Austin = Increase from 2x- to 3x- daily; Nashville to Fort Lauderdale = Increase from 1x- to 2x-daily; Nashville to Jacksonville = Increase from 3x- to 4x- daily; Nashville to Las Vegas = Increase from 3x- to 4x-daily; Nashville to Orlando = Increase from 4x- to 5x-daily; Nashville to San Antonio = Increase from 1x- to 2x-daily; Nashville to Tampa = Increase from 4x- to 5x-daily; Oakland to Albuquerque = Increase from 2x- to 3x-daily; Oakland to Burbank = Increase from 14x- to 16x-daily; Oakland to Orange County = Increase from 8x- to 9x-daily; Oakland to San Diego = Increase from 18x- to 20x-daily; Orlando to Birmingham = Increase from 1x- to 2x-daily; Orlando to San Antonio = Increase from 1x- to 2x-daily; Philadelphia to Jacksonville = Increase from 1x- to 2x-daily; Philadelphia to Phoenix = Increase from 1x- to 2x-daily; Philadelphia to Pittsburgh = Increase from 6x- to 7x-daily; San Diego to Austin = Increase from 1x- to 2x-daily; San Diego to San Antonio = 1x-daily; Tampa to Fort Lauderdale = Increase from 8x- to 9x-daily; Tampa to Jacksonville = Increase from 2x- to 3x-daily; Tampa to St Louis = Increase from 1x to 2x-daily.

"The single overriding issue [in the USA market] is excess capacity" that keeps USA carriers in red ink, (SWA) (CEO) and Vice Chairman Gary Kelly said. Speaking to the Aero Club of Washington, Kelly said, "The market needs to be allowed to run its course. There has been no meaningful reduction of surplus capacity," unlike the experience of the last downturn. The US Airways (USA)/America West (AMW) merger "is a step in the right direction," he said, adding, "The 1st thing I would do if I was losing money would be to stop buying airplanes." When his call for reduced capacity was contrasted with (SWA)'s continuing expansion (its fleet is growing at about a +11% clip this year) Kelly said, "We're adding value, giving more flights, so more people will be flying" at lower fares.

With reduced hedging next year likely to add +$500 million to the airline's expenses, "We are going to need more revenue growth to meet our 15% earnings target for 2006," Kelly said. According to Airclaims' (CASE) database, (SWA) will receive 34 737-700s in 2006 and has retired no airplanes so far in 2005.

Pleased with the profit this year, Kelly pointed out that it will be well below the 2000 figure despite a +50% larger fleet. "The return on invested capital is below what it should be for a solid Fortune 500 company," he said.

(SWA) is unlikely to help consolidation along with an acquisition, Kelly said. And while the code share arrangement with (ATA) Airlines (AAT) is working well and is likely to expand, "I would not extrapolate that into something bigger." No other airline is being considered for a codeshare relationship, but he wouldn't rule out another deal, saying, "We have nothing teed up, but we want to be prepared for that possibility."

General Electric's Aviation Engine Services (GEC) unit, in 1 of the largest such deals it has done, signed an 8-year OnPoint Solutions service agreement valued at $1.5 billion covering maintenance, repair and overhaul (MRO) of the nearly 600 (CFM56-7) engines in service or on order powering (SWA)'s 737-700s. According to (GEC), the new deal is a "hybrid" blending traditional OnPoint time-and-materials and cost-per-flight-hour agreements. It includes fixed-price life-limited parts shop visits, turnaround time and performance guarantees, spare engine availability, on-wing support and remote diagnostics. Also included is "fleet management support," which will bring (SWA) the benefit of (GEC)'s expertise in engine work scoping, shop visit forecasting, cost estimating and budgeting.

November 2005: Southwest Airlines (SWA) board of directors declared a regular quarterly dividend of $.0045 per share to shareholders of record at the close of business December 8, payable January 5. It is (SWA)'s 117th consecutive quarterly dividend.

The Wright Amendment would be repealed under legislation introduced by Senator John Ensign (Republican - Nevada) and co-sponsored by Senator John Sununu (Republican - New Hampshire). The American Right to Fly Act would overturn the federal law that restricts commercial flights from Dallas Love Field to destinations within Texas and 7 nearby states. (SWA) is campaigning to have the amendment overturned. It is opposed by Dallas/Fort Worth International Airport and its largest tenant, American Airlines (AAL). The Senate aviation subcommittee has scheduled a hearing on the issue.

(SWA) named Mike Van de Ven as its new executive VP Aircraft Operations to replace Jim Wimberly, who will retire at year end. Van de Ven is a 12-year veteran of (SWA) and a member of its Executive Planning Committee.

Pemco World Air Services was chosen by (SWA) to provide jet airplane Maintenance Repair & Overhaul (MRO) for its 737s at Pemco's Alabama facility.

December 2005: Soon after President George W Bush put pen to paper on the transportation appropriations bill that exempts Missouri from the Wright Amendment, Southwest Airlines (SWA) released details yesterday of its new service between Dallas Love Field and St Louis and Kansas City. Four daily direct flights to each Missouri city will commence from Love Field on December 13. One-way fares will be $79 with a 2x-weekly advance purchase and $129 walkup.

Responding to the changed market realities, (AAL) said that it had formally notified Love Field that it intends to start service from the airport as soon as it can obtain and prepare appropriate facilities. It did not announce a schedule.

"(SWA) has served Missouri for >20 years, but Congress has prevented us from offering low-fare service between Missouri and our home airport at Dallas Love Field," Chairman Herb Kelleher said. Addition of Missouri means that carriers may operate into Love from 8 nearby states as well as within Texas. "Missouri has been punished far too long by the resulting high-fare monopoly. We are delighted by [Missouri Senator Christopher Bond's] efforts to wipe out the last vestige of airline regulation for the people of Missouri," Kelleher added.

(SWA) already had a significant presence in St Louis with 65 daily departures, but it will have to resist the urge to market the Gateway to the West as the Gateway to Dallas for the eastern USA. "The Bond Amendment only lifts the veil by 1 more state," a (SWA) spokesperson stated. "We still must deal with the onerous marketing restrictions that will prevent us from marketing, selling or even talking about service from Dallas beyond Missouri. So, customers in (BWI) know they can fly from (BWI) to (STL), and they now know they can fly from (STL) to (DAL), but we can't market that service, as it goes beyond the amended Wright Amendment 'service area'."

A short time after (SWA) launched its 1st flights to St Louis and Kansas City from Dallas Love Field, (AAL) announced its own schedule from the airport, where it owns the rights to 3 gates. Daily flights to St Louis, Kansas City, San Antonio and Austin will begin March 2. Regional affiliate American Eagle will operate the flights within Texas. The airlines will require 2 gates for the current schedule and said they are working with airport officials to arrange for ticket counters and other facilities.

In conjunction with the schedule, (AAL) said it will not back down from the fight to keep the Wright Amendment in place and to maintain Dallas-Fort Worth (DFW)'s position as the area's only long-haul gateway. Southwest (SWA) won a major victory when President George W Bush signed a transportation bill earlier this month opening Missouri to service from Love Field.

"We have not, and will not, abandon our efforts in support of the Wright Amendment and all those in North Texas who want to keep (DFW) International Airport strong, vibrant and growing," (AAL) Executive VP Marketing Dan Garton said. "(DFW) is the region's economic engine and was always intended to be the home for all commercial air service in Dallas/Fort Worth. (AAL) remains intensely devoted to that principle."

With no choice but to compete with (SWA) in the meantime, (AAL) unveiled a schedule from Love highlighted by four daily flights to St Louis and 3x-daily service to Kansas City. Both routes will be operated with 136-seat, 2-class MD-80s.

American Eagle will service the intrastate routes aboard 50-seat Embraer ERJ-145s. It will fly 4x-daily between Dallas and San Antonio and 5x-daily to Austin.

(SWA) reported a +16.4% growth in passenger traffic last month to 4.99 billion (RPM)s compared to November 2004. Capacity in (ASM)s rose +7.5% to 7.05 billion and load factor improved 5.4 points to 70.9% LF.

(SWA) pilots (FC) agreed to raise by 1.5 hour their average flight time per month to 68.5 hours. The initiative will save (SWA) about -$4 million per year, the Associated Press reported. The deal runs through July, but (SWA) will seek to make it a permanent part of a new labor agreement. The current contract runs through September 1, 2006.

ACCDT: 737-7H4 (32471, N471WN) overran Chicago Midway runway in snow and crashed through airport fence onto highway crashing into 2 cars = 1 fatality (child in car). (SWA) said that the 737-700 that landed and veered from the runway at snowy Chicago Midway and crashed into cars at a nearby intersection, killing a 6-year-old boy, was a new airplane delivered in July 2004 and had been released from a maintenance check at its Phoenix Maintenance Repair & Overhaul (MRO) facility on December 7, a day before the accident, and there was no indication of any problems. (SWA) said Flight 1248's captain (FC) is a 10-plus-year veteran of (SWA). Weather conditions at the time were described as one-quarter to one-half mile visibility with snow and the airplane circled for approximately 35 minutes before landing, according to (SWA). The boy's death was the 1st accident-related fatality in (SWA)'s 34-year history. Under questioning, the pilot (FC) suggested there might have been a problem with the switch not activating the thrust activators on landing.

International Federation of Airline Pilots (IFALPA) said the Chicago Midway runway overrun accident "demonstrates once again the need for Runway End Safety Areas (RESA) to be established at airports with airline operations." (IFALPA) favors a (RESA) 300 m in length by at least twice the runway width. At airports where no space is available for an overrun area, such as Midway, the organization advocates that Engineered Materials Arrester Systems be installed.

Flight Data Recorder (FDR) data from the (SWA) 737-700 overrun accident on December 8 show the thrust reversers did not deploy until about 18 seconds after the airplane touched down on Chicago Midway Runway 31C and 14 seconds before it ran through a blast fence at the end of the runway, the National Transportation Safety Board (NTSB) said yesterday. The airplane continued through a perimeter fence and onto a roadway where it struck 2 cars, killing a 6-year-old passenger in 1 of them. The captain, who was pilot in command during the landing, told (NTSB) investigators he could not get the reverse thrust levers out of the stowed position upon touchdown. The first officer, after several seconds, noticed they were not deployed and activated them without a problem, (NTSB) said. Preliminary calculations show that the airplane touched down with about 4,500 ft of remaining runway. Calculations also show that "for the runway conditions and use of brakes and thrust reverser that occurred, the stopping distance without hitting obstructions would have been about 5,300 ft," while the actual stopping distance was 5,000 ft.

USA National Transportation Safety Board (NTSB) issued an "urgent safety recommendation" to the (FAA) requesting that the agency "prohibit airlines from using credit for the use of thrust reversers when calculating stopping distances on contaminated runways." The recommendation comes out of the Board's continuing investigation into the December 8 (SWA) runway overrun accident at Chicago Midway. According to (NTSB), (FAA) does not allow the use of the reverse thrust credit when determining dispatch landing distances. However, it does permit the credit for calculating en route operational landing distances for some commercial airplanes like the 737-700. Using their onboard laptop performance computer, the (SWA) pilots (FC) concluded they could land safely using thrust reversers. But in actuality, the reversers did not deploy until 18 seconds after touchdown and the airplane crashed through a perimeter fence and onto a roadway where it stuck 2 vehicles, killing a 6-year-old passenger in 1 of them. Given the runway conditions at the time of the accident, (NTSB) said that "if the thrust reverser credit had not been allowed in calculating the stopping distance for flight 1248, the (OPC) would have indicated that a safe landing on runway 31C was not possible." It concluded: "As a result, a single event, the delayed deployment of the thrust reversers, can lead to an unsafe condition, as it did in this accident."

The USA National Transportation Safety Board (NTSB) will hold a 2-day public hearing into the (SWA) runway overrun accident at Chicago Midway beginning June 20 in Washington.

In June, National Transportation Safety Board (NTSB) hearings concluded with attention focused on the pilots (FC)' calculation of stopping distance before landing and their decision to land in deteriorating winter conditions rather than divert to another airport, an option they discussed during flight. "There are certainly a lot of variables," Captain Denny Mosseller (SWA)'s Senior Director Pilot Training & Standards testified regarding the decision to land. The airplane ended up on a street corner beyond the airport perimeter where it hit 2 cars, killing a 6-year-old child. "It's very difficult to take a definition from paper and translate that to what it feels like to land on a runway with poor conditions," Mosseller said. "It is essential [pilots] get accurate and timely weather reports. It's certainly a subjective area. I do believe we're giving our pilots and captains good tools to make a subjective decision."

The airplane did not have enough room to stop on a runway on which conditions were deemed "fair-to-poor" and which lacks a standard safety area to act as buffer. The pilots did not deploy thrust reversers until 18 seconds after the airplane touched down. Mosseller said (SWA) pilots are given guidance that includes using "maximum thrust reversers and maximum manual breaking" in conditions where stopping margins decrease due to poor weather.

Also at issue at the hearing was Midway's lack of an (RSA), which at standard length should be 1,000 ft. But David Bennett Director of (FAA)'s Office of Airport Safety & Standards, said that (RSA)s are not required. "We consider [an (RSA) to be] a very important and valuable enhancement for safety, but there is no operational requirement," he said. The (FAA)'s rule regarding (RSA)s states that airports should install them "to the extent practicable," which means they "may be technically possible but not feasible or reasonable for some reason," Bennett explained. Chicago officials have determined that there is no practical way to build standard (RSA)s at Midway, he said.

- - See later (NTSB) report in October 2007.

(SWA) will expand its code share agreement with (ATA) Airlines (AAT) to include the latter's 3x-daily service between Dallas/Fort Worth (DFW) and Chicago Midway (MDW). The code share flights will begin January 11. (SWA) operates 196x-daily from (MDW), its 2nd-busiest market. Although (AAL) said it will launch service to Kansas City and St Louis from Dallas Love Field, (SWA) (CEO) Gary Kelly said (SWA) has "no interest in splitting our operation between Dallas Love Field and (DFW) Airport. Given the success (SWA) has had with the (ATA) (AAT) code share agreement in other cities, along with the route restructuring underway at (ATA) (AAT), and the progress we've made in repealing the Wright Amendment, it now makes sense to add (DFW) Airport to our list of code share cities. With the high fares prevailing at (DFW) Airport, I know our travelers will be delighted with this new low-fare service."

737-7H4 (N711HK "The Herbert D. Kelleher").

2 737-7H4's (32496, N228WN; 34333, N225WN), deliveries.

January 2006: On the heels of a chaotic year featuring surging fuel costs, perilous weather, the bankruptcy of two legacy carriers and the failure of a low-cost competitor, Southwest Airlines (SWA) once again demonstrated a "record unmatched in this bruising commercial airline business," reporting net earnings of +$548 million for 2005, a remarkable +75.1% increase over a 2004 profit of +$313 million as its extensive hedges cushioned the impact of high fuel prices. CEO Gary Kelly said yesterday that the airline expects its good fortune to continue through the first quarter of 2006 as it "continues to enjoy strong revenue momentum and benefit from reductions in competitive capacity," although he did warn that the shift of the Easter holiday from March into April this year will reflect on year-over-year first-quarter comparisons.

Southwest (SWA)'s 2005 operating revenue rose +16.1% to $7.58 billion against a +13.2% increase in expenses to $6.76 billion. Fuel costs climbed +34.2% to $1.34 billion and the company is more than 70% hedged for 2006 at $36 per barrel. Annual operating income rose to $820 million, a jump of +48%.

Passenger traffic increased +12.7% to 60.22 billion (RPM)s while capacity grew +10.8% to 85.17 billion (ASM)s as the carrier added 28 airplanes and service to Fort Myers and Pittsburgh in 2005, lifting load factor +1.2 points to 70.7% LF. Operating (RASM) was up +4.7% to 8.9 cents. Expenses per (ASM) increased +2.2% to 7.94 cents but dropped -1.5% to 6.37 cents excluding fuel costs. Last year was the company's 33rd consecutive in the black. It plans to add 33 airplanes this year and raise capacity by +8%, according to Kelly, who said he hoped the airline would boost earnings by +15%, a "daunting task."

Southwest (SWA) lamented a "surprise" $24 million assessment from the USA Transportation Security Administration covering retroactive airport security expenses but still finished strong in the fourth quarter. Net income shot up +53.6% to +$86 million, revenue rose +20.1% to $1.99 billion, expenses were up +18.8% to $1.82 billion and operating income increased +35.8% to $163 million. Traffic during the quarter grew +15.3% against a +7.6% rise in capacity, driving load factor up +4.6 points to 69.6% LF. Operating (RASM) climbed +11.7% to 9.14 cents, while (CASM) increased +10.5% to 8.39 cents, or +5.6% to 6.57 cents excluding fuel.

Full year 2005 = Passenger traffic 96.90B (RPK) (+12.7%) (10th highest in world) (#1 LCC).

Southwest Airlines (SWA)'s board of directors authorized the repurchase of up to $300 million worth of common stock, which the carrier said represented approximately 17.9 million shares as of Jan 18. It has about 804 million shares outstanding. Repurchased shares may be retired or used to fund the carrier's employee stock plans.

ATA Airlines (AAT) flew its last flights out of Denver. Southwest Airlines (SWA), which allows its passengers to connect to ATA (AAT) flights, said it would discontinue the code-share partnership for the Denver flights and will essentially replace ATA (AAT) with its own flights to and from Denver.

The Indianapolis-based, low-cost carrier, ATA (ATA) announced in November that it would end its four daily nonstop flights from Denver to Chicago's Midway International Airport and two daily nonstop flights from Denver to Phoenix.

ATA (AAT) has been flying out of Denver since 1998, when it started local operations with flights to Midway. The carrier filed for bankruptcy protection in 2004. Southwest (SWA) provided $117 million to ATA (AAT) in 2004, while adding six of ATA's gates to the 19 Southwest (SWA) already had at Midway. The code-share agreement was part of that deal.

Southwest Airlines (SWA) launched service from Denver International Airport (DEN) with 13 daily nonstops to Chicago Midway, Las Vegas and Phoenix. It also announced it will begin new services March 4 with a daily flight from (DEN) to Baltimore/Washington International Airport and four-times-daily service to Salt Lake City. It will increase (DEN) service to Phoenix from four daily flights to five and to Las Vegas from five to six on the same day. Southwest Airlines (SWA) continues to rebuild service to New Orleans following last summer's hurricane and flood that destroyed large parts of the city. From March 17, service to Houston Hobby will grow from five to eight daily flights, to Orlando International from two to three daily flights and to Dallas Love Field from two to three daily flights. Southwest Airlines (SWA) said it will add 18 roundtrip flights between New Orleans and Houston Hobby, Dallas Love Field and Orlando International from Feb 24 to March 4 to support the rebuilding city's Mardi Gras celebration.

Southwest Airlines (SWA) launched a wireless check-in service on its website. Passengers can access travel information and check in for a flight from a mobile device before printing their boarding pass at an airport kiosk.

Pemco Aviation Group said it received its first Southwest Airlines (SWA) 737 at its Maintenance Repair & Overhaul (MRO) facility in Dothan, Alabama, under an agreement signed last November.

Southwest Airlines (SWA) will be the lucky recipient of Boeing's 5,000th 737. The airplane, a 737-700 has entered final assembly and is scheduled to be delivered next month. The 5,000th 737-700 is the 447th 737 to join Southwest (SWA)'s fleet. It expects to take delivery of 33 additional 737s in 2006.

737-7H4 (32498, N229WN), delivery.

February 2006: Southwest Airlines (SWA) announced a further ramp-up of its New Orleans and Chicago Midway schedules as part of 15 new flights announced recently. It will launch daily Las Vegas - Orlando service April 28, daily Midway - Orange County service May 25 and daily service from New Orleans to Fort Lauderdale - Hollywood, Phoenix, Las Vegas, Baltimore/Washington International and Midway June 10. It also is adding one daily frequency on the following routes: Midway to Buffalo, Salt Lake City and Las Vegas from April 28; Las Vegas - Orange County from May 25; New Orleans - Houston Hobby, Seattle - Las Vegas and Long Island Islip - Las Vegas from June 10, and Midway - St Louis from June 11.

2 737-7H4's (34592, N230WN (5,000TH 737 BUILT); 32499, N231WN), deliveries.

March 2006: Southwest Airlines (SWA) will add at least 140 new pilots (FC) to the Baltimore/Washington International (BWI) over the next two years to fly 14 new 737-700s to be based at (BWI). According to the Annapolis Capital, the hiring comes as Southwest (SWA) takes in 600 new pilots across its network, or 10 pilots for each new airplane. Southwest (SWA) also has an agreement with Boeing to purchase 25 planes in 2007, with an option for nine more.

3 737-7H4's (32500, N232WN; 32501, N233LV; 32502, N234WN), deliveries.

April 2006: With Independence Air (BLR) out of the picture and JetBlue Airways (JBL)'s armor revealing a few chinks, Southwest Airlines (SWA) has decided to increase its presence in the Washington area by requesting two gates at Washington Dulles (IAD) for unidentified service scheduled to begin this fall. Southwest (SWA) has been a fixture at nearby Baltimore/Washington International, from which it operates 165 daily flights, for more than a decade. "The sheer size and scope of the Washington, DC, metro area makes [Dulles] an exceptional market opportunity," CEO Gary Kelly said. "The population and business growth in Northern Virginia means a great opportunity is rapidly getting even better."

(SWA) said it will announce its Dulles route and fare structure this summer. Initially the airline is planning to operate 10 to 12 flights a day to 4 or 5 destinations. (IAD) served 27 million passengers on 31 airlines in 2005 and is midway through a $4 billion expansion program including construction of a new runway, expanded gates and an underground automated train system that will transport passengers from the main terminal to airfield concourses.

Southwest Airlines (SWA)'s announcement that it plans to serve Washington Dulles International (IAD), an airport it rejected last fall as being too expensive, signals that "all major domestic airports are fair game," wrote Merrill Lynch analyst Michael Linenberg in a research note. Earlier this year, Southwest (SWA) began service at Denver International Airport, historically viewed as being among the most expensive in the USA. According to Linenberg, the demise of Independence Air (BLR), which operated out of (IAD), "created an opportunity which the company has seized." Although Southwest (SWA)'s arrival will mean a bit of "heartburn" for United Airlines (UAL), which has a major international hub at Dulles with 63% of seats in the market, the analyst thinks the bigger losers could be other Low-Cost Carriers (LCC)'s such as JetBlue (JBL), which has a 6% seat share at (IAD), given that JetBlue (JBL) and Southwest (SWA) "target the same passenger segments."

Southwest Airlines (SWA) will appeal a recent verdict in a racial profiling case that concluded with a $27.5 million award to a California woman and Iran native who claimed false imprisonment and malicious prosecution following her 2003 arrest in El Paso, according to press reports.

Southwest Airlines (SWA) will launch new flights from Philadelphia (PHL) to Columbus (thrice-daily) and Nashville (twice-daily) from July 2. It will add daily frequencies the same day from (PHL) to Providence (to six from five) and Orlando International (to seven from six) and from Chicago Midway to San Antonio (to two from one) and Portland, Oregon (to two from one).

"We are pleased with the continued and consistent improvement in our earnings performance," (CEO), Gary Kelly said. "Thus far, strong load factor and revenue trends have continued in April, and customer bookings for the remainder of second-quarter 2006 are strong."

Passenger traffic increased +15.4% to 15.28 billion (RPM)s on a +9.9% gain in revenue passengers to 19.2 million. Capacity rose +9.1% to 22.08 billion (ASM)s, resulting in a record first-quarter load factor of 69.2% LF, up +3.8 points over the year-ago period. Average passenger fare grew +10.7% to $100.94, lifting yield +5.4% to 12.68 cents, while (RASM) jumped +11.3% to 9.15 cents. Fuel prices had an adverse effect on unit costs, boosting (CASM) +11.3% to 8.7 cents. Excluding fuel, (CASM) dipped -0.2% to 6.43 cents, which was in line with expectations, according to Kelly.

"We are optimistic we can achieve our full-year 2006 goal of flat year-over-year unit costs, excluding fuel, at 6.48 cents," Kelly said. The airline is more than 75% hedged for the current quarter with fuel costs capped at $36 per barrel and more than 70% hedged for the remainder of 2006 at the same rate.

The tentative pilot contract at Delta Air Lines (DAL), if ratified by its (ALPA) membership, will drop the carrier from having the third-highest-paid narrowbody captains to the middle of the pack, while Northwest Airlines (NWA), if its pilots ratify their agreement, will fall even further, from having the second-highest-paid work group to the No 8 position, just above JetBlue (JBL).

Interestingly, the (NWA) and (DAL) pilot (FC) ratification voting periods overlap. This sets up a scenario in which the (NWA) pilots may develop a case of "Delta (DAL) envy" because the terms of the (DAL) (TA) "appear significantly richer than those at Northwest," according to a report from JP Morgan.

The analysis, which cited as sources JP Morgan research, Atlanta-based AIR, Inc, and union contracts, shows that a 12-year Northwest (NWA) A320 captain currently earns $180 per hour, which falls to $137 under the (TA). By comparison, a 12-year Delta (DAL) 737 captain's hourly pay will fall from $173 to $149. Prior to their November 2004 concessionary agreement, Delta (DAL) captains were the highest-paid in the industry, earning $202 per hour.

In addition, Delta (DAL) pilots will receive a $2.1 billion unsecured claim and management has agreed that if the pilot pension plan is rejected - - as appears likely - - they will get cash and securities worth $650 million. Furthermore, the Delta (DAL) contact runs through 2009, versus 2011 for (NWA). Voting on the (NWA) contract began April 6 and ends May 3. Pilots can recast their votes up until polls close at 10 am on May 3.

The overall salary leader among USA passenger carriers is Southwest Airlines (SWA), whose 12-year 737 captains earn $186 per hour, according to JP Morgan. Among legacy network carriers, the leader is American Airlines (AAL) at $161. At the bottom is US Airways (USA) at $125, followed by United (UAL) at $131 and America West (AMW) at $134. US Airways (USA) and America West (AMW) pilots are in discussions about merging seniority lists.

(SWA) also announced that it will exercise options for 79 737-700s for delivery from 2007 through 2012. Southwest (SWA) now has 140 737-700s on firm order as well as 116 options on additional airplanes for delivery from 2008 to 2012 and 54 purchase rights for delivery through 2014.

Southwest (SWA) will take 36 airplanes next year, 30 the following year, 18 in 2009 and 10 in each year from 2010 through 2012. It holds 116 options with delivery positions in 2008 - 2012 and 54 purchase rights for delivery through 2014. (CFMI) valued the new firm engine orders at $1 billion at list prices.

3 737-7H4's (34630, N235WN; 34631, N236WN; 34632, N237WN), deliveries.

May 2006: Southwest Airlines (SWA) recently announced Jeff Lamb as the new Vice President, People and Leadership Development. In his new position, Lamb is responsible for all activities involved in bringing the right People into Southwest Airlines (SWA); giving all employees the opportunity for personal and professional growth; and assuring quality and depth of leadership throughout the Company.

Lamb joined the Southwest (SWA) family in 2004. Prior to joining Southwest (SWA), Lamb worked for The Staubach Company for five years, assuming various positions including Executive VP, Corporate Operations and the leader for Staubach Lease Administration Company.

Employees = 31,729.

2 737-7H4's (34713, N238WN; 34714, N239WN), deliveries.

June 2006: Southwest Airlines (SWA) will launch a daily Denver - Houston Hobby flight on July 17 (increasing to twice-daily on August 4), a four-times-daily (DEN) - Kansas City service and daily flights from (DEN) to Orlando International and Nashville, all on August 4, and a daily Baltimore/Washington International (BWI) - Oakland service from August 17. It also will add one more daily flight from (DEN) to (BWI), Chicago Midway and Phoenix on July 17, and to Las Vegas on August 4. Frequencies will be added between (HOU) and Tampa on July 17 and between Boise and Oakland on August 17. The service increases at (DEN) will give the carrier 32 daily departures there.

After nearly three decades of frustration, Southwest Airlines (SWA) will have to wait only eight more years to unleash itself from its Love Field base (DAL). The mayors of Dallas and Fort Worth, along with Southwest (SWA) and American Airlines (AAL), yesterday unveiled a long-awaited compromise that - - subject to approval and appropriate legislation from the USA Congress - - will dilute and eventually repeal the Wright Amendment. Through-ticketing will be made available to (DAL) passengers as soon as Congress acts, and all flight restrictions will be removed in 2014.

Southwest (SWA) Executive Chairman, Herb Kelleher said the agreement left him feeling that "there must be hope for world peace," adding that "all parties have been compelled to make sacrifices [and] the only sure-fire winner from this agreement is the public."

CEO, Gary Kelly said, "We're trading certainty for uncertainty with this agreement, and it will allow us to plan for the future. It will allow us to reinvest in Dallas Love Field (DAL), our hometown airport, and it will allow us the opportunity to grow."

American (AAL) Chairman and CEO, Gerard Arpey did his best to put a positive spin on the deal, saying that Wright enabled Dallas/Fort Worth International Airport (DFW) to "become the economic engine of North Texas" and that (AAL) could now "refocus our collective energy on our Turnaround Plan and serving our customers in the best possible way."

The terms of the agreement, as outlined in The Dallas Morning News, are as follows:
- - Southwest can begin immediate through-ticketing from Love.
- - All flight restrictions at Love will be lifted in 2014.
- - (AAL) will cede one gate at Love but does not have to leave the airport. Increased landing fees at Love will fund $150 - $200 million in upgrades.
- - Love will be under curfew between 11 pm and 6 am.
- - The cities of Dallas and Fort Worth will oppose new commercial passenger service at any airport within 80 miles of Love, save (DFW), through 2014.
- - Southwest (SWA) will cede gates at Love if it chooses to operate from any other airport within 80 miles of Love before 2025.
- - Southwest will cede eight gates at Love if Congress passes legislation inconsistent with the agreement or if (SWA) launches nonstop, long-haul flights to or from the airport.

The agreement gives Congress until year end to codify the compromise, the Morning News said.

Southwest Airlines (SWA), after 35 years of first-come, first-served seating, announced that it will look to trim boarding times by experimenting with assigned seating. Starting July 10, and running for "several weeks," it will assign seats on about 200 select departures from San Diego. It will not be evaluating assignment procedures or the accompanying information technology issues and instead will assign seats manually during the test. "We want to make sure that we have studied all the possibilities and aspects of assigned seating, before we make any change to what has been a very successful formula," CEO, Gary Kelly said. Southwest (SWA) said that specially trained staff will monitor boarding time and efficiency, as well as customer reaction, on each flight. It confirmed that no policy change will be made before 2008. According to The Dallas Morning News, the airline picked San Diego because the gate layout allows for easier monitoring and because it liked the airport's mix of short-, medium- and long-haul flights.

6 737-7H4's (32503, N240WN; 32504, N241WN; 32505, N242WN; 32506, N245WN; 34863, N243WN; 34864, N244WN), deliveries.

July 2006: For the six-month period, Southwest Airlines (SWA) net income grew +93.1% to +$394 million as revenues climbed +23.9% to $4.47 billion and expenses increased +21.3% to $3.97 billion, lifting operating profit +48.4% to $500 million.

(SWA) is accepting applications and continues to interview. (SWA) is hiring 60 Flight Crew (FC) in July and expects to hire 400 in 2006.

Southwest Airlines (SWA) will inaugurate non-stop service from Baltimore to Detroit Metro on September 14th and will operate 4 flights a day using 737s. (SWA) unveiled details of its new Washington Dulles operation, having announced its intention three months ago to start service at the airport. It will occupy two gates on Concourse B, hire about +40 local employees and start flying October 5 with services to Chicago Midway (seven-times-daily), Orlando International (twice-daily), Tampa (twice-daily), and Las Vegas (daily). "Dulles will be a fantastic complement to our Baltimore/Washington operation," (CEO), Gary Kelly said.

(SWA) will install Aviation Partners Boeing (APB) Blended Winglets on up to 90 of its 737-300s. The order of 59 firm systems and 31 options follows the airline's commitment in June 2003 to install Blended Winglets on all of its 737-700s. Installations are planned to begin in early 2007.

4 737-7H4's (32507, N246LV; 32508, N257WN; 32509, N248WN; 34951, N249WN), deliveries.

August 2006: Southwest Airlines (SWA) named Executive VP Aircraft Operations, Mike Van de Ven, Chief of Operations effective September 1. Van de Ven joined (SWA) in 1993. Also, (SWA) promoted VP In-flight, Daryl Krause to Senior VP In-flight & Provisioning, and Senior Director Provisioning, Scott Halfmann to VP Provisioning. (SWA) promoted Senior VP Ground Operations, Greg Wells to Senior VP Operations, effective September 1. VP Station Operations, Chris Wahlenmaier will add Wells' former title, and Senior Director Ground Operations Stations, Teresa Laraba will become VP Ground Operations, sharing duties with Wahlenmaier.

(SWA) plans to launch daily Albany - Tampa service from October 29 and daily Reno/Lake Tahoe - Chicago Midway flights from December 4. It also announced frequency increases on 10 additional routes.

3 737-7H4's (32510, N251WN; 34972, N250WN; 34973, N252WN), deliveries.

September 2006: 5 737-7H4s (32511, N253WN; N32512, N254WN; 32513, N255WN; 32514, N256WN; 32515, N257WN), deliveries.

October 2006: Southwest Airlines (SWA) launched its Washington Dulles (IAD) service. (SWA) will use two gates on the B Concourse and operate 12 daily flights to Chicago Midway (seven), Orlando International (two), Tampa (two) and Las Vegas (one). It will base 40 employees at (IAD).

(SWA) is ready to "bring the Dallas/Fort Worth area into the 21st century of low-fare air travel" following USA President, George Bush's signing of a law that will weaken and ultimately repeal the Wright Amendment. (SWA) announced that it will begin selling tickets for one-stop flights from Dallas Love Field to Baltimore/Washington International, Chicago Midway, Cleveland, Columbus, Denver, Detroit, Fort Lauderdale, Indianapolis, Jacksonville, Las Vegas, Los Angeles, Louisville, Nashville, Oakland, Omaha, Orlando International, Philadelphia, Phoenix, Portland, Sacramento, Salt Lake City, San Diego, Seattle, Tampa and Tucson. CEO, Gary Kelly said during a conference call with reporters that the airline is not altering any routes, adding frequencies or reassigning airplanes, it just is making the cities available to Love Field passengers who now can travel across the network with a single ticket.

(SWA) promoted Senior VP Enterprise Spend Management, Bob Jordan to Executive VP Strategy, Procurement & Technology, and named Senior Management Committee and Executive Planning Committee member, Ron Ricks as the new Executive VP Law, Airports & Public Affairs. Both will report to (CEO), Gary Kelly. It also promoted Chief Development Officer, Jan Marshall to VP Technology & Chief Information Officer, and Director of Application Architecture, Kerry Schwab to VP & Chief Technology Officer. It named Lori Rainwater, the new VP Internal Audit.

USA legacy carriers have made substantial progress in becoming more competitive but still trail low-cost carriers in a number of areas related to labor efficiency, a new analysis by the USA Department of Transportation's Bureau of Transportation Statistics (BTS) confirms. The analysis, based on Form 41 data filed by seven network carriers, and seven budget airlines, reveals that Low Cost Carriers (LCC)s reduced the number of full-time-equivalent employees (FTE) per airplane by -16%, from 92 in the first quarter of 2001 to 77 in the first quarter of 2006, while the network carriers reduced their (FTE)s per airplane by -23% but still averaged 99 at the end of the study period, +28.6% higher than the (LCC) group.

Among network carriers, United Airlines (UAL) showed the largest gain as (FTE)s dropped -27.5% from 160 to 116. US Airways (USA) (which was counted in the network group, while America West Airlines (AMW) was included in the (LCC) group), and Northwest Airlines (NWA) had the fewest employees per airplane at the end of the first quarter with 82.

In terms of percentage reduction in (FTE)s, JetBlue Airways (JBL) led the low-cost group as it went from 127 in 2001 to 95 in 2006. In numeric terms, however, most (LCC)s did better: Spirit Airlines (SPR)had 62 (FTE)s per airplane as of the 2006 first quarter, followed by AirTran Airways (CQT) (64), Southwest Airlines (SWA) (70) and America West (AMW) (83).

The (LCC)s also boarded an average of +67% more passengers per (FTE) than their network counterparts, 195 to 117. Southwest (SWA) led all airlines at 234 enplanements per (FTE) in the first quarter, up from 203 five years earlier. On a percentage basis, AirTran (CQT) performed better, rising from 173 to 220. Among network airlines, (USA) led the group with 149 enplanements and (UAL) lagged at 102, although this was up from 65 in 2001. Overall, the network group improved from an average of 85 enplanements per (FTE) to 117, while the (LCC) group rose from 164 to 195.

Turning to compensation (salary plus benefits), network carriers reduced their annual compensation cost gap to $7,514 compared to $22,139 in 2001, (BTS) reported. Southwest (SWA)'s average annual compensation led the industry at $95,555. Among legacy airlines, (NWA) was highest at $91,613, and (USA) was the lowest at $73,642. Among the (LCC)s, Frontier Airlines (FRO) had the lowest average employee compensation at $55,432 and AirTran (CQT) was second-lowest at $59,637.

(SWA) cited a -$40 million revenue reduction related to the August terrorist threat, special charges and "an overall softening in demand for air travel" as reasons for a -77.1% plunge in third-quarter profit to +$48 million from net income of +$210 million in the year-ago quarter.

Still, (CEO), Gary Kelly called the result "solid" considering the aforementioned difficulties. "We began the quarter with unit revenue increases over +10%. Although the revenue momentum has slowed, demand for low fares has continued and overall, our revenue growth is healthy. Thus far in fourth quarter 2006, load factors and bookings remain solid and year-over-year unit revenue growth is currently 4% -5%," he said.

Willis Lease Finance of California (WLFC) announced the signing of an engine sharing agreement with American Airlines (AAL), Southwest Airlines (SWA) and WestJet (WJI) covering (CFM56-7B)s used to power 737NGs.

The pool initially will service more than 450 airplanes. "I believe engine sharing pools will ultimately change the way all engines are leased . . . Engines can literally be rented in a matter of minutes," (WLFC) President & (CEO), Charles Willis said. "We have worked with the management teams of these airlines for over five years to reach agreement on the details."

(SWA) has firm orders, options or purchase rights for 317 737s over the next six years, while (AAL) and WestJet (WJI) will make engines available to the pool as well as lease from it. (AAL) also may lease engines for its Maintenance, Repair & Overhaul (MRO) operations, Willis said, adding that the pool should improve spare engine productivity for the three carriers by 30% - 50%.

737-7H4 (32516, N258WN), delivery and 737-705 BBJ (29090, N271LV) bought from Ford (YFD).

November 2006: Insisting that his carrier has "a number of weapons to choose from," Southwest Airlines (SWA) (CEO), Gary Kelly said that a +15% increase in year-end earnings remains a goal for both 2006 and 2007.

On the heels of a difficult third quarter during which net profit fell -77%, Kelly said (SWA) expects fuel prices to continue to rise for the next four years and that "we know our focus now, and for the next several years, is to drive revenue growth."

(SWA) was enjoying another banner year, before the third-quarter profit plunge, caused in part by the August terrorist scare and expenses that rose +19.5% from the year-ago quarter against a +17.7% increase in revenues. Nine-month profit of +$442 million was up just +6.8% over the year-ago period, but Kelly is confident of a rebound despite some analyst skepticism. "We wouldn't mention it if we didn't believe we could do it," he declared.

Saying he did not want to "give a road map for competitors to follow," he would not reveal (SWA)'s specific revenue-enhancement strategy. But he claimed (SWA) is "in position to [increase revenue] better than other airlines due to competitive advantages."

Kelly added that costs are under control and said the airline is in the process of reviewing airport operations and looking for savings and efficiencies. He noted that there are plenty of growth opportunities in markets (SWA) already serves, starting with Dallas. In conjunction with the announcement of a fare sale out of Dallas Love Field, he said load factors on flights leaving the airport have been approximately 65%, but the repeal of the Wright Amendment means Dallas "is like a new city for us."

(SWA) remains reluctant to raise fares, but will consider "modest" hikes in some markets. Kelly maintained that its low-fare brand is worth more than any individual increase and said he does not foresee an across-the-board fare hike in this quarter.

(SWA) also would consider another codeshare agreement that might help boost loads (its deal with ATA Airlines (AAT) is worth $50 million in revenue), but Kelly said one of the problems with partnering with other carriers is that "most of them have very unfriendly customer service and that doesn't work for (SWA)."

(SWA) also will not start charging passengers for extras, and he said it has no plan to establish and charge for assigned seating. It continues to conduct tests in San Diego on a variety of boarding procedures, but will not reveal the results. He said assigned seating only will be implemented if it is revenue neutral, ensuring no costs would be passed on to the customer.

"We're accelerating our growth at a time that our competition is decelerating," Kelly concluded. (SWA) plans to take delivery of 37 airplanes next year.

(SWA) is interested in acquiring assets that may have to be sold off to complete US Airways (AMW)/(USA)'s proposed $8 billion takeover of Delta Air Lines (DAL). Chairman, Herb Kelleher reportedly called senior executives at both carriers to convey his interest, especially for assets on the East Coast. (SWA) told reporters last month in Dallas that it is pursuing extra airplanes aggressively and has a strong desire to expand. (CEO), Gary Kelly told the "The Wall Street Journal" that (SWA) is interested in "airplanes, gates at airports, slots at slot-controlled airports." He noted that such speculation "is all very preliminary and who knows what twists and turns the deal will take. We just want to have an opportunity to grow on the East Coast."

(SWA) will establish both pilot (FC) and flight attendant (CA) bases in Las Vegas (LAS) by October 2007. The 17,000-sq ft facilities will be located near McCarran Airport's C Concourse and initially will accommodate 350 pilots and 600 cabin staff. When fully staffed, (SWA) will employ 600 pilots, 1,000 flight attendants and 2,500 total staff at the airport. It operates 225 daily flights out of (LAS) to 53 cities.

(SWA) will inaugurate nonstop service between Detroit Metro and Orlando and an additional nonstop between Denver and Orlando starting on December 20th. Flights will operate with 737s.

(SWA) unveiled 33 new non-stop flights across 26 city-pairs. From March 11, it will launch thrice-daily Baltimore/Washington - Pittsburgh; Chicago (MDW) - Austin, increased to 2/day; - San Diego, increased to 5/day; twice-daily, Dallas Love Field - Birmingham; - St Louis, increased to 8/day; Las Vegas - Albuquerque, increased to 7/day; - Sacramento, increased to 8/day; - San Jose, increased to 9/day; Los Angeles - Salt Lake City, increased to 5/day; - Tucson, increased to 6/day; Oakland - Spokane, increased to 2/day; Orlando - Buffalo, increased to 3/day; - Cleveland, increased to 2/day; - Fort Myers, increased to 4/day; - Manchester, increased to 5/day; Philadelphia - Manchester, increased to 6/day; - Raleigh, increased to 6/day; - Tampa, increased to 4/day; - West Palm Beach, increased to 2/day; Sacramento - Burbank, increased to 11/day; - Portland, increased to 7/day; & twice-daily, San Diego - Reno/Tahoe; starting March 17, Chicago (MDW) - Denver, increased to 2/day; - Seattle, increased to 4/day; & starting April 15th, Chicago (MDW) - Las Vegas, increased to 12/day; - Orlando, increased to 8/day.

2 737-7H4s (32518, N260WN; 35554, N259WN), deliveries.

December 2006: AirTran Airways (CQT) would be interested in acquiring assets from Delta Air Lines (DAL) or US Airways (AMW)/(USA) if those carriers need to make sales to alleviate anticompetitive concerns in order to facilitate a potential merger, President & (COO), Bob Fornaro said.

Fornaro noted that (CQT) has a strong presence in markets where (DAL) and (AMW)/(USA) rank among the top two or three carriers and likely would need to reduce their presence to appease antitrust regulators. As of next month, for example, (CQT) will operate 215 daily departures from (DAL)'s base hub at Atlanta Hartsfield. "If we felt we could buy something that would add value, we would do it," he said. "We could help create a solution" to facilitate the proposed (AMW)/(USA) takeover of (DAL).

He predicted that USA regulators "will be receptive" to a (AMW)/(USA)/(DAL) merger. "I think [the merger] has a chance because it could strengthen the industry and [prevent] airlines from coming back to [the USA government] in a few years with hat in hand."

Fornaro said East Coast shuttle operations may be less appealing to (CQT), because much of the revenue on those flights comes from prearranged corporate deals. "The shuttle is really a question mark," he explained. "We could operate those routes very profitably but I'm not sure we could take advantage of all the corporate sales. Our interest [in shuttle operations] would probably be low."

He said expansion through consolidation may be USA carriers' best bet, because buying new planes will not be easy. "My assessment is that for at least the next two years, [the airplane] is going to be very tight, and if you want to get a plane, you'll have to pay a premium for it. And it's hard to pay a premium for airplanes and make money in a competitive market like the domestic USA."

(AAR) was selected by (SWA) to perform heavy maintenance services and winglet installations for (SWA)'s 737s, with the work to be done at (AAR)'s Indianapolis facility. Under terms of a three-year agreement, AAR will operate one line of nose-to-tail heavy maintenance checks starting in January. Winglet installation will include two nose-to-tail lines, each operating for 16 to 18 months, also starting next month.

(SWA) President, Colleen Barrett said (SWA) wants to buy more airplanes, even though it has 37 737-700s on order for delivery next year. "We're still out there looking for airplanes at the right price," she said. While most USA carriers have minimized capacity growth this year, a confident (SWA) will up capacity (ASM)s by +10% this quarter.

Barrett said (AMW)/(USA)'s $8 billion takeover offer for (DAL) is "serious and substantial, and is something the creditors are going to have to take a look at." (CEO), Gary Kelly recently said (SWA) is interested in airplanes, airport gates and slots at East Coast airports, that may become available as a result of a (AMW)/(USA)/(DAL) merger.

The Los Angeles Board of Airport Commissioners voted unanimously to increase cumulative rents and fees at Terminals 1 and 3 at Los Angeles International to $292.8 million over five years from $76 million, according to press reports. The two terminals serve primarily low-cost carriers, with Southwest Airlines (SWA) operating the most routes. In addition, maintenance fees will double, the "Los Angeles Times" reported. The increases will go into effect February 1 and will equal a +$4.19 increase in cost per boarded passenger to $9.89 in T1, and a $5.45 increase to $11.60 in T3.

2 737-7H4s (32517, N261WN; 32519, N262WN), deliveries.

January 2007: Southwest Airlines (SWA) posted a +$57 million profit in the fourth quarter that represented a -18.6% decline from the +$70 million earned in the year-ago period.

(SWA) was profitable for the 34th consecutive year in 2006, but posted just a +3.1% year-over-year increase in full-year net income to +$499 million from 2005's +$484 million, as higher fuel prices and lingering security issues slowed its inexorable growth.

(CEO), Gary Kelly opted to look ahead, saying the carrier is "well-positioned to respond to airline industry changes and consolidation." He said it will add 37 737s this year.

Full-year revenues climbed +19.8% to $9.09 billion against a +18.9% increase in expenses to $8.15 billion. Operating profit rose +28.8% to +$934 million. Kelly said fourth-quarter revenues were boosted by $11 million, thanks to service added at Dallas Love Field in response to partial repeal of the Wright Amendment. (SWA) also launched Washington Dulles service last quarter.

(SWA) carried 83.8 million revenue passengers in 2006, up +7.9% year-over-year, and flew 67.69 billion (RPM)s, up +12.4%. Capacity climbed +8.8% to 92.66 billion (ASM)s and load factor improved +2.4 points to a record 73.1% LF.

February 2007: Southwest Airlines (SWA) said it will resume service to San Francisco International (SFO) "in a meaningful way in the early fall," ending a six-year-plus hiatus. (SWA), which serves nearby Oakland and San Jose with 142 and 77 daily departures, respectively, pulled out of (SFO) in March 2001, after more than 18 years, citing its inability to operate profitable services to Phoenix and San Diego.

March 2007: Southwest Airlines (SWA) is expecting +7% to +8% capacity growth this year as it takes delivery of "at least" 37 737s, (CEO), Gary Kelly said as the (LCC) unveiled a series of new routes and frequency increases. New services include daily Fort Lauderdale - Providence and Houston Hobby - San Diego, starting June 4, five-times-daily Denver - Oakland from June 17, and daily Baltimore/Washington - Oklahoma City beginning August 4.

Starting June 4th, Fort Lauderdale - Providence, and Houston Hobby - San Diego. Starting June 17th, Tampa - Norfolk. Starting August 4th, Baltimore - Oklahoma City.

(SWA) authorized a new share repurchase program to buy back $300 million worth of common stock, or an estimated 20.2 million shares. (CEO), Gary Kelly said (SWA) has repurchased 62.1 million shares worth $1 billion since the beginning of 2006.

April 2007: Sixteen years worth of profitable quarters have raised standards and expectations at Southwest Airlines (SWA), which reported a +52.5% increase in first-quarter net profit to +$93 million from +$61 million in the year-ago quarter but called the result "disappointing" thanks to drops in both operating and non-(GAAP) earnings. "Based on the strength of last year's overall revenue growth, we had hoped this year's revenue growth would surmount these cost pressures," (CEO), Gary Kelly said, referring to rising fuel prices and a +4.3% increase in economic operating unit cost. "First-quarter 2007 unit revenue growth of +1.4% was solid, but slower compared to last year's growth rate. Inclement weather, a slowing economy and higher fare levels likely combined to cool the rate of growth in domestic air travel."

Kelly also revealed that the airline will be ready to fly internationally by 2009, although he ruled out starting long-haul services, which he said are "much lower priority than continuing to expand our 737 network."

Hawaiian Airlines (HWI) led all USA carriers with a 93.8% ontime percentage in March, according to data compiled by FlightStats. Among continental carriers, Southwest Airlines (84.4%) was the most punctual of the 39 measured. The worst ontime rates belonged to US Airways (AMW)/(USA) (56.6%). Sun Country Airlines (SCA) was the only carrier not to cancel a single flight.

(SWA) hired 58 pilots (FC) in March and expects to hire 68 this month.

Southwest Airlines (SWA) will launch daily Denver - Tampa service on May 4.

2 737-7H4s (32528, N273WN; 32529, N274WN), deliveries. 737-76Q (30279, N550WN), Aviation Capital Group leased (CGP).

May 2007: Southwest Airlines (SWA) will launch daily Phoenix (PHX) - Manchester, New Hampshire, service on August 26 and add an eighth daily (PHX) - Salt Lake City flight. On October 4, it will start a second daily Las Vegas (LAS) - Raleigh/Durham flight and a fourth daily (LAS) - Seattle flight.

(SWA) said it initially will serve three cities with 18 daily nonstop flights from San Francisco, when it launches service there on August 26. Destinations are Chicago Midway (thrice-daily), San Diego (eight-times-daily), and Las Vegas (seven-times-daily).

(CFM) International said (SWA) placed an order for up to 92 additional (CFM56-3) Advanced Upgrade kits worth approximately $145 million at list prices. (SWA)'s total order now stands at 447.

Calling it a "tipping point for performance-based navigation," USA (FAA) Administrator, Marion Blakey said that (SWA) informed the agency that it will equip its entire fleet for Required Navigation Performance (RNP), including retrofitting its 737 Classics.
The airline confirmed the plan, which (ATA) President & (CEO), James May said was an indication that "the entire industry is migrating as rapidly as possible to NextGen." A (SWA) spokesperson said that (SWA) "has made the decision to move forward internally, but all the specifics are not in place. We've been researching the capabilities for more than a year, the possibilities and efficiencies that we would gain and the benefits from our fleet being (RNP)-capable." The airline will start with its 737-700s, which come (RNP)-ready but would require "some switches to be flipped" before flying for (SWA). There is no timetable on the retrofit, the spokesperson revealed, saying, "we don't have a clear plan of how we're going to move forward." Nevertheless, (SWA) is the first airline to commit to (RNP) capability across its entire fleet. Blakey said 37 (RNP) approaches currently are available at 17 airports, with an additional 34 scheduled to be in place by year end and another 25 published next year.

Delta Air Lines (DAL) Executive VP Operations, Joe Kolshak was on hand to detail the benefits performance-based navigation has brought to his carrier. (DAL) received approval in March for its 737-800s to fly (RNP) approaches, joining Alaska Airlines (ASA), Horizon Air and Continental Airlines (CAL), and Atlanta Airport (ATL) has been (RNAV)-equipped since Fiscal Year (FY) 2005. Kolshak said average delays have been reduced at (ATL) by 3 minutes, which he said was the equivalent of adding three airplanes to the fleet. (DAL) ranked sixth among USA legacy carriers in ontime performance two years ago and stands second so far this year. The fifth runway and new taxiway also have been key contributors.

Kolshak said (DAL) is conducting constant descent approach beta testing on early morning transcontinental arrivals at Atlanta and that initial indications are that it will save 400 lbs of fuel per flight, or 13 million gallons per year.

(SWA) announced an agreement with Naverus to "develop and implement [RNP] tailored approach and departure procedures at each of the airports (SWA) serves." Executive VP & Chief of Operations, Mike Van de Ven said, "We recently commissioned Naverus to illustrate the benefits of (RNP) for (SWA). We discovered how Tailored (RNP) can be used for more than just terrain-challenged airports. By using it everywhere, we'll unlock the tremendous capabilities of modern avionics, maximizing our investment in new airplanes and equipment."

(SWA) signed a 10-year distribution agreement with Galileo, the second-largest Global Distribution System (GDS) in the USA, and will begin participating in the system later this year after technical work is completed. The deal does not include the carrier's Web-only fares. Since 1995, (SWA) has participated only in Sabre, the largest (GDS) in the USA market, at the Basic Booking Request level. But more attractive (GDS) economics and a need to boost revenue as fuel costs soar, induced it to reconsider its stance, as (GDS) participation offers access to the higher-yield corporate travel market. JetBlue Airways (JBL) came to a similar conclusion last year and has said its (GDS) revenues are noticeably higher. The new (SWA) content apparently will come at a cost to Galileo subscribers. "Details of the cost to agents for this (SWA) content will be available shortly," the (GDS) said.

In response, Sabre said the (SWA)-Galileo deal signifies "the ongoing recognition of the importance of the travel agency channel and their corporate customers" and "confirms the value and importance of the (GDS) channel for all size carriers."

June 2007: Southwest Airlines (SWA) (CEO), Gary Kelly said (SWA) will "prototype inflight wireless connectivity next year." Speaking at the Merrill Lynch Global Transportation Conference in New York, Kelly also said the carrier's +8% growth this year "is too high" in the face of the soft demand environment. "We don't need to be growing at +8%," he said. (SWA) aims to boost load factors, has significant potential to diversify its revenue base, and is busy developing "new products and services," he stated. It also wants to expand its code sharing, "first with near-international destinations, and then ultimately with European and transpacific destinations," from 2009.

(SWA) (CEO), Gary Kelly said that the carrier plans to offer service on a code share basis to destinations in Mexico, Canada and the Caribbean from Baltimore (BWI) by 2009 or 2010, according to press reports. Flights will be operated by partner ATA Airlines (AAT). "This airport is well prepared for more growth," he told businesses serving (BWI), according to "The Baltimore Sun." "Philadelphia is strained . . . I don't really see it as a cannibalization issue here at all." (SWA) also is interested in code sharing on flights to Europe.

(SWA) said that it will slow its growth to contend better with weak economic conditions and fuel costs, lowering capacity growth to +6% from +8% for the 2007 fourth quarter, and full-year 2008, dropping unprofitable routes, adding new ones (including five new destinations from Denver) and taking delivery of 19 net airplanes next year, instead of the previously planned 34. Additionally, in what may be a bid to win more business (C) fliers, it will unveil a new "boarding/seating method" in the fourth quarter, replacing its open seating policy.

(CEO) Gary Kelly said, "Given the slowing USA economy and fuel cost pressures, we are taking these steps to adjust our capacity growth rate, which will help to restore profit growth. If we find that conditions change, we will reevaluate our growth plans for future periods. In this economic environment, we simply need to take less risk and grow more slowly." The comments were in line with those he made earlier this month at the Merrill Lynch Global Transportation Conference, when he characterized the carrier's +8% growth this year as "too high" in the face of soft demand. It is rationalizing its network by eliminating -39 daily flights from its schedule, while adding +46 in "key growth markets."

Kelly said the airline plans to implement new revenue initiatives by year end, including undisclosed enhancements to its fare structure and loyalty program and a new advertising campaign. "In all, we are targeting more than >$1 billion in incremental revenue over the next few years," he said. (SWA) led the USA industry with +$93 million in net income in the first quarter, but he conceded that the results fell short of expectations, and that revenue growth was failing to surmount "cost pressures."

(SWA) said it will accept PayPal payments for tickets purchased on its website. PayPal is an eBay subsidiary that allows account-holding customers to pay for online transactions through various means without submitting financial information to the vendor.

July 2007: Southwest Airlines (SWA) is offering voluntary buyouts to approximately 9,000 employees, or 27% of its workers, according to press reports citing statements from the Low Cost Carrier (LCC). The buyout comprises a $25,000 payment, medical and dental benefits. Among those eligible are flight attendants (CA), ramp workers, customer service employees, and those in reservations, operations and freight, who have reached a specific pay scale. (SWA) offered a similar buyout in 2004. Last month, it said it planned to slow capacity growth through 2008 and delay several airplane deliveries.

(SWA) and Boeing (TBC) reached an agreement under which (SWA) deferred delivery of five 737-700s slated to arrive in 2008 to 2013 and exercised options for 25 additional 737-700s for delivery in 2013 and 2014. The agreement is part of a broader strategy to slow its rate of growth. "In our continuing efforts to restore profit growth, we have adjusted both our fourth-quarter 2007 and full-year 2008 capacity plans to grow capacity (ASM)s year-over-year by approximately +6%, or about two percentage points slower than previously planned," (SWA) said. It originally had planned to take delivery of 34 737s next year. In addition to the five deferred airplanes, it said it is "exploring a variety of alternatives" regarding another +10 737s it had planned to take in 2008. It said net deliveries next year will total 19, or 15 fewer than its previous plan.

August 2007: Southwest Airlines (SWA) launched service from San Francisco (SFO) to Chicago Midway (thrice-daily), San Diego (eight-times-daily) and Las Vegas (seven-times-daily), and announced that it will start eight-times-daily (SFO) - Los Angeles service on November 4.

September 2007: Southwest Airlines (SWA) said in an investor update that third-quarter unit costs will rise +4% to +5%, owing mainly to a $25 million charge related to its voluntary employee buyout program. The cost increase is more than double its projected growth in quarterly unit revenue, and caused analysts to project lower-than-expected earnings for (SWA) in the quarter. JP Morgan's (SWA) third-quarter earnings estimate was lowered to 20 cents per share from 23 cents previously.

(SWA) said just 609 employees accepted the company's buyout offer, which included a $25,000 payment as well as benefits such as (SWA) travel privileges. (SWA) said the program's intention was to lower costs by encouraging senior high-paid employees to take voluntarily leave. It said staff totals will stay relatively static, as it plans to replace nearly all of the bought-out workers with younger employees earning lower wages. The majority of the departing employees (-395) worked in reservations. Pilots (FC) and mechanics (MT) were not offered buyouts. The workers who have decided to participate in the program, will leave their jobs between September 30 and April 30, 2008.

(SWA) hired 40 pilots (FC) in July and 60 in August. Expects to hire 640 pilots (FC) this year.

Sabre Airline Solutions said (SWA) Cargo selected the CargoMax Revenue Manager system.

After extensive deliberation, (SWA) said it has decided to maintain its "legendary" open-seating policy, but will change its boarding process to eliminate "the perceived cattle call" experience at gates, in which its passengers "camp out in their boarding line." The carrier will launch its new boarding system in November. Each passenger still will be given cards at check-in denoting A, B and C groups as now, but the cards also will contain numbers 1 to 60. According to a spokesperson, each (SWA) gate will feature a series of five columns labeled 1 to 5, 6 to 10, etc, on one side and 31 to 35, 36 to 40, etc, on the other side. When the A group is told to line up, passengers will stand in groups of five next to their designated columns. Southwest (SWA) envisions two lines of five-person clusters, with gate agents boarding 1 to 5, 6 to 10, and so on. When the A group has completed boarding, the B group will be told to line up next to their designated columns, followed by the C group. Passengers will not have to board in consecutive numerical order, but will be expected to board within their group of five, the spokesperson explained. For example, passenger A4 could board followed by A2, then A5, then A1 and A3. Boarding positions will be given out, based on time of check-in, which opens 24 hours prior to departure, with the first person checking in getting A1. Passengers checking in online will be able to print out their boarding cards with the letter-number designation. "Our open seating has served us exceptionally well throughout our 36-year history and, after much research . . . and significant feedback from our employees and customers, we've decided that it is here to stay," (CEO), Gary Kelly said. "After testing assigned seats in San Diego last summer, we quickly learned that the majority of our customers did not want us to abandon our open seating, but they did challenge us to enhance the way we board our airplanes." (SWA) last month, performed a "dress rehearsal" at San Antonio International of its new boarding process, and Kelly said passengers and employees were "overwhelmingly positive" in their response. The carrier plans to introduce the system at every airport it serves by early November. Over time, it will modify its gates with permanent columns and signage, that reflect the revamped boarding system.

October 2007: POST ACCDT REPORT: (December 2005 - National Transport Safety Board (NTSB) Report: The USA (NTSB) concluded that the probable cause of the Southwest Airlines (SWA) 737-700 runway overrun in December 2005 at Chicago Midway "was the pilots (FC)'s failure to use available reverse thrust in a timely manner" and to use the best data to calculate landing distance. The airplane veered from the runway after landing, and crashed through a boundary fence onto a road next to the airport, striking a car and killing a six-year-old child. The (NTSB) said that the pilots' lack of familiarity with the 737-700's autobrake system "distracted them from thrust reverser usage during the challenging landing." Also contributing to the crash, was a failure to use the best information to calculate landing distance, the board said. "As we approach the winter months, we continue to push for acceptance of a minimum safety margin, so that this type of accident does not occur again," the (NTSB) Chairman, Mark Rosenker said. The investigation revealed that as the flight neared Midway, the pilots "received mixed braking action reports for the landing runway. The flight crew used an onboard laptop performance computer, provided in the cockpit of (SWA)'s airplanes to calculate expected landing distance. They entered multiple scenarios, including wind speed and direction, airplane gross weight at touchdown, and reported runway braking action." Based on their calculations, they decided they could land safely. However, the (NTSB) stated, "the accident pilots were not aware that stopping margins displayed by the Onboard Performance Computer (OPC) for poor runway conditions, were in some cases based on a lower tailwind component than that which was presented. Also, the accident pilots were not aware that the stopping margins computed by the (SWA) (OPC) incorporated the use of thrust reversers for their model airplane, the 737-700, which resulted in more favorable stopping margins." If they had been aware of these factors, they "might have elected to divert to another airport." In the aftermath of the accident, the (NTSB) in January 2006 issued an urgent safety recommendation to the (FAA) "to prohibit airlines from using credit for the use of thrust reversers, when calculating stopping distances." In this week's report, the board issued a new urgent safety recommendation, that calls on the (FAA) "to immediately require operators to conduct arrival landing distance assessments, before every landing, based on existing performance data, actual conditions and incorporating a minimum safety margin of 15%."

(SWA) hired 46 pilots (FC) in September.

(SWA) unveiled a new gate design to complement the adjusted, numbered boarding procedure announced last month, that it hopes will "alleviate the need for customers to 'camp out' in line at the gate." Stainless steel columns and television monitors will be installed to support the boarding procedure at each of (SWA)'s 64 airports, with a family area, power stations, a business/leisure section with padded seats and tables and flat screen TVs to follow. Dallas Love Field gates were overhauled by October 15, with remaining airports finished in the first half of next year. The new boarding procedure will begin early next month systemwide.

(GE) Aviation was selected to provide Flight Management System (FMS)s for 200 737 Classics operated by (SWA), in what may be the largest cockpit retrofit program announced to date. The technology upgrade is in keeping with (SWA)'s plan to implement Required Navigation Performance (RNP) at every airport it serves. The value of the deal was not disclosed. Deliveries are scheduled for 2008 through 2009. The (FMS)s will be supplied by the Systems division of (GE) Aviation, formerly Smiths Aerospace. "(SWA) is pleased to select (GE) to provide this key capability to our Classic airplanes, which will enable our entire 737 fleet to operate more efficiently in today's air traffic environment," said Executive VP & Chief of Operations, Mike Van de Ven.

November 2007: Southwest (SWA) opened a new crew base in Las Vegas (LAS) on October 1. (SWA) hired 20 pilots (FC) in October.

(SWA) introduced a "business select" fare category that will provide passengers paying more for tickets with guaranteed early boarding, more frequent-flier credits and a free cocktail, a move that is part of (SWA)'s ongoing effort to alter its traditional single-class service to attract more business (C) travelers. (CEO), Gary Kelly said the new offering, which will be available on its website, will "transition (SWA) from a one-size-fits-all airline to the airline that fits your life." Added VP Marketing, Sales & Distribution, Kevin Krone, "This new product allows customers the ability to customize their travel and get rewarded for it."

(SWA) also introduced an enhancement to its "Rapid Rewards" frequent-flier program, whereby members who fly 32 one-way or 16 roundtrip flights in 12 months will receive "A-List" status that allows them to "automatically" check in for flights in advance and "most likely" ensures they will be among the first to board. In addition, Rapid Rewards members will be allowed to exchange two "standard awards" for one "freedom award," that will be "free of seat restrictions except for a few blackout dates around major holidays, which means that as long as there is a seat for purchase on a flight, members can use this new reward to reserve it," (SWA) said.
Kelly stated that the changes are "value added improvements, that will differentiate our product without changing our core business."

(SWA) reached agreement with the City of Chicago that Mayor Richard Daley's office said is "a very big first step" toward its planned privatization of Midway Airport. USA legislation, enacted in 1996, created a pilot program for five airport privatizations, but under the law, a city needs the approval of 65% of an airport's airline tenants, in order to use proceeds from a privatization for nonaviation-related purposes, which has been a historical stumbling block. Daley wants to lease Midway to a private operator, but his administration still must gain approval from four more airlines to reach the threshold. (SWA), the airport's largest tenant, had been a strong opponent in the past. Observers noted that its statement regarding the agreement was not a full endorsement of Daley's plan. (SWA) said it "welcomes the opportunity to increase our collective knowledge about airport privatization in a manner that hopefully produces a mutually beneficial outcome. We applaud the City of Chicago for carefully exploring the possibility of a potential long-term lease of Midway Airport to a private airport operator." Hochtief AirPort, the airport investment and management unit of the global construction services firm, expects to put in a bid for Midway.

December 2007: Southwest (SWA) is accepting Flight Crew (FC) applications. (SWA) is no longer conducting interviews. (SWA) predicts it will interview again in the second quarter of 2008. The carrier will continue classes filled from their pilot (FC) pool in January. (SWA) expects to hire 400 pilots (FC) in 2008.

(SWA) officially opened an 80,000-sq-ft maintenance hangar at Dallas Love Field. Construction on the $18.5 million facility, which can accommodate three winglet-equipped 737-700s, began in November 2006. (SWA)'s Dallas maintenance base now comprises five hangars.

USA airlines warned of rising fuel costs and a slowing USA economy, with Continental Airlines (CAL) and (SWA) reducing planned 2008 capacity growth and Delta Air Lines (DAL) projecting that it could post an operating loss in the fourth quarter. USA carriers, which have returned to profitability in the past 18 months, appear to be bracing for a weak USA economic environment in the new year. (SWA) said it plans to reduce its 2008 fleet growth from 10 to five airplanes and grow capacity (ASM)s 4% to 5% next year. This represents its second downward revision in planned capacity growth. It previously trimmed 2008 growth from 8% (34 net airplanes) to 6%. (CEO), Gary Kelly said, "We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices." He added that "more conservative growth . . . will aid us in our efforts to drive improved profits next year."

January 2008: Southwest Airlines (SWA) 2007 statistics: 116.36 billion (RPK)S passenger traffic +6.8%; +7.5% capacity (ASK)s; -.5 load factor for 72.6% LF. SEE ATTACHED COMPARISON CHART TO SELECTED OPERATORS - "SWA-2007-STATS."

(SWA) (CEO), Gary Kelly told "Bloomberg News" that (SWA) will cut its 2008 capacity increase to +4% to +5%, compared to +7.5% last year, and that it must realize $1 billion in new annual revenue before it increases its growth rate. (SWA) has, however, identified several possibilities for new revenue growth, such as marketing seats on ATA Airlines (AAT) flights to Mexico and selling vacation packages on (SWA)'s website, Kelly told "Bloomberg." "There is a $1 billion-plus potential there. We can't cut -$1 billion out of our cost structure, unless we cut our pay, and that's the last thing I want to do."

The more things change at (SWA), the more they stay the same. Facing record fuel prices, sagging demand and leaner competition, the carrier slowed its once-inexorable growth and worked on revenue initiatives like its "Business Select" product that might conflict with its populist image. But while the company changes, the results do not: (SWA) reported yet another increase in full-year profit, this time a +29.3% boost to +$645 million from the +$499 million earned in 2006. Special gains and fuel hedges helped it flourish during a fourth quarter, that was troublesome for several legacy competitors, as net earnings for the period soared +94.7% to +$111 million. CEO, Gary Kelly said both results "fell short of our earnings goals" but that "2007 was much more difficult than anticipated, due to rising energy prices throughout the year and softer demand for domestic air travel." (SWA) previously announced plans to cut its growth this year. Full-year operating revenue climbed +8.5% to $9.86 billion, against a +11.3% rise in expenses to $9.07 billion. Fuel jumped +18.6% to $2.54 billion, helping contribute to a -15.3% decline in operating income to +$791 million from +$934 million in 2006. The bottom line was boosted by $267 million in special gains related largely to derivative instruments and hedges, which compared to a -$144 million loss on a similar basis in 2006. (SWA) carried 88.7 million passengers in 2007, up +5.8% from the prior year. (RPM)s traffic rose +6.8% to 72.32 billion against a +7.5% lift in capacity to 99.64 billion (ASM)s, dropping load factor -0.5 point to 72.6% LF. Yield grew +1.2% to 13.08 cents on a +0.9% gain in unit revenue to 9.90 cents. Cost per (ASM) was up +3.4% year-over-year to 9.10 cents, or +1.1% to 6.56 cents, excluding fuel. The airline operated 520 airplanes as of December 31, up from 481, one year before.

This summer, (SWA) will partner with "Row 44" of California to test satellite-delivered Internet access for Wi-Fi enabled passengers, on four airplanes. Similar to initiatives underway at JetBlue Airways (JBL), Air France (AFA), and American Airlines (AAL), the product promises "the highest bandwidth available to commercial airlines in the USA," according to Senior VP Marketing, Dave Ridley.

(SWA) released a summer schedule, that features the elimination of 57 roundtrip flights and the addition of 40 new flights, including service to six new destinations from Denver. The schedule takes effect May 10, and reflects the fact that the airline is "concerned about slowing economic growth, and we want our flight schedule to be built around flights that are in high demand," according to CEO, Gary Kelly. New routes are Denver to Los Angeles (five-times-daily), Philadelphia (twice-daily), Raleigh Durham (daily), San Antonio (daily), San Jose (thrice-daily), and St Louis (thrice-daily); Austin to Fort Lauderdale (daily) and Oakland (daily); Fort Lauderdale - Manchester (daily); Las Vegas - Jacksonville (daily); Nashville - Norfolk (daily).

(SWA) announced the following new services: Five-times-daily, San Francisco - Phoenix, beginning March 8; daily, from Philadelphia to Austin and San Antonio, on March 17; five-times-daily, Denver - San Diego, beginning April 4.

A fanfare of headlines recently proclaimed the news that crude oil topped $100 per barrel, heralding a feeding frenzy on the first trading day of 2008. But oil prices have been climbing steadily over the past six years, and there are few companies for which fuel is more crucial than it is for airlines. Today's oil prices are particularly burdensome for this bunch, with more than >25% of the airline industry's cost structure tethered to this volatile input. Although conventional airlines such as American Airlines (AMR), Delta Air Lines (DAL), Continental Airlines (CAL), and United Airlines (UAL) will be affected by higher long-term fuel prices, low-cost carriers (LCC)s such as (SWA), JetBlue (JBL), and AirTran (CQT) are no less vulnerable. (LCC)s grow by sustaining their low fares, attracting customers who might otherwise drive to their destinations or may not be able to afford other means of travel. Low costs - - including the cost of oil - - are fundamental to the success of the business model. In fact, the rise of the low-cost business model since the mid-1980s, as exemplified by Southwest Airlines (SWA), is directly tied to a period when oil prices adjusted for inflation were generally flat. As long as oil prices remain tame, low-cost airlines can focus on productivity and efficiency gains to decrease unit costs. As these airlines grow and bring their low-cost business to new destinations, they can use these low prices to stimulate demand. For example, when a low-cost carrier enters a market and undercuts incumbents by offering a $200 round-trip airfare compared with the $400 fares offered by competitors, passengers all get excited, because it means they can actually afford to take twice as many trips for the same price. In addition, leisurely weekend getaways become more affordable, making trips that might not have been feasible at higher prices a reality.

However, this phenomenon is a double-edged sword. Low-cost airlines in particular, risk destroying demand if they raise prices, say, because they are passing along higher fuel costs. Indeed, higher oil prices pack a double whammy for these airlines. First, higher fuel costs crimp profit margins, forcing the airlines to raise prices to recover some of the increased expense. Second, airlines are raising prices at exactly the same time that higher oil prices are taking a bite out of consumers' pocketbooks, which makes it more difficult for customers to afford travel, even if airfares remain unchanged. The one-two punch of higher oil prices and a slowing economy, make for a destructive combination. As low-cost carriers are forced to pass along fuel prices, it is expected that demand destruction will inevitably erode some of their customer base and cause management to continue ratcheting down growth plans. After recently factoring in expectations for slower growth in the future, Southwest (SWA), AirTran (CQT), and JetBlue (JBL) are all 1-star stocks at Morningstar - - that is, it is thought that current prices are still significantly above the fair values of these firms.

(LCC)s will not take the assault on their business models sitting down. Already, (SWA) and JetBlue (JBL) are shifting focus toward luring more lucrative business (C) travelers. For the first time in its history, (SWA) is offering priority boarding, extra frequent-flyer miles, and on-board perks to those who purchase higher-priced business (C) fares. The firm is launching a colossal marketing campaign to woo business (C) travelers in its push to generate +$1 billion more revenue annually by 2009. In addition, it is thought that low-cost carriers (LCC)s will place more emphasis on ancillary revenues, a process that was accelerated with the entry of Virgin America (VUS), which is offering a smorgasbord of seat-back options, including laptop plug-ins, connectivity, and an on-board system for ordering food and sundries. Not to be left behind, (SWA) plans to unveil its own suite of in-flight tools in the near future.

It is expected that in a world of higher oil prices, all of the airlines will be vying for premium customers, while fighting over a smaller industry pie. Airlines have yet to pass along the full impact of higher fuel prices, but record load factors (based on the percentage of seats occupied on each flight) have so far offset these pricing deficiencies. As carriers raise fares to offset higher fuel prices, driven in large part by the rolling-off of below-market fuel hedges for price leader (SWA), it is expected that demand destruction will lead to falling load factors - - and eventually fewer domestic flights.

Rockwell Collins said (SWA) selected the GPS-4000S for Required Navigation Performance (RNP) operations. In May, (SWA) told the (FAA) it will equip its entire fleet for (RNP), including retrofitting its 737 Classics. Installation will begin this year.

The (SWA) board authorized a new share repurchase program to acquire up to $500 million of (SWA) common stock, equal to roughly 41 million shares. It is the sixth repurchase program authorized since January 2006, resulting in the repurchase of 116 million shares of common stock worth $1.8 billion, (CEO), Gary Kelly said. The company has around 735 million shares outstanding.

February 2008: Southwest Airlines (SWA) will continue its efforts to tap into the business travel market, following the introduction of its "Business (C) Select" product, CEO Gary Kelly said at the Raymond James Growth Airline Conference in New York. "The biggest opportunity for us to grow is the business (C) traveler," he said. The "Business (C) Select" product, introduced last fall, allows passengers paying a higher fare to board first, select a seat and enjoy a free cocktail, while receiving extra frequent-flier credits. Kelly said the program has generated an extra $7 million in revenue so far and revealed that he expects the figure to rise to $100 million by next year.

Regarding the consolidation talk spreading through the USA industry, he said (SWA) would consider acquiring another carrier, even if it meant going against its long-held policy of operating a single fleet type, in this case the 737. "I think consolidation provides an opportunity for (SWA) regardless of what we do," he said. "If there's an opportunity to acquire another carrier that does not have 737s, we have plans in mind about how we could deal with that. While that is an impediment to an acquisition, it's not a deal killer."

If domestic rivals shrink, (SWA) will benefit, Kelly predicted. "And of course, I wouldn't eliminate the possibility that we would participate in some form or fashion in consolidation."

(SWA) is considering a code share partner that would allow it to offer international service and develop more ancillary revenue sources, such as online hotel bookings, vacation packages or car rentals, he added. It also is moving forward with installation of broadband Internet access on its fleet.

(SWA) said just 609 employees accepted the company's buyout offer, which included a $25,000 payment as well as benefits such as (SWA) travel privileges. (SWA) said the program's intention was to lower costs by encouraging senior high-paid employees to take voluntarily leave. It said staff totals will stay relatively static as it plans to replace nearly all of the bought-out workers with younger employees earning lower wages. The majority of the departing employees (-395) worked in reservations. Pilots (FC) and mechanics (MT) were not offered buyouts. The workers who have decided to participate in the program will leave their jobs between September 30 and April 30, 2008.

Accertify said (SWA) selected its fraud prevention solution Interceptas. The technology features end-to-end business coverage.

A next generation narrowbody that offers significant improvements in operational efficiency over current designs but has “a common type rating” with the 737 would be ideal for Southwest Airlines (SWA).
Asked to discuss (SWA)’s interest in narrowbody replacement, the carrier’s Senior Director Engineering & Maintenance Programs, Dale Stolzer said that, if it is not possible to achieve the same type rating as the 737, than “something that would have the lowest amount of additional training time required” would be the next most attractive option “in order to gain operational flexibility with any pilot (FC) flying for (SWA)”. It would cost “several hundred million dollars” for 737 operator (SWA) to train its pilots (FC) in multiple airplane types, he notes. While (SWA) is “always looking at what everybody has on the drawing board regardless of manufacturer and regardless of size”, it has kept coming back to the 737 “because it has served us so well”, says Stolzer, noting that standardization of (SWA)’s fleet has given the carrier “one of the biggest operational efficiencies”. Any new-design narrow body has some big shoes to fill, he says. “The existing airplane we have today has set the bar very high. We would be looking for a +15% to +20% operational efficiency improvement over our existing 737-700.” An entry-into-service of 2015 or later for narrowbody replacement airplanes is being projected by airframers. New engine technology will largely drive this timeline. (SWA) has not shown favoritism to one engine over another. For example, notes Stolzer, while open rotor architecture “promises the most fuel burn,” there are other issues “that nobody has their arms wrapped around” yet, including whether the powerplant will pass regulatory standards for blade-out and whether it will be the most cost-efficient in terms of maintenance. Lifecycle costs must be determined, he says. The design goals for new engines that call for higher fuel efficiency with super-low emissions and noise, “run opposite of each other,” he says, adding: “Everybody can’t have everything.” In light of these considerations, (SWA) continues to study the market. “Have we sent a message to Boeing (TBC) that this is what we want? No, we have not. We’re looking at every option that’s on the table and trying to come up with a long-term plan.”

March 2008: Southwest Airlines (SWA) flew 5.43 billion (RPM)s passenger traffic in February, up +12% from the year-ago month, against a +9% increase in (ASM)s to 7.91 billion. Load factor rose +1.8 points to 68.6% LF.

The USA (FAA) proposed a $10.2 million civil penalty against Southwest Airlines (SWA) "for operating 46 airplanes without performing mandatory inspections for fuselage fatigue cracking," representing "deliberate violations" of an agency airworthiness directive. The fine, if it becomes final, would be the largest-ever penalty imposed by the (FAA) on an airline for safety violations. The agency said it issued a 2004 Airworthiness Directive (AD) mandating repetitive external detailed and eddy-current inspections on older 737 models at intervals of no more than 4,500 flight cycles to detect fatigue cracking in areas of the fuselage skin. The (FAA) alleges that from June 18, 2006, to March 14, 2007, (SWA) operated 46 737 Classics on 59,791 flights "while failing to comply" with the (AD). "Subsequently, the airline found that six of the 46 airplanes had fatigue cracks," it said. "The (FAA) is taking action against Southwest Airlines (SWA) for failing to follow rules that are designed to protect passengers and crew," said Associate Administrator Aviation Safety, Nicholas Sabatini. "We expect the airline industry to fully comply with all (FAA) directives and take corrective action." The (FAA) further alleges that after (SWA) "discovered that it had failed to accomplish the required repetitive inspections . . . it continued to operate those same 46 airplanes on an additional +1,451 flights [in March 2007]. The amount of the civil penalty reflects the serious nature of those deliberate violations."

The carrier, which boasts often of having a stellar safety record, has 30 days to respond formally respond to the allegations. In a statement issued to the "Associated Press," (SWA) said it had found "the start of some very small cracking" on six of the 46 737 Classics. "These are safe planes," (SWA) insisted, adding that it believed the matter had been settled last year.

House of Representatives Transportation & Infrastructure Committee Chairman, James Oberstar (Democrat-Minnesota) said he planned to hold hearings on the issue soon to examine both (SWA)'s alleged violation and whether the (FAA) should have been more aggressive and ordered the grounding of the airplanes.

Southwest Airlines (SWA) claimed that both Boeing (TBC) and the USA (FAA) approved its continued operation of 46 737 Classics for nine days in March 2007, even though the airplanes had not undergone required inspections, expressing dismay at the size of the agency's proposed fine for alleged safety lapses. "We've got a 37-year history of very safe operations, one of the safest operations in the world," (SWA) CEO, Gary Kelly said in comments e-mailed to reporters. "We're disappointed, obviously, with the fine. It is unprecedented and we think it is unfair." The airline contacted the (FAA) on March 15, 2007, to disclose that it had been operating the airplanes without conducting the required inspections. Kelly blamed the oversight on "a gap in our documentation. We voluntarily reported that." The (FAA) is proposing to fine (SWA) just $200,000 for that lapse, crediting it for self-disclosure. But it is proposing an additional +$10 million penalty for continuing to fly the 46 airplanes through March 23 without conducting the inspections, saying that the carrier knew it was noncompliant yet operated an additional 1,451 flights over nine days. (SWA) said that when it made its voluntary disclosure on March 15, it developed a "10-day compliance plan" in which it would continue to operate the airplanes "for up to 10 days until the airplanes could be reinspected." It said it consulted Boeing (TBC) and that the manufacturer found the plan "technically valid." Boeing (TBC) said in a statement last week that "the safety of the Southwest (SWA) fleet was not compromised." Kelly said the airline believed the (FAA) approved the plan. "Our interpretation of the guidance that we got from the (FAA) at the time was that we were in compliance with all laws and regulations," he said. "I think the (FAA) has a different view of that today." (SWA) acknowledges that it found "small cracking" on six of the 46 fuselages during inspections. "With respect to those cracks . . . the Boeing Company (TBC) said that at no time were those cracks unsafe," Kelly said.

USA Transportation Secretary, Mary Peters vowed to take action "swiftly" if "serious allegations" that (FAA) Safety Inspectors were negligent in their oversight of Southwest Airlines (SWA) are true. The (FAA) is coming under increasing criticism, particularly from House of Representatives Transportation & Infrastructure Committee Chairman, James Oberstar (Democrat-Minnesota), who claims congressional investigators have "uncovered a pattern of regulatory abuse . . . What is so disturbing is that many (FAA) Inspectors have given up reporting failures by the carriers, because there is such a cozy relationship between (FAA) management and airline management."
Speaking at the (FAA) Aviation Forecast Conference in Washington, Acting Administrator, Bobby Sturgell said, "I reject that suggestion. . . [(FAA) Inspectors] are dedicated safety experts and tough as nails. It's vital that we constantly reevaluate our procedures, but it's entirely another matter to call into question the integrity of the system." Peters, also speaking at the conference, said she has directed Sturgell to "get to the bottom" of what happened in the Southwest (SWA) case. Sturgell said he will hold a meeting with "all senior Safety Managers" and will be "looking at what went wrong" to allow (SWA) to operate 46 improperly inspected 737 Classics repeatedly, including on more than >1,400 flights over nine days, after the carrier disclosed the lapse to the (FAA). Oberstar plans to hold a hearing next month and has hinted that "whistle-blower" (FAA) Inspectors will provide damaging testimony on the agency's oversight system. Delta Air Lines (DAL) CEO, Richard Anderson, also speaking at the conference, said the (FAA)'s safety oversight system "works really well," adding, "people don't understand how close the working relationship is between the regulator and the airline. There's a free and open exchange about what's going on . . . We don't need to go back 20 to 25 years, where every time the (FAA) saw something, you got a civil penalty letter in the mail and you were in a litigation situation."

Later, Southwest Airlines (SWA) removed -38 737 Classics from service for inspections, leading to cancellation of -4% of its schedule, a move that resulted from its "ongoing internal review of . . . maintenance programs, policies and procedures" launched in the aftermath of last week's (FAA)-proposed $10.2 million civil penalty for alleged safety lapses. (SWA) also placed three employees on administrative leave. It said it hoped to have the grounded airplanes back in service the following day. The action occurred after it found "ambiguity related to required testing" during a review of maintenance records. "Southwest (SWA) made the decision to take a conservative approach and remove airplanes out of scheduled service . . . [and] immediately began reinspecting those airplanes," it said. Five other 737 Classics already in maintenance for scheduled checks, will be inspected as well, it said, adding that one already-retired 737 missed a required inspection. It did not specify exactly what was being inspected, nor did it say whether any of the airplanes were among the 46 737s that the (FAA) alleges it operated improperly last year. It did not identify the employees placed on leave. "I am concerned with some of our findings [from the internal review] as to our controls over procedures within our maintenance airworthiness directive and regulatory compliance processes," CEO, Gary Kelly said. "I have insisted that we have the appropriate maintenance organizational and governance structure in place to ensure that the right decisions are being made." (SWA) said it has "hired a respected outside consultant with proven experience to help review its maintenance program controls, especially airworthiness directive (AD) compliance."

Shortly after, Southwest Airlines (SWA) returned to service 34 of 38 737 Classics it had temporarily grounded for inspection and operated a normal schedule, saying the other four airplanes will need "surface repairs" expected to be completed by this weekend. Meanwhile, CEO, Gary Kelly met with (FAA) Acting Administrator, Bobby Sturgell and other agency officials to brief the regulators on measures (SWA) is taking to avoid maintenance inspection problems such as those that led to a proposed $10.2 million civil penalty and this week's temporary grounding. The airline and the (FAA) are expected to undergo tough questioning at an April 3 House of Representatives Transportation & Infrastructure Committee hearing. Chairman, James Oberstar (Democrat-Minnesota) said this week's "action by Southwest Airlines (SWA) raises serious questions about whether the (FAA) adequately followed up on the discovery a year ago that Southwest (SWA) had failed to make required inspections." A pair of "whistle-blower" (FAA) Inspectors are expected to testify that the agency's former (SWA ) Safety Supervisor knowingly allowed the carrier to operate improperly inspected airplanes and generally was too "cozy" with the airline to regulate it objectively. Oberstar also claims to have damaging information about other (FAA) safety oversight abuses.

JDA Aviation Technology Solutions of Washington, DC, was hired by Southwest Airlines (SWA) "to evaluate its maintenance programs and to make recommendations on how the airline can improve its maintenance process," JDA announced. The move follows (SWA)'s failure to comply with a USA (FAA) airworthiness directive (AD) that resulted in the temporary grounding of 34 737s and a proposed $10.2 million fine.

3 737-3H4s (23340; 23341; 23342), returned to lessor. 4 737-7H4s (29840, N913WN; 36621, N912WN; 36622, N914WN; 36888, N915WN), deliveries.

April 2008: Southwest Airlines (SWA) flew 6.68 billion (RPM)s passenger traffic in March, up +9.8% from the year-ago month. Capacity rose +5.3% to 8.74 billion (ASM)s, and load factor improved +3.2 points to 76.5% LF.

A plunge in first-quarter profit to +$34 million from the +$93 million earned in the first three months of 2006, revealed both the strength of Southwest Airlines (SWA)'s business model and the weakness of the environment in which it now operates, as even the USA's most consistently profitable airline is struggling with soaring fuel costs.
Excluding special items largely related to SWA's hedging program and settlements from derivative contracts, first-quarter net income rose +30.3% year-over-year to +$43 million. In addition, it enjoyed record first-quarter revenue of $2.53 billion, up +15.1%. Still, it said it will reduce fleet growth further in 2009 as part of its effort to negotiate a climate that has led to one merger and four bankruptcies in recent weeks. "Although we are pleased with the progress of our revenue initiatives and optimistic that we can continue to grow revenues, we cannot ignore the threat of volatile and unprecedented jet fuel prices," CEO, Gary Kelly said. "We will continue to take steps to restore our profit margins, including an ongoing rigorous review of our flight schedule to eliminate nonproductive flying."
Capacity will rise +2% to +3% over this year's level. Record first-quarter revenue was offset by a +15.5% increase in operating expenses to $2.44 billion, as fuel costs climbed +33.5% to $753 million. Operating income rose +4.8% to +$88 million and the bottom line sagged under a negative -$116 million swing in nonoperating results.

(SWA) carried 21.5 million revenue passengers during the quarter, up +7.7% year-over-year, as traffic grew +9.2% to 17.59 billion (RPM)s. Capacity rose +6.4% to 25.19 billion (ASM)s, lifting load factor +1.8 points to 69.8% LF. Yield climbed +4.7% to 13.72 cents and unit revenue rose +8.2% to 10.04 cents. (CASM) was up +8.5% to 9.69 cents but just +2.4% to 6.7 cents, excluding fuel. Kelly said bookings for the remainder of the current quarter are "strong" and that "based on current trends," second-quarter unit revenue will improve year-over-year.

Southwest Airlines (SWA) CEO, Gary Kelly conceded that there "was clearly a mistake with our regulatory compliance" when the carrier operated 46 737 Classics for nine days in March 2007, after it had disclosed to the USA (FAA) that the airplanes were in noncompliance with an agency airworthiness directive, but insisted that "safety of flight" was not compromised. "It's a black eye, but my commitment to you is that we're going to take this constructively and move forward," Kelly testified before the House of Representatives Transportation & Infrastructure Committee. "We should not have flown those airplanes based on what we know today." Added Chairman, Herb Kelleher: "I apologize to this committee. We realize those planes shouldn't have flown." But he emphasized that the airplanes had been "inspected over and over and over" and only a "small part" of fuselage skin was missed during those checks. "I don't want anyone on this committee to get the impression that Southwest (SWA) was just rumbling through the sky without having inspections," he said. The (SWA) executives' comments came toward the end of a 9-hour Congressional hearing in which several (FAA) inspectors, Dept of Transportation Inspector General, Calvin Scovel, and Committee Chairman, James Oberstar (Democrat-Minnesota) alleged pervasive dysfunction in the (FAA) field office that oversees (SWA), including an inappropriately "cozy" relationship between regulators and the airline.

Lawmakers heard explosive testimony from (FAA) inspectors who said they repeatedly highlighted concerns over (SWA)'s compliance with (AD)s, but were shunned by supervisors who "looked the other way." The inspectors said attempts to report wrongdoing in the (FAA)'s (SWA) Certificate Management Office in Dallas led to harassment and threats of termination from supervisors. Douglas Gawadzinski, then the (FAA)'s supervisory Principal Maintenance Inspector for (SWA), told the airline that it could continue operating the 46 airplanes in March 2007 even after (SWA) disclosed noncompliance related to fuselage skin inspections. (FAA) Associate Administrator, Aviation Safety, Nicholas Sabatini told the House panel that Gawadzinski's actions were "truly disturbing" and said he had been "removed from any safety duties . . . It's absolutely Safety 101: You don't let noncompliant airplanes fly." While Gawadzinski is still employed by the (FAA), "my expectation is that person is in the office essentially counting paper clips," Sabatini said.

But the agency's top safety official also had harsh words for (SWA), against which the (FAA) has proposed a $10.2 million fine. "That an airline with Southwest (SWA)'s reputation would think that it was permissible to operate airplanes that were in noncompliance with an (AD) is astounding to me," he said.

Later, the USA (FAA) removed Southwest Region Manager Flight Standards , Thomas Stuckey from his position, the latest fallout from the ongoing controversy over the agency's oversight of Southwest Airlines (SWA). The agency's Dallas area office was portrayed as dysfunctional and plagued by "regulatory abuse" at a House of Representatives hearing. Stuckey, who testified at the hearing along with other (FAA) officials, has been placed in an "administrative position that has no safety oversight duties," the (FAA) said. He was accused by Inspectors from the (SWA) Certificate Management Office of ignoring their repeated complaints that their supervisors were "looking the other way," when confronted with evidence that the airline was not complying with airworthiness directives (AD)s. The Inspectors further alleged that supervisors harassed and threatened to terminate those who wanted to report safety lapses.

Dept of Transportation Inspector General, Calvin Scovel said Stuckey, who is based in Dallas and had oversight responsibilities for five states, and (FAA) officials in Washington should have been aware of the problems at the (SWA) (CMO). "Red flags were flying and should have been warning signs to the (FAA)," he said. "There's a disconnect between the (FAA) headquarters in Washington and what happens out in the field and we saw that at Southwest (SWA). There's been a consistent lack of desire [at headquarters] to exercise ownership for problems [at regional offices]."

Douglas Peters, an Inspector in the (SWA) (CMO), told lawmakers that there was an "intentional and blatant disregard for national policy" at the (CMO). "The fact that (FAA) management knew about these issues in the Southwest field office is undisputed," he alleged. "I don't see how the (FAA) can be trusted to police itself."

House Transportation & Infrastructure Chairman, James Oberstar said the agency's problems are more pervasive. "The (FAA) would have us believe that what took place was an isolated incident that has been corrected," he said. "Clearly this is not an isolated incident . . . but rather a systematic breakdown of the (FAA)'s oversight role. It is malfeasance bordering on corruption."

Scovel said that until its recent audit of domestic airlines' compliance with (AD)s, the (FAA) hadn't conducted a review of (SWA)'s (AD) compliance program since 1999, even though such a review is required at least once every five years. The year 2004 "should have been a drop-dead date" but the lapse was allowed to continue for another four years, he said at last week's hearing, asking, "Why didn't higher authorities at the (FAA) not know that?"

SWA will take delivery of 29 new 737-700s this year as planned but in 2009 it will take a maximum of 14 rather than the scheduled 28 (25 firm and three options). The remaining 14 airplanes were deferred to 2015. A dozen 2010 deliveries, all options, also have been bumped back to 2013 through 2015, and 12 options have been exercised for delivery in 2010 through 2012. The carrier now has 125 airplanes on firm order through 2015, plus 67 options and 54 purchase rights for delivery through 2018.

3 737-7H4s (29843, N918WN; 36623, N916WN; 36624, N917WN), deliveries.

May 2008: Southwest Airlines (SWA) flew 6.26 billion (RPM)s passenger traffic in April, up +5.7% from the year-ago month. Capacity rose +5.3% to 8.63 billion (ASM)s, lifting load factor +0.3 point to 72.6% LF.

Southwest Airlines (SWA) announced the following new services from Denver: Twice-daily to Portland, Oregon, and Indianapolis beginning June 4; an eighth daily flight to Las Vegas beginning June 4; new twice-daily to Sacramento, daily to Fort Lauderdale and New Orleans, and a seventh daily flight to Phoenix from August 4; a second daily flight to San Antonio from August 23. (SWA) will launch thrice-daily flights from Denver to San Francisco and Omaha on September 2.

Southwest Airlines (SWA) announced the addition of Chairman to the title of its CEO. (SWA) CEO, Gary Kelly was elected Chairman and will succeed the departing Herb Kelleher. He also will assume the title of President, taking over from Colleen Barrett when her contract expires on July 15. Kelleher and Barrett will remain with the airline through July 2013. The (SWA) board named Executive VP Corporate Services, Ron Ricks to fill Barrett's position as Corporate Secretary.

Southwest Airlines (SWA) said it "has no plans" to change its policy of allowing passengers to check their first two pieces of luggage free of charge in response to reports that it was considering such a move in the wake of American Airlines (AAL)'s decision to charge $15 for the first bag.

(SWA) is accepting Flight Crew (FC) applications, however, it is no longer conducting interviews. (SWA) hired 60 pilots (FC) in April; is hiring 48 in May; and 24 in June. The classes will be filled by those in the pilot (FC) pool who have already interviewed and are awaiting a class date. (SWA) does not anticipate interviewing again until 2009. The carrier expected to hire 150 to 200 pilots (FC) in 2008. (SWA) has stopped interviewing pilots (FC) for now, but plans to attend the FLTops.com "Pilot Career Conference & Job Fair" in Las Vegas on May 16th.

3 737-7H4s (32460, N920WN; 36625, N919WN; 36626, N921WN), deliveries.

June 2008: Pratt & Whitney (P&W) reached multiyear agreements with United Airlines (UAL) and Southwest Airlines (SWA) to provide its EcoPower engine wash system offered by its Global Service Partners division. The technology, which is expected to result in significant fuel savings and emissions reductions, features a closed-loop system with atomized water that works to prevent contaminant runoff.

USA airline executives stressed the debilitating nature of rising fuel prices and said further capacity reductions may be warranted. Carriers said they have been unable to come close to passing on the record fuel price increases to customers. Southwest Airlines (SWA), meanwhile, was the only profitable USA carrier in the first quarter and is still contemplating expansion. CEO, Gary Kelly told "Bloomberg News" that (SWA) is "willing to grow the fleet, and that's very different than what's going on with our competitors." He said it may keep as many as 10 airplanes slated for retirement this year and is on schedule to add +14 new airplanes in 2009. The "Associated Press" reported that (SWA) plans to increase capacity +4% this year and has yet to make its plans for 2009, although Kelly said it is "obviously prepared" to cut all growth if necessary. He also told "Bloomberg" that (SWA) has no plans to charge for extra bags or onboard drinks like some competitors, calling it a "great opportunity" to "differentiate itself from the pack."

Southwest Airlines (SWA) will invest $175 million to implement Required Navigation Performance (RNP) fleetwide for use at 64 USA airports, (SWA) announced at the Eco-Aviation conference presented by Air Transport World (ATW) and Leeham Co in Washington. Senior Director Flight Operations, Jeff Martin said (SWA) is teaming with Naverus and the (FAA) to jumpstart the USA's transition to a satellite-based NextGen Air Traffic Control (ATC) system. "This is in line with the (FAA)'s future direction roadmap," he told attendees at the conference. He added that "for a single minute of time saved on each flight, the annual savings quickly add up" and will reach 156,000 metric tons of reduction in emissions per year by 2015, when the airline anticipates 95% deployment. It also will achieve -$25 million in fuel savings per year, he said.

(SWA), Naverus and the (FAA) have been discussing the initiative since May 2007. The (RNP) program will involve training the airline's 5,700 pilots (FC), equipping the entire fleet of both 737NGs and Classics to be (RNP)-capable, developing (RNP) procedures, and making necessary airport upgrades. "Implementing (RNP) offers the single greatest opportunity to make near-term gains in reducing harmful emissions, improving fuel efficiency, increasing airspace capacity and maximizing flight safety," Naverus CEO, Dan Gerrity said. (SWA) aims to begin implementing (RNP) by fall 2009. Martin said the initial focus will be "in the Dallas-Houston area, which is our backyard." He added, "We hope that the rest of the industry will follow, once we prove the business case."

Claiming it has a "much different story to tell today than our competitors," Southwest Airlines (SWA) unveiled a schedule adjustment that will see it add a net nine roundtrip flights to its network. (SWA) will add +40 flights and eliminate -31 on November 2, concentrating on enhancement of its schedule in "key growth cities" like Denver and Fort Lauderdale. "We are trimming our flight schedule, frequently and continually, of unproductive flights, while we continue to grow in cities like Denver," CEO, Gary Kelly said. "We have a much different story to tell today than our competitors. We are well prepared financially." Kelly told reporters that (SWA) still is looking to grow and may keep as many as 10 airplanes it originally had scheduled to retire this year. Two of the airplanes will be used to handle these new flights and will bring the airline's net fleet growth to +15 aircraft in 2008.

New services beginning November 2 include: From Denver, a thrice-daily to Orange County, and a twice-daily to Tulsa; from Fort Lauderdale, daily flights to Las Vegas, Kansas City, and Albany. Most cuts will come from frequency reductions, but Kansas City - Sacramento and Oakland - Tucson will cease completely.

(SWA) said it employed a unique "schedule optimization model" to determine which routes to add/cut. In a posting on (SWA)'s website, Lead Planner, Bill Owen described the "global optimizer" as a tool that "takes all of our schedule rules and preferences and actually picks the one schedule, that scores the absolute highest based on the input parameters we supply." He said all 800-plus nonstop markets have their "own, unique demand curves" and the algorithm "lets us match our schedule" to that demand.

3 737-7H4s (32461, N922WN; 36627, N923WN; 36628, N924WN), deliveries.

July 2008: Southwest Airlines (SWA) flew 6.88 billion (RPM)s traffic in June, up +0.7% year-over-year, against a +5.7% increase in capacity to 8.8 billion (ASM)s. Load factor fell -3.9 points to 78.2% LF.

Crediting fuel hedging, capacity reductions by competitors and fare increases, (SWA) overcame a difficult cost environment to post second-quarter net income of +$321 million, up +15.5% from a +$278 million profit in the year-ago quarter and a sharp contrast to USA competitors reporting big losses. Chairman, President & CEO, Gary Kelly called the quarter "very gratifying" and explained that a "burning cauldron of issues . . . including a weak economy and soaring operating costs . . . is being offset by huge seat reductions by our competitors in most markets . . . We're continuing to see reduced competition and it's pretty broad. In some markets we've seen competitors exit completely." (SWA) also realized -$511 million in savings owing to its fuel hedging program. "Of course, our fuel hedging was huge," Kelly said.

Second-quarter revenue rose +11% to $2.87 billion, but expenses soared +18.1% to $2.66 billion, producing operating income of +$205 million, down -37.5% from +$328 million last year.

(SWA) is feeling pressure from rising operating costs and a slow USA economy, forcing it to raise fares four times since the start of the second quarter. "We know that we've got to get our average fares up and we've got to get them up substantially," Kelly told analysts, adding that the price hikes would be done "gradually."

It is also taking a "cautious" approach to growth, with airplane deliveries to range from zero to 14 next year. "We're already in a mode where we're essentially not growing [for the remainder of the year] and it's not hard to believe that will continue through 2009," Kelly said. "We're not real bullish about adding flights at all," but may do so, if competitors significantly reduce capacity in key markets. "Our competitors are in full retreat mode and we don't know what kind of benefit that will bring to us," he explained.

Kelly emphasized that it is "not consistent with our philosophy" to charge for checked bags and other services and not imposing add-on fees gives "us a sweet advantage . . . we can differentiate (SWA) substantially from the pack."

Second-quarter traffic rose +4.2% to 19.81 billion (RPM)s on a +5.4% boost in capacity to 26.34 billion (ASM)s, producing a load factor of 75.2% LF, down -0.9 point. Yield increased +6.5% to 13.86 cents, as (RASM) lifted +5.3% to 10.89 cents, and (CASM) jumped +12.1% to 10.12 cents. (CASM) excluding fuel, rose +1.8% to 6.72 cents.

Net income for the year's first half was +$355 million, down -4.3% year-over-year, on a +12.9% rise in revenue to $5.4 billion. Half-year operating profit fell -28.9% to +$293 million.

The USA (FAA) was guilty of "serious lapses" in its regulatory oversight of Southwest Airlines (SWA), allowing airworthiness directive (AD) "noncompliance issues within (SWA)'s maintenance program to go undetected for years," leading to repeated violations, the USA Department of Transportation, Inspector General alleged in a recent scathing report.

The USA House of Representatives unanimously passed aviation safety legislation that aims to create more distinct separation between the (FAA) regulators and airlines in response to an alleged "cozy" relationship between (FAA) inspectors and Southwest Airlines (SWA). It includes a two-year "cooling off period" before former (FAA) inspectors or officials overseeing inspectors can work for carriers and requires the (FAA) to rotate principal maintenance inspectors between airline oversight offices at least once every five years. It also calls for establishment of an independent "aviation safety whistleblower investigation office" charged with receiving and investigating safety complaints submitted by (FAA) employees and by airline or Maintenance Repair & Overhaul (MRO) company employees. The bill directs the (FAA) to "modify its customer service initiative" to clarify that the agency's customers are the traveling public and not airlines, and that carriers "do not have the right to select the employees of the [FAA], who will inspect their operations." It requires a monthly review of the (FAA)'s Air Transportation Oversight System to ensure that safety concerns are identified and acted upon.
The legislation now moves to the Senate for consideration. House Transportation Committee Chairman, James Oberstar (Democrat-Minnesota) said the bill's passage is the "first legislative step in reversing the complacency over safety regulation that has set in at the highest levels of the Federal Aviation Administration (FAA)."

Southwest Airlines (SWA) and WestJet (WJI) agreed to form a "codeshare partnership" by late 2009, that would link the networks of the two Low Cost Carriers (LCC)s and allow passengers flying on USA domestic-only (SWA) to connect to Calgary-based (WJI)'s network throughout Canada. No routes or schedules were unveiled, but the airlines said the partnership will be extensive, and allow for seamless connections of passengers and baggage and reciprocal ticket booking. Both operate all-737 fleets and are characterized by highly motivated workforces, winning internal cultures and strong reputations for customer service. "A company's dedication to culture and customer service are very high on our priority list, when considering a relationship of any kind," (SWA) Chairman & CEO, Gary Kelly said. "We are confident that we've found a perfect fit in WestJet (WJI)." He added that the deal would allow (SWA) "to enter the international market."

(WJI) President & CEO, Sean Durfy said, "This is a defining moment . . . When you examine our network in Canada and Southwest (SWA)'s network in the USA, and the potential to significantly improve both organizations' market access, this is indeed a great day."

(WJI), founded in 1996, serves 49 destinations with 75 737NGs and plans to grow its fleet to 121 by 2013. It operates transborder service to 10 destinations in the continental USA, as well as Hawaii. At the height of its winter schedule, it flies to seven Caribbean airports and two in Mexico. (SWA) serves 64 USA cities with a fleet of 537 737s. Despite the USA downturn, it continues to grow its network using a "schedule optimization model." It previously codeshared with defunct ATA Airlines (AAT) in order to give passengers access to Hawaii.

(SWA) and (WJI) said they plan to introduce a distribution plan later this year with the aim of launching the codeshare agreement, which is subject to USA and Canadian government approval, by the end of next year. A (WJI) spokesperson conceded that the carrier's reservation system is "not sufficient" to handle the anticipated codesharing, adding, "Both Southwest (SWA) and WestJet (WJI) have a number of enhancements to be implemented to deliver the full set of business capabilities we require, and this is why we have given ourselves the time to deliver this capability." (WJI) abandoned installation of the "airRES" reservation system, which was intended to offer more complete codeshare and interline capabilities, last year.

(WJI) founder, Clive Beddoe has noted that he studied (SWA) closely. A key player in WestJet (WJI)'s launch, was JetBlue (JBL) founder, David Neeleman, who also co-founded Morris Air and briefly served as an (SWA) executive following the Dallas-based airline's purchase of Morris in December 1993. Neeleman signed a five-year noncompete agreement upon leaving (SWA) in 1994, which led him to Canada to help start (WJI).

Southwest Airlines (SWA) Chairman, President & CEO, Gary Kelly said that (SWA)'s recently announced partnership with WestJet (WJI) likely will not be its last codeshare tie-up with another airline, as it seeks to expand its reach beyond the continental USA. While the deal with (WJI) gives (SWA) extensive access to the Canadian market, "we're working very hard on a Hawaiian solution and also a Mexican and Caribbean solution," Kelly told analysts. (WJI) serves Hawaii, Mexico and seven Caribbean destinations, but flights to those destinations are from Canada and would make little sense as connections for (SWA) passengers. Kelly did not specify the carriers to which (SWA) is speaking. It previously codeshared with defunct ATA Airlines (AAT) to give passengers access to Hawaii. Kelly noted that the (WJI) codeshare agreement, set to begin by late 2009, "eventually" could generate $30 to $40 million in annual revenue for (SWA).

The USA (FAA) issued new airworthiness directives this week requiring "repetitive inspections for cracking" of overwing frames on MD-80s and of the upper frame to side frame splice on the fuselage of 737 Classics. American Airlines (AAL) is the largest operator of the MD-80 and Southwest Airlines (SWA) is the largest operator of the 737 Classic series, but one or both of the types are present in the fleets of most other USA major airlines. It does not appear that the (AD)s, to take effect next month, will require widespread groundings like those that occurred earlier this year.

(GE) Aviation (GEC) announced that Southwest Airlines (SWA) signed a 10-year OnPoint Solution agreement covering maintenance and overhaul of all its current and future (CFM56-7B)s, totaling more than >660 currently in operation and an additional +200 on order. (GEC) valued the contract at more than >$2 billon over its life.

Honeywell (SGC) won a 10-year extension on its contract with Southwest Airlines (SWA) to provide Maintenance Repair & Overhaul (MRO) for avionics and mechanical products on 737s. The contract covers up to 520 airplanes plus future deliveries and includes Honeywell (SGC) (APU)s, (HMU)s, lighting, components, and wheels and brakes.

Southwest Airlines (SWA) and (KLM) became the latest carriers to achieve (CFM) International's "TRUEngine" designation for their respective (CFM56)s. Southwest (SWA) operates more than >1,100 (CFM56-3) and (CFM56-7B) engines, while (KLM) has more than >115 (CFM56-3)s and (CFM56-7B)s. To qualify for TRUEngine status, the engine configuration, overhaul practices, spare parts, and repairs used to service it, must be consistent with (CFM) requirements for that model. In addition, all maintenance must comply with (CFM)-issued manuals and other maintenance recommendations.

August 2008: 1st 6 months = 60.18 billion (RPK)s traffic - - "SWA-08TOPWLD6MTHSRPK."

The USA (FAA) told Southwest Airlines (SWA) that it is upholding a proposed $10.2 million fine for operating 46 737 Classics for nine days in March 2007, after it had disclosed to the agency that the airplanes were in noncompliance with an airworthiness directive (AD) and is seeking payment by August 29. The penalty would mark the largest ever collected by the (FAA) from an airline for a safety violation. (SWA) wanted the fine to be reduced, because the agency acknowledged that an official at its Dallas area office told (SWA) it could operate the airplanes. The (FAA) subsequently removed the official from his post and has acknowledged errors in its oversight of (SWA). The Department of Transportation (DOT) Inspector General, Calvin Scovel issued a scathing report earlier this summer, in which he accused the agency of "serious lapses" in its regulatory oversight of the airline. The (FAA) traditionally has lowered its proposed fines after carriers make changes in their safety programs and promise future compliance, as (SWA) has done. (SWA) said it is reviewing the agency's decision to uphold the fine and declined further comment.

Despite criticism of the (FAA)'s performance, (SWA) does not appear to be in a strong position to fight the penalty because Chairman & CEO, Gary Kelly told Congress it "was clearly a mistake" to operate the airplanes and a "black eye" for (SWA). He insisted, however, that "safety of flight" was not compromised.

Southwest Airlines (SWA) named 15-year employee, Kay Weatherford as VP Revenue Management & Pricing. She had been Senior Director Revenue & Traffic Analysis. (SWA) named Bob Young as CTO. He is new to the airline.

September 2008: Southwest Airlines (SWA) said that it will add Minneapolis/St Paul (MSP) to its network in March, its first new city since adding San Francisco in August 2007. Chairman & CEO, Gary Kelly said the expansion will be "very cautious and very conservative," evidenced by (SWA)'s only operating flights to Chicago Midway from (MSP). He did not disclose the number of daily flights on the route.

Kelly, speaking to reporters during (SWA)'s media day, said the airline is taking a "modest" approach to growth, but nevertheless felt that (MSP) offered a strong opportunity. "There are no low-cost carriers of any size there," he explained, adding that entrance is "different" from previous expansions that generally have featured flights from the new airport to multiple destinations. "We'll have that one pipe to Chicago and that opens up to the whole Southwest network," he said.

He said the carrier continues to raise fares to combat much higher operating costs. "I don't see costs going back down," he said. Noting that (SWA) used to target its costs at 7 cents per (ASM) capacity, he added, "We're over 10 cents per (ASM) and just trying to hold on." Kelly conceded that (SWA) has "probably priced out a small percentage of our most cost sensitive customers," explaining, "We hate to increase fares. That works reverse to what we like to do. But we're past that concern. We know we have to adapt and adjust . . . What we'd love to do is if we're going to lose some price sensitive customers, is replace them with less price sensitive customers. Our greatest opportunity to grow our customer base from here is with business customers." He pointed out that (SWA)'s customer service initiatives increasingly are focused on such passengers. For example, the carrier said it will roll out "priority security lane access" for its "business select" passengers and top frequent fliers. Starting later this month, fast track security lanes will be available at Baltimore, Dallas Love Field, Phoenix, Orange County, Denver, San Francisco, and Los Angeles.

(SWA) assigned Tammy Romo as VP Financial Planning. Leah Koontz, replaced her as VP & Controller.

Southwest Airlines (SWA) moves to a cashless cabin on September 9. Handheld device and software service will be provided by GuestLogix.

Southwest Airlines (SWA) pilots (FC) at Baltimore/Washington International (BWI) began particparting in the USA Transportation Security Administration's SecureScreen trial, which is using biometric screening technology developed by Priva Technologies to positively identify flightdeck (FC) crewmembers. The trial will run for 60 days at (BWI) and include more than >200 (SWA) pilots (FC). It aims to identify pilots (FC) more accurately than current screening methods and allow them to move through security checkpoints more quickly.

Southwest (SWA) hired 24 pilots (FC) in August, and is hiring 48 in September. The carrier expects to continue interviewing through the fall.

October 2008: Southwest Airlines (SWA) announced that the Company flew 5.3 billion revenue passenger miles (RPMs) traffic in September 2008, a -5.9 percent decrease from the 5.6 billion (RPM)s flown in September 2007. Available seat miles (ASMs) capacity increased +0.8 percent to 8.4 billion from the September 2007 level of 8.3 billion. The load factor for the month was 63.4% LF, compared to 67.9% LF for the same period last year.

For the third quarter 2008, (SWA) flew 18.8 billion (RPM)s, compared to the 19.7 billion (RPM)s recorded for the same period in 2007, a decrease of -4.4 percent. Available seat miles increased +2.2 percent to 26.3 billion, from the third quarter 2007 level of 25.7 billion. The third quarter 2008 load factor was 71.6% LF, compared to 76.6% LF for the same period last year.

For the nine months ended September 30, 2008, (SWA) flew 56.2 billion (RPM)s, compared to the 54.8 billion (RPM)s recorded for the same period in 2007, an increase of +2.6 percent. Available seat miles increased +4.6% to 77.8 billion from the 2007 level of 74.4 billion. The year-to-date load factor was 72.3% LF, compared to 73.7% LF for the same period last year.

The fuel hedges that helped (SWA) stay profitable while surging oil prices crippled its USA rivals, now have resulted in the carrier's first quarterly net loss in 17 years, a -$120 million deficit that represented a reversal from the +$162 million profit reported in the third quarter of 2007. The company took a $247 million charge as oil prices dropped, a sum that "essentially reversed a large portion of mark-to-market gains recognized in prior periods," it said. It remains committed to the hedges in the long run, however, and will save money as it expects to pay around $2 per gallons for fuel in the current quarter compared to $2.44 in the third, Chairman, President & CEO, Gary Kelly said. It holds derivative contracts for more than >75% of its estimated 2009 fuel consumption at approximately $73 per barrel. Kelly said the hedge program "continues to provide us superb price protection" and had saved the carrier -$1.3 billion through the first nine months of 2008. "Of course, the value of our fuel hedge fluctuates with oil prices. The dramatic drop . . . since July is a significant overall benefit for (SWA), of course, even though the fuel hedge portfolio dropped over the last three months," he said.

(SWA) remained in the black on the operational front, reporting a record quarterly revenue of +$2.89 billion, up +11.7% year-over-year. Expenses climbed +20% to $2.81 billion on a +51.5% surge in fuel costs and operating income fell -65.7% to +$86 million from +$251 million in the year-ago quarter. The net result excluding special items, was a +$69 million profit, down from +$156 million on a similar basis last year.

Third-quarter traffic fell -4.4% to 18.82 billion (RPM)s against a +2.2% increase in capacity to 26.29 billion (ASM)s, lowering load factor -5 points to 71.6% LF. Yield was up +16.6% to 14.7 cents as the average fare climbed +18%. Unit cost rose +17.4% to 10.67 cents, or +5.2% to 6.86 cents excluding fuel.

(SWA) will feel the effect of the ongoing Boeing (TBC) machinists (MT) strike as three 737-700 deliveries are pushed into next year. Net airplane growth for 2008, now is expected to total 15 and the airline currently plans to take 13 737-700s next year and return three leased 737-300s. Fourth-quarter capacity will grow around
+1% year-over-year, and first-quarter 2009 (ASM)s are expected to fall -5% to -6%. Kelly said (SWA) intends to "pick up the pace" in "pruning our schedule of unpopular and less profitable flights."

Through the first nine months, the company reported net earnings of +$234 million, down -56.1% from +$533 million posted in the year-ago period. Operating profit fell -42.8% to +$380 million.

(SWA) Chairman & CEO, Gary Kelly said that the carrier will take delivery of 10 737NGs next year, down from the 14 previously planned, with four deliveries deferred until 2016. He added that (SWA) continues to consider flat capacity growth next year an option and could treat the new 737s as replacements by "returning five [737 Classics] to the leasing company" and selling "five or more" that it owns.

November 2008: 1st 6 months = 60.32 billion (RPK)s traffic (+6.59%); +6.04% (ASK)s; 72.6% LF (+.4); 103.56 million (FTK)s (+6.35%); 52.32 million passengers (+5.02%).

Southwest Airlines (SWA) released its spring schedule featuring eight-times-daily service from its newest destination, Minneapolis/St Paul, to Chicago Midway, beginning March 8. The schedule includes 70 new roundtrip flights and cancellation of 39 others. (SWA) also will begin daily, Phoenix - Birmingham. Service will end on Albuquerque - Amarillo, Albuquerque - Tampa, El Paso - Lubbock, and Kansas City - Tulsa.

Having already sealed a code share deal with WestJet (WJI) giving it access to Canada, Southwest Airlines (SWA) announced a partnership with Mexico's Toluca-based, Volaris (VLS) that will give (SWA) a foothold in Mexico for the first time. (SWA) CEO, Gary Kelly said in July that he was looking to expand on the carrier's deal with WestJet (WJI) and offer passengers access to Mexico and the Caribbean. (SWA) said it and Volaris (VLS) will offer "a seamless travel experience to a wide array of destinations," with codeshare flight schedules and "additional features" scheduled to be announced by early 2010. By next spring, (SWA)'s website will become a distribution channel for Volaris (VLS) tickets. Loyalty programs, ground handling and cargo are areas of potential cooperation, it said.

"We are continuing to look for ways to expand our network through international code share partnerships, and we are excited to team up with Volaris (VLS) to offer our customers access to attractive Mexican destinations," Kelly said.

Launched in early 2006, Volaris (VLS) flies 18 A319s and one A320 on 39 routes to 23 Mexican destinations. It has 13 more A320s on order. CEO, Enrique Beltranena called (SWA) the "best possible partner." (SWA) serves 64 airports. (SWA) Senior Director Planning & Distribution, Richard Sweet wrote on the carrier's website that Volaris (VLS) plans on flying to the USA next year, and that despite being an "unknown brand in the USA" and a "relatively small and certainly new" airline, it has "proven [to be] a successful and viable airline and [is] developing a new generation of flyers in Mexico."

Southwest Airlines (SWA) Pilots' Association President, Carl Kuwitzky told union members that he "cannot support" the carrier's new code share agreements with Mexico's Volaris (VLS) and Canada's WestJet (WJI). In a letter obtained by the "Dallas Morning News," he said that the alliances have "the potential to severely affect the career of all pilots (FC) on our seniority list." Regarding Volaris (VLS) in particular, he claimed that (SWA) "is risking brand dilution by association with an unknown carrier." Kuwitzky referenced (SWA)'s partnership with defunct (ATA) Airlines, writing that it "resulted in numerous customer service and operational problems, that reflected poorly on Southwest Airlines (SWA)." He claimed that (SWAPA) pilots (FC) "could do some transborder flying and completely control our brand image" and that "overwhelming membership feedback" indicated that the code shares are a "significant thorn in the side of our members" as (SWA) cuts capacity.

Southwest Airlines (SWA) said that it has submitted a $7.5 million bid to gain the rights to 14 New York LaGuardia (LGA) slots - - seven roundtrips - - formerly used by ATA Airlines (AAT), which declared bankruptcy and shut down in April. The bid was submitted in connection with the public auction of ATA (AAT)'s assets being handled by the USA Bankruptcy Court in Indianapolis. "The bid does not contemplate operating ATA (AAT), but it is intended to allow Southwest (SWA) to acquire the (LGA) slots," (SWA) said in a statement. It also adds a new twist to the ongoing legal and policy battle over the (FAA)'s plan to auction slots at New York-area airports beginning in January, as a way to manage capacity.

Chairman, President & CEO, Gary Kelly said (SWA) plans to initiate service at (LGA) next year. Its presence in the New York area is limited to its operations at Long Island Islip, about 50 miles east of the city; it does not operate any flights to New York (JFK) or Newark. "Even in this volatile environment, we have said we must monitor the competitive landscape and take advantage of prudent market opportunities," Kelly said. The bankruptcy court must approve the bid before (SWA) could gain the rights. The carrier said it has not yet determined which cities it would serve from (LGA). It had a limited codeshare relationship with ATA (AAT) from 2005 to the shutdown earlier this year.

December 2008: Southwest Airlines (SWA) flew 5.26 billion (RPM)s traffic in November, down -8.3% year-over-year. Capacity rose +0.4% to 8.33 billion (ASM)s, dropping load factor -6.1 points to 63.2% LF.

(SWA) added a link to WestJet (WJI)'s booking portal to southwest.com, which (SWA) called "an important first step forward in the relationship" between the (LCC)s that will include the announcement of code share flight schedules by late next year.

(SWA) won USA Bankruptcy Court approval to purchase ATA Airlines (AAT)'s 14 slots at New York LaGuardia for $7.5 million, November 20, "Bloomberg News" reported. The sale will be finalized when ATA (AAT)'s bankruptcy plan is approved. (SWA) currently flies to Chicago Midway, Baltimore, Las Vegas, and five Florida destinations from Long Island Islip.

(SWA) reached a tentative four-year labor agreement with mechanics (MT) represented by the Aircraft Mechanics Fraternal Association that it said is "cost neutral" and offers raises in exchange for work rule improvements and contract flexibility.

(SWA) announced elimination of 32 existing round trip flights and addition of 19 new flights on its summer schedule beginning May 9, which will include changes in the number of flights offered in 102 markets. New services will comprise daily, Denver - Tucson; daily, Nashville - Oakland; and daily, Nashville - Seattle flights. (SWA) will cancel its daily, Austin - Midland/Odessa; daily, Detroit - Orlando International; daily, Fort Lauderdale - Manchester, New Hampshire; and daily, Fort Myers - Long Island Islip flights.

(SWA) said that it submitted an application to the USA Department of Transportation for Canadian route authority, which is required in order to implement its code share agreement with WestJet (WJI). (SWA) said it hoped to receive approval next quarter and that it had no intention to fly to Canada with its own airplanes "at this time."

Both American Airlines (AAL) and (SWA) have overhauled maintenance procedures, but neither airline appears ready to pay the huge fines federal regulators are seeking. "The instructions are gone over with a fine-tooth comb before the work is even done," says an (AAL) spokesman regarding (FAA) airworthiness directives (AD)s for electrical wiring on MD-80s, while (SWA) has instituted compliance teams and spent nearly $1 million to rewrite maintenance manuals. With all the changes they've made, the airlines believe the (FAA) is overreaching in levying fines that could reach $30 million. "It's not defiant to assert your legal rights and defend yourselves against a penalty that isn't fair or equitable based upon the facts," says an official at (SWA), which has been contesting a $10.2 million fine since last March.

(TBC) announced a deal with Southwest Airlines (SWA) to serve as lead integrator for the carrier's 737-300/-700 flight deck upgrade to incorporate performance-based navigation capabilities. The contract includes design, installation and integration of hardware and software from multiple suppliers, as well as flight testing and certification. The integration program calls for 737-300 modification with avionics supplied by (GE) Aviation (GEC), Honeywell (SGC) and Rockwell Collins. (GE) Aviation (GEC) said it won a $40 million deal with (SWA) to provide its SDS-6000 large area display suite. Systems will be installed on up to 150 airplanes. First production deliveries are slated for early 2011.

(SWA) reached a sale and leaseback deal with an unnamed lessor for 10 737-700s. Under the agreement's first tranche, (SWA) sold five 737-700s for "approximately" $175 million and immediately leased them back for 12 years. It will make monthly payments of around $7.8 million during the first six months of the leases, with the amount scheduled to reset every six months, based on the six-month (LIBOR) rate. In the first quarter of 2009, (SWA) will sell the five remaining 737-700s and lease them back for 16 years under "similar terms."

737-3Q8 (23406), returned to Aviation Capital Group (CGP) and parted out.

January 2009: Southwest Airlines (SWA) flew 5.79 billion (RPM)s traffic in December, up +1.1% from the year-ago month, against a -1% decline in capacity to 8.32 billion (ASM)s. Load factor rose +1.5 points to 69.7% LF.

(SWA) said it reduced its fuel hedge contracts to cover just around 10% of its estimated consumption each year through 2013. This year, it expects to save approximately -$1.4 billion compared to the guidance provided last summer as its economic fuel cost per gallon excluding taxes is expected to be around $1.80. Its current unhedged estimate is $1.60 per gallon.

(SWA) followed up its first quarterly loss in 17 years with another in the fourth quarter of 2008, but it maintained its record of full-year profitability with a +$178 million surplus that represented a -72.4% plunge from the +$645 million earned in 2007. Notwithstanding that result, (SWA) announced that for the first time it will shrink capacity on an annual basis in 2009. "The economic environment has never been more uncertain, certainly in (SWA)'s history, and accordingly we have got to adjust," Chairman, President & CEO Gary Kelly said. "Just in the nick of time we have cut our fleet growth . . . Our fleet growth plans are suspended indefinitely."

First-quarter seat capacity will be down -4.4% year-over-year and around -4% for 2009, Kelly said. "We will continue to prune unproductive flights and this is a technique that is unprecedented for (SWA) he said. (SWA) plans to take delivery of 13 737-700s this year, including three delayed from 2008 by the Boeing (TBC) machinists strike, and return or retire 15 airplanes. (SWA) said it will reduce 2010 deliveries to 10 from 22 and 2011 deliveries to 20 from 32.

Fuel hedges again proved (SWA)'s undoing in the fourth quarter as it reported a -$56 million net loss, reversed from a +$111 million profit in the year-ago period. It remained in the black on the operating level, posting a +$70 million profit (down -44.4% year-over-year), but recorded special charges totaling $117 million relating to its fuel hedge portfolio.

In response, (SWA) has reduced its hedge position to approximately 10% of estimated requirements through 2013. It said its current forecast for 2009 fuel costs is more than >$1 billion lower than last summer's but that the current market value of its net fuel derivative contracts through 2013 reflects a liability of around $1 billion. It expects its economic fuel costs per gallon to exceed market prices by some 16 to 17 cents per year over the next three years. It said it secured $1.1 billion in financing last quarter and earned an additional +$346 million through a sale-and-leaseback transaction.

(SWA)'s full-year operating revenue climbed +11.8% to $11.02 billion against a +16.6% increase in costs to $10.57 billion. Operating income slid -43.2% to +$449 million from +$791 million in 2007. Traffic rose +1.6% to 73.49 billion (RPM)s on a -0.2% dip in revenue passenger numbers to 88.5 million. Capacity was up +3.6% to 103.27 billion (ASM)s, dropping load factor -1.4 points to 71.2% LF. Yield increased +9.7% to 14.35 cents on a +11.8% rise in average fare to $119.16, while operating (RASM) was up +7.8% to 10.67 cents. Unit costs grew +12.5% to 10.24 cents, or+ 3.7% to 6.64 cents excluding fuel and related taxes.

(SWA) announced the closure of the second tranche of a transaction with an unidentified lessor involving the sale and leaseback of 10 737-700s, under which it sold the remaining five for approximately $175 million and immediately leased them back for 16 years each. (SWA) will make monthly payments of $7.6 million for the first six months, with payments for subsequent semesters based on the six-month LIBOR rate.

(SWA) said it will launch five-times-daily, San Francisco - Orange County flights on May 9.

SEE ATTACHED - - "SWA-NEWS-JAN09" which shows 737-7H4 (N901WN) which is the first (SWA) airplane equipped with "Onboard Wi-Fi System" which is evident by the bulge on the upper rear fuselage, and the lower photo of 737-7H4 (N912WH) which is powered by "Pixie Dust" promoting Walt Disney's Tinkerbell DVD and Blue Ray movie.

737-7H4 (36636, N930WN), delivery.

February 2009: Southwest Airlines (SWA) will begin serving Boston Logan (BOS) this fall with a "conservative number of flights and a two-gate operation," according to Chairman, President & CEO, Gary Kelly. (SWA) will continue to serve Providence (PVD) and Manchester (MHT), New Hampshire, and will release additional details regarding its (BOS) service "in the coming months." Kelly said using the airport "is a smart choice" for (SWA), which traditionally has operated at less congested, cheaper facilities, and that its (BOS) service "will be made possible by . . . optimizing its current flight schedule and repositioning airplanes." It said it still plans to reduce 2009 capacity by -4% year-over-year. It flies to nine destinations from four gates at (PVD) and to eight cities from four gates at (MHT).

(SWA) announced a tentative five-year deal with the Southwest Airlines Pilot Association (SWAPA) that will run through August 31, 2011, if approved by the union's board and membership. (SWA) has been negotiating with the pilots (FC) since September 2006. According to a statement from (SWA), the agreement "delivers raises and increased benefits" to its pilots (FC). It is subject to approval by the (SWAPA) board after which it will be submitted to union membership for ratification.

(SWA) also announced that 2,500 mechanics (MT) represented by the Aircraft Mechanics Fraternal Association (AMFA) voted to ratify the tentative four-year agreement reached in December. CEO, Gary Kelly said the contract "delivers raises in exchange for work rule improvements and scheduling flexibility along with productivity and gained efficiencies." (AMFA) said the (SWA) mechanics (MT), 60% of whom voted to approve the contract, will get a +3% ratification bonus.

(SWA) began testing onboard Wi-Fi Internet connectivity in conjunction with "Row 44" (test airplane - - SEE ATTACHED - - "SWA-ROW 44-FEB09"), deploying the technology on one 737. It also is partnering with "Yahoo!" to offer an in-flight homepage. The service will be free during the test period, which will last "the next few months" and include three more airplanes that (SWA) is in the process of equipping. The USA Federal Communications Commission has not given approval for permanent in-flight use and (SWA) said it will wait to evaluate the trial period before deciding whether to move forward with fleet wide equipage.

737-7H4 (36637, N931WN), delivery. 737-3A4 (23290, N678AA), returned to lessor.

March 2009: Southwest Airlines (SWA) flew 5.1 billion (RPM)s traffic in February, down -6% year-over-year. Capacity dropped -6.5% to 7.39 billion (ASM)s and load factor rose +0.5 point to 69.1% LF. Revenue passenger numbers were down -9.9% to 6.1 million.

(SWA) said it has a "more cautious" outlook for 2009 resulting from a "continued deterioration in revenue and booking trends and the current economic environment." Unit revenue through the first two months of this year has fallen in the "2% range" year-over-year, while full-fare traffic "has softened significantly," (SWA) said.

(SWA) launched service at Minneapolis-St Paul (MSP) with eight-times-daily service to Chicago Midway. (SWA) will operate from two gates at (MSP)'s Humphrey Terminal.

(SWA) said that it recently operated a 737 demonstration round trip between Dallas Love Field and Houston Hobby using Required Navigation Performance (RNP) procedures, yielding 904 lbs of carbon dioxide savings, part of its $175 million program to implement (RNP) fleet wide that was announced last June at the Eco-Aviation conference. "This is a milestone in the six-year plan to implement (RNP) procedures across the (SWA) system and assist the USA (FAA) with NextGen initiatives," (SWA) Executive VP & COO, Mike Van de Ven said.

Based on data gathered during the demonstration flights, (SWA) estimated that "carbon reduction in one year of flying (RNP) procedures between Dallas and Houston could equal a reduction of approximately 8.42 million lbs of CO2." In addition, fuel used per round trip between the airports would be reduced by -8%. (SWA) said the demonstration flights were operated in conjunction with the (FAA).

(SWA) agreed to pay the USA (FAA) a $7.5 million fine to settle an enforcement action stemming from the carrier's operating 46 737 Classics for nine days in March 2007 after it had disclosed to the agency that the airplanes were in non-compliance with an airworthiness directive (AD). The total amount represents a reduction from a $10.2 million penalty proposed by the (FAA) last year, but the agreement also requires (SWA) to take a number of steps regarding its maintenance program.

According to the (FAA), (SWA) has agreed to increase the number of on-site technical representatives for heavy maintenance vendors from 27 to 35 within 30 days; to allow (FAA) inspectors improved access to maintenance and engineering information within 60 days; to designate a management head of Quality Assurance (QA) "who does not have air carrier certification responsibilities" within 90 days; to review its Required Inspection Item (RII) procedures to ensure compliance with (FAA) rules and "identify more clearly all (RII) items on its maintenance work instructions, engineering authorizations and task cards" within 180 days, and to rewrite all (FAA)-approved manuals within one year. "This agreement furthers aviation safety by requiring important improvements to the airline's safety program," Acting Administrator, Lynne Osmus said. "Some of those safety measures exceed (FAA) regulations."

(SWA) said in a statement that it is "pleased that we have been able to resolve all outstanding issues with the (FAA) as we continue to work together to ensure the highest degree of flight safety." It added that the settlement "will allow us to focus on safety going forward, rather than on issues that are behind us." The fine will paid in three installments of $2.5 million, the first of which is due within 10 business days. The two additional payments are to be made no later than January 15, 2010, and January 15, 2011, respectively, the (FAA) said. The (FAA) added that the fine could double to $15 million if (SWA) does not make the changes within the agreed time frames.

(SWA) Pilots (FC) Association endorsed the tentative five-year deal reached with (SWA) management earlier this year and sent the agreement to its more than >5,900 members for a ratification vote. "We believe this contract addresses the needs of our pilot (FC) group," (SWAPA) President, Carl Kuwitzky said. "Another positive is that it keeps our company financially competitive in a trying and unknown time in our industry." He said the proposed contract "includes pay increases, stronger job protection language, increased retirement benefits and scheduling improvements" and imposes "limitations on the company" regarding code sharing, which will be allowed under the contract, to "keep our jobs secure." The announcement by the pilots (FC) was among positive developments by (SWA) on the labor front.

(SWA) committed to growth in 2010, according to a copy of its tentative contract with the Southwest Airlines Pilots Association (SWAPA) obtained by "The Dallas Morning News." (SWA), which plans to cut capacity for the first time this year, promised pilots (FC) that it will operate 535 airplanes by year end (compared to 537 at the close of 2008), 541 at the end of 2010, and 568 the following year, according to the "Morning News." The deal also limits the airline's code share options. (SWAPA) must approve any domestic or long-haul code share partner, while "near international trans-border" code shares cannot exceed +6% of the flying performed by union members. Furloughs will not be prohibited while (SWA) has a code share deal in place. The new contract also offers annual +2% raises retroactive to September 2007 in addition to increased retirement account contributions.

(SWA) said it reached a tentative agreement with the Transport Workers Union (TWU) representing more than >9,800 flight attendants (CA) on a new four-year contract through May 31, 2012. It also announced that its ramp, operations, provisioning and freight agent employees represented by (TWU), voted to ratify a tentative three-year agreement that was reached last month. "The new contract delivers raises in exchange for work rule improvements and scheduling flexibility along with productivity and gained efficiencies," (SWA) said.

(SWA) announced a tentative three-year labor agreement with the Transport Workers Union (TWU) covering freight agents and ramp, operations and provisioning employees. Negotiations began in January 2008 and the contract, if approved, will run through June 30, 2011. The (TWU) board has submitted to deal to its 7,780 (SWA) employees for a ratification vote.

Some controversial females on planes? - - SEE ATTACHED - - "SWA-BIKINI."

737-7H4 (36639, N932WN), delivery.

April 2009: Southwest Airlines (SWA) said March passenger (RASM) declined by an estimated -10% to -11% year-over-year. It flew 6.65 billion (RPM)s traffic last month, down -0.4%, while capacity dropped -1.5% to 8.61 billion (ASM)s. Load factor rose +0.8 point to 77.3% LF.

(SWA)'s stretch of un-profitability continued with a first-quarter net loss of -$91 million, reversed from a +$34 million profit in the year-ago period and (SWA)'s third consecutive quarter in the red, leading it to initiate a "system wide voluntary early-out program" as part of an effort to "align headcount to current capacity." Chairman & CEO, Gary Kelly said the carrier is "modestly overstaffed" and added that he doesn't "see involuntary furloughs needed" unless demand declines more than expected and a fleet reduction becomes unavoidable. But he emphasized in a conference call with analysts and reporters that (SWA), which expects to operate 535 737s at year end, has "no commitment to grow our fleet and that is indefinite."

Kelly said reports that the airline had promised pilots (FC) it would grow its fleet are incorrect, explaining that a tentative five-year contract with the (SWA) Pilots Association contains provisions that would put "fences around" some code sharing if the fleet does not grow. "Absolutely we are not committed contractually to grow the fleet," he said.

The voluntary leave program will be offered through June 19. "We don't have a minimum [number of employees accepting] that we are dependent on" and will not resort to layoffs if a certain figure is not reached, he claimed. (SWA) has implemented a hiring freeze and suspended pay increases for senior management.

First-quarter revenue dropped -6.8% to $2.36 billion, while expenses increased +1.4% to $2.41 billion, producing an operating loss of -$50 million, reversed from an operating profit of +$88 million last year. Traffic fell -4% to 16.89 billion (RPM)s on a -4.1% cut in capacity to 24.17 billion (ASM)s, producing a load factor of 69.9% LF, down -0.1 point. Yield dipped -2.8% to 13.33 cents as (RASM) slipped -2.9% to 9.75 cents and (CASM) lifted +2.8% to 9.96 cents. (CASM) ex-fuel rose +8.4% to 7.07 cents.

Kelly projected "another year-over-year decline in our second-quarter 2009 operating unit revenues," cautioning that the recovery from the economic downturn "is going to be a long, drawn-out, painful affair." He added that the (RASM) drop "could be worse" than the first quarter: "I wouldn't be shocked at all to see it down more than >-2.9%."

(SWA) will launch thrice-daily, Denver - Minneapolis/St Paul service on May 26. (SWA) will launch its Boston (BOS) service on August 16 with five-times-daily flights to Chicago Midway and five-times-daily service to Baltimore. It will operate from two gates at (BOS) and have approximately 40 full time employees at the airport.

(SWA) Chairman & CEO, Gary Kelly strongly rejected Wall Street advice that (SWA) begin charging for checked baggage to generate more revenue. During a conference call to discuss (SWA)'s third consecutive quarterly loss, multiple analysts pushed Kelly to follow other USA carriers and implement baggage fees. But he insisted the move would drive away customers. "The bottom line assessment is we believe we're having a meaningful impact [telling consumers] that we are alone in not charging bag fees and that [impression] is increasing our demand," Kelly explained. "SWA) is a very well-known value brand . . . and it would be disruptive to all of the things we're doing to build the brand. You just risk losing customers." He continued: "I don't see there's any reason for us to panic based on the first-quarter results. [Not charging bag fees is] no different from us not charging $400 Minneapolis-to-Chicago one-way. We don't want to be another airline that nickles and dimes customers. We don't believe it would be revenue positive any more than we could argue imposing a [large] fare increase right now would generate more revenue compared to the customers we'd lose."

BOC Aviation (SIL) announced a sale/leaseback transaction with (SWA) covering six 737-700s that will be leased back to the carrier for 14 years each. The first tranche of three airplanes closed April 2 and the second is scheduled to close in the current quarter. (SIL) closed a similar deal with (SWA) in January covering 10 airplanes.

2 737-7H4s (36640, N933WN; 36642, N934WN), deliveries.

May 2009: Southwest Airlines (SWA) said that current revenue and booking trends "continue to be adversely impacted by the weak economic environment" and continuing swine flu concerns, leading (SWA) to predict that second-quarter unit revenue will fall more than the -2.8% decrease reported in the first quarter. April (RASM) is expected "to be in line" with the year-ago month. (SWA) flew 6.52 billion (RPM)s traffic last month, up +4.1% year-over-year, against a -1.9% decline in capacity to 8.46 billion (ASM)s. Load factor rose +4.4 points to 77% LF.

(SWA) announced that it will start service in November or December at Milwaukee (MKE), a market targeted for growth this year by rival AirTran Airways (CQT). Wisconsin's largest city is the fourth new destination (SWA) will add this year despite not growing capacity or its fleet. (SWA) said it will "offer multiple destinations" from (MKE). Speaking at the annual shareholders meeting, available via webcast, Chairman & CEO, Gary Kelly said operating at (MKE) will "help us better serve the northern Chicago area and be a wonderful complement to our Chicago Midway (MDW) service." (SWA) launched service at Minneapolis - St Paul (MSP) in March with eight-times-daily service to (MDW) and next month plans to start New York LaGuardia (LGA) flights with Boston Logan to follow in August.

Kelly said the new destinations "will add tens of millions of dollars in incremental revenue in the first year." He emphasized that (SWA) is not veering from its strategy this year of lowering capacity and not growing its fleet of 535 737s. It will redirect airplanes to its newest destinations by "pruning" existing routes.

AirTran (CQT) Chairman, President & CEO, Bob Fornaro said last month that (CQT) will continue to build its presence at (MKE), where it plans to double capacity this summer. "The timing is right for us to finally get a foothold in the Midwest," he told analysts and reporters.

(CQT) said that it will occupy six gates at (MKE) this summer to operate 34 daily weekday flights, representing a 57% year-over-year increase in its (MKE) activity. Earlier this month it began operating flights from (MKE) to (MSP) and Branson, Missouri, and will launch service from the airport to Denver and St Louis. Additional flights from (MKE) to (LGA), Baltimore, San Francisco, Seattle and Tampa/St Petersburg will be started this summer.

(MKE) Director, Barry Bateman said that (SWA)'s entry goes a long way toward "further solidifying [the airport] as Chicago's third airport."

WestJet (WJI) announced that its code share partnership with Southwest Airlines (SWA), slated to launch by late 2009, "will be delayed" because (SWA) "has decided to redirect a portion of its resources dedicated to the code share project towards other near-term revenue opportunities." (WJI) emphasized that its new Sabre reservation system will be online by the fourth quarter and could handle implementation of the code share, but said (SWA) is concerned about launching the arrangement in a weak revenue environment. A (WJI) statement quoted (SWA) Executive VP Strategy & Planning, Bob Jordan as saying, "In response to the current economic environment, (SWA) is focusing its immediate attention on several critical objectives, including increasing our revenues." He added that (SWA) is "absolutely committed to our partnership with (WJI) and to code sharing in general."

Neither carrier said how long the delay might be. (SWA) also has signed a code share deal with Toluca-based, Volaris (VLS) that was expected to kick in sometime next year; it is not clear whether that arrangement has been affected. "(WJI) understands the decision made by (SWI)," (WJI) Executive VP Commercial Distribution, Hugh Dunleavy said. "Our continued USA expansion is a key strategy for our airline, but code sharing is only one element of this. Both airlines remain committed to minimizing delays and are focused on generating revenue as quickly as possible."

Air New Zealand (ANZ) revealed the results of its December 29, 747-400 bio-fuel test flight at the Eco-Aviation conference presented by (ATW) and Leeham Company in Washington, saying that data gathered from the 2-hour flight show that a 50/50 blend of jatropha-based fuel and standard jet fuel could reduce fuel burn by -1.2% and carbon dioxide emissions by -60% to -75% on an average 12-hour 747 flight. (ANZ) earlier had stated that there were no operational problems during the test flight from Auckland that used the fuel blend to power one of the airplane's Rolls-Royce (RRC) (RB211)s. But it said its analysis of scientific data gathered during the flight revealed a performance that was "better than we expected." Extrapolating data from the flight, (ANZ) believes a 12-hour 747 flight powered by the fuel blend would yield fuel savings of -1.43 tons and a CO2 emissions reduction of -4.5 tons compared to a similar flight powered today by traditional jet fuel. The test flight was operated in conjunction with Boeing (TBC), Rolls-Royce (RRC) and Honeywell (SGC).

Despite the strong results, ANZ General Manager Operations & Chief Pilot, Dave Morgan cautioned that there is no imminent "silver bullet" regarding bio-fuel and that there may be too much "hype." He explained that the test flight was just part of a long process: "The reason we did the flight was to make a contribution to the database in order to [make progress toward getting] this fuel certified. In the short term, it's really about getting a second-generation bio-fuel certified. In the long term, we believe it could be a fuel alternative for (ANZ)."

(ANZ) has a goal of using 10% alternative fuel (covering all fuel needs, including ground operations) by 2013. Morgan said jatropha may not be the most ideal feedstock for (ANZ) because it cannot grow in New Zealand.

Commercial Aviation Alternative Fuels Initiative Executive Director, Richard Altman told the Eco-Aviation conference that developing sustainable feedstocks for bio-fuels is critical but warned that serious challenges lie ahead. "We need investors," he said, adding: "What's it going to take to get a farmer to plant camelina instead of what he's planting now? . . . We need to develop an entirely new fuel dynamic." Altman said much of the "hype" about bio-fuels is well-founded. "The expectations may be too high for certain feedstocks, but in terms of moving to bio-fuel [to power commercial flights], there's not too much hype." Algae, for example, has been called the "Holy Grail" of alternative fuel offerings by Boeing (TBC) and others, but he cautioned that while it "looks good on paper . . . we really don't know much about it. We don't know what the manufacturing process [for turning it into fuel] is."

Airlines are not sitting idly waiting for major new (ATM) programs such as the USA (FAA)'s NextGen and are investing in and employing new technology to reduce fuel burn and emissions, industry leaders Air New Zealand (ANZ) and (SWA) said. (SWA) Senior Director Flight Operations, Jeff Martin said (SWA) continues to invest in its program to develop and introduce Required Navigation Performance (RNP) procedures at every airport it serves in order to boost efficiency and reduce fuel burn and emissions. To facilitate (RNP), (SWA) activated the auto-throttles on its 737-700s last January. In March, it conducted a test flight between Dallas Love and Houston Hobby using (RNP) and estimated that "carbon reduction in one year of flying (RNP) procedures between Dallas and Houston could equal a reduction of approximately 8.42 million lbs of CO2."

Martin said (SWA) has set a 6% target for fuel reduction as a result of the (RNP) project. It also has equipped its fleet with Aviation Partners Boeing (APB) blended winglets and is limiting the use of APU ground power to 5 minutes before departure to further conserve fuel. He and Morgan noted that in order to more fully reap the benefits, their respective programs need to be adopted industry-wide.

(SWA) announced a tentative four-year agreement with customer support and services and airport customer service employees represented by the International Association of Machinists and Aerospace Workers. The contract is subject to union ratification.

(SWA) cabin staff (CA) represented by the Transport Workers Union ratified the four-year labor agreement reached in March. The contract covering more than 9,700 flight attendants (CA) runs through May 2012.

Seabury Solutions announced that (SWA)implemented its Airline Performance Analysis System, a decision-support tool that measures the operational and financial performance of individual flights.

(SWA) announced the closure of the second tranche of its sale and leaseback deal with BOC Aviation (SIL), selling three 737-700s for $104 million. (SIL) immediately leased the airplanes back to (SWA) for 16 years.

2 737-7H4s (36641, N935WN; 36643, N936WN), deliveries.

June 2009: Southwest Airlines (SWA) said May passenger (RASM) fell an estimated -9% year-over-year. It flew 6.43 billion (RPM)s traffic last month, down -3.6%, against a -3.2% decline in capacity to 8.62 billion (ASM)s. Load factor slipped -0.3 point to 74.6% LF.

(SWA) will launch its Milwaukee service on November 1 to six destinations. (SWA) will fly to Baltimore (thrice-daily), Kansas City (thrice-daily), Las Vegas (twice-daily), Kansas City (twice-daily), Orlando International (twice-daily), Phoenix (daily) and Tampa (daily). (SWA) will operate out of two gates at General Mitchell International and have 40 full time employees.

(SWA) said that customer support and services and airport customer service employees represented by the International Association of Machinists and Aerospace Workers ratified a four-year labor agreement reached last month.

FltOps.com, an assistance service for professional pilots (FC), recently released a report of what each major USA carrier pays its captains and first officers. For the eleven largest USA airlines, including freight carriers FedEx (FED) and (UPS), the average annual pay for a first-year first officer flying the smallest mainline airplane is about $36,000. But the range between the best and worst paying airlines is large, with (FED) paying $51,000 and US Airways (AMW)/(USA) just $22,000. Southwest Airlines (SWA) is the second highest paying at the entry level ($50,000), while Continental Airlines (CAL) and United Airlines (UAL) are tied for second last at $27,000. At the other end of the scale are long tenured captains flying the largest airplanes, who earn an average of $165,000 per year. Again, the cargo carriers are tops with (UPS) and (FED) paying $231,000 and $211,000, respectively. The best paying passenger airline is (SWA) ($181,000), quite remarkable considering its pilots (FC) only fly narrow body 737s. The worst is JetBlue (JBL) ($123,000). Flt.Ops.com notes that pilots (FC) can earn considerably more than their base pay through international overrides, overtime work, per diems and other items.

Recently released federal government employment figures for airline pilots (FC) and mechanics (MT) run counter to data compiled by private organizations and the personal stories of highly-trained pilots (FC) standing in unemployment lines. FltOps.com recently held a pilot (FC) recruiting conference in Dallas-Fort Worth in which only a handful of airlines were on hand to interview pilots (FC). Last year’s event drew 35 airlines, spelling out how drastic the drop in pilot (FC) hiring has been, as air carriers quit hiring and in many case furlough pilots (FC). FltOps.com says the 15 largest USA airlines it tracks hired 2,300 pilots (FC) in 2006 and 2,440 in 2007. But last year, only 1,300 pilots (FC) found jobs. Through the first four months of 2009, only 28 new pilots (FC) joined the 15 air carriers. FltOps.com’s figures jive with that of AIR Inc, the aviation career information service, that for two decades served as a reservoir of data on pilot (FC) hirings. But if anyone needed more evidence of the worsening condition of the airline industry, Air Inc in February this year, shuttered its operation as a result of the sorry state of the economy worldwide, which has produced a dearth of new commercial pilot (FC) jobs as legacy airlines shed capacity, implementing pilot (FC) furloughs and layoffs while also putting off new flight deck crew (FC) hiring.

By the end of 2008, as the recession deepened, it became clear that the future would be bleak for newly minted flight school graduates. Air Inc said airline pilot (FC) hiring totals for 2008 were less than half of what they were the previous year, 6,479 compared to 13,157 in 2007.

However, the federal government says USA scheduled passenger airlines employed +2.3% more pilots (FC) and +5.9% more maintenance (MT) workers in 2008 than in 2007, while total industry jobs declined by -3.0%. According to the USA Department of Transportation (DOT)’s Bureau of Transportation Statistics (BTS), the seven large network carriers employed +1.1% more pilots (FC) and +8.6% more maintenance (MT) workers in 2008 than in 2007. The seven largest low-cost carriers (LCC)s employed +5.2% more pilots (FC) and -6.8% fewer maintenance (MT) workers from 2007 to 2008.

Delta Air Lines (DAL) had the largest increase in pilots (FC) of any network airline from 2007 to 2008,K while Alaska Airlines (ASA) had the greatest percentage decrease in pilot (FC) employment of the network airlines. United Airlines (UAL) had the largest increase in maintenance workers of any network airline from 2007 to 2008, while Northwest Airlines (NWA) had the smallest increase.

All of the low-cost carriers (LCC)s except Frontier Airlines (FRO) added pilots (FC) from 2007 to 2008. Spirit Airlines (SPR) had the largest increase in pilot (FC) employment followed by Allegiant Airlines (WJE). (WJE) had the largest increase in maintenance (MT) workers of any low-cost airline from 2007 to 2008, while (SPR) had the largest reduction. The seven network carriers employed 13.2 pilots per airplane in 2008, down from 13.5 pilots (FC) per airplane in 2007. The (LCC)s employed 11.2 pilots (FC) per airplane in 2008, down -1.8% from 11.4 pilots (FC) per airplane in 2007.

Alaska Airlines (ASA) had 12.0 pilots (FC) per airplane in 2008, down from 12.9 (FC) per airplane in 2007, the fewest of any network airline. Delta (DAL), with 14.9 per airplane, up from 14.3 per airplane in 2008, had the largest increase in the number of pilots (FC) per airplane from 2007 to 2008 and had the most pilots (FC) per airplane of any network carrier.

Allegiant (WJE) had 9.3 pilots (FC) per airplane in 2008, the fewest of any (LCC), compared to 9.6 pilots (FC) per airplane in 2007. Spirit (SPR), with 15.5 (FC) per airplane, up from 12.6 (FC) per airplane in 2007 had the most pilots (FC) per airplane in the (LCC)s group.

As regards airline mechanics (MT), the (BTS) said the passenger airlines had 8.9 maintenance (MT) workers per airplane in 2008, up from 8.3 per airplane in 2007. The network airlines had 12.9 maintenance (MT) workers per airplane in 2008, up from 12.3 (MT) per airplane in 2007. Spending by network airlines for outsourced maintenance increased from 42.5% of total maintenance spending in 2007 to 42.8% in 2008. The (LCC)s had 3.2 maintenance (MT) workers per airplane in 2008, down from 3.7 (MT) per airplane in 2007. Spending by (LCC)s for outsourced maintenance increased from 52.1% of total maintenance spending in 2007 to 54.6% in 2007.

(NWA) had 0.8 maintenance (MT) workers per airplane in 2008, the fewest of any network airline and unchanged from the 0.8 employees per airplane in 2007. (NWA)’s spending for outsourcing maintenance declined from 71.0% of total spending in 2007 to 65.9% in 2008. American Airlines (AAL) had 22.4 maintenance (MT) workers per airplane in 2008, the most of any network airline. (AAL)’s spending for outsourcing was 23.6% of total maintenance spending in 2008, the lowest percentage spending share of the network carriers.

Virgin America (VUS) had 1.7 maintenance (MT) workers per airplane in 2008 the fewest of any (LCC). Of the (LCC)s, Spirit (SPR) spent the smallest portion of its maintenance expense on outsourcing at 22.6%. Southwest (SWA) had the highest percentage share for outsourcing at 61.3%. Frontier (FRO) had 3.9 maintenance (MT) workers per airplane in 2008, the most of any (LCC) but down from 7.7 (MT) employees per airplane in 2007. (FRO)’s spending for outsourcing increased from 20.5% of total maintenance spending in 2007 to 24.9% in 2008.

In the news, Alaska Airlines (ASA) and its mechanics (MT) union produced a tentative agreement on a two-year contract extension, through October 17, 2011. The Aircraft Mechanics Fraternal Association (AMFA) represents 655 airline technicians (MT). (ASA) and the union announced that they expect the results of the ratification vote by late July. (AMFA) is the largest craft union representing airplane maintenance technicians (MT) and related employees and serves members at (ASA), Mesaba Airlines and (SWA).

But (SWA) pilots (FC) rejected a tentative five-year contract that would have increased their salaries and retirement benefits. Work to reopen contract talks with (SWA) will begin immediately, said Carl Kuwitzky, President of the (SWA) Pilots’ Association. Almost 51% of pilots (FC) voted against the agreement, which was reached in January after >2 years of talks. In the interim, the existing contract remains in effect. >95% of pilots (FC) voted. "We are naturally disappointed and acknowledge it was a very close vote," said Chuck Magill, VP Flight Operations for (SWA). "We reached a tentative agreement in good faith, and both sides put a lot of effort into getting to this point. We have an outstanding and highly productive group of Pilots (FC), and we appreciate their active involvement in the voting process. We welcome the opportunity for our negotiating teams to re-engage and work toward an agreement that best meets the needs of our company and our outstanding pilots during these challenging economic times."

Meanwhile, it is reported that the skies aren’t so friendly for Steffan Schmidt and Chris Campbell. They were recently found on a street in Seattle, at rush hour, holding signs more often used by panhandlers. “Two laid-off pilots (FC)” read Schmidt's sign. “Will Fly for Food” Campbell’s sign said. It’s a small industry, and there aren’t a lot of pilot (FC) gigs on Craigslist or Monster, said Campbell, who lost his job flying a corporate airplane. Schmidt was laid off from his job flying a corporate plane three months ago, and figured they would get some “exposure” by standing at a busy freeway ramp. “The normal way to find employment didn’t cut it,” he said. Schmidt said he wanted to get off unemployment, and not “waste any more tax dollars.” They're seeking pilot (FC) jobs, not handouts, but passersby offered them money and books, which they politely declined.

(SWA) raised certain baggage charges and will begin allowing pets onboard for a fee as it looks for new revenue streams. (SWA) said that it will raise existing charges for passengers checking a third or overweight bag (51 to 70 lbs) to $50 from $25 and will add a $25 fee each way for those traveling as unaccompanied minors.

(SWA) also announced that small cats and dogs able to fit in a carrier under the airplane seat can be brought onboard for a "pet fare" of $75 each way and will count as the passenger's carry-on item. (SWA) said the new pet policy is one of several programs it will begin to "create opportunities for incremental revenue growth."

All initiatives become effective June 17. The announcements follow (SWA)'s recent decision to delay its code share with WestJet (WJI), preferring to focus "its immediate attention on several critical objectives, including increasing our revenues."

(SWA) Chairman & CEO, Gary Kelly said that (SWA)'s code share partnership with (WJI) will be delayed until "late next year." A delay was announced previously but no timetable had been identified. "We're still very committed to adding Canada," he said. Implementing the code share this year as initially planned has "been replaced by some more important near-term revenue opportunities," he explained. "We only have so many resources available." He rejected speculation that (SWA), which also has signed a code share deal with Toluca-based, Volaris (VLS) to enable passengers to connect to Mexican destinations, is seeking a Caribbean code share partner. "Our priority is not expanding into the Caribbean," he said.

Messier Services said it won a three-year deal from (SWA) to provide landing gear support on its fleet of 737NGs.

4 737-7H4s (36644, N937WN; 36645, N938WN; 36646, N939WN; 36900, N940WN), deliveries.

July 2009: Southwest Airlines (SWA) said June passenger (RASM) decreased an estimated -9% to -10% year-over-year. It flew 6.73 billion (RPM)s traffic in June, down -2.1%, against a -3.8% fall in capacity to 8.46 billion (ASM)s. Load factor rose +1.3 points to 79.5% LF.

(SWA) returned to profit after three consecutive quarters in the red, earning +$54 million in the second quarter, down -83.2% from +$321 million in the year-ago period, although it warned that "based on weak travel demand and fuel price volatility, we cannot predict a profitable third quarter 2009." Chairman, President & CEO, Gary Kelly cited a -4.6% fall in unit cost excluding special items and a -22.8% drop in economic fuel costs as key to (SWA)'s performance, although other indicators remained worrisome. The voluntary early-out program offered during the quarter attracted 1,400, which will cost the carrier $70 million through 2010 but "should eventually" produce annual savings in excess of that figure.

"We continue our diligent cost control efforts and remain committed to maintaining our competitive cost advantage to sustain our strong low-fare brand. However, we are not immune to the effects of the debilitating economic environment," Kelly said, adding that (SWA) has "more [revenue initiatives] planned for the fall," including a revamped website. It added charges for pets, unaccompanied minors and extra baggage in the second quarter.

Meantime, it has been forced to "stimulate traffic with more discounted and promotional fares." Second-quarter operating revenue fell -8.8% to $2.62 billion, yield was down -8.2% to 12.73 cents and (RASM) dropped -6% to 10.24 cents. The swine flu scare cost it some $20 million.

Second-quarter expenses were down -6.4% to $2.49 billion on a -3.6% fall in (CASM) to 9.76 cents, although unit cost, excluding fuel rose +5.8% to 6.91 cents, which Kelly said "was better than we anticipated." It is expected to increase in the current quarter, and he said (SWA) expects third-quarter unit revenue to decline more than >-6%.

(SWA) took $60 million in charges related to cash settlements from derivative contracts during the quarter. Operating profit fell -40% to +$123 million from +$205 million in the year-ago period. It has $2.4 billion in cash and short-term investments.

(SWA) flew 19.68 billion (RPM)s traffic, down -0.6% year-over-year, against a -3% cut in capacity to 25.55 billion (ASM)s. Load factor rose +1.8 points to 77% LF. It plans to cut third-quarter capacity by -6% and fourth-quarter (ASM)s by -8%, resulting in a full-year reduction of -5% TO -6%. Some of that excess space will be used to stimulate growth at new markets like New York LaGuardia, Boston and Minneapolis/St Paul, Kelly said. (SWA) operated 543 airplanes at quarter's close and intends to reduce the fleet by an additional -8 to -10 airplanes by year end. It has one more 737-700 scheduled for delivery this year.

Six-month net loss of -$37 million compared to a +$355 million profit at the same point last year. Operating profit fell -75.1% to +$73 million from +$293 million on a -7.9% decline in revenue to $4.97 billion.

(SWA) launched its New York LaGuardia (LGA) service. It is flying to Chicago Midway five-times-daily and Baltimore thrice-daily from Gate B4 in (LGA)'s Central Terminal Building.

(SWA), which launched service at Denver (DEN) a little more than three years ago, announced that it has submitted a nonbinding proposal to bid for bankrupt Frontier Airlines (FRO), which now is scheduled to be sold at auction next month. If it opts to present an offer, (SWA) will compete with regional operator Republic Airways Holdings for (FRO). The USA Bankruptcy Court approved Republic's $108.8 million proposal two weeks ago, but (FRO) reportedly continued to solicit competing bids. (SWA) said that its offer is worth at least $113.6 million.

The court has established an August 10 deadline for a binding bid. (SWA)'s proposal grants (SWA) access to (FRO)'s confidential data, allowing it to perform "the due diligence required to determine the scope of a binding proposal." "We see a strong fit between our company cultures, a mutual commitment to high-quality customer service, and similar entrepreneurial roots," (SWA) Chairman, President & CEO, Gary Kelly said.

(SWA) began flying out of (DEN) in January 2006, likely contributing to (FRO)'s reversal of fortune. It now serves 34 destinations nonstop from the airport, which is dominated by United Airlines (UAL), and has continued to add flights there even while cutting back elsewhere.

(FRO) confirmed the move, saying that its arrangement with Republic "provides for an auction period, during which (FRO) may seek higher or otherwise better competing bids." (FRO), its advisers and a committee representing unsecured creditors have been authorized by the court to conduct on auction on August 11. Republic did not issue a statement.

(SWA) Executive VP Corporate Services & Corporate Secretary, Ron Ricks and Executive VP Strategy & Planning, Bob Jordan said that if it acquires (FRO), the "goal is to integrate (FRO)'s operations into (SWA) over a reasonable period of time." That would include disposal of (FRO)'s A320 family fleet and transitioning to 737s. In a Q&A published on (SWA)'s website, Ricks said (FRO) would "operate as a wholly owned subsidiary, independently and separately from (SWA), for a period of time until (FRO) could be combined with (SWA)." He continued: "Over time, (FRO) employees would be hired into (SWA) as needed to support our fleet growth and expanded operations." Ricks said (SWA) is in good position to make the offer, which it has been considering for "some time." He said (SWA) has "the cash, access to capital and collateral that allows us to take advantage of this existing opportunity."

INCDT: The USA National Transportation Safety Board (NTSB) issued a report stating the Southwest Airlines (SWA) 737-300 that developed a hole in its fuselage in July 2009 while flying from Nashville to Baltimore suffered from "fatigue cracking of the fuselage skin near the leading edge of the vertical stabilizer."

Flight 2294 experienced "rapid decompression while in cruise flight at approximately 35,000 ft when the fuselage crown skin ruptured just forward of the vertical stabilizer," according to the (NTSB). It said magnified inspections of the fracture area revealed "surfaces indicative of fatigue progress." During the July 13 flight, "the fatigue cracking penetrated the fuselage skin and created an approximate 18-inch by 12-inch flap in the skin that depressurized the airplane," the (NTSB) stated.

At the time of the incident, "the specific area of rupture and skin cracking…was not subject to any inspection Airworthiness Directives (AD)s or service bulletins (SB)s" the (NTSB) pointed out. Prompted by the incident, Boeing (TBC) issued a September 2009 service bulletin (SB) calling for repetitive external inspections of the area in question to detect cracks in the fuselage skin of 737 Classics. The (FAA) followed with an (AD) issued January 12 mandating the inspections.

(SWA) said in a statement that it is in "full compliance with all new safety regulations developed by Boeing (TBC) and the (FAA) and we thank the (NTSB) for its thorough investigation." It added it has "taken aggressive measures to incorporate additional maintenance inspections in response to what was learned from flight 2294. Immediately after the accident, we increased our ongoing maintenance inspections in the impacted area to include recurring detailed visual inspections and non-destructive tests, with a goal to not only meet but exceed known safety standards."

737-7H4 (36647, N941WN), delivery.

August 2009: Southwest Airlines (SWA) said July traffic rose +5.2% year-over-year to 7.24 billion (RPM)s on a -3.6% reduction in capacity to 8.7 billion (ASM)s, producing a load factor of 83.2% LF, up +6.9 points.

(SWA) launched its Boston service, which will comprise five daily flights to Chicago Midway and five to Baltimore.

(SWA) confirmed its submission of a binding cash offer worth more than >$170 million to acquire Denver rival, Frontier Airlines (FRO), which now will be sold at auction because Republic Airways Holdings also has placed a bid. When announcing its nonbinding interest in late July, (SWA) said its offer would be worth at least $113.6 million, eclipsing Republic's USA Bankruptcy Court-approved proposal of $108.8 million.

Explaining the difference in value, (SWA) Executive VP Strategy & Planning, Bob Jordan said, "Our submission about 10 days ago really wasn't a bid. It was just a placeholder to get us into the process . . . This is our bid." He made his comments during a conference call with reporters. The auction is expected to begin August 13, (SWA) said, and the winning bid remains subject to approval by both the court and the USA Department of Justice.

(SWA) said its offer includes acquisition of "approximately" 80% of (FRO)'s 51 A320 family fleet - - around 40 airplanes, according to Jordan - - and the entirety of its Lynx Aviation subsidiary, which flies DHC-8-Q400s. (SWA) will transition out of the A320 family airplanes into 737s over a period of approximately 24 months.

(SWA) "intends to maintain all existing markets, as well as add new nonstop routes from Denver that are not served by either (SWA) or (FRO) today." However, Jordan noted that it has not decided whether it will continue to operate Lynx itself or "find someone else to operate it."

In discussing the difference in value between the Republic and (SWA) bids, Executive VP Corporate Services & Corporate Secretary, Ron Ricks, who also participated in the conference call, pointed out that among other things (SWA) is proposing a bigger payout to unsecured shareholders: 12 cents on the dollar versus the 8.7 cents offered by Republic. He also noted that Republic "is around 50% of the unsecured claims pool [by value]." Explaining why (SWA) is bidding on (FRO), Jordan said, "(FRO) is for sale in bankruptcy, so something is going to happen to (FRO) and we want to be a part of that. Second, we want to grow . . . and this provides us a great way to grow in a city that is very important to us."

(SWA) currently operates 113 daily flights to 34 destinations from Denver, where it employs nearly 400. Chairman, President & CEO, Gary Kelly said it is "the fastest-growing city in our history."

Later, (SWA) said that its $170 million bid to acquire (FRO) was "deemed unacceptable" by a USA Bankruptcy Court after the two carriers' pilot (FC) unions were unable to reach an agreement on joint work rules and seniority, paving the way for Republic Airways Holdings to purchase (FRO). (SWA) and Republic both issued bids for bankrupt (FRO) that were considered in a court-monitored auction. Even though (SWA)'s offer was much higher than Republic's $108.8 million proposal, (SWA)'s bid included a clause requiring that the Southwest Airlines Pilots Association (SWAPA), representing its nearly 6,000 pilots (FC), and the Frontier Airlines Pilots Association (FAPA), representing 700 pilots (FC), reach an accord. But the two groups suspended negotiations after (FAPA) balked at (SWAPA)'s proposal to place the (FRO) pilots (FC) at the bottom of their seniority list. "(SWA) was not willing to remove the need for the two pilot (FC) unions to reach agreement," (SWA) said in a statement, adding that its "culture and relationships with its employees are too important to compromise."

Chairman, President & CEO, Gary Kelly explained, "We said all along that we would only move forward on this deal if it proved to be the right decision for our employees and financially prudent for our company . . . We chose not to amend our bid to remove the labor requirement, a key reason our bid was not selected." He added that (SWA) remains "committed" to the Denver market.

(SWA) Chairman, President & CEO, Gary Kelly said (SWA) is "seriously considering" operating international flights as soon as 2011 and also remains interested in acquiring troubled assets from rival carriers following its failed bid to purchase Frontier Airlines (FRO). In an interview with "The Wall Street Journal," Kelly said there are plenty of markets to which (SWA) still can expand (it currently serves 67). "If you're just talking about the domestic USA, I think there are a dozen [potential expansion cities]," he said. "If you add international markets, there are dozens . . . The 737 can do Canada, Mexico, the Caribbean. . . We're seriously considering that . . . 2011 [would be] the earliest that we'd be flying international metal."

(SWA) previously announced its intention to give customers access to Canada and Mexico via code sharing; a partnership with WestJet (WJI) was supposed to begin this year but has been delayed, likely until late 2010.

Regarding Frontier (FRO), Kelly likened (SWA)'s losing out to Republic Airways Holdings to the world's top golfer recently losing the (PGA) Championship. "Even Tiger Woods doesn't win every tournament," he told the newspaper. "We'll be back in the game for the next tournament. It's a matter of being opportunistic. Any time you've got a competitor failing in bankruptcy, that presents an opportunity." He said Southwest could grow 10% via an acquisition, as would have been the case with (FRO), but much larger growth would be "a huge risk" not worth taking. He added that acquiring regional airlines is "not our vision going forward."

(SWA) announced that it plans to begin a fleet-wide rollout of Wi-Fi Internet connectivity in conjunction with "Row 44" in the 2010 first quarter. (SWA) said it "has received fantastic customer feedback" from passengers who have used the "Row 44" satellite-enabled service on four 737s on which it has been tested since February. "We have concluded our testing for in-flight Wi-Fi and are very happy with both the technical performance of the system and the response of customers who have used it," Senior VP Marketing & Revenue Management, Dave Ridley said.

During the testing phase, passengers using their own laptops or other Wi-Fi enabled devices, used the service to send and read e-mails as well as surf the Internet, (SWA) said. It added that it has been testing "a variety of price points for the service and will continue testing price points through the end of 2009." It did not say how long it would take to equip its entire fleet.

(SWA) and USA (FAA) officials met to discuss an agency inspector's recent discovery that (SWA) is operating more than >40 737s with parts produced by an un-certified vendor, a finding that led to the August 22 grounding of the airplanes from early morning to 3 pm.
"The (FAA), Boeing (TBC) and (SWA) all agreed [by the afternoon of August 22 that] our aircraft were safe to operate with the parts as they were," a (SWA) spokesperson said. The (FAA) confirmed that use of the parts does not create an immediate safety issue, but added that permission granted to (SWA) to continue operating the 737s is for 10 days only, giving (SWA) a brief reprieve to find a more permanent solution.

The parts in question are exhaust gate assembly hinge fittings, which deflect engine exhaust from wing flaps. A maintenance company that neither the (FAA) nor (SWA) identified, apparently replaced the parts with hinge fittings produced by a vendor that has not gained (FAA) certification for the parts. The issue was first revealed by "The Wall Street Journal."

(SWA)'s latest confrontation with the (FAA) comes fewer than six months after it agreed to pay a $7.5 million fine to settle an enforcement action stemming from operating 46 737 Classics for nine days in March 2007, after it had disclosed to the agency that the airplanes were in noncompliance with an airworthiness directive (AD). Disclosure of that episode led to allegations that (FAA) inspectors in Dallas were too "cozy" with (SWA).

737-7H4 (36648, N942WN), delivery.

September 2009: Southwest Airlines (SWA) said August passenger (RASM) fell -5% to -6% year-over-year. It flew 6.69 billion (RPM)s traffic, up +1%, while capacity dropped -6.1% to 8.34 billion (ASM)s. Load factor increased +5.6 points to 80.2% LF.

(SWA) and negotiators for the Southwest Airlines Pilots Association (SWAPA) reached a new tentative labor agreement, though the union's board has not decided whether to endorse the accord. In June, (SWA)'s pilots (FC) narrowly rejected ratification of a prior deal. The latest agreement would last two years before becoming amendable. According to "The Dallas Morning News," the new contract would limit capacity operated by (SWA) code share partners on international routes to no more than 4% of (SWA)'s total capacity, down from 6% in the rejected agreement. It also includes pay increases. (SWAPA) told the newspaper that its board will meet and consider sending the new deal to its membership.

Later, (SWAPA)'s board voted unanimously to endorse a new tentative labor contract with the airline and send it to membership for ratification. (SWAPA) members rejected a previous Tentative Agreement (TA) in June. (SWAPA) said the new five-year agreement, which replaces a contract that became amendable in 2006, differs from the rejected agreement "in that it allows more flexibility to the pilots (FC)'s quality of life, maintains long-standing scheduling programs, gives an increase to a retirement benefit for pilots (FC) sooner, and further restricts the Company's ability to code share both domestically and internationally." In return, (SWAPA) accepted "a compensation package valued slightly less than the previous (TA)."

(SWA) announced that it will launch service from Denver to Boston (twice-daily), Reno - Tahoe (daily) and Spokane (daily) on January 10.

(SWA) announced schedule adjustments for the January 9 - March 12, 2010 period featuring elimination of -92 individual flights and addition of another +42, including new service from St Louis to Boston and Minneapolis-St Paul beginning January 10. (SWA) temporarily will suspend Albuquerque - Portland (Oregon), Manchester (New Hampshire) - Pheonix, and Kansas City - Seattle service.

(SWA) unveiled "EarlyBird Check-in," which allows passengers to board the airplane prior to general check-in, but after Business Select customers and premium loyalty program members, for an extra $10 each way. (SWA) is known for its unreserved seating and for boarding passengers in groups. The EarlyBird service will be available up to 25 hours prior to scheduled departure.

(SWA) announced it will temporarily halt service on three nonstop routes this winter, as well as other schedule changes that will result in a net loss of -10 daily flights system-wide. "We have to be smart about where we put our planes and our people," a (SWA) spokesman noted.

(SWA) plans to open international routes to Europe and South America, although so far there is "no timetable" for the move, Director Network Strategic Planning, Lee Lipton said at the World Route Development Forum in Beijing. "Europe and South America are our first choice . . . but currently, we are still evaluating our options," Lipton said. (SWA) Chairman, President & CEO, Gary Kelly said last month that (SWA) is "seriously considering" operating international flights to Canada, Mexico and the Caribbean as soon as 2011.

Lipton said he is confident that the "low-cost, long-haul" business model can work for (SWA) "just as AirAsia X (ASX) and Jetstar (IMU) have achieved success," adding, "it could even become a trend for Low Cost Carriers (LCC)s in the coming days."

Interestingly, Spring Airlines (CQH), the most successful Chinese (LCC), also plans to launch international service. It intends to operate to neighboring Asian countries in time for Shanghai's Expo 2010 starting in May.

However, Association of Asia Pacific Airlines Director General, Andrew Herdman expressed reservations about the low-cost long-haul model, saying, "It's too early to tell if it will be a trend for the future." He contrasted the normal low-cost business model - - narrow body airplanes, single-class (Y) cabins and online ticket sales - - with a typical long-haul operation. "Once the (LCC)s enter the international market, they have to comply with international rules, which means they have to operate a two-class cabin on wide body airplanes and sell their tickets not only through their website but also by Global Distribution Systems (GDS)," he said. "All these would make low-cost carriers look like full-service airlines, as they have a lot of convergence with carriers that choose the standard model." Herdman concluded: "I wouldn't say it can't work, but it's quite challenging."

Later, (SWA) moved to clarify its international future, stressing that it "does not have any plans to fly distant, long-haul international flights at this time or in the near future."

(SWA) confirmed that any such venture likely is a long way off. "Our immediate focus is on developing our previously announced code share partnerships with WestJet (WJI) and Volaris (VLS), and we have expressed interest in exploring near international markets, including Mexico, Canada and the Caribbean, with our own fleet," a spokesperson told this website. "While we can't rule out the possibility in the future, we are not actively considering service to distant international markets with our own airplanes."

Three months ago, (SWA) said its partnership with (WJI) will be delayed until late 2010 as it focuses on "near-term revenue opportunities."

In remarks prepared for delivery in Beijing, Lipton wrote that (SWA) and other Low Cost Carriers (LCC)s "have only just started to make our mark on world travel" and that the nascent trend "has been confined to individual regions." He predicted that "the time is approaching when those regions will be connected by low-cost carriers (LCC)s providing long-haul services, complemented by airline partnerships that extend the geography of individual carriers beyond their home markets."

He wrote that as the industry evolves, (LCC)s will be "changing their ways or developing outside the traditional view of what a (LCC) should look like." He said that rather than "a sign that the low-cost carrier model has run its course," a move toward "extending the geographic reach and expanding diversity of our business model is really a sign of strength."

(SWA) and the USA (FAA) were working toward accommodation on a plan and timetable to replace unapproved exhaust gate assembly hinge fittings on some 49 of (SWA)'s 737s. When the (FAA) became aware of the existence of the unapproved parts, it issued a letter giving (SWA) conditional approval to operate airplanes with the parts for 10 days. An (FAA) spokesperson said that (SWA) has come up with a proposal to address the situation. The (FAA) is trying to "find a way to accommodate Southwest (SWA) and do so in a manner compliant with [FAA] regulations," he said. He added that (FAA) does not view the unapproved parts as "an immediate safety problem."

(SWA) has replaced the parts on 33 airplanes. However, the spokesperson added that the timeframe for repairing the remainder could be more challenging. "Availability of resources would be a consideration," he said. The parts were installed by D-Velco Aviation Services, the (SWA) spokesperson confirmed. They were manufactured by an (FAA)-approved subcontractor named Future Fab that "lacked approval to perform this particular function," he said.

Later, (SWA) received a reprieve from the USA (FAA) and now has until December 24 to replace the unapproved parts on approximately 39 remaining 737-300s/-500s as both the regulator and Boeing (TBC) said the exhaust gate assembly hinge fittings "would not prevent safe operation of the airplanes." The (FAA)'s original 10-day grace period during which (SWA) could operate the airplanes with the unapproved parts expired, but (SWA) uncovered additional affected airplanes in the interim. (SWA) said it already has replaced the parts on 43 planes. The (FAA) said (SWA) may operate the remaining airplanes as long as each is "inspected for wear and tear" every seven days until the replacement is carried out. (SWA) said it does not expect to ground any airplanes, nor does it expect customers to "experience any impact to their flight plans."

(SWA) must "locate and dispose of" any other unapproved parts produced by Future Fab, which was subcontracted to fabricate the hinge fittings by D-Velco Aviation Services. Future Fab is (FAA)-approved but was not specifically authorized to market the part in question. The (FAA) said it has opened an investigation into the issue. A spokesperson would not speculate on whether the investigation will lead to a fine for (SWA), D-Velco or Future Fab. "We're still in the midst of the investigation," the spokesperson said. "We want to assure our customers that this situation is not about having unsafe parts on our airplanes," (SWA) Executive VP & COO, Mike Van de Ven said. "Our approved vendor subcontracted a machining function without appropriate written approval from the (FAA). As a result, the parts are considered unapproved and must be removed regardless of their quality. The parts have been inspected, and the (FAA) agrees that they meet the requirements of the aircraft manufacturer, (TBC). We concur that this plan is the best and most reasonable manner in which to fulfill the (FAA)'s mandate."

737-3H4 (22941, N301SW), WFU at Dallas-Love airport and scrapped.

October 2009: Southwest Airlines (SWA) flew 5.77 billion (RPM)s traffic in September, up +8.8% year-over-year. Capacity fell -7.8% to 7.72 billion (ASM)s and load factor surged +11.3 points to 74.7% LF.

(SWA) posted its fourth quarterly deficit in the past five reporting periods, a third-quarter net loss of -$16 million that was narrowed from a -$120 million loss in the year-ago period, and announced that it likely will follow up its "no growth" 2009 with a flat 2010. (SWA) said it would have earned a +$23 million third-quarter profit absent special items, including a $27 million charge for its "early out" voluntary job reduction program and a $12 million non-cash mark-to-market fuel hedging charge. Chairman, President & CEO, Gary Kelly said the result was a "remarkable accomplishment" given the "continuation of the depressed economy."

He said that while the carrier's "low fare brand" serves it well during a downturn, it is suffering along with the rest of the industry because of the absence of full-fare business passengers. "We're not counting on the return of business passengers anytime soon," he told analysts and reporters. "It's a low fare environment . . . I think the economy will continue to bump along. It's not getting better. It's just not getting worse." Advance bookings are robust but "discount-oriented," he said.

(SWA) likely will be forced to keep capacity flat through 2010, Kelly projected. Its capacity in the first nine months of 2009 was down -4.3% year-over-year. "We still see ourselves as a growth company," he said. "Now is not the time to grow, of course. We hope we'll have ample opportunity [in the future] to grow our route map, not only in the USA but in the near-international market." He insisted that the decision not to charge for first and second checked bags is paying off: "It's not a stretch to say that 2% to 3% of our customers [are flying on (SWA)] because we're not charging bag fees . . . We're at worst neutral [from a revenue perspective] by not charging the bag fee and it's our belief that we're ahead."

Third-quarter operating revenue lowered -7.8% to $2.67 billion, while expenses decreased -5.7% to $2.64 billion, producing operating income of +$22 million, down -74.4% from +$86 million last year. Traffic rose +4.7% to 19.71 billion (RPM)s on a -5.8% cut in capacity to 24.77 billion (ASM)s, driving load factor up +8 points to 79.6% LF. Yield declined -12% to 12.94 cents as (RASM) lowered -2.2% to 10.76 cents and (CASM) was flat at 10.67 cents. (CASM) ex-fuel increased +6.6% to 7.11 cents.

(SWA) pilots (FC) represented by the Southwest Airlines Pilots' Association (SWAPA) ratified the five-year labor agreement reached in mid-September. The contract runs through August 31, 2011, and was ratified by 87.5% of voting members. The union said more than 93% of the approximately 5,900 members participated. The vote concluded a process that began in September 2006. "Our pilots (FC) are the hardest working and most productive in the business and deserve a contract that reflects this, yet is still in keeping with the current uncertain economic outlook," (SWA) Chairman, President, & CEO, Gary Kelly said. "After we voted down the first agreement in June, we returned to the table to address areas our membership felt needed improvement," (SWAPA) President, Carl Kuwitzky said. "We were able to negotiate positive changes in many of those areas, including scheduling flexibility and code share protections."

(SWA) is accepting Flight Crew (FC) applications and resumes online and encourages applicants to update on a quarterly basis. No pilots (FC) are on furlough.

(SWA) launched service from Milwaukee to Baltimore (thrice-daily), Kansas City (thrice-daily), Las Vegas (twice-daily), Orlando International (twice-daily), Phoenix (daily) and Tampa (daily).
(SWA) will add more than >100 weekday flights to its network beginning in March, including 21 additional daily flights from Chicago Midway, 18 from Baltimore and nine each from Orlando and Tampa. It emphasized that the increased schedule will "not [be achieved] by adding to our fleet, but by taking advantage of the seasonal decrease in flying time going from winter into spring."

(SWA) announced service increases from Denver (den) and St Louis (STL). From (DEN) it will launch daily flights to Hartford, Boise, Ontario, Detroit, and Washington Dulles on March 14, as well as a third daily frequency to Oklahoma City. In May, it will start Saturday flights to New York LaGuardia along with additional frequencies to seven USA cities. (SWA) said it has acquired two additional gates on Concourse C, giving it 12 at the airport. In May it will add new flights from (STL) to Nashville, Los Angeles (each twice-daily), Raleigh/Durham, New Orleans, Seattle and San Diego (all daily) and a second daily Minneapolis/St Paul service.

(SWA) announced it will launch service at the new Northwest Florida-Panama City International Airport next May, operating at least two daily flights to four undisclosed destinations. The airport, slated to open May 18, is being built on land donated by St. Joe Co., Florida's second-largest landowner and a major developer in northern Florida. Under a "strategic alliance" between the companies, St. Joe agreed to reimburse SWA on a quarterly basis if the airline incurs losses during the first three years. "We've got an opportunity to be a launch airline at a new airport but we're not in an environment where we can take a lot of risk," SWA Chairman and CEO Gary Kelly said yesterday in Dallas at the airline's annual media day.

According to a Securities & Exchange Commission filing from St Joe, the agreement may be terminated by St Joe if payments to (SWA) exceed $14 million in the first year or $12 million in the second year. (SWA) may terminate the deal if annual revenues at the airport "are less than certain [agreed upon] minimum annual amounts." Either party may cancel after two years, Kelly said, adding that Florida's Gulf panhandle region "is a large, underserved, overpriced tourism gem." The current airport, Panama City-Bay County International, has no mainline jet operations but is served by regional partners of Delta Air Lines (DAL) and Northwest Airlines (NWA). Kelly also said that (SWA) could add two more new destinations next year.

(SWA) placed into revenue service a "green plane" - - a retrofitted 737-700 with a new interior featuring lighter, "eco-friendly" seat and carpet materials - - for a six-month trial and projected that the airplane could yield 10,000 gallons in fuel savings per year. Speaking in Dallas during the airline's annual media day, Chairman, President & CEO, Gary Kelly said the four-year-old airplane now is 519 lbs lighter than a standard (SWA) 737-700 and offers -5 lbs of savings per seat. The interior modifications, done in conjunction with Boeing (TBC), could produce a per-airplane, per-year cost savings of -$20,000 if implemented widely across the fleet. A decision on further retrofits will come following the trial.

Two new seat cover products are being tested. On one side of the aisle, seats are covered with e-Leather, made of recycled raw materials. On the other side, seats are covered with (IZIT) Leather, a fully synthetic material. All seats are filled with a lighter foam produced by Garnier PURtec. The floor is covered with InterfaceFLOR carpet, made from recycled carpet and installed in sections rather than in one full piece, allowing (SWA) to replace damaged sections rather than the whole carpet. (TBC) Managing Director Environmental Strategy, Billy Glover, in Dallas for the airplane's unveiling, said the interior took four years to develop. Reducing aviation's environmental impact "starts with little details like carpets and seatbacks," he said.

(SWA) revealed in a regulatory filing that it has settled a shareholder lawsuit related to safety issues for $3.5 million. The lawsuit stemmed from (SWA)'s $7.5 million fine paid to the USA (FAA) for operating 46 737 Classics for nine days in March 2007 after it had disclosed to the (FAA) that the airplanes were in noncompliance with an airworthiness directive (AD). The shareholders alleged in the lawsuit that (SWA) management failed to protect their interests when it was unable to prevent safety violations from occurring. (SWA) said the settlement includes "the adoption and/or implementation of a variety of reforms," including changes in its safety management and maintenance systems. The settlement is subject to court approval.

Is it possible that (SWA) would break its longtime practice of flying smaller versions of the 737, namely the 737-700 series (and older models like the 737-300 and 737-500 series)? During its third quarter earnings presentation, CEO, Gary Kelly said the decision partly depends on labor considerations. Buying larger 737-800s, which carry the benefit of lower unit costs, would also require a
fourth flight attendant (CA) and new negotiations with the carrier’s pilot (FC) union. Although Kelly said he sees some markets where acquisition of 737-800s would be worth it — New York LaGuardia, for example — he doesn’t see enough of those markets yet to change the strategy. Having a small sub-fleet of different airplanes, even from the same family, has its own costs.

November 2009: Southwest Airlines (SWA) flew 6.33 billion (RPM)s traffic in October, a +1.9% rise year-over-year, while capacity was cut -9.4% to 7.99 billion (ASM)s. Load factor surged +8.8 points to 79.2% LF.

A month after American Airlines (AAL) announced a dramatic cutback in its St Louis schedule, Southwest Airlines (SWA) took on the role of a ‘white knight’ adding nine daily flights from Lambert-St Louis International Airport (STL), including six new nonstop destinations, beginning in May. In September, (AAL) said it will eliminate 46 daily flights from (STL) and end service to 20 cities by April, further eroding nonstop opportunities for (STL) travelers. Since 2003, (AAL) has slashed service at (STL), which in its glory days, had served as a hub for Trans World Airlines (TWA). (AAL) acquired (TWA) in 2001. (AAL) had accounted for 44% of all flights there in 2008.

Starting in May, (SWA) will begin offering two daily nonstop, round-trip flights between (STL) and both Nashville and Los Angeles, and one daily nonstop between (STL) and Raleigh/Durham, New Orleans, Seattle, and San Diego. (SWA) also will add a daily nonstop roundtrip between (STL) and Minneapolis/St Paul (MSP) at that time, adding to the two daily nonstop roundtrips that launches in January.

(SWA) began service to (STL) on March 17, 1985, with 17 daily nonstop departures to four destinations. (SWA) currently operates 72 daily nonstop flights from (STL) with additional or connecting service to 42 destinations. With previously announced nonstop service additions to (MSP) and Boston Logan (beginning January 10, 2010) and the May additions, (SWA) becomes the dominant airline serving (STL), in terms of daily departures.

December 2009: Southwest Airlines (SWA) said November passenger (RASM) rose an estimated +12% year-over-year. It flew 5.88 billion (RPM)s traffic, up +11.7%, while capacity was cut -7.7% to 7.69 billion (ASM)s. Load factor surged +13.3 points to 76.5% LF.

(SWA) Chairman, President& CEO, Gary Kelly said there has been a "very dramatic shift" in domestic USA market share over the last year, with "1% moving from the rest of the industry to (SWA)."

In a speech to the Wings Club in New York available via webcast, Kelly said that while 2009 has been "very, very challenging on multiple fronts," forcing (SWA) to shrink capacity on an annual basis for the first time, (SWA) is reaping the benefits of a transformation process that began in 2007. He explained, "We were a no-frills, low-tech, all-domestic, point-to-point operator, [but new technology and initiatives to attract business passengers] are enabling us to evolve to something more than that."

He said this year saw (SWA) implement "the largest number of new technology" initiatives of any year in its 38-year history. "The big story of 2008 and 2009" was employing schedule optimization programs that have allowed it to trim unprofitable routes and increase profitable flying, he said, noting that even though capacity will shrink by -5% for full-year 2009, (SWA) added four new destinations.

The new additions include Boston (BOS) and New York LaGuardia, two airports that (SWA) previously made a point of avoiding but that now are critical to establishing a complete network, Kelly said. He added that (SWA) has had "easily the best market penetration" at (BOS), where flights started in August, of any new market in which it ever has launched service.

He said that a revamped website is allowing (SWA) to charge "higher average fares" and has led to a "higher book-to-look ratio," meaning an increasing percentage of visitors to the site are purchasing tickets. It also is using the site to generate ancillary revenue via car rental, hotel and cruise bookings. "We think we have an opportunity to grow that business," Kelly said.

He assured the audience that while (SWA)'s capacity will be "roughly flat" in 2010 following this year's contraction, "we still see ourselves as a growth company." He did not rule out acquisitions. "We'll be on the prowl looking for opportunities to grow in any form that it takes," he said.

January 2010: Southwest Airlines (SWA) said December passenger (RASM) rose an estimated +7% year-over-year. It flew 5.97 billion (RPM)s traffic during the month, up +3%, against a -5.8% cut in capacity to 7.83 billion (ASM)s. Load factor rose +6.5 points to 76.2% LF.

(SWA) reported its 37th consecutive full-year profit, a +$99 million surplus that represented a -44.4% decline from the +$178 million earned in 2008, and remained committed to maintaining flat capacity this year despite improving booking trends. The 2009 result included a $35 million third-quarter charge related to a voluntary redundancy program and a -$9 million fuel hedge loss. CEO, Gary Kelly said last year produced "the most difficult revenue environment the airline industry has ever faced" and that new revenue streams, destinations and processes, improved operating performance and higher loads helped (SWA) cope.

(SWA) launched service at New York LaGuardia, Boston, Milwaukee, and Minneapolis-St Paul in 2009, introduced the EarlyBird Check-in program, welcomed pets onboard and "made major advancements in our core technology," Kelly said. He promised, "We are not going to be charging for bags."

Full-year operating revenue fell -6.1% to $10.35 billion and expenses were cut -4.6% to $10.09 billion. Operating income dropped -41.6% to +$262 million from +$449 million in 2008.

(SWA) transported 101.3 million passengers last year, down -0.6%, and flew 74.46 billion (RPK)s, up +1.3% from 2008. Capacity was cut -5.1% to 98 billion (ASM)s, lifting load factor +4.8 points to 76% LF. Passenger yield dropped -7.4% to 13.29 cents and operating (RASM) was down -1% to 10.56 cents. Unit cost inched up +0.5% to 10.29 cents but soared +8.3% to 7.19 cents excluding fuel.

(SWA) concluded both 2009 and 2008 with 537 737s in service after reducing its fleet by four in the fourth quarter. (SWA) plans to take delivery of 10 737-700s this year but does not intend to grow the fleet. It has 91 firm airplanes on order scheduled for delivery through 2016.

(SWA) is sticking to its full-year flat capacity plan as well despite "strong revenue and booking trends continuing thus far into 2010," Kelly said. It expects an increase in unit revenue this quarter as capacity is cut -5% to -6% year-over-year. Second-quarter capacity (ASM)s are expected to fall -1% (it announced four new frequencies from Denver starting June 13), followed by slight rises in the second semester.

But unit costs are expected to increase, and Senior VP Finance & CFO, Laura Wright said full-year (CASM) excluding fuel, is expected to rise +5% "as a result of our flat capacity and inflationary pressures in many cost categories." She told analysts and reporters yesterday that "this is not acceptable and adjusting our cost structure and improving our productivity to support the changes we have made with our schedule will be one of our top priorities in 2010."

In the 2009 fourth quarter, (SWA) posted a +$116 million profit, reversed from a -$56 million loss in the final quarter of 2008. Operating profit more than doubled to +$167 million from +$70 million on a -0.8% slip in revenue to $2.71 billion.

February 2010: Southwest Airlines (SWA) announced the end of the "equipment testing" phase of its Row 44 on board Wi-Fi product and said it has signed an equipment purchase contract with the provider. (SWA) will start full fleet installation in the second quarter at a rate of 15 airplanes per month, aiming to increase to 25 as it "ramp[s] up the process." Under that schedule, (SWA) estimated that its full fleet of more than 540 airplanes will be equipped by early 2012. It will announce pricing for the service in the second quarter.

Airports in the USA Mid-Atlantic and Northeast reopened as the regions began to dig out from back-to-back storms that produced record snow accumulation in some areas. Seven consecutive days of snow removal were required at Washington Dulles and National, the Metropolitan Washington Airports Authority said. Baltimore, Philadelphia and the three major New York area airports also were operational, although airlines continued to cancel flights as they sought to reposition airplanes and employees and return to normal operation.

According to FlightStats, American Airlines (AAL)had canceled 465 of the 1,419 scheduled departures tracked, or 32.8%. The number of departures tracked represented 72.4% of the total. Continental Airlines (CAL) canceled 13.2% of its 675 tracked departures, representing 69.9% of the total schedule. Delta Air Lines (DAL) canceled 10.4% of its 1,658 tracked departures, representing 69.6% of its total. United Airlines (UAL) canceled 13.8% of its 741 tracked departures, representing 64.5% of its total. US Airways (AMW)/(USA) canceled 24.2% of its 921 tracked departures, representing 68.7% of its total. Southwest Airlines (SWA) canceled 22.4% of its 2,012 tracked departures, representing 62.9% of its total, FlightStats reported.

737-3A4 (23505), scrapped.

March 2010: Southwest Airlines (SWA) said the February snowstorms cost it an estimated -$15 million in lost revenue but boosted passenger (RASM) by +16% to +17% year-over-year as a result of the reduced capacity. (SWA) flew 4.99 billion (RPM)s traffic in February, down -2.3% year-over-year, and capacity was down -8.7% to 6.75 billion (ASM)s. Load factor rose +4.8 points to 73.9% LF.

USA airlines presenting at the Transportation Conference in New York agreed that they see signs of a nascent industry recovery but that they will maintain cost and capacity discipline for now. "We're clearly seeing signs of economic recovery and premium and corporate travelers returning," (UAL) Corporation's CFO, Kathryn Mikells said, adding, "The return of higher quality traffic, combined with the significant reductions in capacity that we undertook in 2009, has really begun to improve our relative revenue results." American Airlines (AAL) Executive VP Finance & Planning and CFO, Tom Horton said first-quarter mainline passenger (RASM) will be up +6.5% to +7.5% year-over-year, while Continental Airlines (CAL) Chairman, President & CEO, Jeff Smisek said (CAL) is "seeing business (C) travel begin to return." Delta Air Lines (DAL) agreed that corporate sales trends are improving, though its system capacity at the end of the first quarter will be down -4% to -5% year-over-year. (DAL) President, Ed Bastian said (DAL) will "continue to maintain that level of capacity restraint."

From the low-cost sector, Southwest Airlines (SWA) said it is taking a slow approach to expanding in new markets, remaining focused on improving profitability rather than increasing fleet size. CFO, Laura Wright said (SWA) wants additional slots at New York LaGuardia and that it will be filing comments in the next few weeks to express interest. "We don't have an expectation to have 100 flights a day at LaGuardia, but we know we've got demand for more than the eight that we have today," she said. Slots might become available if US Airways (AMW)/(USA) and (DAL) proceed with their slot swap agreement. AirTran Airways (CQT) said it expects capacity growth of +3% to +4% over the next year owing to higher utilization and will maintain a conservative fleet plan for the "next couple of years." It expects to take delivery of seven airplanes over the next year. JetBlue Airways (JBL) has decided to take four A320s in 2011 rather than the eight previously planned, along with five EMB-190s, according to the "Associated Press."

(SWA)'s August 15 to October 30 schedule features a reduction of -116 daily round trip flights to 3,254 and a move to "restructure" its Washington Dulles (IAD) service, which it said has been a "small, boutique operation" since it was launched in October 2006. "We're going to refocus our service there to strengthen connectivity to the Midwest and Western parts of our network," Lead Planner, Bill Owen said. (SWA) will eliminate flights from (IAD) to Orlando International and Tampa, and will redirect its flight to Las Vegas through Denver. Daily departures will drop from 11 to eight. The only new route on the schedule is a daily, Chicago Midway - Orange County service. (SWA) also will discontinue its daily, Baltimore (BWI) - Los Angeles; daily, (BWI) - Seattle; daily, Fort Lauderdale - Kansas City; daily, Milwaukee - Tampa; and daily, Seattle - St Louis services.

3 737-7H4s (36659, N944WN; 36660, N945WN; 36913, N943WN) deliveries.

April 2010: Southwest Airlines (SWA) responded to comments from WestJet (WJI) that it is considering exploring additional code share opportunities, including one with Delta Air Lines (DAL), insisting that it it is "prepared to move forward to implement our agreement" with (WJI) but that it will look for alternatives for Canada service if (WJI) goes in a different direction. WestJet (WJI) is one of the beneficiaries of a compromise offered by (DAL) and US Airways (AMW)/(USA) regarding their proposed New York LaGuardia (LGA)/Washington National slot swap and would receive five former (DAL) pairs at (LGA).

(SWA) said a (DAL)/(WJI) code share "could be inconsistent with the agreement presently in place between Southwest (SWA) and WestJet (WJI)," which was supposed to launch late last year but was delayed. "The (SWA)/(WJI) project was on target in accordance with a mutually agreed upon timetable," (SWA) Executive VP Strategy & Planning, Bob Jordan said. "However, (WJI) in recent weeks requested material and significant changes to our agreement that we could not accept . . . We have not yet been notified of (WJI)'s intent to terminate that agreement."

Later, however, fewer than two years after Southwest Airlines (SWA) called WestJet (WJI) "the perfect fit" for a code share partnership that promised to expand its reach outside the USA, (SWA) said it will "terminate" the relationship with its Canadian counterpart (WJI) before the agreement ever gets implemented. The code share pact, announced in July 2008, was supposed to start late last year, giving (SWA) passengers access to Canada's second-largest airline and (WJI) access to (SWA)'s extensive USA domestic network. But (SWA) postponed implementation last year because it said the recession necessitated that it focus "immediate attention on several critical objectives, including increasing our revenues." Former (WJI) President & CEO, Sean Durfy, who resigned last month for personal reasons, said in February that (WJI) was "ready to go" with the code share and was waiting on (SWA).

In recent weeks, talks between (WJI) and Delta Air Lines (DAL) regarding a possible code share accord surfaced and (SWA) expressed its objections, saying a (WJI)/(DAL) deal "could be inconsistent with the agreement presently in place between (SWA) and (WJI)."

(SWA) said in a statement that (WJI) had "requested significant changes to the agreement that the two airlines have had in place since 2008 . . . (SWA) cannot agree with the modifications." Executive VP Strategy & Planning, Bob Jordan added, "Upon reviewing the number of changes that (WJI) has requested, we have decided that it is in the best interest of both parties to move forward independently." He said (SWA) "would not rule out future code share relationships with Canadian carriers or flying north of the border ourselves."

(WJI) VP Planning & Strategy, Hugh Dunleavy said that "ending the agreement is best for both companies at this point in time." He added that (WJI) will continue to pursue a code share agreement with a USA airline. "(WJI) plans to sign and implement partnerships with strategically aligned carriers from each of the major regions around the world," he said. "To date, (WJI) has been approached about potential partnerships by over 70 airlines, including a number of large USA carriers."

These brief statements by the Low Cost Carriers (LCC)s were in stark contrast to the celebratory feel of the code share accord's announcement 21 months ago. Durfy then said, "This is a defining moment . . . When you examine our network in Canada and (SWA)'s network in the USA, and the potential to significantly improve both organizations' market access, this is indeed a great day."

737-7H4 (36918, N946WN), delivery.

May 2010: Southwest Airlines (SWA) announced plans to serve its first destinations in South Carolina, Charleston, and Greenville-Spartanburg, starting in 2011. Service will be provided without state subsidies, it said.

June 2010: Southwest Airlines (SWA) Executive VP & COO, Mike Van de Ven called on airplane manufacturers to develop a new narrow body airplane, saying that today's 737NG and A320s are unable to deliver the "step change" in efficiency that the airline industry needs.

Delivering the opening keynote address at Air Transport World (ATW)'s Eco-Aviation Conference in Washington, he said, "The time has come to develop a replacement to the workhorse narrow bodies." He added that today's single-aisle airplanes only enable airlines to make "marginal improvements" in fuel burn efficiency, adding that "marginal improvements won't allow us to meet our environmental responsibilities and economic challenges. Our industry needs better economics. I believe that a new narrow body airplane will produce one of the single most significant steps toward meeting our economic challenges."

Both Boeing (TBC) and Airbus (EDS) are contemplating whether to re-engine the 737/A320 for a service entry around 2015 or to launch an all-new airplane program with an Entry Into Service (EIS) around 2018 to 2020. Both have said a re-engining decision likely will be made this year.

"It looks like now you can re-engine the existing [narrow body] airplanes with a very substantial fuel burn improvement," Pratt & Whitney (P&W) VP Technology & Environment, Alan Epstein said. "The airframers and the engine companies have learned you can put a much bigger engine under existing wings than you would have thought three or four years ago."

He explained, "All [airplane manufacturers] have design rules for how far the engine has to be off the runway. Each of the four Western airplane companies has very firm guidelines. But [each company's guidelines] are different, so it's not the laws of nature but the laws of man [that have determined the guidelines]. What's the ultimate low ground clearance? It's where you don't hit the ground lights. Everything else is technology. Boeing (TBC) and Airbus (EDS) are enormously capable technical organizations. Each company has come up with very credible [re-engine] designs with engine [ground clearances] that 3 to 5 years ago, you wouldn't have thought were feasible."

As a result, he added, whether or not to re-engine is "a business decision at this point, not a technology decision."

(P&W) is pushing its (PW1000G) geared turbofan for a re-engining program. Epstein said airlines are "telling us they're holding their orders for narrow bodies" until (TBC) and (EDS) make "definitive comments" on whether they will re-engine or launch new airplanes. "Historically, these guys like to play liar's poker," he commented. "They like to confuse the enemy as to what their intentions are."

(SWA) expects significant fuel savings from its $175 million roll-out of Required Navigation Performance (RNP) to its airports starting in 2011. Senior Director Flight Operations, Jeff Martin said (SWA) "completed the activation of auto-throttle technology in all 340 of our 737-700 airplanes and flew our first (RNP) demo flight, both significant milestones in implementing our program." (SWA) also has modified its speed schedule and is flying at optimum speed and altitude, contributing to approximately -4.8 million gallons in fuel savings of the 8.5 million gallons saved by (SWA) last year.

In preparation for the (FAA)'s NextGen Air Traffic Control (ATC) system, (SWA) over the last two years has modified more than >444 airplanes with (GPS) and (RNP) software, modified 343 737NGs from (EFIS) to (PFD)/(ND) and completed 30,000 pilot (FC) training events. It has flown 9,000 (GPS) approaches since April 6. (SWA) is on track for the first 737 Classic digital conversion in 2011. "The payoff is already -$1 million in fuel savings each month with the new automation," Martin said. "With (RNP), for every 3 nm we save 1 minutes of flight time, 10 gallons of fuel, eliminate 200 lbs of carbon dioxide and eliminate 0.75 lbs of (NOX)." (SWA) anticipates a 100% return on investment in fewer than 10 years as long as the (FAA) implements NextGen in a timely manner. "With (RNP)/NextGen procedures designed at 13 of our airports, we project a savings of -$16 million a year once we begin flying (RNP) in January 2011," Martin said.

(ITT) VP NextGen Transportation Systems, John Kefaliotis told the conference that 330 (ADS-B) stations will be installed in the USA by September as the roll-out that began in 2008, continues through 2013.

737-7H4 (36662, N948WN; 36924, N947WN), deliveries.

July 2010: Southwest Airlines (SWA) flew 7.07 billion (RPM)s in June, a +5% increase on the year-ago month, against a +1.9% lift in capacity to 8.63 billion (ASM)s. Load factor grew +2.4 points to 81.9% LF.

(SWA)'s second-quarter net income rose +23.1% year-over-year to +$112 million from +$91 million in the year-ago period and (SWA) expressed confidence in "continued strong revenue performance" for the remainder of 2010. (SWA)'s quarterly revenue jumped +21.1% to $3.17 billion, its second-highest-ever revenue total for a second quarter. Its revenue growth during the three months ended June 30 "is the best in the industry domestically" despite the fact that it operated "slightly less capacity" compared to 2009, Chairman, President & CEO, Gary Kelly told analysts. "It's a revenue story. That's what drove our earnings growth."

CFO, Laura Wright said (SWA) is offering "fewer fare sales" compared to last year and is seeing "strong overall consumer demand." But like other USA airlines, (SWA) said it is committed to little-to-no capacity growth, at least through 2011. "We're planning for flat capacity this year," Wright said. "For 2011, we're expecting a modest capacity increase and a flat fleet." (SWA) took delivery of three 737-700s during the second quarter to bring its fleet to 544 737s.

As impressive as the quarter's revenue growth was, Kelly said (SWA) still has "a very significant opportunity to win more business (C) customers." He revealed that it will roll out a new frequent-flyer program next year aimed at appealing to business (C) travelers. He offered no details but said the development phase will be completed this year for a 2011 implementation. "It [was developed] from scratch and custom-built for (SWA)," he said, adding that the initiative could be "a game-changer.” He also stated that (SWA) likely will make a decision "sometime this year" on if and when it will start international service.

Second-quarter expenses lifted +12.5% to $2.81 billion and operating income was +$363 million, nearly tripling a +$123 million operating profit in the year-ago period. Traffic rose +2.7% to 20.21 billion (RPM)s on a -0.3% dip in capacity to 25.47 billion (ASM)s, producing a load factor of 79.3% LF, up +2.3 points. Passenger yield heightened +17.3% to 14.93 cents as (RASM) climbed +21.5% to 12.44 cents and (CASM) increased +12.8% to 11.01 cents. (CASM) ex-fuel rose +6.4% to 7.35 cents.

(SWA) launches five-times-daily, Boston - Philadelphia service, increasing to eight-times-daily on August 14.

737-7H4 (36663, N949WN), ex-(N1786B), delivery.

August 2010: Southwest Airlines (SWA) 2009 World Passenger Traffic = 119,801 Million (+1.3%) (RPK)s (World Highest #8) (#7); World Total Employees = 34,726 (-2.2%) (World Highest #10). SEE ATTACHED - - "SWA-2010-08-WLD RPK-2009."

(SWA) flew 7.49 billion (RPM)s traffic in July, up +3.4% from the year-ago month. Capacity climbed +1.4% to 8.82 billion (ASM)s, while load factor rose +1.7 points to 84.9% LF.

(SWA) reported continued demand strength in July, with passenger unit revenue increasing by +17% to +18%. Traffic was up +3.4% (RPM) year-on-year for the month, and capacity rose +1.4% (ASM). Load factor increased by +1.7 points to 84.9% LF. For the year through the end of July, traffic rose +2.4%, capacity was down -2.6%, and the airline’s load factor increased +3.8 points to 78.8% LF.

(SWA) announced "a shuffling of frequencies" for its January/February 2011 flight schedule, including the elimination of Kansas City (MCI) - Seattle (SEA) flights from January 9. Writing on (SWA)'s blog, available on its website, Schedule Planning Department Lead Planner, Bill Owen said Long Island Islip - Ft Meyers service will be resumed from February 13, while Nashville - Ft Meyers flights will also be launched that day. He said the (MCI) - (SEA) service "in all likelihood . . . will return" by the 2011 summer. No new cities were announced.

The rest of the changes involve frequency adjustments that reflect "the seasonal traffic ebb and flow," Owen wrote. Phoenix will be the "largest gainer" with 10 added departures per day to bring its daily total to 183, he said. Orlando will gain eight additional daily departures. Las Vegas remains the "busiest (SWA) station" with 213 daily weekday departures scheduled this winter, Owen stated.

The USA Justice Department (JD) said that it has no more antitrust (ATI) concerns about the deal that would combine United (UAL) and Continental (CAL) into the world's largest airline. To win that approval, (CAL)/(UAL) had to open the door to Southwest Airlines (SWA) at Continental (CAL)'s hub in Newark, New Jersey, where it is the dominant carrier. The (JD) said leasing takeoff and landing permission to (SWA) in Newark cleared up its main competitive concern.

Shareholders at Continental Airlines Inc and United (UAL) parent, (UAL) Corporation are set to vote on the deal on September 17, and the Transportation Department (TD) has to approve it. The airlines now expect the deal to close by October 1.

The combined airline would leapfrog Delta Air Lines (DAL) Inc to become the world's biggest airline. (DAL) itself grabbed the top spot by buying Northwest Airlines (NWA) in 2008.

The Justice Department (JD) said it thoroughly investigated the (CAL) - (UAL) deal and concluded that their two networks mostly complemented each other, with overlaps on a limited number of routes.
But Newark stood out. (CAL) had 70.9% of Newark's passengers during the year that ended in June. (UAL) is only Newark's fifth-biggest airline, but most of its hubs also connect directly to Newark.

(CAL) and (UAL) operate 442 daily round trip flights in and out of Newark. The deal with (SWA) will give it enough of (CAL)'s slots to operate 18 round trip flights there by June 2011. The move increases competition for (CAL) at its Newark hub, as well as for (UAL). Currently, (SWA) operates a few flights at New York's LaGuardia Airport but none at Newark or Kennedy.

(SWA) is getting slots at both peak and off-peak travel times, (CAL) Chairman & CEO, Jeff Smisek told workers in a memo. Smisek will be CEO of the combined airline, which is to be called "United" and based in (UAL)'s hometown of Chicago.

(SWA)'s entrance to Newark won't change the estimates for revenue gains and cost savings from combining (CAL) and (UAL), (UAL) Chairman & CEO, Glenn Tilton told employees in a message. "We vigorously compete with (SWA) throughout our network," he said.

Mike Boyd, an airline and airport consultant in Colorado, said giving up a few slots at Newark was an easy decision for the combining giants. "(CAL) and (UAL) want to get this merger done," Boyd said, and if federal regulators "stick their nose in there and say, 'Give something up,' they're going to give it up."

Bob Jordan, (SWA)'s Executive VP Strategy, said Newark would complement (SWA)'s service at LaGuardia and increase competition in the New York market. (SWA), which is based in Dallas, said it was still deciding what cities it will serve from Newark. From LaGuardia, it flies only to Chicago and Baltimore.

(SWA) confirms it is weighing a purchase of 737-800 airplanes, a larger model that would help (SWA) offer more seats at airports where slot controls make it difficult to add flights. (SWA) currently has orders on the books for new 737-700 airplanes configured to seat 137 passengers, but it may seek to negotiate an upgrade to the 737-800 model configured for 175 seats. Boeing (TBC) appears willing to allow the change, but (SWA) must also win approval from unions representing pilots (FC) and flight attendants (CA).

As (SWA) grows its network with crowded airports in New York, Boston and other cities, (SWA) says it is considering larger 737-800 models to serve those markets more efficiently. But (SWA) flight attendants (CA) are demanding a new contract to work the larger planes, which boast +38 more seats than the current fleet. (SWA) says it will decide on its jet order by December 1.

2 737-7H4s (36664, N950WN; 36665, N951WN), deliveries.

September 2010: Southwest Airlines (SWA) agreed to buy AirTran Airways (CQT) in a $1.4 billion deal that will combine two of the USA's largest low-cost carrier (LCC)s and give (SWA) a bigger slice of the market in the Northeast and in Atlanta, the busiest hub in the nation. The acquisition moves (SWA), which already carries more passengers than any other American airline, into 37 new cities.

It gains a foothold in cities like New York and Boston, where (SWA) has already been expanding, and adds to its push to expand internationally. (SWA) gains routes to Mexico and the Caribbean, where remaining discount airline JetBlue (JBL) has a big presence.

(SWA) has been targeting Atlanta, where (CQT) currently competes with Delta Air Lines (DAL), because it is a hub for business (C) travelers, who tend to pay higher fares.

The buyout is the latest in a wave of consolidation in the airline industry. Continental Airlines (CAL) and the parent of United Airlines (UAL) will combine this week to topple (DAL) as the largest airline in the world. (DAL) got the title when it bought Northwest Airlines (NWA) in 2008.

For fliers, it could mean higher airfares in cities where competition is already fierce, such as Boston, New York, and Baltimore. Fares probably won't leap dramatically anytime soon, said fare expert George Hobica, because (JBL) competes on many of the routes where (CQT) and (SWA) overlap in the East. But travelers also should be prepared for fewer fare sales when (SWA) and (CQT) combine, Hobica said. Locked in a constant battle with (DAL) in Atlanta and other discounters on the East Coast, (CQT) puts fares on sale nearly every week. The acquisition by (SWA) will take out a competitor and make fare sales less important for the combined airline.

Passengers in smaller cities like Moline, Illinois, and Wichita, Kansas will have more options for flights and connections, which means more opportunities to avoid delays and cancellations.

In welcome news for weary travelers, (SWA) said it will drop (CQT)'s bag fees, when the pair combine in 2012. Right now, (CQT) charges $20 for the first checked bag, $25 for the second. Some major airlines charge even more. (SWA) claims it has lured passengers by refusing to charge for bags, and has built a marketing campaign around the policy, with baggage handlers shouting declarations of love to suitcases on the tarmac.

(SWA) will remain the No 4 airline by traffic (RPM). (CQT) is the nation's 8th largest airline.

Last year, (SWA) tried unsuccessfully to buy Frontier Airlines (FRO) out of bankruptcy. Republic Airways Holdings won the auction for (FRO) last August, buying it for about $109 million.

(SWA)'s acquisition of (CQT) is expected to close in the first half of next year. It requires both regulatory and shareholder approval. Based on (SWA)' recent closing share price, the deal is worth $7.69 per (CQT) share. That's a 69% premium over its closing price of $4.55. (CQT) shares jumped +62% to $7.36, while (SWA) shares rose $1.73 to $14.01. (SWA) will pay about $670 million with available cash. (SWA) will assume $2 billion in (CQT) debt.

(SWA) and (CQT) said the new airline will operate from more than >100 different airports and serve more than >100 million customers.

In April, AirTran Holdings Incorporated CEO, Robert Fornaro signaled his interest in making a deal, saying the airline would consider a combination with another carrier if approached and if such a deal made sense for the company and shareholders. But when asked by "The Associated Press" who might be a potential suitor for (CQT), Fornaro said, "I'm not sure that we're necessarily a natural fit to be gobbled up by somebody else."

(CQT) was founded in 1992 as ValuJet Airlines (VAU). It was renamed after the 1996 crash of ValuJet (VAU) Flight 592 into the Florida Everglades, which killed all 110 people on board.

(CQT) would be (SWA)'s largest acquisition by a wide margin. (SWA), which began with a handful of planes hopping among three Texas cities in the early 1970s, bought Morris Air and Muse Air in the mid-1980s. Two years ago, (SWA) bought assets of ATA Airlines (AAT) out of bankruptcy, which gave (SWA) an opening to serve New York with (AAT)'s takeoff and landing slots at LaGuardia Airport.

Workforces of both airlines are heavily organized. (SWA)'s approximately 5,900 pilots (FC) are represented by the Southwest Airlines Pilots Association, while AirTran (CQT)'s 1,500 pilots (FC) are represented by the Air Line Pilots Association. (SWA)'s 9,600 flight attendants (CA) are represented by the Transport Workers Union while AirTran (CQT)'s 2,000 flight attendants (CA) are represented by the Association of Flight Attendants. Full integration is expected to take up to two years.

(CQT)/(SWA) will operate 685 airplanes comprising 401 737-700s, 173 737-300s, 25 737-500s and 86 717s. (SWA) Chairman, President & CEO, Gary Kelly said that (SWA) believes it can make the 717 work in the (SWA) fleet.

Sagging passenger demand does not appear to be a concern at Baltimore/Washington International Airport (BWI), which recorded its busiest month in history in July. (BWI) says 2.2 million commercial passengers flew through the airport, which broke the record set in August 2001. The record was largely driven by Southwest Airlines (SWA) and AirTran Airways (CQT), (BWI)'s No 1 and No 2 carriers, respectively. Both airlines count (BWI) among their busiest airports, and each posted its highest-ever monthly passenger count at (BWI) in July.

(SWA), the nation's largest low-cost carrier (LCC), accounted for more than half (>1.2 million) of the airport's passengers in July, the latest month for which data are available. For the summer travel season, (SWA) boosted its level of flights to 182 daily departures at (BWI), the most ever for the airline, according to the airport.

Passenger traffic has increased at (BWI) during 13 of the past 14 months. The only exception came in February 2010, when two blizzards hammered the region and affected airline flight schedules throughout the nation.

(SWA) says it has activated Wi-Fi on 13 airplanes and expects to have it on more than >60 by the end of this year. But (SWA) says it also looks like it will not complete installation for its entire fleet of about 540 737 airplanes until mid-2012, a bit later than estimated earlier this year. ”We hoped to have it by early 2012, but the way we have to schedule the installations moved our date back to mid-2012,” a (SWA) spokeswoman says. ”We are starting to get our rhythm with the installation now and have a better idea of how long this process will take.”

(SWA) also is promising to unveil its Wi-Fi pricing in the fourth quarter, as well as a newly designed portal that all Wi-Fi customers will be able to access for free. For now, it is testing different price points with customers flying on Wi-Fi-equipped airplanes. (SWA) is using in-flight connectivity provider Row 44, which has a satellite-based system, rather than going with the air-to-ground system many carriers are using. Dave Ridley, (SWA)'s Senior VP Marketing & Revenue Management, says (SWA) knew its choice of the ”cutting-edge technology” meant it would take longer to outfit the fleet, but believes Row 44 will enable (SWA) ”to provide a robust service at a great value.”

October 2010: Southwest Airlines (SWA) will introduce service to and from South Carolina, the 36th state in its network, with routes from Greenville – Spartanburg and Charleston, beginning March 13.

From Charleston, (SWA) will operate thrice-daily service to Baltimore, twice-daily flights to Chicago Midway, daily service to Nashville and daily flights to Houston Hobby. From Greenville, it will begin twice-daily service to Baltimore, twice-daily to Chicago Midway, daily to Nashville, daily to Houston Hobby and daily to Orlando.

"The arrival of (SWA) will absolutely be a game changer," Greenville-Spartanburg Executive Director, Dave Edwards said. "Not only will passengers benefit, but we've already heard from those working in the area of economic development that they are getting calls from business and industry groups from around country that never would have considered the [region] without (SWA)."

(SWA) said that its "international connect" service in partnership with Mexico's Volaris (VLS) will launch December 1 with bookings opening on November 12. (SWA) also revealed its first services from Newark and set pricing for its in-flight Wi-Fi product.

The (SWA)/)VLS) partnership, which was agreed to nearly two years ago, will enable passengers to book connections from 20 (SWA) destinations through Los Angeles, Oakland, and San Jose, to Cancun, Guadalajara, Morelia, Toluca/Mexico City and Zacatecas. The service will require customers to have a booking on both (SWA) and (VLS), which can be done via the (SWA) website. Luggage will be transferred to final destinations.

(SWA) said the partnership sits somewhere "between an interline and a code share" agreement, adding, "It takes some of the best features of those and simplifies it. As (VLS) grows, additional (SWA) cities will open international destinations."

(VLS), which launched in 2006, expects to carry 4 million passengers this year and with the shutdown of Mexicana (CMA), has become the country's second largest airline, according to airline officials.

(SWA) announced the first wave of new services at Newark International (EWR) with slots supplied by United Airlines (UAL) and Continental Airlines (CAL) under an agreement with the USA Department of Justice (DOJ). (SWA) will operate six daily non-stops to Chicago Midway and two to St Louis beginning March 27, 2011.

(UAL) and (CAL) agreed to transfer 18 slot pairs at (EWR) to (SWA) in order to receive (DOJ) clearance for their merger. (EWR) becomes (SWA)'s 72nd city. (SWA) said it will announce additional flights there before year end.

It also said that it will offer Row 44 In-flight Internet service for a $5 flat fee, covering any Wi-Fi enabled device. It so far has equipped 32 airplanes for Wi-Fi and expects to have 60 airplanes with the service by the end of 2010. All of its 737-700s will be equipped by the end of 2012, (SWA) stated. "I think over time, it will become expected [for airlines] to have" in-flight connectivity, Chairman, President & CEO, Gary Kelly told reporters." It opens up a number of entertainment options for us." Customers will be offered access to online shopping at no charge.

November 2010: Southwest Airlines (SWA) flew 6.85 billion (RPM)s traffic in October, up +8.3% from the year-ago month. Capacity climbed +5% to 8.39 billion (ASM)s as load factor jumped +2.5 points to 81.7% LF.

(SWA) will launch Newark service to Chicago Midway (six-times-daily) and St Louis (twice-daily) on March 27. (SWA) will launch daily Denver service to Columbus, Jacksonville, and Pittsburgh on June 5.

Business (C) travelers currently contribute about 40% of the revenue at (SWA), compared to 50% or more at network carriers that offer other amenities. Though CEO, Gary Kelly insists (SWA) won't change its model in an attempt to be all things to all people, (SWA) does tout some business (C)-friendly features, such as "Business (C) Select" tickets, with special privileges and last-minute itinerary changes with no change fees. Those features, along with fewer overall fees and increased service to major cities, are helping to win over business (C) travelers, says travel writer Joe Brancatelli, "St Petersburg Times (Florida)."

December 2010: Southwest Airlines (SWA) Senior VP Finance & CFO, Laura Wright told investors and media at the 2010 Hudson Securities Airline Conference in New York that (SWA)’s proposed acquisition of AirTran Airways (CQT) is on track to “close in the first half of 2011.”

Following the USA Department of Justice (DOJ)’s second request November 8, “we are working on fulfilling their information needs,” said Wright. She noted that (SWA) filed its S-4 Registration Statement with USA Securities & Exchange Commission on November 19. “Now what remains is to have the (CQT) shareholders’ approval and receipt of the (DOJ) and any other necessary clearances, plus the fulfillment of customary closing conditions,” Wright said.

After a record third-quarter net income of +$195 million (excluding special items), Wright said that, assuming traffic and revenue trends continue, (SWA) expects “solid revenue improvement” in the fourth quarter. “We have strong December bookings and, excluding fuel and related taxes, we expect fourth-quarter 2010’s unit costs to increase, year-over-year, in the 6% range,” Wright said.

Looking to 2011, Wright said capacity (ASM)s are forecast to be “up in the 8% range in the first quarter of 2011 and in the 5% range in the second quarter.”

(SWA)'s pilots (FC) ratified a tentative agreement to amend their collective bargaining accord to allow (SWA) to add the 737-800 to its fleet. "With this positive vote, the pilots (FC)'s current contract will also be extended by one year, becoming amendable August 2012, and will include the potential for wage rate increases based on the company's financial performance," (SWA) said in a statement. The (SWA) Pilots Association represents more than >5,600 (SWA) pilots (FC).

(SWA) said it will "now move forward finalizing discussions" with Boeing (TBC) "regarding substitutions of the 737-800s for the 737-700 positions and configuration and equipage options." (SWA) flight attendants (CA) cleared the addition of the 737-800 last month. "Since we began evaluating the opportunity to introduce the 737-800 into our fleet, both our pilots (FC) and flight attendants (CA) quickly grasped the potential benefits along with the added operational complexities associated with this decision," Executive VP & COO, Mike Van de Ven said.

(SWA) Chairman, President & CEO, Gary Kelly told the Wings Club in New York City that (SWA) has notified Boeing (TBC) that it will “substitute 20 of its 737-700 orders for 737-800s,” with the first delivery scheduled for March 2012. (SWA) had made known its desire to add the larger type into its fleet of 737-700s, 737-300s, and 737-500s but needed to get approval from its pilot (FC) and cabin crew (CA) unions first.

In a statement, (SWA) said it is "continuing to finalize discussions" with (TBC) regarding "substitutions of the 737-800s for the 737-700 positions, and configuration and equipage options." Kelly said the current plan is to take the 20 airplanes in 180-minute Extended Twin Engine Operations (ETOPS) configuration. The airplanes "would bring us to more distant markets like Hawaii, Cancun, Mexico, the Caribbean, and Bermuda," he said. Southwest Airlines (SWA) plans to buy at least 70 737-800 airplanes by 2014, CEO, Gary Kelly said, with the first 20 deliveries scheduled for March 2012. Kelly said the larger planes would boost efficiency at congested airports and allow service to Hawaii and other more distant markets. Regarding the 737-800, (SWA) says the current plan is to get all of the new airplanes to include Boeing’s "Sky Interior," which features
a quieter cabin, larger overhead storage bins, brighter and more adjustable reading and ceiling lighting.

Regarding (SWA)’s pending acquisition of AirTran (CQT), Kelly said it “boosts our profitability, which is key to resuming investment in our business,” and brings an “additional 38 cities” into the (SWA) network. Coupled with the 72 cities (SWA) serves today, Kelly noted this creates a “whole host of expansion opportunities simply by virtue of “connecting the two route networks together.” This can all be accomplished, he said, “without adding an airplane or raising fares.” Kelly also announced 10 additional daily nonstop flights from Newark Liberty with three daily non-stops to Baltimore/Washington International, three daily non-stops to Denver, two daily non-stops to Houston Hobby, and two daily non-stops to Phoenix Sky Harbor, beginning June 5, 2011. These cities join the previously announced non-stop service from Newark (EWR) to Chicago Midway with six non-stop flights, and St Louis with two non-stop flights — which begins March 27, 2011 — providing Newark a total of 18 daily (SWA) departures. (SWA) acquired slots at (EWR) from United Airlines (UAL) and Continental Airlines (CAL) under an agreement between those carriers and the USA Department of Justice.

(SWA) is currently interviewing pilots (FC) who were in the pool in 2008. (SWA) plans to hire 68 pilots (FC) in January, 60 in February and 60 in March. The flight crew (FC) positions will likely be filled by the pilots (FC) from the pool. The (SWA) flight crew (FC) application system is not active.

737-7BX (30744, N552WN), ex-(VH-VBQ), ACG (CGP) leased and 737-7H4 (36668, N953WN), ex-(N1786B), deliveries.

January 2011: SEE ATTACHED "SWA-2011-01-2010 WORLD TOP TRAFFIC."

Southwest Airlines (SWA) posted net income of +$459 million for 2010, more than quadrupling a +$99 million profit in 2009, marking (SWA)'s 38th consecutive year in the black. Despite a +12.7% year-over-year increase in fuel costs in the fourth quarter, 2010 was a "very satisfying year," Chairman, President & CEO, Gary Kelly told analysts and reporters. "Except for fuel, our outlook for 2011 is quite good," he said, citing "tremendous momentum" in revenue generation. "Pretty substantial" fuel hedging in place through 2014, fuel conservation initiatives and "revenue offsets" should allow (SWA) to navigate a high fuel cost environment, he stated.

He warned that per barrel crude oil prices reaching $120 would pose a serious threat to profitability. "If you look at our 2010 results, there's $1 billion that we have to work with to sustain some level of profitability," he explained. "Every $10 move in crude costs us $300 million, so at what point do we have a problem?" Noting that per barrel crude oil prices, now at just under $90, averaged around $80 in 2010, he said, "A $30 to $40 move in crude oil [in 2011] from 2010 [average prices] to reach the $120 range would wipe out profitability, all things being equal $110 would be alarming, but I think it's clear $120 would be a problem."

On the fleet front, (SWA) said it has reached agreement with Boeing (TBC) to take three of 23 737-700s slated for delivery in 2012 this year while switching the remaining 20 737-700s to 737-800s, all of which will be delivered in 2012. Kelly said (SWA) could have 50 to 100 737-800s in its fleet "eventually," noting, "I think our baseline is we could use more than >50 in our route system as it exists today."

He repeated that (SWA) expects to close its acquisition of AirTran Airways (CQT) during this year's first half, with early integration activities starting as soon as the second quarter.

As Southwest Airlines (SWA) prepares for its planned acquisition of AirTran Airways (CQT), some AirTran (CQT) employees say the sense of anticipation is "palpable." (SWA) workers have reached out to their new colleagues with parties and cakes, and observers say preserving the (SWA) culture and sense of family will be the key to a successful merger.

Full-year 2010 revenue jumped +16.9% to $12.1 billion, while expenses grew +10.2% to $11.12 billion, producing an operating profit of +$988 million, nearly four times greater than a +$262 million operating profit in the year-ago period. Traffic rose +4.8% to 78.05 billion (RPM)s on a +0.4% increase in capacity to 98.45 billion (ASM)s, producing a load factor of 79.3% LF, up +3.3 points. (SWA) plans to grow capacity +4% to +5% in 2011 compared to 2010, achieved primarily through higher airplane utilization.

Full-year 2010 yield heightened +10.8% to 14.72 cents as (RASM) escalated +16.5% to 12.3 cents and (CASM) rose +9.7% to 11.29 cents. (CASM) ex-fuel was up +5.8% to 7.61 cents. Fourth-quarter net income was +$131 million, up +12.9% from a +$116 million profit in the prior-year period, on a +14.8% lift in revenue to $3.12 billion.

In what it described as the "single biggest new product launch" in its history, Southwest Airlines (SWA) unveiled a revamped frequent flier program particularly aimed at attracting business (C) passengers and with the potential to generate "hundreds of millions" of dollars in incremental revenue annually according to the airline. The (SWA) "Rapid Rewards" program that has been in place for 24 years is different from the typical loyalty program in that it is based on trips taken — members receive per-trip credits regardless of distance flown or fare paid. In contrast, the new Rapid Rewards offering that will commence March 1, benefits passengers paying more and flying longer distances by linking ticket price directly to reward points, and promises additional benefits to a new status of member, "A-List Preferred." All premium members will get "bonus" points on ticket purchases.

The upgraded program also aims to provide maximum flexibility. "Members can redeem their points for every seat, every day, on every flight with absolutely no blackout dates or seat restrictions, and points won't expire with any earning activity in a 24-month time period," (SWA) explained in a filing with the USA Securities & Exchange Commission. "Members will earn points for every dollar spent on (SWA) flights. The amount of points earned is based on the fare and fare product purchased, and the same is true for redeeming points." Additionally, Rapid Rewards credit card holders will be able to redeem points for international flights operated by other carriers to more than >800 destinations, for stays at more than >70,000 hotels worldwide and for gift cards at more than >45 major retailers. Program members will also have the ability to purchase points.

Chairman, President & CEO, Gary Kelly hinted at the upgrade last July when discussing (SWA)'s second-quarter results with analysts and reporters. As impressive as the quarter's 21% year-over-year revenue growth was, Kelly said (SWA) still had "a very significant opportunity to win more business (C) customers." A new frequent-flier program to be rolled out in 2011 was developed "from scratch and custom-built for (SWA)," he said, adding that the initiative could be "a game-changer."

Kelly told "The Dallas Morning News" that "the real benefit here is of course winning more customers, getting more trips, winning more credit card utilization. The big deal here is getting more revenue." In a blog post, Senior Director Customer Loyalty & Partnerships, Brian Green said the new program was "several years" in the making. "We conducted months of customer surveys, focus groups and research to find out what travelers like about our current program, what they don't like, and what they'd like to see changed," he explained.

(SWA) stated that this month it will start commencing Required Navigation Performance (RNP) procedures for approaches at 11 airports, asserting that "these new efficient flight procedures and enhanced avionics" will save (SWA) -$16 million annually. (SWA) added that full implementation of (RNP) at all airports (SWA) serves would lead to more than >$60 million in reduced costs annually. (SWA) in 2008 announced at Air Transport World (ATW)'s Eco-Aviation conference that it would invest $175 million to implement (RNP) fleet wide, and previously operated a demonstration round trip between Dallas Love Field and Houston Hobby using (RNP). It has modified more than >444 airplanes with (GPS) and (RNP) software, including transitioning 343 737NGs from (EFIS) to (PFD)/(ND), and completed over >30,000 pilot training events.

"(RNP) sets the stage for (SWA) to continue doing its part to conserve fuel, improve safety, and reduce carbon emissions and greenhouse gases, while simultaneously taking advantage of the high-performance characteristics that exist in an airline's fleet," VP Operations Coordination Center, Jeff Martin said.

The airports at which (SWA) is inaugurating (RNP) are Amarillo, Birmingham, Boise, Corpus Christi, Los Angeles, Chicago Midway, Oakland, Oklahoma City, West Palm Beach, Raleigh-Durham, and San Jose. (SWA) said in a statement that implementing (RNP) procedures marks the "culmination of a four-year project with partners Boeing (TBC), (GE) and Honeywell (SGC). (RNP) is satellite-based navigation that brings together the accuracy of (GPS), the capabilities of advanced airplane avionics and new flight procedures." Executive VP & COO, Mike Van de Ven added, "This milestone culminates substantial efforts by our company working with the (FAA) to position (SWA) as a leading participant in a modernized air traffic control (ATC) system."

In a textbook preemptive move, Alaska Airlines (ASA) began flying to Honolulu from Bellingham, an airport located between Seattle and Vancouver, BC, Canada. The idea is to prevent Allegiant Air (WJE), which already serves eight destinations from Bellingham, from getting a foothold in the Hawaii market, one that’s increasingly key to (ASA)’s fortunes. (WJE) is buying 757s to start Hawaii service. Of course, Air Canada (ACN) and WestJet (WJI) also fly to Honolulu from Vancouver, BC, while (ASA) and Delta Airlines (DAL) have Honolulu non-stops from Seattle. It might not be long before Southwest (SWA) enters the Hawaii market using 737-800s (which start arriving in 2012), although it would probably fly there from California, where it has stronger brand loyalty. (ASA) is also using 737-800s for its new Bellingham flights.

February 2011: Paying passengers flew 6.23 billion (RPM) miles on Southwest Airlines (SWA) in January, an increase of +13.2% from year-earlier levels. Capacity increased by only +7.5% (ASM), so planes flew fuller, with occupancy up nearly +4 points to 76% LF. Passenger Revenue per Available Seat Mile (PRASM) was up by +8% to 9% year-over-year, (SWA) said.

(SWA) took two steps toward completing its planned acquisition of AirTran Airways (CQT), receiving approval from the USA (FAA) on a plan to merge the two carriers' under a Single Air Operating Certificate (AOC) and reaching agreement with the (SWA) Pilots Association (SWAPA) on "a procedural framework" for eventually integrating the two pilot (FC) work groups. (SWA) said the (SWAPA) board "unanimously agreed" to the accord.

(SWA) said it was informed by the (FAA) that the (FAA) "has accepted (SWA)'s transition plan to combine the operations" following the closure of the transaction, which still must receive approval from the USA Department of Justice and AirTran (CQT) shareholders. (SWA) expects the merger to close in the second quarter.

(SWA) VP Maintenance & Engineering, Brian Hirshman said "We consider this acceptance by the (FAA) as the first major milestone on the journey towards (SOC)," which (SWA) aims to achieve in the 2012 first quarter. The plan accepted by the (FAA) "outlines the methodology, processes, tools and timing to be employed to maintain the safety of [SWA and (CQT)'s] day-to-day operations during the transition period."

(SWA) Chairman, President & CEO, Gary Kelly said that rising fuel prices make (SWA)'s planned acquisition of AirTran Airways (CQT) "absolutely imperative." Speaking at a hearing held in Milwaukee by the USA Senate's subcommittee on antitrust, competition policy and consumer protection, Kelly said, "The economies of scale and the revenue synergies presented by this merger are a hedge against higher fuel prices."

Senator Herb Kohl (Democrat - Wisconsin), Chairman of the subcommittee, has said the panel "will carefully examine this proposed merger to determine whether air travelers will continue to see the low fares that they have come to rely on, especially in cities like Milwaukee where (CQT) and (SWA) are key competitors."
But Kelly asserted that neither carrier will be able to grow without the merger, a situation that would ultimately lead to less service for consumers. "High fuel prices have stymied growth in the airline industry and will continue to do so for the foreseeable future," he explained. "The (CQT) acquisition is a strategic hedge to enable a resumption of growth by (SWA). Absent the merger, both carriers will be constrained and even hard-pressed to maintain current capacity levels."

While the USA Congress often holds hearings on pending mergers, it has no formal role in approving the transactions. The (SWA)/(CQT) merger, which the carriers expect to close in the second quarter, still requires USA Department of Justice clearance.

(SWA) is currently interviewing pilots (FC) who were in the pool in 2008. (SWA) planned to hire 68 pilots (FC) in January, 60 in February and 60 in March. The openings will likely be filled by the pilots (FC) from the pool. (SWA)'s flight crew (FC) application system is not active.

March 2011: Southwest Airlines (SWA) reported a +8% to +9% gain in February's passenger revenue per available seat mile, while traffic rose +13% (RPM) on a +8.6% increase in capacity (ASM). (SWA)'s planes were fuller in February, with occupancy rising three percentage points to 76.9% LF.

(SWA) which expects to close its acquisition of AirTran Airways (CQT) in the first half of the year, noted that seniority integration of the two airlines will take some months, and "probably will" extend into 2012, but that it has no plans to change (CQT)'s network. "We have no plans to close any cities, we have no plans to add any cities," Kelly said, adding that (SWA) is "excited" about the 717 airplane type that (CQT) will bring to the group. "It's a good short-haul airplane," Kelly said. "The bigger question there is, What's the next-generation 717 solution? And we don't have an answer yet."

Kelly revealed that (SWA) has had six fare increases so far this year. “That’s a lot in 90 days,” he said, noting that (SWA) has, at the same time, seen very strong demand and will retain its existing plan to increase capacity +5% to +6% this year, excluding the pending acquisition of AirTran (CQT).

AirTran Holdings announced that its shareholders “overwhelmingly approved” the proposed acquisition of AirTran (CQT) by Southwest Airlines (SWA). More than >98.6% of votes cast and 77.5% of shares outstanding were in favor of the acquisition, (CQT) said.

"We are grateful for our stockholders' strong vote of confidence in this merger," said (CQT)'s Chairman, President & CEO, Bob Fornaro. "In approving the transaction, our stockholders recognized the value of bringing together (CQT) and (SWA) to create a platform for increased profitability and sustainable long-term value."

(SWA) Chairman, CEO & President, Gary Kelly called the approval, "another important and exciting step toward completing the transaction and beginning the integration of (CQT) into (SWA) to ultimately serve the flying public as one carrier."

The deal remains under review by the USA Department of Justice and is expected to close in the second quarter.

(SWA) is now providing service in and out of Newark Liberty International Airport. Chris Rupprecht, the station manager of ensuring (SWA)'s planes take off on time, is a 15-year veteran of the industry. "I've never worked at an airport this busy," he says, while climbing steep metal stairs to the jet bridge. "You're at the mercy of the air traffic control (ATC) tower. I don't expect everything to be perfect the first day, but we'll be ready."

April 2011: Southwest Airlines (SWA) earned +$5 million in the first quarter, a -54.5% decline compared to +$11 million earned in the year-ago period, but a solid showing in view of rapidly rising fuel costs and tough winter weather.

(SWA) also announced it expects to close its purchase of AirTran Airways (CQT) on May 2 at which point (SWA) Executive VP Strategy & Planning, Bob Jordan will become president of (CQT), succeeding President & CEO, Bob Fornaro who will continue in a consulting role. Jordan also will retain his responsibilities at (SWA). The deal is still awaiting clearance from the USA Department of Justice (DOJ).

"While escalating jet fuel prices and inclement weather challenged our first-quarter profitability, our people prevailed," said Chairman, President & CEO, Gary Kelly. (SWA) noted that both periods' results included special items related to fuel hedges, while first-quarter 2011 results are net of around $9 million in charges related to consulting fees in connection with the acquisition of (CQT). Excluding special items from both periods, net income for the 2011 quarter was +$20 million compared to +$24 million last year.

Operating revenues rose +18% to $3.1 billion, propelled by "record monthly load factors, combined with solid passenger revenue yields," Kelly said. Operating expenses climbed +16% to $2.99 billion, driven mainly by a +26.4% rise in fuel expense to $1.04 billion. Operating income more than doubled to $114 million from $54 million last year, but was up +7.8% to $110 million, excluding special items.

(SWA) flew 19.2 billion (RPM)s traffic in the quarter, up +11.9%, on a +8.3% rise in capacity to 24.5 billion (ASM)s. Load factor was 78.3% LF, up +2.4 points year-to-year. Yield rose +5.3% to 15.31 cents per (RPM), while the higher load factor pushed up (RASM) +8.9% to 12.66 cents. Cost per (ASM) climbed +7.1% to 12.2 cents. (CASM) ex-fuel and special items, rose +1.9% to 7.91 cents.

(SWA) ended the first quarter with 550 active 737s in the fleet, according to Senior VP Finance & CFO, Laura Wright. (SWA) recently acquired an additional 737 delivery slot from Boeing (TBC), which in addition to two previously reported leased airplanes, will bring 2011 deliveries to 20. Commenting on the outlook for the second quarter, Kelly said bookings look strong. Capacity will be up an estimated +6% and +5% to +6% for the year.

INCDT: After scrubbing hundreds of flights over the weekend, Southwest Airlines (SWA) expects to cancel +100 more as it looks for signs of metal fatigue throughout its fleet of 171 737-300 airplanes. The inspections started after a five-foot rip forced Southwest Flight 812 to make an emergency landing on Friday, April 1st. A member of the National Transportation Safety Board (NTSB) said the hole began at a joint where two sections of the plane's metal skin are riveted together. The (NTSB) said there was no indication of improper maintenance, but (SWA) grounded similar 737-300 airplanes as a precaution.

(SWA) found small, subsurface cracks on two more 737-300s, bringing the total to five that have been grounded in the aftermath of April 1st's midair fuselage skin rupture on Flight 812.

(SWA) said it has concluded inspecting 79 737-300s for fuselage skin cracks and that its schedule returned mostly to normal following three days of disruptions. The five 737-300s with cracks will remain out of service pending Boeing (TBC) guidance on repairs.

Separately, Lufthansa (DLH) said it checked three of its 63 737-300/500s during normal maintenance and found no cracks.

USA (FAA) Administrator, Randy Babbitt told the USA Congress that the (FAA) is reviewing requirements for inspecting aging airplanes following the April 1st midair fuselage skin rupture on a Southwest Airlines (SWA) 737-300. The (FAA) issued an emergency directive requiring operators of "specific" 737-300/400/500 series airplanes to conduct initial and repetitive electromagnetic inspections for fatigue damage. (SWA) found five 737-300s with cracks during inspections of 79 airplanes following the midair incident. (SWA) said that Boeing had provided repair instructions for "the removal and replacement of an 18-inch section of the lap joint." It said four of the damaged 737s would be back in service following the repair process, which is expected to take 8 to 16 hours per airplane.


AirTran Airways (CQT) says some of its 8,000 workers - - particularly those in Finance and Information Technology (IT) - - are leaving ahead of a planned merger with Southwest Airlines (SWA). (SWA) has "every intent" of offering jobs to all (CQT) employees, though some relocations may be necessary. In an effort to prevent defections, (CQT)n has set aside $10.2 million for retention bonuses.

(SWA) promoted Matt Buckley to VP Cargo & Charters.

INCDT: A Southwest Airlines (SWA) 737-700 (N799SW) slid off runway 13C while landing at Chicago Midway Airport, marking the second time a (SWA) 737 has had a runway excursion at the airport.

Flight 1919 was en route from Denver. There were no injuries among the 134 passengers, five lap children and five crew members on board, (SWA) said, noting that the passenger count was still preliminary. Passengers were deplaned using air stairs.

According to the National Transportation Safety Board (NTSB), the incident occurred at around 1:33 pm local time. The weather at the time of the incident was reported as rainy with southerly winds.

(SWA) said it would refund the round trip fares and issue each passenger two complimentary round trip passes.

In 2005, a (SWA) 737-700 overshot runway 31C in heavy snow, sliding into an intersection and resulting in the death of a passenger in a car that was struck by the airline.

May 2011: Southwest Airlines (SWA) completed its acquisition of AirTran Airways (CQT), a move that combines the world's largest Low Cost Carrier (LCC) with the third largest (LCC) in North America and further accelerates the USA industry's consolidation. The deal gained USA Department of Justice approval at the end of last month.

"The acquisition of (CQT) represents a unique opportunity to extend our network into key markets we don't yet serve, such as Atlanta and [Washington National]," (SWA) Chairman, CEO & President, Gary Kelly said in a statement. "It gives us the opportunity to serve more than >100 million customers annually from more than >100 different airports in the USA and near-international destinations, providing customers more low-fare destinations, as we diversify and expand the well-known 'Southwest Effect' to hundreds of additional low-fare itineraries for the traveling public."

(SWA) valued the deal at around $1 billion in aggregate (below the $1.4 billion originally estimated), or approximately $7.57 per share of (CQT) common stock. Each (CQT) shareholder will receive $3.75 in cash, with (SWA)'s cash outlay totaling $518 million, and 0.321 shares of (SWA) common stock, or 44 million shares in total. Including (SWA)'s assumption of (CQT)'s debt, the transaction is valued at $3.2 billion. (SWA) estimates net annual synergies from the acquisition of (CQT) will exceed $400 million by 2013. One-time costs associated with the acquisition and integration are pegged at $500 million by (SWA).

The two carriers generated $14.7 billion in combined revenue in 2010. As of March 31, (SWA)/(CQT)'s combined unrestricted cash and short-term investments stood at approximately $5 billion. (SWA) said its funding for the transaction came from cash on hand. "In addition, (SWA) has a fully available, unsecured revolving credit facility of $800 million," it noted.

Kelly said, "(SWA)'s profitability and financial strength, along with the USA's largest low fare network, puts (CQT) crew members in a position to be part of a growing company again, once (CQT) is integrated into (SWA)."

(SWA) Executive VP Strategy & Planning, Bob Jordan was named (CQT) President, effective immediately. (CQT) Chairman, President & CEO, Bob Fornaro "will move to a new key role today as a full-time consultant for the integration of the two airlines, working closely with Kelly and Jordan to ensure a smooth transition," (SWA) said in a statement. It noted that (SWA)'s headquarters will remain in Dallas, "with plans for (CQT)'s operations and presence in both Orlando and Atlanta still under review."

A joint "Integration Board" that will oversee the (CQT)/(SWA)'s combination is comprised of Jordan, Kelly, (SWA) Executive VP & COO, Mike Van de Ven, (CQT) Senior VP Human Resources (HR) & Administration, Loral Blinde, and (SWA) Senior VP Administration & Chief People Officer, Jeff Lamb. "Until a single operating certificate is secured, (CQT) operational departments will continue operating under the (CQT) air operating certificate (AOC) with the full authority of its operating teams led by Klaus Goersch, (CQT)'s Executive VP Operations & Customer Service," (SWA) stated. "Goersch will report directly to Jordan, and will work closely with Mike Van de Ven. The remainder of the leadership structure will be communicated at a future date."

(SWA) aims to receive a single air operating certificate (AOC) from the (FAA) by the 2012 first quarter. It said it "estimates it will take several years to fully transition (CQT) into (SWA) to become one airline."

(SWA) Senior VP & (CFO), Laura Wright said that specific revenue initiatives undertaken by (SWA) helped to boost sales by +$2.2 billion between 2007 and 2010, exceeding (SWA)'s target of growing top-line revenue by +$1.5 billion. Wright noted that the revenue growth was achieved "on capacity that was slightly down" from 2007."

Among successful initiatives she identified is (SWA)'s "Business Select" program that gives customers in the highest fare buckets priority in boarding the airplane as well as other perks. Incremental revenues from "Business Select" in the 2011 first quarter were $24 million, up from $21 million in the year-ago period with passengers up +12%, she said.

Another success is the "Early Bird" product that allows customers to pay $10 to get an early boarding number. "We are well ahead of what we initially thought we would achieve with this product," she said. (SWA) had "an annual goal of $100 million in incremental revenue and in the first quarter we had $34 million, which was double what we earned the previous year." The service is being used by 16% to 17% of customers.

Additionally, the easing of the Wright Amendment, which gave (SWA) the ability to begin offering additional connections out of Dallas Love Field on a one-stop or connecting basis, contributed +$59 million in incremental revenues in the first quarter, up from $47 million a year ago, she said.

Southwest Airlines (SWA) intends to strengthen its presence in Atlanta's Hartsfield-Jackson Atlanta International Airport and expand East-West coast routes with its acquisition of AirTran Holdings, new AirTran (CQT) President, Bob Jordan said. "Our intent is to grow Atlanta, get more passengers and more dots on the map," he explained.

(STG) Aerospace has received its largest single order for its SafTGlo photoluminescent floorpath marking system in a deal to retrofit the (SWA) fleet with SafTGlo ColorMatch. The system will be installed over the next few years, during (SWA)'s normal maintenance schedule.

June 2011: 40 year anniversary!

Southwest Airlines (SWA) launched daily, Jacksonville - Denver service. (SWA) will launch Milwaukee service to St Louis (twice-daily) and Denver (daily) on September 6.

The "Associated Press" reported that the legendary Herb Kelleher, the Founder of Southwest Airlines (SWA) had emerged from retirement to speak about the past, present, and the future. SEE THE REPORT BELOW IN MANAGEMENT UNDER HERB KELLEHER. ALSO SEE "SWA-HERB KELLEHER-2011-07-A/B."


July 2011: Southwest Airlines (SWA), the Southwest Airlines Pilots Association (SWAPA) union representing (SWA) pilots (FC) and the Air Line Pilots Association (ALPA) representing AirTran Airways (CQT)'s flight crew (FC) said that an "agreement in principle" was reached to integrate the two pilot (FC) groups' seniority lists.

"The unions and company negotiating teams have accomplished a task that is rare in this industry, developing an integrated seniority list and transition plan for our pilots (FC) outside of arbitration," (SWA) Executive VP & COO, Mike Van de Ven stated. (SWA) had already reached agreement with (SWAPA) on "a procedural framework" for eventually integrating the two pilot (FC) work groups.

The pilot (FC) seniority list integration is "subject to the respective unions' board approval and membership ratification," (SWA) noted.

(SWA) completed its acquisition of AirTran (CQT) in May, combining the world's largest Low Cost Carrier (LCC) with the third largest (LCC) in North America. The two carriers generated $14.7 billion in combined revenue in 2010. As of March 31, (SWA)/(CQT)'s combined unrestricted cash and short-term investments stood at approximately $5 billion. (SWA)/(CQT) aims to receive a single air operating certificate (AOC) from the (FAA) by the 2012 first quarter. It has said "it will take several years to fully transition (CQT) into (SWA) to become one airline."

August 2011: Southwest Airlines (SWA) will launch daily, Nashville - Fort Myers, Denver - Providence, Fort Lauderdale - Manchester, and Fort Lauderdale - Milwaukee service on January 7. It will also launch daily, Long Island - Fort Myers on February 12.

September 2011: Southwest Airlines (SWA) appointed J Veronica Biggins to its board of directors. Biggins was a member of the board of directors for AirTran (CQT) Holdings, which was acquired by (SWA) in a deal completed in May.

(SWA) announced several executive changes. Current Executive VP Strategy & Planning, Bob Jordan has been promoted to Executive VP & CCO and will maintain his role as President of AirTran Airways (CQT). Jeff Lamb, currently Senior VP Administration & Chief People Officer has been promoted to Executive VP & Chief People & Administrative Officer. Previously VP Customer Support & Services, Ellen Torbert has been promoted to VP Diversity & Inclusion.

(SWA) announced that (SWA) and AirTran (CQT) pilots (FC) have reached a tentative agreement on seniority. (SWA) finalized closing of the acquisition of AirTran Holdings on May 2. The two groups reached an "agreement in principle" in July.

(SWA) pilots (FC) belong to the Southwest Airlines Pilots' Association (SWAPA); AirTran (CQT) pilots are members of the Air Line Pilots Association (ALPA). Members of each pilot union will review the proposed agreement and put it to a ratification vote.

(SWA) said that reaching a negotiated agreement with the two pilot (FC) groups “avoids the arbitration process and gives both groups ownership of the combined list.” Each pilot (FC) group will now review the tentative agreement before putting it up for a ratification vote. (SWAPA) represents more than >6,000 (SWA) pilots (FC) and (ALPA) represents close to 1,600 AirTran (CQT) pilots (FC).

(SWA) will launch daily, Atlanta service to Phoenix and Las Vegas on March 10.

October 2011: Southwest Airlines (SWA) reported the combined September traffic results for (SWA) and its subsidiary, AirTran (CQT), which indicates the company’s revenue passenger miles from 2010 to 2011 increased by +6.4%, a combined 7.5 billion.

Available seat miles (ASMs) increased +3.2% to 10.2 billion from the September 2011 combined level of 9.9 billion. The load factor for September 2011 was 77.8%, compared to the combined load factor of 75.5% LF in 2010.

For the first nine months of 2011, the company flew 78.7 billion combined revenue flights, compared to 72.9 billion combined revenue flights flown for the same period in 2010, an increase of 8.0%.

Owing to $227 million in unrealized, non-cash fuel hedging mark-downs, (SWA) incurred a third-quarter net loss of -$140 million, reversed from a +$205 million profit in the year-ago period. But (SWA) touted a strong revenue performance and pointed out that, excluding special items, third-quarter net income was +$122 million.

That was still down -37.4% from +$195 million in net income on a similar basis in the 2010 third quarter. (SWA) noted that fuel market prices have rebounded since the September 30 end of the quarter "and our future fuel hedge portfolio has gained back over $300 million in fair value."

Chairman, President & CEO, Gary Kelly told analysts and reporters that (SWA)'s "business is quite good" and "the revenue environment continues to be strong and stable." He reiterated that (SWA) and AirTran Airways (CQT), which (SWA) acquired in May, plan to begin integrating next year, contingent on the USA (FAA) issuing a single air operating certificate (AOC) and resolving labor issues.

"The AirTran (CQT) business has been very solid," Kelly said, pointing out that (CQT) performed better than (SWA) in the third quarter on a unit revenue basis.

He said fuel prices are the biggest drag on earnings. "The challenges to earnings are cost-related, especially fuel costs. Were it not for that, our earnings would have been outstanding," Kelly explained. "We saw no weakening in overall demand [in the third quarter]. And perhaps more importantly, we saw no softening in business travel."

Third-quarter revenue (including both (SWA) and (CQT)) totaled $4.31 billion, up +11.7% from pro forma (SWA)/(CQT) revenue in the prior-year period. Expenses jumped +18.5% to $4.09 billion, including a +40.1% surge in fuel costs to $1.59 billion. Operating income was +$225 million, down -45.5% from pro forma operating income of +$413 million in the 2010 third quarter.

(SWA) will deploy a system from Varolii Corporation, of Seattle, to streamline its process for matching pilot (FC) availability with flight needs through an interaction platform sending text messages to pilots (FC) about flight scheduling opportunities.

Using Varolii’s Softward-as-a-Service (SaaS) system, (SWA)’s Open Time Alerts (OTA) helps (SWA) quickly staff unassigned flights, ensure on-time flight operations and reduce costs from a less efficient, manual process, according to Varolii. In cases of illness or other circumstances that prevent a pilot (FC) from attending their scheduled flights, airlines are left with "open time," or an uncovered shift, that must quickly be reassigned.

With the Varolii Interact platform, (SWA)'s (OTA) solution provides pilots (SMS) with an opt-in program that delivers Short Message Service (SMS) text messages directly to their mobile devices to alert them of open flights and give them the real-time opportunity to opt-in to staff specific flights. Each message includes detailed flight information, including the length of the assignment, overnight accommodations, if necessary, flight time and more.

(SWA) has reportedly warned AirTran Airways (CQT)'s 1,600 pilots (FC) that voting against ratification of a tentative agreement to combine the merging airlines' pilot (FC) seniority lists could force a reevaluation of (SWA)'s merger strategy.

The "Atlanta Journal-Constitution" reported that (SWA) issued the warning to Air Line Pilots Association (ALPA) leaders representing (CQT) pilots (FC), and the pilots (FC) have in turn been briefed. Voting by pilots (FC) from both airlines on the tentative accord reached last month is slated to continue through early November.

According to the newspaper, (SWA) told (ALPA) that a negative vote on pilot (FC) seniority integration would force (SWA) to turn to a "Plan B" for merging with (CQT) that could see (CQT) remaining as a separately-operated subsidiary. Such a scenario could possibly give (CQT) pilots (FC) less job security.

While not commenting specifically on the warning to the union, (SWA) told "The Atlanta Journal-Constitution" it would have to "reset" its integration plans if (CQT) pilots (FC) don't ratify the seniority list agreement.

An April 2011 agreement on "a procedural framework" for integration of the seniority lists, reached before (SWA) closed its acquisition of (CQT), called for "the matter [to] be sent to arbitration" if no resolution could be negotiated and ratified. (SWA) could still move in that direction if the seniority list integration deal is rejected by (CQT) pilots (FC).

737-7H4 (36967, N867WN), ex-(N1796B).

November 2011: Southwest Airlines (SWA) will launch daily, Houston Hobby service to Raleigh, Kansas City and Seattle as well as daily, Chicago Midway - Oklahoma City service on June 3.

(SWA) announced its pilots (FC), represented by the Southwest Airlines Pilots’ Association (SWAPA) and Air Tran (CQT) pilots (FC), represented by the Air Line pilots Association (ALPA), have ratified a seniority integration agreement. The agreement combines the merging airlines' pilot (FC) seniority lists.

Last month, (SWA) reportedly warned (CQT)'s 1,600 pilots (FC) that voting against ratification of a tentative agreement to combine the merging airlines' pilot seniority lists could force a reevaluation of (SWA)'s merger strategy.

"The ratification of this seniority integration agreement is a significant milestone in the integration of our two great airlines, and wouldn't have been possible without the leadership of our company's negotiating committee bringing all parties together," said (SWA) Executive VP & CEO, Mike Van de Ven.

According to (SWA), there is still work to be done to integrate the more than >6,000 (SWA) pilots (FC) and 1,700 (CQT) pilots (FC). “Integration teams made up of pilots (FC) from both groups have already been formed and are moving forward in an effort to make the combining of the two groups as seamless as possible,” (SWA) said.

December 2011: Southwest Airlines (SWA) will operate daily seasonal, Fort Myers service to Hartford and Providence, and daily, Baltimore - Tucson service February 12 - April 9.

(SWA) announced it will deploy the Flightcom wireless aviation ground support communications system at each of its gates at all 73 of its destinations across the USA. It expects deployment to be complete in the first quarter of 2012.

“We are the first major airline to widely deploy this type of wireless system, and we expect it will strengthen our team communications and operational efficiency,” (SWA) Senior Manager Safety, Standards & Regulatory Compliance, Ground Ops, Marc Stank said.

The hands-free wireless communications system, which continuously connects one or more wing walkers with the tractor operator during airplane movement, will increase the safety and efficiency of ground push-back operations, (SWA) said. Rather than hand signals, the system permits the tractor operator to wirelessly communicate with the airplane pilot (FC) through a portable system, which also allows all team members to hear the pilot (FC).

“We are extremely pleased to work with (SWA) on this initiative to increase safety and efficiency,” Flightcom Executive VP, Reed Stager said. “We have worked extensively with (SWA) to incorporate their ramp operations requirements in the development of our latest wireless ground support solutions, and this deployment validates the advantages of our systems and our total customer support.”

Southwest Airlines (SWA) ordered 208 new 737 airplanes with a value of nearly $19 billion. (SWA) placed a firm order for 150 of the 737 Max, a new version of Boeing (TBC)'s most popular airplane with more fuel-efficient (CFM) International (Leap-1B) engines. The (CFMI) order value is $4.7 billion at list prices. (SWA) also ordered 58 Next-Generation 737s.

This order makes (SWA) the 737 MAX launch customer. The 737 MAX first delivery will be in 2017.

Boeing (TBC) said this represented its largest-ever firm order (both in terms of units and value) and provided a major boost to the 737 Max program. Boeing Commercial Airplanes President & (CEO), Jim Albaugh said that (SWA) Executive VP & (COO), Mike Van de Ven negotiated long and hard and he got (SWA) a very good deal. Mike Van de Ven said the 737 Max is "tailor-made" for (SWA)'s network, and insisted (SWA) didn't choose Boeing simply for leagy reasons. (SWA) is the world's largest 737 operator with a fleet of 559 and was the launch customer for the 737-300, the 737-500 and the 737-700 versions. He continued "We did do comparisons between the 737 Max and the A320neo" and emphasized that the 737 Max came out as a clear winner for (SWA)'s needs. He added "Overall, we expect the superior economics of our fleet modernization plan to meet our 15% pretax return requirement and provide substantial flexibility to manage our growth in a variety of economic conditions over the next decade."

(SWA) said the 737 Max will reduce fuel burn and carbon dioxide emissions "by an additional 10% to 11% over today's most fuel efficient single aisle airplane." (SWA) claimed the 737 Max will have a "7% advantage over its competition."

(SWA) has bought more 737s than any other airline. (TBC) says (SWA), which flies more USA passengers than any other carrier, is the first customer to complete an order for the 737 Max. Including this order, Boeing (TBC) now has orders or commitments from 13 customers for more than >948 of the new model.

Last month, Lion Air (MLI) committed to pay $21.7 billion for 230 737s. (MLI) also has options for 150 more planes, valued at $14 billion, bringing the deal's total potential value to $35 billion. But the Lion Air (MLI) deal is not a certainty; it still has to complete the order. In other words, until now, all customer agreements have only been regarded as "commitments" rather than "firm orders." Also in November, Emirates Airline (EAD) ordered $18 billion worth of 777s.

Both deals came shortly after Boeing (TBC) finally began delivering its two newest planes, the next-generation 787 and the latest version of the iconic 747.

Boeing (TBC) produces about one 737 every day in Renton, Washington. It is raising that to 42 per month in 2014. Boeing (TBC) shares rose 66 cents to $71.56 in premarket trading.


January 2012: Southwest Airlines (SWA) reported 2011 net income of +$178 million, down -61.2% from a net profit of +$459 million in 2010. (SWA) attributed the profit decline to "significantly higher fuel prices," but noted that its revenue performance was strong and 2011 marked its 39th year of profitability in a row.

"We had an outstanding revenue performance," Chairman, President & (CEO), Gary Kelly said. "Our fourth-quarter operating revenues were a record $4.1 billion. Fourth-quarter passenger revenues were strong, driven by record yields and continued high load factors. Based on current traffic and booking trends, we expect another strong passenger revenue performance in first quarter of 2012."

(SWA) posted a +12.7% year-over-year revenue increase in 2011 (on a combined pro forma basis that includes AirTran Airways (CQT)'s 2010 results) to $16.6 billion. Expenses heightened +17.3% to $15.93 billion driven by a +35% leap in fuel costs to $6.01 billion. Pro forma 2011 operating income was +$662 million, down -41.9%.

Kelly said that (SWA) had "very strong revenue growth, but not quite enough to completely offset" high fuel costs and avoid a profit dip last year. Traffic in 2011 increased +2.4% year-over-year on a pro forma basis to 110.15 billion (RPM)s on a +3.3% rise in capacity to 135.27 billion (ASM)s, producing a load factor of 80.8% LF, up +1.1 points. Passenger yield heightened +6.4% to 14.97 cents. "We have no plans to grow the fleet in 2012," Kelly said. "Our network plans in that respect are conservative and are aimed at boosting unit revenue." (SWA)/(CQT) combined capacity in 2012 will be flat compared to 2011, he said. (SWA) will take delivery of its first two 737-800s in March. It will receive 33 737-800s by the end of this year, but will also retire 40 older 737s in 2012.

(SWA) acquired AirTran (CQT) last year. Kelly indicated the (FAA) is likely to grant the carriers a single air operating certificate (AOC) in March. "At that point, the visible transformation of AirTran (CQT) can begin," he said, noting there will be "big schedule changes occurring within" (CQT)'s network throughout the year. The airlines have already co-located facilities at 22 airports and consolidated their maintenance operations in Orlando and Baltimore.

(SWA) will operate daily seasonal Fort Myers, Florida service to Hartford, Connecticut and Providence, Rhode Island, and daily, Baltimore - Tucson service on February 12 - April 9. (SWA) will launch daily, Atlanta - Los Angeles service on June 10.

(SWA) said it will continue to operate to 22 airports now served by AirTran Airways (CQT), while over time converting flights to/from those destinations to the (SWA) brand. However, it will cease services to six airports in (CQT)'s network after August 12.

(SWA), said that it expects the (FAA) to grant the carriers a single air operating certificate (AOC) by the end of March. Effective August 12, (CQT) will cease serving Allentown, Pennsylvania (ABE), Lexington, Kentucky (LEX), Harrisburg, Pennsylvania (MDT), Sarasota, Florida (SRQ), Huntsville, Alaba (HSV), and White Plains, New York (HPN).

All told (taking into account cities jointly served by the carriers), (SWA) plans to fly to 53 of the 69 airports to which (CQT) operated when it was acquired by (SWA) in May 2011.

The (CQT) airports that will eventually join (SWA)'s network include Washington National (DCA), Memphis (MEM), Montego Bay (MBJ), Aruba (AUA), San Juan, Puerto Rico (SJU), Bermuda (BDA), Flint, Michigan (FNT), Rochester, New York (ROC), Pensacola, Florida (PNS), Charlotte (CLT), Dayton, Ohio (DAY), Richmond, Virginia (RIC), Key West, Florida (EYW), Akron-Canton, Ohio (CAK), Wichita, Kansas (ICT), Des Moines, Iowa (DSM), Branson, Missouri (BKG), Portland, Maine (PWM), Grand Rapids, Michigan (GRR), Punta Cana, Dominican Republic (PUJ), Cancun (CUN) and Nassau, Bahamas (NAS). "(CQT) service and employees at these airports are planned to convert to (SWA) gradually over the course of (CQT)'s integration into (SWA)."

Meanwhile, (CQT) will begin serving Mexico City (MEX) May 24 and San Jose Cabo (SJD) June 3; those destinations will also convert to (SWA) eventually.

(SWA) said Seattle-Tacoma (SEA) will become the first airport now served by both carriers to convert to full SWA services; from August 12, 41 daily flights branded as (SWA) will fly to/from (SEA). The transition there won't be overly difficult because (CQT) currently serves the market with one daily flight from (SEA) to Milwaukee (MKE) and seasonal service to both Atlanta (ATL) and Baltimore (BWI).

In addition, both carriers will add new flights from August 12. (SWA) will fly thrice daily from (ATL) to both Norfolk, Virginia (ORF) and Louisville (SDF), as well as twice daily between New York LaGuardia (LGA) and St Louis (STL), and twice daily between (STL) and San Antonio (SAT). (CQT) will launch two daily flights between (CAK) and Chicago Midway (MDW) from August 12.

(SWA)'s fleet will actually shrink this year as it takes delivery of its first 33 737-800s but retires 40 older 737s. Full-year 2012 capacity for (SWA) and (CQT) will be flat year-over-year because the incoming airplanes will be larger than the retiring planes (total trips will be down 3 to 4%).

Kelly conceded that the company is following a “conservative” fleet strategy that eschews growth in favor of boosting unit revenue. But he described the current economy as “a very good environment. The macro-[economic] environment feels better now [compared to mid-year 2011], much more stable, much more consistent.”

Nevertheless, growing capacity continues to be verboten for (SWA) and most other USA airlines. If you can’t grow capacity following a year in which (PRASM) increased +8.2%, overall revenue lifted +12.7% and your cross-town rival (and competitor on numerous routes) is occupied with Chapter 11 reorganization, when can you? Kelly’s response is that high fuel costs (up +35% year-over-year in 2011) have driven up expenses and prevented (SWA) from reaching its profit targets. Absent hitting and exceeding profit targets, (SWA) doesn’t grow capacity. Period.

For much of its history, of course, (SWA) did hit profit targets and grew capacity at a fairly steady pace. Not so in recent years (though, of course, acquiring (CQT) does increase the company’s size, but neither (SWA) nor (CQT) is growing capacity (ASM)s).

(SWA)’s discipline has always been one of its hallmarks; even if profits were down last year, earning positive net income for 39 straight years in the USA air transport market is quite an achievement, one that likely wouldn’t have been accomplished without sticking religiously to the credo that revenue must outpace costs, a simple business philosophy that has often been ignored by USA airlines.

The rest of the USA industry, however, appears to have also finally accepted that basic supply/demand operating strategy over the last couple of years. (SWA)’s opening salvo in USA carriers’ 2011 earnings reporting season likely previews a trend: USA airlines are making money, the economic environment is showing noticeable signs of improvement, BUT the industry won’t actually grow again until it is near-certain that the growth will pay off on the balance sheet.

Cabin attendants (CA) from (SWA), represented by the Transport Workers Union (TWU), and AirTran Airways (CQT), represented by the Association of Flight Attendants (AFA) voted to ratify their seniority integration agreement. The tentative agreement, reached late last year, integrates the two groups' seniority lists.

(SWA) finalized closing of the acquisition of AirTran Holdings, on May 2, 2011.

The (TWU) represents approximately 9,800 (SWA) cabin attendants (CA), and the (AFA) represents close to 2,400 (CQT) cabin attendants (CA).

(SWA) and (CQT) pilots (FC) completed the seniority integration negotiation process late last year. Mechanics (MT) from both airlines are reviewing their tentative seniority integration agreement and will vote in the next several weeks.

(SWA) plans to hire around 140 Flight Crew (FC) pilots for first quarter classes for 2012. Recruitment is conducting interviews in January. (SWA) and (CQT) pilots (FC) have agreed to a seniority list integration.

February 2012: Southwest Airlines (SWA) and AirTran Airways (CQT) will launch non-stop flights on five new routes from 12 August. (SWA) will begin thrice daily flights between Atlanta and Norfolk and thrice daily flights between Atlanta and Louisville. It will also launch twice daily flights between New York LaGuardia and St Louis and twice daily flights between San Antonio and St Louis. (SWA) will launch daily, Detroit - Las Vegas service on September 30.

In addition, (CQT) will start twice daily flights between Akron - Canton, Ohio, and Chicago Midway. (CQT) will be the only carrier operating between Akron - Canton and Chicago Midway. (CQT) will launch Denver - Cancun service April 16 - September 28, as well as Austin - Cancun May 25 - September 28. It will also launch Houston - San Antonio May 24 and Houston - Austin May 25.

(SWA) launched five new routes on 12 February, in addition to taking over frequencies on routes already operated by its subsidiary, AirTran (CQT) on the same day. From the (CQT) base in Atlanta (ATL), (SWA) now operates the new twice-daily route to Austin (AUS) in competition with Delta (DAL)’s 39 flights a week. From Georgia’s capital (ATL), it also serves Baltimore/Washington (BWI) thrice-daily in competition with (DAL)’s 68 and subsidiary, (CQT)’s 26 weekly flights, Chicago Midway (DEN) also thrice-daily, competing with the same two airlines that operate 46 and 23 weekly flights, respectively, and Houston Hobby (HOU) twice-daily, which faces (DAL)’s 49 and (CQT)’s 20 flights a week. One further (ATL) route was launched in competition with an entire four other airlines; Denver (DEN) is served twice-daily and competes with (DAL)’s 50, United (UAL)’s 18, Frontier (FRO)’s 16 and (CQT)’s 14 flights a week. From Baltimore/Washington, (SWA) now also flies daily to Tucson (TUC). Three of (SWA)’s new routes were launched out of (CQT)’s Fort Myers (RSW) base; each daily to colder climates in Hartford (BDL), Providence, Rhide Island (PVD), and Long Island/Islip (ISP). All of the routes are operated with (SWA)’s 737-700s.

(SWA) will compete against Delta Air Lines (DAL) on Atlanta - Norfolk, Atlanta - Louisville and New York LaGuardia - St Louis. Vision Airlines (VIS) also operates between Atlanta and Louisville, and American Airlines (AAL) flies between New York LaGuardia and St Louis.

(SWA) currently operates one-stop service on New York LaGuardia - St Louis and San Antonio - St Louis. No airline currently flies non-stop between San Antonio and St Louis.

(SWA) smooth path to integrating with AirTran Airways (CQT), which it acquired last year, hit some turbulence with its latest rejection by (SWA)'s 1,600 mechanics (MT) of a seniority integration agreement.

The Aircraft Mechanics Fraternal Association (AMFA) Local 11 had reached an accord with (SWA) and (CQT)'s 400 mechanics (MT), but the members have voted to reject it, taking a different track from flight attendants (CA) and pilots (FC) who have approved integration pacts.

"Our goal continues to be the speedy resolution of seniority integration," (SWA) VP Maintenance Operations, Jim Sokol said. (SWA) said the next step was to file for arbitration, but added that it remained open to working toward a negotiated solution.

March 2012: The (FAA) has granted Southwest Airlines (SWA) and AirTran Airways (CQT) a single air operating certificate (AOC), formally combining the world's largest low-cost carrier (LCC) with the third largest (LCC) in North America.

Although (CQT) and (SWA) are now both operating under a single (AOC), the two airlines have not yet been able to merge their reservations systems. Therefore, as far as its customers are concerned, (SWA) launched two new daily flights from Atlanta (ATL) to Las Vegas (LAS) and Phoenix (PHX). (CQT) will also continue to serve both routes as well. Further competition is provided by Delta (DAL), which offers multiple daily flights to both Las Vegas and Phoenix, and US Airways (AMW)/(USA) which operates up to four flights per day on the Phoenix route.

(SWA) acquired (CQT) last year in a deal valued at around $1 billion in aggregate (below the $1.4 billion originally estimated), or approximately $7.57 per share of (CQT) common stock. Including (SWA)'s assumption of (CQT)'s debt, the transaction was valued at $3.2 billion. (SWA) estimates net annual synergies will exceed >$400 million by 2013.

"We cannot overstate the significance of having received our single (AOC) (it is a monumental step in the regulatory process) and achieving it enables us to move forward with the integration of the two airlines into a single carrier," (SWA) (COO), Mike Van de Ven said.

(SWA)/(CQT) cautioned that "the transition to a single ticketing system is a large and complex process that will take several years to complete." Van de Ven said that "most employees and customers will see little or no immediate difference in the two airlines' flight operations." (SWA) has ruled out capacity growth this year.

Facing its first quarterly loss in three years, (SWA) is developing a new cost reduction strategy aimed at recapturing its historical advantage over a set of rivals that have reduced costs under bankruptcy protection over the last decade. "We're coming up with the tools right now," Bob Montgomery, VP Airport Affairs said.

The details of the strategy have not yet been revealed outside (SWA). "We haven't made those things public yet," Montgomery says. But it is clear a key element of the strategy if focused on compensating somehow for (SWA)'s rising labor costs in comparison to legacy carriers. Montgomery noted how (SWA)'s culture was based on having the lowest cost structure, especially on labor rates.

"Due to all the bankruptcies of all the other carriers, we got what we call the 'Aunt Jemima' treatment," Montgomery explains, invoking a USA brand name for pancake syrup. "You've been flipped. It's a constant thing we're talking to our unions about. It's antithetical to our culture to have the highest cost. We don't want to disrupt that culture. [But] we're going to have to grapple with the cost."

(SWA) warned earlier this month that it would post a first quarter loss. The carrier's management blamed the loss on a sharp spike in jet fuel prices during the first two months of the year. "The real story is fuel. Our fuel bill was +$250 million more than the first quarter of last year," Montgomery says. "Last year we made +$20 million in the first quarter. It's kind of hard to sustain your profitability when fuel cost are up by +$250 million. We have had some gains in revenue, but it has not been sufficient to stave off the fuel costs."

Montgomery's remarks show that (SWA) has acted upon a warning issued to employees in December by (CEO), Gary Kelly. "The sloth-like industry you remember competing against is now officially dead and buried," Kelly wrote. "Now, the enemy is our own cost creep, our own legacy-like productivity, and our own inefficiencies. Fighting this cost enemy is an imperative to remain the Maverick. We will fight, and we will remain the Maverick."

(SWA) is currently negotiating contracts with three labor groups (appearance technicians, dispatchers, and ramp, operations and provisioning and freight agents). Three more contracts with pilots (FC), mechanics (MT) and customer support and service representative and agents become amendable later this year.

"No doubt our labor cost structure will be a central theme throughout the year." However, Montgomery's references to specific tools applies to broader issues than labor costs, (SWA) said.

"Battling costs is an everyday occurrence in the airline industry, whether it's airport costs, fuel, labor, vendor contracts, etc.," (SWA) said.

(SWA) filed an application with the USA Department of Transportation (DOT) for slots at Washington National (DCA), attempting to take advantage of the recently passed (FAA) reauthorization legislation's approval of new flights beyond (DCA)'s 1,250 mile perimeter.

(SWA), which has long had a dominant presence at Baltimore/Washington (BWI) but no presence at (DCA), said it would operate daily flights from (DCA) to Austin Bergstrom (AUS) and one-stop, same airplane service from (DCA) to San Diego (SAN) via (AUS). (SWA) did gain access to (DCA) through its acquisition of AirTran Airways (CQT) and has stated its plans to convert (CQT) operations at the airport to (SWA)-branded flying. (SWA) also operates out of Washington Dulles (IAD).

(SWA) said it would operate the (DCA) - (AUS) - (SAN) flights with a 175-seat 737-800. (SWA) expects a decision from the (DOT) in May, and said it is ready to start the service this summer.

(SWA) has announced plans to turn Houston William P Hobby (HOU) into one of its gateways for international services to the Caribbean, Mexico and other destinations in Central America. The airport currently does not have an immigration and customs facility and is only used for domestic services within the United States. (SWA)'s talks with the airport have already triggered public criticism by competitor United Airlines (UAL) which states that Houston George Bush Intercontinental (IAH), its hub in the city, had been intentionally designed as Houston's only international airport. (SWA) is reportedly in talks with Delta Air Lines (DAL) about a possible deal to transfer the 717-200 fleet of subsidiary it has inherited from the acquisition of AirTran Airways (CQT) to (DAL).

(SWA) seems to have emerged as the winner of a battle over traffic rights for scheduled services between Chicago and Cancún International airport (CUN) that have become available as a result of the suspension of all services by Apple Vacations subsidiary USA3000 Airlines (USX) earlier this year. (SWA) subsidiary, AirTran Airways (CQT) and Frontier Airlines (FRO) had both applied for the traffic rights for the route where only three USA carriers are allowed to operate according to the bilateral agreement between the USA and Mexico. The route has been awarded to AirTran (CQT) now by the Department of Transportation. (FRO) had planned to operate on the route for Apple Vacations as it does now on many other routes between the USA and Mexico but to sell some seats directly to the public requiring traffic rights to do so.

(SWA) took delivery of its first 737-800; it plans to receive 33 737-800s by the end of the year. The airplane, which took its first flight on February 23, will begin service for (SWA) April 11 on Flight #1717 from Chicago Midway to Fort Lauderdale, Florida.

“Our 737-800 adventure starts small, with just two airplanes overnighting at Chicago Midway and Baltimore/Washington and flying to and from Florida. The 737-800 fleet will grow gradually.” (SWA) will take delivery of two more on April 22, two more on May 13, “and by the August schedule, we’ll have more than >20 737-800s flying longer-haul routes like between Chicago Midway and the West Coast, between Baltimore/Washington and California, and between Florida and Las Vegas.”

Prior to entering service, the first 737-800 will go to Paine Field in Everett, Washington for “make ready” and installation of its Wi-Fi hotspot. It will then visit Dallas, Texas where it will undergo standard tests and evaluations performed by the (FAA) before entering revenue service.

SEE ATTACHED - "SWA-2012-04 - 737-800 INTRO."

April 2012: Southwest Airlines (SWA), which had warned of a first-quarter loss, posted net income of +$98 million for the period, improved over a +$5 million net profit in the 2011 March quarter.

However, (SWA) conceded that the net result benefited from $116 million in favorable special items and that it incurred a -$18 million net loss for the three months excluding special items, reversed from +$20 million in net income on a similar basis in the prior-year period. (SWA) Senior VP Finance & (CFO), Laura Wright last month had projected a first-quarter deficit for (SWA).

On a separate front, (SWA) and Amadeus Information Technology (IT) Group announced a contract for Amadeus’ Altea reservations solution, which would support international service. “Now that the contract is finalized, the two companies will work closely together to implement Amadeus' technology to allow Southwest (SWA) to operate international flights in 2014,” the companies said in a joint statement.

Speaking to reporters and analysts, Chairman, President & (CEO), Gary Kelly said (SWA) sees a “significant opportunity to operate international service out of Houston Hobby” (HOU). He added that (SWA)is going through the regulatory process to begin international flights from (HOU) starting in 2015, and is also in close contact with (HOU) and the Houston city government about the plans.

The contract also allows (SWA) to convert its domestic business to Amadeus in the future. (SWA) is now operating limited international flights owing to its acquisition of AirTran Airways (CQT), but the contract with Amadeus allows for more large-scale, (SWA)-branded international flying.

On a combined, pro-forma basis (including AirTran (CQT)’s results), (SWA) generated +$3.99 billion in first-quarter revenue, up +5.9% year-over-year. Expenses increased +7.7% to $3.97 billion, including a +16.7% rise in fuel costs to $1.51 billion. Operating income was +$22 million, down -74.1% from pro-forma operating income of +$85 million in the 2011 first quarter.

“The decline in operating income was driven by a +$478 million increase in our first quarter economic fuel costs compared to first quarter last year,” Kelly said. “Energy price increases continue to pressure costs.”

(SWA) will launch 2X-daily, Chicago Midway - Akron Canton service and daily, Denver - Dayton service on August 12. It will also launch 2X-weekly, Des Moines - Chicago Midway service on September 30.

(SWA) mechanics (MT), represented by the Aircraft Mechanics Fraternal Association and the AirTran Airways (CQT) mechanics (MT), represented by the International Brotherhood of Teamsters, met in Dallas to continue negotiating a seniority integration agreement. An integration agreement by the two groups was voted down in February.

“We’re really close, we’ve agreed on a road map on how to merge the seniority list. I’m optimistic within the next few weeks we’ll have a resolution,” (SWA) Senior VP Technical Operations, Brian Hirshman said.

(SWA) is also beginning to convert AirTran (CQT) planes to the (SWA) configuration. The first two airplane conversions are underway with partner Aviation Technical Services (ATS), Hirschman said.

Goodrich (BFG) was selected by Southwest Airlines (SWA) to supply wheels, carbon brakes, Maintenance Repair & Overhaul (MRO) services and comprehensive asset management covering its new fleet of 737-800 airplanes.

The world's leading low-cost carriers (LCC)s enjoyed double-digit revenue growth in 2011 and collective passenger numbers rose nearly 12%. The latest "Airline Business" low-cost carrier (LCC) survey showed revenues grew strong at virtually all of the more than >30 carriers 2011 financial results were available for.

Southwest Airlines (SWA) remains the largest budget operator by revenue and passenger numbers. Its revenues jumped nearly +30% to $15.7 billion when accounting for its 2011 acquisition of fellow low-cost carrier (LCC) AirTran (CQT). Excluding the merger, its revenues were up +6%. Passenger numbers reached 135 million.

Ryanair (RYR), using an annual figure based on revenues in its four published quarters for the calendar year, was the second largest no-frills operators by revenues at just under <$6 billion.

(RYR) was also among the most profitable of low-cost carrier (LCC) operators. It posted net profits of +$496 million to March 2011 and has been targeting net profits of +$630 million for its financial year just ended.

Passenger numbers across 75 low-cost carriers (LCC)s in the survey grew +11.6% in 2011.

May 2012: Southwest Airlines (SWA) will launch daily, Nashville - Boston service on August 12. Airtran Airways (CQT) launched 4X-weekly, San Antonio - Cancun; daily, San Antonio - Mexico City; and 2X-daily, Fort Lauderdale - San Juan service on May 24, as well as 4X-weekly, Austin - Cancun service on May 25. On June 3, it will launch daily Orange County service to Mexico City and Cabo, as well as daily Chicago Midway - Cancun service.

Alaska Airlines (ASA), jetBlue Airways (JBL), Southwest Airlines (SWA) and Virgin America (VUS) have all received slot exemptions for new flights beyond the perimeter of 1250 statute miles from Washington Ronald Reagan National airport (DCA). Flights over longer distances from Reagan are restricted to ensure the majority of this traffic is flowing through Washington Dulles International (IAD). (ASA) will serve Portland International (PDX), jetBlue (JBL) will operate to San Juan Luis Muñoz Marin International airport (SJU), (SWA) to Austin Bergstrom International airport (AUS) and (VUS) to San Francisco International airport (SFO).

(SWA) and United Airlines (UAL) squared off in front of the Houston City Council over whether (SWA) should be allowed to launch international service from Houston Hobby airport (HOU) in 2015.

(SWA) has agreed to invest $100 million in a new international facility at Houston William P Hobby (HOU) allowing it to use the airport as an international gateway for flights to the Caribbean, Central America, Mexico and South America from 2015. The new terminal extension will have 5 gates and passport control as well as customs facilities. In return for the investment, (SWA) will be allowed to use the new gates for free once it starts operating international flights from there.

(SWA), which carries more domestic USA passengers than any other airline, last month announced plans to launch the first-ever (SWA)-branded international flights from (HOU) by mid-decade. (HOU) is a domestic-only airport; all of the city’s international flights operate to/from Houston Intercontinental airport (IAH), a hub dominated by (UAL) in the aftermath of the (UAL)-Continental Airlines (CAL) merger. Both airports are owned by the City of Houston.

(UAL) is pushing back hard, against allowing (SWA) to launch flights to Mexico, the Caribbean, plus Central and South America from (HOU), claiming the service “will drain passengers from (IAH), resulting in a net loss of -3,700 jobs and -$295 million in gross regional product annually in the Houston region.”

But (SWA), said the expansion “would open up new low-cost international travel competition to the area,” adding in an online statement, “It won’t cost the City of Houston a dime, but it will bring in more than >+$1 billion of additional revenue annually. It will also create thousands of new jobs and help continue to grow the Houston economy. The downside? There isn’t one — unless you’re Chicago-based, United (UAL) - Continental Airlines (CAL) and want to maintain a stranglehold on the international air service from Houston.”

(SWA) already has a formidable domestic presence at (HOU).

(UAL) commissioned Massachusetts Institute of Technology (MIT) International Center for Air Transportation research engineer, William Swelbar and University of Houston economics professor, Barton Smith to study opening up (HOU) to international flights. (UAL) said its study shows that a study done by the Houston Airport System (HAS) in support of adding international flights at HOU “used flawed assumptions to reach unrealistic conclusions that the proposal would be good for Houston.”

Smith said, “Competition is always good, but there is already plenty of competition at [IAH] where it can take advantage of the enormous economies of scale associated with a large hub. Diminishing the volume of connecting flights through [IAH] could be very damaging. The (HAS) study finding that the (SWA)’s proposal would actually increase trips through [IAH] is just sheer nonsense.”

After years of wooing potential Information Technology (IT) customers in North America, Amadeus finally gained a foothold on the continent with its new contract with Southwest Airlines (SWA). The contract calls for (SWA) to use the Amadeus Altéa Customer Management System to handle its international flying beginning in 2014.

But in his first-quarter earnings call with analysts, Gary Kelly, (SWA)’s (CEO) said “it also sets the stage for us to move all of our reservations, the domestic reservations that is, to Amadeus if we choose to. “If it works well for us, we’ll obviously take a very hard look at domestic,” Kelly said. “I mean, why go to all this trouble to work with Amadeus with the thought that you're not going to continue to do business with them in a broader way?”

In an interview with "Travel Technology Update," Scott Gutz, President & (CEO) of Amadeus North America, said he believed Amadeus’ track record, as well as its commitment to moving to open systems, played a role in winning (SWA)’s business.

Amadeus has migrated more than >115 airlines to at least one module of Altéa’s reservations, inventory control and departure control systems.

(SWA), now the largest domestic carrier in the USA, has never flown internationally, but its acquisition of AirTran (CQT), which flies to Mexico and the Caribbean, brought it into the international arena. (SWA)’s current passenger services system is based on the old Braniff Cowboy system and modified over the years by Sabre. (SWA) passengers are processed in a separate mainframe complex within the Sabre data center.

Kelly has said that the current system is not capable of handling international flying. AirTran (CQT) currently uses Navitaire’s New Skies system.

As (SWA) integrates AirTran (CQT)’s flights, (CQT) will migrate to the Altéa platform, Gutz said. A more modern system also will open the door for (SWA) to more easily participate in activities such as interlining and code-sharing. “It will be able to move into new markets in a simple and efficient manner,” he said.

For a period of time, the three systems (Altéa, Sabre, and New Skies) will be required to communicate with each other. Gutz said that does not pose any unusual problems. Airlines use solutions and tools from multiple vendors, he said.

“From Amadeus’ point of view, we are used to integrating Altéa with other solutions,” he said. “Our systems are interacting with many other systems and solutions, including Sabre.” Gutz acknowledged that Amadeus is “thrilled ” to have landed the (SWA) business.

The company suffered a disappointment in 2009 when United (UAL) confirmed that it would not migrate to the Altéa platform, despite signing a contract to do so in 2005. Instead, it decided to move to the SHARES system used by Continental (CAL), its merger partner.

That was followed by American Airlines (AAL)’s announcement that it would work with HP Enterprise to develop Jetstream, its new (PSS). Amadeus had made the shortlist in that contest.

Despite the letdowns, Amadeus persevered in pursuing the North American market. Gutz said Amadeus has spent “the better part of the last two years making investments in (IT) and in personnel in North America.”

The (SWA) agreement makes no mention of participation in Amadeus’ Global Distribution System (GDS).

(SWA) participates at a basic level in Sabre, and it uses the Travelport Universal (API) to provide fares and inventory to Travelport subscribers.

Gutz said that as Amadeus’ relationship with (SWA) develops, “we would hope that participation in the (GDS) would follow.”

(SWA) promoted Mike Delehant to VP Strategic Planning, replacing Kathleen Wayton, who has been named VP Technology, Commercial Portfolio.

(SWA) has deferred deliveries of 30 737-800s from 2013 - 2014 to 2017 - 2018, as it focuses on hitting its profit target. The deferrals, 20 in 2013 and 10 in 2014, will save more than >-$1 billion for (SWA).

“We’re more conservative right now in our ambitions with respect to expansion,” (CEO), Gary Kelly said following (SWA)’s annual shareholder meeting, according to "Bloomberg." “We’ll have plenty of airplanes in future years to be able to grow the airline. It’s just not the kind of environment I’m willing to be aggressive in terms of increasing our fleet next year.”

With the deferrals, (SWA) will now receive 20 737-800s in 2013 and 24 in 2014, and a total of 34 737-800s this year. Of the deferred airplanes, 15 will be delivered in 2017, with the remaining 15 scheduled for 2018. It took delivery of its first on March 8.

Delta Airlines (DAL) will lease all 88 Boeing 717s from Southwest Airline (SWA)’s AirTran (CQT), the airlines said. The leases will help (DAL) accelerate its domestic fleet restructuring as it retires its 50-seat regional jets and aging DC-9s. “These actions pave the way for us to restructure and upgauge our domestic fleet, which will lower our costs, provide more pilot (FC) jobs and improve the onboard experience for our customers,” said (DAL) (CEO), Richard Anderson. “The addition of the Boeing 717s, additional large regional jets and the planned replacement of 50-seat airplanes continue (DAL)'s commitment to operating an efficient, flexible domestic fleet that offers customers even more opportunities to upgrade to our First Class (F) and Economy (Y) Comfort cabins.”

The agreement, which is contingent upon (DAL) pilots (FC) approving a new labor contract, would transfer the 717s from (SWA) to (DAL) beginning in 2013 with completion in 2015. “This is a very complex transaction that requires time and close coordination with multiple parties," said (SWA) Chief Operating Officer (COO), Mike Van de Ven. "While we do have a tentative agreement with (DAL), final details must be completed with all parties before a binding agreement between (DAL) and (SWA) can be completed.”

June 2012: Southwest Airlines’ (SWA) "Appearance" Technicians, represented by the Aircraft Mechanics Fraternal Association (AMFA), voted to ratify its tentative labor agreement. The new contract is good through February 2017. The current collective bargaining agreement became amendable in February 2009.

(SWA) VP Maintenance Operations, Jim Sokol said the contract “delivers enhancements to pay and benefits in exchange for work rule adjustments that provide better flexibility and more closely align with the company's long-term strategic business plan.”

The (AMFA) represents approximately 260 appearance Technicians.

(SWA) has named Trevor Stedke as VP Technical Services, effective June 20. Stedke, who served for 15 years at Federal Express (FED), will provide leadership for Engineering Services & Standards, Quality, Maintenance Safety, Powerplant, and Aircraft Programs. (SWA) promoted Assistant Treasurer, Chris Monroe to Treasurer. Monroe began his career at (SWA) in September 1991, and will replace former (SWA) Treasurer, Scott Topping, who left the company last year.

Southwest Airlines (SWA) plans to sell live television service on five planes and expand it to more airplanes by mid-July. (SWA) said that it would offer seven sports and news channels for passengers to watch on their own devices.

(SWA) said it will test prices from $3 to $8 during a trial period. Passengers will need a Wi-Fi-enabled device such as a smartphone, tablet or laptop computer.

Live TV will be offered separately from wireless Internet access and customers won’t have to buy Internet access to watch TV. The (SWA) channels: NBC Sports, MLB (Major League Baseball), NFL Network, CNBC, MSNBC, Fox News and Fox Business News.

(SWA) hired Row 44 to provide the service, which (SWA) plans to expand to 20 planes by mid-July. (SWA) said that if the service is successful, it will be added to all (SWA)’s Wi-Fi-enabled planes by the end of the year.

(SWA) has about 550 737 jets including about 250 with Wi-Fi. It plans to outfit 70% of its fleet by the end of 2013.

Airlines have been expanding in-flight entertainment (IFE) options such as Internet access to distinguish themselves from other airlines that often sell tickets for about the same price.

JetBlue Airways (JBL) and Virgin America (VUS) have offered live TV programming on seat-back screens for several years at no extra fee. They provide 36 and 18 channels, respectively. Frontier Airlines (FRO) sells 25 channels of live satellite TV on its larger planes for $6, with elite-level frequent fliers getting it free. United (UAL) charges $6 for flights under two hours and $8 for longer ones but hasn’t outfitted its entire fleet.

Separately, Delta Air Lines (DAL) said that it will offer Internet access on international flights beginning early next year. (DAL)’s entire domestic fleet is already outfitted for Wi-Fi, but airlines have been slower to add the service on overseas routes partly because they need satellites to get a signal over the middle of the ocean, not the land-based transmission signals often used within the USA.

July 2012: An impressive revenue performance enabled Southwest Airlines (SWA) to earn second-quarter net income of +$228 million, up +41.6% over a net profit of +$161 million in the prior-year period.

(SWA)’s second-quarter revenue rose +11.6% year-over-year to $4.62 billion. “Record revenues driven by steady growth were sufficient to overcome high jet fuel prices,” Chairman, President & (CEO), Gary Kelly said. “We are producing very strong results despite a fragile economic environment. Total cash on hand plus short-term investments, at June 30, 2012, was a very solid $3.3 billion. For 2013, we expect our fleet to remain comparable to 2012, and we are planning for modest year-over-year available seat mile growth, attributable to additional seats from 737-800 deliveries and the replacement of 717s with 737s.”

(SWA)’s second-quarter expenses grew at half the rate of revenue, increasing +5.8% to $4.16 billion. Operating income was +$460 million, more than double an operating profit of +$207 million in the 2011 June quarter.

The easing burden from oil prices in recent months is clearly seen on (SWA)’s balance sheet as second-quarter fuel expense lifted just +3.3% year-over-year to $1.58 billion even as fuel expense for the entire 2012 first half heightened +20.4% to $3.09 billion.

(SWA)’s second-quarter traffic increased by +5.1% to 27.2 billion (RPM)s on a +5.6% lift in capacity to 33.2 billion (ASM)s, producing a load factor of 81.9% LF, down -0.4 point. Passenger yield rose +6% to 15.94 cents. (SWA)’s first-half 2012 revenue grew +18.9% to $8.61 billion, leading to a +$327 million six-month net profit, up +97% year-over-year.

(SWA) will operate 2X-daily, Kansas City - Minneapolis service, as well as daily, Albuquerque - Orlando, Albany - Las Vegas (LAS), Hartford - (LAS), Islip - Ft Myers (RSW), West Palm Beach (PBI) - Pittsburg, (PBI) - Providence (PVD), and (PVD) - (RSW) Feb 14 - March 8. (SWA) will launch 2X-daily, St Louis (STL) - Washington Reagan service on September 30th. It will also launch 2X-daily, (STL) - San Antonio service on August 12.

(SWA) has promoted Senior VP Customer Services, Teresa Laraba to Senior VP Customers, and VP Ground Operations/AirTran (CQT), Jack Smith to VP Customer Support & Services.

August 2012: Southwest Airlines (SWA) Senior VP-finance & (CFO), Laura Wright has announced her retirement. She will remain with the airline through the end of the year, but Senior VP Planning, Tammy Romo will take over as VP Finance & (CFO) on September 20.

Romo joined (SWA) in 1991 and has held various financial and planning positions with (SWA). Wright has been with (SWA) for 25 years, including the last eight as (CFO).

(SWA) Chairman, President & (CEO), Gary Kelly described Romo as “an excellent choice based on her strong accounting and technical background, outstanding strategic planning capabilities, and deep knowledge of our company and overall corporate finance strategy.”

September 2012: Southwest Airlines (SWA) will launch daily, Branson, Missouri service to Dallas Love (daily), Houston Hobby (daily), Chicago Midway (daily) and Orlando (weekly) on March 9.

(SWA) sees significant new opportunities out of its base of Dallas Love Field after October 2014, when a restriction on flights from the airport is lifted. (SWA) is currently only able to launch non-stop flights out of Love Field to other points in Texas and eight other states, due to legislation introduced in the 1970s to protect the then newly-built Dallas-Fort Worth International Airport.

The Wright Amendment will be repealed in October 2014. It currently limits (SWA)'s non-stop flights to Texas, Alabama, Arkansas, Kansas, Louisiana, Mississippi, Missouri, New Mexico, and Oklahoma. "We have substantial opportunities out of Love Field," says Tammy Romo, (SWA)'s Chief Financial Officer (CFO).

Romo also emphasises a significant growth opportunity out of Houston Hobby Airport, where the airline is building a new international terminal and federal inspection services facility. The terminal is expected to open in 2015.

(SWA) currently does not operate internationally, but its subsidiary AirTran Airways (CQT), which it acquired in May 2011, flies to the Caribbean and Mexico. (SWA) plans to integrate these operations with theirs and has said it plans to launch flights to the Caribbean, Mexico, Central and South America from Hobby when the new terminal opens. "Obviously with our strong presence in Texas, we think we have significant opportunities to grow the route system out of Houston," says Romo.

(SWA) is in the process of transitioning (CQT)'s international flying over to (SWA), and has hired Amadeus to launch a reservations system that will allow (SWA) to operate the international flights in 2014. (SWA) currently uses Sabre, while (CQT)n is on the Navitaire New Skies platform.

Milwaukee is about to lose the last vestige of its former Midwest Airlines (MWX) hub.

Republic Airways has applied to the USA Department of Transportation to shift its Milwaukee to Washington National slots to Madison and Omaha. With the shift, Republic Airway's Frontier Airlines (FRO) subsidiary will only fly to Cancun, Denver, Orlando and Rhinelander (not sure how long that will last) from the former Midwest (MWX) stronghold.

Long gone are (MWX)'s former routes from Milwaukee to major business markets around the country, including Boston, Los Angeles, New York, and San Francisco. Many of these routes are now served by AirTran Airways (CQT) and its parent, Southwest Airlines (SWA), and Delta Air Lines (DAL).

What a difference five years make.

AirTran Airways (CQT) began building up a hub at Milwaukee following its failed takeover of Midwest (MWX) in 2007. Now, combined with (SWA) who bought (CQT) in 2011, it is the largest carrier at the airport with 3.7 million enplaning passengers, or a 43% market share, during the year ending in 30 June, according to (DOT) data.

Frontier (FRO) had a 9% market share with just 797,000 enplaning passengers during the period, according to the (DOT). It began cutting flights and staff at Milwaukee in 2011.

A hub is not coming back. Despite AirTran (CQT) and (SWA)'s significant operation at Milwaukee, the carrier's have already begun shifting routes to smaller Midwestern cities, including Akron-Canton and Des Moines, to its large "hub" (though it does not refer to it as one) at Chicago's Midway airport, which is only about 140 km to the south. The moves suggest that Milwaukee will simply be a large originating and departing market at the combined carrier.

Michael Boyd, Chairman of the Boyd Group International, said that Milwaukee has lost its status as a connecting point in the USA and that he anticipates declining passenger enplanement numbers at the airport during the next five years.

Milwaukee's loss of its hubs is emblematic of the trends among USA airlines during the past decade. It joins a growing list of former rust belt and Midwest hubs, including Pittsburgh, St Louis and increasingly Cincinnati, that have devolved to simply points in the web of hub and spokes around the USA.

(SWA) has reached an agreement with its flight attendants (CA) that will allow it to start operations requiring overwater flying. Its pilots (FC) had already agreed to a similar contract change earlier this year. (SWA)'s original labor agreements did not allow the carrier to operate overwater flying preventing it from serving Hawaii or destinations in the Caribbean or Central America for example. (SWA) does not plan international operations for at least another year or more with such flights continuing to be exclusively served by subsidiary AirTran Airways (CQT) but is considering launching routes from the West Coast to Hawaii.

(SWA) acquired (CQT)'s 88 717s and 52 737-700s when it bought (CQT), and is in the process of converting (CQT)'s 737s to (SWA) livery. Eleven of the 737s will be completed by the end of this year and the remaining 41 will transition from 2014, says Romo. A (SWA) spokesman clarifies that the 41 airplanes support (CQT)'s Puerto Rico and international operations and will transition to (SWA) livery, when its international reservations system is in place.

(SWA) agreed in May to sublease the 88 717s operated by (CQT) to Delta Air Lines (DAL). The first 717 will leave the fleet in August 2013 and all the 717s will exit by the end of 2015. With the 717s leaving the fleet, (SWA) has said it intends to extend a seat reconfiguration project it is rolling out across its 737-700s to its 737 Classics as well. (SWA) is also pushing back the retirement dates of these 737 Classics to allow it to backfill some of the 717s as it aims to keep capacity flat. (SWA) has not decided on the retirement rate for the 737 Classics.

(SWA) (CEO), Gary Kelly has said (SWA) will likely retrofit a hundred 737 Classics with the additional seats under the seat reconfiguration program called "Evolve." Romo said that it "makes sense" to have the additional seats on the airplanes, but could not confirm the exact number of 737 Classics that will get the extra seats. "It's a good portion," she says.

The "Evolve" cabin retrofit project was first announced by (SWA) in January 2012, and it expects to complete the retrofit on the 737-700s in the second quarter of 2013. Kelly has said the retrofitting of the 737 Classics will not meet this timeline. The retrofit involves adding an extra row of six seats each to 372 737-700s, taking the number of seats on each airplane to 143 from 137.

(SWA)'s 737-300s have the same number of seats as the 737-700s pre-retrofit. (SWA) has a fleet of 142 737-300s, with build dates ranging from the mid-1980s to late 1990s. (SWA) also has a fleet of 21 737-500s, which have fewer seats on board.

(SWA) has ordered 268 more winglet sets from Seattle-based Aviation Partners Boeing (APB) for its 737 airplanes. (SWA)'s original order in 2003 was for 169 so-called “blended winglets” with an option for more through this year. The new order is (APB)’s largest single order in its history. (SWA) can expect the winglets to bring more than -$150 million in annual fuel savings, while reducing their carbon dioxide output by more than >-580,000 tons a year.

October 2012: Southwest Airlines (SWA) reported a third-quarter net profit of +$16 million, reversed from a -$140 million net loss in the prior-year period. The improvement occurred even as revenue was flat and (SWA) incurred -$81 million in net losses on unfavorable special items.

Chairman, President & (CEO), Gary Kelly said “While in line with the domestic industry, our third-quarter 2012 year-over-year unit revenue growth was more sluggish than planned due to weaker demand, particularly in September. While the economy remains a significant concern, we are encouraged, thus far, by October’s bookings and revenue trends. Thus far in October 2012, passenger unit revenues are running ahead of the comparable year-ago period by approximately +4%.”

Third-quarter revenue was flat year-over-year at $4.31 billion, while expenses increased +4.2% to $4.26 billion, producing an operating profit of +$51 million, down -77.3% compared to +$225 million in operating income last year.

Kelly said “much of the [expense] growth was investment related,” adding, “We have retrofitted 147 (SWA) 737-700s with our updated cabin interior and plan to complete all 372 737-700 retrofits in the first half of 2013.”

Third-quarter traffic lowered -0.6% to 27.16 billion (RPM)s on a -0.7% cut in capacity to 33.08 billion (ASM)s. Load factor was 82.1% LF, essentially flat year-over-year. (RASM) lifted just +0.6% to 13.02 cents, while (CASM) rose +5% to 12.87 cents. Passenger yield increased +0.8% to 14.89 cents.

(SWA) launched five routes at the end of September; all with its fleet of 737-700 airplanes. Two of the routes are from Atlanta, Georgia (ATL), where (SWA) replaced some of the frequencies operated by subsidiary, AirTran (CQT). Only on one of the routes launched, does Southwest (SWA) not face any direct competition, but United (UAL) and American Airlines (AAL) indirectly compete with their flights between Chicago O’Hare and Des Moines, Iowa (DSM), operating 53 and 46 times a week, respectively.

Southwest Airlines (SWA) said it will convert AirTran (CQT)-branded flights to (SWA) flights at four cities from April 14, 2013. The airports include Charlotte, from which (SWA) will fly to Baltimore/Washington (BWI), Chicago Midway (MDW) and Houston Hobby (HOU) airports; Flint (Michigan), from which (SWA) will operate flights to (BWI), Orlando (MCO) and Tampa (TPA); Portland (Maine), from which (SWA) will fly to (BWI); and Rochester (New York), from which (SWA) will operate flights to (BWI), (MDW), (MCO), and (TPA).

Additionally, starting April 14, (SWA) will start new daily service between Boston and Kansas City, and between (HOU) and Pittsburgh. Also from April 14, AirTran (CQT) will start new daily flights between (BWI) and Punta Cana, Dominican Republic, pending government approval.

(SWA) and (CQT) gained a single air operating certificate (AOC) earlier this year. (SWA) said that it has so far converted nine (CQT) 737s into (SWA) airplanes. It plans next year to begin enabling passengers to connect from (SWA) to (CQT) flights, and vice versa, on a single itinerary.

(SWA) has announced that it will take over all remaining AirTran Airways (CQT) operations from Charlotte Douglas International (CLT), Flint Bishop International (FNT), Portland International (PWM) and Rochester International (ROC) from April 14, 2013. (SWA) subsidiary, (CQT) currently serves Charlotte, Flint and Rochester from its home base in Atlanta. From Baltimore Thurgood Marshall International (BWI), it serves Charlotte, Portland and Rochester. (CQT) also operates from Orlando International (MCO) to Flint and Rochester and from Tampa International (TPA) to Flint.

(SWA) has named former USA Federal Aviation Administration (FAA) Administrator Randy Babbitt to Senior VP Labor Relations. Babbitt served as (FAA) administrator from June 2009 to December 2011. He has also served as President & (CEO) of the USA Air Line Pilots Association.

“For more than >40 years, (SWA) has thrived because of our regard for labor organizations as partners,” (SWA) (COO), Mike Van de Ven said, adding, “Randy's unique skills and experience at various levels in our industry can only strengthen those partnerships.”

Babbitt will be responsible for all negotiation, communication and relationships between (SWA) and the 11 organizations representing 87% of (SWA) employees.

November 2012: Southwest Airlines (SWA) took over former AirTran (CQT) Key West (EYW) service to Orlando (2X-daily) and Tampa Bay (2X-daily). It will also launch daily, (EYW) - New Orleans service March 9.

Starting June 2, (SWA) will fly its own branded service from Chicago Midway, Dallas and Las Vegas to Wichita a city in Kansas that happens to have a large aerospace sector. (SWA) will also operate San Juan - Baltimore, Houston Hobby - New York LaGuardia and Chicago Midway to the oil town of Tulsa in Oklahoma.

Also, (CQT) will launch Tampa Bay service to Houston Hobby and Raleigh on June 2. Meanwhile (CQT) will exit Wichita, ending flights from Atlanta. That's another former AirTran (CQT) market that Delta Airlines (DAL) will be glad to have to itself.

Soon-to-be acquired Row 44 has teamed with Dallas-based technology company, SwiftAir to provide interactive in-flight travel guides for (SWA)/(CQA)'s fleet of more than >350 wi-fi enabled airplanes. The guides will debut in 2013 on flights headed to to 11 cities, with more options to come throughout the year. Passengers using the service will be able to view tours of the city as well as purchase exclusive ticket deals from businesses, restaurants and other companies to redeem after touching down.

The free platform will be part of (SWA)'s in-flight entertainment interface that passengers access with their personal electronic devices (PEDs). (SWA) uses Row 44's Ku-band connection to provide entertainment via these devices rather than installing embedded seatback units in the airplanes. (SWA) plans to complete wifi installations on its 737-700s and 737-800s by mid-2013, or 70% of its fleet.

Global Eagle Acquisition announced that it would combine Row 44 and a majority stake in content provider Advanced Inflight Alliance (AIA) to create an "entertainment in motion powerhouse," and this deal provides some insight into the future offerings the company will provide. The crux of Global Eagles' business model is to combine entertainment aggregation expertise of (AIA) with the technical ability to install Ku-band satellite installations, so that passengers can access a full range of entertainment options on their (PED)s. Global Eagle has said it also wants to integrate ancillary revenue opportunities for airlines into its offering as well, which the partnership with SwiftAir demonstrates.

Airlines for America (A4A) announced it elected Southwest Airlines (SWA) Chairman, President & (CEO), Gary Kelly as Chairman of the (A4A) board. Kelly succeeds Delta Air Lines (DAL) (CEO), Richard Anderson. United Airlines (UAL) Chairman, President & (CEO), Jeffery Smisek was elected to serve as Vice Chairman. (A4A) President & (CEO), Nicholas Calio said Kelly will lead the organization as it continues to push to further a National Airline Policy, “which is critical to America’s economic growth, our communities, our infrastructure and the traveling public.”

Kelly said, “The USA airline industry plays a vital role in the overall health of our nation’s economy. I look forward to the opportunity to work with my industry peers to advocate for a National Airline Policy and serve our passengers, our employees and our communities.”

December 2012: Southwest Airlines (SWA) said that VP General Counsel, Madeleine Johnson will retire, effective February 1. Her successor will be Mark Shaw, (SWA)'s Associate General Counsel Corporate & Transactions. (SWA) said Johnson was instrumental in orchestrating the legal work to enable (SWA)'s acquisition of AirTran Airways (CQT), now a wholly owned subsidiary of (SWA). Shaw joined (SWA) in 2000 as an attorney in the General Counsel department and was promoted in 2008 to his current role.

Executive VP & Chief Legal & Regulatory Officer, Ron Ricks said, “I have great confidence in Mark's abilities and his character as a leader. This will be a seamless transition given his history with (SWA) and with his colleagues in the General Counsel department.”

January 2013: Southwest Airlines (SWA) posted 2012 net income of +$421 million, marking its 40th consecutive year of profitability.

The net profit more than doubled net income of +$178 million in 2011. The profit increase was achieved even though (SWA)’s fourth-quarter net income declined -48.7% year-over-year to +$78 million. Chairman, President & (CEO), Gary Kelly noted that finishing in the black for 40 years consecutively is “a record unmatched in the airline industry.”

He added in a statement, “As we enter 2013, bookings and revenue trends, thus far, suggest a year-over-year improvement in January 2013 passenger unit revenues in the 2% to 3% range. While the effect of USA tax increases on the domestic economy remains uncertain, bookings for the remainder of first quarter, thus far, are strong.”

(SWA)’s 2012 revenue rose +9.1% year-over-year to $17.09 billion, while expenses increased +10% to $16.47 billion. Operating income fell -10.1% to $623 million. Net income was helped by $4 million in net favorable special items, which compared to $152 million in net unfavorable special items in 2011.

Kelly said “significant optimization efforts are planned in 2013 for the AirTran (CQT) network,” which should boost revenue performance. (SWA) and (CQT) received a single air operating certificate (AOC) in 2012.

(SWA)’s full-year traffic rose +5.4% year-over-year to 102.87 billion (RPM)s on a +6.3% increase in capacity to 128.14 billion (ASM)s, producing a load factor of 80.3% LF, down -0.6 point. Passenger yield lifted +3.4% to 15.64 cents.

(SWA) expanded its network with five new routes on 6 January. All flights are performed using (SWA)’s fleet of 737-family airplanes and (SWA) faces competition on two routes – from Fort Lauderdale (FLL) to Phoenix (PHX), and from Nashville (BNA) to New York LaGuardia (LGA).

Although Southwest Airlines (SWA) acquired AirTran Airways (CQT) in May 2011, it will be this year in 2013 that the real impact of that acquisition will start to become clear. Customers will be able to book single-ticket itineraries by March, connecting (SWA) and (CQT) networks for the first time, and (SWA) is expecting this to significantly boost revenue and give it a competitive advantage. (SWA) also faces some new challenges, with (CEO), Gary Kelly warning that (SWA) must respond to the cost-cutting that American Airlines (AAL) and other competitors have achieved in bankruptcy protection. That raises the prospect of a problem (SWA) usually does not encounter: divisive disputes with its labor unions.

(SWA) will launch AirTran (CQT)-operated Chicago Midway service to Montego Bay (4X-weekly, on April 14) and Punta Cana (4X-weekly, on May 19).

AirTran Airways (CQT) will launch daily, Denver - Los Cabos service on March 10.

Row 44, of Westlake Village, California, said its in-flight entertainment and connectivity service, which includes high-speed Internet, shopping, destination services, and real-time flight map with updates, has been installed on 400 (SWA) airplanes.

"The 400th installation of broadband capabilities on our fleet is a particularly significant milestone for (SWA) and our partner, Row 44," said Dave Ridley, (SWA)'s Senior VP & Chief Marketing Officer (CMO). "(SWA) was the first USA carrier to test satellite-delivered broadband Internet access on multiple airplanes. We have found the strength of satellite service has allowed us to deliver very high bandwidth for Internet users and provide our in-flight entertainment via the addition of live television."

Now available on (SWA) airplanes installed with Wi-Fi, the live television service features nine channels of live news and sports, which includes NBC Sports, NFL Network, NFL Red Zone, MLB, MSNBC, CNBC, Fox News, Fox Business News and FOX-NYC. Passengers with Wi-Fi-enabled devices can stream the live television service. Importantly, the Row 44 live television service utilizes a distinct band transmitted to the airplane, and therefore does not interfere with Internet connectivity.

In November, the Global Eagle Acquisition Corporation signed an agreement to acquire Row 44 and an 86% stake in Advanced In-flight Alliance (AIA) to create "the largest entertainment and connectivity platform for the worldwide airline industry."


February 2013: Southwest Airlines (SWA) has finally implemented a limited code share agreement with subsidiary AirTran Airways (CQT) allowing the two carriers to work together more closely. The implementation of the code share agreement between the two carriers had to be postponed because of technology issues with the passenger servicing systems at both carriers with a full merger of the two airlines still not expected for some years. AirTran (CQT) has now put its FL code on (SWA) services from Atlanta to Louisville Standiford International (SDF) and Norfolk International (ORF), while (SWA) code shares on AirTran (CQT) services from Atlanta to Fort Lauderdale Hollywood International (FLL) and Fort Myers Southwest Florida International (RSW). The two airlines will then gradually introduce additional routes making it possible for customers to buy itineraries including both airlines which has so far not been possible.

(MTU) Maintenance Canada has a long-term agreement from Southwest Airlines (SWA) for the maintenance of (SWA)’s (CFM56-3) engines. (MTU) will provide (SWA) with a total engine care program.

March 2013: AirTran Airways (CQT) commenced operation on the 1,900 km route from Denver (DEN) to San José del Cabo (SJD) on 10 March. Daily flights using (CQT)’s 737-700s are offered to the Mexican city located on the southern tip of the California Baja peninsula. Frontier Airlines (FRO) and United Airlines (UAL) provide competition in this market, which they serve with eight and four weekly frequencies, respectively. (CQT) will launch daily, Austin Bergstrom - Los Cabos, Mexico 737 service on June 1. (CQT) will add seasonal, Orlando - Houston Hobby service; Orlando - New Orleans service; Fort Myers - Columbus service; and Fort Lauderdale - Pittsburgh service.

(SWA) will launch daily, Des Moines - Las Vegas service; daily, Jacksonville - Chicago service; daily, Atlanta - San Diego service; daily, Nashville - Pittsburgh service, and 2X-daily, Fort Lauderdale - San Juan service on September 29. It will also restart seasonal daily, Jacksonville - Las Vegas service, as well as seasonal daily service from Orlando to Indianapolis and Minneapolis/St Paul. (SWA) added New Orleans (MSY) as the third route it offers from Key West, Florida (EYW) on 9 March. The 1,000 km route is operated on a daily basis using (SWA)’s 737-700s and constitutes one of the destinations previously served by AirTran Airways (CQT). Kevin Krone, (SWA)’s VP Marketing, Sales, & Distribution, said: “Our arrival in Key West represents one of the true benefits of our integration with AirTran (CQT), allowing us to continue to bring low fares and legendary customer service to the Florida Keys.” On the same day, (SWA) also inaugurated services from Branson (BKG), a destination previously served by AirTran (CQT). Daily flights are now offered on the brand new route to Dallas Love Field (DAL), as well as the former (CQT) routings to Houston Hobby (HOU) and Chicago Midway (MDW), which were last served in November 2012. Also, (SWA) decided to take over directly (CQT)’s weekly service to Orlando (MCO).

(SWA) said it has connected the (SWA) and AirTran Airways (CQT) networks, enabling a single transaction for coordinated itineraries for flights from April 14. (SWA) and (CQT) operate to a combined 97 destinations. The carriers were granted a single air operating certificate (AOC) by the (FAA) last year, following (SWA)’s acquisition of (CQT) in 2011.

(SWA) said that “full integration” (repainting and reconfiguring (CQT)’s 737s, total airport facility commonality and using a single ticketing system) “is a large and complex process that is expected to be completed by the end of 2014.” So far, 30% of (CQT) employees have officially switched over to (SWA), 11 (CQT) 737-700s have been repainted and reconfigured, and there has been an ongoing conversion of (CQT)-branded flights to (SWA)-branded flights at airports.

According to (SWA), it realized $142 million of net, annualized, pre-tax merger synergies in 2012 and expects to achieve $400 million in such synergies in 2013. This excludes acquisition and integration expenses.

(CQT) President & (SWA) Chief Commercial Officer, Bob Jordan said, “With a connected network, we can offer customers more itineraries, more destinations, more low fares, and a taste of what’s to come once the integration is complete.”

April 2013: Southwest Airlines (SWA) reported first-quarter net income of +$59 million, down -39.8% from a net profit of +$98 million in the year-ago period, but more than tripled operating income year-over-year.

AirTran Airways (CQT) inaugurated flights on its 15th route from Baltimore/Washington (BWI) on 24 April, and now serves Las Vegas (LAS) with daily frequencies. Flights on the 3,400 km route are offered with (CQT)’s 737-700s in competition against Spirit Airlines (SPR)’s daily flights. In addition, Southwest Airlines (SWA) (which owns AirTran Airways (CQT)) also serves the market from Baltimore/Washington to Las Vegas, offering 27 weekly flights. Confusing, isn’t it?

(SWA) will begin Chicago Midway - Jacksonville service on June 3.

(SWA) and AirTran (CQT) completes the connection between the carriers’ networks on April 14. Customers will be able to purchase itineraries to the (SWA)/(CQT) airlines’ combined 97 cities, including international services, in one transaction.

May 2013: Southwest Airlines (SWA) has added some new routes in its latest flight schedule which covers the winter months to early January. These include Atlanta - Hartford, Atlanta - Oklahoma City, Austin - New Orleans, and some winter-only runs to Florida locations. In November, the last three airports that AirTran (CQT) serves but (SWA) doesn't (Memphis, Pensacola, and Richmond) will start transitioning to (SWA) branding. A few routes will be discontunued, including: Atlanta - Buffalo, Denver - Manchester, New Hampshire, Denver - Providence, Chicago (MDW) - Canton/Akron, and some seasonal Las Vegas routes.

AirTran Airways (CQT) started flying on the 3,200 km route from Chicago Midway (MDW) to Punta Cana (PUJ) on May 19th, making the service its third route to the Dominican Republic airport after Atlanta and Baltimore/Washington. Four-weekly frequencies are scheduled for the service, which is operated using 737-700s.

(SWA) will begin its new flights between Houston Hobby and Washington National from August 4th, following its win of a pair of slot exemptions at the Washington DC airport. (SWA) will operate a daily round trip flight between the two cities. (SWA) will be the only carrier operating between Washington National and Houston Hobby. United Airlines (UAL) serves Houston Intercontinental non-stop from both Washington National and Washington Dulles airports.

(SWA) will begin Austin - New Orleans on November 3.

(SWA) announced Craig Maccubbin will join (SWA) as its new Chief Technology Officer & VP Technology Operations, effective May 6. (SWA) has promoted Randy Sloan to Senior VP & Chief Information Officer (CIO). Sloan, who joined (SWA) in March 2012, will immediately assume the new role.

(SWA) was named the launch customer for Boeing (TBC)'s 737 MAX 7. (SWA) converted its existing orders for 30 Next-Generation 737s into orders for 737 MAX 7 series, and has also chosen to exercise options to add five Next-Generation 737-800s to its fleet. At current list prices, the total order (including options) is valued at $2.9 billion. Deliveries for (SWA) are scheduled to begin in 2019.

With the 737 MAX 7 conversions and exercised options for 737-800s, (SWA)’s unfilled orders consist of 180 737 MAX airplanes and 137 Next-Generation 737s. The 737 MAX now has orders for 1,315 airplanes.

737-7BD (33934, N7746C), ex-(N328AT), delivery.

June 2013: Southwest Airlines (SWA) begins daily, Houston Hobby - Washington (DCA) service on August 4.

(SWA) continues to refine the combined operations it has with AirTran (CQT) in Atlanta as part of its overall strategy to put less emphasis on Atlanta as a connection point and more focus on creating a rolling schedule in the market that is more reflective of its other top focus cities.

All of the efforts that are designed to reach fruition in November 2013 are being undertaken to improve the overall performance of Atlanta in the combined AirTran (CQT) - (SWA) network as the integration of the two carriers continues.

But in the short-term, (SWA) is battling some revenue weakness as unit revenues during the 1st quarter 2013 increased just roughly +2% and fell -4% to -5% during April 2013. Some of the weakness in April 2013 resulted from the timing of the Easter holiday and system slowdowns triggered by budget cuts in the USA. Moving forward, (SWA) believes it should post unit revenue improvements during the last two months of the 2nd Quarter 2013, with the momentum continuing throughout the rest of the year.

July 2013: Southwest Airlines (SWA) has reported a second-quarter net income of +$224 million, down -1.8% from a net income of +$228 million in the year-ago period.

(SWA) begins daily, Atlanta - Washington DC (DCA) service on February 13, while AirTran (CQT) continues to offer 5X-daily between the cities.

INCDT: On July 22nd, emergency responders at New York's LaGuardia Airport (LGA) evacuated passengers and crew on Southwest Airlines (SWA) Flight 345 after the 737-7H4 (CFM56-7B22) (400-29848, /99 N753SW) commercial passenger jet’s nose gear collapsed upon landing.

The 737-7H4 landed on its nose-gear first, according to the USA National Transportation Safety Board (NTSB). The (NTSB) said in an investigative update on the incident, “Evidence from video and other sources is consistent with the nose-gear making contact with the runway before the main landing gear.” The main landing gear is supposed to make the first contact with the runway.

The (NTSB) has determined that the nose landing gear “collapsed rearward and upward into the fuselage, damaging the electronics bay, which houses avionics and other equipment.” The 737-7H4 slid 2,175 feet on its nose before coming to rest off to the right side of (LGA) runway 4. “At touchdown, the airspeed was approximately 133 knots and the airplane was pitched down approximately 3 degrees,” the board stated. “After touchdown, the 737-7H4 came to a stop within approximately 19 seconds.”

The flight data recorder and cockpit voice recorder from the Nashville-to-(LGA) flight have been recovered and are being analyzed by the (NTSB). None of the 145 passengers or five crew are believed to have been seriously injured in the incident.

A later report stated:
The USA National Transportation Safety Board (NTSB) said “no mechanical anomalies or malfunctions have been found” with the Southwest Airlines (SWA) 737-700 that made a hard landing at New York LaGuardia Airport (LGA).

The 737-700 landed July 22 at (LGA) on its nose landing gear first, leading to the collapse of the nose-gear and the 737 sliding 2,175 feet on its nose. There were no serious injuries, but the airplanet “was substantially damaged.” The (NTSB) said a “preliminary examination of the nose-gear indicated that it failed due to stress overload,” not a mechanical malfunction. The main landing gear should touch down first in a normal landing; the nose-gear is not designed to absorb the entire weight of the airplane.

The (NTSB) said the captain (FC) on the flight has been with (SWA) for almost 13 years. “She has over >12,000 total flight hours, over >7,000 of which are as pilot-in-command (FC). In 737s, the captain (FC) has over >7,900 hours, with more than >2,600 as the pilot-in-command (FC).”

The (NTSB) added that the first officer has been with (SWA) for about 18 months, reporting, “The pilot (FC) has about 5,200 total flight hours, with 4,000 of those as pilot-in-command (FC). In 737s, the first officer usually has about 1,100 hours, none of which are as the pilot-in-command (FC).”

The (NTSB) noted the Nashville-to-(LGA) flight was part of the first trip the two pilots (FC) had flown together; it was the second leg of the trip. “The first officer (FC) had previous operational experience at (LGA), including six flights in 2013. The captain (FC) reported having flown into (LGA) twice, including the accident flight, serving as the pilot (FC) monitoring for both flights.”

Regarding the July 22 landing, the (NTSB) said the weather in the New York area “caused the accident flight to enter a holding pattern for about 15 minutes. The flight crew (FC) reported that they saw the airport from about 5 - 10 miles out and that the airplane was on speed, course and glideslope down to about 200 - 400 feet. At a point below <400 feet, there was an exchange of control of the airplane and the captain (FC) became the flying pilot (FC) and made the landing.”

The (NTSB) noted its investigators “have collected five videos showing various aspects of the crash landing. The team will be analyzing these recordings in the coming months.” The (FAA), Boeing (TBC), (SWA) and the (SWA) Pilots Association are parties to the (NTSB)’s probe.

Investigators determined that an unstable approach and the captain's decision to take command of the airplane at low altitude contributed to the crash. "She should have called for a go-around when it was apparent that the approach was unstabilized well before the point that she attempted to salvage the landing by taking control of the airplane at a very low altitude" said the (NTSB) report.

August 2013: Southwest Airlines (SWA) begins daily, Atlanta - Washington DC (DCA) service on February 13, while AirTran (CQT) continues to offer 5X-daily service between the cities.

(SWA) expanded its offering from Houston Hobby (HOU) on August 4th with daily services on the 2,000-kilometre route to Washington Reagan (DCA). (SWA), which plans to double the route frequency from August 11, deploys winglet-equipped 737-700s on the route. While there is no direct competition on the route, United Airlines (UAL) serves the market from Houston to Washington with flights from Houston Intercontinental to Washington Reagan (51 weekly flights) and Washington Dulles (41).

(SWA) started two new routes from Grand Rapids, Michigan (GRR) on August 11, when it launched daily flights from its bases at Denver, (DEN) and St Louis (STL). Competition on the Denver route comes from United Airlines (UAL) (two daily flights), and Frontier (FRO) (daily flights), though (FRO)’s services will end early next month. In addition, (SWA) has taken over the routes from Grand Rapids to Baltimore/Washington and Orlando, that had previously been operated by its wholly-owned subsidiary, AirTran Airways (CQT). In early January, (SWA) will add Fort Myers and Tampa (both in Florida) to its Grand Rapids network.

AirTran Airways (CQT) has introduced three new routes; Baltimore/Washington (BWI), Chicago Midway (MDW), and Orlando (MCO), all from Memphis (MEM). The three new routes started on August 11 and are operated using (CQT)’s 117-seat 717s. (CQT)only faces competition on the Memphis - Orlando route from Delta Air Lines (DAL). (CQT) offers a daily service on the city pair, whereas (DAL) operates thrice-daily with the only exception being Saturdays, where (DAL) offers a daily service. Up to now, (CQT) has only operated a single route from Memphis to its main hub at nearby Atlanta. All three of these new routes will be transferred to Southwest Airlines (SWA) from early November.

(SWA) has a strong hand with no competition on its new non-stop daily service from Las Vegas (LAS) to Flint (FNT). Flint, which started on August 11, is now (SWA)’s 57th route served out of Las Vegas. The 2,789 km sector will carry passengers on a 143-seat 737-700. Southwest now operates four routes (including this latest addition) to Flint, with Baltimore/Washington, Orlando and Tampa, being joined by Las Vegas.

According to FAPA.aero, Southwest Airlines (SWA) intends to open up Pilot (FC) credentials for pilots (FC) to input new profiles (not applications). The AirTran (CQT) merger has solidified the hiring freeze for now. 2014 (FC) hiring is likely.

September 2013: AirTran Airways (CQT) has transferred approximately 3 717s per month to Delta (DAL), and now totals 88.

October 2013: Southwest Airlines (SWA) reported a third-quarter net income of +$241 million, more than doubled from a +$97 profit in the year-ago period.

Similar to USA carriers Delta (DAL) and US Airways (AMW)/(USA), Southwest Airlines (SWA) recorded a strong financial performance in its 3rd quarter 2013, driven partly by its ability to raise fares as well as some relief in unit cost pressure. (SWA) remains optimistic about its 4th quarter 2013 even as it faces some headwinds stemming from the USA Government shutdown and the sliding of busy travel days for the US Thanksgiving holiday from November 2013 to December 2013.

(SWA) reaches a milestone in November 2013 when its de-hubbing of Atlanta takes full effect. By April 2014, (SWA) and AirTran (CQT) will deploy 160 daily flights from the largest USA airport in terms of passenger enplanements. At that time, Atlanta will be roughly the same size in terms of departures as Houston Hobby or Phoenix: – two of Southwest’s top markets. But it will pale in comparison to Chicago Midway, which currently has roughly 253 daily departures.

(SWA)’s management has concluded that Atlanta was a “challenge” for AirTran (CQT) prior to (CQT)'s acquisition by (SWA) and the de-hubbing should produce improvements in bolstering traffic in the local market from the airport. Carrier executives are also stressing the company’s shrinking footprint in Atlanta should not be interpreted as the airport’s value diminishing in the combined Southwest (SWA) - AirTran (CQT) network.

(SWA) has no official stance on the American Airlines (AAL) - US Airways (AMW)/(USA) merger, but (SWA) wants to have a stronger presence at Washington National Airport (DCA) and wants (AAL) - (AMW)/(USA) to divest Washington National slots.

(SWA) begins weekly seasonal service on March 8: Fort Myers - Albany, - Denver, - Kansas City; and Orlando - Portland; Minneapolis - Tampa Bay.

(SWA) has announced organizational and executive personnel changes in its Commercial, Operational and Technology groups.

Andrew Watterson, most recently VP Planning & Revenue Management at Hawaiian Airlines (HWI), was appointed VP, Network Planning & Performance. Watterson will lead (SWA)’s Network Planning & Commercial Planning teams.

Sherry Staber joins (SWA)’s Technology organization in a new position, VP Business Transformation Solutions, Operations & Enterprise Management. Staber was previously VP Corporate Solutions at J C Penney Company’s corporate headquarters in Plano, Texas.

Another new position, VP Supply Chain Management, will be filled by Bill Tiffany, previously (SWA)’s Maintenance Senior Director of Supply Chain Management. (SWA)’s supply chain management group will now encompass the company’s Maintenance Supply Chain, company wide Purchasing plus Procurement & Fuel Management functions.

In (SWA)’s Operational group, Greg Wells has been promoted to Senior VP Operational Performance. Brian Hirshman, previously (SWA)’s Senior VP Technical Operations, will take Wells’ former position of Senior VP Operations, overseeing (SWA)’s Technical Operations, Cargo/Charter Operations, Ground Operations and (SWA)’s Operations Coordination Center.

Within (SWA)’s Marketing group, Ryan Green was promoted to Managing Director Customer development, reporting to VP & Chief Marketing Officer, Kevin Krone. Green was previously (SWA)’s Senior Director of Loyalty & Partnerships in Marketing.

(SWA) has fired the captain (FC) of the 737-700 that made a hard landing at New York LaGuardia Airport (LGA) in July. The airplane landed nose gear first, leading to the collapse of the nose-gear and the 737 sliding 2,175 feet. There were no serious injuries, but the airplane “was substantially damaged,” according to the USA National Transportation Safety Board (NTSB).

The (NTSB) said it found no evidence of mechanical malfunction, instead blaming the incident on “stress overload” on the front landing gear. The main landing gear should touch down first in a normal landing; the nose-gear is not designed to absorb the entire weight of the airplane. The (NTSB) also found that “there was an exchange of control of the airplane [when it was below 400 feet] and the captain (FC) became the flying pilot (FC) and made the landing.”

(SWA) said it conducted an internal review and determined the captain (FC) should be dismissed. The first officer (FC) has been required to undergo additional training.

According to the (NTSB), the captain (FC) had been with Southwest (SWA) for almost 13 years, accumulating over 12,000 total flight hours, including more than >7,000 hours as pilot-in-command (FC).

AirTran Airways (CQT), subsidiary of Southwest Airlines (SWA) launched four new domestic services on September 29. The two routes from Orlando, Florida (MCO) to Houston Hobby, Texas 7x weekly, and to New Orleans 7x weekly, both “compete” with Southwest Airlines (SWA), although the two carriers are currently being integrated. The Fort Myers, Florida (RSW) to Columbus, Ohio (CMH) route is operated by AirTran (CQT) until January 6, when (SWA) takes over the route. Similarly, the Fort Lauderdale, Florida (FLL) to Pittsburgh (PIT) service is handed over from November 3.

(SWA) launched four new routes in one day on September 29. Three of the new city pairs are domestic routes, with the fourth being ‘technically’ an international route to the capital San Juan and most populous city in Puerto Rico (albeit an unincorporated territory of the United States and therefore passengers fly domestically). The only route without competition is between Nashville (BNA) and Pittsburgh (PIT), 7x weekly. The other three included Des Moines, Iowa to Las Vegas, 7x weekly, competing with Allegiant (WJE) 4x weekly; Atlanta to San Diego, 7x weekly, competing with Delta (DAL) 34x weekly; and Fort Lauderdale to San Juan, Puerto Rico, 14x weekly competing with JetBlue Airways (JBL) 34x weekly, and Spirit Airlines (SPR) 7x weekly.

(SWA) increased its network with the launch of 17 new services on November 3rd. Atlanta (ATL) saw the most new services commence (four), followed by Memphis (MEM), where three new routes were launched. All new routes are operated with daily or twice-daily frequencies. (SWA) faces competition on eight of them, including all services from Atlanta.

(SWA) broke ground this month on a new, $156 million terminal at Houston Hobby Airport (HOU), from which it plans to launch international flights in late 2015.

November 2013: Southwest Airlines (SWA) will be the first USA airline to offer passengers gate-to-gate wi-fi service after gaining an approval from the Federal Aviation Administration (FAA) for use of portable electronic devices (PEDs) throughout all phases of flight.

A majority of (SWA)’s fleet is outfitted with a Ku-band satellite wi-fi system from Global Eagle Entertainment's Row 44. In addition, (SWA) provides live television and on-demand content delivered to passengers’ portable devices. All of these services will be available without interruptions to passengers throughout the flight on small devices such as tablets and smartphones in “airplane mode.”

"We know this is something customers have wanted for some time now, and we're excited to give them the freedom to use personal devices while in the air and on the ground," said Kevin Krone, (SWA)’s Chief Marketing Officer.

(SWA) is one of the last major USA airlines to gain the approval for (PED) usage below 10,000 ft after the (FAA) updated its guidance to allow the expanded usage on October 31st. However, (SWA) is so far the only one among its peers to offer connectivity during the full duration of the flight. “Certainly, as the only domestic carrier with active satellite-based WiFi, [(SWA) has] yet again raised the bar, and we are proud to provide the service that will keep their passengers connected to the web, as well as allow them to use their portable electronic devices to access the entertainment they love through all phases of flight,” says Global Eagle Entertainment (CEO), John LaValle.

Many other USA carriers are outfitted with air-to-ground (ATG) technology offered through Gogo, which is certified for use on the ground but would require some changes to be used throughout the whole flight. The connectivity provider said earlier this month that (ATG) is engineered to work above >10,000ft and said it is exploring what it would look like to change that.

ViaSat has said that its Ka-band satellite system is certified and designed to work during take-off and landing, however, it has not yet been rolled out to passengers. The technology is expected to debut on a JetBlue (JBL) A320 in coming weeks and has also gained the approval for installation on United (UAL)’s 737s.

Delta Air Lines (DAL) and JetBlue (JBL) were the first airlines to gain (FAA) approvals to use (PED)s from gate to gate on November 1st. Since then, American Airlines (AAL), (UAL), US Airways (AMW)/(USA) and Alaska Airlines (ASA) have made similar approvals. Virgin America (VUS) has not yet announced its approval of gate-to-gate wi-fi but has said it is aiming to secure it before the busy holiday season.

December 2013: Southwest Airlines (SWA) has acquired 12 takeoff and landing slots (for six roundtrip flights) at New York LaGuardia Airport (LGA) being divested by American Airlines (AAL) as part of its merger with US Airways (AMW)/(USA).

In addition, (SWA) said it has gained permanent control of 10 takeoff and landing slots (for five roundtrip flights) that it currently operates under a lease from (AAL). It did not release details of the transaction.

According to a company statement, (SWA) plans to begin new service at (LGA) in May 2014. Details of the new service will be available later this month.

(SWA) and its subsidiary, AirTran Airways (CQT) operate 27 daily roundtrip flights to and from (LGA) to eight nonstop destinations. The company said the acquired slots will allow the airlines to add six daily roundtrips.

(SWA) currently serves Newark Liberty International, LaGuardia Airport, and Long Island MacArthur Airport. “These six additional roundtrips at (LGA) will strengthen (SWA)’s service to and from the New York City area,” (SWA) said.

(SWA) Executive VP & (CCO), Bob Jordan said, “We also look forward to bidding on the slots at Washington National Airport that (AAL) also is required to divest. That will be conducted as a separate process, and was not a part of this slot bid.”

(SWA) is reportedly planning to offer Caribbean and South American flights out of Fort Lauderdale International, once construction of a new USD 300 million terminal is completed. According to the "Sun Sentinel, (SWA) plans to add 25 international flights a day to the 70 domestic flights that it operates daily out of Fort Lauderdale. Construction is slated to begin in late 2014, with completion set for 2017. With the exception of San Juan Luis Muñoz Marin flights, (SWA)'s operations are currently restricted to the United States.

Southwest Airlines (SWA) could complete the phasing out of its fleet of seventy-nine 717-200s as early as the first quarter of 2015. The move would allow (SWA) to streamline its Flight Operations following its acquisition of AirTran Airways (CQT). However, it is claimed, the retirement won't affect the rate of introduction of the twinjets to Delta Air Lines (DAL) as the affected 717s will “remain inactive” after their retirement by (SWA) until (DAL) introduces them into service. (SWA) will replace the 717s with twelve additional 737-700s as well as 52 additional 737-800s due between 2014 and 2015.

2 737-78Ds (33919, N7713A; 33922, N772DF), ex-(N267AT; N281AT), AND 3 737-8H4s (36731, N8623F; 36917, N8621A; 36919, N8622A), deliveries.

(SWA) currently operates 691 airplanes to 2 countries, 89 destinations, on 3,286 routes and 2,400 daily flights.

January 2014: SEE ATTACHED - - "SWA-2014-01-2013 TOP WORLD AIRLINES-A/B).

Southwest Airlines (SWA) reported a 2013 net profit of +$754 million, up +79.1% over net income of +$421 million in 2012 and its 41st consecutive full-year net profit.

(SWA)'s 2013 revenue rose +3.6% year-over-year to $17.7 billion, while expenses decreased -0.3% to $16.42 billion, producing an operating profit of +$1.28 billion, more than doubling an operating profit of +$623 million in 2012.

Chairman, President & (CEO) Gary Kelly said that (SWA) is “on track with our AirTran (CQT) integration, achieving approximately $400 million in annual net pre-tax synergies in 2013, as planned.” He noted that 17 of AirTran (CQT)’s 52 Boeing 737-700s have been converted to (SWA) branding and (SWA) service has replaced the 13 (CQT) 717-200s transitioned to Delta Air Lines (DAL) in 2013.

“+9 717s were removed from active service at year end 2013 and the remaining 66 717s are scheduled to be removed from the AirTran (CQT) network by the end of this year and transitioned to (DAL) through 2015,” Kelly said.

He added that the remaining 35 AirTran (CQT) 737-700s “are scheduled to be converted to (SWA) this year. We are pleased with the rapid improvement of our developing markets as we convert AirTran (CQT) routes into Southwest and optimize our combined networks.” (SWA) plans to “complete the (CQT) integration and retire the brand by the end of 2014,” Kelly said.

(SWA)’s 2013 traffic increased +1.4% year-over-year to 104.35 billion (RPM)s on a +1.7% lift in capacity to 130.34 billion (ASM)s, producing a load factor of 80.1% LF, down -0.2 point. Passenger yield rose +2.4% to 16.02 cents.

(SWA) achieved a 13.1% return on invested capital for the full year before taxes and excluding special items. (SWA) earned a 2013 4th-quarter net profit of +$212 million, widened over +$78 million in net income in the 2012 December quarter. 4th-quarter revenue increased +6.1% year-over-year to $4.43 billion.

Southwest Airlines (SWA) has been provisionally approved for 27 new slot pairs at Washington National Airport (DCA), while JetBlue Airways (JBL) has received tentative clearance for 12 new (DCA) slot pairs.

The gains are part of the divestiture of (DCA) slot pairs agreed to by American Airlines (AAL) and US Airways (AMW)/(USA) as part of settling the Department of Justice’s (DOJ) antitrust lawsuit against the carriers’ merger. That settlement called for the divestiture of 52 slot pairs at (DCA) by American (AAL)-US Airways (AMW)/(USA).

In addition to (JBL)’s 12 new slot pairs, (JBL) and (AAL) have reached an agreement under which (AAL) will permanently transfer to (JBL) eight (DCA) slot pairs owned by (AAL) that (JBL) has been operating on a temporary, leased basis since 2010. That leaves five slot pairs still available via the (AAL)-(AMW)/(USA) settlement agreement with the (DOJ).

(SWA), while the largest carrier at Baltimore/Washington International Airport (BWI) with 200 daily flights, currently has only a minimal presence at (DCA). (SWA) Executive VP and (CCO) Bob Jordan said last year that (SWA) would like to have a much stronger (DCA) presence to enable it to compete “more effectively” in the Washington DC market. “Details of [(SWA)’s] bid to acquire divested slots remain confidential under terms of the deal and are subject to final approval of the Department of Justice and completion of customary written agreements,” (SWA) said. “The additional slots will translate to an increase in (SWA)’s service at [DCA] from 17 daily departures to 44 daily departures. (SWA) plans to announce destinations, schedules, and fares for the additional flights later this quarter and anticipates it will begin flying in the 3rd quarter of 2014.”

(JBL) said, “Once approved by the (DOJ), (JBL) expects to add 12 new round trip flights at Washington’s popular, close-in airport. (JBL) plans to introduce nonstop service to cities it does not currently serve from (DCA) as well as add more flights on some existing routes.”

New York-based (JBL) started service at (DCA) in 2010 and currently operates 18 daily flights from the airport to Boston, Fort Lauderdale, Orlando, Tampa and San Juan, Puerto Rico. “With its new slots, (JBL) will operate up to 30 round trips per day at (DCA),” (JBL) said.

(JBL) Senior VP Government Affairs and Associate General Counsel Rob Land added, “(JBL) has already had a major impact at [DCA] in just a few short years with its everyday low fares, such as in the key business market to Boston, where since our entry in 2010 average fares have been reduced -31% and traffic has nearly doubled to +93%.”

(SWA) will add direct flights from its Dallas Love Field (DAL) base to 15 destinations in the 2014 fall after the Wright Amendment is officially repealed on October 13. The Wright Amendment is a USA federal law, in place since 1979, restricting airlines from operating long-distance flights from (DAL). Even with some adjustments made to the law in the 1990s, the Wright Amendment meant (SWA) has only been able to operate flights from (DAL) to other airports in Texas and states close to Texas for the past 34 years. Flights to 41 USA states from (DAL) are banned under the law. But all Wright Amendment restrictions will expire on October 13.

From October 13, (SWA) will add direct flights from (DAL) to Denver, Las Vegas, Orlando, Baltimore, and Chicago Midway. From November 2, (Swa) will add direct flights from (DAL) to Atlanta, Nashville, Washington National, Fort Lauderdale, Los Angeles, New York LaGuardia, Phoenix, San Diego, Orange County (California), and Tampa.

The 15 new destinations will expand (SWA)’s service from its base airport to 31 destinations from the 16 short-haul destinations, it currently serves from (DAL). “The official repeal of Wright Amendment federal flight restrictions signifies a turning point for the (SWA) brand not just in Dallas, but from coast-to-coast,” (SWA) President, Chairman & (CEO) Gary Kelly said. “We are pleased to offer this new service to the customers of our home airport, who have waited 34 long years.”

(SWA) said specific flight schedules to the new destinations from (DAL) will be announced in May. The announcement of the post-Wright Amendment destinations from (DAL) follows (SWA)’s recent announcement of its 1st 3 international destinations in the Caribbean.

(SWA) will start service to Montego Bay in Jamaica, Nassau in the Bahamas and Aruba from July 1, marking the launch of international operations for the low-cost carrier (LCC) that has long focused on the USA domestic market.

The 3 Caribbean destinations will be converted from AirTran Airways (CQT) to (SWA)-branded flying as (SWA) continues the integration process following its acquisition of (CQT) in 2011. (SWA) plans to retire the "AirTran" brand entirely by the end of this year.

(SWA) said passengers can began booking the flights to the Caribbean destinations from January 27 “seamlessly” through (SWA)’s website.

(SWA) Chairman, President & (CEO) Gary Kelly called the sale of international flight tickets an “historic” moment for (SWA) that commenced operations in 1971.

The (SWA) international flights will include service from Atlanta to Aruba and Montego Bay; from Baltimore/Washington to Aruba, Nassau and Montego Bay; and from Orlando to Aruba and Montego Bay.

“(SWA) democratized the sky from our 1st flights >4 decades ago,” Kelly said. “Today’s milestone enables us to reach new territory, new customers, and build upon a 4 decade foundation of doing right by the travelers who trust our value.”

(SWA) is in the process of building its first dedicated international terminal at Houston Hobby Airport, a $156 million facility slated to open in late 2015.

INCDT: There were lots of raised eyebrows after a Southwest Airlines (SWA) 737-700 somehow ended up at the wrong Missouri airport on Sunday evening, January 12th. Some of its passengers said there was a very hard landing followed by a smell of burning rubber, after which they were told they had landed at Taney County Airport, some seven miles from their planned destination of Branson Airport.

The (FAA) and the (NTSB) are investigating.

Southwest Airlines (SWA) is upgrading its fleet of Boeing Next-Generation 737-800 airplanes with Split Scimitar Winglets from Aviation Partners Boeing (APB), (SWA) said on January 2nd. SEE ATTACHED - - "SWA-2014-01 - SPLIT SCIMITAR WINGLET."

(APB) developed the winglet using its existing blended winglet structure with new strengthened spars, aerodynamic scimitar tips and a large ventral strake. (FAA) certification of the new winglets is expected later this month.

"(SWA) is continuously searching for opportunities to reduce fuel consumption and to supplement our environmental stewardship," said Mike Van de Ven, (SWA) Executive VP and Chief Operating Officer (COO).
"(APB) has proven to offer superior technology that performs as promised and we are excited to introduce Split Scimitar Winglets on our 737-800 airplanes in 2014," said Van de Ven.

(SWA) ordered 85 winglets to retrofit a fleet of 52 737-800s. Pending (FAA) certification, the fleet should be retrofitted by early 2015.

February 2014: Route Network Update for Southwest Airlines (SWA):
Southwest Airlines ((IATA) Code: WN, based at Dallas Love Field) network changes:
New route: Aruba - Atlanta Hartsfield Jackson starting July 1, 2014.
New route: Aruba - Baltimore Thurgood Marshall starting July 1, 2014.
New route: Aruba - Orlando International starting July 5, 2014.
New route: Atlanta Hartsfield Jackson - Aruba starting July 1, 2014.
New route: Atlanta Hartsfield Jackson - Montego Bay starting July 1, 2014.
New route: Baltimore Thurgood Marshall - Aruba starting July 1, 2014.
New route: Baltimore Thurgood Marshall - Montego Bay starting July 1, 2014.
New route: Baltimore Thurgood Marshall - Nassau International starting July 1, 2014.
New route: Montego Bay - Atlanta Hartsfield Jackson starting July 1, 2014.
New route: Montego Bay - Baltimore Thurgood Marshall starting July 1, 2014.
New route: Montego Bay - Orlando International starting July 1, 2014.
New route: Nassau International - Baltimore Thurgood Marshall starting July 1, 2014.
New route: Orlando International - Aruba starting July 5, 2014.
New route: Orlando International - Montego Bay starting July 1, 2014.

737-76Q (30288, N7815L), ex-(VH-VBU & N488AC) Aviation Capital Group (CGP) leased, delivery.

March 2014: AirTran Airways (CQT), the subsidiary of Southwest Airlines (SWA), commenced its 2nd route to Minneapolis St Paul (MSP) on March 8th, this time from Tampa, Florida (TPA), joining its existing 4x-daily flights from Atlanta, Georgia. The 2,103 km sector will be served weekly (Saturdays) until April 5th, utilizing (CQT)’s 117-seat 717-200s and faces extensive competition from Delta Air Lines (DAL)’s 4x-daily flights, Spirit Airlines (SPR)’s daily services, and Sun Country Airlines (SCA)’s 6x-weekly operations.

Southwest Airlines (SWA), the world’s largest low cost carrier (LCC), increased its domestic offering with the launch of four new services, all of which are operated weekly (Saturdays). With the longest route being the 2,585 km service from Fort Myers, Florida (RSW) to Denver, (DEN), and the shortest being inaugurated from Fort Myers (RSW) to Kansas City (MCI) at 1,860 km. (SWA) will face competition only on the Fort Myers to Denver route, from United Airlines (UAL)’s daily flights and Frontier Airlines (FRO)’s 4x-weekly operations.

(SWA) has announced it will double flights from Washington National Airport (DCA), including seven nonstop routes. (SWA) has outlined its planned new Washington National operations following the acceptance of its bid by USA regulators. As reported previously, (SWA) won 54 slots at the Washington airport, allowing 27 additional daily flights.

In a press release, (SWA) announced it would launch the following new routes out of Washington National with effect from August 10: Chicago Midway, Nashville International, and New Orleans International. Effective November 2: Akron/Canton, Dallas Love Field, and Indianapolis International.

American Airlines (AAL) and US Airways (AMW)/(USA) relinquished the slots as part of their anti-trust settlement with the USA Department of Justice (DOJ).

(SWA) will start service to 2 destinations in Mexico in August.

(SWA) previously announced it would fly to Montego Bay in Jamaica, Nassau in the Bahamas and Aruba from July 1, marking the first (SWA)-branded international flights. As with those destinations, flights to Cancun and San Jose del Cabo/Los Cabos in Mexico will be conversions from AirTran Airways (CQT)-branded flights.

(SWA) acquired AirTran (CQT) in 2011 and plans to completely retire the AirTran brand by the end of 2014.

The Mexican service, which can now be booked via (SWA)’s website, will include flights from Atlanta, Baltimore and Milwaukee to Cancun from August 10. The Milwaukee flights will operate on Saturdays only. Also from August 10, (SWA) will fly between Orange County (California) and San Jose del Cabo/Los Cabos.

From October 7th, (SWA) will operate daily, Denver - Cancun flights and from October 11th it will fly Saturday, Denver - San del Cabo/Los Cabos service. In addition, (SWA) will start a Saturday, Atlanta - Nassau service from August 10th.

For the 2nd consecutive month, after 15 months of reported declines, full-time equivalent (FTE) employment at USA scheduled passenger airlines has registered a monthly increase year-over-year.

In February, USA scheduled passenger airlines employed 381,985 full-time workers, up +0.4% year-over-year, according to figures from the USA Department of Transportation’s Bureau of Transportation Statistics (BTS).

It was the 3rd consecutive month in which full-time equivalent (FTE) jobs at USA scheduled passenger airlines increased year-over-year. The February total registers +1,571 more (FTE) jobs among USA scheduled passenger carriers than in February 2013.

Among the USA major/network carriers, year-over-year increases in February (FTE) jobs were seen at US Airways (AMW)/(USA) (up +3.6%), Alaska Airlines (ASA) (up +2.7%), American Airlines (AAL) (up +0.4%) and Delta Air Lines (DAL) (up +0.2%). United Airlines (UAL) reported losing -1.8% of its (FTE) positions year-over-year. Overall, the USA major/network carriers saw a +0.1% year-over-year increase in February (FTE) employees.

Hawaiian Airlines (HWI), a major carrier classified by (BTS) as an “other carrier” (airlines that operate within specific niche markets) reported a year-over-year February increase of +332 (FTE) positions, up +7.5%.

Overall, (FTE) positions at the major USA low-cost-carriers (LCCs) grew +0.7% year-over-year in February. Spirit Airlines (SPR) had the largest concentration of year-over-year growth, expanding its February (FTE) job count by +16.8%, to 3,534 (FTE) employees; Allegiant Air (WJE)’s monthly (FTE) job count grew as well, up +14.3% from February 2013, to 2.134 (FTE) employees. Increases also occurred at Virgin America (VUS) (up +6.7%) and JetBlue Airways (JBL) (up +4.9%). February (FTE) job declines were seen at Frontier Airlines (FRO) (down -7.4%) and Southwest Airlines (SWA) (down -1.7%).

Sun Country Airlines (SCA), a national carrier/(LCC) classified by (BTS) as an “other carrier,” registered a year-over-year February increase of +169 (FTE) positions, up +17.4%.

Ranked by (FTE) workforce, the top 10 passenger airlines for February were: United Airlines (UAL) (80,694 (FTE) employees), Delta Air Lines (DAL) (73,602), American Airlines (AAL) (59,699 + 31.604 from merger with (AMW)/(USA)), Southwest (SWA) (45,091 + 8500 when merged with (CQT)), US Airways (AMW)/(USA) (31,604), JetBlue Airways (JBL) (13,301), and Alaska Airlines (ASA) (10.192).

(SWA) operates 684 airplanes, and serves 6 countries, 94 destinations, 3,177 routes and 3,454 daily flights.

2 737-8H4s (36896, N8625A; 37004, N8624J), deliveries.

April 2014: Southwest Airlines (SWA) earned 1st-quarter net income of +$152 million, a significant improvement over a net profit of +$59 million in the prior-year period, and expects continued strength throughout 2014.

(SWA) has long targeted a 15% return on invested capital (ROIC) goal, a mark it routinely hit in previous decades but has struggled to achieve in recent years, even as it maintained profitability. (CFO) Tammy Romo told analysts and reporters that after “a very strong 1st quarter we’re close to our 15% (ROIC) goal and we plan to hit it this year.” (CEO) Gary Kelly added, “There are no airlines [that] have hit a 15% (ROIC) over a cycle except for (SWA). That’s what we did in the 1970s, ‘80s and ‘90s. We’ve worked very hard for a decade to get [back] to this point.”

(SWA)'s (ROIC) for the 12 months ended March 31 was 14.2%, which compares favorably to (ROIC) of 8.3% for the 12 months ended March 31, 2013.

Despite the encouraging financial performance, (SWA) plans to keep capacity flat for the full-year 2014 as it completes the integration of AirTran Airways (CQT), which it acquired in 2011. Kelly said (SWA) will contemplate growth opportunities next year. “We want to grow, but we’re cautious,” he said, adding that “our first priority” is hitting the 15% (ROIC) goal.

(SWA)’s fleet stood at 676 airplanes as of March 31, -5 fewer than it had at the end of 2013. During the 1st quarter, it took delivery of 2 new Boeing 737-800s and 6 pre-owned 737-700s. It retired 1 737-300 and removed 12 AirTran (CQT) 717-200s from service. “This is a very tactical business, especially when it comes to growth and growth strategies,” Kelly said, adding, “We’ll want to manage our growth very carefully with an eye to keeping our balance sheet strong and hitting our return on invested capital.”

(SWA)’s 1st-quarter revenue increased +2% year-over-year to $4.17 billion while expenses decreased -1.6% to $3.95 billion, producing an operating profit of +$215 million, >tripling operating income of $70 million in the 2013 March quarter. The carrier estimated severe winter weather cost it $45 million in revenue during the 1st quarter.

(SWA)’s traffic grew +1.7% year-over-year in the 1st quarter to 24.16 billion (RPM)s on a -1.1% cut in capacity to 30.47 billion (ASM)s, producing a load factor of 79.3% LF, up +2.2 points. Yield improved +0.7% to 16.28 cents.

(SWA) increased its domestic offering from San Diego, California (SAN) on April 8th, with the launch of daily flights to New Orleans, Louisiana (MSY). The 2,573 km sector will be operated utilizing the (LCC)’s 143-seat 737-700s. Furthermore, (SWA)’s 20th route from San Diego will face no competition from other carriers.

737-7BD (33925, N7728D), 2 737-7K9s (30041, N7813P; 30042, N342TR), and 2 737-790s (30166, N557WN; 30778, N562WN), deliveries.

May 2014: AirTran Airways (CQT) will operate its last scheduled flight before it is fully absorbed into parent, Southwest Airlines (SWA) on Sunday, December 28, 2014. Routed Atlanta Hartsfield Jackson to Tampa International, the final flight will operate as AirTran Flight #1 (Marketed as Southwest Flight #5001) and reprises the 1st flight (CQT) operated on October 26, 1993.

Southwest Airlines (SWA) announced its acquisition of AirTran Airways (CQT) in September 2010, and closed the transaction on May 2, 2011. Thereafter, the USA Federal Aviation Administration (FAA) awarded the firm a single air operating certificate (AOC) for the 2 carriers on March 1, 2012.

Southwest Airlines (SWA) named Craig Drew as VP Flight Operations.

June 2014: Southwest Airlines (SWA) began daily Austin - Cancun service.

Southwest Airlines (SWA) has selected Boeing Airplane Health Management (AHM) to enhance operational efficiency in its maintenance and engineering operations. (SWA) will use (AHM) to collect and evaluate airplane operations data while the airplane is in flight. This real-time data is used to signal ground operations crews of any potential maintenance issues before the airplane lands, minimizing flight schedule disruptions and maintenance-related delays.

(AHM) is a web-based system that captures data in real time from airplanes while in-flight and delivers it to airlines' ground operations through the MyBoeingFleet.com web portal. Access to data about oxygen pressure, engine condition and hydraulic fluid are among the parameters monitored using the Aircraft Communications Addressing & Reporting System (ACARS) through the installed Aircraft Condition Monitoring System (ACMS).

"In our trials with Airplane Health Management, we clearly saw how we would be able to reduce (and even avoid) unscheduled maintenance and ground time for our fleet," said Jim Sokol VP Maintenance Operations, (SWA). "The predictive nature of this product allows us to proactively initiate planning for necessary repairs, even while an airplane is in flight. With this capability, we can mitigate schedule delays and help ensure on time arrivals and departures for our customers."

Boeing technical teams will work with (SWA) to facilitate initial deployment of the system for its Next-Generation 737s. (SWA) is Boeing's 66th customer for Airplane Health Management. "We expect to see an immediate cost benefit with the introduction of (AHM) to our next-generation 737 fleet," said Trevor Stedke, VP Technical Services, (SWA). "We're excited to work with Boeing (TBC) to take advantage of the full potential of this product and further leverage its capabilities to improve efficiency across our operations."

(BHM) is a powerful, data-driven capability used worldwide by airplane operators, and maintenance, repair & overhaul providers (MROs) to proactively manage the serviceability of airplanes and fleets. It is designed to interface with existing airplane systems and communication infrastructure, using state-of-the-art airplane and ground technology to address day-of-operation disruptions, help predict future operations events and prevent unplanned maintenance and schedule interruptions.

Airplane Health Management (AHM) is part of an integrated suite of aviation services marketed as the "Boeing Edge." These include parts, training, engineering, maintenance and software solutions that increase the efficiency and profitability of airlines and leasing companies. "Throughout the long relationship between Boeing (TBC) and (SWA), we have worked closely together to support ongoing focused efforts in applying state-of-the-art technology to solve day-of-operations issues," said Rick Anderson VP Sales, Boeing Commercial Aviation Services (CAS). "We are very pleased to provide Digital Aviation solutions such as Boeing (AHM) to enhance and accelerate improvements in (SWA)'s operations with real-time data analysis, which gives our customers a competitive advantage."

(SWA) is an all-Boeing carrier and operates the largest 737 fleet of any airline. In 2011, (SWA) became the launch customer for the 737 MAX.

July 2014: Southwest Airlines (SWA) posted a net profit of +$465 million for the 2nd quarter, more than doubling net income of +$224 million in the prior-year quarter, and exceeded its pre-tax return on invested capital (ROIC) target for the 12 months ended June 30.

(SWA) has been endeavoring to return to the 15% or better pre-tax (ROIC) target it used to routinely hit in previous decades, but has struggled to achieve in recent years. “Over the last 12 months, our exceptional earnings performance, combined with our actions to prudently manage our invested capital, produced a 17.1% pre-tax return on invested capital, excluding special items,” Chairman, President & (CEO) Gary Kelly said. “This positions us well to meet or exceed our 15% pre-tax (ROIC) target for full year 2014.”

The 17.1% pre-tax (ROIC) for the 12 months ended June 30, marks a significant improvement over an 8.5% pre-tax (ROIC) for the 12 months ended June 30, 2013.

(SWA)’s 2nd-quarter revenue totaled $5.01 billion, up +7.9% year-over-year, while expenses rose just +0.6% to $4.24 billion, producing an operating profit of+ $775 million, up +79% over operating income of $433 million in the 2013 June quarter. 2nd quarter traffic increased +2.4% year-over-year to 28.59 billion (RPM)s, while capacity was cut -0.4% to 34.1 billion (ASM)s, producing a load factor of 83.9% LF, up +2.3 points. (RASM) rose +8.4% to 14.7 cents and passenger revenue yield increased +6% to 16.62 cents.

(SWA) added 7 net airplanes during the 2nd quarter and ended the period with 683 airplanes in its fleet. During the 3-month period, it took delivery of 12 new Boeing 737-800s and 3 pre-owned 737-700s. It retired 1 737-500 and removed 7 AirTran Airways (CQT) 717-200s from service.

(SWA) plans to retire the AirTran (CQT) brand by the end of this year.

2 (SWA) 737-700s departed Baltimore/Washington International Airport (BWI) July 1st morning bound for the Caribbean, marking the 1st international flights in the 44-year history of (SWA). The 1st (SWA) 737 departing (BWI) headed for Aruba, while the 2nd 737 headed for Montego Bay, Jamaica. (SWA) is beginning branded international flying to Aruba, Montego Bay, and Nassau in the Bahamas, and in August will add Mexican destinations Cancun and San Jose del Cabo/Los Cabos. All of the international destinations were previously operated to by AirTran Airways (CQT), which (SWA) acquired in 2011. (SWA) plans to completely retire the "AirTran" brand by the end of this year.

Chairman, President & (CEO) Gary Kelly said international flying will be “a modest component of (SWA)’s route system for the near future,” but could eventually make up 10% - 15% of (SWA)’s network. “We need to walk before we run, but we’re excited to get started” with international flights, he said.

United Airlines (UAL) said its application for seasonal service to Mexico still will leave one available designation for another USA carrier to serve the routes, thereby dismissing Southwest Airlines (SWA)’s letter of support for (UAL)’s application. At issue are 2 routes to Mexico — Houston - Puerto Vallarta and - San Jose del Cabo (for which (UAL) has applied for permission from the USA Department of Transportation (DOT) to begin operating November 1). (UAL) is applying for the routes with SkyWest, which will replace the ExpressJet regional service that currently holds the designation.

By the terms of the USA - Mexico bilateral air services agreement, the two governments can designate a limited number of carriers to serve any given city pair between the two countries. (SWA) argued in May that although it does not currently operate these routes, it might do so in the future. (SWA) supported (UAL)’s application with the proviso that the (DOT) should require United (UAL) to surrender one of its designations on each route should (SWA) (or another USA carrier) express an interest in the routes.

In a filing before the (DOT), (UAL) said (SWA)’s request was “without merit.” (UAL) argued that even if the (DOT) grants it the route authorities, there will be 1 available designation on each route, and “(SWA) is well aware” of this. “[(UAL) and SkyWest] made clear that SkyWest’s United Express service would simply replace the existing ExpressJet United Express service on these routes and that no additional designations would be required.”

(UAL) added that (SWA)’s request does not apply yet. “Moreover, (SWA) has no immediate intent to serve these routes.” However, (SWA) late last month raised concerns about when ExpressJet would return the designation it currently holds and said then the decision was entirely “within (UAL)’s discretion.” Although (SWA) does not now serve the routes, (SWA) said it is likely to be interested “within the next year or so.”

Southwest Airlines (SWA) is the #1 carrier in California! - - SEE ATTACHED - - "SWA-TOP 15 AIRLINES IN CALIFORNIA-2014-07."

Analysis of schedule data for July 2014 confirms that (SWA) is the leading airline operating at airports in California, ahead of United Airlines (UAL). Alaska Airlines (ASA) is an impressive 5th, ahead of US Airways (AMW)/(USA), with California-based, Virgin America (VUS) in 7th place ahead of JetBlue Airways (JBL). Air Canada (ACN) is the leading foreign carrier (highlighted in bright green) in 9th place, while 2 Mexican carriers just make the top 15 as well. 3 (LCC)s (Spirit Airlines, Allegiant Air and Frontier Airlines) all make the top 15 but have a combined seat market share of just 2.3%.

Since last July, Phoenix has overtaken Las Vegas to be the leading airport served from airports in California. With seat growth of >13% compared with a year ago, it is even possible that Seattle-Tacoma may pass both Phoenix and Las Vegas to become the leading route, as Delta Air Lines (DAL) continues to ramp up its operations there to feed its Asian network. Among the top 15 destinations from California are 4 ‘domestic’ airports within California (highlighted in bright green ON THE ATTACHED - - :SWA-2014-07-TOP 15 ROUTES FROM CALIFORNIA"). 3 of these have seen a reduction in capacity since last July.

Last year, California’s airports (SEE ATTACHED - - "SWA-2014-07-TOP CALIFORNIA AIRPORTS") handled an estimated 183 million passengers. For comparison, this is more than passed through all Italian airports (144 million), or French airports (161 million), but slightly >187 million passengers processed at all Spanish airports in 2013. The state’s top 12 airports all handled more than one million passengers, with Los Angeles currently ranked at number 6 in the world, and number 3 in the USA behind Atlanta and Chicago O’Hare. San Francisco with 45 million passengers ranked 22nd in the world last year.

(SWA) has announced changes in its executive leadership. (SWA) VP Ground Operations Jack Smith is being promoted to Senior VP Operations. (SWA) Managing Director Ground Operations Steve Goldberg is being promoted to VP Ground Operations. (SWA)’s longtime VP Maintenance Operations Jim Sokol will retire, effective September 15. Landon Nitschke, currently Senior Director of Maintenance, will succeed Sokol as VP Maintenance Operations. All promotions are effective July 1.

(GE) Aviation (GEC) has reached a deal with Southwest Airlines (SWA) to expand its OnPoint solution agreement to cover a total of 196 (CFM56-7B)s on 737-800s and up to 100 (CFM56-7B)s on 737-700s.

The (FAA) announced in a press release it was proposing a $12 million civil penalty against Southwest Airlines (SWA) for failing to comply with (FAA) regulations in 3 separate enforcement cases related to repairs on its 737s.

The (FAA) said it “alleged that beginning in 2006, (SWA) conducted so-called ‘extreme makeover’ alterations to eliminate potential cracking of the aluminum skin on 44 jetliners. The (FAA) conducted an investigation that included both (SWA) and its contractor, Aviation Technical Services (ATS) (BFG) of Everett, Washington. Investigators determined that (ATS) (BFG) failed to follow proper procedures for replacing the fuselage skins on these airplanes. (FAA) investigators also determined that (ATS) (BFG) failed to follow required procedures for placing the airplanes on jacks and stabilizing them. All of the work was done under the supervision of (SWA), which was responsible for ensuring that procedures were properly followed.”

The (FAA) alleged “(SWA) returned the jetliners to service and operated them when they were not in compliance with federal aviation regulations (FAR)s. The regulatory violations charged involve numerous flights that occurred in 2009 after the (FAA) put (SWA) on notice that these airplanes were not in compliance with either (FAA) Airworthiness Directives (AD)s or alternate, (FAA)-approved methods of complying with the (AD)s. The (FAA) later approved the repairs after (SWA) provided proper documentation that the repairs met safety standards.”

During its investigation, the (FAA) said it “found that (ATS) (BFG) workers applied sealant beneath the new skin panels, but did not install fasteners in all of the rivet holes during the timeframe for the sealant to be effective. This could have resulted in gaps between the skin and the surface to which it was being mounted. Such gaps could allow moisture to penetrate the skin and lead to corrosion. As a result of the improper repairs, these airplanes did not comply with federal aviation regulations (FAR)s.”

The (FAA) also “alleged that (ATS) (BFG) personnel failed to follow requirements to properly place these airplanes on jacks and shore them up while the work was being performed. If a plane is shored improperly during skin replacement, the airframe could shift and lead to subsequent problems with the new skin.”

In the 3rd case, “the (FAA) alleged that (SWA) failed to properly install a ground wire on water drain masts on 2 of its Boeing 737s in response to an (FAA) (AD) addressing lightning strikes on these components. As a result, the airplanes were not in compliance with federal aviation regulations (FAR)s. The airplanes were each operated on >20 passenger flights, after (SWA) became aware of the discrepancies, but before (SWA) corrected the problem.”

(SWA) Communications Director Brandy King said: “The (FAA) letter includes repair issues that were addressed several years ago. The press release and letter issued by the (FAA) are not assessments of a fine (they are proposed), and (SWA) will respond to the (FAA) allegations in accordance with applicable procedures. Having fully resolved the repair issues some time ago, none of the items raised in the (FAA) letter affect airplanes currently being operated by (SWA). Safety is paramount, and we always strive for full compliance with established and approved processes and procedures. As always, (SWA) is committed to continuously making enhancements to our internal procedures, as well as improvements related to oversight of our repair vendors. This continuous improvement has helped bolster (SWA)’s maintenance program, continuing our safety commitment for every (SWA) employee in all aspects of our operations.”

Later, however, (SWA) was fined $12 million by the Federal Aviation Administration (FAA) for making faulty repairs to its Boeing 737 passenger jets and the unsafe transport of hazardous materials on commercial flights. Beginning in 2006, the Dallas, (SWA) conducted so-called “extreme makeover” alterations to eliminate potential cracking of aluminum skin on 44 jetliners. But investigators determined the airline and its contractor (Aviation Technical Services (ATS) (BFG)) failed to follow proper procedures for replacing the fuselage skins, among others.

(SWA)’ problems, however, are not confined to repairs. Jeffrey Bondurant, a former (SWA) Cargo Manager, was allegedly fired for bringing to light (SWA)’s unsafe transportation of lithium ion batteries on passenger planes. Improperly packaged lithium ion batteries have resulted in fires that have downed cargo planes and killed flight crew (FC) members, according to the National Transportation Safety Board (NTSB).

(SWA) has 30 days from the receipt of the (FAA)’s Civil Penalty letter to respond to the allegations and negotiate fines.

August 2014: Southwest Airlines (SWA) is revealing where it plans to fly in Mexico, through filings with the USA Department of Transportation (DOT) that support (or at least do not object to) another airline’s plans in that country.

But the objection comes with caveats. United Airlines (UAL) has applied for an exemption that would allow SkyWest, operating as United Express, to fly between Houston and Mexico City. (UAL) and its code share partner, ExpressJet already have authority to fly the route, and (UAL) has asked the (DOT) to substitute SkyWest for ExpressJet.

The USA - Mexico bilateral air services agreement stipulates that each country may designate 2 carriers to serve that route. If the SkyWest exemption is granted, (UAL) can continue to hold both slots, operating both mainline and regional partner flights, between the 2 cities.

In its filing with the (DOT) on August 14, (SWA) said it does not object to (UAL)’s application “at this time,” because (SWA) is not currently seeking to serve that route. But that could change, (SWA) said. “(SWA) urges the department to put [(UAL) and SkyWest] on notice, that their authority and corresponding USA carrier designations in this market are subject to being rescinded, if (SWA) were to actively seek competing authority to serve the Houston - (MEX) market.” (SWA) could seek the authority in 2015, before (UAL)’s 2-year exemption expires.

(SWA) said its new international terminal at Houston Hobby Airport should be open by the 4th quarter of next year, at which point, (SWA) will seek “to offer a broad range of competitive USA carrier services from Houston to points in Mexico, as well as destinations in the Caribbean and South America.”

(SWA) cites longstanding (DOT) precedent to reallocate limited Mexico route authorities to new entrant carriers. In fact, the (DOT) ruled that (UAL) will have to surrender a Houston - Leon route authority, for which it and SkyWest applied for exemptions, should another carrier desire to serve that route. (SWA) signaled its intent for future service between Houston and Leon earlier this year.

The USA and Mexico have been negotiating the bilateral agreement, first ratified in 1960, and amended in 2005, but an "open-skies" deal remains elusive. (SWA), among other carriers, has expressed hope that the treaty will be liberalized.

Although (SWA) operates international flights, it inherited through its merger with AirTran Airways, (SWA) launched its 1st international flights on its own airplanes last month with flights to the Caribbean, and began operating flights to Mexico, earlier this month.

(SWA) expanded its network with the addition of 5 new routes, all of which were launched on August 10th using the low-cost carrier (LCC)’s 143Y-seat 737-700s. With the longest sector being the 2,235 km airport pair from Baltimore/Washington (BWI) to Cancun (CUN) in Mexico, (SWA) will face competition on just 3 of the 5 new additions from Delta Air Lines (DAL) and US Airways (AMW)/(USA). In fact, the 2 links to Mexico are replacing the former AirTran Airways (CQT) operations. Also noteworthy is the fact that (SWA) expanded its presence at Washington Reagan (DCA) with 3 routes, served by an average weekly frequency of almost 26. (SWA) is also planning to increase its frequency on the 967 km route to Chicago Midway (MDW) to 9x-daily starting from September 30th.

(SWA) which in the previous week expanded in Washington and headed to Mexico, continued to replace AirTran Airways (CQT) operations on August 16th with +2 more airport pairs, both of which are operated weekly (Saturdays) using (SWA)’s 143-seat 737-700s. (SWA) inaugurated operations on the 1,167 km route from Atlanta (ATL) to Nassau (NAS) in the Bahamas, a sector served by Delta Air Lines (DAL) (29x-weekly). In fact, Nassau is already served daily by (SWA) from Baltimore/Washington. In addition, (SWA) added its 3rd route to Cancun (CUN) with flights from Milwaukee (MKE), an airport pair not flown by any other airline. (SWA) is currently operating to the Mexican city with 9 weekly services from Baltimore/Washington and 8 weekly operations from Atlanta as of August 10th.

(SWA) sees “plenty” of opportunity for expansion in the north of South America with its existing fleet of Boeing 737s and will begin increasing its international service from Fort Lauderdale, Florida by 2017 or 2018.

(TIMCO) Aviation Services (ASC), a subsidiary of Hong Kong Aircraft Engineering Company (HAECO), has named Jim Sokol as President of (MRO) Services. Jim has 33 years of experience in the airplane maintenance industry, most recently as VP Maintenance Operations for Southwest Airlines (SWA).

September 2014: Southwest Airlines (SWA) has unveiled a new logo and brand overhaul (named "Heart") - SEE ATTACHED - - "SWA-2014-09 - NEW LIVERY AND LOGO" which it said puts (SWA)’s heart on display after a year of change for (SWA). “It’s a big year for (SWA), as (SWA) introduces its legendary brand to international destinations; the repeal of the Wright Amendment is within sight; and the integration of AirTran Airways (CQT) operations is on track to be completed later this year. (SWA) continues to evolve, serving >90 destinations, and expanding its footprint in big markets like New York City and Washington DC,” (SWA) said.

“With all these exciting changes happening, we thought it was time for a new visual expression of our brand (one that marries our past to our present and sets the course for where we're headed in the future),” (SWA) (CEO) Gary Kelly said.

“The job wasn’t to change who we are,” (SWA) VP & Chief Marketing Officer Kevin Krone said. “We already know who we are. The job was to keep the elements of (SWA) that our employees and customers love, and to make them a bold, modern expression of our future.”

(SWA) said the approach and focus with this launch has been with the intent to remain cost-neutral by using a phased rollout. Airplanes will receive the newly painted livery within the airplane’s existing repainting schedule, with new airplanes delivered in the new Heart livery. In addition, many of the future airport conversions will be integrated into existing and upcoming airport improvement projects.

Click here to view a video of the new look: http://www.multivu.com/players/English/7316751-southwest-airlines-unveils-new-heart-look-logo-livery-airport-experience/

(SWA) (which just revealed a new logo and brand overhaul) is committed to keeping fares low. But in order to do so it must cut costs, with the bulk of those cost savings coming out of labor. (CEO) Gary Kelly remains adamantly opposed to baggage fees.

Future growth in (SWA)’s network will come from its growing number of international routes, and (SWA) sees potential in 50 “dots,” or new destinations, within reach of its current fleet of Boeing 737s.

(SWA) evaluates new international service through a number of criteria, asking whether a market is underserved, whether the population is affluent enough to support air service, and if the right infrastructure is in place, (SWA) VP Network Planning & Performance, Andrew Watterson said.

By these criteria, (SWA) has a short list of about 50 destinations in Mexico, the Caribbean and the north of South America (all within 737 range). Details on what cities the carrier may target, remain unclear, although it has indicated a few cities in Mexico, including Leon and Mexico City earlier this year, through filings with the USA Department of Transportation.

One country within range has not risen to the short list, and that’s Canada, Watterson said. By most of the measures listed above, Canada is attractive, but the Crown Rents, Canadian airports must pay, and which they pass onto airlines through fees, would make it difficult to maintain Southwest (SWA)’s low fares, he said.

Watterson sees most growth coming from new international routes. “We are closer to the end than the beginning” for new routes in the USA, he said. Cincinnati, de-hubbed by Delta Air Lines (DAL), is the largest city (SWA) does not serve currently, and although Watterson said only that (SWA) is “considering” the market.

The AirTran Airways (CQT) acquisition gave (SWA) more access to LaGuardia Airport and Washington National Airport, giving (SWA) the opportunity to target higher-yielding business travelers. “East of the Mississippi, we were seen as a leisure carrier, but in the West, we are thought of as both a business and leisure airline,” Watterson said.

(SWA) is trying to change how it is perceived in the East Coast by adjusting its schedule to be of more utility to the business traveler. Through the AirTran (CQT) acquisition, and from buying slots at Washington National, American Airlines (AAL) and US Airways (AMW)/(USA) had to divest as a condition of their merger, (SWA) now is the 2nd-largest carrier at the airport.

(SWA) also is adjusting its schedule at Dallas Love Field in advance of the October expiration of the Wright Amendment, which restricts long-haul flights from the airport. Some short-haul flights will be trimmed from the Love Field schedule to allow more long-haul flights. “We have chosen a broad network out of Dallas,” Watterson said. “We didn’t go super deep in any particular market.

About 150 flights per day from Love Field is “right,” (CEO) Gary Kelly said. Love Field, although important to (SWA)’s history, will never be the size of Chicago Midway Airport or Baltimore Washington International Airport, 2 of (SWA)’s largest bases, Kelly said.

(SWA)'s 8th international destination will be San Jose, Costa Rica (SJO), to which (SWA) will operate daily flights from Baltimore/Washington International Airport (BWI) from March 7, 2015, subject to government approval.

(SWA) Chairman, President & (CEO) Gary Kelly announced the (BWI) - (SJO) route, while speaking at a Washington DC breakfast meeting of the Greater Washington Board of Trade. “International is the growth opportunity ahead [for (SWA)] and (BWI) will be a big part of that as this morning’s announcement shows,” Kelly said.

He added that Dallas-based (SWA) is developing a regional strategy for the Washington DC - Baltimore market now that it has a presence at all 3 area airports ((BWI), Washington National (DCA), and Washington Dulles (IAD)). Thanks to slots gained from its 2011 acquisition of AirTran Airways (CQT) and via American Airlines (AAL)/US Airways (AMW)/(USA) divestitures, (SWA) will operate 44 daily departures to 14 destinations from (DCA) by November. (SWA), which had no (DCA) flights at the beginning of 2011, will be the 2nd largest carrier at the airport in terms of seats by November, trailing only the new American Airlines (AAL).

(SWA) has long had a dominant presence at (BWI), where it is the largest carrier and will operate 200 daily departures to 60 destinations by March 2015. It has operated (IAD) service since 2006.

The Baltimore-Washington market “is huge” for (SWA), Kelly said, adding, “Now we’ve emerged as the largest airline for the metro area and it allows us to think of a strategy for the region. Our primary focus city is (BWI) and that won’t change, but [DCA] can complement that. We will have a very thoughtful and very coordinated approach among the 3 airports.”

As a company philosophy, (SWA) targets its advertising to a national audience, with a particular focus on television ads during major USA sports events. But Kelly said (SWA) is now looking at developing Washington-Baltimore specific advertisements in addition to its national campaigns. “This metro area is large enough for us now that it affords us the opportunity to customize our [advertising] message here,” he explained.

Southwest Airlines ((IATA) Code: WN, based at Dallas Love Field) (SWA) will commence international services out of Houston Hobby next year with the launch of a weekly flight to Aruba on March 7. At present, (SWA) operates an extensive domestic USA-based network out of Houston Hobby with San Juan Luis Muñoz Marin, its only destination outside the mainland USA.

(SWA) currently operates 692 airplanes and travels to 7 countries and 93 destinations, on 3,107 routes and 3,330 daily flights.

See video on (SWA) new livery.

October 2014: News Item A.1: Southwest Airlines (SWA), the world's largest low-cost carrier (LCC), owns a fleet of almost 700 airplanes, serving more domestic passengers than any other USA airline, with a unique offering of low fares, without any annoying extra fees. (SWA) has been a legendary growth story, being profitable for 42 consecutive years. From three jet airplanes in 1971, (SWA) grew to 70 by 1985, and was flying more than >400 airplanes by the middle of the last decade. But aside from the US$1.4 billion purchase of AirTran Airways (CQT) in 2011, (SWA) has hardly grown in recent years. In 2013, (SWA) reported the full year net income of +US$754 million, or US$1.05 per diluted share, which exceeded the figure before the economic crisis in 2007. SEE ATTACHED CHART SHOWING NET PROFIT AND OPERATING REVENUE OVER THE LAST 10 YEARS - - "SWA-2014-10 - NET PROFIT LAST 10 YEARS."

News Item A.2: Southwest Airlines (SWA) has further expanded its USA domestic offering with the addition of its 12th route from Washington Reagan (DCA) on September 30th, this time to Tampa, Florida (TPA). The 1,310 km sector is already served by US Airways (AMW)/(USA)’s 34 weekly services and JetBlue Airways (JBL)'s 2x-daily flights. Nevertheless, (SWA) will operate 2x-daily services on the new airport pair, utilizing its 143-seat 737-700s.

Documents filed by Southwest Airlines (SWA) and American Airlines (AAL)s objecting to JetBlue Airways (JBL)’s proposed Jacksonville, Florida (JAX) - Washington National (DCA) service show just how contentious the battle for valuable slots at the close-in Washington airport can be.

News Item A-3: Southwest Airlines (SWA) and the International Association of Machinists and Aerospace Workers (IAM) (representing (SWA)’s approximately 6,000 customer service agents and customer support and services representatives) have reached a tentative agreement for a new 4-year contract. The current contract became amendable in October 2012.

In the upcoming weeks, the (IAM) membership will be given the full details of the agreement and vote on ratification.


November 2014: News Item A-1: Southwest Airlines (SWA) has launched (SWA)-branded flights to Punta Cana and Mexico City, in a step closer to its integration with AirTran Airways (CQT). All international flights on (CQT)’s 7 cities outside the USA and its 9 USA gateway cities are flown by (SWA).

(SWA) continued to expand rapidly, adding a total of +20 routes on November 2nd. While the majority of the new additions have been taken over from its AirTran Airways (CQT) subsidiary, as part of their merger, (SWA) has also commenced a further eight new links from Dallas Love Field (DAL), following the recent abolition of the Wright Amendment. Notably, the average weekly frequency across the 20 new routes is 11.8. With the longest sector being the 3,626 km route from Washington Dulles (IAD) to San Diego (SAN), and the shortest being inaugurated from Washington Dulles, VA (IAD) to Akron/Canton, Ohio (CAK) at 441 km, (SWA) will face direct competition on half of the newly launched routes:
Atlanta (ATL) to Punta Cana (PUJ), 8x-weekly vs Delta Airlines 15x-;
Austin-Bergstrom, Texas to Cancun (CUN) 7x- vs United Airlines 1x-;
Baltimore/Washington (BWI) to (PUJ) 8x- VS Frontier Airlines 2x-;
Chicago Midway (MDW) to (CUN) 14x-; to Montego Bay (MBJ) 7x-; to (PUJ) 8x-.
Dallas Love Field (DAL) to Atlanta (TL) 26x-, vs Delta Air Lines 32x-, to Fort Lauderdale (FLL) 14x-; to Nashville (BNA) 14x-; to NY LaGuardia (LGA) 20x-; to Orange County (SNA) 7x-; to Phoenix (PHX) 27x-; to San Diego 14x-; and to Tampa (TPA) 14x-.
Orange County (SNA) to Mexico City (MEX) 7x-.
San Antonio (SAT) to (MEX) 7x- vs Interjet (AAE) 12x-, & Aeromexico (AMX) 9x-.
Washington Dulles (IAD), to Las Vegas (LAS) 7x-, vs (UAL) 13x-; (FRO) 4x-; to San Diego (SAN) 6x-, vs (UAL) 30x-; to Akron/Canton (CAK) 7x- vs US Airways (AMW)/(USA); to Indianapolis (IND) 14x- vs (AMW/(USA) 40x-.

Reservations and frequent flyer services are now performed by Southwest.com. The integration of the 2 carriers will be completed December 28, 2014.

New services for Dallas Love Field - San Francisco and - Oakland begin January 6, 2015.

News Item A-2: Southwest Airlines (SWA) could be planning a competitive response to Spirit Airlines (SPR)’s recent decision to add seven new routes to Mexico and Central America from Houston’s George Bush Intercontinental Airport.

News Item A-3: The federal government is suing Southwest Airlines (SWA) after failing to reach a settlement with (SWA) over allegations that repairs to dozens of planes didn't meet safety standards.

The Justice Department sued (SWA) on Monday November 3rd in the federal district court in Washington state. The lawsuit seeks to enforce $12 million in civil penalties that the Federal Aviation Administration (FAA) announced in late July.

The government said that starting in 2006, (SWA) hired a contractor to make extensive repairs on 44 planes to prevent the aluminum skin from cracking. The (FAA) said the contractor, Aviation Technical Services Inc (ATS) (BFG) of Everett, Washington, failed to follow proper procedures.

"We dispute the (FAA)'s allegations and look forward to the opportunity to vigorously defend (SWA)'s record in a court of law," (SWA) spokeswoman Brandy King said.

The (SWA) case is the 2nd-largest penalty that the (FAA) has ever sought against an airline, behind only a $24.2 million case against American Airlines (AAL).

Typically, airlines negotiate with the (FAA) to reduce the penalties. The (FAA) hit (SWA) with $10.2 million in penalties in 2008, and that case was settled a year later for $7.5 million. The government's decision to sue (SWA) barely three months after announcing the most recent penalty, indicated the wide gap between the two sides.

The most serious allegation in the current case involves replacement of parts of the fuselages on 44 planes. The (FAA) said Aviation Technical Services (BFG) workers under (SWA)'s supervision put sealant under the new skin panels but didn't install all the rivets fast enough for the sealant to be most effective, which could create gaps for moisture to penetrate and cause corrosion.

(SWA) returned the planes to service in 2009 and kept flying some of them for months after the (FAA) warned (SWA) of the improper repairs, the (FAA) said. Regulators approved later repairs.

December 2014: News Item A-1: Southwest Airlines (SWA) is the recipient of the Air Transport World (ATW) "2015 Airline of the Year Award."

Other winners of the 41st Airline Industry Achievement Awards include Air Astana (AKZ) (Airline Market Leader of the Year); Ethiopian Airlines (ETH) (Regional Airline of the Year); Spirit Airlines (SPR) (Value Airline of the Year); Lufthansa (DLH) (Eco-Airline of the Year); Boeing (TBC) (Eco-Company of the Year); London Heathrow (LHR) Terminal 2, The Queen’s Terminal, and Star (SAL) Alliance (Airport of the Year); and L-3 Link Simulation & Training (Aviation Technology Achievement).

In selecting (SWA) as "Airline of the Year," (ATW) Editors cited the USA carrier’s extraordinary and consistent standards of service, financial performance, safety, and environmental and corporate responsibility. In particular, for the 1st time in 14 years, (SWA) achieved its 15% return on invested capital target, before taxes and excluding special items, reporting 17.1% for the 12 months ended June 30, 2014. (SWA) remains the world’s only airline that can claim 41 consecutive years of profitability. And it has maintained the highest of standards through its merger-acquisition with AirTran Airways (CQT), marking (SWA)’s transition to serving international destinations.

“(CEO) Gary Kelly’s leadership has allowed (SWA) to become the USA’s largest in terms of originating domestic passengers, as well as 1 of the world’s safest airlines. With Gary at the helm, (SWA) said goodbye to the Wright Amendment and hello to international destinations (massive milestones). All of this, while delivering a financial performance that is the envy of airlines worldwide, and customer service that is renowned for its hospitality. I sincerely congratulate Gary and the entire (SWA) team,” (ATW) Editor-in-Chief Karen Walker said.

“On behalf of the People of Southwest Airlines (SWA), I am delighted that our airline has been selected by (ATW) as Airline of the Year,” (SWA) Chairman, President, & (CEO) Gary Kelly said. “This is a prestigious honor, and I am proud for all of our employees. They have done an extraordinary job transforming (SWA) over the past decade, which culminated in a record and historic 2014 performance. Because of their Warrior Spirits, (SWA) now flies to international destinations; Dallas Love Field has been set free from the Wright Amendment; AirTran (CQT) will be fully integrated in just days; and "LUV" has reached lifetime highs. We celebrated this year with a bold new look to our brand and airplane livery. This award is, truly, icing on the cake!”

News Item A-2: The final AirTran Airways (CQT)-branded flight operated from Hartsfield-Jackson Atlanta International Airport to Tampa Bay International Airport, formally completing the 2011 Southwest Airlines (SWA) - AirTran (CQT) merger.

(SWA) acquired Orlando-based, AirTran (CQT) for $1.4 billion in cash and (SWA) common stock in 2011 in a deal that brought together the world's largest low-cost carrier (LCC) with the 3rd largest (LCC) in North America. (CQT) was only about 25% of (SWA)’s size, but had strengths at airports where (SWA) had little-to-no presence and also enabled (SWA) to venture into international flying for the 1st time.

“The acquisition of (CQT) was a unique opportunity to extend the (SWA) network into key markets it didn’t yet serve, such as Atlanta and the greater Washington DC area, via Ronald Reagan National Airport,” (SWA) said.

(SWA) President, Chairman & (CEO) Gary Kelly said earlier this month that (SWA)’s decision to slowly re-brand (CQT) flights as (SWA) flights was critical to the merger being “a tremendous success” with no major integration or operational problems. “We didn’t do a hard cutover,” he explained. “We did it gradually over a 2- to 3-year time period.”

The last 18 AirTran (CQT) Boeing 737s will be temporarily taken out of service to be converted into (SWA) airplanes in early 2015, according to Kelly. (SWA) is close to finishing the process of transferring 88 AirTran (CQT) 717s to Delta Air Lines (DAL).

News Item A-3: Southwest Airlines (SWA) could be planning a competitive response to Spirit Airlines (SPR)’s recent decision to add 7 new routes to Mexico and Central America from Houston’s George Bush Intercontinental Airport.

Southwest Airlines (SWA) plans to operate Boeing 737 flights starting in late 2015 from its new Houston Hobby Airport (HOU) international terminal to 4 destinations in Mexico as well as San Jose, Costa Rica, and Belize City, Belize.

(SWA) has filed applications with the USA Department of Transportation (DOT) to operate the routes from (HOU). The $156 million (HOU) facility, slated to open in the 2015 autumn, will be (SWA)’s first terminal dedicated to international flights. (SWA), which began operating branded international flights for the first time this year, currently operates to seven international destinations as well as San Juan, Puerto Rico.

None of (SWA)’s current international flights retain the AirTran Airways (CQT) brand, which still exists on some domestic flights but will be retired completely after December 28. The Mexican destinations (SWA) plans to serve from (HOU) are Mexico City, Cancun, Puerto Vallarta, and San Jose del Cabo/Los Cabos. (SWA) will begin Aruba flights from (HOU) in March 2015 before completion of the international terminal. This is possible because there is a USA customs pre-clearance facility in Aruba.

Southwest (SWA) currently operates to 93 total destinations and believes there are 50 potential destinations it could add, “virtually all of them outside the 48 states” of the continental USA, Chairman, President & (CEO) Gary Kelly said.

Belize City will be the 3rd new destination added to (SWA)’s network in 2015, following San Jose, Costa Rica (which it will serve from Baltimore/Washington International Airport starting March 7) and Puerto Vallarta (which it will serve from Orange County Wayne Airport starting June 7).

Kelly said (SWA) is eyeing a fourth addition to its network in 2015, but won’t announce the destination until next year. He noted that passengers flying on (SWA)’s international flights are “mostly USA citizens traveling for leisure.” International flying currently makes up about 1% to 1.5% of (SWA)’s capacity, Kelly said.

(SWA) will start daily flights between Austin, Texas, and St Louis from June 28, 2015. (SWA) is Lambert - St Louis International Airport’s biggest operator with >90 daily flights to 35 cities.

News Item A-4: "Rare good ‘shock’ for airlines" by Air Transport World (ATW)'s Aaron Karp in his AirKarp Blog:

Southwest Airlines (SWA) expects per gallon jet fuel prices to be as low as $2.30 in 2015. Airlines have learned to expect the unexpected, but usually the “shock” is bad news leading to carriers’ bottom lines taking a hit. But a rare surprise has occurred in recent months that likely will result in airlines making more money: the relatively sudden and steep drop in oil prices.

“I quite frankly was taken by surprise by the decline in oil prices,” (SWA) Chairman, President & (CEO) Gary Kelly told The Wings Club in New York.

Dropping oil prices played a large part in (IATA) boosting the projected 2014 collective net profit of the world’s airlines by +10.6% compared to its June forecast. And (IATA) is forecasting a >25% year-over-year increase in airline net profits in 2015.

Kelly said he expects per gallon jet fuel prices to be as low as $2.30 in 2015, but cautioned that things could change quickly. “I don’t think we’ve ever anointed ourselves the czars or seers of what the future is,” he said, adding that “the fundamental question to answer” regarding the airline industry in 2015 is “where are fuel prices going to be? Nobody knows.”

Noting that the recent drop has been both surprising and fast, Kelly warned, “Logic tells you the opposite can happen and we certainly have to be prepared for that.”

According to its 3rd-quarter financial release, (SWA) has about 40% of its fuel consumption hedged for 2015, 2016 and 2017, though the company is exploring adjustments to its fuel hedging contracts. Kelly acknowledged (SWA) is not getting the full benefits of lower oil prices because of its hedging program, but he said its 2014 “fuel bill all-in, including hedging, will be down dramatically” compared to 2013.

Fuel hedging has benefited (SWA) in the past and Kelly said he doesn’t regret hedging even when oil prices dip unexpectedly. “Hedging is not intended to be a money-maker,” he said, calling it a form of “insurance” that, like all insurance, comes with a cost. “Our hedging program is designed to prevent catastrophe,” he explained.

Kelly said the bottom line is that fuel is one-third of an airline’s costs and “with these oil prices, if they continue, our operating costs will be lower than we thought they would be and lower than they have been the last couple of years.”

Airplane manufacturers and aircraft engine producers have used the high fuel cost environment of recent years to promote (and sell a large number of) fuel-efficient airplanes to airlines. Boeing (TBC) Chairman, President & (CEO) Jim McNerney said in October that he doesn’t think falling oil prices will diminish airlines’ huge appetite for fuel-efficient airplanes such as the 787 and 737 MAX. “Our analysis is the price of oil could fall a long way before our planes are anything but compelling,” he said, adding that fuel costs would have to drop “a long way before you see even incremental impact” on airplane sales.

News Item A-5: The International Association of Machinists & Aerospace Workers (IAM) (representing Southwest Airlines (SWA)’s approximately 6,000 customer service agents and customer support and services representatives) have ratified a new four-year contract.

According to (SWA), the agreement includes pay increases, as well as bonus opportunities that are tied to company and employee performance.

(SWA) Senior VP Labor Relations, Randy Babbitt said, “With the ratification coming before the end of the year, our (IAM) Employees will benefit from (SWA)'s outstanding 2014 financial accomplishments.”

(SWA) said it is approximately 83% unionized and actively engaged in negotiations with 6 out of its 12 unions.

January 2015: News Item A-1: Southwest Airlines (SWA) reported a 2014 net profit of +$1.14 billion, up +50.7% over net income of +$754 million in 2013, as expenses decreased slightly year-over-year while revenue grew +5.1%.

The 2014 net profit was (SWA)’s highest ever and marked the 42nd consecutive year (SWA) has been in the black. The record net profit was achieved even with (SWA) taking a mark-to-market $251 million hit on fuel hedging contracts. The company’s pre-tax return on invested capital (ROIC) for the 12 months ended December 31, 2014 was 21.2%, well exceeding (SWA)’s historic 15% (ROIC) target and an improvement over 2013’s 13.1% (ROIC).

(SWA) retired the AirTran Airways (CQT) brand on December 28, 2014, and net pre-tax synergies from the AirTran (CQT) merger were approximately $500 million in 2014, exceeding (SWA)’s $400 million target. (SWA) launched Southwest-branded international flights for the 1st time in 2014; it now serves 5 countries and plans to add +2 more in 2015. “Our strategic plan has come together successfully, and we have realized significant contributions from the AirTran (CQT) integration,” (SWA) Chairman, President & (CEO) Gary Kelly said, adding, “Without question, 2014 was a monumental year for (SWA) with many notable achievements.”

(SWA)’s 2014 revenue was up +5.1% to $18.61 billion, while expenses lowered -0.2% to $16.38 billion, producing operating income of $2.23 billion, up +74.1% from an operating profit of +$1.28 billion in 2013. Even with fuel hedging factored in, (SWA) did see benefits from lower oil prices, as 2014 fuel costs decreased -8.2% year-over-year to $5.43 billion.

Kelly said (SWA)’s fuel cost savings are expected to be significant in the 2015 March quarter. “Based on our existing fuel derivative contracts and market prices as of January 16, 2015, we estimate our 1st quarter 2015 economic fuel costs to be approximately $1.90 per gallon, which would result in approximately -$500 million in year-over-year fuel cost savings for the 1st quarter alone.”

(SWA)’s 2014 traffic increased +3.5% year-over-year to 108.04 billion (RPM)s on just a +0.5% rise in capacity to 131 billion (ASM)s, producing a load factor of 82.5% LF, up +2.4 points. Passenger yield improved +2% to 16.34 cents.

(SWA)’s fourth-quarter 2014 net profit was +$190 million, down -10.4% compared to +$212 million in net income in the 2013 December quarter, on a +4.5% year-over-year increase in revenue to $4.63 billion. The fourth-quarter net profit decline is owing to the vast majority of (SWA)’s fuel hedging hit for the year coming during the period.

(SWA) ended 2014 with 665 airplanes in its fleet, down -2.3% from 681 at the end of 2013.

News Item A-2: Southwest Airlines (SWA) increased its seasonal offering from Milwaukee (MKE) with the addition of weekly flights (Saturdays) until April 11th to Montego Bay (MBJ) in Jamaica and Punta Cana (PUJ) in the Dominican Republic on January 24th. The low-cost carrier (LCC) will operate the route to Jamaica using its 143Y-seat 737-700s, a sector flown by Frontier Airlines (FRO) weekly. In addition, the airport pair to the Dominican Republic will be served by its 175-seat 737-800s. Competition on this route will be provided by (FRO)’s 2x-weekly services. This brings to 22 the number of destinations served this winter by (SWA) from Milwaukee. (SWA) now serves Montego Bay from a total of 5 airports (the others being Atlanta, Baltimore/Washington, Chicago Midway and Orlando), while Punta Cana is now served from four airports (the others being Atlanta, Baltimore/Washington and Chicago Midway).

News Item A-3: Boeing (TBC) delivers 2 new 737-800s to Southwest Airlines (SWA).

February 2015: News Item A-1: Over the last year, Southwest Airlines (SWA) has gone from having one of the worst on-time performance rates among major carriers to having one of the best.

Executives at (SWA) said their low on-time rate was the result of trying to maximize revenue by scheduling too many flights per day. The schedules were so jam-packed that any mechanical problem or staffing error created a ripple of delays throughout the airline.

Starting in August of last year, (SWA) began increasing the time allotted for each flight as well as the time needed to connect and turn around flights after they arrived at airports.

It seems to have made a difference. (SWA) reported a 79% on-time arrival rate in January, compared with a 69% rate in January of 2014, according to "Flightview," a company that monitors airline arrival data.

Among major USA carriers, Hawaiian Airlines (HWI) had the highest rating, with an 86% on-time record.

"We are pleased with the positive results of our schedule investments as demonstrated by our year-over-year results for January 2015," said (SWA) spokesman, Brian Parrish. "We will work hard to maintain (SWA)'s positive performance momentum throughout 2015."

News Item A-2: Southwest Airlines (SWA)is investigating why a required inspection interval in its routine maintenance program was left out of its maintenance tracking system, causing it to miss deadlines for checking backup hydraulic systems on 128 Boeing 737s.

(SWA) discovered the issue on February 24th and immediately informed (FAA). The affected airplanes were voluntarily removed from service while (SWA) and the (FAA), in consultation with Boeing (TBC), came up with a plan to perform the required checks. The (FAA) said it evaluated the risk and determined the airplane could remain in service for up to five days while awaiting checks. News of the missed checks, which affected 1 of 3 737NG hydraulic systems, was 1st reported by "The Wall Street Journal."

With the immediate issue of getting the airplanes airworthy apparently settled, (SWA) is examining what went wrong. “While updating our maintenance tracking system, we discovered that we inadvertently omitted the lowest of three intervals for the maintenance check established within (SWA)’s (FAA)-approved maintenance program,” (SWA) explained. “We are investigating the events and will implement any necessary policy or procedure changes.”

The missed inspections are part of work packages performed in-house, (SWA) confirmed. The missing interval was discovered internally, though was not immediately clear whether the issue was uncovered by happenstance or as part of a routine quality check.

The issue caused (SWA) to cancel about 80 flights as it worked with the (FAA) to gain approval on a plan.

Analysts at Cowen & Company calculated that the entire issue could cost (SWA) $3.6 million in lost bookings, assuming 200 cancellations that drove most customers to book on other carriers. It also suggested (SWA) could incur $64 million in added maintenance costs to expedite the checks.

The actual costs are likely to be lower, as (SWA) had fewer cancellations Wednesday than Tuesday and was able to accommodate a sizable portion of the disrupted passengers on other (SWA) flights.

News Item A-3: With Wright Amendment restrictions in the rearview mirror, Southwest Airlines (SWA) has added daily flights from Dallas Love Field to +8 airports, bringing to 50 the number of destinations (SWA) will serve from its base airport.

Daily flights from Love Field to Boston, Charlotte, Detroit, Omaha, Philadelphia, Pittsburgh, Raleigh/Durham, and Salt Lake City will start August 9. Also on that date, Saturday service between Love Field and Charleston, South Carolina (slated to launch in April) will be upgraded to daily. As of August 9, (SWA) will operate 180 weekday departures from Love Field.

(SWA) has been free to expand at Love Field since the the Wright Amendment, a USA federal law that restricted airlines from operating long-distance flights from the airport, expired October 13, 2014.

(SWA) said the 8 additional destinations are made possible by a deal between (SWA) and (UAL) under which the former is subleasing 2 Love Field gates from the latter. The arrangement gives (SWA) control of 18 of Love Field’s 20 gates; it directly leases 16 gates.

In announcing the new flights, (SWA) Lead Planner Network Pplanning Technology, Bill Owen wrote on (SWA)’s website that Love Field “may be a nearly 100-year-old airport, but with the improvements (SWA) made to the terminal and the city [of Dallas] has made to the runways and taxiways [to be completed later this year], this historic airport will be state-of-the-art.”

March 2015: News Item A-1: A series of winter storms streaking across the USA in the past two weeks resulted in a staggering 17,400 flight cancellations and 52,650 delays between February 21 and March 4, as snow and ice crippled major airport hubs, from Dallas and Chicago to Atlanta.

The extreme winter weather, which included multiple ice storms in Dallas and snow and sleet in Atlanta (2 of the world's busiest airports) helped influence airline and airport on-time rankings for the month of February.

Southwest Airlines (SWA) was the top on-time performer of all of the major USA airlines during the month, according to "FlightView," while Alaska Airlines (ASA) occupied the top spot in on-time performance for North America. Both Southwest (SWA) and Alaska Airlines (ASA) have extensive route networks throughout the American West, where the weather was unusually placid and mild during February. (ASA) also flies throughout the Frontier State, which saw record warmth and a lack of snow in February.

The flight delays reflect a slight shift in the weather pattern during February that brought snow and ice to a wider area, rather than confining most of winter's misery to southern New England, as happened earlier in the month. Instead, sprawling areas of low pressure and wintry precipitation formed and slowly moved across the USA during the 2nd half of February, affecting nearly every major airline hub from Denver to Detroit.

To put the delays and cancellations into perspective, there are about 23,000 scheduled flights in the USA on an average winter weekday, "USA Today" reported. This means that the two-week delay total was equivalent to about three full days of USA flights.

The delays and cancellations this year far outpaced figures for a similar period last year, according to "FlightAware." The USA saw just 9,003 cancellations between February 22 and March 7, 2014, along with 47,824 total USA flight delays.

News Item A-2: Southwest Airlines (SWA) expanded its international network with the addition of two new links on March 7th, both of which are served using its 143-seat 737-700s. 1st of all, the world’s largest low-cost carrier (LCC) according to passengers carried in 2014, introduced daily flights from Baltimore/Washington (BWI) to San Jose (SJO) in Costa Rica. Besides this, (SWA) commenced weekly (Saturdays) departures on the 3,225 km sector from Houston Hobby (HOU) to Aruba (AUA), a route served until August 8th. (SWA) is already flying to Aruba from Baltimore/Washington (eight times weekly) and Orlando (daily). No other carrier operates on (SWA)’s new additions.

(SWA) begins daily service from Dallas Love Field August 9: to Boston, Charlotte, Detroit, Omah, Philadelphia, Pittsburgh, Raleigh/Durham, and Salt Lake City.

News Item A-3: "March Madness: Southwest vs Spirit" by Aaron Karp in AirKarp Blog, March 23, 2015.

Many Americans spent the last four days obsessed with “March Madness,” the moniker given to the annual National Collegiate Athletic Association basketball tournament in the USA featuring 48 televised games over about 85 hours. Basketball fans watching the smorgasbord of games repeatedly saw a new commercial for Southwest Airlines (SWA), 1 of the tournament’s primary sponsors. The commercial caught my attention because, for the 1st time, (SWA) appears to be targeting ultra-low cost carrier (ULCC) Spirit Airlines (SPR).

(SPR) maintains (and (SWA) in the past has concurred) that it is not stealing passengers from (SWA) or any other airline, but rather is creating new passengers with its no-frills product in which fares are kept very low, while fees are added for nearly all services. Speaking earlier in March at the (ISTAT) Americas 2015 conference in Phoenix, Spirit (SPR) (CFO) Ted Christie talked about the fast-growing Florida-based (ULCC)’s “price aggressive” business model.

“There’s demand today at our price point, it’s just that no one [else] serves it,” he said. “The people we carry, were there the day before we entered the market, it’s just that fares [on other airlines] were too high for them. We’ve fully unbundled the product and allowed our customers to pay for exactly what they want. The data suggests that on average we’re around 30% - 40% cheaper than the comparable fare in the markets we serve, even when you take into account the [ancillary] options you add.”

Whereas Southwest (SWA) blankets popular televised sports with ads, Spirit (SPR) focuses much of its marketing on Internet campaigns featuring puppets, disrobing passengers and the occasional double entendre. And (SWA)’s ads previously focused either on (SWA) itself or differentiating (SWA) from legacy USA airlines like American (AAL), Delta (DAL), and United (UAL). The new (SWA) ad doesn’t directly mention (SPR), but it’s unmistakable to which airline it is referring.

“We invented low fares,” (SWA) reminded basketball viewers in the commercial. “Then everyone else pretty much tried to follow. We call it the "Southwest effect." But other airlines probably use more colorful language. Low fares. We don’t just have them, we invented them.”

The “more colorful language” reference (accompanied by one smiling (SWA) employee rolling her eyes and another shrugging her shoulders) is clearly a shot at Spirit (SPR).

Why is (SWA) suddenly worried about Spirit (SPR)? Well, (SPR) is growing aggressively (its capacity will rise +30% year-over-year in 2015) and (SPR) is increasingly becoming an alternative in many markets (SWA) serves. And while (SPR) is definitely creating new passengers, perhaps (SWA) is worried that its existing low-end leisure passengers could be starting to bleed to (SPR). Also, while (SWA) more and more targets business (C) passengers, it does not want to lose its signature brand recognition in the USA as THE low fares airline: “Low fares. We don’t just have them, we invented them.”

The frenzy that is the 4 days of "March Madness" in which 64 teams are dramatically and quickly paired down to 16 has become beloved for, above all else, big upsets in which an established, powerhouse university loses unexpectedly to a scrappy, unknown upstart school. Often, these upsets occur because the well-known team doesn’t take its opponent seriously enough until, suddenly, it is late in the game and the underdog has too much momentum to be overcome. (SWA) does not want to be “upset” by (SPR) because it does not take its lesser known, smaller rival seriously enough. (SWA)’s March Madness ad campaign, to me, is the 1st signal that (SWA) does see (SPR) as a potential threat that needs to be taken seriously.

April 2015: News Item A-1: Coming off its best-ever full-year earnings performance in 2014, Southwest Airlines (SWA)’s momentum continued in the 2015 1st quarter with net income of +$453 million, nearly tripling a net profit of +$152 million in the prior-year quarter.

(SWA)’s 1st-quarter revenue rose +6% year-over-year to $4.41 billion, while expenses decreased -8% to $3.63 billion, producing an operating profit of +$780 million, more than tripling operating income of $215 million in the 2014 March quarter.

“Our return on invested capital (ROIC) for the 12 months ended March 31, 2015, was an outstanding 25.6%,” Chairman, President & (CEO) Gary Kelly said. The (ROIC) was up +11.4 points from 14.2% for the 12 months ended March 31, 2014.

Kelly added, “Customer demand was strong throughout 1st quarter 2015, resulting in a record 1st quarter load factor of 80.1% LF. We are delighted also with our unit cost trends, which continue to benefit from increased stage length, increased gauge, lower maintenance costs and substantially lower fuel prices. Our 1st quarter 2015 unit costs, excluding special items, declined -12.4% year-over-year.”

(SWA)’s 1st-quarter traffic increased +7.1% year-over-year to 25.86 billion (RPM)s on a +6% lift in (ASM)s to 32.3 billion, producing the 80.1% LF load factor, up +0.8 point. (SWA)’s average airplane stage length increased +4.1% year-over-year to 739 miles. Yield dipped -0.7% to 16.16 cents.

News Item A-2: Southwest Airlines (SWA) inaugurated its Memphis - Dallas Love Field service on April 8th, opening up direct commercial service between the 2 airports for the 1st time since 1974. A previous lack of direct service can partly be blamed on the now-repealed Wright Amendment. (SWA) will operate the Memphis - Dallas Love Field route 2x- daily.

(SWA) began daily, Dallas (DAL) - Milwaukee service.

News Item A-3: (SWA) has chosen Global Eagle Entertainment’s (GEE) Ku-band global satellite connectivity system to be factory installed on its orders for the Boeing 737 MAX.

(SWA) is Boeing (TBC)'s launch customer for the 737 MAX program and the airlines expects to take the 1st deliveries of these airplanes in 2017. The airplanes will be delivered to (SWA) with (GEE)'s connectivity system pre-installed, enabling passengers to access the Internet and the airline's free live TV service.

News Item A-4: Mxi Technologies has been selected by (SWA) for a collaborative planning and scoping phase to determine how Maintenix would be implemented at (SWA).

News Item A-5: See attached "SWA-2015-04 - TOP 25 WORLD TRAFFIC.jpg."

May 2015: News Item A-1: Southwest Airlines (SWA) and the Transport Workers Union (TWU) 550, representing (SWA)’s 250 flight dispatchers, have agreed to terms on a new four-year contract extension.

News of the tentative agreement comes on the heels of a deal with (SWA)’s customer service agents and customer representatives last December, and only days after its flight simulator technicians ratified their new four-year contract. The agreement with dispatchers amends the group’s current contract and provides adjusted wage-scale increases, as well as continued opportunities for bonuses that are tied to individual and company performances, according to (SWA).

News Item A-2: Southwest Airlines (SWA) selected Honeywell (SGC) to supply avionics package to meet future government-mandated regulations for its Boeing 737 MAXs (currently 200) on order and existing 737NG fleet. Most of this fleet will include a collision avoidance system that can be coupled with an automatic dependent surveillance-broadcast (ADS-B) In receiver.

The 737NGs and its incoming 737 Max will get the SmartTraffic collision avoidance system. Although the system has the ability to interface with the (ADS-B) In data, Honeywell (SGC) said that the deal does not include installation of those receivers.

(SWA)'s fleet includes 436 737-700S AND 93 737-800s, and it has orders for 170 737 Max 8s and 30 737 Max 7s. (SWA) also has 118 older 737-800s and 12 737-500s, although (SWA) did not say whether those types will receive the upgrades.

The airplanes will also have installed (SGC)'s Multi-Mode Receiver, which can process data from a range of navigation systems, as well as its Aspire satellite communications system, which provides voice and data communications via satellite networks.

Other equipment included in the deal includes (SGC)'s IntuVue RDR-4000 3-D weather radar, which can help predict turbulence at distances up to 60 nm and its Quantum Line communications and navigation radios, Honeywell (SGC) added.

News Item A-3: The Southwest Airlines (SWA) Pilots' Association (SWAPA) announced staffing and funding for a Strike Preparedness Committee to prepare the pilots (FC) and the flying public for strike action if (SWAPA) and (SWA) cannot come to an agreement on a new contract in the coming months.

The committee will work closely with outside consultants, staff and other committees and union resources for all contingencies available under the Railway Labor Act, (SWAPA) said.

The pilots (FC) and company have been engaged in federally mediated talks through the National Mediation Board (NMB) since November in hopes of closing out remaining open items including pay, retirement, and scheduling, and job scope. “While a strike is certainly not in either side's best interest, the Railway Labor Act clearly defines the procedure for protracted negotiations which can lead to a lock out by management or a suspension of service by our pilots (FC). (SWAPA) is doing our due diligence to prepare our pilots (FC) and passengers for the next steps in this federal mediation process should we not be able to reach a deal,” (SWAPA) President Paul Jackson said. “We have been in negotiations for >3 years and are seeking a market rate contract for pilots (FC) that is in line, economically, with our peers at other major airlines.”

“Despite astronomical profits and record-setting forecasts for the coming years, (SWA) management has not come forward with an economic offer that can bring both sides to an agreement,” Jackson added. “Our offer is very affordable and would not impact the company’s competitive low-cost advantage. It is time for a deal.”

(SWAPA) represents >8,000 (SWA) pilots (FC).

(SWA) stated in an email: “We are aware of the (SWA) Pilots Association’s (SWAPA) intent to form a strike preparedness committee. Customers of (SWA) have no reason to change or be concerned about their travel plans. We are currently in National Mediation Board (NMB) mediation with (SWAPA). These mediated sessions began in February 2015, and we are fully committed to continuing the mediation process with the hopes of rewarding our pilots (FC) as we have done with other (SWA) employee groups. We have full faith in the mediation process. Both parties are under the authority of the (NMB), and (SWAPA) would not be able to strike without the (NMB) releasing both parties from mediation.”

News Item A-4: Southwest Airlines (SWA)’s growing international network is focused on bringing USA-based leisure travelers to vacation destinations in Mexico, Central America and the Caribbean, but that could change as the network matures, (SWA)’s Network Planning Chief said.

News Item A-5: Southwest Airlines (SWA) will switch all 31 pending airplane orders for 2016 to larger versions of the Boeing 737 as (SWA) expands within the USA and adds new international markets. The swap will bring (SWA)'s 737-800 fleet to 135 by the end of next year.

2 737-8H4 (36657, N86670; 36903, N8668A), ex-(N1786B), deliveries.

June 2015: News Item A-1: Southwest Airlines (SWA) launched 5 new routes on June 28, including 2 new routes from Austin-Bergstrom (AUS) to St Louis (STL) and Orange County (SNA). Commenting at the launch in Austin, David Harvey (SWA)’s Senior Director of Network Planning & Performance, said: “With new routes to St Louis and Orange County now flying, plus services to Seattle and Boston beginning in November, Austin-Bergstrom will be connected to 29 cities across the USA and Mexico non-stop.” 2 of the new routes face direct competition, with services between Indianapolis (IND) and Boston (BOS) seeing competition from Delta Air Lines (DAL), who operate 34x-weekly flights, whereas flights from Orange County to Seattle-Tacoma (SEA) face direct competition from Alaska Airlines (ASA), who operate 47x-weekly flights. All of the new city pairs will operate on either a daily or 2x-daily frequency using (SWA)’s 737-700s.

Routes as follows:
Austin-Bergstrom (AUS) to Orange County (SNA), 737-700 7x-, to St Louis (STL), 737-700 7x-;
Indianapolis (IND) to Boston (BOS), 737-700 14x-, vs Delta Air Lines (DAL) 34x-;
Orange County (SNA) to Chicago Midway (MDW); 737-700 7x-, to Seattle-Tacoma (SEA), 737-700 14x-, vs Alaska Airlines (ASA) 47x-.

News Item A-2: Southwest Airlines (SWA) has agreed to allow Delta Air Lines (DAL) to continue using one of its Dallas Love Field gates pending the outcome of a court case to determine the latter's right of access to the metropolitan airport.

According to the "Dallas News," (DAL) petitioned a USA District Court in Dallas to issue a preliminary injunction blocking a (SWA) restraining order which would evict (DAL) from Love Field.

737-7CT (32751, N7829B), ex-(C-FWBX) delivery.

July 2015: News Item A-1: See "AAL-2015-07 - World Airline Report-A/B/C/D/E" which shows Southwest Airlines (SWA) as one of the top 10 airlines in the world.

News Item A-2: Southwest Airlines (SWA) earned a net profit of +$608 million in the 2nd quarter, up +30.8% over net income of +$465 million in the 2014 June quarter, as the company surged to a 28.2% pre-tax return on invested capital (ROIC) for the 12 months ended June 30.

The (ROIC) was +11.1 points higher than the 17.1% (ROIC) (SWA) reported for the 12 months ended June 30, 2014. “Overall, our network performance is exceptional,” (SWA) Chairman, President & (CEO) Gary Kelly said. He outlined growth plans for 2015 and 2016: “For this year, we are growing our (ASM)s approximately +7% year-over-year. As we continue to optimize our network, we are currently planning to grow our total 2016 (ASM)s in the +5% to +6% range year-over-year with the goal to sustain strong margins and (ROIC) levels in line with 2015.”

(SWA)’s 2nd-quarter revenue grew +2% year-over-year to $5.11 billion, while expenses decreased -5% to $4.03 billion, producing an operating profit of +$1.09 billion, up +40% over operating income of $775 million in the prior-year quarter. (SWA)’s 2nd-quarter fuel expense lowered -29.5% year-over-year to $1.01 billion, representing $420 million in savings. “2nd-quarter 2015 economic fuel costs were $2.02 per gallon, compared with $3.02 per gallon in 2nd quarter 2014,” Kelly said. “Based on our existing fuel derivative contracts and market prices as of July 20, 2015, we expect significant year-over-year fuel savings again in 3rd quarter 2015, with economic fuel costs currently estimated to be approximately $2.20 per gallon, as compared with 3rd quarter 2014’s $2.94 per gallon.”

(SWA)’s half-year net profit was +$1.06 billion, up +72% over net income of +$617 million in the 1st 6 months of 2014, putting it well on pace to exceed its 2014 full-year record net profit of +$1.14 billion.

(SWA)’s 2nd-quarter traffic increased +7.9% year-over-year to 30.86 billion (RPM)s on a +7% gain in capacity to 36.48 billion (ASM)s, producing a load factor of 84.6% LF, down -0.7 points. Yield lowered -5.4% to 15.72 cents.

During the 2nd quarter, (SWA)’s fleet increased by +10 airplanes to 689. (SWA) took delivery of 6 new Boeing 737-800s and 5 pre-owned 737-700s. It retired 1 737 Classic.

News Item A-3: "Southwest Rethinks Old Assumptions" by (ATW) Aaron Karp in his AirKarp blog, July 23, 2015.

One of the hallmarks of Southwest Airlines (SWA)’s persistently successful financial performance, is that (SWA) is willing and unafraid to rethink assumptions, even long-held ones. Case in point: On pace for its second straight year of record profitability, (SWA) is questioning its old assumptions about fuel hedging and pre-tax return on invested capital (ROIC) goals.

(SWA) has famously deployed fuel hedging on a consistent basis as insurance against spikes in oil prices and has long cited a 15% (ROIC) goal as its measurement for financial performance. But with fuel prices remaining low and (SWA)’s (ROIC) surging well past >20%, (SWA) appears to be backing off of hedging and is no longer using the 15% (ROIC) target.

Chairman, President & (CEO) Gary Kelly, speaking to reporters and analysts to discuss (SWA)’s 2nd-quarter net profit of +$608 million, explained, “Given the current fuel price environment and the current industry environment, we’re achieving tremendous shareholder value. It renders the 15% [ROIC] target moot. We’re not targeting down to 15%.”

(SWA)’s (ROIC) for the full year 2014 was 21.2%, and for the 12 months ended June 30 was 28.2%. “Last year we had a 21% (ROIC) and our goal this year is to beat that,” Kelly said, adding that the goal next year will be to beat 2015’s (ROIC). He conceded, “If fuel prices double between now and next year, it will be an unrealistic goal in the short term.”

But per barrel oil prices dropped below <$50 this week and (SWA) is now assuming “fuel prices will continue to be moderate for at least the next several quarters,” Kelly said, adding that the “direction of energy prices appears to be a bit clearer. It’s always dangerous to think you know where energy prices will go, but you have to have a view” and (SWA)’s current view is that low fuel prices will be sustained.

That outlook is also driving (SWA) to become less attached to fuel hedging. (SWA) currently is “effectively un-hedged” in 2018 and reviewing its hedging positions for 2016 and 2017. (SWA) has approximately 40% of its fuel consumption hedged for both 2016 and 2017, but that could change. “We’re still working on our 2016 and 2017 hedge books,” (CFO) Tammy Romo said. “Our bias at this time is toward lower jet fuel prices, so we’re working to balance that as best we can.”

(SWA) expects a net liability of $308 million from fuel hedge contracts in the second half of 2015 and appears to be looking to lower its future liability from hedging. (About 30% of (SWA)’s fuel consumption is expected to be hedged for the full year, which is wound down from the 40% hedging position for 2015 it held late last year.)

The current market “argues to be less hedged rather than more hedged,” Kelly said.

News Item A-4: (SWA) began St Louis - Austin service on June 28 as well as daily, Austin - Orange County service. (SWA) will also begin again daily, St Louis - Little Rock service on January 6, 2016.

News Item A-5: Southwest Airlines (SWA) has reached a tentative agreement with its flight attendants (CA), represented by the Transport Workers Union. Terms of the deal were not released, but (SWA) said they include wage increases, bonus opportunities and work-rule adjustments.

(SWA) Executive VP & (COO) Mike Van de Ven said, “This tentative agreement not only provides additional money, it also supports (SWA)’s low-cost structure and positions the company to be competitive in the years to come.”

Flight attendants (CA) will be presented with the details of the agreement in the coming weeks, and members will have the opportunity to vote on ratification. The current contract became amendable May 31, 2013. If approved, the new agreement will run through May 2019.

(SWA) should operate more efficiently and profitably to international destinations if flight attendants (CA) approve a proposed contract later this month, a (SWA) representative said.

Later, however, on July 24, Southwest Airlines (SWA) flight attendants (CA) voted down a tentative agreement that would have ended 2 years of negotiations.

Representatives for Transport Workers Union (TWU) said flight attendants (CA) rejected the deal by 87% of those casting ballots. Nearly 89% of eligible flight attendants (CA) voted.

(SWA) Senior VP Labor Relations Randy Babbitt said the agreement “ensured that our flight attendants (CA) would stay atop the industry in pay and benefits. It improved (SWA)’s competitiveness with certain work-rule changes and supported our evolving network, both domestically and in international markets. So naturally we’re disappointed that it didn’t pass.”

The deal was slated to run through May 2019 and contained fixed wage increases, cash bonuses and quality of life improvements. (SWA) said it remains committed to reaching an agreement that best serves the interests of both the company and its flight attendants (CA).

“Knowing how volatile our industry can be, I can’t imagine a better time to secure an agreement,” (SWA) VP Cabin Services Mike Hafner said. “But together, we will find a way to move forward. (SWA) flight attendants (CA) are the finest in the industry, and I am continuously proud of their consistent efforts and the caring service they provide our customers.”

(SWA) said it expects (TWU) leadership will take some time to evaluate the results prior to returning to direct bargaining. But for now, the flight attendants (CA) will continue working under the terms of their current agreement, which became amendable May 31, 2013.

News Item A-6: (SWA) promoted Tammy Romo to Executive VP & (CFO); she also has leadership responsibility for Supply Chain Management.

News Item A-7: "Scary Moments on Southwest Airlines (SWA) Flight," (CBS) News, July 9, 2015.

Southwest Airlines (SWA) said no one was injured after one of its planes aborted a takeoff at Midway International Airport in Chicago due to a mechanical issue.

(SWA) spokesperson Emily Samuels said emergency responders met the plane July 8 and the 143 passengers exited via air stairs and returned to the terminal.

(CBS) Boston reported that a passenger on board recorded video of the fire, sparks and possible explosion on the right side of the jet.

Chicago Fire Department spokesman Commander Frank Velez told the "Chicago Tribune" 1 of the 737's engines caught fire but the airplane has since been secured. (CBS) Boston also said there was an engine fire.

Samuels said (SWA) is waiting for reports on the incident and she didn't immediately have further details about what happened. She said the plane would be inspected.

One passenger tweeted a video of the takeoff.

The plane was headed to Logan International Airport in Boston.

"We pulled over and all these fire trucks came over and it was crazy," a woman who was on the plane told "CBS" Boston. "I was actually freaking out because I don't like flying that much anyway and then I just saw that go off and I thought I was going to die."
"I'm just happy it happened on the ground," another passenger told (WBZ).

Samuels said another plane was to take the passengers to Boston.

The (FAA) is investigating engine problems that grounded 2 (SWA) 737s in the same week at Chicago Midway International Airport, (FAA) and airline officials said on July 10.

There were no injuries in either incident, a (SWA) spokeswoman said.

The (FAA) is looking into both cases, in which (SWA) reported issues with an engine, an (FAA) spokeswoman said.

(SWA) said that 136 passengers evacuated on Friday July 10 and traveled to Philadelphia on a new airplane, arriving about 2 hours behind schedule.

(SWA) Flight 4384 to Philadelphia returned to the gate before takeoff after a pilot (FC) from another (SWA) 737 reported seeing "potential signs of a mechanical issue."

Smoke was seen coming out of the right engine of the plane, "ABC7" in Chicago reported. The captain (FC) told passengers that people reported seeing flames, "ABC7" said, citing a passenger.

(SWA) Flight 3299 bound for Boston aborted takeoff on Wednesday July 8 after signs of a "performance issue" with 1 of the engines, (SWA) said.

The engine was on fire and flames shot out of the plane, "ABC7" reported. The fire was extinguished as passengers were evacuated, "ABC7" said.

(SWA) said 143 customers evacuated by air stairs and boarded buses to return to the terminal. A replacement 737 took passengers to Boston later on July 8, a few hours behind schedule.

August 2015: Southwest Airlines (SWA) launched 13 new services on August 8 and 9, with 9 of the routes launching from Dallas Love Field (DAL). Of the new city pairs, only 3 will face direct competition, most notably on services from Washington Reagan (DCA) to Fort Lauderdale (FLL), which sees JetBlue Airways (JBL) and American Airlines (AAL) already operating a combined 48 weekly flights. The average sector length of the new services is 1,737 km and all will be operated using (SWA)’s 737-700s.

Routes as follows:
Columbus (CMH) to Boston (BOS), 737-700 14x- weekly, vs Delta Airlines 19x-, to Oakland (OAK) 7x-;
Orange County (SNA) to Portland (PDX), 14x-, vs Alaska Airlines (ASA) 20x-;
Washington Reagan (DCA) to Fort Lauderdale (FLL), 7x-, vs (JBL) 28x-, (AAL) 20x-;
Charleston (CHS) to Dallas Love Field (DAL), 7x-;
(DAL) to (BOS), 7x-, to Charlotte Douglas (CLT), to Detroit (DTW), to Omaha (OMA), to Philadelphia (PHL), to Pittsburgh (PIT), to Raleigh-Durham (RDU), to Salt Lake City (SLC).

September 2015: News Item A-1: Southwest Airlines (SWA) pilots (FC), represented by the Southwest Airlines Pilots’ Association (SWAPA) have reached a new tentative agreement with (SWA). If ratified, the deal could end >3 years of negotiations.

The company said the agreement offers wage increases and work-rule changes that will benefit the pilot (FC) group and position (SWA) to continue its expansion both domestically and internationally.

“I am encouraged that the union’s board of directors has chosen to put this agreement in front of our pilots (FC), (SWA) VP Flight Operations Craig Drew said. “Everyone on both sides of the table worked hard to fashion a contract that recognizes and rewards the steadfast professionalism of our pilots (FC).”

The ratification vote will close November 4. If the pilots (FC) approve the deal, the contract will become amendable April 1, 2019.

News Item A-2: Southwest Airlines (SWA) is planning to open a 5-gate international facility at Fort Lauderdale Airport in Florida as it grows its beyond USA network. (SWA) Senior VP Network & Revenue Management Andrew Watterson said (SWA)’s international routes were “maturing nicely, in line with expectations.”

October 2015: News Item A-1: Southwest Airlines (SWA) earned net income of +$584 million in the 3rd quarter, up +77.5% from a net profit of +$329 million in the 2014 September quarter, as (SWA) continued to grow capacity at a faster rate than other major USA airlines.

“We’re real happy with the product we have right now,” Chairman, President & (CEO) Gary Kelly told reporters and analysts, adding, “We want to be America’s low fares leader, and I think we are. We’re the only carrier that doesn’t nickel and dime with bag fees and change fees, so that provides tremendous value.” (SWA) grew capacity +7.6% year-over-year in the quarter and expects to grow capacity +7% for the full year and another +5% to +6% in 2016. Kelly said (SWA) is taking advantage of growth opportunities at Dallas Love, Washington National, and Houston Hobby airports.

(SWA)’s 3rd-quarter revenue increased +10.8% year-over-year to $5.32 billion, while expenses dropped -2.2% to $4.09 billion, producing an operating profit of +$1.22 billion, nearly double operating income of $614 million in the prior-year period.

(SWA)’s third-quarter traffic rose +8.9% year-over-year to 31.05 billion (RPM)s on a 7.6% hike in (ASM)s to 36.36 billion, producing a load factor of 85.4% LF, up +1 point. Yield declined -5.1% to 15.19 cents.

Kelly asserted that (SWA)’s negative 3rd-quarter (RASM), down -0.4% year-over-year ((PRASM) dropped -4%), is misleading on the surface, because of various factors, including a continuing increase in the stage length of (SWA) flights (up +3.6% year-over-year in the 3rd quarter), operating more higher gauge airplanes and developing new markets. “There’s quite a bit of noise in those numbers,” Kelly said. “They look very good to me, when you tease out the impact of stage length, the impact of gauge [and other factors]. If you’re careful and you look at the analysis, I think you’ll be pretty impressed with the revenue performance.”

News Item A-2: "Southwest Airlines Delays Hundreds of Flights over Technical Glitch" by (ATW) Aaron Karp, October 12, 2015.

Technical problems caused Southwest Airlines (SWA) to delay 500 flights on October 11, but (SWA) said its systems were expected to “perform normally” October 12.

(SWA) has not pinpointed what went wrong, saying that it had “issues with primary systems” that forced employees to utilize “back-up procedures” to get passengers and baggage processed. “We have some additional work to do, to get bags delivered and some delayed or displaced [passengers] into open seats [October 12],” (SWA) said. “We have teams working as quickly as possible to accomplish that.”

The technical problem affected (SWA) systems at airports across the USA; there were numerous reports of long lines at (SWA) check-in counters and baggage carousels. (SWA) said about 25% of its 3,600 scheduled flights were delayed October 11.

(SWA) said it hopes to “welcome back [passengers] for a better experience soon. We’ll continue to work individually with our affected [passengers] to make this right.”

News Item A-3: "Southwest’s Houston Hobby International Concourse Opens" by (ATW) Aaron Karp, October 15 2015.

A Southwest Airlines (SWA) 737 flight from Houston Hobby Airport (HOU) to Cancun on October 15 inaugurated (SWA)’s international concourse at (HOU).

The (SWA)-financed $156 million concourse, on which construction began 2 years ago, marks the 1st time (SWA) has had a major airport facility dedicated to international operations. In addition to Cancun, (SWA) has started daily service from (HOU) to Mexico City, Puerto Vallarta and San Jose del Cabo/Los Cabos in Mexico; Belize City, Belize ((SWA)’s 96th and newest destination); and San Jose, Costa Rica. From November 1, (SWA) plans to launch service from (HOU) to Liberia, Costa Rica, and Montego Bay, Jamaica.

(SWA) will also operate seasonal flights from (HOU) to San Juan, Puerto Rico and Oranjestad, Aruba.

In addition to the (SWA) concourse at (HOU), USA Customs & Border Protection (CBP) opened a customs facility to process international travelers at the airport, which has been domestic-only for 46 years. To gain clearance to build the concourse, (SWA) had to win a showdown with United Airlines (UAL) in front of the Houston City Council, which approved international flights from (HOU) over objections from (UAL), which dominates Houston Intercontinental Airport.

November 2015: News Item A-1: Southwest Airlines (SWA) commenced services on 23 new routes, all of them starting on November 1. Of the new routes, 11 will face direct competition, with 4 facing 2 incumbent carriers. The average sector length of the new routes is 1,884 km, while all will operate at least a daily rotation. The new routes also welcome (SWA)’s 1st ever services from Houston Hobby (HOU) to Montego Bay (MBJ) and Liberia (LIR), routes that have only been allowed to operate since the recent opening of a new international facility at the Texan airport.

News Item A-2: Southwest Airlines (SWA) pilots (FC) voted to reject a tentative agreement on a new labor contract that had been reached between their union leadership and airline management.

The (SWA) Pilots Association (SWAPA), which represents >8,300 (SWA) pilots (FC), said rank-and-file flight deck crew (FC) had rejected the tentative agreement by a 62% to 38% margin. >95% of the union’s members voted on the tentative accord, which was reached in September.

The rejection, which came after a 45-day education period, sends (SWAPA) leadership and Southwest management back to the negotiating table.

(SWA) said it expects talks overseen by the USA National Mediation Board (MNB) to resume in the spring of 2016. Negotiations between (SWA) and its pilots (FC) have been ongoing for >3 years, with (NMB) involved since November 2014. “(SWA) pilots (FC) will continue working under their existing contract until a new agreement is reached,” (SWA) said.

(SWAPA) President Paul Jackson said that “membership has spoken” and he will now work “to bring our pilots (FC) a contract they can rally behind.” He said the tentative agreement included “increased compensation and some work rule improvements,” but also had provisions “that our pilots (FC) did not find palatable when compared to the potential gains.” Jackson added that (SWAPA) will endeavor to “pinpoint which exact issues” the pilots (FC) want addressed.

The (SWAPA) President said the union “will regroup and begin preparations to return to collective bargaining.”

News Item A-3: Southwest Airlines (SWA) has snapped up 5 ex-Transaero Airlines (TRX) 737-700s, which are being leased by (SWA) from Dutch lessor, AerCap (DEA).

Thus far, 2 of the 737-700s (29350 and 29359) have already arrived at Everett, while the other 3 (29352, 29354 and 29355) are in Shannon awaiting onward transmission to the USA.

(SWA) currently operates 701 airplanes, to 6 countries, to 97 destinations on 3,154 routes and 3,678 daily flights.

(SWA) currently operates 468 737-700s and has been adding a lot of 2nd-hand airplanes of the type of late.

December 2015: News Item A-1: Southwest Airlines (SWA) and the USA have settled a lawsuit involving allegations (SWA) operated numerous 737 airplanes that did not conform to USA (FAA) maintenance standards and were therefore not airworthy.

In November last year, the USA Department of Justice (DOJ) announced a USD12 million lawsuit against (SWA) for 3 separate types of maintenance violations. The 1st 2 categories of violations related to approximately 44 un-airworthy airplanes that (SWA) flew prior to and throughout 2009, whose fuselages had been improperly maintained by, 1st, improperly installing fasteners and, 2nd, improperly supporting (shoring) the airplanes during maintenance. The 3rd category of violations involved (SWA) flying 2 airplanes in 2012, whose drain masts had been improperly altered.

The USA government claimed that (SWA), despite having outsourced its Maintenance Repair & Overhaul (MRO) requirements to Aviation Technical Services Inc (BFG) of Everett, Washington, was still liable for the improper repairs done by the contractor as it is ultimately responsible for (SWA)'s proper maintenance.

However, following talks between the 2 parties, the (DOJ) announced that (SWA) had agreed to pay a USD2.8 million civil penalty and up to USD5.5 million in deferred civil penalties, should it fail to implement operational changes as required by the settlement agreement. (SWA) is required to overhaul its operational protocols aimed at enhancing its oversight of and control over 3rd parties that perform maintenance on its airplanes.

“The Justice Department believes the settlement agreement with (SWA) will provide meaningful improvements in safety and compliance and further ensure the integrity of (FAA) air safety regulations,” Principal Deputy Assistant Attorney General, Benjamin C Mizer, Head of the Justice Department’s Civil Division, said.

Though a trial had been scheduled for March 14, 2016, company and government lawyers notified USA District Court Judge John Coughenour in Washington State that they had reached a settlement.

In 2008, the USA Federal Aviation Administration (FAA) sought USD10.2 million in civil penalties from (SWA) for neglecting to inspect the fuselages of 46 of its planes. The 2 later settled for USD7.5million.

News Item A-2: "Southwest Airlines, Ground Crew Workers Reach Tentative Agreement" by (ATW) Mark Nens, December 30, 2015.

Southwest Airlines (SWA) reached a tentative agreement with the union representing its ground operations workers on December 29; a vote on the new contract is imminent.

The executive board of Transport Workers Union Local 555 (which represents >12,000 Southwest Airlines ramp, ground operations, provisioning and cargo agents) reviewed the Agreement in Principle reached by negotiators December 23 and decided to conduct a ratification vote. A final copy of the tentative agreement will be mailed to union members; voting is expected to begin in January 2016.

“After >4 years of negotiations, our members will have the final say on this tentative agreement,” (TWU) President Greg Puriski said. “It is an important choice for workers and their families and the decision is theirs, and theirs alone.”

(SWA)’s ground crew workers have not had a new contract since 2009. The intervening period has been marked by striking (TWU) members picketing many public and business appearances by (SWA) officials.

According to (TWU) Local 555, the proposed new contract includes substantial pay raises of >20% over the life of the agreement for union members in all classifications. If approved by the union membership, the contract will remain in force for 5 years from the date of the ratification and will become amendable at that time, presumably in 2021.

“We wanted a rewarding contract that our employees would support, as well as one that supports our company’s low-fare structure and growth opportunities,” (SWA) VP Ground Operations, Steve Goldberg said. “We believe this agreement achieves those objectives.”

“The new contract not only improves wages and benefits, but it also enhances (SWA)'s competitive standing within the industry,” (SWA) said.

News Item A-3: Baggage fees revenues for USA airlines in (3Q) 2015 rose +6.2% year-over-year, to $1.02 billion, according to the USA Bureau of Transportation Statistics (BTS). It is the 1st time 3rd-quarter baggage fee revenues have surpassed the $1 billion threshold.

In contrast, reservation cancellation/change fees revenues for the 11 major USA reporting airlines +2 other carriers (Sun Country Airlines (SCA) and Island Air Hawaii) were down -0.4% year-over-year (YOY), to $755.2 million.

In figures released December 15 by the (BTS), a USA Department of Transportation agency, American Airlines (AAL)’s (3Q) revenue figures in both categories reflected the consolidation of its reporting following its merger with US Airways (AMW)/(USA), with extreme (YOY) boosts in revenue: for baggage fees, (AAL)’s revenue grew +88.5% (YOY), while for reservation cancellation/change fees, its revenue grew +51.7% (YOY). Looking more closely, however, if the (3Q) 2014 revenues from both airlines are combined and contrasted to the consolidated (AAL) (3Q) 2015 revenue, the (AAL)'s (YOY) changes are more realistic, with baggage fee revenue rising +3.9% (YOY), and reservation cancellation/change fee revenue falling -2.7% (YOY).

For 3rd-quarter baggage fee revenues, after American Airlines (AAL)’s $292.1 million in revenue, Delta Air Lines (DAL) earned the most, with $236.9 million in revenue, virtually flat with its (3Q) 2014 total. United Airlines (UAL) was next, with $184.7 million in revenue, up +2.2% (YOY).

4 of the 5 reporting low-cost-carriers (LCCs) showed remarkable jumps in (3Q) 2015 baggage fee revenue. JetBlue Airways (JBL) reported $42.7 million in (3Q) baggage fee revenue, up +86.6% from $22.9 million in (3Q) 2014. Allegiant Air (WJE), Spirit Air Lines (SPR) and Frontier Airlines (FRO) all saw (YOY) baggage fee revenue growth of +25.2%, +23.5% and +22.6%, respectively. Virgin America (VUS)’s (3Q) baggage fee revenue fell -1% (YOY).

(SWA) reported a -34.9% (YOY) drop in baggage fee revenue, earning $11.5 million during the September quarter (compared to $17.7 million in (3Q) 2014). (SWA)’s baggage policy allows two checked pieces of baggage per customer. Excess baggage on (SWA) starts at $75 per item one-way.

(DAL) brought in the most revenue for reservation cancellation/change fees during the 3rd quarter with $230.9 million, up +2.1% (YOY). Following (AAL)’s $217 million in revenue, (UAL) reported $202.2 million in revenue, down -4.2% (YOY).

Low Cost Carriers (LCC)s (FRO) and (WJE) both had notable increases in revenue for reservation cancellation/change fees during the quarter. (FRO)’s revenue was up +41.2% (YOY) to $9.3 million, while (WJE)’s was up +31.7% (YOY) to $2.7 million. Minneapolis-based, Sun Country Airlines (SCA) reported reservation cancellation/change fees revenue of $3.8 million during the quarter, over >5 times what the airline earned in (3Q) 2014.

January 2016: News Item A-1: "Southwest Airlines (SWA) Posted Record Net Income, Extended Profit Streak to 43 Years" by (ATW) Aaron Karp, January 21, 2016.

Southwest Airlines (SWA) earned net income of +$2.18 billion in 2015, up +92% over a net profit of +$1.14 billion in 2014, marking (SWA)’s 43rd straight year of profitability.

The annual net profit was the best-ever reported by the company (the second straight year it has posted a record net profit). (CFO), Tammy Romo called 2015 “exceptionally strong” even for an airline that has consistently been one of the industry’s top performers. (SWA)’s return on invested capital (ROIC), long a key indicator highlighted by (SWA), was a record 32.7% for the 12 months ended December 31.

(SWA)’s 2015 revenue was up +6.5% year-over-year to $19.82 billion, a notable increase given that most USA airlines are reporting flat revenue or year-over-year declines. Annual expenses dropped -4.1% to $15.7 billion and the company’s 2015 operating profit was +$4.12 billion, up +85% over operating income of +$2.23 billion in 2014.

(SWA)’s 2015 traffic grew +8.8% to 117.5 billion (RPM)s on a +7.2% increase in capacity to 140.5 billion (ASM)s, producing a load factor of 83.6% LF. Yield fell -4.7% to 15.57 cents.

With the continued growth of ultra low-cost carriers (ULCC) Spirit Airlines (SPR), Frontier Airlines (FRO), and Allegiant Air (WJE) in the USA, (SWA) President, Chairman & (CEO) Gary Kelly conceded that (SWA) (the original (LCC)) is for the 1st time facing serious competition from airlines that “clearly” have lower operating costs than (SWA). Kelly told analysts and reporters that (SWA) is up against “more intense competition today than we ever have had in our history, [which places] an obligation on us to innovate so we don’t lose our low-fare leadership position in the country.” He added that, despite the heavy competition, “(SWA) has never been stronger,” citing in particular its route network and balance sheet.

News Item A-2: "Incident: Southwest Airlines (SWA) 737 at Sacramento, Bird Strike into Both Engines" by Simon Hradecky, The Aviation Herald, January 9, 2016.

INCDT: A Southwest Airlines (SWA) Boeing 737-7BD (CFM56-7B20)(2083-33923,N7734H) performing flight WN-3097 from Sacramento, California to Santa Ana, California, USA with 110 people on board, was in the initial climb out of Sacramento's runway 16R when the crew reported flying through a flock of birds at about 1,000 feet (AGL), and sustained bird strikes into both (CM56) engines. The right hand engine was running fine, the left hand engine was running at reduced thrust. The flight crew (FC) levelled off at 3,000 feet and returned to Sacramento for a safe landing on runway 16R about 20 minutes after departure.

A replacement Boeing 737-700 reached Santa Ana with a delay of 5.5 hours.

News Item A-3: "Southwest Airlines (SWA) Beware: the Meaning of Allegiant Air (WJE) Adding Baltimore/Washington International Airport (BWI)" by (ATW) Aaron Karp in his AirKarp Blog, January 14, 2016.

The most intriguing network expansion in the USA announced by an airline so far in early 2016 is Allegiant Air (WJE)’s move into Baltimore/Washington International Airport (BWI), planned for this spring. 2 worthy notables: 1) (WJE), the Las Vegas-based ultra low-cost carrier (ULCC) is staking a claim at Southwest Airlines’ USA east coast stronghold; (SWA) has around a 70% market share at (BWI). 2) (BWI) - Cincinnati, one of the routes (WJE) will be operating, is decidedly NOT a route featuring a small, regional market at one end and a leisure destination at the other end, which has long been (WJE)’s calling card.

(WJE) has been profitable for 51 straight quarters (likely to be 52 when its 4th-quarter 2015 earnings are announced) and has only had 1 real recent failure: its ill-fated attempt to fly 757s to Hawaii, an endeavor on which it is pulling the plug this year. That likely has spooked (WJE) from pursuing beyond-continental USA expansion. So where will Allegiant (WJE)’s expansion come from?

(WJE) has so far been immune to the major carrier price-matching that is bedeviling fellow (ULCC)s Spirit Airlines (SPR) and Frontier Airlines (FRO)) simply because, unlike (SPR) and (FRO), it does not attempt to compete on routes dominated by big USA airlines like American (AAL), Delta (DAL), United (UAL) and (SWA). That’s not likely to change. But (WJE) appears to be making 2 alterations (or additions) to its strategy of flying from markets like Bismarck, North Dakota to leisure markets like Las Vegas and Orlando. That strategy will surely still be Allegiant (WJE)’s bread-and-butter: cheaply taking folks in small towns to vacation destinations.

But (BWI) indicates two strategic additions:

1) Filling in network “gaps” not served by (SWA) and other big USA airlines. The one thing the 6 destinations (WJE) plans to serve from (BWI) (Cincinnati, Savannah, Tulsa, Asheville, Knoxville, and Lexington) have in common: none are on (SWA)’s network.

2) Targeting underserved medium-size market to medium-size market routes. Last year, (WJE) started serving Austin - Cincinnati and indicated it is interested in connecting non-major markets that aren’t served (or are only served via high-fare itineraries requiring connections and trips aboard regional aircraft).

Don’t expect Allegiant (WJE) to start going head-to-head with (AAL), (DAL) or (UAL) or even (SPR), (FRO) or (SWA). But it is starting to augment its small town - to -Las Vegas/Orlando/San Diego model by looking for the gaps in the USA domestic airline network. Given that it does not operate daily service and is flexible on what days it flies ((BWI) - Cincinnati, for example, will be 2x-weekly and not always on the same days every week), these new routes are somewhat low-risk for Allegiant (WJE).

(WJE) is basically saying: Hey, if you need to get from Baltimore to Cincinnati to visit Grandma and don’t really care what day you fly, then we’ll get you there directly, cheaply and without flying aboard a regional aircraft (Though you will be flying aboard an older, used MD-80 or an older, used A319/A320). How big of a market is there for these types of travelers? Allegiant (WJE) wants to find out.

News Item A-4: Southwest Airlines (SWA) commenced four services on January 6. The average sector length of the new city pairs is 490 km, with the shortest being the 261 km link between Chicago Midway (MDW) and Indianapolis (IND), a route which (SWA) will operate 13x-weekly without facing direct competition. Of the 4 routes, 2 will face incumbent carriers, namely the 525 km Californian city pair of Burbank (BUR) and San Francisco (SFO), which will see (SWA) compete with United Airlines (UAL).

Speaking at Little Rock Airport on January 6, Airport Commission Chairman, Virgil L Miller, Jr and Fredbird, mascot of the St Louis Cardinals, celebrated the inauguration of (SWA)’s flights between the 2 cities of Little Rock and St Louis. The 702 km sector will face no direct competition.

See photo - "SWA-2016-01 - Little Rock to St Louis.jpg."

All 4 routes will be served by (SWA)'s 737-700s.

All routes as follows:
Boise (BOI) to Sacramento (SMF) 737-700 6x-, vs Alaska Airlines 7x;
Burbank (BUR) to San Francisco (SFO) 737-700 20x-, vs (UAL) 36x-;
Chicago Midway (MDW) to Indianapolis (IND) 737-700 13x-;
Little Rock (LIT) to St Louis (STL) 737-700 13x-.

News Item A-5: "Mid-Atlantic USA Snowstorm Prompts Major Flight Cancellations" by (ATW) Mark Nensel, January 22, 2016.

Anticipating a major snowstorm due to strike the USA Mid-Atlantic region over the weekend, airlines have canceled at least 3,014 flights as of 11:30 am (EST) January 22.

According to flight tracking site "FlightAware," as of 11:30 am (EST), airlines reporting cancelations include: American Airlines (AAL) (789 flights canceled), Southwest (SWA) (492), ExpressJet (194), Republic (171), United (UAL) (166), Delta (DAL) (147), Mesa (111) and JetBlue (JBL) (88), among numerous others.

Airports reporting cancelations as of 11:30 am (EST) include Charlotte-Douglas International (396 canceled flights), Washington Reagan National (181), Baltimore-Washington International (167), Washington Dulles International (158), Raleigh-Durham International (123), New York LaGuardia (118), Hartsfield-Jackson International-Atlanta (112) and Chicago O’Hare International (107) among many others.

The USA National Weather Service is forecasting the storm “will impact a large portion of the East Coast from the southern Appalachians through the Mid-Atlantic states from Friday into the weekend. Snowfall totals may exceed 2 feet in portions of these areas, including the Baltimore and Washington DC metropolitan areas.”

In advance of the storm, several airlines offered ticket-holders for flights between January 21 and January 24 the opportunity to change flights without penalty. In (AAL)’s case, passengers making flight changes will have the ticket-reissue charge waived for 1 ticket change, and could begin travel as early as January 20 or as late as January 27 under the waiver. JetBlue (JBL)’s change/cancel fees waiver extends the travel change date through January 29.

Southwest Airlines (SWA) had previously announced it will cancel almost 400 flights system wide January 22. (DAL) preemptively canceled 120 flights in the Southeast region, and is expected to cancel more for the Washington DC and New York region as the storm progresses. (UAL) announced it “will be shutting down operations starting Friday afternoon out of Dulles, and a few other airports in the Washington metro area. The company hopes to resume some operations on Sunday," and Etihad (EHD) "has regrettably been forced to cancel [6] flights to and from Abu Dhabi and New York (JFK) and to and from Abu Dhabi and Washington, DC."

February 2016: Southwest Airlines (SWA) promoted Ryan Green, currently Managing Director of Customer Strategy & Development, to VP & Chief Marketing Officer, succeeding the retiring Kevin Krone, effective February 15. Also, Senior Director of Capacity Planning Dave Harvey is being promoted to Managing Director of Business Development. Senior Director Schedule Planning Adam Decaire is being promoted to Managing Director of Network Planning.

March 2016: News Item A-1: "USA Carriers File Applications to Start Scheduled Flights to Cuba" by (ATW) Editor Karen Walker, March 2, 2016.

All 4 USA major carriers and at least 3 independents filed applications with the USA government March 2, seeking approval to provide non-stop services to Cuba.

The flood of filings, submitted March 2, come after the USA and Cuba announced an agreement in February to resume scheduled commercial air service. Services are expected to begin late summer or early fall this year, with an initial total of 20 daily round-trip flights being allocated to USA airlines between the USA and Havana and 10 daily round-trip flights to nine other Cuban cities.

Those slots will be hard fought over as the consolidated “big four”:— American Airlines (AAL), Delta Air Lines (DAL), United Airlines (UAL) and Southwest Airlines (SWA)) and independents Alaska Airlines (ASA), JetBlue Airways (JBL) and Silver Airways rushed to get their applications in. Ultra low-cost carrier (ULCC) Spirit Airlines (SPR), based in Florida, has also said it said it plans to apply.

(AAL) is requesting 10 daily frequencies to Havana from its Miami hub plus additional service to Havana from Charlotte, Dallas/Fort Worth, Los Angeles, and Chicago. (AAL)’s proposal also includes daily service between Miami and five other Cuban cities.

To Havana, (AAL) is proposing 10 daily flights from Miami, one daily from Charlotte and (DFW), and one weekly from (LAX) and Chicago. (AAL) also wants to fly 2x-daily services out of Miami to Santa Clara, Holguin, and Varadero; and daily service to Camaguey and Cienfuegos.

Delta (DAL) wants to fly daily flights to Havana from Atlanta, New York (JFK), Miami, and Orlando, using Boeing 757-200s out of its Atlanta and (JFK) hubs and Boeing 737-800s on the Miami and Orlando routes.

United (UAL)'s proposal seeks 11 roundtrip flights per week to Havana that includes daily service from New York, +1 additional Saturday flight (8x-weekly flights), along with a Saturday-only flight from Houston George Bush Intercontinental, Washington Dulles and Chicago O'Hare (3x-weekly flights). (UAL) would use 737-800s.

Southwest (SWA) wants to serve Havana from three Florida airports: (Fort Lauderdale, Tampa Bay, and Orlando) as well as fly to Varadero and Santa Clara from Fort Lauderdale. (SWA) is an all-737 operator.

New York-based, JetBlue (JBL) would put Airbus A320s and A321s on 15 daily frequencies connecting 4 Cuba cities with 6 cities. These include 2x-daily, New York (JFK) - Havana; 4x-daily, Fort Lauderdale - Havana; 1x-daily, Fort Lauderdale - Camaguey; 1x-daily, Fort Lauderdale - Holguiìn; 1x-daily, Fort Lauderdale - Santa Clara; 2x-daily, Orlando - Havana; 2x-daily, Tampa - Havana; 1x-daily, Newark - Havana; and 1x-daily, Boston - Havana.

JetBlue (JBL) said it anticipates a start date of September 8, or within <100 days after receipt of all necessary approvals, whichever is earlier.

Alaska Airlines (ASA) (seemingly the only USA carrier with a concept of Cuba’s still limited and fragile infrastructure) has placed a relatively modest request to fly 2x-daily nonstop flights from Los Angeles to Havana operating 737-900ERs.

Silver Airways, a small regional carrier that operates Saab 340B turboprops, is seeking approval to serve 10 Cuban destinations from the 5 Florida cities of Key West, West Palm Beach, Fort Lauderdale, Jacksonville, and Fort Myers/Naples.

Although the restoration of an air bilateral with Cuba is widely welcomed, general USA tourist travel to Cuba is still not allowed. Initially, at least, the new arrangement will be aimed at facilitating visits by travelers who fall under one of the 12 categories authorized by the USA Department of Treasury’s Office of Foreign Assets Control.

However, USA President, Barack Obama is scheduled to make an historic visit to Cuba March 21 - 22 (the 1st sitting USA President to visit the Caribbean island in 88 years) as part of efforts to normalize diplomatic relations.

(IATA) and others forecast that USA tourism to Cuba will see huge growth.

News Item A-2: "Cuba is a Rare, Hot-growth Opportunity for USA Airlines" by Karen Walker in (ATW) Editor's Blog, March 3, 2016.

Large and significant as it is, the USA domestic air transport market is essentially a mature market, growing at about +4 to +5% annually. Relative to regions like China, which is seeing domestic travel increase at about +10% year over year, or India, that is seeing an astonishing +20% clip, the USA market has limited growth opportunities.

That helps to explain the mass rush to grab available frequencies to Cuba for scheduled flights that will become available later this year under the new USA - Cuba air bilateral.

American Airlines (AAL), Delta Air Lines (DAL), Southwest Airlines (SWA), United Airlines (UAL), Alaska Airlines (ASA), JetBlue Airways (JBL), Silver Airways, Spirit Airlines (SPR), and Frontier Airlines (FRO) all want to get a slice of what is a rare new growth market right on America’s doorstep. Cuba isn’t a USA domestic destination, of course, but much of the Caribbean is regarded as “almost” domestic (especially from Florida and east coast cities (and Puerto Rico is a USA territory)) in terms of appeal and ease of access for American tourists.

What each of these airlines wants to establish is a foot in the door of this new market, then build on it as USA - Cuban diplomatic relations thaw and normalize. Here’s an opportunity to get in 1st on a near-USA market that is expected to see double-digit air traffic growth, akin to the emerging and much further afield markets like China and India.

India, of course, is a much tougher market for USA airlines to break into because the major Gulf carriers got ahead of that game. China, also, is a huge future market (but Chinese carriers are also growing fast, in numbers, quality, aircraft capacity and ability to compete).

Cuba has only Cubana (CUB), a small airline with very limited resources and which has been severely restricted by Havana in the types and origin of aircraft and components it can operate.

In the application filings submitted this week to the USA Department of Transportation, (AAL) made the biggest grab, seeking more than half of the 20 daily round trips that are expected to be made available to Havana, as well as some of the 10 daily round trips dispersed among Cuba’s other nine airports. (AAL)’s interest is natural, given its Miami hub, but it seems unlikely that the (DOT) will extend a large hand to the largest of the big four consolidated airlines. That probably explains why (AAL) has hedged its bets and also submitted applications for Cuban cities like Santa Clara, Holguin, and Varadero, which the other airlines are far less interested in. Havana is the prize.

What will be interesting to see is whether the (DOT) divvies this year’s flight allocations between a couple of the “big four,” enabling them to offer meaningful frequencies and connections from the get-go, or whether it will disperse them more widely so that independents like JetBlue (JBL) (which operates charters to Cuba), Alaska (ASA), or even small turboprop regional, Silver can get a foothold and keep the market competitive. My guess is the latter.

The timing of this opportunity is also interesting. A few short years ago, (SWA) would not have been a player, but since its acquisition merger with AirTran (CQT), it has become an international airline with a significant Caribbean market it wants to grow. Will the (DOT) regard (SWA) as a low-cost competitor in its decision-making, or just another one of the big 4 that dominates 80% of the USA domestic market and warrants as much control as (AAL), (DAL), and (UAL)?

But remember, the real growth trajectory won’t occur until the USA lifts its prohibition on regular American tourists who can visit Cuba, just as they do in their millions to the Virgin Islands, Bahamas, Mexico and the rest of the Caribbean. That’s the historic landmark that these USA airlines want to get ahead of and why these initial flight allocations are so important. It’s a critical moment for a USA airline to get in on the ground as a new market opens; and that’s a rare opportunity.

News Item A-3: Southwest Airlines (SWA) on March 10 introduced 3 USA domestic city pairs to its already extensive network. (SWA) 1stly commenced services between Pittsburgh (PIT) and St Louis (STL), an 890 km sector, which will be flown daily. The 2nd route introduced was between Washington Dulles (IAD) and Atlanta (ATL). The 856 km pairing between the USA capital and the nation’s busiest airport will be offered by (SWA) 2x-daily. The final route, which was inaugurated this week was also from the capital, this time from Washington Reagan (DCA) to Omaha (OMA) in Nebraska. The 1,622 km route will be served daily. Of the 3 services, the 2 routes from Washington will face direct competition, with the airport pair of Dulles to Atlanta already seeing Delta Air Lines (DAL) and United Airlines (UAL) offering between them 63 weekly services. (SWA) will also see competition from (DAL) 6x-weekly between Reagan and Omaha. The 3 routes will all be flown by (SWA)’s fleet of 737-700s

News Item A-4: "American (AAL), Southwest (SWA) pilots (FC) Back Shuster’s (ATC) Plan" by (ATW) Aaron Karp, March 4, 2016.

Unions representing pilots (FC) from American Airlines (AAL and Southwest Airlines (SWA) have added their support to the proposal by Representative Bill Shuster (Republican-Pennsylvania) to separate USA air traffic control (ATC) from the (FAA).

Shuster’s proposed (FAA) re-authorization bill, which has cleared the House Transportation & Infrastructure Committee (T&I), chaired by Shuster, would move the management and operation of USA (ATC) to a “federally chartered, fully independent, not-for-profit corporation” led by a board of directors that would include a pilot (FC) labor representative. Both the Southwest Airlines (SWA) Pilots Association (SWAPA), representing (SWA)’s 8,000 flight deck crew, and the Allied Pilots Association (APA), representing (AAL)’s 15,000 pilots (FC), were pleased Shuster’s original bill was amended during a (T&I) markup so that the governing board’s pilot (FC) labor representative would be appointed by a coalition of flight deck crew labor groups rather than just the Air Line Pilots Association (ALPA).

(ALPA) remains opposed to the bill. (SWAPA) and (APA) both said they would like to see additions to the legislation related to, for example, pilot (FC) medical certification reform. However, the 2 unions said such concerns aren’t enough to stop them from backing the overall bill, particularly the plan to create a non-profit, independent (ATC) corporation led by a 13-member board of directors (the (T&I) markup added aerospace manufacturing and business aviation directors to the board, bringing its membership from 11 to 13).

“For decades, we have watched valuable taxpayer-supported resources used in well-intended efforts to modernize the (FAA) and the air traffic control system, only to have those efforts thwarted or become obsolete at implementation due to the vagaries and inefficiencies of the federal funding mechanism,” (APA) President Keith Wilson said in explaining his support for “separating the regulated from the regulators.”

(SWAPA) President Jon Weaks said, “For too long, the delays in upgrading our air traffic control technology have led to costly delays for passengers on the ground. [The proposed bill] will take bold and significant steps to separate the (FAA)’s air traffic controllers from the federal bureaucracy that has deprived them of the tools necessary to best do their job.”

Shuster’s plan to create an (ATC) corporation separate from the (FAA) has already gained the backing of the National Air Traffic Controllers Association (NATCA), the union representing 19,000 USA air traffic controllers.

News Item A-5: Southwest Airlines (SWA) sees the potential for “hundreds of millions of dollars” in incremental revenue, when it fully integrates its domestic and international reservations systems next year.

April 2016: News Item A-1: Southwest Airlines (SWA) is to increase its summer service, adding one daily flight, June 5 - August 6 from Baltimore/Washington (BWI): - Oakland to 2x-daily; - Denver to 6x; - Manchester/Boston (MHT) to 9x; - Hartford to 8x; - Tampa to 7x; and - Orlando to 10x-daily.

News Item A-2: (SWA) has announced it will use its 4 Long Beach slots to launch 4x-daily return flights to Oakland beginning June 5.

Of the 9 newly available slots issued in February this year, the City of Long Beach awarded (SWA) 4x-, JetBlue Airways (JBL) 3x-, and Delta Air Lines (DAL) 2x-.

News Item A-3: (SWA) is adding 2 new gates at Lambert St Louis International Airport (STL) in Missouri. The new gates, E31 and E33, bring the total at Lambert for (SWA) to 13. New daily services are added, 2x to Des Moines and Wichita, beginning April 12. Also (SWA) upgrades seasonal Seattle service to year-round. Additional flights will be added to Tulsa and Minneapolis.

(SWA) has been completing upgrades and additions for the new gates including carpeting, new podiums and counters, as well as restroom improvements in the gate area.

(SWA) will be operating 12x-daily flights from gate E31 and E33.

On June 5, (SWA) will be flying 100 daily flights from St Louis, with new services to Oakland, Cleveland, and Portland, Oregon for a total 43 cities.

News Item A-4: "Southwest Launches 1st International Service from Los Angeles" By Alex McIntyre, Airways, April 13, 2016.

On April 12, Southwest Airlines (SWA) officially launched its 1st international service from Los Angeles (LAX), when flight WN6920 to Liberia, Costa Rica departed on its inaugural journey at 14:36.

The new route clocks in as the longest in (SWA)’s route network. The travel time southbound is approximately 5 hours and 30 minutes, and a slightly longer 6 hours northbound on the return leg.

In addition to serving the local LA market, (SWA)’s Liberia route facilitates easy connections to many other cities within its network. This new Liberia service offers connection opportunities to Oakland, Phoenix, and Las Vegas, all western focus cities for the airline.

Alaska Airlines (ASA) and Delta Air Lines (DAL) also offer non-stop Liberia – Los Angeles service. (SWA)’s entrance into the market will provide fliers with a low-cost connection to Southern California and other nearby destinations.

Los Angeles represents the 3rd city from which (SWA) flies to Liberia, with Houston-Hobby and Baltimore/Washington already offering service. (SWA) launched the flight from Houston in November 2014, shortly after it unveiled its new international terminal at the airport.

(SWA) is also currently progressing on Terminal 1 renovations at (LAX). The construction is designed to freshen an aging facility, providing a better experience for customers as well as improve operations at the airport. The project recently wrapped up Phase 1, with full completion expected in 2018.

May 2016: Southwest (SWA) Exec: Mexico City Slot Allocation Process ‘Not Transparent.’

Southwest Airlines (SWA) is in what it says is the “1st phase” of its expansion in Mexico, targeting leisure routes to resort destinations.

June 2016: News Item A-1: "6 USA Airlines Granted Permission to Operate Cuba Flights" by (ATW) Aaron Karp, June 10, 2016.

6 USA airlines have been granted permission by the USA Department of Transportation (DOT) to begin scheduled flights between the USA and Cuba in the autumn. The awards follow last December’s bilateral agreement between the USA and Cuba to restart scheduled commercial flights between the countries. The route authorities were approved for non-Havana services; the (DOT) said it will make a decision on Havana authorities over the summer.

American Airlines (AAL), Frontier Airlines (FRO), JetBlue Airways (JBL), Silver Airways (Saab 340B turboprop operator based in Fort Lauderdale), Southwest Airlines (SWA), and Sun Country Airlines (SCA) all had their applications to operate non-Havana routes approved in full by the (DOT). Miami-based Eastern Air Lines (EAL)’s application was deferred because the startup carrier using the historic name is currently only authorized to operate charter flights.

“Last year, President Obama announced that it was time to ‘begin a new journey’ with the Cuban people,” USA Transportation Secretary Anthony Foxx said. “Today, we are delivering on his promise by re-launching scheduled air service to Cuba after >half a century.”

(AAL) has been authorized to fly 2x-daily between Miami and the Cuban destinations Santa Clara, Holguin, and Matanzas, and daily between Miami and Camaguey plus Cienfuegos. The flights to/from Santa Clara and Holguin will be operated with 160-seat Boeing 737-800s, while the 3 other routes will be flown with 144-seat Airbus A319s. (AAL) said the flights are expected to start in September.

(FRO) has been authorized to fly daily between Chicago O’Hare and Santiago de Cuba, and weekly (on Saturdays) between O’Hare and Matanzas. Additionally, (FRO) can fly 4x-weekly between Philadelphia and Camaguey, 3x-weekly between Philadelphia and Santa Clara, and weekly (on Saturdays) between Philadelphia and Matanzas. All of (FRO)’s Cuba flights will be operated with 180 to 186-seat A320s.

(JBL) has been given permission to fly daily between Fort Lauderdale, Florida, and Camaguey, Holguin and Santa Clara in Cuba. All of (JBL)’s Cuba flights will be with 162-seat A320s.

Silver has been granted the authority to fly between Fort Lauderdale and 9 Cuban destinations: Camaguey (5x-weekly, but not on Mondays or Fridays), Cayo Coco (3x-weekly), Cayo Largo del Sur (weekly on Saturdays), Cienfuegos (2x-weekly), Holguin (daily), Manzanillo (3x-weekly), Santa Clara (daily), Santiago de Cuba (daily) and Matanzas (4x-weekly). All of Silver’s flights will be operated with 34Y-seat Saab 340B turboprops.

(SWA) has been given permission to fly between Fort Lauderdale and Matanzas (2x-daily) and between Fort Lauderdale and Santa Clara (daily) using 143-seat 737-700s.

Sun Country (SCA) has been granted authority to fly between Minneapolis and Santa Clara (weekly on Sundays) and between Minneapolis and Matanzas (weekly on Saturdays) using 737s.

“Today’s news is historic on many fronts, especially for the families who, for the 1st time in generations, will have affordable air travel to visit their loved ones,” (JBL) President & (CEO) Robin Hayes said.

News Item A-2: 737-7Q8 (29352, N7874B), ex-TransAero (TRX), and 737-8H4 (36916, N8690A), deliveries.

July 2016: News Item A-1: "Southwest Flight Cancellations Continue Following Technical Disruption" by (ATW) Mark Nensel, July 22, 2016.

Southwest Airlines (SWA) canceled at least 300 additional flights on, July 22, as (SWA) continued to deal with lingering disruptions following its system wide technology breakdown on July 20. The cancellations were primarily the result of displaced flight crews (FC). “Our technology systems have been fully restored and we continue to focus on getting customers and their baggage to their destinations safely,” (SWA) said. “Because this was a network problem, it became very complicated,” (SWA) Senior Director Network Operations Control, Steve West said on (SWA)’s Facebook page July 22. “This is the highest level of disruption that we’ve seen in many years.”

“Today is actually the first day we were in more of a recovery plan. What we’re doing today is we’re making sure that if we’re doing any schedule adjustment, such as cancellations, that we’re doing it well in advance. The majority of our cancellations today are in advance,” West said. “What we’re doing is to try and reset the network, and that is a complicated task that we have to do. It takes two to three days to totally get there, and each day we’re making progress,” West said. “We have about 650 lines of flight, so you take the flight attendants (CA) and pilots (FC), who aren’t matched up, and we have to marry them together, so if they’re out of sequence for some reason, we have to find a way to marry them,” West said. “And once you do that, something else is disrupted so we have to ask the pilots (FC) and the flight attendants (CA) to do extra flying, which they’re thankfully doing, and we’re making (SWA) make the operations move.”

(SWA) has extended customer re-booking through July 26. Customers have two weeks from their original date of departure to re-book travel at the original fare, at no additional cost. “Our employees in airports, online, and on the phone are assisting a significant number of customers and hold times are much longer than average. In the midst of peak summertime travel, we recognize many flights through this weekend were already close to full,” (SWA) said. “As cancellations continue, we recommend customers who have flexibility, explore re-booking on alternate dates beyond Sunday by checking availability [on (SWA)’s website].”

(SWA) has not announced additional cancellations for Saturday or Sunday, July 23 - 24.

* "Analysis: Delta & Southwest Technology Crashes Raise Troubling Questions" by (ATW) Aaron Karp, August 22, 2016.

Delta Air Lines (DAL) and Southwest Airlines (SWA) are very different airlines. One is a global full-service airline with a fleet of varied aircraft types and multiple product offerings for passengers, while the other is the world’s original low-cost carrier (LCC) with an all-737 fleet, no business (C) class and a mostly domestic operation. But the USA carriers have 2 things in common: both make operational reliability a key selling point, and both recently suffered severe technology meltdowns that damaged their reputations for reliable service. Each airline was forced to cancel around 2,000 flights over several days.

1st came (SWA), which suffered what it called a “system-wide technology outage” on July 20. “There was a network equipment failure and the planned redundancy, or backup, failed as well,” Chairman, President & (CEO) Gary Kelly explained. (COO) Mike Van de Ven said (SWA)’s “redundant systems” didn’t work, forcing (SWA) “to reboot about 400 servers,” a process that took 12 hours.

In a video posted on Twitter the week of the system failure (part of (SWA)’s effort to inform and apologize to passengers) Van de Ven noted all of the spillover effects that resulted. “We have an incredible backlog of customers and bags, and we have crews in places they’re not supposed to be,” he said, adding that (SWA) also “had a fare sale going on in the middle of all of this” on its website that was disrupted by the technology failure.

(SWA) gave a hint of the extent of the damage in an August 10 report detailing its July traffic. The flight delays and cancellations from the July 20 incident will cause an 0.5 point unfavorable year-over-year impact to 3rd quarter 2016 (RASM), (SWA) stated. “As a result, (SWA) now expects its 3rd quarter 2016 (RASM) to decline, year-over-year, in the 3.5% to 4.5% range, versus its previous guidance of a year-over-year decline in the 3% to 4% range,” it said.

That likely means a financial hit totaling tens of millions of dollars. But some of the impact is incalculable. “I realize how frustrating it can be” to have travel plans disrupted, Van de Ven said, adding, “Some of those travel plans were for really special moments that can’t be replaced.”

(DAL), meanwhile, spent much of the 1st half of 2016 touting is operating performance advantage over American Airlines (AAL), United Airlines (UAL) and (SWA). “We’re operating the best airline on the planet and it’s not even close,” (CEO) Ed Bastian said at (DAL’s media day in the spring, pointing out that (DAL) had more “100% completion factor days” (by a wide margin) than its 3 USA rivals combined.

As of August 7, (DAL) had canceled just 300 total flights in all of 2016. But despite the fact that (DAL) has spent hundreds of millions of dollars on technology safeguards, an early morning August 8 power outage at its Atlanta headquarters led to a disastrous operational failure. That’s because critical systems inexplicably did not switch over to redundant backup power (sound familiar?) and (DAL) had a technology crash that required a reboot, forcing its entire global operation to be grounded for several hours.

“This isn’t who we are,” Bastian said in a one of several apology videos (DAL) posted online in the aftermath of the system failure. Beyond the monetary hit (DAL) will incur in its third-quarter earnings, the episode is a significant negative mark on one of (DAL)’s core brand claims (that it is operating the best, and most reliable, airline in the world). Bastian and other executives will have to cool it for a while on the operational reliability horn tooting.

The dual system failures at (SWA) and (DAL) lead to a number of questions. 1st, why did their backup systems fail? What is the point of investing so heavily in redundant systems if they can’t be relied upon at critical times? And if the backup systems are inadequate, how vulnerable are (SWA), (DAL) and other airlines to similar system crashes occurring in the future?

The competitive stakes are high. Just a week after its system crash, (DAL) announced that it will introduce an all-suite business (C) class cabin on its 1st Airbus A350-900 arriving next year, and will roll out the new business (C) class offering on additional aircraft over time. The A350 business (C) class cabin will feature 32 suites with full-height sliding doors. (DAL) has 25 A350-900s on order and will also install the suites on Boeing 777s. Among other amenities, each suite will also have a lie-flat seat with a memory foam cushion and an 18-inch high resolution in-flight entertainment (IFE) monitor.

The “Delta One suite” and the fact that (DAL)’s entire A350 business (C) class offering will be comprised of these suites are truly innovative concepts among the USA majors that show (DAL) is finally trying to compete with the passenger offerings of Asia-Pacific and Gulf global long-haul carriers.

But however luxurious the service, what passengers (especially business (C) travelers) value most is reliability and an on-time arrival. No fancy suite is going to hold its appeal if the airline can’t deliver the fundamentals.

News Item A-2: GE Aviation (GEC) has expanded its "TrueChoice" contract with Southwest Airlines (SWA) to include (CFM56-7B) engines powering (SWA)’s fleet of 83 737-700 and 737-800 airplanes.

The engine type is added to the existing TrueChoice FlightHour agreement covering >1,400 (CFM56-7B) engines operated across (SWA)’s fleet.

Kevin McAllister, President & Chief Executive Officer (CEO) of (GE) Engine Services, said the expanded cooperation is demonstration of (SWA)’s confidence in its Maintenance Repair & Overhaul (MRO) capabilities.

Part of the TrueChoice suite, the FlightHour offering aims to optimise airline ownership costs over an engine’s whole lifecycle and includes flexible risk transfer and payment options.

News Item A-3: 737-7L9 (28015, N7841A) delivery.

August 2016: News Item A-1: "USA Airlines Tickets to Havana Already On Sale" by (ATW) Mark Nensel, marknensel@penton.co, August 31, 2016.

The eight USA airlines granted permission by the USA Department of Transportation (DOT) on August 31 to operate scheduled flights between the USA and Havana have begun rolling out proposed service plans. Tickets are already on sale at Spirit Airlines (SPR) and United Airlines (UAL). All routes require approval by the Cuban government. Most airlines will not reveal start dates until the approval is granted.

* Seattle-based Alaska Airlines (ASA) is tentatively scheduling 1x-daily service involving a Seattle - Los Angeles -Havana same-airplane routing.

* American Airlines (AAL) will operate 4x-daily service from Miami and a 1x-daily flight from Charlotte, North Carolina.

* Delta Air Lines (DAL) intends to begin 1x-daily nonstop service to Havana from Atlanta, Miami and New York (JFK) on December 1. (DAL) said tickets for the proposed flights will go on sale September 10. (DAL) operated charter flights to Havana from the USA at various times since 2002, including a period from October 2011 through December 2012 in which up to 12 flights to Havana per week originated from Miami, Atlanta and New York (JFK).

* Frontier Airlines (FRO) will operate 1x-daily service from Miami.

* New York-based JetBlue Airways (JBL), which on August 31 made the 1st commercial airline passenger flight to Cuba in nearly 55 years, will operate 2x-daily service from Fort Lauderdale, Florida (excluding Saturday, which will be 1x-daily) and 1x-daily service from both New York (JFK) and Orlando, Florida. (JBL) announced it will offer Cuban government-required health insurance coverage as part of the ticket purchase price. Additionally, as part of the online booking process, customers can fill out the required affidavit indicating which of 12 USA Treasury Department-approved Cuba-travel reasons (ie, family visits, educational activities, religious activities, journalism, humanitarian projects, professional research, professional meetings, etc.) is applicable to them.

* Florida-based low cost-carrier (LCC) Spirit Airlines (SPR) expects to begin 2x-daily nonstop service from Fort Lauderdale Hollywood International Airport (FLL) on December 1. Tickets for (SPR)’s flights to Havana went on sale on September 1, but (SPR)’s booking site stipulates the flight is subject to government approval. Cuban government-required health insurance is bundled into the ticket price, (SPR) said.

* Southwest Airlines (SWA) intends to offer 2x-daily nonstop service to Havana from Fort Lauderdale (FLL) and 1x-daily nonstop service from Tampa, in addition to 2x-daily nonstops from (FLL) to Varadero, Cuca and 1x-daily nonstop service to Santa Clara, Cuba. (SWA) said the airline intends to launch its Cuban flights later this year.

* United Airlines (UAL) will begin 1x-daily nonstop flights to Havana from Newark, New Jersey, on November 29, pending Cuban government approval, (UAL) said. Additionally, (UAL) will have 1x-Saturday-only service to Havana from Houston Bush Intercontinental Airport (IAH). (UAL)’s Havana flights went on sale on September 1. (UAL) will operate both services utilizing Boeing 737 airplanes.

News Item A-2: Southwest Airlines (SWA) plans to launch daily flights on December 4 between Los Angeles International (LAX) and three Mexican destinations: Cancun (CUN), San Jose del Cabo/Los Cabos (SJD), and Puerto Vallarta (PVR).

(SWA) said the USA Department of Transportation (DOT) has already approved the Boeing 737 flights, but they still are subject to Mexican government approval.

(SWA) also plans to launch daily flights from Oakland (California) International (OAK) to (SJD) and (PVR) from February 12, 2017. Those flights also have been cleared by the (DOT), but await Mexican government approval.

(SWA)’s current international service from (LAX) is to Liberia, Costa Rica (LIR).

News Item A-3: "INCDT: Truck Rams into Southwest 737 at Omaha Airport Gate" by (ATW) Aaron Karp aaron.karp@penton.com, August 26, 2018.

A Southwest Airlines (SWA) Boeing 737 parked at an airport gate was rammed by a pickup truck at Omaha Eppley Airfield (OMA) as passengers were boarding. According to (SWA), the incident took place shortly after 9:30 pm local time on August 25. “Our reports indicate that a civilian breached a perimeter fence,” at the airport, (SWA) said in an emailed statement, adding, “The civilian gained access to a vehicle on the ramp and proceeded to drive the vehicle into the nose gear of a (SWA) 737 that was parked at gate B17.”

Passengers were in the process of boarding the 737, which was preparing to fly to Denver as Flight 3018. (SWA) reported “a couple minor injuries to the crew” and a minor injury to one of 18 passengers who were on board the aircraft at the time of the incident.

The Omaha Airport Authority Police apprehended the man who commandeered the truck, and he remains in custody, according to (SWA). (SWA) has removed the 737 from service to inspect for damage. A replacement (SWA) airplane operated the flight after a 3-hour delay.

According to the "Omaha World-Herald," police said the man scaled an airside perimeter fence at (OMA) and (stripped down to his underwear) got in a truck that was unlocked and running. Police pursued the truck, but were unable to stop him before he rammed the 737’s nose gear.

* "Latest Example of Aviation Security Gaps: Truck Rams Southwest 737" by (ATW) Aaron Karp in AirKarp Blog, August 26, 2016.

The disturbing incident at Eppley Airfield in Omaha, Nebraska (in which a man scaled a fence to get onto the airport apron, found an unlocked, unoccupied truck with its motor on, and then raced around in the truck before ramming it into a Southwest Airlines Boeing 737 parked at a terminal gate) is just the latest example highlighting big gaps in aviation security around the world.

I’ve written about this repeatedly over the years. Airport security is almost entirely focused on screening passengers inside airports who are headed to flights. But what good is all that security in the airport if, as you are boarding your flight, a vehicle is rammed into the airplane. There were just “minor injuries” in the Omaha incident (the pilots (FC) were reportedly rocked around a bit on the flight deck after the truck slammed into the 737’s nose gear. But it’s not hard to imagine a much worse outcome from a similar incident).

Remember the diamond heist at Brussels Airport in 2013? Criminals staged a commando-style raid, breaching a perimeter fence to gain access to a Helvetic Airways Fokker 100 preparing for takoff. The aircraft was carrying valuable diamonds in its cargo hold, and the armed assailants forced ground staff to unload the jewels at gunpoint. And, of course, there were the recent airport bombings in Brussels and Istanbul.

Keeping bad individuals off of airplanes is only part of the aviation security equation. But so much emphasis has been placed on screening passengers bound for flights, that not enough resources or thought has gone into the remainder of the aviation security equation, leaving open a gap in which a running truck (temporarily left unattended) is commandeered and crashed into an airplane as passengers are boarding.

News Item A-4: Southwest Airlines (SWA) Head of Labor Relations and former (FAA) Administrator Randy Babbitt is to retire. Babbit has been (SWA)’s Senior VP Labor Relations since 2012. He was the (FAA) administrator from 2009 to 2011.

“We wish Randy all the best in his retirement after a long and distinguished career in aviation," (SWA) (COO) Mike Van de Ven said. "We are grateful for his many contributions."

(SWA)’s once harmonious labor relations have been in turmoil recently, with the heads of 4 of the company’s unions calling for the ousting of (CEO) Gary Kelly and Van de Ven. 5 work groups are negotiating contracts with (SWA).

Among the most contentious are talks with pilots (FC) represented by the Southwest Airlines Pilots’ Union (SWAPA). The contract has been amendable since 2012, and the USA National Mediation Board has overseen negotiations since 2014.

However, Babbitt’s decision to resign is unrelated to these issues, a (SWA) spokesman confirmed.

Babbitt began his airline career in 1966 as a pilot (FC) for Eastern Air Lines (EAL) and was head of the Air Line Pilots Association (ALPA) from 1990 - 1998.

News Item A-5: According to FAPA.aero, Southwest Airlines (SWA)
hired 48 pilots (FC) in July and 405 year-to-date. (SWA) is projected to hire 616 (FC) during 2016.

News Item A-6: 737-3Q8 (23401, N685SW), 737-5H4 (25319, N520SW; 26565, N523SW; 26566M N524SW) all (WFU) at Tucson. 4 737-8H4 (35965, N8695D; 36661, N8694E; 36678, N8696E; 36728, N8597C) and 1 737-7CT (35084, N7881A) deliveries.

September 2016: News Item A-1: Southwest Airlines (SWA) and the Aircraft Mechanics Fraternal Association (AMFA), the union representing the carrier’s facilities maintenance technicians (MT), have reached an “agreement in principle” according to a September 1 statement from (SWA).

Terms of the 5-year contract—which, if ratified, will be the facilities maintenance technicians (MT)’s 1st contract since being accreted into (AMFA), include a complete set of work rules, a wage scale and a ratification bonus. The agreement in principle remains subject to final review by (AMFA)’s national executive committee before it is submitted for union members’ approval. The ratification vote date is still to be determined.

Contract negotiations between (SWA) on (AMFA) on behalf of the carrier’s facilities mechanics (MT) began June 6, 2013.

News Item A-2: Southwest Airlines (SWA)’s flight attendants (CA) will follow (SWA)’s pilots (FC) in holding a ratification vote on a new labor contract.

The Transport Workers Union (TWU) Local 556, which represents >14,000 (SWA) flight attendants (CA), said its executive board has decided to move a recently-reached tentative agreement with airline management to rank-and-file flight attendants (CA) for a ratification vote.

“This is a straightforward agreement that rewards your contributions as a (SWA)’s flight attendant (CA) to the company’s success,” (TWU) Local 556 leadership said in a September 23 message to (SWA) flight attendants (CA). The voting process is being finalized; the vote is expected to take place in October.

Like the pilots (FC), who will be voting on whether to ratify a tentative agreement starting October 8, rank-and-file (SWA) flight attendants (CA) rejected a previous tentative agreement in voting last year. (SWA) and its flight attendants (CA) have been in labor contract negotiations since 2013.

(SWA) Senior VP Cabin Services Sonya Lacore said (SWA) and (TWU) Local 556 leadership “worked diligently to reach an agreement” on a new labor contract. Details of the tentative agreement have not been released.

News Item A-3: Southwest Airlines (SWA)’s international expansion
could take it to Canada, and an executive for the company did not rule out eventual transatlantic flights.

Dave Harvey, (SWA)’s Managing Director for Business Development, told "Aviation Daily" that (SWA) might one day consider transatlantic flights. Flights to the UK from some of (SWA)’s East Coast cities are within the theoretical range of the Boeing 737 MAX airplane, which the airline plans to start receiving next year. (SWA) has 200 of the 737 MAX airplanes on order.

But transatlantic service is far down on the list of (SWA)’s priorities, Harvey said. “We have so many other places in the USA, the Caribbean, South America and Central America that we are considering first,” he said. (SWA) will offer “far international” flying when it begins interlining with other carriers, Harvey said, referring to transatlantic service.

The agreements are contingent upon (SWA) pilots (FC) ratifying an agreement-in-principle, Harvey said. Union leaders and management finalized that agreement in August; (SWA) expects a ratification vote to take place later this year.

Canada faces another challenge. (SWA)’s current reservations system does not allow foreign currency sales, which limits its potential in that country, Harvey said. However, (SWA) is developing an Amadeus-based reservations system that will support foreign currencies. “Once we have the new system in place, Canada would be strongly considered,” he said. The new system is expected to launch sometime next year, although (SWA) did not define a timeline for when the cutover would occur. Foreign currency sales could take “another couple of years” to come online, he said.

(SWA) has not faced problems with foreign-currency sales yet, despite operating to Mexico, the Caribbean, and Central America. Most traffic originates in the USA and consists of leisure travelers going to beach destinations. However, this is expected to change as (SWA) builds its international network to include destinations aimed at business and visiting friends plus relatives (VFR) traffic, Harvey said.

Mexico City is a case in point. Most of (SWA)’s traffic headed there originates in the USA, but this is expected to change as the local market becomes more familiar with (SWA). The capability to sell tickets in foreign currencies will allow (SWA) to land more corporate contracts with Mexico-based businesses, Harvey said. In Mexico, (SWA) also is breaking with its longstanding practice of only selling tickets directly through its website. (SWA) will begin selling some tickets through Mexican travel agents, a practice that is only expected to increase when it can accept payments in foreign currencies. (SWA) expects it will only sell tickets through travel agents in its international markets. (SWA) has no plans to change its distribution model in the USA, Harvey added.

Harvey said (SWA) also is studying other distribution models in Mexico, including selling tickets through nontraditional channels such as banks, supermarkets and convenience stores, as Volaris (VLS) and other Mexican carriers do. Distribution through these channels is a long way off, however. “These are all things we’re studying,” he said.

Madhu Unnikrishnan, madhu.unnikrishnan@aviationweek.com

October 2016: News Item A-1: Southwest Airlines (SWA) posted a $388 million net profit for the 2016 3rd quarter, down -33.6% year-over-year (YOY) from $584 million in (3Q) 2015.

(SWA) board Chairman, President & (CEO) Gary Kelly said (SWA) benefited from low fuel prices and record traffic levels during the quarter, “especially considering the operational challenges caused by the technology outage in July.” (SWA) said the outage cost the company an estimated -$55 million in lost revenue. “We will continue to manage our growth prudently in light of the revenue environment and increasing fuel prices,” Kelly said, adding (SWA) plans to slow its 2017 capacity growth to <4% (YOY) with approximately 2 points of the increase related to domestic growth.

(SWA)’s total operating revenue for the quarter was $5.2 billion, down -3.4% (YOY). Passenger revenue during the quarter was $4.7 billion, down -1% (YOY).

(SWA) pointed out its 3rd-quarter revenue in 2015 included a 1-time special revenue adjustment of $172 million related to an amended co-branded credit card agreement with Chase Bank. Excluding that special item, (SWA)’s (3Q) 2016 revenue was nearly identical with its (3Q) 2015 revenue result, down -0.1% (YOY), “despite an estimated $55 million reduction in 3rd quarter 2016 revenues due to the company’s July technology outage,” (SWA) said.

Unit revenue (RASM) was 13.57 cents for the quarter, down -4.1% compared to 14.15 cents a year ago, on a +4.2% increase in available seat miles (ASMs). (SWA)’s total operating expenses for the 3rd quarter rose +8.6% (YOY) to $4.4 billion. (SWA)’s operating profit was +$695 million, a -43.3% (YOY) drop from +$1.2 billion in (3Q) 2015.

(SWA)’s expenses in (3Q) 2016 included $18 million in lease termination costs following (SWA)’s acquisition of 4 of its Boeing 737-300 airplanes off operating lease, as well as $356 million related to proposed union contract signing bonuses. In recent months, (SWA) reached tentative agreements with its facilities Maintenance Technicians (MT), pilots (FC), flight attendants (CA)
and airplane appearance technicians; however, the agreements have not yet been ratified by each respective employee group.

(SWA)’s 3rd quarter traffic rose +4.1% (YOY) to 32.3 billion (RPM)s. Capacity grew +4.2% (YOY) to 37.88 billion (ASM)s. (SWA)’s passenger load factor for the quarter was 85.3% LF, down -0.1% (YOY), and passenger revenue yield per (RPM) declined -4.9% to 14.45 cents.

(SWA)’s (3Q) fleet changes included delivery of 11 new Boeing 737-800s and the retirement of 16 Boeing 737 Classic aircraft, including the last 737-500 airplane in (SWA)’s fleet.

(SWA) expects to end 2016 with 723 airplanes, reflecting full-year 2016 capacity growth of 5% to 6% (YOY). (SWA) expects to take delivery of 13 737-800s and 4 737-700s by year-end. (SWA)’s 2017 delivery schedule plans for 67 new airplanes: 39 737-800s, 14 737 MAX 8s and 14 737-700s.

News Item A-2: "Southeast USA Braced for Hurricane Matthew; Over >2,300 Flights Canceled" by (ATW) Mark Nensel mark.nensel@penton.com, October 6, 2016.

As Hurricane Matthew, a major Category 4 storm, bore down on Florida and the southeastern USA on October 6, airlines serving the region announced preemptive operational closures and flight cancellations. Nearly 2,400 preemptive flight cancellations have been announced.

As of noon, October 6, Delta Air Lines (DAL) shuttered operations at Miami International Airport, Fort Lauderdale-Hollywood International Airport and Palm Beach International Airport, resulting in 130 total flight cancellations. Additionally, (DAL) canceled nearly 150 mainline and Delta Connection flights for Friday, October 7 to and from airports in Melbourne, Orlando, Daytona Beach, Gainesville, and Jacksonville, Florida. (DAL) said there were additional cancellations for flights Saturday, October 8 to coastal Georgia and South Carolina airports.

As of October 6, at 2:30 pm (CDT), (SWA) estimated about 60 flights were canceled systemwide, and about 130 flights were canceled for October 7. (SWA) canceled all operations at Fort Lauderdale, Florida; Nassau, Bahamas; and West Palm Beach, Florida, for Thursday and Friday, October 6 & 7. Operations in Jacksonville were canceled October 7 and resumed at 1:30 (CDT) on October 8. Operations in Orlando were canceled as of late afternoon October 6 and October 7. (SWA) had delays and cancellations in Charleston, South Carolina for October 7. For the airports on the east coast of Florida, (SWA) adjusted its resumption of service plans as needed once the storm passed.

JetBlue Airways (JBL) said they canceled over >450 flights through October 8. (JBL) offered to waive change/cancel fees for customers traveling October 5 - 9 to/from Charleston, South Carolina; Daytona Beach, Florida; Fort Lauderdale, Florida; Nassau, Bahamas; Orlando, Florida (MCO); Raleigh/Durham, North Carolina; Savannah/Hilton Head, Georgia; and West Palm Beach, Florida.

American Airlines (AAL) canceled 65 flights for October 5, with 600 flights preemptively canceled for October 6, 475 flights canceled for October 7, 130 flights canceled for October 8 and 20 flights canceled for October 10; 1,290 flights in all.

United Airlines (UAL) said it canceled nearly 180 flights in Florida through October 8, 2016.

News Item A-3: INCDT: Southwest Airlines (SWA) Flight 994, a Boeing 737-700, underwent an emergency evacuation October 5 at Louisville, Kentucky, International Airport following a passenger’s report of a smoking smartphone. All passengers and crew exited the airplane safely without further incident, but the Baltimore-bound flight was canceled.

News reports from various sources have suggested the phone was a replacement model of Samsung’s recalled Galaxy Note7 smartphone.
A Samsung spokesperson said “Until we are able to retrieve the device, we cannot confirm that this incident involves the new Note7. We are working with the authorities to recover the device and confirm the cause. Once we have examined the device we will have more information to share.”

The (FAA) said that it “has confirmed that it was a Samsung phone that caused the smoke. Airport Rescue & Fire Fighting (ARFF) responded. The (FAA) has issued safety alerts for operators (SAFO) and advisory circulars (AC) advising the airlines (operators) that they must have procedures for fighting these in-cabin fires. Each airline has its own procedures for handling in-cabin electronic device fires.”

The (FAA) issued a warning on September 9 for customers to not use Samsung Galaxy Note7 devices on board aircraft: “In light of recent incidents and concerns raised by Samsung about its Galaxy Note 7 devices, the [FAA] strongly advises passengers not to turn on or charge these devices on board aircraft and not to stow them in any checked baggage.”

The European Aviation Safety Agency (EASA) issued a similar warning on September 12.

The USA Consumer Product Safety Commission (CPSC) recalled the phone September 15 with the warning that “the lithium-ion battery in the Galaxy Note7 smartphone can overheat and catch fire, posing a serious burn hazard to consumers.”

In a September 22 statement, Samsung Electronics America, Inc said “about half of all recalled Galaxy Note7 phones sold in the USA have been exchanged through Samsung’s voluntary recall. Additionally, 90% of Galaxy Note7 owners have been opting to receive the new Galaxy Note7 since the phones became widely available on September 21.”

In an emailed statement (SWA) said: “Prior to (SWA) Flight 994 departing from Louisville for Baltimore, a customer reported smoke emitting from a Samsung electronic device. All customers and crew deplaned calmly and safely via the main cabin door. Customers are being accommodated on other (SWA) flights to their final destinations. Safety is always our top priority at (SWA) and we encourage our customers to comply with the (FAA) Pack Safe guidelines.”

Under the (FAA)’s packing guidelines, “Lithium batteries recalled by the manufacturer/vendor must not be carried aboard airplanes nor packed in baggage. Battery-powered devices recalled because of lithium battery safety concerns also should not be carried aboard airplanes nor packed in baggage unless the device or its battery has been replaced, repaired or otherwise made safe per manufacturer/vendor instructions.”

In an October 5, statement, (CPSC) Chairman Elliot Kaye said: “The (CPSC) is moving expeditiously to investigate this incident. Agency staff has already reached out to the (FAA) and Samsung to gather the facts about the incident. (FAA) staff will also reach out to the consumer who experienced a serious incident with his phone.”

Kaye added: “I want to reiterate my call for consumers who have the recalled Galaxy Note7 to keep their smartphones powered down and to immediately take advantage of the remedies being offered by Samsung. Consumers should know that one of the remedies is a refund.”

November 2016: News Item A-1: Southwest Airlines (SWA) pilots (FC) have voted by an 84% to 16% margin to ratify a new labor contract, ending >4 years of sometimes contentious negotiations.

The (SWA)s Pilots Association (SWAPA), which represents (SWA)’s 8,400 pilots (FC), said 96.3% of eligible flight deck crew (FC) participated in the vote. The new contract will run through August 2020.

According to (SWAPA), the collective bargaining agreement includes a date of ratification pay-rate increase of +15% and +3% pay-rate increases in 2017, 2018, 2019 and 2020. The union said the contract “contains the strictest job scope and code share language in the industry, with very strong protections as (SWA) seeks out foreign-airline partnerships.” (SWAPA) had previously said the contract would allow Southwest to enter into “limited partnerships with other airlines for near-international interline agreements and far-international codeshare, with enforceable restrictions.”

(SWA) VP Flight Operations Alan Kasher said “Beyond the compensation and work rule improvements, this forward-looking agreement delivers the operational flexibility needed to grow our network and ensures that (SWA) will remain well-positioned for long-term success in our intensely-competitive industry.”

The pilots (FC) and (SWA) had been in talks on a new contract since 2012, and the USA National Mediation Board has been involved since November 2014. Last year, (SWAPA) leadership and (SWA) management also reached a tentative agreement, but rank-and-file (SWA) pilots (FC) rejected it by a 62% to 38% margin in a ratification vote.

Re- the newly ratified contract, (SWAPA) acknowledged the “failed 1st attempt last year” to ratify a contract and said it worked this year to “reach a deal that the (FC) collectively believed was suitable.”

News Item A-2: (SWA)’s appearance technicians have ratified a 4-year tentative agreement with (SWA), according to a tally released Nov. 22 by the Aircraft Mechanics Fraternal Association (AMFA), which represents >200 (SWA) personnel responsible for airplane detailing and appearance care services.

(AMFA) reported that of those who cast ballots, 88% voted in favor of the new contract, which takes effect immediately. The 4-year contract extension will run through February 2021 and replaces the current collective bargaining agreement ahead of its February 2017 amenable date. “Our appearance technicians [now] have a new contract that provides increased pay and benefits and supports the company's long-term business plan,” (SWA) VP Maintenance Operations Landon Nitschke said.

News Item A-3: The 1st commercial passenger flights in 55 years between the USA and Havana, Cuba, departed November 28, as Fort Worth, Texas-based American Airlines (AAL) and New York-based low-cost carrier (LCC) JetBlue Airways (JBL) each launched scheduled service to the island nation’s capital.

(AAL) flight 17, a Boeing 737-800, took off from Miami International Airport at 7:41 am and landed at Havana’s José Martí International Airport at 8:25 am. (JBL) flight 243, an Airbus A321, departed New York’s (JFK) International Airport at 9:45 am and landed in Havana at 12:34 pm.

The (AAL) and (JBL) flights are the vanguard of scheduled commercial passenger service to Havana from 8 USA airlines. Havana service was also awarded to Alaska Airlines (ASA), Delta Air Lines (DAL), Frontier Airlines (FRO), Southwest Airlines (SWA), Spirit Airlines (SPR) and United Airlines (UAL).

(UAL) is scheduled to begin its Havana service from Newark Liberty International Airport on November 29, with (DAL), (SPR) and (FRO) all launching Havana service December 1. (SWA) will launch Havana service December 12. (ASA) will launch its Havana service from Los Angeles on January 5, 2017.

The USA announced the resumption of commercial passenger airline service to Cuba following the signing of an agreement between the 2 countries on February 17. The 1st commercial flights between the USA mainland and Cuba began August 31, with a (JBL) flight from Fort Lauderdale, Florida, to Santa Clara, Cuba. That same day the USA Department of Transportation awarded 8 USA airlines service routes to Havana.

December 2016: News Item A-1: Southwest Airlines (SWA) is hoping to resume recently suspended flights between Los Angeles and 3 resort cities in Mexico beginning December 18. (SWA) had cancelled all its flights from Los Angeles International Airport to Los Cabos, Puerto Vallarta and Cancun since December 7 because all the necessary paperwork hadn't been completed.

(SWA) said Mexican authorities issued the permits December 9th night to clear the way for (SWA) to resume its Los Angeles service to and from the cities affected by the shutdown. A total of 40 flights were canceled during the 4-day suspension of service. (SWA) said it is trying to rebook the passengers on the canceled flights.

News Item A-2: Southwest Airlines (SWA) began inaugural flights to Havana, Cuba on December 12 from 2 Florida gateway airports, Tampa International and Fort Lauderdale-Hollywood International.

(SWA) will operate daily Tampa - Havana service and 2x-daily Fort Lauderdale - Havana services. (SWA) flew to its first Cuban destination, Varadero, on November 13. (SWA) will launch service to a 3rd Cuban city, Santa Clara, on December 13, with daily service from Fort Lauderdale.

“By the end of this year, we’ll offer 6 daily round trips between 2 Florida gateways and 3 Cuban cities as the work continues to open a new, 5-gate international concourse here in Fort Lauderdale next summer,” (SWA) VP Ground Operations Steve Goldberg said.

Since American Airlines (AAL) and JetBlue (JBL) launched the 1st commercial passenger flights between the USA and Havana on November 28, +4 additional USA carriers have begun scheduled service to the island nation’s capital, including United Airlines (UAL), which began Newark - Havana service on November 29, and Delta Air Lines (DAL), Spirit Airlines (SPR) and Frontier Airlines (FRO), which all began service December 1. Alaska Airlines (ASA) will launch its Havana service from Los Angeles on January 5, 2017.

The USA announced the resumption of commercial passenger airline service to Cuba following the signing of an agreement between the 2 countries on February 17. The 1st commercial flights between the USA mainland and Cuba began August 31, with a (JBL) flight from Fort Lauderdale, Florida, to Santa Clara, Cuba. That same day the USA Department of Transportation awarded 8 USA airlines service routes to Havana.

January 2017: News Item A-1: Southwest Airlines (SWA), which plans to grow capacity +3.5% in 2017, has released details on 22 new and seasonal routes, including 4 international routes originating from its forthcoming international concourse at Fort Lauderdale-Hollywood International Airport in Florida.

As of November 30, 2016, (SWA) had taken delivery of 131 of 155 Boeing 737-800s on order; 32 were delivered through November 30, approximately 3 per month. At this rate, the remaining 737-800s should be delivered by July, in time for the planned entry-into-service of Boeing’s 737 MAX airplane, for which (SWA) is the launch customer. (SWA) has 200 737 MAXs on order.

(SWA)'s new 5-gate international Concourse A at Fort Lauderdale’s Terminal 1 is scheduled to open June 4. On that date, (SWA) will launch 1x-daily service to Grand Cayman. On June 6, (SWA) will begin new routes to Montego Bay (Jamaica), Belize and Cancun (Mexico). The new routes are pending government approvals and will bring to 8 the total number of international routes (SWA) will operate from Fort Lauderdale (along with Nassau, Bahamas, and Cuban cities Havana, Varadero and Santa Clara).

Additionally out of Fort Lauderdale, (SWA) plans to launch new 1x-daily service to Washington Dulles, 1x-daily service to Philadelphia, and 1x-daily service to Orlando beginning June 4. (SWA) will also launch a new 2x-daily Tampa - New York LaGuardia service, as well as a weekend Pensacola - Denver route.

(SWA) also announced new Ohio routes beginning June 4, concentrating on operations out of Cincinnati/Northern Kentucky International Airport and Cleveland International Airport. (SWA) plans to end operations out of airports in both Akron-Canton and Dayton on June 3. The new Ohio routes include daily Cincinnati - Baltimore, Cincinnati - Chicago Midway, and Cleveland - Atlanta service. (SWA) will increase Cleveland - St Louis service to 2x-daily.

Also out of the USA midwest, (SWA) will introduce new Indianapolis - Newark and Nashville - Minneapolis service, starting June 4.

On the USA west coast, (SWA) is boosting service from San Diego with +2 new routes (San Diego - Boise, Idaho, and San Diego - Salt Lake City, Utah) and 3 seasonal routes (San Diego - Newark; San Diego - Spokane, Washington; and San Diego - Indianapolis, Indiana). All routes will begin June 4.

Additional new west coast routes to launch on June 4 include Portland, Oregon - San Francisco; San Jose, California - Reno, Nevada; and a seasonal route between Oakland, California - Newark.

News Item A-2: "Southwest Restructures Leadership; (CEO) Kelly Cedes President’s Role" by (ATW) Aaron Karp aaron.karp@penton.com, January 10, 2017.

Southwest Airlines (SWA) has promoted Executive VP Strategy & Innovation Tom Nealon to the role of President, and expanded Chief Operations Officer (COO) Mike Van de Ven’s responsibilities.

The moves suggest Chairman & (CEO) Gary Kelly, who had also held the title of President, will be stepping back from day-to-day operational management of (SWA). (SWA) said that “Kelly’s focus will be in external areas including political, governmental and industry affairs; investor relationships; and community affairs and outreach; and internally on employee and culture activities.”

Kelly, who has been (SWA)’s top executive for 12 years, said “It is important for us to evolve our leadership structure as part of our ongoing succession planning process.”

Nealon will report directly to Kelly and have responsibility over (SWA)’s Commercial, Finance, Technology and Corporate Strategy departments, (SWA) said. Nealon was (SWA)’s Chief Information Officer from 2002 - 2006 and rejoined (SWA) last year. He has been group Executive VP at retailer JC Penney and also was VP & Chief Information Officer at Frito-Lay, a subsidiary of the Pepsi Company.

(SWA) said Van de Ven will report to Kelly and expand his responsibilities by adding Customer Support & Services & Hospitality to his current responsibilities overseeing Ground, Flight & Technical Operations, Labor Relations & Operational Strategy & Performance. He has been with (SWA) since 1993.

Chairman & (CEO) Gary Kelly said this executive suite shuffle at (SWA) does not mean his successor has been appointed or that he will be ceding responsibility for (SWA)’s direction anytime soon.

“The board is adamant, as am I, that we don’t have an heir apparent,” Kelly said, adding, “So no, we’re not appointing a (CEO) successor. I’m looking forward of course to personally serving (SWA) for many years to come.” But Kelly noted he will soon turn 62 and “succession planning is a serious duty for the (CEO) and the board.”

By naming Tom Nealon President and giving (COO) Mike Van de Ven more responsibility, (SWA) is developing potential (CEO) talent, Kelly explained. “It’s sort of an office of the (CEO), if you will, between me and Mike and Tom,” he said of the new management structure. “So they’ll be spending more time and effort in broader areas beyond I’d say just the operations. The only way to adequately prepare for succession is to give people opportunity, so this is a great opportunity for Tom to grow. It’s a great opportunity for Mike to grow.”

Kelly has been (SWA)’s (CEO) since 2004, and since 2008 also held the title of President. But the time had come to rethink (SWA)’s management structure, he said. “We want to pick up the pace of our ability to adapt to changing conditions, and then pick up the pace of our ability to address issues,” Kelly said. “I’m responsible for everything that happens at (SWA). And we’ve grown since I’ve been (CEO) from about 35,000 employees to almost >20,000 more than that. Here in 2017, we’ll be close to 55,000 employees. We’ve got one of the largest fleets in the world. So it is impossible for the (CEO) in a large organization like that to drill as deep as one would like on every issue that one deems to be important. And that is the beauty of having 2 senior executives like this that have the experience and have the ability to help the (CEO) drive the agenda.”

News Item A-3: Southwest Airlines (SWA) will not be following American Airlines (AAL), Delta Air Lines (DAL) and United Airlines (UAL) in implementing a “basic economy” fare, Chairman & (CEO) Gary Kelly said. Speaking to analysts and reporters to discuss (SWA)’s 2016 earnings, Kelly said (SWA) is sticking to its relatively straightforward fare structure that includes checked bags and flight changes at no extra-cost. (SWA) also will stay with a single-class configuration on its all-Boeing 737 fleet, he added.

While (SWA) does offer a “business (C) select” product that includes perks such as guaranteed early boarding (a particular draw for (SWA) passengers since (SWA) has no seat assignments), Kelly said (SWA) has built its brand around a simple, fee-free fare and passenger experience model that it would be unwise to alter. “There is huge value in offering all of our customers (100% of them) a great product,” Kelly said. “We like to say at (SWA) there is no 2nd class [and] in addition to that, we strive to keep the customer experience and the product offering as simple as possible. Complexity drives confusion and it clouds the brand. So what you have at (SWA) is a very strong brand positioning in customers’ minds that we stand for friendliness, reliability and low fares. The whole ‘free bags and no change fees’ becomes a very powerful component of all that.”

Kelly added that (SWA) has “spent 45 years educating our customers as to what to expect” and making a major change like offering a basic economy (Y) fare “would be a huge mistake.” He also said (SWA) has no plans “to change our seating configuration and add bigger seats compared to smaller seats.” (AAL), (DAL) and (UAL), Kelly argued, “place lavish attention on elite customers, and they ignore the rest, and that is our biggest opportunity because we don’t ignore anybody. And we just don’t want to change that.”

Kelly said (SWA)’s financial results, which include record net profitability each of the last 2 years and 44 straight years of operating in the black, indicate “there’s just no emperical evidence that we’re missing anything.” He added, “If we start tinkering with the brand, we start offering the basic economy, blah, blah, blah, it would risk the revenue stream and the loyalty that we have with that frequent flyer base. So my report to you is we don’t have any thoughts about any radical changes to the program.”

News Item A-4: (SWA) was eager to sign up as the "launch customer" for Boeing (TBC)'s new 737 MAX. But it won't be the 1st to fly or even receive the new airplane. That honor will go to smaller low cost carrier (LCC) Norwegian Air Shuttle (NWG). (NWG) will receive the first MAX 8 in May, with flights starting as early as June.

As Boeing's largest customer for the 737, (SWA) has been involved in the redesign, which included outfitting the "workhorse" with a more powerful engine. In 2011, (SWA) placed the 1st order for the 737 MAX, followed by Indonesia's Lion Air (MLI).

Gary Kelly said (SWA) will getr its 1st of its 200 737 MAXs by July. (SWA) plans to put its 1st 737 MAX into service once it retires its 87 remaining 737-300 Classics, its oldest airplanes. And this is the sticking point: (SWA) must retire those old airplanes before it can accommodate new ones, a conundrum that traces back to pilot (FC) training issues.

About 10 of (SWA)'s 737 MAX planes will be finished by the time (SWA) is ready to begin flights in October. (SWA) is in talks with Boeing about what to do with those airplanes between July and October, because several are now parked at the periphery of Boeing's 737 factory in Renton, Washington.

737-3H4 (26571, N360SW), last revenue flight sold to Jetran. 2 737-8H4 (36910, N8519R, 42532, N852OQ) deliveries.

February 2017: News Item A-1: The USA National Transportation Safety Board (NTSB) said in a newly released report that “excessive speed” by a tug driver caused the nose gear of a Southwest Airlines (SWA) Boeing 737-300 to collapse upon pushback from the gate at the Baltimore-Washington International Airport on the night of August 4, 2016. While none of the 6 crew members or 129 passengers was injured, the airplane was “substantially” damaged when the nose gear collapsed in the forward direction.

News Item A-2: Southwest Airlines (SWA) commenced its 1st international flights from Oakland (OAK), California on February 12. (SWA) will link Oakland to Puerto Vallarta (PVR) and San Jose del Cabo (SJD) in Mexico with daily 737-700-operated flights. Both 2,501- and 2,008-km sectors will face no direct competition. Travelers across (SWA)’s western network (in particular those in Reno - Tahoe, Boise, Spokane, and Portland) also now have faster and more reliable options by connecting here at Oakland. “These new non-stop flights translate to greatly reduced journey times for sun and fun seekers resulting in more time at their destination.” With these latest launches, it brings to 6 the number of destinations in Mexico served directly from Oakland. Along with those launched by (SWA), Volaris (VLS) (Mexican airline) connects to Guadalajara, Tijuana, Morelia and Leon, while Mexico City is also served seasonally during summer by the airline.

737-7Q8 (30630, N7856A), AerCap leased, 737-76N (33379, N7885A), to Phoenix for entry into service. 3 737-8H4 (36922, N8522P; 36969, N8523W; 36970, N8524Z), ex-(N1786B).

March 2017: Southwest Airlines (SWA) commenced flights on 7 routes during the past 7 days, ranging from an 853 km USA domestic link between Salt Lake City (SLC) and Sacramento (SMF) to a 2,937 km international connection between Denver (DEN) and Belize City (BZE). The latter was the only international route launch by (SWA) this week. Of (SWA)’s new connections that started this week, 3 are routes that are currently unserved, with the 7 registering an average sector length of 1,551 km and an average weekly frequency of 7.9.

April 2017: Southwest Airlines (SWA) posted 2017 1st-quarter net income of +$351 million, down -31.6% from a net profit of +$513 million in the 2016 March quarter, even as (SWA) generated record 1st-quarter revenue of $4.9 billion, up +1.2% year-over-year (YOY).

1st-quarter expenses increased +8.8% (YOY) to $4.2 billion as labor costs rose +12.6% to $1.7 billion and fuel costs heightened +8.2% to $922 million. Operating income was $658 million, down -30.3% from an operating profit of +$944 million in the prior-year quarter.

(SWA)’s 1st-quarter traffic rose +3.3% (YOY) to 29.3 billion RPMs on a +4.1% increase in capacity to 36.7 billion ASMs, producing a load factor of 79.9% LF, down 0.6 points. Yield dropped 2.6% to 15.1 cents.

(SWA) took delivery of 9 Boeing 737-800s and 3 737-700s in the 1st quarter and is scheduled to take delivery of another 55 airplanes in 2017, comprising 30 737-800s, 11 737-700s and 14 737 MAX 8s. Its 1st 737 MAX 8 is scheduled to enter service October 1.

See photo - "SWA-737 MAX 8 - 2017-04.jpg."

(SWA) unveiled its new "California One" on 737-7H4 (3195-36913, N943WN - SEE PHOTO) after retirement of 737-300 (27929, N609SW).

May 2017: News Item A-1: International flying still represents only about 4% of (SWA)'s network-wide (ASM) capacity.

News Item A-2: Lion Airlines (MLI) subsdidiary Malaysia’s Malindo Air (MXD) has operated the 1st revenue flights with a re-engined Boeing 737 MAX 8 airplane in (MXD)'s subsidiary Batik Air (BTK) livery.

(BTK), which took delivery of the 1st (CFM) International (LEAP-1B)-powered 737 MAX 8 on May 22 operated the airplane on a revenue flight from Kuala Lumpur to Singapore and then on a return flight from Singapore to Kuala Lumpur. The flights operated as Malindo (MXD) flight 803 and flight 804, respectively.

Norwegian (NWG) is expected to be the next airline to put the 737 MAX 8 into service. Southwest Airlines (SWA), which placed the launch order for the 737 MAX, is expected to receive its 1st 737 MAX 8 on July 1 and place it into service on October 1.

News Item A-3: Southwest Airlines (SWA) began operating all of its flights under its Amadeus reservation system on May 9.

(SWA) has already done most of the heavy lifting to move to the new system, but the cutover still marks a major milestone in its multiyear effort to update and simplify its booking technology. (SWA) will move to a single reservation system for the 1st time since its merger with AirTran Airways (CQT) in 2011.

(SWA) rolled out the Amadeus system in 2014 for its international sales & operations, and also retired AirTran (CQT)’s "legacy system" in November of that year. However, it continued to use a legacy system for its domestic bookings. (SWA) emphasized that it has already been booking itineraries with the new system for several months. “We have been booking all flights from May 9 forward in the new reservations platform since December of last year (2016), which means there is no need to migrate customer data today.”

(SWA) said is not expecting any impacts on customer travel, but has a “robust support plan in place.” It had not seen any major issues by the afternoon of May 9. One benefit of the new reservation system is that it will allow (SWA) to process foreign currencies. (SWA) is hoping to expand its international audience in its international markets, such as Mexico City.

(SWA) cited other benefits of the new reservation system. These include improved schedules and connection times; the ability for automated rebookings; and inventory management.

2 737-8H4 (63592, N530W; 63575, N8531Q), ex-(N1786B) deliveries.

June 2017: 1 737-7Q8 (30644, N7863A) and 1 737-79P (29362, N7860A), AerCap (DEA) leased.

August 2017: News Item A-1: Southwest Airlines (SWA) has expanded its route offering from Sacramento (SMF) with flights to Long Beach (LGB) and Spokane (GEG). Both launched on August 1, the 621 km link to Long Beach will be operated by (SWA) 2x-daily, facing direct competition from JetBlue Airways (JBL) which also operates the city pair 2x-daily. The 1,044 km route to Spokane will be flown daily facing no direct competition. Both sectors will be flown using (SWA)’s 737-700s.

With these launches, (SWA) now offers 17 routes from Sacramento this summer on 532 weekly flights, with the top destinations being San Diego (7x-weekly flights), Los Angeles (58x-) and Las Vegas (53x-).

News Item A-2: Houston Intercontinental Airport (IAH) and Houston Hobby Airport (HOU) were closed because of severe flooding in Houston in the aftermath of Hurricane Harvey, significantly affecting United Airlines (UAL) and Southwest Airlines (SWA). >5,000 flight cancellations in the USA are estimated as a result of the hurricane so far.

All scheduled flights to/from the 2 Houston airports were suspended at 12 pm local time on August 27. According to Airlines for America (A4A), (HOU) will remain closed until 8 am August 30 and (IAH) will remain closed until 12 pm August 31. (UAL) has a major hub at (IAH), while (HOU) is a key airport in (SWA)’s network.

(SWA) said all of its flights at (HOU) are canceled at least through August 29. The Houston Airport System, which operates both airports, said “flooding” had necessitated the closing of both inbound and outbound roads to/from (IAH). It added that “all roads leading into” (HOU) have been closed because of “high water.”

Flights are “stopped until further notice,” (IAH) stated on its Twitter feed. “We are doing everything we can to resume operations once it’s safe to do so.”

(UAL) (>58%) and (SWA) (>22%) have a >80% market share combined at the 2 Houston airports, according the Houston Airport System. (UAL) has >4,000 weekly departures from (IAH); (SWA) has nearly 900 weekly departures from (HOU).

(SWA) confirmed that it flew 486 passengers stranded at (HOU) to Dallas on August 27 on 5 flights specially approved by the (FAA). "A large portion of those [passengers] had Dallas as their final destination and we put the other [passengers] in a hotel overnight and are working to accommodate them to their final destination out of [Dallas] Love Field today. We currently have 10 airplanes on the ground at Hobby and we are actively working to secure flight crews (FC) to transport those airplanes to other (SWA) airports."

(UAL) said it has waived the change fee and any difference in fare for flights to/from (IAH) and a number of other Texas airports for flights scheduled between August 25 and September 13, 2017. Other airlines serving Houston have followed suit ((SWA) does not charge change fees).

(IAH) handled 41.4 million passengers in the Houston Airport System’s most recent fiscal year ended June 30, 2017. (HOU) handled 13.3 million passengers during the fiscal year.

(SWA) financed a $156 million (HOU) international concourse that opened in 2015.

United Continental Holdings is likely to take at least a -$265 million financial hit from Hurricane Harvey because of (UAL)'s reliance on Houston as one of its biggest hubs. Flights at (UAL), the 3rd-largest USA carrier will decline an estimated -1.5% in the current quarter because of the storm, with little opportunity to recoup lost sales, Helane Becker of Cowen & Company said. Houston's George Bush Intercontinental Airport accounts for about 17% of (UAL)'s capacity.

The projected losses would more than double the -US$125 million blow Delta Air Lines (DAL) suffered when it canceled about 4,000 flights after April storms in Atlanta. Harvey probably also will prove more troubling than Hurricane Ike in 2008, which cost Continental Airlines (CAL) -US$50 million 2 years before it merged with (UAL), Becker said.

Harvey "seems more powerful and impactful," she wrote. Sandy, the storm that hit New York in 2012, "is probably the best comp, given the impact lingered beyond just the initial airport closings. After the airports opened, there was rebuilding to be done, and people just didn't travel for a while."

(UAL) hasn't issued guidance to investors about the storm's impact yet. "Our focus right now is on resuming operations out of Houston and helping our customers and employees."

* Shares Slip

(UAL) fell less than -1% to US$62.70 at 12:56 pm in New York after a similar drop on August 28. The shares tumbled -13% this year through August 28, more than 2x- the decline of (DAL) and 3x- the slide of the American Airlines (AAL) Group.

Southwest Airlines (SWA) will probably take a -US$77 million hit in the 3rd quarter because of its major presence at Houston's William P Hobby airport, Becker said. Discounter Spirit Airlines (SPR) is in line for -US$11 million in storm-related losses, she said.

The total blow adds up to -US$353 million for the 3 airlines, assuming the airports reopen August 31. Intercontinental is expected be reopen no sooner than the middle of that day, while Hobby may reopen Wednesday, according to the Federal Aviation Administration (FAA).

A computer outage last year led to a -US$150 million hit for (DAL).

News Item A-3: Southwest Airlines (SWA) said it is “working feverishly” to resolve a technical issue that is causing many of its highest-tier frequent flyers to receive low-status boarding positions.

The problem comes as (SWA) works to resolve a handful of issues with the new Amadeus reservation system it transitioned to in May. (SWA) Chairman & (CEO) Gary Kelly has characterized the new system and its rollout as an overall success, but has also acknowledged “break-in issues” that have specifically affected business-select fares that give passengers priority boarding status.

The current issue, which has seen numerous passengers complaining on social media, involves “A-list” frequent flyers who have accumulated so many flights in (SWA)’s loyalty program that they are automatically given high “A group” boarding status 36 hours before departure. Since (SWA) does not have assigned seats, boarding at the top of the A group means wide latitude in selecting seats and ample overhead luggage space on (SWA)’s Boeing 737 airplanes.

But many (SWA) A-list passengers in recent days have been assigned B or C group boarding status, meaning they may be left choosing among middle seats on crowded aircraft. (SWA)’s $15 boarding upgrade option at check-in has not been affected by the issue, leading some A-list passengers to insinuate on social media that (SWA) is intentionally knocking them down the pecking order to make room for those paying the $15 fee.

But that does not appear to be the case — (SWA)’s systems are at fault. “There is currently an ongoing issue affecting priority check-in and tier member boarding positions for (SWA)’s "Rapid Rewards" frequent flyer program. This resulted in boarding positions that are less typical than what the A-list and A-list preferred Rapid Rewards customers are used to expect. (SWA) technology teams have been working feverishly to resolve the issue.

In a message sent to A-list customers, (SWA) encouraged them to “manually” check in 24 hours in advance of their departure to get as high a boarding position as possible.

They indicated “If you do happen to receive a boarding position in the B or C group, remember that as always, your tier status enables you to board between Groups A and B,” (SWA) told its A-list customers.

Boarding between A and B is when (SWA) allows families with small children to board. While there is still generally a good selection of seats available between A and B boarding, the fact that families with small children (which board 1st on most airlines) are made to wait for the A group to board, demonstrates just how much value (SWA) places on A-group boarding.

Kelly told analysts and reporters on (SWA)’s recent 2nd-quarter earnings call that the issues with the new res system have “nothing to do with the elegance of the system” and are “a couple of one-off items that we’ve found and we’ll fix and get behind us.”

News Item A-4: Southwest Airlines (SWA) appointed John Zuzu as Managing Director Corporate Facilities and Thomas Merritt as VP Information Technology (IT) & Infrastructure Services.

News Item A-5: "Dueling Dallas Views of USA Airline Industry" by (ATW) Aaron Karp in AirKarp, August 18, 2017.

There were 2 schools of thought prominent during the recent round of USA airlines’ 2nd-quarter earnings calls: 1) Yes, net profits and margins are down year-over-year, but look at the long-term picture: the USA airline business is absolutely fundamentally changed and will be strongly profitable, despite some temporary dips here and there, for years to come—so investors should get on board quickly and unhesitatingly. 2) Well, maybe the business is different than it used to be, but maybe not. Airlines (and investors) need to be prepared for some rough patches and airlines need to be prudently managed under the assumption there will be difficult times.

You don’t have to leave Dallas to find perhaps the biggest proponents of each view. American Airlines (AAL) Chairman & (CEO) Doug Parker is repeatedly pounding view number 1. Southwest Airlines (SWA) Chairman & (CEO) Gary Kelly is the more cautious voice, expressing view number 2. Both men, of course, are coming at things from different perspectives.

Parker took over the merged American (AAL) - US Airways (AMW)/(USA) just as American was emerging from Chapter 11, and he believes consolidation, fundamental changes made during Chapter 11 restructuring and a reformed view by airline management regarding capacity discipline insulate the industry from the disastrous sea of red ink USA major airlines swam in during the previous decade. Kelly’s (SWA) has always been profitable (net profits every year, without exception, for the last 44 straight years) and that is because it never assumed things would always be rosy and planned accordingly. It’d be great if airlines writ large are now perpetually profitable businesses, Kelly believes, but (SWA) won’t assume that’s the case and will make sure it stays profitable, even if the rest of the industry nose dives again.

Is Parker too optimistic? Is Kelly too cautious?

The half-year financial results for the 9 publicly traded mainline USA airlines released this month by Airlines for America (A4A) include some numbers that certainly provide grist for Kelly’s wait-and-see caution.

USA airlines’ expenses grew at >2x- the rate of revenue in the 2017 1st half, leading to a -23.3% year-over-year (YOY) decline in pre-tax profitability. Higher expenses included increases in fuel (+19.9% (YOY)), labor (+9.1%), maintenance (+8.3%), aircraft (+6.8%) and airport rents and landing fees (+3.1%).

What if those kinds of expense jumps become common? Parker and proponents of the fundamentally changed view believe the cost hikes are not going to be repeated over and over (the spikes are themselves a sign of a maturing, healthy industry that needed some corrections). Labor costs needed to match airlines’ new level of profitability and now they do, so the jumps being experienced now are just short-term course corrections, the proponents of this view say. Fuel was so low it had to rise somewhat. New aircraft may be costly upfront, but they represent huge leaps in fuel efficiency and so operating costs will decline over time.

I don’t think Kelly would necessarily disagree with the above sentiments, but I’ve heard him in the past discuss fuel volatility. (“I don’t think we’ve ever anointed ourselves the czars or seers of what the future is,” he once said when discussing fuel prices.)

How does anybody know fuel prices won’t skyrocket again? They probably won’t, but they could (and nobody really knows).

What if labor now believes its pay raises should be perpetual and the current round of labor cost hikes are not just one-time course corrections? What if there is some global event outside of airlines’ control that leads to a significant drop in air travel demand?

Wall Street is clearly in the cautious camp, something that has frustrated Parker. “It feels to me that [investors] can’t just believe that the industry has gotten well, almost like this is too good to be true,” he said during American (AAL)’s call.

Kelly appears to be among those who believe it may be too good to be true. “The philosophical point to argue here is we are still going to manage the company under the assumption that there will be very difficult times again,” Kelly told analysts. “I’ve heard comments [along the lines of] things are different now. Maybe. But we’re going to make sure that (SWA) is very well positioned to weather the storm.”

News Item A-6: "Southwest Enters ‘New Chapter’ with Boeing 737 MAX 8"
by Aaron Karp (ATW) Plus August 30, 2017.

Southwest Airlines (SWA) has become the 1st USA airline to take delivery of the Boeing 737 MAX 8, an airplane in which (SWA) played a key role in developing. (SWA) launched the 737 BMAX program with an order for 150 in 2011. (SWA) was not the 1st in-service operator of the 737 MAX airplane (Malaysia’s Malindo Air (MXD) operated the 1st 737 MAX 8 revenue flight in May and Norwegian (NWG) is operating the 737 MAX 8 on transatlantic flights.

September 2017: Southwest Airlines (SWA) expects to lose -$100 million in revenue in the 3rd quarter because of the recent spate of hurricanes, and has downgraded its unit revenue and cost guidance for the September quarter.

In a filing with the USA Securities & Exchange Commission (SEC), (SWA) said it has canceled approximately 5,000 flights during the current quarter because of “impacts from the natural disasters.”

(SWA) has exposure to Texas, Florida and the Caribbean, which have all been affected by severe hurricanes in recent weeks. In particular, (SWA) has major operations at Houston Hobby Airport, where all of the (SWA)’s flights were canceled for nearly a week in late August/early September because of flooding in the aftermath of Hurricane Harvey.

(SWA) said its 3rd-quarter (RASM), which it had previously projected to grow +1% year-over-year (YOY), is now expected to be flat to down -1% (YOY) in the quarter. (SWA) added that its 3rd-quarter (CASM) is now expected to be up +3% to +4% (YOY), a higher unit cost rise than the +2% to +3% increase previously projected.

October 2017: News Item A-1: Southwest Airlines (SWA) weathered hurricanes and a competitive fare environment to post a +29.6% year-over-year (YOY) net profit gain in the 3rd quarter, and (SWA) is confident about its prospects for 2018.

Citing multiple hurricanes that affected key (SWA) markets (costing (SWA) $100 million in lost revenue) as well as the mass shooting in Las Vegas and wild fires on the USA west coast, Chairman & (CEO) Gary Kelly said, “I don’t know that we’ve ever had a 60-day period in our history when we had to deal with so many external events. Despite all these challenges, it was a very good quarter and the 4th quarter looks better.”

Kelly and (CFO) Tammy Romo told analysts and reporters they believe minor issues with a new reservations system transitioned to in May are behind (SWA), and (SWA) retired all of its remaining Boeing 737 Classics and introduced the 737 MAX 8 into its fleet during the 3rd quarter. That puts (SWA) in good shape for both the 4th quarter and 2018, they said.

“I do feel really good about the cost outlook for 2018,” Kelly said. “It’s our view that the economy will continue to be stable and travel demand will continue to be very strong. There’s a lot of strength throughout the (SWA) system.”

“With the Classic retirements and the addition of the 737 MAX, we see meaningful fuel efficiency gains in 2018,” Romo added.

(SWA) has 10 737 MAX 8 airplanes in its fleet currently, with +4 more scheduled to be delivered by the end of 2017.

(SWA) reported a net profit of +$503 million for the 3rd quarter, up +29.6% over net income of +$388 million in the 2016 September quarter, as revenue rose +2.6% to $5.2 billion and expenses decreased -0.2% to 4.4 billion.

News Item A-2: Southwest Airlines (SWA) launched the Boeing 737 MAX 8 into revenue service on its network on October 1, flying from Dallas Love Field to Houston Hobby Airport for its 1st official flight with the (CFM) International (LEAP-1B)-powered airplane.

(SWA) Chairman & (CEO) Gary Kelly called the MAX 8 “the future of the (SWA) fleet.” (SWA) launched 9 737 MAX 8s into service October 1 and will add +5 more to its fleet by the end of 2017. (SWA) plans to have a fleet totaling 707 airplanes by the end of 2017 comprised entirely of 737-700s, 737-800s and 737 MAX 8s; all of its 737 Classics have been retired.

(SWA)’s 737 MAX 8s are configured with 175Y, 32-inch pitch seats in a single-class layout.

(SWA), which Boeing (TBC) has said played a pivotal role in helping design the airplane, becomes the 1st North American airline to operate the airplane, which entered service with Malaysia’s Malindo Air in May 2017. (SWA) test flew a 737 MAX 8 on simulated operations over 6 days in September 2016. (SWA) has orders for 200 737 MAX airplanes, a combination of the 737 MAX 8 and 737 MAX 7 models.

News Item A-3: "Ryanair Pilots Win Support of Southwest Airlines Crews in Bid to Unionize" by Benjamin D Katz & Mary Schlangenstein, Bloomberg News, October 10, 2017.

Pilots (FC) at Ryanair Holdings Plc got a boost in their bid to unionize from counterparts at Southwest Airlines (SWA), the USA carrier that provided a blueprint for Europe's biggest discount operator.

As the crisis surrounding the cancellation of 20,000 flights continues to swirl, the (SWA) Pilots' Association are ready to help their (RYR) colleagues, offering to host meetings as well as provide assets and resources, Jon Weaks, the union's President said in an interview. "I'm preparing a letter to send offering support," said Weaks, whose union represents 8,700 pilots and is based in Dallas. "We're on standby to help them in any way."

The backing from flight crew (FC) at the biggest USA discounter follows an offer of legal, organizational and financial assistance from American Airlines (AAL) Group's Allied Pilots Association. The involvement of (SWA) is symbolically significant as (RYR) (CEO) Michael O'Leary used the company's business model as a template after taking the top job in 1994.

Weaks said he is willing to travel to Ireland to meet with (RYR)'s pilots (FC), although no financial assistance has yet been offered and his union's involvement remains preliminary. USA labor groups are aiding (RYR) staff as they seek to stem the spread of outsourced recruitment and contracts, though Weaks added that organizing pilots (FC) has been tough given management's anti-union stance.

(RYR) shares fell -0.9% at 10:09 am in Dublin. The stock has declined > -4% since the initial cancellations were announced on September 15.

* Model Company

Even as (RYR) faces potential upheaval from organizing pilots (FC), it has stablilized operational issues, with 98% of passengers refunded or re-accommodated on alternative flights.

While (RYR) "deeply regretted" scrapping flights through the winter flying schedule, the move has lifted punctuality, with 97% of flights leaving on time last week after dropping to <70% in the weeks leading up to the crisis, Chief Marketing Officer (CMO) Kenny Jacobs said.

O'Leary last week made the rare move of directly appealing to pilots (FC) with an improved pay deal aimed at stemming defections to competitors including Norwegian Air Shuttle (NWG) and the UK's Jet2 (JT2). "It's like indentured servitude," Weaks said of the relationship between (RYR) and its pilots (FC). "O'Leary likes to take the good things" from (SWA) Co-Founder and former (CEO) Herb Kelleher, but "doesn't follow through on walking the walk."

(RYR) said on October 6 that its Chief Operations Officer, Michael Hickey, would be stepping down. The current crisis arose after (RYR) failed to adequately prepare for a change in regulations that require it to squeeze 6 months of annual leave into its final quarter, prompting the scrapping of services for some 700,000 customers.

News Item A-4: (SWA) plans to launch flights between the continental USA and Hawaii, a move that will test the limits of (SWA)’s service model given the distance of the flights. (SWA) has applied to the (FAA) for the Extended-range Twin-engine OPerationS (ETOPS) approval for the Boeing 737 MAX 8 that will be needed to fly to Hawaii. (SWA) started operating 9 737 MAX 8 airplanes at the beginning of October.

(SWA) is giving “serious consideration” to operating inter-island flights in Hawaii, Chairman & (CEO) Gary Kelly said. Inter-island flying is 1 of the many issues being examined by (SWA) as it prepares to launch service between the continental USA and Hawaii next year, Kelly told analysts and reporters during (SWA)’s 3rd-quarter earnings call. Kelly said launching Hawaii service is the “big-ticket item” for (SWA).

News Item A-5: North American airlines are facing headwinds in 2017 that are lowering operating margins compared to 2015 and 2016, but air travel demand in the region remains strong and the overall industry outlook remains stable, according to "Fitch Ratings." In a new report issued October 23, Fitch analysts said higher wages, higher jet fuel prices and “intense competition” are leading to “weaker operating margins and deterioration in credit metrics for North American carriers.

December 2017: News Item A-2: "WestJet (WJI) Changes Boeing Order to Include 737 MAX 10; 3Q Net Profit up +19.4%" by Kristin Majcher, (ATW) Plus November 1, 2017.

WestJet (WJI) has modified its Boeing commitments to include the 737 MAX 10 model, (WJI) told analysts during its 3rd-quarter earnings call on October 31. Under the amended agreement, (WJI) will take 7 737 MAX 10 airplanes instead of 7 737 MAX 8s originally slated for delivery between 2022 to 2025. It will also add +5 787-10 airplanes for delivery starting in 2022, raising its total firm 737 MAX orders from 50 to 55 airplanes. (WJI) will also change 7 787-9 orders to 4 787-8s.

December 2017: News Item A-1: Delta Air Lines (DAL) and Canada’s WestJet (WJI) have signed a preliminary Memo Of Understanding (MOU) to form a joint venture (JV) that will include coordinated schedules and pricing on USA - Canada transborder flights.

(DAL) and (WJI) already code share, but the (JV) will lead to expanded code sharing and “seamless connections on the airlines’ extensive networks in the USA and Canada.”

(WJI) President & (CEO) Gregg Saretsky said the 2 carriers will have “fully reciprocal” frequent flyer program benefits under the (JV).
(DAL) and (WJI) plan to finalize the terms of the (JV) agreement in the 1st half of 2018 and aim to launch the (JV) in the 1st half of 2019. The (JV) requires the approval of both airlines’ boards and regulatory clearance from the USA and Canada. Given that pricing will be coordinated, the carriers will need to gain antitrust immunity from both countries’ governments.

“We anticipate that the agreement will be reviewed by USA and Canadian regulatory authorities,” (DAL) said. “On the US side, this includes the Department of Transportation.”

(DAL) President International & Executive VP Global Sales Steve Sear said the carriers’ combined transborder network “captures 95% of demand between the 2 countries.”

The announcement of the proposed (JV) across the northern USA border comes 7 months after (DAL) launched a USA - Mexico transborder (JV) with Aeromexico (AMX). Sear noted that a (DAL) - (WJI) (JV) would be (DAL)’s 8th cross-border agreement with another airline that features a (JV) or an equity stake, or both.

Citing Aeromexico (AMX) and Air France (AFA) - (KLM), both of which are partly owned by (DAL) and have antitrust-immunized (JV)s with (DAL), Saretsky said a (DAL) - (WJI) (JV) will “open doors for [WJI] to play with those partners.”

(DAL) and (WJI) began interlining in 2011 and code sharing in 2012. Their cooperation caused a planned extensive code sharing accord between (WJI) and Southwest Airlines (SWA) to be terminated before it was implemented. (SWA), which had wanted to partner with (WJI) to extend its reach to Canada, said (WJI)’s plans with (DAL) were “inconsistent” with the (WJI) - (SWA) deal.

The (DAL) - (WJI) (JV) is slated launch around the same time the 1st of (WJI)’s 10 Boeing 787-9s is scheduled to be delivered in 2019. Both the addition of 787s and the (JV) with Delta mark key milestones for (WJI) as “we morph into a longer-haul international carrier,” Saretsky said.

News Item A-2: Southwest Airlines to Restrict Smart Bags with Non-removable Lithium Batteries" by Mark Nensel mark.nensel@informa.com aaron.karp@penton.com December 18, 2017.

Southwest Airlines (SWA) is joining the movement to restrict smart bags with non-removable lithium batteries, following similar guidelines announced by fellow USA carriers Delta Air Lines (DAL), American Airlines (AAL) and Alaska Airlines (ASA) in early December.
Effective January 15, 2018, (SWA) will no longer accept smart bags if the lithium battery cannot be removed, according to new rules released by the (SWA) on December 15.

Smart bags are recently introduced luggage products that utilize integrated lithium batteries that power imbedded electronics, such as (USB) ports for recharging personal electronic devices (PEDs), self-weighing technology and even motors that power the bag’s wheels and allow it to keep up with its owner.

All 4 airlines instituting the policy cite (FAA) guidelines, which restrict lithium ion batteries in airline cargo holds to avoid runaway fire incidents if the batteries ignite in-flight.

(SWA) will allow smart bags with a removable lithium battery to be transported into the cabin as carry-on baggage, and the battery may remain installed. “[But] if checking a smart bag is required at any time for any reason, the customer will need to remove the battery,” (SWA) said. The customer would then have to keep the battery on their person, or in carry-on baggage, in the main passenger cabin.

“Customers traveling with smart bags should note that (SWA)’s policy applies regardless of any manufacturer statement indicating the item is (FAA) or (TSA) ‘approved’,” (SWA) said, advising passengers to “[take] a few minutes to understand the bag’s battery placement and whether it can be removed. [It will] save you time and improve your travel experience at the airport.”

Additionally, each (SWA) passenger is now permitted to carry up to a maximum of 15 (PED)s and a maximum of 20 spare batteries. However, all loose and spare batteries and power banks (i.e., portable chargers) must be protected from short circuit and transported in carry-on baggage only, (SWA) said.

(SWA) also announced it will allow passengers to carry one book of safety matches or 1 “common” lighter on their person, effective January 15, 2019, while also emphasizing that lighters and matches are prohibited from carry-on bags, and should never be placed in checked baggage. The policy differs somewhat from present (TSA) prohibited item guidelines, which state that “disposable and Zippo lighters without fuel are allowed in checked bags.” The same lighters are also allowed in carry-on bags, according to (TSA).

Other major USA carriers, such as United Airlines (UAL), JetBlue (JBL), Hawaiian Airlines (HWI) and (LCC)s Frontier (FRO), Spirit (SPR), and Allegiant (WJE), have yet to make a statement clarifying their positions on transporting smart bags.

January 2018: News Item A-1: "Southwest Airlines (SWA) Orders 40 More Boeing 737 MAX 8s" by Aaron Karp, January 3, 2018.

Southwest Airlines (SWA) has exercised 40 Boeing 737 MAX 8 options while deferring 23 737 MAX 7 deliveries, a fleet adjustment (SWA) said was driven by the tax bill passed in late 2017 by the USA Congress. The tax legislation, signed into law by USA President Donald Trump, lowers the USA corporate tax rate to 21%. The 40 737 MAX 8s firmed by (SWA) are valued at $4.5 billion at list prices.

(SWA) said it will receive 15 of the 40 737 MAX 8 airplanes in 2019 and the remaining 25 will be delivered in 2020. The deferrals will push 23 737 MAX 7 firm orders, previously scheduled to be delivered from 2019 through 2021, to 2023 (12 deliveries) and 2024 (11 deliveries).

“We applaud Congress and the President for taking this action to pass legislation, which will result in meaningful corporate income tax reform for the transportation sector in general, and for (SWA) in particular,” (SWA) Chairman & (CEO) Gary Kelly said. 1 use of the additional capital (SWA) expects from the tax rate change is ordering more MAX airplanes, Kelly said.

(SWA)’s 737 MAX 8s are configured with 175Y, 32-inch pitch seats in a single-class layout. The exercised options bring its total orders for MAX aircraft to 240. It placed its 1st 737 MAX 8s into service in the 2017 4th quarter.

News Item A-2: "Southwest Airlines (SWA) to Fly Out of Everett's Paine Field" by Dominic Gates (dgates@seattletimes.com), 2018-01.

February 2018: News Item A-1: "Southwest Airlines Cancels All Flights at Midway Airport" (NBC) Chicago, February 12, 2018.

Almost 500 flights have been canceled at Chicago's airports as they continue to clean up following a series of heavy snowfalls in the area. At Midway Airport, Southwest Airlines (SWA) announced that they had canceled all of their remaining flights on Sunday after running low on de-icing fluid for their planes.

"We have paused our service for the remaindeR of the day for the safety of our customers and crews," (SWA) said.

At Chicago O'Hare (ORD), where 4.1 inches of snow had fallen on Saturday and Sunday, >200 flights had been canceled. A total of 222 flights were canceled, and the average delay on departing flights was around 22 minutes.

Midway Airport fared worse in the cancellation department, as 265 flights were canceled at the airport due to the wintry weather. Average flight delays of >15 minutes were reported on Sunday afternoon.

The Chicago-area received several waves of snow, including a storm Friday that dumped as much as a foot of snow in western areas. Chicago Public Schools canceled classes as a result of the snow, and >1300 flights were canceled at the area's airports.

On Saturday night and into Sunday morning, even more snow and some sleet fell, prompting a Winter Weather Advisory and hazardous travel conditions in some areas.

News Item A-2: Southwest Airlines plans to start rolling out international cargo shipments in May, with Mexico City, Cancun, Cabo San Lucas/Los Cabos and Puerto Vallarta at the top of the list.

The new service, subject to government approvals and the successful deployment of its new Southwest Cargo Suite (SCS) point-of-sale and back-office system, would expand to more destinations in 2018. (SCS) is expected to be in place by April 1 and will enable advanced cargo bookings and electronic air waybills.

(SWA) saw cargo revenue rise +1.2% year-over-year (YOY) in 2017 to $173 million, “primarily due to increased demand,” (SWA) said in its most recent 10-K filing with the USA Securities & Exchange Commission. Its 2018 1st-quarter outlook was for a (YOY) rise compared to 2017's 1st 3 months. “Sluggish demand” contributed to a -4.5% drop in full-year 2016 revenue to $172 million from $178 million in 2017.

North America, like much of the rest of the globe, enjoyed a strong air freight year in 2017. (IATA) figures show North American (FTK)s rose +7.9% (YOY) in 2017, while global (FTK) growth was +9% (the strongest (YOY) surge since 2010).

March 2018: News Item A-1: Southwest Airlines (SWA) (CEO) Gary Kelly, who has long resisted calls from some Wall Street analysts to charge fees for checked bags, voiced his most adamant rejection yet of baggage fees, completely ruling them out. Bags will “be free as long as I’m the (CEO) and I hope that’s a long time,” Kelly told the USA Chamber of Commerce Aviation Summit in Washington DC.

News Item A-2: "Boeing’s 737 Hits Historic Milestone: 10,000 737s"
Dominic Gates Aerospace Reporter, Seattle Times, March 13, 2018.

The 737’s evolution over 5 decades shows a progression from a short, stubby puddle-jumper to a much-larger plane carrying 2x- as many passengers >2x- the distance. The 737 airplane celebrated March 13 was the latest (SWA) 737 MAX 8.

To mark the occasion, top 737 customer Southwest Airlines (SWA) donated to the Boeing Employee Community Fund a check for $10,000 earmarked for disaster relief.

See attached photos: "SWA-2018-03 10000 737.jpg" and
"SWA-2018-03 1st 737 Flight 1967-04.jpg"

April 2018: News Item A-1: "INCDT: One Fatality After Southwest 737 Mid-air Engine Failure" by "Aviation Week" Bill Carey, (bill.carey@aviationweek.com), April 17, 2018.

A Southwest Airlines (SWA) Boeing 737-700 made an emergency landing at Philadelphia International Airport on April 17 after an apparent engine failure that caused 1 fatality.

(SWA) flight 1380 was en route from New York La Guardia Airport to Dallas Love Field when passengers heard an explosion involving the left engine, which blew out a window and caused the cabin to depressurize, according to media reports. The flight crew (FC) diverted the 737 to Philadelphia.

The pilots (FC) including Captain Tammie Jo Shults guided the plane carrying 144 passengers and 5 crew to a smooth landing. The jet landed 20 minutes after the explosion.

Powered by twin (CFM56-7B) turbofans, the airplane had reached an altitude of 32,500 feet before descending; it landed at 11:23 am, according to tracking company FlightAware. The 737, registered as (N772SW), was carrying 143 passengers and 5 crew.

Following the landing, the (FAA) imposed a ground stop for airplanes at other airports waiting to depart for Philadelphia. At 1:45 pm, the Philadelphia airport reported the ground stop had been lifted.

The passenger fatality was the 1st on a USA airline since 2009 and (SWA)'s 1st onboard fatality. In December 2005, a (SWA) airplane slid off the runway at Chicago Midway International Airport, through a fence and crashed into a car, killing a child in the car.

“We are deeply saddened to confirm that there is 1 fatality resulting from this incident,” (SWA) said in a late afternoon statement. “The entire Southwest Airlines (SWA) family is devastated and extends its deepest, heartfelt sympathy to the customers, employees, family members and loved ones affected by this tragic event. We have activated our emergency response team and are deploying every resource to support those affected by this tragedy.”

The (NTSB) dispatched a go-team to investigate the scene. Briefly addressing reporters at Reagan Washington National Airport prior to departing for Philadelphia, Chairman Robert Sumwalt described the incident as “an apparent in-flight engine failure,” but declined to use the term uncontained engine failure.

“I don’t want to sound bureaucratic, but ‘uncontained engine failure’ connotates a very specific thing,” Sumwalt said. “The engine is designed not to have an uncontained engine failure. There are protection rings around the engine to keep shrapnel from coming out. Even though we believe that there were parts coming out of this engine, it may not have been in that section of the engine that technically would qualify this as an uncontained engine failure.”

Manufactured by (CFM) International, the joint venture of (GE) Aviation and France’s Safran Aircraft Engines, the (CFM56) engine type entered service in 1997 and has accumulated >350 million flight hours.

“The (NTSB) confirmed that there was 1 fatality. The (CFM) team worldwide expresses its deepest condolences to the family of that victim,” (CFM) spokesperson Jamie Jewell said. “We have sent a team of technical representatives to the site to support the (NTSB) and the investigation, along with supporting (swa).”

In August 2016, a (SWA) 737 en route from New Orleans to Orlando experienced an uncontained engine failure of the left (CFM56) engine after climbing to 31,000 feet. The flight crew (FC) landed the airplane safely at Pensacola International Airport.

* "Southwest’s ‘LUV’ Heart Beats Through Tragedy" by Karen Walker (karen.walker@informa.com) in (ATW) Editor's Blog, April 18, 2018.

It’s not something that any airline wants to be in a position to “get right,” but what Gary Kelly and his team at Southwest Airlines (SWA) have demonstrated is the textbook way to respond to a disaster.

Immediately it became clear that something had gone tragically wrong with one of its flights, (SWA)’s emergency response team was at work; with its people, with responders at Philadelphia Airport, where flight 1380 made an emergency landing, getting assistance to those affected, and communicating to the wider public its shock, condolences and what information it had.

USA National Transportation Safety Board (NTSB) investigators are on the scene to establish what happened and why.

For the 144 passengers and 5 crew, it was an awful ordeal. The left engine of the Boeing 737-700 exploded, hurling shrapnel through a window, which broke open. A female passenger was half sucked out of the plane and other passengers battled to keep her inside; she later died. Depressurization meant everyone was wearing oxygen masks and the remaining flight must have been terrifying, even though it was cooly and expertly flown to a safe landing.

But if airlines (or any service company) want a real-world guide on to how to respond in a crisis, they should look at how (SWA) handled this incident. The messaging was quick and easily accessible, distributed on social media, in press statements, at a press conference, and via the posting of a video by (CEO) Kelly.

In that video, Kelly looks shocked, calls it a “sad” and “tragic” day; he expressed his deep condolences to the victim’s family and sympathy to all those affected. He said they are (SWA)’s top priority and pledged every assistance to them. He made clear that it was an engine failure and that (SWA) would give the (NTSB) investigation its full support. He thanked the crew and those at Philadelphia Airport for their actions. And he promised more information as it became available.

With impressive speed, the company offered a "from the top" message of heartfelt condolences, assistance to those directly affected; transparency, gratitude to those who helped, and a promise to find out what went wrong.

No airline (CEO) wants to be in the position Kelly was in this week. But all airlines should have crisis communications plans. And while it will be no comfort to (SWA)’s People, they should be commended for their preparation and professionalism in a crisis.

"‘Nerves of Steel’: She Calmly Landed the Southwest Airlines Flight and Broke Barriers as a Fighter Pilot" by Samantha Schmidt, "The Washington Post," April 17, 2018.

In the midst of the chaos, Southwest Airlines (SWA) pilot Captain Tammie Jo Shults successfully completed an emergency landing of the Boeing 737 in Philadelphia, saving the lives of 148 people and averting a far worse catastrophe.

The Captain’s voice was calm yet focused, as her plane descended with 149 people on board. “Southwest 1380, we’re single engine,” Captain Tammie Jo Shults, a former fighter pilot with the US Navy, said. “We have part of the airplane missing so we’re going to need to slow down a bit.” She asked for medical personnel to meet her airplane on the runway. “We’ve got injured passengers.”

“Injured passengers, okay and is your airplane physically on fire?” asked a male voice on the other end, according to an air traffic recording. “No, it’s not on fire, but part of it’s missing,” Shults said, pausing for a moment. “They said there’s a hole, and uh, someone went out.”

The engine on Shults’ plane had, in fact, exploded, spraying shrapnel into the airplane, causing a window to be blown out and leaving one passenger dead and 7 others injured. Frightened passengers on board the Dallas-bound flight braced for impact as oxygen masks muffled their screams.

In the midst of the chaos, Shults successfully completed an emergency landing at the Philadelphia International Airport, saving the lives of 148 people and averting a far worse catastrophe.

“She has nerves of steel,” one passenger, Alfred Tumlinson, told the Associated Press. “That lady, I applaud her. I’m going to send her a Christmas card (I’m going to tell you that) with a gift certificate for getting me on the ground. She was awesome.”

Another passenger, Diana McBride Self, thanked Shults on Facebook for her “guidance and bravery in a traumatic situation.” She added that Shults “came back to speak to each of us personally.” “This is a true American Hero,” she wrote. Others on social media agreed, even comparing Shults with Captain Chesley “Sully” Sullenberger, who glided his US Airways plane to safety in New York’s Hudson River in 2009.

It was also no surprise to her that Tammie Jo Shults was the pilot credited with the skillful landing. Shults’ mother-in-law and friends described her as a pioneer in the aviation field, a woman who broke barriers to pursue her goals.

She was among the 1st female fighter pilots for the US Navy, according to her alma mater, MidAmerica Nazarene University, from which she graduated in 1983. Cindy Foster, who went to college with her, told the "Kansas City Star" that Shults was also among the 1st women to fly an F/A-18 Hornet for the Navy. “She said she wasn’t going to let anyone tell her she couldn’t,” Foster said.

Shults’s persistence in becoming a pilot goes back to her upbringing on a New Mexico ranch, near Holloman Air Force Base, Shults wrote in the book “Military Fly Moms,” by Linda Maloney.

“Some people grow up around aviation. I grew up under it,” she wrote. Watching the daily air show, she knew she “just had to fly” She recalled attending a lecture on aviation during her senior year of high school, in 1979. A retired colonel started the class by asking Shults, the only girl in attendance, “if I was lost.”

“I mustered up the courage to assure him I was not and that I was interested in flying,” she wrote. “He allowed me to stay but assured me there were no professional women pilots.”

When she met a woman in college who had received her Air Force wings, she wrote, “I set to work trying to break into the club.” But Shults, whose maiden name is Bonnell, wrote that the Air Force “wasn’t interested” in talking to her. The Navy let her apply for aviation officer candidate school, “but there did not seem to be a demand for women pilots.”

“Finally,” she wrote, a year after taking the Navy aviation exam, she found a recruiter who would process her application. After aviation officer candidate school in Pensacola, Florida, she was assigned to a training squadron at Naval Air Station Chase Field in Beeville, Texas, as an instructor pilot teaching student aviators how to fly the Navy T-2 trainer. She later left to fly the A-7 Corsair in Lemoore, California.

By then, she met her “knight in shining airplane,” a fellow pilot who would become her husband, Dean Shults. (He also now flies for (SWA)).

Because of the combat exclusion law, Tammie Jo Shults was prohibited from flying in a combat squadron. While her husband was able to join a squadron, her choices were limited, involving providing electronic warfare training to Navy ships and aircraft.

She later became 1 of the 1st women to fly what was then the Navy’s newest fighter, the F/A-18 Hornet, but again in a support role. “Women were new to the Hornet community, and already there were signs of growing pains.”

She served in the Navy for 10 years, reaching the rank of Navy lieutenant commander. She left the Navy in 1993, and now lives in the San Antonio area with her husband. She has 2 children (a teenage son and a daughter in her early 20s).

Foster, her friend from college, told the Kansas City Star that Shults knew she “had to work harder than everyone else. She did it for herself and all women fighting for a chance.” Her approach to parenting, described in the “Military Fly Moms” book, reflected a similar sentiment.

“We endeavor to teach our children to be leaders, not lemmings,” she wrote. “This is especially important when it comes to making the right choice while the crowd is pulling in the other direction.”

Gary Shults, her brother-in-law, described her to the "AP" as a “formidable woman, as sharp as a tack.” “My brother says she’s the best pilot he knows,” Gary Shults said. “She’s a very caring, giving person who takes care of lots of people.”

Whatever was going through her mind as she completed her landing, Tammie Jo Shults even made time to tell the control tower: “Thank you, thanks guys, for the help.”

News Item A-2: "NTSB: Investigators Find Metal Fatigue in Southwest Airlines 737 Engine Failure" by "Aviation WSeek" Bill Carey (bill.carey@aviationweek.com), April 18, 2018.

USA National Transportation Safety Board (NTSB) investigators found evidence of metal fatigue in the left engine of the (SWA) Boeing 737-700 that made an emergency landing at Philadelphia International Airport on April 17 after the pilots (FC) initially reported an engine fire, then clarified that there was no fire but that engine parts were missing.

At a 9 pm briefing at the airport the day of the incident, (NTSB) Chairman Robert Sumwalt said investigators immediately focused on a missing fan blade in the damaged (CFM56-7B) turbofan engine. The number 13 fan blade, 1 of 24 fan blades that draw air into the engine, was broken at the point where it attached to the hub. “Our preliminary examination of this was that there is evidence of metal fatigue where the blade separated,” he told reporters.

The engine cowling was found in Bernville, Pennsylvania, about 70 miles NW of the airport.

Sumwalt said the (NTSB) wants to determine if the affected engine part is subject to a pending (FAA) airworthiness directive (AD) for certain (CFM56-7B) engines that would require ultrasonic inspections of certain fan blades. The (FAA) proposed the (AD) after a (SWA) 737 experienced a fan blade failure while flying from New Orleans to Orlando in August 2016. The flight crew landed the aircraft safely at Pensacola International Airport.

In June 2017, engine manufacturer (CFM) International issued a revised service bulletin that recommended one-time ultrasonic inspection of high-time fan blades “as soon as possible” on (CFM56-7B) engines.

(SWA) (CEO) Gary Kelly informed Sumwalt that (SWA) will immediately begin enhanced inspection procedures involving ultrasonic inspection on its entire fleet. (SWA) said it will accelerate its existing engine inspection program relating to (CFM56) engines “out of an abundance of caution,” a process it expects to complete in 30 days.

(CFM), the joint venture of (GE) Aviation and France’s Safran Aircraft Engines, said the (CFM56) engine type entered service in 1997. The (FAA) issued a certificate of registration to the incident aircraft in 2000.

During the briefing, Sumwalt provided a timeline of the emergency landing. The flight departed La Guardia Airport at 10:43 am About 20 minutes after takeoff, as the airplane was passing through 32,500 feet, multiple aural alerts and warnings sounded on the flight deck. The 2 pilots donned oxygen masks and reported to air traffic control that they had a Number 1 engine fire, were operating on a single engine and were initiating an emergency descent.

“Because they were concerned with potential airplane controlability issues, they elected to land the airplane with flaps 5 instead of the normal flap setting for a Boeing 737, which would be either flaps 30 or flaps 40,” Sumwalt said. “Once they were on final approach, they clarified to the tower that there was no engine fire, but they were operating single engine and they reported parts of the engine were missing.”

Asked about the significance of the lower flap setting, Sumwalt said: “That would mean that they were going to have a faster approach speed by a good bit, and they did that because of concerns about controlability.”

Sumwalt said the flight crew (FC) consisted of a female captain and a male first officer. Media reports identified the captain as Tammie Jo Shults, who was described by friends as 1 of the 1st women to fly the US Navy’s F/A-18 Hornet fighter.

News Item A-3: "(FAA), (EASA) Issue Emergency Directives for (CFM56-7B) Inspections" by "Aviation Week" Bill Carey (bill.carey@aviationweek.com and Sean Broderick, (sean.broderick@aviationweek.com), April 20, 2018.

The (FAA) and European Aviation Safety Agency (EASA) late April 20 issued emergency airworthiness directives (AD) calling for inspections of fan blades on (CFM56-7B) engines that power Boeing 737NGs.

The emergency (AD)s come 3 days after a (CFM56-7B)-powered Southwest Airlines (SWA) 737-700 carrying 144 passengers and 5 crew made an emergency landing at Philadelphia International Airport after experiencing an apparent left-engine explosion. One passenger died in the incident.

The directives follow a service bulletin (SB) engine manufacturer (CFM) International also issued April 20, recommending that fleet operators perform ultrasonic fan-blade inspections “within the next 20 days” on high-time (CFM56-7B) turbofans. The (SB) recommends inspections at different thresholds for all blades, with the highest-time blades (those with 30,000 or more cycles) needing inspections immediately. (CFM) also recommends repetitive inspections.

(EASA)’s (AD) adopts the (SB), while the (FAA) (AD) only mandates one-time inspections on the highest time blades. The (FAA) plans to follow up with another (AD) that would cover the rest of the blade population and possibly require repetitive checks.

The (FAA)’s (AD) describes its requirement as “a one-time ultrasonic inspection (USI) of all 24 fan blade dovetail concave and convex sides to detect cracking” within 20 days.

(EASA)’s directive supersedes an (AD) the (FAA) released in March, which became effective on April 2 and was in response to an August 2016 (SWA) 737-700 uncontained engine failure. “Since the AD was issued, a further failure of a fan blade of a (CFM56-7B) engine has been reported,” (EASA) said.

The USA National Transportation Safety Board (NTSB) initially found that 1 of the 24 titanium alloy fan blades in the engine in the April 17 (SWA) incident had separated from the fan hub, where there was evidence of fatigue cracking. The safety board has said it is too early to say if the 2016 engine failure and the latest incident are directly related.

(CFM), the (GE) Aviation/Safran Aircraft Engines joint venture, said there are roughly 14,000 (CFM56-7B) engines in service. The fan-blade inspections recommended within 20 days would be for engines with >30,000 cycles since delivered new (each cycle consisting of an engine start, takeoff and landing, and full shut down). That affects about 681 engines world wide, of which 150 have already been inspected, (CFM) said. Some 352 engines would be affected in the USA, the (FAA) said. (CFM) said it issued the recommendation in “close collaboration” with the (FAA), the (EASA), Boeing (TBC) and (CFM56-7B) operators. (CFM) recommends inspections “by the end of August” for fan blades with 20,000 cycles, and inspections of all other fan blades when they reach 20,000 cycles. After the 1st inspection, the manufacturer recommends operators repeat the inspection every 3,000 cycles, which represents about 2 years in airline service. Inspections can be conducted on-wing with an ultrasonic probe along the surface of the fan blade and take about 4 hours per engine, (CFM) said.

“About 60 customers world wide operate engines within the cyclic thresholds of the new service bulletin,” (CFM) stated. “(CFM) partners (GE) and Safran Aircraft Engines have about 500 technicians (MT) directly involved to support customers and minimize operational disruption.”

* "Proposed FAA Reauthorization Amendment Calls for Engine Safety Review" by Bill Carey (ATW) Plus, April 24, 2018.

USA House Transportation Committee Chairman Bill Shuster (Republican - Pennsylvania) has submitted an amendment to proposed (FAA) re-authorization legislation that would require a “call to action” review of airline engine safety in the wake of the Southwest Airlines (SWA) flight 1380 engine failure. The amendment to HR 4, the (FAA) Re-authorization Act of 2018, calls on the (FAA) to initiate the review process within 90 days of the bill’s enactment.

* "Passenger Sues Southwest Airlines Over Fatal Engine Explosion" by Alana Wise, "Reuters" April 28, 2018.

A lawsuit against Southwest Airlines (SWA) has been filed by a passenger who was flying on (SWA) flight 1380, in which an engine exploded and 1 person was killed. The lawsuit claims that since the accident, the passenger, Lilia Chavez, has suffered post-traumatic stress disorder, anxiety, depression and other personal injuries.
The lawsuit was filed in the USA District Court for the Eastern District of Pennsylvania.

(SWA) has been under intense scrutiny in the days since a (CFM56-7B) engine on 1 of its Boeing 737-700 jets blew apart during an April 17 flight, shattering a plane window and flinging shrapnel. Passenger Jennifer Riordan, 1 of 149 people aboard, was killed. The incident has raised concerns about the safety of similar engines.

"Our focus remains on working with the (NTSB) to support their investigation," (SWA) said. "We can't comment on any pending litigation. The safety and security of our employees and customers is our highest priority at all times."

Also named in the suit are France's Safran S A, General Electric Aviation and (CFM) International, the manufacturers behind the engine that broke apart. (CFM) is a transatlantic joint-venture co-owned by GE and Safran.

The suit claims that (SWA) and the engine makers had "placed profits and business" over passenger safety and continued to operate the engine "even when there was confirmation that an unsafe condition existed." A (SWA) flight in August 2016 with the same type of (CFM56-7B) engine made an emergency landing in Pensacola, Florida, after a fan blade separated and debris ripped a hole above the left wing. After the incident, European regulators gave airlines 9 months to check the engines. USA regulators were still were considering what to do after proposing some checks.

"Despite knowing of the dangerous condition of the subject aircraft's engine, the defendants risked the lives of more than a hundred innocent passengers," including Chavez, the filing reads. The incident marked the first fatality on a USA commercial passenger airline since 2009.

(SWA) shares closed up 0.4%. They have lost -18.2% year to date.

News Item A-4: Southwest Airlines (SWA)’s near-term international focus will be to add more USA gateways, Executive VP & Chief Revenue Officer Andrew Watterson told an audience at the International Aviation Club in Washington DC on April 4th. (SWA) will operate 65 international routes from 23 USA gateways by July 2018, up from just 4 USA airports from which it operated international flights when it started flying beyond the USA in 2014. (SWA) flies to 15 international destinations in 10 countries.

News Item A-5: "Southwest Airlines Builds its Own Kind of International Network" by by Aaron Karp in AirKarp, Aviation Daily (aaron.karp@informa.com) April 5, 2018.

Southwest Airlines (SWA) has always been its own airline (while many carriers around the world have copied aspects of (SWA)’s business model, (SWA) remains unique. So it goes with (SWA)’s budding international operations.

(SWA) launched international service in 2014 with a small number of routes inherited from AirTran Airways (ATA). It has since developed a larger Caribbean/Mexico-focused international network that includes 15 destinations in 10 countries. Its 3 largest international destinations are Cancun (Mexico), San José del Cabo (Mexico) and Montego Bay (Jamaica).

But the growing network is taking a different form than those of the legacy USA international airlines. Traditionally, USA airlines funnel international passengers into a handful of USA airports from which beyond-USA flights are operated. Delta Air Lines (DAL), for example, largely concentrates international flights at 6 USA airports: Atlanta, Boston, Detroit, Los Angeles, New York (JFK) and Seattle. If you live outside those areas, flying international on (DAL) usually means making a domestic connection 1st.

(SWA), on the other hand, is starting to develop a robust network of USA gateways. By July, it will operate 65 international routes from 23 USA gateways. “As a point-to-point carrier, you don’t serve all of these international points from 1 or 2 gateways,” (SWA) Executive VP & Chief Revenue Officer Andrew Watterson explained during an appearance at the International Aviation Club in Washington DC. “We’ve zoomed up to 23 gateways and I expect that to keep growing.”

The (SWA) concept appears to be: Bring the international service to the passenger. This adds another selling point beyond the no fees, low fares, on-time service (SWA) is already selling: Start your vacation off with a nonstop flight.

For example, (SWA) operates nonstop Saturday flights from St Louis and Indianapolis to Cancun. This means flight time of about 3 hours. Most journeys from St Louis or Indianapolis to Cancun aboard legacy airlines take about 6 hours or more and include a connection (with 1 leg potentially including a regional jet flight). Cutting out 3 hours of travel and eliminating a connection is a real selling point.

Some caveats: It is the early days of (SWA)’s international operations and the available options are still somewhat limited. A lot of the nonstop options are just 1x-weekly (although, for vacationers, this lack of frequency may not be a big deal). And (SWA) will do plenty of funneling itself, especially to airports like Houston Hobby, where it has built its own international terminal.

But as time goes on, expect more and more nonstop international options on (SWA), and a different kind of international network compared to rivals like (DAL), (AAL), (UAL) and focus-city oriented JetBlue Airways (JBL).

News Item A-6: Southwest Airlines (SWA) and the Aircraft Mechanics Fraternal Association (AMFA), the union representing >2,400 (SWA) maintenance technicians (MT) and related employees, reached an agreement in principle (AIP) April 10 for a 5-year contract.

The agreement comes “after nearly 6 years of negotiations,” (AMFA) National Director Bret Oestreich said. “The parties have reached the stage where it is time for our members at (SWA) to review and vote on a package produced by this protracted process.” The current (AMFA) contract became amendable in August 2012; the (AMFA) filed for National Mediation Board assistance in July 2015.

(SWA) described the contract as including terms for updated work rules, improved wages and benefits, and a total of $91 million in ratification bonus payments. (SWA) labor managers said the agreement “is good for our people and helps (SWA) maintain an efficient operation” and “rewards [our employees’] efforts with an industry-leading offer.”

The negotiating committee for the union, however, distributed a memo April 11 explaining the last-minute negotiations that resulted in the (AIP), and announced it had decided it “will not endorse this (AIP) or recommend that you vote yes. It remains our position that you are entitled to a better compensation package.” The (AIP)’s contract language is being finalized and will be sent to employees for a ratification vote in the coming weeks.

May 2018: A-1: Southwest Airlines (SWA) revealed the 4 continental USA cities from which it plans to operate flights to Hawaii as it moves closer to selling tickets for the service. As expected, all 4 airports are in California: Oakland, Sacramento, San Diego and San Jose. (SWA), which has called launching Hawaii service its biggest initiative this year, is awaiting extended-range, twin-engine operations standards (ETOPS) approval from the (FAA) to allow it to fly Boeing 737-8 airplanes on the operation.

News Item A-2: Dallas/Fort Worth International Airport (DFW) launches a major rehabilitation project on May 24, closing part of its Runway 17-Center/35-Center (17C/35C) and beginning work on replacing the center 3rd of the 13,400 ft runway.

(DFW) is replacing a section of the runway that measures 6,000 ft by 50 ft, including the sub-base. The airport plans to keep part of the runway open for at least 2 months, which will allow the southern portion of the strip to be used during the day. Full closure is planned for August as the project expands. Work is slated for completion by year end.

The new runway will include special pavement sensors to help monitor weather. The project also includes building connections to a planned NE airport perimeter (or end-around) taxiway. (DFW) has a perimeter taxiway at the southern end of 2 east-side parallel runways, including 17C/35C.

Built in 1984, the runway handles the most arrivals at (DFW). But the airport expects operational impact to be minimal thanks to the airport's 6 other runways.

The $135 million project is being funded in part by a $49.5 million (FAA) Airport Improvement Program grant. "This runway work is a critical need for the (DFW) Airport, and the 1st major step in our 10-year plan to modernize infrastructure across the airport," (DFW) Executive VP of Infrastructure & Development Khaled Naja said. "We've taken a long look at our 44-year old facilities and have developed a comprehensive plan to address the upcoming work on runways, taxiways, aircraft ramps, roadways and bridges over the next few years."

June 2018: News Item A-1: More USA capacity cuts needed after Southwest Airlines (SWA) cuts growth, analysts say. Recent news from (SWA) that it is scaling back planned growth through year-end will help keep domestic capacity in check as costs rise, but similar moves will be needed by peers to cement what analysts believe is a necessary market correction.

News Item A-2: Southwest Airlines (SWA) is adding about 15 daily flights, including nonstop service to 6 new markets out of Dallas Love Field (DAL) in early 2019, crediting schedule-optimization for creating room to fly out of its already-crowded headquarters airport.

Under the revised schedule, daily nonstops will connect (DAL) with Charleston, Ft Myers/Naples, Jacksonville, Louisville, Milwaukee, Minneapolis/St Paul, and—in a seasonal-service addition: Panama City Beach, Florida. (SWA) also is adding Sunday-only service to Tucson. The Louisville and Tucson routes are new, while Minneapolis is being upgraded from Sunday-only and the others are former seasonal routes. (SWA) is also adding frequencies on 8 current (DAL) routes.

Among other changes, (SWA) is bringing back its Newark to Nashville nonstops and stopping its Newark to Indianapolis flying. The changes go into effect January 7, 2019. "This is a re-optimized schedule, and as our unique optimization system is improved and enhanced, it allows us to implement significant changes to our network," (SWA) said. "Our current schedule optimization toolset is generating returns with every schedule publication, allowing (SWA) to capitalize on minute-by-minute time savings and adjustments and to operate even more flights out of its gates at Love Field," a (SWA) spokesman added.

The changes increase (SWA)'s peak daily (DAL) operation to 195 flights, up from 180. (SWA) operates out of 18 gates at 20-gate (DAL), and generally considered 10 flights per gate per day to be maximum capacity.

One of its gates is shared with Delta Air Lines (DAL) in a long-running dispute that ended up in court, with (DAL) believing it should have more space for competition's sake, and (SWA) arguing that its lease permits it to full use of its gates. (SWA) also points out that under the 5-party agreement, it cannot serve both (DAL) and Dallas-Fort Worth (DFW), meaning its only practical expansion avenue in the market is growing at (DAL).

The latest changes do not affect the (SWA)-(DAL) legal battle. (SWA) is not adding service at Gate 15, the space it shares with (DAL). In a court filing, (SWA) said that if not for (DAL)'s presence at Gate 15, it would add 5 more daily flights, but the court has ordered (SWA) not to disrupt Delta's (DAL) operation until the legal proceedings are complete. Alaska Airlines (ASA) occupies (DAL)'s 2 remaining gates.

(SWA)'s schedule update also does not include any more details about (SWA)'s planned Hawaii service. (SWA) has announced the markets in both Hawaii and the mainland USA, but has not released a start date, schedule or city pairs.

July 2018: News Item A-1: "Say Hello to the 737 MAX by Southwest Airlines" Airways Magazine, July 2018.

On Tuesday afternoon, June 26, Southwest Airlines (SWA) flew home the 1st of 9 Boeing 737 MAX 8 airplanes that they’ll put into service October 1, making them the 1st North American airline to receive the new and improved plane. As the largest operator of 737s world wide, (SWA) was instrumental in turning the 737 into Boeing’s all-time bestseller. So fittingly, (SWA) was the 1st airline to place an order in 2011: 200 airplanes and the option to purchase 191 more.

As the “launch customer,” (SWA) had every intention of being the 1st to receive and the 1st to fly the new plane, but in January of this year, Norwegian Air Shuttle (NWG) announced they’d be the 1st to fly the airplane. Not so fast, Norwegian (NWG).

In March, Malaysian carrier Malindo Air (MXD) (a subsidiary of Lion Air (MLI) emerged and said they would be the 1st to operate the 737 MAX, and that claim held true. (MXD) took delivery of their 1st 737 MAX 8 at the Seattle Delivery Center May 16, and the plane entered commercial service May 22.

(NWG) wasn’t too far behind when they took delivery of 2 737 MAX 8s 2 months later, but not without a series of delays. And even though (NWG) was the 1st in the USA to operate the 737 MAX, (SWA) will still be the 1st American airline to fly the 737 MAX when they begin service this fall.

But being surpassed by the other carriers wasn’t the 1st problem (SWA) faced with the 737 MAX. Back in April 2016 (>4 years into ongoing negotiations between (SWA) and their pilots (FC) union, (SWA) decided to retire the 737-300 fleet by the 3rd quarter 2017 due to uncertainties around (FAA) pilot (FC) training requirements for the old 737-300s and the new 737 MAX fleet. Just 2 months later, (SWA) announced they would delay a $1.9 billion order consisting of 67 737 MAX 8 airplanes by upwards of 6 years.

Even with postponed deliveries, and even though an airline (or two) came from behind and took the “first to fly” crown from (SWA), the 1st 737 MAX painted in airline colors wore none other than the red, yellow and blue (SWA) livery. (SWA) was also a huge player in the development and testing of the 737 MAX.

News Item A-2: Southwest Airlines (SWA) will stop giving away peanuts on flights next month, ending a tradition that goes back decades. (SWA) said it was pulling peanuts from all flights because of concern for passengers with peanut allergies. They will be replaced by pretzels and, on some longer flights, other free snacks.

(SWA) said the decision followed months of deliberation and wasn’t tied to any particular incident involving passengers with allergies.
No snack is more closely identified with a USA airline. Over the years, (SWA) used the humble legume in marketing campaigns. A blog on its website is called "Nuts About Southwest." Some of (SWA)’s other early quirks, like dressing flight attendants (CA) in hot pants, went out decades ago, but the peanuts survived. Until now.

September 2018: "Baltimore’s (BWI) airport plans Southwest Airlines Maintenance Facility" by Ben Goldstein
(Ben.Goldstein@aviationweek.com), September 21, 2018.

Southwest Airlines (SWA) Chairman & (CEO) Gary Kelly joined Maryland Governor Larry Hogan and state transportation leaders to announce plans for (SWA) to construct and operate a major aircraft maintenance facility at Baltimore/Washington International Thurgood Marshall Airport (BWI).

The project (which will be (SWA)’s 1st maintenance facility in the Northeast) is expected to create 450 construction and maintenance jobs over the next 3 years, as well as support hundreds of additional jobs over the next 2 decades.

Kelly said the facility will be (SWA)’s “1st maintenance hangar in the Northeast and will support >120 Technical Operations employees with performing existing line maintenance work at (BWI).”

The proposed facility would include a 130,000 sq ft maintenance hangar, which would support 3 airplanes, as well as exterior apron space that would accommodate up to 8 airplanes.

Construction of the project, which is pending (FAA) approval, is expected to begin in 2019, with a scheduled completion in late 2021.

The total cost of the maintenance facility is $130 million, with (SWA) contributing $80 million to build the facility and the (MDOT) Maryland Aviation Administration supplying $50 million for infrastructure improvements like utility work and preparation.

The announcement coincided with the 25th anniversary since (SWA) started service at (BWI). (SWA) is the busiest at the airport, flying nearly 18.2 million domestic and international passengers to/from (BWI) in the 2017 calendar year. (SWA) employs 4,837 staff at the airport.

October 2018: News Item A-1: Southwest Airlines (SWA) reported 3rd-quarter 2018 net income of +$615 million, a +16.5% increase from a +$528 million net profit in the same period last year. (SWA)’s (3Q) (RASM) increased +1.2% year-over-year (YOY), driven largely by a yield increase of +2.3% and offset slightly by a load factor decline of -0.9 point to 83.9% LF. That marked a rebound from the 2nd quarter, when (RASM) decreased -3% in the wake of the April 17 Boeing 737-700 in-flight engine failure

News Item A-2: Southwest Airlines (SWA) is nearing the end of its required (FAA) certification process to launch Hawaii flights, and could launch service within weeks of getting final approval, top executives said. (SWA) is moving into the “demonstration” phase of its Extended Twin engine OPerationS (ETOPS) certification effort needed to launch overwater flights to Hawaii, (SWA) Executive VP & Chief Revenue Officer Andrew Watterson told analysts on October 25.

November 2018: News Item A1: "(NTSB) Eyes Fan Blades, Inlet in Southwest Airlines 737 Engine Failure Investigation" by Bill Carey November 14, 2018.

A USA National Transportation Safety Bureau (NTSB) investigative hearing into the April in-flight engine failure of a Southwest Airlines (SWA) Boeing 737-700 on November 14 honed in on the design and testing of the (CFM56-7B) engine fan blades and the containment capability of the engine inlet and fan cowl.

Questioning representatives of Boeing and engine manufacturer (CFM) International, (NTSB) investigators compared the April accident to an engine failure on a (SWA) 737-700 in August 2016. Both were “fan blade out” (FBO) events stemming from cracked fan blades. Since the 2016 accident, inspections have detected 8 cracked fan blades, 4 on (SWA) airplanes, (CFM) reported.

Following the earlier accident, (CFM), the 50/50 joint venture of (GE) Aviation and France’s Safran Aircraft Engines, recommended a series of corrective actions through service bulletins, but they did not apply to the fan blades in the latter accident.

On April 17, the pilots (FC) of (SWA) flight 1380 made an emergency landing at Philadelphia International Airport (PHL) after the left (CFM56-7B) engine of the 737 failed, blowing out a nearby window and causing the cabin to depressurize.

1 of the 144 passengers on board was killed (the 1st fatality involving a USA passenger airline since February 2009) and 8 passengers suffered minor injuries. There were 5 crew aboard the planned flight from New York La Guardia Airport to Dallas Love Field.

(NTSB) investigators responding to the scene discovered that 1 of the 24 titanium alloy fan blades was missing from the damaged engine, and there was evidence of metal fatigue where the blade separated. The engine cowling was found in Bernville, Pennsylvania, about 70 mi NW of the airport.

The accident was reminiscent of the August 27, 2016 uncontained engine failure on a (SWA) 737-700 that forced pilots (FC) to divert to Pensacola International Airport, Florida, during a flight from New Orleans to Orlando. In that case, the (NTSB) found that 1 fan blade had separated from the fan disk because of fatigue cracking. Debris from the (CFM56-7B) engine inlet damaged the 737's fuselage, wing and empennage.

Boeing (TBC) developed the design requirements for the (CFM56-7) engine inlet and fan cowl, which it provided to United Technologies Aerospace Systems (UTAS) to build the structure. (FBO) containment capability was not required in the initial inlet design, according to a (UTAS) presentation.

Based on a rig test conducted in 1995, Boeing issued a revised design specification requiring containment capability for a “forward-spiraling fan blade fragment.” The production inlet design that went through engine certification test in 1996 included an inlet containment shield that performed its intended function in 2 bird strikes.

During certification, the (FAA) would expect the airframe manufacturer “to show that anything that departed the engine during a fan blade out event wouldn’t impact the wing or the empennage,” said Victor Wicklund, representing the (FAA)’s Transport Standards Branch. “They would have to demonstrate that whatever they lost wouldn’t jeopardize safe flight and landing.”

Following the Pensacola accident, (CFM) implemented a set of corrective measures, recommending eddy current, or electrical current, testing of fan blades when an engine is in the repair shop and ultrasonic fan-blade inspections for on-wing engines, said (CFM) International (CFM56) engineering leader Mark Habedank. Previously, maintainers examined for cracks through fluorescent penetrant inspections.

The engine manufacturer issued the 1st related service bulletin in March 2017, which later was revised. Based on the most recent bulletin, ultrasonic inspections using a probe now are recommended every 1,600 engine cycles.

(NTSB) board member Bella Dinh-Zarr, who chaired the investigative panel, explained the hearing was a fact-finding exercise to assist the board in determining probable cause of the accident.

News Item A-2: Southwest Airlines (SWA), looking to solidify and potentially improve upon a projected 3% unit-revenue increase in 2019 amid costs rising at the same rate, has increased fares in most USA domestic markets by +$2 to +$5. Early returns showed that mainline competitors were selectively matching (SWA)’s moves, suggesting a boon for much of the USA industry. (SWA) began rolling out the increases November 19.

December 2018: News Item A-1: "INCDT: (EMAS) Stops Southwest 737 in Burbank Overrun; No Injuries Reported" by Sean Broderick (sean.broderick@aviationweek.com) December 6, 2018.

The runway-excursion safety system installed following a 2000 overrun by a Southwest Airlines (SWA) 737-300 at Hollywood Burbank Airport (BUR) is being credited for helping to keep another 737 from leaving airport property after the 737-700 airplane landed and went past the same runway end on December 6.

“Shortly after 9:05 am (PT) December 6, (SWA) flight 278 rolled off the end of Runway 8 while landing at [BUR] and came to rest in the Engineered Material Arresting System (EMAS),” the (FAA) said via Twitter shortly after the incident (INCDT).

(SWA) said the flight from Oakland, California, “landed safely and rolled to a stop at the end of a runway.” Images shared on social media show the 737-7H4 (N752SW), firmly embedded in the (EMAS)’ crushed cement debris.

All 112 passengers and 5e crew members departed via “air stairs,” (SWA) said. No injuries were reported.

Weather at (BUR) at the time of the incident included heavy rain. The (FAA) issued a ground-stop for certain flights headed for (BUR) for about 2 hours after the incident.

(EMAS) installations, used to provide supplemental safety at the ends of runways that do not have enough room for standard 1,000 ft long by 500 ft wide runway safety areas, have been credited for 14 saves since 1999, (FAA) data show. Flight 278 is the 3rd involving a scheduled commercial passenger flight. In 2016, then USA VP Mike Pence’s chartered 737 rolled into an (EMAS) at New York’s LaGuardia Airport.

Burbank’s single (EMAS) bed, which now measures 170 ft long and 350 ft wide, according to an (FAA) chart of the airport, was installed in January 2002 with the help of a $1.9 million (FAA) grant. The original bed was 170 ft wide and was enlarged in 2008. The entire bed was replaced in 2017.

The bed’s installation came <2 years after another excursion involving (SWA) and same runway. On March 5, 2000, (SWA) flight 1455 overran (BUR)’s Runway 8 departure end, ran through a blast fence and perimeter wall, and came to rest on Hollywood Way, a 4-lane city street that runs perpendicular to Runway 8/26, east of the airport. 2 passengers suffered serious injuries.

The USA National Transportation Safety Board (NTSB) cited the crew (FC)’s decision to continue an unstable approach with excessive speed and flight-path angle as the accident’s primary cause. The board also cited air traffic control (ATC)’s handling of flight 1455’s approach, which “positioned the airplane too fast, too high, and too close to the runway threshold to leave any safe options other than a go-around maneuver.”

The report did not cite the airport’s configuration as a factor, but (BUR) opted to install the (EMAS). The bed sits between the Runway 8 departure end and Hollywood Way. (EMAS) systems have been installed or planned for 113 runway ends at 69 USA airports. Most of the installations were done by Zodiac Aerospace, now part of Safran. In 2014, a competitor, Runway Safe, introduced a system that uses aggregate foam made from recycled glass, touting it as cheaper and more durable than Zodiac’s cellular cement product. Chicago Midway Airport has installed 4 of the Runway Safe systems.

News Item A-2: "Southwest’s Load Factor Declines for 8th Straight Month" by Sean Broderick, December 7, 2018.

Southwest Airlines (SWA) continues to see capacity growth outpace revenue passenger mile (RPM) additions, underscoring (SWA)'s need to boost unit revenue through efforts such as its recent fare increases.

(SWA) saw (RPM)s increase +4.9% last month compared to year-earlier figures, while available seat miles (ASMs) were up +6.5%. (SWA) has not seen monthly traffic growth outpace capacity expansion since March. Year-to-date figures through November had (RPM)s up +3.3%, while (ASM)s increased +3.8%.

Among USA competitors, that report regular traffic results, only Alaska Airlines (ASA), which is still integrating Virgin America (VUS), is on track to see full-year capacity growth outpace traffic gains. (ASA)’s most recent figures show (RPM)s up +4.2% through October, while (ASM)s increased +5.1%. Its monthly (RPM)s grew faster than (ASM)s as recently as July. Dallas/Fort Worth-based American Airlines (AAL), Delta Air Lines (DAL), JetBlue Airways (JBL) and United Airlines (UAL) are each on pace for full-year load-factor increases. After a slow start to the year, caused in part by a temporary drop in bookings following April’s in-flight engine failure and related passenger fatality, (SWA)’s total passenger unit revenue (PRASM) rebounded last quarter, increasing +1.1%. Airline executives have expressed confidence in the overall revenue environment, and point to steadily increasing benefits from new revenue-management tools. Nevertheless, (SWA) recently put in fare increases of up to $5 on most of its domestic routes (in part to help offset a projected +3% rise in nonfuel costs next year.

“(SWA) is performing reasonably well on the revenue side despite traffic growth lagging capacity growth,” Delta Airport Consultants Chief Industry Strategist William Swelbar said. “If (SWA) is to expand margins in the face of rising costs, then, simply, revenue growth is paramount.”

While (SWA)’s revenue is holding up, the extended run of monthly load-factor declines may be a sign of more fundamental challenges, Swelbar said. “The USA market is a more mature market, and the ability to stimulate new demand is more difficult as a result,” he said. “(SWA) flies in the largest city-pair markets. In 2000, 76% of the top 2000 city-pair markets had nonstop service. Today, >92% of the top 2000 city pairs have nonstop service. Finding new opportunities is no longer low-hanging fruit.”

Meanwhile, (SWA)’s fleet plan emphasizes efficiency at the cost of some capacity flexibility. Like most carriers, (SWA) is adding seats to its airplanes, chasing more revenue for marginally higher unit costs. Carriers with mixed fleets can combine frequency and gauge, using regional jets if needed, to optimize service in a market. (SWA)’s all-Boeing 737 fleet, while highly efficient because of its commonality, offers less flexibility. The gauge increase combined with (SWA)’s preference for high frequencies makes lower-demand markets particularly challenging.

At the end of 2012, (SWA)’s 694-airplane fleet averaged 136 seats per hull. By the end of 2017, the fleet numbed 706 and the average seat size was up to 152 per airplane (a +12% increase). (SWA) plans to finish 2018 with about 750 airplanes, with the notable year-over-year jump coming as (SWA) steadily adds 737 MAX family airplanes after accelerating retirement of its last 737 Classics last year.

“With average seat size growing and new markets to enter being fewer and smaller compared to (SWA)’s historical standards, traffic lagging capacity growth should not come as a big surprise,” Swelbar said.


Click below for photos:
SWA-2000TH 737
SWA-737 - 2012-01
SWA-737 5000TH
SWA-737 MAX - 2011-12
SWA-737 MAX - 2017-08.jpg
SWA-737 MAX 7 - 2013-05
SWA-737 MAX 8 - 2017-04.jpg
SWA-737 MAX 8 10000 N8717M 2018-03.jpg
SWA-737 N411WN LAX 2016-03.jpg
SWA-737 N7816 COCO SEA TAC 2017-11.jpg
SWA-737-300 - 2015-09.jpg
SWA-737-3H4-LONE STAR ONE-2004-02
SWA-737-700 - COLORADO ONE - 2012-09
SWA-737-700 - Latest Livery - 2015-06.jpg
SWA-737-700 - WITH WINGLETS - 2014-08
SWA-737-700 2018-03.jpg
SWA-737-700 Missouri One 2018-03.jpg
SWA-737-700 N918WN 2018-02.jpg
SWA-737-700 N931WN Lone Star 2018-03.jpg
SWA-737-700 N943WN California One 2018-03.jpg
SWA-737-7H4 - HEART TWO - 2014-10
SWA-737-7H4 HK
SWA-737-800 - 2013-04
SWA-737-800 - 2014-09 NEW LIVERY
SWA-737-800 - 2016-08.jpg
SWA-737-800 - Missouri One-2016-02.jpg
SWA-737-MARYLAND ONE-2005-06

December 2018:

14 737-2H4 (JT8D-9A HK) (640-22062, /80 N64SW; 725-22357, /80 N68SW "THE WINNING SPIRIT;" 1095-23249, /85 N105SW); 609-21811, SOLD TO (PSS) 2000-06, 21970 RETIRED 2001-02. 3 RETURNED. N767SW & 8 RETIRED 2002-07. 22356 SOLD 2002-12 & SCRAPPED. 22358 SCRAPPED 2003-08. 22699 SCRAPPED. 22675 (2003-11); 22730; (2003-12) & 23249; SOLD TO UNIVERSAL ASSET MANAGEMENT 2004-04. 22826 (2004-05); & 22827 (2004-06) SOLD TO UNIVERSAL. 22904; 23110; SOLD TO UNIVERSAL (2004-07). 22054 SOLD 2004-09. 22963 WFU; 22965 RETIRED 2005-01. 23256; WFU IN STORAGE 2005-02. 22062; FOR SALE. 122Y.

1 737-2K6 (JT8D-15 HK) (678-22340, /80 N129SW), 122Y.

2 737-2T4 (JT8D-15 HK) (855-22699, /82 N130SW; 624-22054, /79 N702ML; 817-22697, /81 N721WN; 823-22698, /81 N722WN), 22697; 22698; SOLD TO (SSV) 2005-01. 122Y.

4 737-3K2 (CFM56-3) (23738; 23786; 24326, 24327), EX-(TAV) 1999-11. 137Y.

0 737-3Q8 (CFM56-3C) (23401, N685SW), BOUGHT FROM WELLS FARGO BANK NW 2015-12. WFU AT TUCSON 2016-08.

1 737-3YO (CFM56-3C) (23495, N664WN; 23497, N665WN), 23497 WFU AT TUCSON 2016-07.

174 737-300 (CFM56-3B1) (1233-23498, /86 N308SA; 1506-24068, /88 N317WN; 2744-27929, N609SW "California One"). 23255 WFU AND SOLD 2005-01. 23064; 23343; RETURNED 2008-01. 23340; 23341; 23342; RETURNED 2008-03. 23406; RETURNED (CGP) & PARTED OUT 2008-12. 23289; 23506; RETURNED 2008-11. 23290; RETURNED 2009-02. 22941; WFU 2009-02 & SCRAPPED - SEE PHOTO - "SWA-2009-12-737-3H4 SCRAPPING." 23253; & 23414; SCRAPPED 2009-12. 737-3A4: 1318-23505; SCRAPPED 2010-02. 26571, SOLD TO JETRAN 2017-01. 27929 "CALIFORNIA" ONE RETIRED 2017-04; 137Y.

19 737-5H4 (CFM56-3B1) (1718-24178, /89 N501SW "SHAMU" THREE COLORS; 864-24184, /90 N507SW "SHAMU" TWO COLORS; 24185, N508SW, 2014-08; 2292-26570, /92 N528SW). 7 WFU AT TUCSON 2016-08 & 2016-09. 122Y.

1 737-7AD (CFM56-7B24) (41-28436, /98 N798SW), EX-(ESW). 137Y.

17 737-7BD (CFM56-7B20) (33919, N7713A; 33922, N7720F; 2083-33925, /06 N7734; 33928, N7742B; 33930, N7738D; 33933, N7745A; 33934, N7746C, 34479, N7721E; 2013-05; 34861, N7732A; 34862, N7735A; 35788, N7741T; 36399, N7748A; 36716, N7750A; 36724, N7749B), EX-(N267AT; N281AT; N296AT, N307AT; N311AT; N315AT). 137Y.

1 737-7BK (CFM56-7B) (30617, N7824A), BOUGHT FROM APOLLO AVIATION 2015-11.

1 737-7BX (CFM56-7B) (30744, N552WN), EX-(VH-VBQ), (CGP) LEASED 2010-12. 137Y.

1 737-7CT (CFM56-7B) (32751, N782B), EX-(C-FWBX), 2015-06.

1 737-7CT (CFM56-7B) (35084, N7881A), 2016-08.

335 737-7H4 (CFM56-7B22) (1-27841, /97 N707SA; 38-27845, /98 N711HK "THE HERBERT D. KELLEHER;" N727SW "NEVADA ONE;" 400-29848, /99 N753SW - SEE INCDT - "SWA-2013-07 - INCDT 737-7H4;" N922SW "TENNESSEE ONE;" 744-27888, N793SA "SPIRIT ONE" 2001-01; 1535-32471, N286WN; 1301-33716, /03 N433LV; 1801-32493, "SLAM DUNK ONE" 2005-10; 36967, N867WN, 2011-10; 3195-36913, /17 N943WN "CALIFORNIA ONE" 2017-04), 9 STORED MOJAVE 2001-11. 137Y.

2 737-7K9 (CFM56-7B) (30041, N7813P; 30042, N342TR), 2014-04. 137Y.

1 737-7L9 (CFM56-7B) (28015, /16 N7841A), 2016-07. 137Y.

1 737-7Q8 (CFM56-7B24) (14-28209, /98 N799SW), EX-(TTA), (ILF) 14 YEAR LEASED 2000-03. +1 ORDER. 137Y.

3 737-7Q8 (CFM56-7B) (29352, N7874B; 29354, N7875A; 29355, N7876A), EX-TRANSAERO (TRX), AERCAP (DEA) LEASED 2015-12.

5 737-7Q8 (CFM56-7B) (29350, 29352, 29354, 29355, 29359), EX-(TRX) 2015-11.

1 737-7Q8 (CFM56-7B (30644, N7863A) AERCAP (DEA) LEASED 2017-06.

1 737-705 BBJ (CFM56-7B24) (109-29090, /98 N271LV), BOUGHT FROM (YFD) 2006-10. WINGLETS. CORPORATE. 122 PAX.

2 737-73V (CFM56-7B) (30243, N7839A; 30249, N559WN), BOUGHT FROM WELLS FARGO BANK NW 2015-12, (GEF) LEASED.

1 737-76Q (CFM56-7B) (1010-30279, N550WN; 30288, N7815L), AVIATION CAPITAL GROUP (CGP) LEASED 2009-04 & 2014-02.

2 737-790 (CFM56-7B) (30166, N557WN; 30778, N562WN), 2014-04. 137Y.

2 737-79P (CFM56-7B) (29362, N786OA; 30657, N7832A), 2015-10 & 2017-06.

74 OPTIONS 737-700 (CFM56-7B22), OVER 12 YEARS:

1 +65 ORDERS 737-800 (CFM56-7B) (2012-03).

4 737-8H4 (CFM56-7B) (35965, N8695D; 36661, N8694E; 36678, N8696E; 36728, N8597C) 2016-08.

2 737-8H4 (CFM56-7B) (36657, N86670, 2015-05; 36903, N8668A, 2015-05), EX-(N1786B).

8 737-8H4 (CFM56-7B) (36684, N8316H; 36686, N8320J; 36687, N83210; 36910, N8519R, 2017-01; 36990, N8314L; 36994, N8319F; 38110, N8602F; 38811, N8315H), 2012-07.

3 737-8H4 (CFDM56-7B) (36715, N8671D; 36734, N8674B; 36940, N8672F), 2015-11.

3 737-8H4 (CFM56-7B) (36731, N8623F; 36917, N8621A; 36919, N8622A), 2013-12.

5 737-8H4 (CFM56-7B) (36896, N8625A; 36907, N8645A; 37004, N8624J; 37009, N8327A; 42532, N852OQ, 2017-01), 2014-03.

3 737-8H4 (CFM56-7B) (36922, N8522P; 36969, N8523W; 36970, N1786B), EX-(N1786B) 2017-02.

2 737-8H4 (CFM56-7B) (63592, N530W; 63575, N8531Q), ex-(N1786B) 2017-05.

23 ORDERS (12 IN 2023, 11 IN 2024 737 MAX 7.



Click below for photos:
SWA-2-GARY KELLY - 2014-09
SWA-2-GARY KELLY-2011-06-A
SWA-2-GARY KELLY-2011-06-B
SWA-2-GARY KELLY-2011-06-C
SWA-2-GARY KELLY-2011-06-D
SWA-2-GARY KELLY-2011-06-E
SWA-3-Tom Nealon - 2017-01.jpg
SWA-5-Andrew Watterson 2018-03.jpg
SWA-6-Captain Tammie Jo Shults 1990s Photo.jpg
SWA-6-Captain Tammie Jo Shults INCDT.jpg
SWA-7-Scott Carpenter 2018-01.jpg
SWA-8-Mark Wibben.jpg

June 2011: The "Associated Press" reported that the legendary Herb Kelleher, the Founder of Southwest Airlines (SWA) had emerged from retirement to speak about the past, present, and the future. Herb is the man who changed the world by bringing air transport to the masses. Herb, whose pioneering business model revolutionized the entire global economy, let alone the USA airline business, still showed up at (SWA)’s head office in Dallas most days, doling out advice when solicited and keeping in touch with old industry contacts. He supported the AirTran (CQT) takeover and downplayed the impact on consumers from consolidation (it’s been happening for decades and the industry remained extremely competitive, he said). Kelleher also thought not charging for bags was an excellent “contrarian” decision, though he understood why other airlines made different choices (noting, for example, that unlike base fares, bag fees were not subject to the 7.5% federal excise tax). When asked if he’d be able to start (SWA) in present times, he essentially said no, because conditions are much different (in the early 1970s, only rich people could fly and airlines were heavily regulated). In other words, the opportunity then was greater. The next big thing in aviation: upgrades in air traffic control and engine technology. And how does Herb Kelleher want to be remembered? For the iron-clad job security he provided to workers at (SWA), which in 40 years had never furloughed a single employee!


In January 2017, Gary was stepping back from day-to-day operational management of (SWA). Gary's focus would be in external areas including political, governmental and industry affairs: investor relationships, and community affairs and outreach; and internally on employee and cultural activities.

Gary who had been (SWA)'s top executive for 12 years, said "It was important to evolve (SWA) leadership structure as part of the ongoing succession planning process."

In January 2017, Tom was elected President, having been promoted from Executive VP Strategy & Innovation. Tom reported to Gary Kelly and had responsibility over (SWA)’s Commercial, Finance, Technology and Corporate Strategy departments. Tom was (SWA)’s Chief Information Officer from 2002 - 2006 and rejoined (SWA). He had been group Executive VP at retailer JC Penney and also was VP & Chief Information Officer at Frito-Lay, a subsidiary of the Pepsi Company.


Andrew was formally Senior VP Network & Revenue Management and before that VP Network Planning & Performance, ex-Hawaiian Airlines (HWI) (2013-10).


In 2017-01, Mike was informed that his responsibilities was to be expanded. Mike reported to Gary Kelly and expanded his responsibilities by adding Customer Support & Services & Hospitality to his previous responsibilities overseeing Ground, Flight, and Technical Operations, Labor Relations & Operational Strategy & Performance. Mike has been with (SWA) since 1993.







JACK SMITH, SENIOR VP OPERATIONS, EX-AIRTRAN AIRWAYS (CQT) (2014-07), Jack oversees Technical Operations, Cargo/Charter Operations, Ground Operations & (SWA)'s Operations Coordination Center (OCC).









Randy began his airline career in 1966 as a pilot (FC) for Eastern Air Lines (EAL) and was head of the Air Line Pilots Association (ALPA) from 1990 - 1998. Prior to joining (SWA), he was the (FAA) Administrator from 2009 to 2011.




Landon succeeded Jim Sokol on his retirement.

Trevor Stedke, who served for 15 years at Federal Express (FED), provides leadership for (SWA) Engineering Services & Standards, Quality, Maintenance Safety, Powerplant, and Aircraft Programs.

Trevor came to (SWA) from Federal Express (FED), where he served for 15 years in progressively responsible positions, culminating in his role as the Managing Director Aircraft Engineering Planning & Performance. His areas of responsibility at (FED) included Aircraft Engineering; Aircraft Maintenance Programs; Propulsion Engineering; Air Operations Technology; Engineering Planning; Aircraft Reliability; Air Operations Standards, Analysis, and Controls; Engineering Support; and Airline Fleet Management (Fleet Teams).

“Trevor’s passion for excellence, coupled with his experience, was to be an asset to the team and served him well in his new role,” said Brian Hirshman, (SWA) Senior VP Technical Operations, to whom Stedke reported.

Trevor received a Bachelor of Science from Ohio State University in Aviation Engineering/Atmospheric Science, where he also completed United States Marine Corps Officer Training. In 2004, Trevor earned his Master of Science in Engineering Management from Christian Brothers University, where he completed a hybrid program which blended a Master of Engineering with a Master of Business Administration.

Mark was promoted from Associate General Counsel Corporate & Transactions. He joined (SWA) in 2000 as an attorney in the General Counsel department and was promoted to his next role in 2008.

Ron Ricks, Executive VP & Chief Legal & Regulatory Officer said "I have great confidence in Mark's abilities and his character as a leader. This would be a seamless transition given his history with (SWA) and with his colleagues in the General Counsel department.






















(SWA)'S Supply Chain Management group encompasses (SWA)'s Maintenance Supply chain, company wide Purchasing, plus Procurement and Fuel Management functions.







Adam was promoted from Senior Director Schedule Planning.





















Scott Carpenter is the current Manager Engineering at (SWA) in charge of Configuration Control, Drafting, (PMA) Engineering, Chemical Engineering, and Tooling Engineering. He has been with (SWA) a little >6 years, having previously worked at Continental (CAL) and Continental Express (ExpressJet) as Liaison Engineer for approximately 10 years. Prior to that, he worked approximately 10 years as an Avionics Integration Engineer at Rockwell International then Boeing (TBC) after military divisions sold in 1996.

Scott has a degree in Mechanical Engineering and (MBA), as well as a life education as a mechanic (MT) in an Army Combat Engineering Unit.











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