AIR TRANSPORT WORLD

POWER FIGHT OEMs and MROs battle for engine service contracts

CEO INTERVIEWSouthwest’s Gary Kelly

SHOPPING ON THE FLYAirports court the passenger’s wallet

The Magazine of Global Airline Management

February 2015 | www.atwonline.com |

AIRLINE OF THE YEAR

SOUTHWEST AIRLINES

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SIMPLY THE BESTSIMPLY THE BEST

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ATW is proud to recognize these standout performers at its 41st Annual Airline Industry Achievement Awards.

The Awards will be presented at a Gala Dinner on Feb. 25 at the Omni Shoreham Hotel in Washington DC.

For full details, go to http://atwonline.com/atws-41st-annual-

airline-industry-achievement-awards

AIRLINE OF THE YEARSouthwest Airlines .........................................................Page 22

AIRLINE MARKET LEADER Air Astana .......................................................................Page 28

ATW LEADERSHIP AWARDJohn S. Pistole.................................................................Page 30

VALUE AIRLINE OF THE YEARSpirit Airlines..................................................................Page 31

REGIONAL AIRLINE OF THE YEAREthiopian Airlines ...........................................................Page 32

AIRPORT OF THE YEARLondon Heathrow & Star Alliance ..................................Page 33

ECO-AIRLINE OF THE YEARLufthansa Group ..................................................... Page 34

ECO-COMPANY OF THE YEARThe Boeing Company ............................................... Page 35

AVIATION TECHNOLOGY ACHIEVEMENTL-3 Link Simulation & Training .................................. Page 36

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There are many reasons why this year’s recipient of ATW’s top award is one of the most loved and honored airlines, and it starts with “LUV” as its stock exchange ticker symbol.

Southwest Airlines is loved by its customers, its employees and its shareholders because it

consistently delivers excellent value and service to all.This past year has been a particularly significant one

for the Texas-based carrier that is admired around the world and which other airlines seek to emulate.

In selecting Southwest as Airline of the Year, ATW

editors cited the US carrier’s extraordinary standards of service, financial performance, safety, and environmen-tal and corporate responsibility.

Southwest remains the world’s only airline that can claim 41 consecutive years of profitability. The company has maintained these highest of standards through its merger-acquisition with AirTran Airways, marking the transition of Southwest to becoming an international carrier. And throughout its history, Southwest has maintained its profitability without ever coming close to needing Chapter 11 bankruptcy support.

Under the leadership of CEO Gary Kelly, the airline has become the nation’s largest in terms of originating domestic passengers.

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Under Kelly’s leadership, the airline is recognized as one of the world’s safest airlines. In 2014, Southwest 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.

Southwest’s commitment to customers and em-ployees doesn’t end at the workplace—the company places high value on building meaningful relationships through community outreach and volunteerism. It has given many millions of dollars in corporate monetary, in-kind, and ticket donations. Employees have volun-teered hundreds of thousands of hours to community projects.

Fleet modernization and new fuel initiatives have also improved fuel efficiency and decreased green-house gas emissions, despite an increase in the size of operations.

Southwest’s commitment to reducing and recycling has resulted in the weight of 300 Boeing 737s being recycled. And, as launch customer for the new super-efficient Boeing 737 MAX, Southwest will see its fleet become even more fuel- and emissions friendly.

The company’s mission to delivering the highest quality of customer service with a sense of warmth, friendliness and individual pride exemplifies the LUV spirit.

This mission has led Southwest to gaining the industry’s best cumulative consumer satisfaction record according to statistics from the US Department of Transportation, and the lowest ratio of complaints per

customers boarded of all major US carriers. Employees are the heart of the airline, and are

rewarded with industry-leading compensation, benefits and unprecedented job security.

“On behalf of the people of Southwest Airlines, I am delighted that our airline has been selected by ATW as Airline of the Year,” Kelly said. “This is a prestigious honor, and I am proud for all of our employees. They have done an extraordinary job transforming Southwest over the past decade, which culminated in a record and historic 2014 perfor-mance. Because of their warrior spirits, Southwest now flies to international destinations; Dallas Love Field has been set free from the Wright Amendment; AirTran is fully integrated; and LUV has reached lifetime highs. We celebrated 2014 with a bold new look to our brand and aircraft livery. This award is, truly, icing on the cake!”

For its remarkable and consistent achievements, this year’s ATW Airline of the Year is Southwest Airlines.

“This is a prestigious honor, and I am proud for all of our employees. They have done an extraordinary job transforming Southwest over the past decade, which culminated in a record and historic 2014 performance.”

Southwest Airlines CEO Gary Kelly

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Congratulations on Southwest’s award as the 2015 ATW airline of the Year! the past year has been extremely active for everyone at Southwest, with the integration of airtran airways a major milestone. How did you and airtran’s manage-ment map out the integration process, which appears to have gone very smoothly?Thank you! It was truly an historic year for Southwest with many major initiatives coming to fruition. The AirTran integration was, by far, the single biggest project we’ve undertaken in our 43-year history. But, it was a homerun, and you’re right, it went exceptionally well.

Our integration plan focused on the people first, including the reorganization of AirTran, labor contracts, and basic onboarding.We developed a network design post-integration to determine which markets to keep and which to exit. We then worked with the people in affected locations with new opportunities. Achieving a single operating certificate quickly was key, in order to efficiently run two airlines during the integration period. And, there were several major technology needs that had

to be met in order to complete the integration. First, Southwest had to implement technology to support AirTran’s small number of international routes, and that was a two-year plus project. The commitment to international was made after we acquired AirTran. Next, Southwest had no systems in place to operate anything other than the Boeing 737. So, integrating or retiring AirTran’s Boeing 717s also meant a project of two to three years, depending on which course we chose. We decided to retire, of course. The actual integration plan allowed for the gradual reduction of flying in AirTran, coinciding with a gradual increase in flying at Southwest. By this approach, we avoided the heavy risks associated with the overnight “flip the switch” approach.

If I had to point to one aspect of the integration that I’m most proud of, it would be how our people came together in a willing, cooperative spirit to accomplish a massive undertaking. They were heroic, and as a result, the integration was a smashing success and completed right on schedule.

Our AirTran unit performed extremely well—a real

interview: Gary KellyPresident and CEO, Southwest Airlines

Under Gary Kelly’s leadership, Southwest Airlines has grown to become the

US’ largest airline in terms of originating domestic passengers carried.

Kelly is a 28-year Southwest veteran, assuming the roles of chairman and

president in 2008. IntervIew by KAren wALKer

Winning Strategy

“I would say the biggest reason

we’ve enjoyed an unprecedented run

of profitability is our people.”

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tribute to our former AirTran Employees.

What are the key transitions you will make as an international carrier?This is new for us, so admittedly we have a lot to learn. Therefore, we will grow in a measured, disciplined manner. Right now, it’s a very small percentage of our business, and I expect it will remain so for a while. Be-yond the “48 states” is where opportunities are to grow our destinations. We have 50 potential new dots to be added to our map, primarily in North America, but also northern South America. A challenge, as we enter new international markets, will be brand awareness. The operating environment is different, as well. So, we are taking a very conservative approach with our flight operations to ensure we have appropriate experience operating in these new environments.

The other major event of 2014 was the ending of the Wright Amendment and its restrictions on SWA operations out of Dallas Love Field. It was a long time coming, but what are the key benefits to Southwest and its customers?Hallelujah! Wright has finally been made right! I can’t emphasize enough how much of a game changer the repeal of the Wright Amendment has been for North Texas and Southwest. Importantly, it has given us new life at our hometown airport of Dallas Love Field.

In short, it means more flights, more destinations, more competition, and lower fares—and so the con-sumer wins. What is transpiring is the classic Southwest Effect—fares have come down and traffic has increased more than 30% at Love Field. Load factors on our new routes out of Dallas are in the 90% range—exceeding our system average—so clearly the market is responding, and the demand for more Southwest service is there.

Forty-one years of consecutive profitability is a re-markable, unsurpassed achievement. What’s the Secret Sauce that no other airline has discovered?Well, unfortunately, it isn’t a secret! And, it’s not just one thing—it never is. I would say the biggest reason we’ve enjoyed an unprecedented run of profitability is our people, who deliver great service at a low cost. We have the best Employees, and our customers tell us they are the friendliest, most-caring Employees in the airline industry. We don’t nickel and dime our customers with things they hate, like bag fees and change fees. And, our focus on keeping our costs low, and thus our fares low, has been the very essence of Southwest since day one.

Southwest is launch customer for the Boeing 737 MAX. What expectations do you have for that type?Very high expectations. Today’s environment demands

that we become more fuel-efficient and environmen-tally friendly, and as the launch customer of the Boeing 737 MAX, we have accomplished both.We are teaming up with Boeing to lead the industry in a way that makes our Employees, our customers, and our share-holders proud to associate with Southwest Airlines.

The much-improved fuel efficiency of the 737 MAX will enable us to reduce our fuel consumption, as well as our carbon output, with great comfort and reliabil-ity. More importantly, it helps us maintain our position as a low-cost provider in the years ahead.

Southwest Employees are famous for their go-to, team spirit. Will the LUV culture be harder to maintain as a much larger company that now encompasses two airlines?No. The merger has been completed, and very success-fully. Our future is brighter than ever, and it’s energiz-ing for our people.

Culture is the sum of many things—excellence; hard work; fun; compassion; to name a few. Take any one out, and the culture is diminished. The essence of our culture is love for people, the desire to work together as a team, to recognize a job well done or a personal event in one’s life.

Those Employees are also great community citi-zens. Can you talk a little about some of South-west’s volunteer and outreach activities that make you especially proud?Southwest is committed to a triple bottom line of people, performance and planet. Our hope is to en-courage change within our company that extends into our communities, and eventually out into our world.

Our 2014 totals are still being finalized, but I’m so proud that in 2013, Southwest donated nearly $19 million in tickets and cash, supported almost 5,000 individual charities, and volunteered more than 144,000 hours in our communities.

What most motivates you as you come to work?Simple. I love my job, and I love the people I work with each and every day. I love the diversity, but I also love the common purpose—and passion—that we share to serve our customers better than anybody else. Of course, my number one priority at all times is the well-being of our people, who we consider to be family at Southwest Airlines. So taking care of them, so we can all serve our customers, is all the motivation I need to look forward to coming to work every day. I am most proud of the fact that, despite the horrible track record of the airline in-dustry, we’ve never had a layoff or a pay cut. Our people are an inspiration, and it’s a blessing and a joy to be part of the Southwest Airlines family.

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