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Southwest Airlines (USA)

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This article is about the American airline. For the Japanese airline formerly named Southwest Airlines, see Japan Transocean Air. For the British airline, see Air Southwest. For the former Chinese airline, see China Southwest Airlines.
Southwest Airlines
IATA
WN		 ICAO
SWA		 Callsign
SOUTHWEST
Founded 1971
Focus cities
Frequent flyer program Rapid Rewards
Fleet size 542
Destinations 65
Company slogan It's On.
Headquarters Dallas, Texas, United States
Key people Gary C. Kelly (Chairman, CEO and President)
Herb Kelleher (Co-Founder)
Laura Wright (CFO)
Colleen Barrett (Ex-President)
Website: http://www.southwest.com

Southwest Airlines Co. (NYSE: LUV) is an American low-cost airline. Southwest is the largest airline in the world by number of passengers carried per year (as of 2007).[7] Southwest, the 6th largest U.S. airline by revenue,[8] maintains the second-largest passenger fleet of aircraft among all of the world's commercial airlines. As of May 3, 2009, Southwest operates approximately 3,500 flights daily. Southwest is headquartered at 2702 Love Field Drive in the Love Field area of Dallas, Texas, adjacent to Love Field airport.[9]

Southwest Airlines has carried more customers than any other U.S. airline since August 2006 for combined domestic and international passengers according to the U.S. Department of Transportations Bureau of Transportation Statistics.[10] Southwest Airlines is one of the worlds most profitable airlines, posting a profit for the 36th consecutive year in January 2009.[11]

Southwest has built a successful business on an unusual model: flying multiple short, quick trips into the secondary (more efficient and less costly) airports of major cities, using only one aircraft type, the Boeing 737.

Contents

History

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Southwest Airlines was originally incorporated to serve three cities in Texas as Air Southwest on March 15, 1967, by Rollin King and Herb Kelleher. According to frequently-cited story, King described the concept to Kelleher over dinner by drawing on a paper napkin a triangle symbolizing the routes.(Dallas, Houston, San Antonio)[12]

Some of the incumbent airlines of the time (Braniff, Aloha, United Airlines, Trans-Texas, and Continental Airlines) initiated legal action, and thus began a three-year legal battle to keep Air Southwest on the ground. Air Southwest eventually prevailed in the Texas Supreme Court, which ultimately upheld Air Southwests right to fly in Texas.[13] The decision became final on December 7, 1970, when the U.S. Supreme Court declined to review the case without comment.[14]

The story of Southwests legal fight was turned into a childrens book, Gumwrappers and Goggles by Winifred Barnum in 1983. In the story, TJ Love, a small jet, is taken to court by two larger jets to keep him from their hangar, and then to try and stop him from flying at all. Taken to court, TJ Loves right to fly is upheld after an impassioned plea from The Lawyer. While no company names are mentioned in the book, TJ Loves colors are those of Southwest Airlines, and the two other jets are colored in Braniff and Continentals colors. The Lawyer is designed to resemble Herb Kelleher. The book was adapted into a stage musical, Show Your Spirit, sponsored by Southwest Airlines, and played only in towns serviced by the airline.[15]

Southwest Airlines founder Herb Kelleher studied California-based Pacific Southwest Airlines extensively and used many of the airlines ideas to form the corporate culture at Southwest, and even on early flights used the same "Long Legs And Short Nights" theme for stewardesses on board typical Southwest Airlines flights. The original flight attendants that worked for Southwest Airlines were chosen by a committee of individuals that included the same person who had selected hostess for Hugh Hefners playboy jet. The selection resulted in a group of female flight attendants that were described as long-legged dancers, majorettes, and cheerleaders with "unique personalities". Southwest Airlines and Herb Kelleher proceeded to dress these individuals in hot pants and go-go boots. [16]

The airline adopted the first profit-sharing plan in the U.S. airline industry in 1971. Through this plan and others, employees own about 10 percent of the company stock.[citation needed]

The airline is about 87 percent unionized. The pilots are represented by the Southwest Airlines Pilots Association, a union separate from the much larger Air Line Pilots Association.[citation needed]

First flights
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In early 1971, Air Southwest changed its name to Southwest Airlines, and the first flight was on June 18, 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio,[17] short hops with no-frills service and a simple fare structure, features that became the basis for Southwests popularity and rapid growth in the coming years.[citation needed]

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

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

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

Early losses and financial troubles

The rest of 1971 and 1972 saw operating losses. One of the four aircraft was sold to Frontier Airlines and the proceeds used to make payroll and cover other expenses. Southwest continued to operate a schedule predicated on four aircraft but using only three, and in so doing the "ten minute turn" was born, and was the standard ground time for many years.[18]

Southwest turned its first annual profit in 1973, and has done so every year since a record unmatched by any other commercial airline.[19][dead link] Southwest has used financial techniques such as fuel hedging to bolster its profitability and counteract many of the fiscal disadvantages of operating an airline.[citation needed]

In 1975 Southwest was headquartered at the 1820 Regal Row building in Dallas, by Love Field.[20]

By 1979, Southwest flew to all of the cities they currently serve in Texas, including El Paso, Amarillo, Beaumont, Corpus Christi, Harlingen, Lubbock, and Midland/Odessa. Interstate service began to New Orleans in 1979, and Albuquerque in 1980. Oklahoma City and Tulsa were added shortly thereafter. In 1981 Southwest co-launched the 737-300 with USAir. In 1982, the first expansion beyond the Texas area took Southwest to the West Coast, adding Phoenix, Las Vegas and San Diego. In late 1984, the 737-300 was placed into service. Chicago Midway and St. Louis service began in March 1985, spreading low-fare service into Midwest markets.[citation needed]

Southwest hired its first African-American pilot, Louis Freeman, in 1980. In 1992, he was named the first African-American chief pilot of any major U.S. airline.[21]

Fuel cost containment measures

Southwest Airlines earned a reputation for being very aggressive and proactive about containing fuel costs as a key to maintaining profit margins. [22]

Hedging fuel

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

In 2000, Southwest said it had "adjusted its hedging strategy" to "utilize financial derivative instruments... when it appears the Company can take advantage of market conditions." Additionally, the company hoped to "take advantage of historically low jet fuel prices."[23] Southwests decision proved to be a prescient and, for a time, an extremely profitable effort.[citation needed]

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

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

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

According to its 2006 Annual Report,[24] Southwest paid low prices for fuel because of the benefit of fuel hedges:

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

Some analysts have argued against the style of profit-motivated energy trading Southwest did between 1999 and the early 2000s. They suggested that rather than hedging business risk (such as a hedge on weather to a farmer), Southwest was simply speculating on energy prices, without a formal rationale for doing so.[25]

At present, Southwest has enjoyed much positive press (and a strong financial boost) from its energy trading skills.[26][27][28] However, while most analysts agree that volatility hedges can be beneficial,[29] speculative hedges are not widely supported as a continuing strategy for profits.[30]

In the third quarter of 2008, Southwest recorded its first loss in 17 years due to its fuel-hedging contracts being of lesser-value because of the drop in oil prices.[31][dead link]

Blended winglets

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All of Southwests 737-700s have blended winglets. Additionally, Southwest began installing blended winglets on up to 90 of its 737-300 aircraft beginning in mid-January 2007, with AAR of Indianapolis, Indiana, accomplishing the work. The first modified aircraft, N368SW, resumed service on February 22, 2007.

Jet engine pressure-washing

In 2008, Southwest contracted with Pratt and Whitney to supply the proprietary Ecopower water pressure-washing system, which allows Southwest to clean grime and contaminants off engine turbine blades while the aircraft is parked at the gate. Frequent use of the Ecopower system is estimated to improve fuel efficiency for Southwest and other customers by about 1.9%.[32][33]

Internet presence

On March 16, 1995, Southwest became one of the first airlines to have a web site. Originally called the "Southwest Airlines Home Gate", customers could view schedules, a route map, and company information at http://www.iflyswa.com.[34][dead link] The company later obtained the rights to its current home on the web, http://www.southwest.com, from an unaffiliated business. Southwest consistently rejects syndicating its fares to fare search sites such as expedia.com or orbitz.com.[35]

Southwest.com is the number one airline web site for online revenue, according to PhoCusWright. Nielsen/Netratings also reports that Southwest.com is the largest airline site in terms of unique visitors.[36] In 2006, 70 percent of flight bookings and 73 percent of revenue was generated from bookings on southwest.com. As of June 2007, 69 percent of Southwest passengers checked in for their flights online or at a kiosk.[36]

Violations of safety requirements

On March 6, 2008, Federal Aviation Administration (FAA) inspectors submitted documents to the United States Congress, alleging that Southwest allowed 117 of its aircraft to fly carrying passengers despite the fact that the planes were "not airworthy" according to air safety investigators.[37] In some cases the planes were allowed to fly for up to 30 months after the inspection deadlines had passed, rendering them unfit to fly. Records indicate that thousands of passengers were flown on aircraft deemed unsafe by federal standards. Southwest declined comment at the time, and US Representative James Oberstar advised a hearing would be held. [38][39][dead link]

On March 12, 2008, Southwest Airlines voluntarily grounded 44 planes to check if they needed further inspection. Federal Aviation Administration claims that Southwest Airlines flew almost 60,000 flights without fuselage inspection. Southwest Airlines could be facing a $10.2 million fine if they violated FAA regulations. There have also been rumors that the FAA knew about Southwest Airlines violations but decided not to fine the airline because it would disrupt the service of Southwest.[40]

On March 2, 2009, Southwest settled these claims, agreeing to pay the Federal Aviation Administration (FAA) fines of $7.5 million for these safety and maintenance issues. The original fine of $10.2 million - a sum which would have been the largest fine in the agencys history - was negotiated down after a year of negotiations. The FAA gave Southwest two years in which to pay the fine. [41]

Lobbying

Southwest has fought against the development of a high-speed rail system in Texas. [42][43]

Leadership
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Southwest Airlines is headed by Gary C. Kelly. Kelly has served as the airline's CEO since 2004, replacing James F. Parker, who had been the CEO for the last 3 years. Gary C. Kelly was named chairman on May 21, 2008, replacing previous Southwest Airlines CEO and co-founder Herb Kelleher. Kelly also became president of Southwest Airlines earlier this year, replacing Colleen Barrett when her contract expired on July 15, 2008.

Rapid Turnaround
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Southwest Airlines also pioneers a turn around service on the ground keeping its aircraft on the ground for a short twenty minutes to maximize profits.

Wi-Fi
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Southwest made an announcement that they will soon start testing Wi-Fi connections on four planes in the summer of 2009. They say it will be the "fastest connection in the skies"[44]. This new Wi-Fi will allow passengers to send text messages, emails, as well as keeping passengers entertained in-flight. The connection will not allow passengers to place calls. SWA will not charge a fee for wi-fi testing, but you must give them feedback, they will not have seat chargers for laptops charging. As of May 2, 2009, four 737-700s are being used to test the Wi-Fi system. (N901WN, N902WN, N906WN and N907WN)[citation needed]

Wright Amendment

Main article: Wright Amendment

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

When airline deregulation came in 1978, Southwest began planning to offer interstate service from Love Field. This caused a number of interest groups affiliated with Dallas-Ft. Worth Airport, including the city of Fort Worth, to push the Wright Amendment through Congress to restrict such flights.[45][dead link] Under the restrictions of the amendment, Southwest, and all other airlines, were barred from operating, or even ticketing passengers on flights from Love Field to destinations beyond the states immediately surrounding Texas. In effect, to travel through Love Field, a passenger and luggage would have to deplane and fly on a separate ticket, on a separate aircraft.

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

Southwests efforts to repeal or even alter the Wright Amendment were met with opposition from American Airlines and Dallas Ft. Worth International Airport. Both American Airlines and DFW contended that repeal of the Wright Amendment restrictions would cripple DFW,[46][dead link] while Southwest contended that repeal of the Wright Amendment would be beneficial to both Love Field and DFW.[19][dead link] Continental Airlines has a successful hub and spoke operation at Houston Bush Intercontinental Airport despite unrestricted competition from Southwest at Houston Hobby Airport.

In 1997, Southwests effort began to pay off with the Shelby Amendment, which added the states of Alabama, Mississippi, and Kansas to the list of permissible destination states. Southwest began offering non-stop service between Dallas Love Field and Birmingham, Alabama, which it could not do prior to the enactment of the Shelby Amendment.

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

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

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

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

Destinations

Main article: Southwest Airlines destinations

Southwest Airlines currently flies to 65 destinations throughout the United States. The airline will add destinations 66, 67 and 68 in 2009, when it begins service from New York at LaGuardia Airport [47], Boston at Logan International Airport[48], and Milwaukee at General Mitchell International Airport[49].

As of March 2009, Southwest Airlines operates scheduled services to the following destinations:

Current service

Southwest does not use the more traditional "hub and spoke" flight routing system of most other major airlines, preferring instead the "Point to Point" system. Currently, Southwest serves 64 cities in 33 states, with more than 3,300 flights a day. It has notably large operations in certain airports. Las Vegas's McCarran International Airport has non-stop service to all but eight of Southwest's locations.[51] Other airports with large Southwest operations include Chicago Midway International Airport, Phoenix Sky Harbor International Airport, Baltimore-Washington International Airport, Orlando International Airport, Tampa International Airport and Houston's William P. Hobby Airport, with all of these airports operating non-stop flights to more than half of the Southwest system. An average of 80 percent of Southwest passengers are local passengers, meaning only 20 percent of all passengers are connecting passengers. This is significantly higher than most airlines, where passengers often connect in hub cities.[52][dead link]

As part of its effort to control costs, Southwest tries to use secondary airports which generally have lower costs and may, or may not be, more convenient to travelers than the major airports to the same destinations. For example, Southwest flies to Midway Airport in Chicago, Fort Lauderdale-Hollywood International Airport and West Palm Beach in South Florida, Love Field in Dallas, MacArthur Airport on Long Island, Hobby Airport in Houston, Manchester-Boston Regional Airport in Manchester, New Hampshire and T. F. Green Airport in Providence, Rhode Island, instead of O'Hare International Airport, Miami International Airport, DFW International Airport, JFK Airport in New York City, Bush Intercontinental Airport in Houston. In 2009, Southwest will expand its service to both Logan and LaGuardia.

Southwest makes exceptions to the philosophy of serving secondary airports by flying into some larger airports in major cities, such as Las Vegas International Airport, Phoenix Sky Harbor International Airport, Lambert St. Louis International Airport, Orlando International Airport, Detroit Metropolitan Wayne County Airport, Philadelphia International, Denver International Airport, Cleveland Hopkins International Airport, Kansas City International Airport, Seattle-Tacoma International and Pittsburgh International. In the Baltimore-Washington market, Southwest has limited flights into one major airport (Washington Dulles International Airport) while maintaining their east-coast focus city at the region's other major airport, Baltimore-Washington International Airport. In the Los Angeles market Southwest flies to both the major city airport, Los Angeles International (LAX), and to three of the four secondary airports, Burbank-Bob Hope Airport, Santa Ana-John Wayne Airport, and LA/Ontario International Airport (it does not serve Long Beach Airport). With the restoration of service out of San Francisco International Airport on August 26, 2007, Southwest now serves all three airports in the San Francisco Bay Area; the other two being Oakland International Airport and San Jose International Airport.

Southwest withdrew from Houston Intercontinental in 2005 in favor of using Houston Hobby, a nearby airport with fewer operations. Besides Houston (Intercontinental) and Denver (Stapleton International), the airline has withdrawn completely from airports in Beaumont, Texas and Detroit, Michigan (Detroit City Airport).

The airline also once served Stapleton International Airport in Denver but withdrew in 1986 because of excessive ATC delays during poor weather exacerbated by minimal separation between the runways. Southwest returned to Denver in 2006 with service to the new Denver International Airport. Southwest is expanding its Denver service faster than it has at any previous Southwest city[53] at the cost of service to Orlando, Kansas City and Baltimore.[54]

On March 8, 2009, Southwest Airlines began operations at Minneapolis/St. Paul (MSP) with 8 daily flights from the Hubert H. Humphrey Terminal to Chicago Midway International Airport, and added 3 daily flights on the MSP-Denver route on May 26, 2009.

On April 7, 2009, Southwest Airlines announced they will operate five daily round-trip, nonstop flights between LaGuardia and Chicagos Midway Airport and three daily round-trip, non-stop flights between LaGuardia and Baltimore/Washington International Airport starting on June 28, 2009.

On May 20, 2009, Southwest Airlines announced they will fly to multiple destinations from General Mitchell International Airport in Milwaukee starting on November 1, 2009.[55]

Southwest is the largest intrastate airline in California, with 694 flights total in the state, 370 of which are intra-California.

Markets lacking Southwest service

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Due to congestion at certain airports and intense competition from entrenched airlines, some markets are not cost-effective for Southwest. Until recently, all New York City-area flights were serviced from Long Island MacArthur Airport instead of directly through the three main New York-area airports (LaGuardia Airport, Kennedy (JFK) International, or Newark Liberty International). Southwest recently announced that they will be entering LaGuardia with plans to overcome the delays and initially operate 8 flights a day. Severe overscheduling of flights at these airports creates rampant flight delays which would hamper Southwest's business model of keeping its planes in service in the air as much as possible.

Southwest lost codeshare service to Washington-Reagan on November 28, 2007 when ATA Airlines discontinued service there.[citation needed]

According to the airline's route map, 15 states are currently without Southwest service in their cities.[56]

In 2005, Southwest proposed servicing Seattle using Boeing Field, which is smaller but closer to downtown than Seattle-Tacoma International Airport. However, King County officials refused to allow a terminal to be built or service to begin.[57]

While other low cost carriers such as AirTran, Frontier, and JetBlue serve international destinations, Southwest does not serve any destinations outside the United States. However, Southwest has not ruled out the possibility of an international market in the future. Mexico, Central America, Canada, and the Caribbean are within the 3,365 nm range of their 737-700 aircraft, as are England and Ireland (a flight from Baltimore-Washington International Thurgood Marshall Airport to London's Heathrow Airport is 3,158 nm), although, on westbound flights from the latter, the aircraft may have to stop for fuel. In July 2007, CEO Gary Kelly stated that because of shrinking profits, the airline will likely slow its rate of expansion.[58]

Top served cities

(as of April 16, 2009)[36]

City Cities served nonstop Daily departures Number of gates Service began
Las Vegas 56 234 21 1982
Chicago (Midway) 48 214 29 1985
Phoenix 42 187 24 1982
Baltimore-Washington 38 162 26 1993
Denver (DEN) 34 115 10 2006
Orlando (MCO) 33 115 12 1982
Tampa 30
Houston (Hobby) 29 135 17 1972
Nashville 28
St. Louis 24
Albuquerque 20
Philadelphia 20
Oakland 19 118 13 1989
Kansas City 19
Ft. Lauderdale-Miami 19
Los Angeles (LAX) 18 120 11 1982
Dallas (Love Field) 15 134 15 1971
Sacramento 11 1991

New service

Southwest announced that they will be participating in Disney's Magical Express program in Orlando, Florida. The program allows passengers to check their bags from their home airport through to their rooms at a Walt Disney World resort.

Effective June 28, 2009

Effective August 16, 2009

Effective November 1, 2009


Expansion into LaGuardia (LGA), Boston's Logan (BOS), and Milwaukee (MKE)

During November 2008, Southwest applied to purchase 14 slots (for 7 roundtrips daily) previously used by ATA Airlines at LaGuardia Airport.[59] The bid was approved about a month later, and further progress was made during late March, 2009. In early April, it was announced that the airline will (strategically) have a combined total of 16 daily arrivals and departures (5 and 3 each way with MDW and BWI respectively), despite the receipt of only 14 slots. [60] The airline is confident about future growth at LGA, including expanded service to other locations.[61] New York City is currently served by Southwest only at Long Island MacArthur Airport, some 50 miles (80 km) from Manhattan;[2] LGA is much closer to that borough, and considered as the most central of the three major New York City-metro airports.

On February 19, Southwest announced service to Boston's Logan airport, in the Fall of 2009 [62], with a follow up on April 14, annoucing service to Logan will begin August 16, 2009, with five daily roundtrips to both BWI and MDW [63]. Southwest says it is only going to complement their service to Manchester, NH and Providence, RI. The Boston Herald reports that they will have a two gate operation with an additional 2 gates as options at Logan [64]. Southwest is hoping to curve toward business travelers that stay in downtown Boston and bring lower ticket cost and fees to these travelers [65].

The airline's most recent expansion announcement happened May 20: Milwaukee's Mitchell airport, with service starting on November 1st, 2009. For southern Wisconsin residents who cannot find Southwest service at Chicago O'Hare Airport, the hope is that MKE can attract these same passengers who have used other airlines at O'Hare.[66]

Discontinued non-stop service between the following airports

Effective August 15, 2009

Effective October 31, 2009

Notes:

On January 11, 2009, Southwest added 6 daily flights, and cut 196 overall. Such changes are mainly because of high fuel costs, the uncertainty of the economy, and the fact that the beginning months of the year traditionally are slower travel months than those preceding them. Also cutting flights adds more free planes, reducing problems due to harsh weather in the winter months.

On May 9, 2009, in a continuing effort to optimize the airline's flight schedule, Southwest eliminated 32 existing roundtrip flights from its current schedule and added 19 roundtrip flights for a net reduction of 13 roundtrip flights systemwide. The additions included reinstatements, from Nashville, TN (BNA) to both Oakland, CA (OAK) and Seattle, WA (SEA) for seasonal service.[67]

International service

Prior to ATA's shutdown, Southwest Airlines had set a goal to codeshare with ATA and begin international codeshare services or ticket for international flights in 2009. Destinations served by ATA could have included Canada, the Caribbean, Mexico, and Europe. In 2010, Southwest plans to partner with other carriers for transatlantic and transpacific flights. On July 8, 2008, Southwest announced that it has agreed to a comprehensive codeshare agreement with Canada's second largest carrier WestJet. The terms of the codeshare should be finalized by the end of 2009. Southwest has said that they have interest in flying to international destinations in the future, the Caribbean, Mexico, and England are all within their aircrafts range.[68][69][70]

Southwest also has announced plans to codeshare with Mexico's Volaris with flights starting in 2010. Plans have yet to be unveiled about which airline will be crossing the border.

Southwest's further plans for codeshares would require negotiation with its Pilot and Flight Attendant work groups due to contractual requirements.

Southwest Airlines Vacations

In 1989, Southwest Airlines and The Mark Travel Corporation entered into an exclusive agreement which gave customers an option to purchase complete vacation packages called Southwest Airlines Vacations. These vacation packages continue to include roundtrip air fare via Southwest Airlines, hotel accommodations, hotel taxes, ground transportation options, Rapid Rewards credit on the air portion and 24-hour traveler assistance. Area attraction passes, travel protection plans and ski lift tickets are also available.

The Southwest Effect and codeshare agreements

Main article: The Southwest Effect

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

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

Morris Air

One airline influenced by Southwest was Morris Air, founded by June Morris and David Neeleman, based in Utah and operating in the northwestern U.S. Southwest Airlines purchased Morris Air and absorbed the capital and routes into its inventory and service. David Neeleman worked with Southwest for a short period. When his non-compete agreement expired, Neeleman founded JetBlue Airways, a competing airline that also incorporates many principles and practices pioneered by Southwest, including building a positive, warm employee culture and operating a simple fleet.[71]

Muse Air

Southwest Airlines has mostly pursued a strategy of internal growth, rather than by acquisition of other airlines as commonly occurs. However, in addition to acquisition of Morris Air Transport (see above), Southwest did acquire competitor Muse Air in 1985, which operated McDonnell Douglas MD-80s. Muse Air was renamed TranStar Airlines. TranStar Airlines was then closed in August 1987

Icelandair

In 1997, Southwest and Icelandair entered into interline and marketing agreements allowing for joint fares, coordinated schedules, and transfer of passenger luggage between the two airlines at Baltimore. Icelandair operated flights between Baltimore and Keflavik Airport in Iceland. Connecting service between several U.S. cities and several European cities appeared in the Southwest timetable[72] The frequent flyer programs were not included in the agreement. This arrangement lasted for several years but is no longer in existence.

ATA Airlines

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

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

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

During 2006, Southwest Airlines began marketing ATA only flights. ATA's dependence on the Southwest network continued to grow in 2006, and at the time of ATA's demise in April 2008, the airline offered over 70 flights a week to Hawaii from Southwest's focus cities in PHX, LAS, LAX, and OAK. Additional connecting service was available to many other cities across the United States. Plans had been announced for ATA to offer exclusive international service for Southwest by 2010, but were scratched when ATA abruptly ended operations on April 3, 2008. There was no plan to open the ATA/Southwest codeshare to ATA's sister carriers,