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5
The Company is one of four carriers that have exclusive rights to fly routes between London Heathrow airport and
the United States. The United States government and the European Union are currently evaluating the possibility
of allowing a greater number of carriers to fly these routes. To the extent additional carriers are granted the right
to fly between Heathrow and the United States in the future, and are able to obtain the necessary slots and
terminal facilities, the Company could suffer an adverse financial impact. See Item 1A, Risk Factors, for additional
information.
Security In November 2001, the Aviation and Transportation Security Act (ATSA) was enacted in the United
States. The ATSA created a new government agency, the Transportation Security Administration (TSA), which is
part of the Department of Homeland Security and is responsible for aviation security. The ATSA mandates that
the TSA provide for the screening of all passengers and property, including U.S. mail, cargo, carry-on and
checked baggage, and other articles that will be carried aboard a passenger aircraft. The ATSA also provides for
increased security in flight decks of aircraft and requires federal air marshals to be present on certain flights.
Effective February 1, 2002, the ATSA imposed a $2.50 per enplanement security service fee ($5 one-way
maximum fee), which is being collected by the air carriers and submitted to the government to pay for these
enhanced security measures. Additionally, air carriers are annually required to submit to the government an
amount equal to what the air carriers paid for screening passengers and property in 2000. President Bush has
sought to increase both of these fees under spending proposals for the Department of Homeland Security.
American and other carriers have announced their opposition to these proposals as there is no assurance that
any increase in fees could be passed on to customers.
Airline Fares Airlines are permitted to establish their own domestic fares without governmental regulation. The
DOT maintains authority over certain international fares, rates and charges, but applies this authority on a limited
basis. In addition, international fares and rates are sometimes subject to the jurisdiction of the governments of the
foreign countries which the Company serves. While air carriers are required to file and adhere to international
fare and rate tariffs, substantial commissions, fare overrides and discounts to travel agents, brokers and
wholesalers characterize many international markets.
Airport Access The FAA has designated New York John F. Kennedy (JFK), New York LaGuardia (LaGuardia),
and Washington Reagan airports as high-density traffic airports. The high-density rule limits the number of
Instrument Flight Rule operations - take-offs and landings - permitted per hour and requires that a slot support
each operation. In April 2000, the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (Air
21 Act) was enacted. It will eliminate slot restrictions at JFK and LaGuardia airports in 2007. The Company
expects that the elimination of these slot restrictions could create operational challenges, but does not expect the
elimination of these slot restrictions to have a material adverse impact on the Company.
Currently, the FAA permits the purchasing, selling, leasing or transferring of slots, except those slots designated
as international, essential air service or Air 21 Act slots (certain slots at JFK, LaGuardia, and Washington Reagan
airports). Trading of any domestic slot is permitted subject to certain parameters. Some foreign airports, including
London Heathrow, a major European destination for American, also have slot allocations. Most foreign authorities
do not officially recognize the purchasing, selling or leasing of slots.
In addition, the Wright Amendment authorizes certain flight operations at Dallas Love Field within limited
geographic areas. Southwest is actively lobbying to expand the authorization and, in November 2005, legislation
was passed that added the State of Missouri to the areas that may be served to and from Love Field. The
Company subsequently announced that it plans to provide service at Love Field in order to protect market share.
The Company vigorously opposes any further expansion of the geographic service areas of Love Field because
such expansion could have an adverse financial impact on the Company.
Although the Company is constrained by slots, it currently has sufficient slot authorizations to operate its existing
flights. However, there is no assurance that the Company will be able to obtain slots in the future to expand its
operations or change its schedules because, among other factors, slot allocations are subject to changes in
government policies.