Southwest Airlines has lower average unit costs, adjusted for average stage length, than virtually all major U.S. carriers. Southwest Airlines’ low-cost structure has allowed us to profitably charge low fares. We keep costs down through our all-Boeing fleet; our efficient, point-to-point route structure; and our highly productive Employees. Excluding fuel and special items,G our cost per available seat mile (ASM) was 7.61 cents,G which was flat relative to 2010. As we integrate AirTran into the Southwest Family over the next several years and execute on our fleet modernization program, we believe we have opportunities to further reduce our operating costs.
Cost Containment
Operating expenses totaled $15.0 billion in 2011, an increase of $3.8 billion, or 34.6 percent, compared to 2010. The increase was primarily due to the inclusion of AirTran’s 2011 operating expenses following the acquisition. Excluding AirTran’s results, operating expenses increased by $1.9 billion, or 17.8 percent, compared to 2010, primarily due to the increase in economic fuel costs.
With record-high and volatile fuel costs, we continue to focus on controlling costs. In 2011, we unveiled our fleet modernization plans that included firm orders for the more fuel-efficient Boeing 737-800 and 737-700 aircraft. Our revised order with Boeing also included 150 firm orders for the launch of the 737 MAX aircraft, with deliveries expected to begin in 2017. As the launch customer for the 737 MAX, we look forward to the benefits of operating what is expected to be the most cost-effective and fuel-efficient, single-aisle airplane. These new aircraft orders with Boeing will provide significant flexibility as we replace our older, less fuel-efficient Classic fleet. We also developed plans to retrofit our 737-700s with the lighter-weight Evolve interior, beginning March 2012. Overall, we expect our fleet modernization plans to reduce our aircraft unit costs once we complete the Evolve retrofit program and have approximately 100 of the 737-800 aircraft in our fleet.
Fuel CostsG
Fuel and oil expense is our largest cost category. Our 2011 economic jet fuel cost averaged a record $3.19 per gallon, a 33.5 percent increase relative to 2010. Total economic fuel and oil expense was significantly higher than 2010 at approximately $5.6 billion, a 63.7 percent year-over-year increase.
Fuel Hedging
We continue our efforts to conserve fuel. In addition, we strive to buy jet fuel at the lowest possible cost and to reduce volatility in operating expenses through our fuel hedging program . Since 2000, our fuel hedging program has reduced our economic fuel costs by $3.3 billion (net of program costs).
Required Navigation Performance
We’re also working to limit fuel consumption through our innovative implementation of satellite-based Required Navigation Performance (RNP) operations, which generate a more precise, direct flight path. In January 2011, we began flying RNP approaches and completed 6,790 of these approaches throughout the year; however, for reasons outside Southwest Airlines’ control the total number of new RNP approaches has slowed. Because of the slowdown in the use of RNP, we decided not to equip our Boeing 737-300 and 737-500 aircraft with RNP capabilities. Changes in air traffic control by the U.S. Federal Aviation Administration still need to take place before we can realize the full potential for jet fuel conservation and emissions reduction from RNP procedures.