no. 2-0012

Southwest Airlines Corporation
In 2001, Southwest Airlines Corporation’s (Southwest) year-end results marked 29 consecutive years of profitability. Southwest, which was incorporated in Texas, commenced customer service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio. The company grew to become the fourth largest U.S. airline (in terms of domestic customers carried). In 2002, it boasted a fleet of 366 Boeing 737 jets. Southwest was the United States’ only major short-haul, low-fare, high-frequency, point-to-point carrier. (Refer to Exhibit 1 for five-year financial highlights.) Southwest had the lowest operating-cost structure in the domestic airline industry and consistently offered the lowest and simplest fares. Southwest also had one of the best overall customer service records. In 2001, the airline had 35,000 employees and generated total operating revenues of $5.6 billion from a passenger load factor of 68.1 percent. Its stock exchange symbol was LUV, representing Southwest’s home at Dallas Love Field, as well as the theme of its employee and customer relationships. Fortune magazine consistently recognized Southwest as one of the top 10 businesses to work for in the U.S. and one of the most admired companies in the world. Among airlines, Southwest ranked on top as the most admired airline worldwide from 1997 through 2001. In 2002, The Wall Street Journal reported Southwest Airlines ranked first among airlines for customer service satisfaction, according to a survey by the American Customer Satisfaction Index. Business Ethics listed Southwest in its “100 Best Corporate Citizens,” a list that ranks public companies based on their corporate service to various stakeholder groups.

The Southwest Difference
Southwest did not employ the “hub-and-spoke” approach used by other major airlines,