Southwest Airlines Releases Economic Proposal to Serve King County International Airport

SEATTLE, July 21 /PRNewswire-FirstCall/ — Southwest Airlines (NYSE:LUV) today released its economic proposal, detailing the $130 million capital investment Southwest Airlines will make at King County International Airport. Southwest is proposing to construct facilities in order to move its airport operation to King County International Airport, from Seattle-Tacoma International Airport, where ever-increasing costs have become an obstacle to growth. To view the entire proposal, click on this link:

Southwest will use its own financial resources for the approximately $130 million improvement of King County International Airport (KCIA). Southwest Airlines proposes to build an eight-gate commercial airport facility, which will include parking garage, passenger concessions, rental car provisions, special accommodations for cruise traffic and buses, and the necessary facilities for Southwest’s flight operations, including gates, office space, baggage claim, and baggage screening.

If approved by King County, Southwest’s operations would start at KCIA in 2009 with 60 daily flights, and plan to grow to 85 flights. Under the terms of the proposal, Southwest will own, manage, maintain, and operate the terminal. Southwest will pay King County landing fees and land rental rates stipulated by the County. After the 50-year agreement expires, ownership of the entire facility will transfer to King County.

“We are giving King County a $130 million airport and by doing this, preserving low fares for all the people of the Puget Sound Region,” said Gary Kelly, Southwest’s CEO, at today’s press conference. “The long-term economic benefits to King County and the region far exceed our initial investment. As a result of estimated direct expenditures, taxes paid, and the preservation of low fares, there will be a projected $1.6 billion total economic gain to the region.”

The Puget Sound region will benefit from Southwest’s proposal. Stimulation of low fares at KCIA also can be expected to stimulate low fares at Seattle-Tacoma International Airport (Sea-Tac), as the result of what has long become known as the “Southwest Effect,” a term coined by the U.S. Department of Transportation.

One of the more significant aspects of the Southwest Effect is that traffic doesn’t just surge at Southwest and the airport it serves; it also stimulates traffic at other airlines and at airports in the same region that are not served by Southwest.

For years, Southwest Airlines has initiated and maintained air service in cities served by more than one airport, including Chicago, Dallas, Los Angeles, Baltimore/Washington DC, the San Francisco Bay Area, and Houston. Of the top U.S. 20 cities in terms of 2004 domestic airport passenger traffic, Southwest served 15 of these markets — nine of which were served via secondary airports located within the metropolitan area. According to Airports Council International, all of the major metropolitan airports increased passenger traffic levels in 2004, even with airfare competition from Southwest’s operations at a secondary airport.

“The high cost of doing business at Sea-Tac has diluted the Southwest Effect in the Puget Sound region,” Kelly said. “By moving operations to King County International and lowering costs, the Southwest Effect can flourish to the benefit of all passengers traveling to and from the region.”

Southwest Airlines cannot afford to operate its successful business model and preserve low fares for consumers at high-cost airports, which is why the airline looked for alternatives that would preserve its commitment and investment in the Seattle market. After more than five years of articulated concerns regarding increasing costs at Sea-Tac, Southwest looked to KCIA as a viable alternative.

“Southwest has a keen focus on keeping costs low, particularly in this volatile energy environment,” said Kelly. “Southwest is fulfilling the obligations of its current lease agreement with the Port of Seattle and we have no plans to do otherwise. When that lease is up in December 2005, just as any lessee would, we have the option to move.”

Southwest Airlines hopes the Metropolitan King County Council will allow Southwest Airlines to relocate to King County International Airport. Any permitting, design, or construction will be undertaken by Southwest only after a rigorous environmental review by local, state, and federal agencies. The airline believes its proposal to be consistent with the requirements of local regulatory agencies, and noise impacts will be minimal.

Southwest Airlines has the largest all-jet fleet in the world, flying only Boeing 737s. The airline exclusively purchases “Next Generation” Boeing 737- 700s, a quieter, more powerful aircraft that climbs higher and faster, thus diminishing the noise on the ground.

The scale of Southwest Airlines’ proposed initial operations at KCIA result in just a 13 percent increase in daily departures for KCIA, which currently oversees more than 800 cargo and general aviation departures and landings each day. The under-utilized King County International Airport would produce a better return on the community’s investment with Southwest Airlines’ proposal.

“Southwest Airlines is committed to the Puget Sound region and its mission of low fares,” Kelly said. “In allowing Southwest Airlines to launch commercial air service from KCIA, King County affirms its dedication to preserving the Freedom to Fly and to the airport’s future success.”

Southwest Airlines, the nation’s largest carrier in terms of domestic passengers enplaned, currently serves 60 airports in 31 states. Its 61st airport, Ft. Myers, begins service on Oct. 2, 2005. Based in Dallas, Southwest currently operates 3,000 flights a day and has 31,000+ employees systemwide.

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