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Sept. 11, 2001, was a devastating day for America and its airlines when four commercial planes were used in terrorist attacks. Major economic turmoil followed the loss of lives, at first because aircrafts were restricted from flying and then because fearful people found other modes of transportation. More than 1 1/2 years later, while airlines struggle and others are in bankruptcy, Southwest Airlines thrives. Based in Dallas and with more than 35,000 employees, Southwest’s 2002 fourth-quarter net income totaled $42.4 million and marked its 30th consecutive year of profitability. The chief executive officer, Jim Parker, who joined Southwest in 1986, and Debby Ackerman, the vice president and general counsel, who came on board in 1988, recently shared Southwest’s secrets for success with Texas Lawyer Managing Editor Lisa Fipps. The discussion follows: Texas Lawyer: Considering U.S. Airways’ and United Airlines’ bankruptcy and American Airlines’ struggle, how is it that Southwest Airlines is able to stay profitable? What role does the GC play in helping Southwest stay profitable? Jim Parker, CEO, Southwest Airlines: We are able to stay profitable because of the dedication and discipline of our employees and our low cost structure. We achieve low costs in many ways, but principally through operation of a single aircraft type (the Boeing 737), our point-to-point route structure and our highly productive workforce. Every employee at Southwest has a vital role in maintaining our low costs, including the general counsel. TL: Southwest did receive some bad press in 2002 for requiring larger passengers to purchase tickets for two seats. Has there been any litigation over the policy? What legal issues are involved in having such a policy? What role does the GC play in handling bad press? How does the GC ensure Southwest is protected from suits arising from such a policy? Debby Ackerman, vice president and general counsel, Southwest Airlines: We have had no recent litigation about our policy, which as you know, is the same policy we’ve had for many years. We have won the one or two suits we have had in the past on the basis that it is not unfair to ask a customer to pay for the seats that he or she uses. The legal group supports our public relations folks who deal with media inquiries. Finally, with respect to legal issues, as with other issues, we basically try to “do the right thing” with all of our customers — that usually turns out for the best in the long run. TL: In light of the terrorist attacks on America on Sept. 11, 2001, what new issues has the legal department had to handle? How has that changed the workload or workflow? Ackerman: Post-9/11 we have been dealing with transportation security and war risk insurance on a daily basis. We have dealt with these issues proactively — helping the Department of Transportation, Federal Aviation Administration and Transportation Security Administration design policy — and reactively — in complying with regulations that seem to change on a daily basis. We also have supported other departments that are changing our airport procedures, such as contracting for our new automatic boarding passes and rapid check-in kiosks. TL: Because of the 1968 Bond Ordinance and the Wright & Shelby Amendments, by federal law Southwest cannot offer transportation for sale between Dallas Love Field and any point beyond Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Mississippi and Alabama. How has that federal law helped or hindered Southwest? Parker: At this point, we have been complying with this law for so long that it’s hard to say. We’ve been clear that it is our desire to do what the citizens of North Texas want us to do in this regard. TL: What impact, if any, has the Enron Corp. debacle and the Sarbanes-Oxley Corporate Fraud and Accountability Act of 2002 had on how Southwest does business? Parker: Honesty, full and forthright disclosure, and creating shareholder value always have been core values of Southwest Airlines. Substantively, we have not made many changes in the way we do business because we’ve been doing the right thing all along. However, the new federal laws and regulations have required us to formalize and document many of the procedures we already had followed. TL: What has been the company’s greatest legal challenge in the past two years? Ackerman: Developing strategies for complying with new federal security and corporate governance regulations while minimizing the impact on our operations and our costs; supporting the negotiation and ratification of multiple collective bargaining agreements; and keeping up with the developing law of the Internet and fending off parasites and wannabes desiring to profit from our success with www.southwest.com. TL: Jim, you used to be the GC. How does that past experience influence you in your current role as vice chairman of the board and CEO? Parker: My personal bias is that the ability to think like a lawyer is useful no matter what you do. I’m very glad I had that experience over the years. TL: What did you look for when hiring a general counsel? What characteristics were most important? Did you set the bar high, considering you had been the GC? Parker: Herb [Kelleher, the chairman of the board and chairman of the executive committee,] may have said it the best — in a GC you need a hunting dog, not a house dog. Meaning, someone who can look down the road and see what’s coming and be aggressive in preparing for it. As for the high bar, that’s the one stocked with Wild Turkey (though in Debby’s case, I believe its chardonnay). FEEL THE LOVE TL: What role does the GC play in key business decisions? Parker: Southwest is a place that obviously values its lawyers. Our lawyers are key members of our team in all key business decisions. TL: What is your weekly interaction with the legal department, on average? Parker: There is no average week in this business, but, as you know, we have an informal style at Southwest. We interact frequently — whether at a “hall conference,” on the phone, by e-mail or at an official function. TL: Considering Jim was the GC, does he give you enough autonomy to do things your way or is that a struggle? Ackerman: Jim is way too busy negotiating labor agreements and being CEO to micromanage my world. Also, we worked together as lawyers for so long, it’s easy for me to spot the issues in which he would have an interest and make sure they are brought to his attention. TL: What did you do prior to joining Southwest and how was that experience helpful? Ackerman: I was a partner in two different San Antonio firms [Oppenheimer, Rosenberg, Kelleher & Wheatley and Cauthorn & Tobin] specializing in corporate finance. As I continued to practice in that area at Southwest, that experience was invaluable. So was the discipline and work ethic that comes from being a young lawyer in a good firm. TL: What in particular made moving in-house an attractive choice for you? Ackerman: It was all about Southwest Airlines, Herb Kelleher, Jim Parker and Colleen Barrett, president and chief operating officer. Those are folks that you would follow anywhere. TL: What kinds of issues have you had to handle? Ackerman: I’ve worked on financings for more than $3 billion of aircraft; I’ve helped negotiate collective bargaining agreements, build a reservations call center, acquire an airline, negotiate with government officials, and market Southwest Airlines to anyone and everyone I meet. TL: What is the best thing about your job? Ackerman: I’ve been blessed to have the best job a lawyer could wish for. I work for a world-class organization, having the highest ethical standards, with the highest caliber of professionals on the most amazing legal projects. The team in the Southwest legal department is like my extended family — each and every one is a superb contributor and human being. The only thing that could make it better would be a return to our 2000-level operating margins, but hopefully that will come — sooner rather than later. TL: How many attorneys do you supervise, and what is the level of your interaction? Ackerman: We have 13 lawyers in the legal department. Since we are a small group, I’m very aware of what everyone is doing, though I try very hard to stay out of their way. TL: How do you motivate your legal staff? Ackerman: Love ‘em to death.

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