30 years of luv new york stock exchange june 27,...

30 Years of LUVNew York Stock Exchange

June 27, 2007

Use of Economic Data

This presentation includes certain financial data that has been calculated by the Company on an "economic" basis. This data excludes certain unrealized items that are recorded as a result of Statement of Financial Accounting Standard 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. Reconciliations of the differences between the economic data and the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States are availableon the Company’s website at www.southwest.com.

Forward Looking Statements

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the Company’s current intent, expectations, estimates, and projections and are not guarantees of future performance. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as “plan,” “believe,” expect,” anticipate,” “may,”“could,” “intend,” “goal,” “will,” and similar expressions and variations thereof. Specific forward-looking statements relate to the Company’s financial and operational goals, its growth strategies and opportunities, and its revenues initiatives and opportunities. These statements involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors include, among others, (i) the Company’s ability to timely and effectively prioritize its revenues initiatives and its related ability to timely implement and maintain the necessary information technology systems and infrastructure to support these initiatives; (ii) the extent and timing of the Company’s investment of incremental operating expenses and capital expenditures to develop and implement its initiatives and its corresponding ability to effectively control operating expenses; (iii) the Company’s dependence on third party arrangements to implement certain of its initiatives; (iv) competitor capacity and load factors; and (v) other factors, as described in the Company’s filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and subsequent filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this news release.


June 27, 2007

Current Revenue Outlook

l June traffic is strong Q Expect record load factorQ Yields down versus year ago levels

l July bookings also strong

Capacity Outlook

l Tremendous long-term growth opportunitiesl Short-term goal to improve profitabilityQ Slowing 4Q07 growth from 8% to 6%

l Trimming 2008 growth from 8% to 6%Q Reducing fleet by 15 aircraftQ Intend to end 2008 with 539 aircraft

Sustainable Low Cost Advantage

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00

South

west

AirTran

JetB

lue

Fronti

erSp

irit

America

n

US Airway

sDelt

a

Alaska

United

Northw

est

Contin

ental

(cen

ts p

er m

ile)

2006 CASM - 1,000 Mile Stage Length Adjusted

Source: Industry data

Still the Low Cost Leader

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

South

west

AirTran

JetB

lue

Fronti

erSpir

it

America

n

US Airw

ays

Delta

Northw

est

Alaska

United

Contin

ental

(cen

ts p

er m

ile)

2006 CASM, excluding fuel & fuel taxes - 1,000 Mile Stage Length Adjusted

Source: Industry data

Rising Fuel Costs

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

'99 '00 '01 '02 '03 '04 '05 '06 '07

Pri

ce P

er G

allo

n

Fuel Hedging Gains Fuel Headwind

Market Jet Fuel price per gallon

Hedged Jet Fuel price per gallon

Results based on Economic data

Revenues Chasing Costs

5.00

6.00

7.00

8.00

9.00

10.00

11.00

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

(cen

ts p

er m

ile)

CASM RASM

3.9 2.8 4.7 10.2(6.9)(9.3)

CASM % chg (2.8) (1.6) 2.1 3.8 1.0 8.83.7

5.2

2.3

2.3

(0.7)

2.1

(0.7)

2.6

6.1

5.3RASM % chg


CASM(excluding fuel)

6.496.486.676.54

6.396.446.50

4.00

5.00

6.00

7.00

8.00

2000 2001 2002 2003 2004 2005 2006

(cen

ts p

er m

ile)

% change change

2.3 2.0 (2.8) 0.2(0.8)(0.0)(2.1)


Productivity(Headcount per aircraft)

68

89

50

55

60

65

70

75

80

85

90

95

100

2001 2002 2003 2004 2005 2006

24% improvementsince 2001

Labor Negotiations

l Pilots (SWAPA) – Currently in negotiationsl Flight Attendants (TWU) - June 2008l Ramp, Operations and Provisioning (TWU) - July 2008l Stock Clerks (Teamsters) – August 2008l Mechanics (AMFA) - August 2008l Customer Service and Reservation Agents (IAM) –

November 2008l Aircraft Appearance Technicians (AMFA) – February 2009l Flight Dispatchers (SWAEA) – December 2009l Flight Simulator Technicians (Teamsters) – November 2011l Flight/Ground School Instructors and Flight Crew Training

Instructors (SWAPIA) – January 2013

The Vision

l Be the best place to workl Operate the safest, most reliable, most efficient airlinel Offer Customers the preferred 737 flight schedule with lots

of flights to lots of placesl Deliver the best overall high value Customer Experiencel Earn excellent financial returns on our investment for our

Shareholders and Employees

Consistent Profitability

$0

$100

$200

$300

$400

$500

$600

$700

$800

2000 2001 2002 2003 2004 2005 2006

(in m

illio

ns)

% change change

63.8 - 88.1 38.1(61.0)(38.6)30.0


Year-over-year quarterly net income trends

22.4%16.8%

30.3%

44.6% 48.4%

87.0%

-0.6%

18.5%

-48.4%-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

1Q05 2Q 3Q 4Q05 1Q06 2Q 3Q 4Q06 1Q07


New Direction

l Updated Flight Schedulel Enhanced Fare Structurel Enhanced Revenue Management Tools and

Techniquesl Enhanced Rapid Rewards Frequent Flyer

Programl New Marketing and Advertising Campaign

Revenue Opportunities

l More Passengersl More Yieldsl Related Air Servicesl Related Non-Air Services

Customer Research

l Excellent Brand Recognitionl Better Ranking with Leisure Segmentl Shorthaul Segment Dominancel More Competitive Frequent Flyer programl Significant Opportunity with Business

Travelers

Business Travel Growth Strategy

l Frequent Flights and Expansive Route System l Enhanced Frequent Flyer Programl GDS Participationl Corporate Travel Department Initiativesl More Productive Travel Experiencel Enhanced Fare Structure l Targeted Marketing Focus

Future Revenue Initiatives

l Revenue Management l International Codeshare l Cargol Inflight wireless internet connectivity

Future Ancillary Revenue Opportunities

l southwest.coml Onboard Customer Offerings

Revenue Target

>$1 billionby 2010

Customer Experience Initiatives

l Automated Boarding Passesl Kiosksl Internet Checkinl Flight Information Displaysl Boarding/Seating Decisionl Enhanced fare structurel Enhanced Frequent Flyer Programl Inflight connectivity

Operational Excellence Initiatives

l Crew Scheduling Optimizationl Gate readersl Schedule Planning Optimizationl Reservation Centers Consolidationl Maintenance Efficiencyl -700/-300 Wingletsl Enhanced fuel tankeringl Redefining Excellence (Rx)l Ramp and Cargo Efficiencyl RNP Specification Approval

Enterprise Initiatives

l Technology Department Restructurel ATA Codesharel Wright Amendmentl Ticketing & Revenue Accounting Systemsl New Revenue Management toolsl southwest.coml International codesharel Galileo

Financial Goals

l 15% Economic Earnings Growth in 2008 l Optimize Capital Base through Prudent Stock

Repurchase Programs Q $1.8 billion authorized since January 1, 2006

l Increase Leverage Q Maintain Investment Grade Credit Rating

l Hit 15% ROIC by 2009


June 27, 2007

30 years of luv new york stock exchange june 27,...

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