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Southwest Airlines Co. (NYSE: LUV) is a major U.S. airline and the world's largest low-cost carrier, headquartered in Dallas, Texas. The airline was established in 1967 and adopted its current name in 1971. The airline has nearly 46,000 employees as of December 2014 and operates more than 3,400 flights per day. As of June 5, 2011, it carries the most domestic passengers of any U.S. airline. As of November 2014, Southwest Airlines has scheduled service to 93 destinations in 41 states, Puerto Rico and abroad.
Southwest Airlines has used only Boeing 737s, except for a few years in the 1970s and 1980s, when it leased a few Boeing 727s. As of August 2012 Southwest is the largest operator of the 737 worldwide with over 550 in service, each averaging six flights per day.
Kelleher believed that by staying within Texas, the airline could avoid federal regulation. Three airlines (Braniff, Trans-Texas and Continental Airlines) started legal action which was not resolved for three years. Air Southwest prevailed in 1970 when the Texas Supreme Court upheld Air Southwest’s right to fly within Texas. The Texas decision became final on December 7, 1970 when the U.S. Supreme Court declined to review the case, without comment.
Boeing 737-200 at William P. Hobby Airport in 1983 The story of Southwest’s legal fight was turned into a children’s book, Gumwrappers and Goggles by Winifred Barnum in 1983. In the story, TJ Love, a small jet, is taken to court by two larger jets to keep him from their hangar and to stop him from flying. In court, TJ Love’s right to fly is upheld after an impassioned plea from a character referred to as "The Lawyer". While no company names are mentioned in the book, TJ Love’s colors were those of Southwest Airlines, and the two other jets are colored in Braniff and Continental colors. The Lawyer resembles Herb Kelleher. The book was adapted into a stage musical, Show Your Spirit, sponsored by Southwest Airlines and played only in cities served by the airline.
Southwest Airlines Boeing 727-200 at Phoenix Sky Harbor International Airport in 1984 On March 29, 1971 Air Southwest Co. changed its name to Southwest Airlines Co. with headquarters in Dallas. Southwest began scheduled flights on June 18, 1971, Dallas to Houston and Dallas to San Antonio with three 737-200s. The OAG for 15 October 1972 shows 61 flights a week each way between Dallas and Houston Hobby, 23 each way between Dallas and San Antonio and 16 each way between San Antonio and Houston; no flights were scheduled on Saturdays.
Southwest Airlines founder Herb Kelleher studied California-based Pacific Southwest Airlines and used many of PSA’s ideas to form the corporate culture at Southwest. Early flights used the same "Long Legs And Short Nights" theme for stewardesses on board typical Southwest Airlines flights. A committee including the same person who had selected hostesses for Hugh Hefner's Playboy jet selected the first flight attendants, females described as long-legged dancers, majorettes and cheerleaders with "unique personalities." Southwest Airlines and Herb Kelleher dressed them in hot pants and go-go boots.
The New York Times wrote in 1971 that Southwest Airlines President Lamar Muse, "says frankly—and repeatedly—that Southwest Airlines has been developed from its inception around the ideas that have proven to be successful for Pacific Southwest Airlines". "We don't mind being copycats of an operation like that", referring to a visit he and other Southwest executives made to PSA as they assembled their operating plans. PSA welcomed them and even sold them flight and operations training. Muse later wrote that creating the operations manuals for his upstart airline was “primarily a cut and paste procedure” and it is said that “Southwest Airlines copied PSA so completely that you could almost call it a photocopy.”
The rest of 1971 and 1972 saw operating losses. One of the four 737s was sold to Frontier Airlines and the proceeds used for payroll and other expenses. Southwest continued a schedule based on four aircraft but using only three, so the "ten minute turn" was born and was the standard ground time for many years.
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Wright Amendment
The Wright Amendment of 1979 is a federal law that governs traffic at Dallas Love Field, the pre-1974 airport in Dallas. It originally limited most nonstop flights to destinations within Texas and neighboring states. The limits began to phase out in 1997 and 2005; in 2006, the amendment was repealed, with some restrictions intact until 2014, but added a restriction on the number of gates allowed.
When airline deregulation came in 1978, Southwest began to plan interstate flights from Love Field, causing groups affiliated with Dallas/Fort Worth International Airport, including the city of Fort Worth, Texas, to push the Wright Amendment through Congress to restrict such flights. Under the amendment, Southwest and other airlines were barred from operating or even ticketing passengers on flights from Love Field to destinations beyond the states that border Texas. The Wright Amendment’s restrictions did not apply to aircraft with 56 or fewer seats; Southwest did not use the 56 seat loophole. Southwest's first schedule out of Texas was Hobby to New Orleans about February 1979.
In 1997 Southwest’s efforts paid off with the Shelby Amendment, which added Alabama, Mississippi and Kansas to the allowed destinations. Southwest began nonstop service between Dallas Love Field and Birmingham, Alabama.
Network expansion
Southwest just flew to DAL, HOU and SAT until 1975 when it added Harlingen. In 1979 it flew to eleven Texas cities and added its first route out of the state, Houston-New Orleans, around the end of the year. In 1981 it expanded north to Tulsa and Oklahoma City and west to Albuquerque; in 1982, north to Kansas City and west to Phoenix, Las Vegas and California.
Flights to Denver started in 1983 (and ended in 1986), to Little Rock 1984, to St Louis and Chicago Midway in 1985, to Nashville in 1986 and to Detroit Metro and Birmingham in 1987. Eastward expansion resumed in 1992 with Cleveland and Columbus, then Baltimore in 1993. The Pacific Northwest started in 1994 after the Morris Air takeover; Tampa and Fort Lauderdale started in January 1996. East to Providence in 1997, Manchester in 1998, and Islip and Raleigh-Durham in 1999.
Southwest's only route within California was San Francisco-San Diego until it started Oakland in 1989; in the next few years its capacity on the West Coast ballooned.
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1980s–90s
Southwest hired their first black pilot, Louis Freeman, in 1980. In 1992 he was named the first black chief pilot of any major U.S. airline.
Southwest's Houston Pilot Base opened on June 1, 1984. Houston was their first crew base outside of Dallas.
A 737–300 (N648SW) pictured in Southwest's original desert gold livery. On November 30, 1984 Southwest took delivery of their first Boeing 737–300. Southwest was the launch customer and as of May 2012 is the largest operator of the aircraft type. The first 737-300 was dubbed "Kitty Hawk."
Southwest paid US$60.5 million in stock and cash for Muse Air when Muse was on the verge of collapse in 1985. After completing the acquisition, Southwest renamed MuseAir TranStar Airlines. TranStar became a wholly owned subsidiary of Southwest and operated as an independent airline. Unwilling to compete in a fare war against Frank Lorenzo's Texas Air, Southwest eventually sold TranStar's assets to Lorenzo in August 1987.
Southwest moved into their current headquarters in 1990. Previously, the airline was headquartered in the 1820 Regal Row building in Dallas, by Love Field. At that time the headquarters had 256,000 square feet (23,800 m2) of space and approximately 650 employees.[25] The current headquarters facility was built at a cost of $15 million in 1990 dollars. In early 1995 the building received an additional 60,000 square feet (5,600 m2) of space. As of 2006 about 1,400 employees worked in the three story building.
In 1990, the airline registered their aircraft in Houston so they could pay aircraft taxes in Houston, even though the actual corporate headquarters were in Dallas. Southwest was not physically relocating any assets, but Texas state law allowed the airline to choose either Dallas or Houston as the city of registry of their aircraft.
Southwest acquired Morris Air, a competing airline based in Salt Lake City, Utah, in 1992, paying US$134 million in stock.[28] After completing the purchase, Southwest absorbed the capital and routes of Morris Air into Southwest's inventory and service, including Morris' Pacific Northwest destinations not previously served by Southwest.[29] One founder of Morris Air, David Neeleman, worked with Southwest for a short period before leaving to found WestJet and then JetBlue Airways, a competing airline.
Boeing 737-200 in Midway Airlines/Southwest Airlines hybrid livery in 1991 On March 16, 1995, Southwest became one of the first airlines to have a website. Originally called the "Southwest Airlines Home Gate", passengers could view schedules, a route map and company information at Iflyswa.com. Southwest.com is the number one airline website for online revenue, according to PhoCusWright. Nielsen/Netratings also reports that Southwest.com is the largest airline site in terms of unique visitors. In 2006, 70 percent of flight bookings and 73 percent of revenue was generated from bookings on southwest.com. As of June 2007, 69 percent of Southwest passengers checked in for their flights online or at a kiosk.
Southwest Airlines gained a reputation for "outside the box thinking" and proactive risk management, including the use of fuel hedging to insulate against fuel price fluctuation. 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.
At present, Southwest has enjoyed much positive press (and a strong financial boost) from their energy trading skills. However, while most analysts agree that volatility hedges can be beneficial, speculative hedges are not widely supported as a continuing strategy for profits.
In March 1996, after the Dallas City Council unanimously voted to allow for construction, the airline began to build a 300,000 square feet (28,000 m2) addition to the existing corporate headquarters at a cost of $30 million in 1996 dollars. This occurred after, on Wednesday March 13, 1996, . The airline leased two additional tracts of land, a total of 10 acres (4.0 ha) of space, from the City of Dallas to build a new pilot training facility, a headquarters expansion, and additional parking spaces. A $9.8 million new pilot training facility was built on a 5 acres (2.0 ha) plot of land owned by the city of Dallas; it was scheduled to be completed Spring 1997. With the new pilot training facility built, the old one would be removed and the company would expand its headquarters building on the former training facility site. 120,000 square feet (11,000 m2) of building space, which had a price of $16 million including fixtures, was built, making the headquarters have a total of 436,000 square feet (40,500 m2). The airline also leased 4.8 acres (1.9 ha) from the city of Dallas to build additional parking; 700 spaces were added to the existing 1,200. After the expansion, Southwest had a total leasehold of about 24 acres (9.7 ha) of land, including its headquarters, training facilities and parking. By the end of 1997 the expansion of the facilities at Love Field and several terminal improvements were expected to cost Southwest $47 million.
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2000s
Repealing the Wright Amendment
Southwest Airlines logo used 2001-2014
A Southwest Airlines Boeing 737–700 landing at San Jose International Airport, shown in the company's Canyon Blue livery, introduced in 2001 and used until September 2014. 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 Saint Louis, Missouri and Kansas City, Missouri 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 but four of the Love Field gates. United Airlines controls two and American Airlines was initially supposed to operate from the other two, however, because of their merger with US Airways, they had to give up the two gates at DAL. Virgin America began leasing the two gates from American on October 13, 2014.
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 winged heart livery and its stock exchange ticker symbol (LUV).
2008–2009
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 by about 1.9%.
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.[46] 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.
Southwest paid US$7.5 million to acquire certain assets from bankrupt ATA Airlines in 2008. Southwest's primary reason for making the purchase was to acquire the operating certificate and landing slots at New York's LaGuardia Airport formerly controlled by ATA. While some preferential hiring was indicated at the time of the purchase, the transaction ultimately did not include the purchase of any aircraft, facilities or transfers of employees directly from ATA.
On March 12, 2008, Southwest Airlines voluntarily grounded 44 planes to check if they needed further inspection. The FAA claimed that Southwest Airlines flew almost 60,000 flights without fuselage inspection. Southwest Airlines faced 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 their services.
On March 2, 2009, Southwest settled these claims, agreeing to pay the FAA fines of $7.5 million for these safety and maintenance issues. The original fine of $30.2 million – a sum which would have been the largest fine in the agency’s history – was lowered after a year of negotiations. The FAA gave Southwest two years in which to pay the fine.
On July 30, 2009, Southwest Airlines made a $113.6 million bid for bankrupt Frontier Airlines Holdings, the parent company of Frontier Airlines. Southwest planned to initially operate Frontier as a stand-alone carrier, eventually absorbing the airline and replacing Frontier's aircraft with Boeing 737s. Less than one month after submitting its bid, Southwest learned on August 14 that it had lost the initial bidding to Republic Airways Holdings and elected not to counter or pursue the deal further. Southwest stated that its requirement for pilots' unions at both companies to reach a negotiated (not arbitrated) agreement as a condition of acquisition was a key factor in its abandonment of its bid.
On August 26, 2009 the FAA investigated Southwest for installing improper parts on about 10% of its jets. The work was performed by an outside maintenance company. The FAA stated that the parts do not present a safety danger, but the airline was given until December 24, 2009 to replace the parts with those approved by the FAA.
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2010s
AirTran Airways acquisition
An AirTran Airways Boeing 737–700 taxiing at Portland Jetport Southwest Airlines first announced the acquisition on September 27, 2010 and received final approval from the United States Department of Justice on April 27, 2011. On May 2, 2011, Southwest Airlines completed the acquisition of AirTran Airways by purchasing all of the outstanding common stock, corporate identity and operating assets of AirTran Holdings, Inc., the former parent company of AirTran Airways. Southwest Airlines estimates the transaction's value at $3.2 billion and expects onetime costs to integrate the two airlines of $500 million, with cost synergies of approximately $400 million annually. The greatest impact on Southwest was the elimination of a direct low-cost competitor, access to Atlanta, international service and the addition of landing slots at New York-LaGuardia Airport and Washington-Reagan Airport. Southwest obtained a single operating certificate (SOC) from the United States Federal Aviation Administration on March 1, 2012, but expects that full integration of AirTran into Southwest's operations to continue until 2014.
An entity called Guadeloupe Holdings was formed by Southwest and currently acts as a wholly owned subsidiary of Southwest Airlines and holding company for AirTran's current operations and assets. Southwest's organized labor groups have ceded contractual "scope" provisions pending acceptable negotiated seniority integration agreements.[54] Southwest is transition aircraft, routes and employees from AirTran to Southwest on a one-by-one basis until all parts of AirTran have transitioned to Southwest.
The purchase adds 25 additional destinations previously not served by Southwest including cities in Mexico, the Caribbean and Atlanta, Georgia, an AirTran hub and at the time, the largest U.S. city not served by Southwest. On October 10, 2011, USA Today reported that Southwest will work to no longer bank flights in Atlanta as AirTran did.[54] AirTran 737 aircraft are in the process of being converted to Southwest's livery and evolve interior.
On February 14, 2013, Southwest began codesharing with AirTran. It took the first step on January 26, 2013 by launching shared itineraries in five markets. Southwest continued to launch shared itineraries with 39 more markets beginning February 25, 2013. In April 2013, shared itineraries were expanded to all Southwest and AirTran cities (domestic and international). The airlines intend to be fully integrated by December 29, 2014.
2011–present
For the tenth year in a row, Fortune magazine recognized Southwest Airlines in its annual survey of corporate reputations. Among all industries in 2004, Fortune has listed Southwest Airlines as number three among America’s Top Ten most admired corporations.
On December 13, 2011, Southwest placed a firm order for 150 Boeing 737 MAX aircraft, becoming the launch customer for the type. First delivery is expected in 2017.
In January 2012, Southwest Airlines expressed interest in serving Mexican and South American destinations out of Hobby.[59] On May 30, 2012 Houston's city council approved Southwest's request for international flights from Hobby.[60] Southwest agreed to invest at least $100 million to cover all costs tied to the Hobby upgrade, which includes designing and building five new gates and a customs facility. Construction at Hobby is expected to take two years, with international flights likely beginning in 2015.
On April 11, 2012, Southwest introduced the 737–800 to the fleet. It seats 175 passengers as compared to the regular 143-seater 737-700. The first 737–800 was called "Warrior One"[62] in salute of the Southwest Employees’ Warrior Spirit.
On May 5, 2014, Southwest announced that it has chosen Amadeus IT Group replace its current domestic reservation system. Southwest already operates its international reservation system with Amadeus. The new domestic reservation system is expected to take a few years before it is implemented. When completed, Southwest will operate one reservation system by Amadeus.
In September of 2014, Southwest introduced new branding, including a new livery and logo.
On October 13, 2014, the Wright Amendment restrictions at Dallas Love Field were repealed and Southwest expanded service at Love Field to include cities outside of the previous location restrictions.
Throughout 2014, Southwest expanded service at Reagan-National in Washington D.C. and LaGuardia Airport in New York City through slot acquisitions from the American Airlines/US Airways merger.
Corporate identity
Advertising
The company has employed humor in its advertising. Slogans include "Love Is Still Our Field", "Just Plane Smart", "The Somebody Else Up There Who Loves You", "You're Now Free To Move About The Country", "THE Low Fare Airline", "Grab your bag, It's On!" and "Welcome Aboard". The airline's current slogan is "If It Matters To You, It Matters To Us".
A Southwest Airlines Boeing 737–700 with blended winglets (N741SA) pictured on the tarmac at Chicago Midway International Airport wearing the airline's original desert gold livery. In March 1992, shortly after Southwest started using the "Just Plane Smart" motto, Stevens Aviation, who had been using "Plane Smart" for their motto, threatened a trademark lawsuit.
Instead of a lawsuit, the CEOs for both companies staged an arm wrestling match. Held at the now demolished Dallas Sportatorium (the famed wrestling facility) and set for two out of three rounds, the loser of each round was to pay $5,000 to the charity of their choice, with the winner gaining the use of the trademarked phrase. A promotional video was created showing the CEOs "training" for the bout (with CEO Herb Kelleher being helped up during a sit up where a cigarette and glass of whiskey (Wild Turkey 101) was waiting) and distributed among the employees and as a video press release along with the video of the match itself. Herb Kelleher lost the match for Southwest, with Stevens Aviation winning the rights to the phrase. Kurt Herwald, CEO of Stevens Aviation, immediately granted the use of "Just Plane Smart" to Southwest Airlines. The net result was both companies having use of the trademark, $15,000 going to charity and good publicity for both companies.
Honor Flight Network
Southwest Airlines is the official commercial airline of the Honor Flight Network. Honor Flights are dedicated to bringing aging and ailing veterans to visit the national monuments in Washington, D.C., devoted to the wars in which they served.
Headquarter
Southwest Airlines headquarters in Dallas The Southwest Airlines headquarters is located on the grounds of Dallas Love Field in the Love Field neighborhood of Dallas, Texas.
On September 17, 2012, Southwest broke ground on a new Training and Operational Support (TOPS) building.[73] The TOPS Building is across the street from its current headquarters building. The property includes a two-story, 100,000-square-foot operations building that could withstand an F3 tornado. It also includes a four-story, 392,000-square-foot office and training facility with two levels devoted to each function. The new facilities will house 24-hour coordination and maintenance operations, customer support and services, and training. BOKA Powell was the project architect. Manhattan Construction is the general contractor. The project is scheduled for completion in late 2013, with occupancy beginning in 2014.
Employment
As of December 2014, Southwest Airlines nearly 46,00 employees.
Gary C. Kelly is Chairman, President and CEO of Southwest Airlines. Kelly replaced former CEO Jim Parker on July 15, 2004 and assumed the title of "President" on July 15, 2008, replacing former President Colleen Barrett. In July 2007, Herb Kelleher resigned his position as Chairman. Colleen Barrett left her post on the Board of Directors and as Corporate Secretary in May 2008 and as President in July 2008. Both are still active employees of Southwest Airlines. Kelleher was President and CEO of Southwest from September 1981-June 2001.
In contrast to competitor JetBlue Airways, where only the pilots are unionized, Southwest maintains its profitability and low-fare, low-cost business model while being heavily unionized. The Southwest Airline Pilots' Association, a union not affiliated with the Air Line Pilots Association, represents the airline's pilots. The Aircraft Maintenance Technicians are represented by the Aircraft Mechanics Fraternal Association (AMFA). Customer Service Agents and Reservation Agents are represented by the International Association of Machinists and Aerospace Workers Union (IAM). Flight Dispatchers, Flight Attendants, Ramp agents and Operations agents are represented by the Transport Workers Union (TWU).
Impact on carriers
Southwest has been a major inspiration to other low-cost carriers, and its business model has been repeated many times around the world. The competitive strategy combines high level of employee and aircraft productivity with low unit costs by reducing aircraft turn around time particularly at the gate. Europe's EasyJet and Ryanair are two of the best known airlines to follow Southwest's business strategy in that continent. 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), Philippines's Cebu Pacific, Thailand's Nok Air, Mexico's Volaris and Turkey's Pegasus Airlines. Although Southwest has been a major inspiration to many other airlines, including Ryanair, AirAsia and Jetstar, the management strategies, for example, of Ryanair, AirAsia and Jetstar differ significantly from those of Southwest. All these different management strategies can be seen as means of differentiation from other competitors in order to gain competitive advantages.
Lobbying Texas rail
Southwest has fought against the development of a high-speed rail system in Texas.
In 1991 a plan was made to connect the Texas Triangle (Houston – Dallas – San Antonio) with a privately financed high speed train system which would quickly take passengers from one city to the next. This was the same model Southwest Airlines used 20 years earlier to break into the Texas market where it served the same three cities.
Southwest Airlines, with the help of lobbyists, created legal barriers to prohibit the consortium from moving forward and the entire project was eventually scuttled in 1994, when the State of Texas withdrew the franchise.
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