Southwest Airlines

1. Southwest Airlines Christine Dao Katrina Elicagaray Kimberly Tran April Weir

3. Airline Regulation • 1938 Civil Aeronautics Act • Civil Aeronautics Authority (CAA) • Its Mission

4. The Beginning… • Founded in 1967 • Founders were Rollin King, John Parker and Herb Kelleher

5. DAL HOUSTON SAN ANTONIO The Napkin Concept “Herb, let’s start an airline” and “Rollin, you’re crazy. Let’s do it!”

6. Mission • The Mission of Southwest Airlines • To Our Employees

7. Executives • Headquarters in Dallas, Texas • Current Leadership Herb Kelleher – Chairman of the Board and Chairman of the Executive Committee Jim Parker – Vice Chairman of the Board and CEO Colleen Barrett – President, COO, and Corporate Secretary

8. Top 3 Strengths Structure Operations Culture Beliefs Policies Innovation

9. Southwest vs. the Majors • Debt • Pricing • Hub & Spoke • Labor Costs • Operations • Understanding the Market • Customer Service

10. Major airlines High debt High daily losses Low cash Southwest Little debt Low daily losses High cash Major airlines include Alaska Air, America West, America Trans Air, American, Delta, Continental, Northwest and United. Not included is US Airways, which is bankrupt and no longer traded on the NYSE. Debt

11. Airline AftermathHow the sector has performed since 9/11 Carrier Stock % Change Since 9/11* Earnings Comparison Q2 2001 Q2 2002 American -69% -$105 million -$465 million US Airways -94 -24 million -248 million Delta -55 -123 million -162 million Northwest -55 -55 million -93 million Continental -76 42 million -35 million Southwest -18 176 million 85 million United -90 -292 million -341 million - America West -76 -15 million -10 million *As of Thursday, Sept. 5, 2002. **Excludes all charges.Source: Company reports, Baseline, TSC Research

12. Prices • Competition • Seat prices • Operation costs • Fuel • Airport fees • Hubs vs. surrounding airports

13. Hub & Spoke

14. Labor Costs • Union vs. Non-Union • Salaries • Labor costs as a percentage of revenues • Employees per flight

15. Operations • Maintenance • Training • Boarding procedures • Airport Fees • Plane design • Idle time • Food Service

16. Operating Costs

17. Understanding the Market • Niche market • Long haul flights • Short haul flights • Price sensitive • High customer service needs

18. Customer Service • The Belief • The Policies • The Results

19. The Belief “Southwest people believe that customer service involves more than an objective understanding of the customer’s need. It also means, …, “being attentive to the person behind the need, and responding to the person more than just responding to the need.” NUTS! Southwest Airlines’ Crazy Recipe for Business and Personal Success by Freiberg & Freiberg

20. The Policies • Seating space • Boarding procedures • Ticketing • Safety • Timeliness of flights • Amenities

21. The Results Best on-time service + Best baggage handling + Best customer Service = Triple Crown Award 5 Years Straight

22. Southwest Culture

24. Information Technology and SystemsWhat Helps Keep Southwest on Top?

25. Deploy’s Enterprise Software PROS Revenue Mgmt. CALEB Technologies Corps CrewSolver Software I2 Service Inventory Management Computerized Reservation System RAPID CHECK-IN Automated boarding passes IT/IS Helps Business Strategy

26. Focused Cost Leadership • High frequency, short hops • Low fair strategy • Cost-effective inventory management • Efficient and cost-effective recruitment • Unique, high level customer service

27. What Major airlines are doing to compete • Cutting jobs • Retiring older planes • Streamlining routes • In the future, closing hubs

28. Combating Competition • Structurally competitive through Operations • Successful in utilizing Information Technology and Information Systems • Creating a culture of Innovation and Great Customer Service

29. Southwest Beating the Competition

30. Thank You