Prior to the recent economic downturn, some of the Companys competitors took advantage of reorganization in bankruptcy, and even the threat of bankruptcy, to decrease operating costs through renegotiated labor, supply, and financing agreements. These aircraft are expected to be placed into service in mid-2012 and are expected to replace older aircraft, which are currently scheduled to be retired. Caution should be taken not to place undue reliance on the Companys forward-looking statements, which represent the Companys views only as of the date this report is filed. This analysis examines the U. For example, AirTran A+ Rewards members who book on Southwest are eligible for A-List benefits on Southwest flights.
Harry Hoffner filed a purported class action lawsuit on September 30, 2010 against AirTran, Robert L. While the economists pursue their theories, it would seem to be appropriate for more airlines to emulate Southwest and its few other successful rivals if not literally, at least in terms of the competitive strengths of the key success factors. If we are not able to make permanent structural changes in the near term to appropriately align our cost structure with the depressed level of revenue we can generate in this business environment, our business, financial condition and operating results will be materially adversely affected. These requirements often impose substantial costs on airlines. The following table details information on the 698 active aircraft in the Companys combined fleet as of December 31, 2011: Type Seats Average Age Yrs Number of Aircraft Number Owned 1 Number Leased 717-200 117 10 88 8 80 737-300 137 20 161 96 65 737-500 122 21 25 16 9 737-700 137 7 424 379 45 Totals 698 499 199 1 As discussed further in Note 7 to the Consolidated Financial Statements, 111 of Southwests and 38 of AirTrans aircraft were pledged as collateral as of December 31, 2011. More and more passengers are flying every year. The amount of hedge ineffectiveness and unrealized gains and losses on the change in fair value of derivative contracts settling in future periods recorded during historical periods has been due to a number of factors.
As a result of the terrorist attacks on September 11, 2001, aviation insurers significantly reduced the maximum amount of insurance coverage available to commercial air carriers for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events. The Company is subject to various other federal, state, and local laws and regulations relating to occupational safety and health, including Occupational Safety and Health Administration and Food and Drug Administration regulations. In addition to providing flight information to Southwest Customers using their preferred contact method, if applicable, the Company directs Southwest Customers to rebook their flights online via southwest. The acquisition of AirTran allowed the Company to immediately and significantly expand and diversify its overall route network and thereby provide a near-term growth opportunity not otherwise available to the Company. In other words, a Customer could not purchase a single ticket between Dallas Love Field and any destination other than a Wright Amendment State. The Company is dependent on Boeing as its sole supplier for aircraft and many of its aircraft parts and is dependent on other suppliers for certain other aircraft parts.
How does Jet Blue, probably the most successful recent startup, compare with the eight airlines examined? And there will be mostly winners. Many carriers have inked new labor contracts during this highly profitable cycle, the effects from which will begin to be felt in coming years. To catch their attention, your marketing strategies must be omnichannel and innovative, frictionless and digitally rich. Award travel available to members of AirTrans A+ program as of December 31, 2011, was not significant to the Company. The Company evaluates its estimates and assumptions each reporting period and, when warranted, adjusts these estimates and assumptions.
Airport capacity constraints and air traffic control inefficiencies could limit the Companys growth; changes in or additional governmental regulation could increase the Companys operating costs or otherwise limit the Companys ability to conduct business. Although management believes these forward-looking statements are reasonable as and when made, forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Southwest and AirTran are both highly unionized. A Consolidated Amended Complaint was filed in the consolidated action on February 1, 2010, which broadened the allegations to add claims that Delta and AirTran conspired to reduce capacity on competitive routes and to raise prices in violation of Section 1 of the Sherman Act. In addition to earning points for revenue flights and qualifying purchases with Rapid Rewards Partners, Rapid Rewards Members also have the ability to purchase points. In addition, there can be no assurance that the Company will be able to cost-effectively hedge against increases in fuel prices.
Accounts and other receivables Accounts and other receivables are carried at cost. The entity that leases the aircraft to the airline is the owner of the unit retains title to it after purchasing it from the manufacturer. As this reduction in residual value is considered a change in estimate, it was accounted for on a prospective basis, and thus the Company has effectively accelerated the recording of depreciation expense over the remainder of the useful lives for each aircraft. Increasing labor costs, combined with curtailed growth, could negatively impact the Companys competitive position. Nevertheless, because 23 energy prices can fluctuate significantly in a relatively short amount of time, the Company is subject to the risk that the fuel derivatives it uses will not provide adequate protection against significant increases in fuel prices. Not doing well in any one area may not result in failure as we define it.
However, if one or more of these counterparties were in a liability position to the Company and were unable to meet their obligations, any open derivative contracts with the counterparty could be subject to early termination, which could result in substantial losses for the Company. In strategic analysis of a business unit, key success factors often initially appear as analytical tools for examining the character of the industry in which the business unit competes. The Company is also subject to a financial covenant included in its revolving credit facility, and is subject to credit rating triggers related to its credit card transaction processing agreements, the pricing related to any funds drawn under its revolving credit facility, and some of its hedging counterparty agreements. We are at risk of losses and adverse publicity stemming from any accident involving our aircraft. This will reduce the systematic risk. Southwest and AirTran also compete for customers with other forms of transportation, as well as alternatives to travel. The Companys revenues are sensitive to the actions of other carriers with respect to pricing, routes, capacity, scheduling, Customer Service, frequent flyer programs, comfort and amenities, cost structure, aircraft fleet, and codesharing and similar activities.
The Companys ability to use AirTrans net operating loss carryforwards to offset future taxable income for U. For AirTran, 100 percent of amounts received for credits sold is estimated to relate to free travel and is deferred until the travel award is flown. Strikes or labor disputes with our and our affiliates unionized employees may adversely affect our ability to conduct our business. According to economic theories of market entry, such as that of Salop 1979 , thereis an optimal number of entries that balances both advantages increasing the variety ofproducts and disadvantages increasing entry costs. Yes þ No ¨ Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months or for such shorter period that the registrant was required to submit and post such files. These efforts contributed to improved revenues and load factors during 2011. In December 2011, the Company also announced that it expanded its current orders for the Boeing Next-Generation 737 aircraft from 142 to 200, which increased the Companys overall total firm orders with Boeing to 350 for 2012 through 2024.
Thisarticle investigates the number of entries in the airline industry, which faces riskmanagement problems concerning flight cancellations. 27 The Companys business is labor intensive; therefore, the Company would be adversely affected if it were unable to maintain satisfactory relations with its Employees or its Employees Representatives. All derivatives are required to be reflected at fair value and recorded on the Consolidated Balance Sheet. No more shots in the dark. Therefore, the Company continues to actively manage its fuel hedge portfolio to address volatile fuel prices and, in particular, to mitigate the impact of significant increases in energy prices, while maintaining an objective to manage derivative premium costs. The leaner flight schedules have led to improvements in industry load factors percentage of seats filled by fare-paying passengers and yields revenue production per passenger mile.