More good news about SWA business model

[magsau]

I have to disagree with you about SW dumping capacity. I think jetBlue (NYC-Florida) is an example of dumping capacity (and to a lesser extent Frontier and Airtran). On the other hand I think SW has managed and planned their growth - selecting markets carefully, executing their business plan rather carefully not deviating too much,

If that is the case then why has IAD been a dry well for SWA? That move to IAD was to head off expansion by B6 and AAI. However, the numbers show SWA has been adding seats and not filling the addition. When the LF declines and you add capacity that means you are adding more seats than the market can support.

I suspect that SWA might try taking some seats out in the future to give some creature comforts, add some type of IFE (broadband internet) would be the best choice as people would rather surf than watch a movie.

Get rid of many of the -300's and -500's, slow down delivery of new jets and possibly look to slash labor cost.

 

[FrugalFlyerv2.0]

I can't comment about SW operation at IAD - I don't have the numbers. But doesn't SW, in general, manage to make a profit even with low or lower LF's than the other airlines?

I would imagine that if SW ever goes international, they may consider some sort of a 'business' class, IFE, etc. along with a new fleet type. I think it would be easy for SW to introduce a new fleet type (B787) and open international service to the EU, especially with the open skies deal. 30 or so 787's flying to half a dozen major EU cities each with 4-6 flights to the USA.

As far as slashing wages I don't see that happening at SW for a very long time - if ever. They are just too well managed of a company, at least right now, to shaft employees like US, UA, DL, NW.

 

[magsau]

I can't comment about SW operation at IAD - I don't have the numbers. But doesn't SW, in general, manage to make a profit even with low or lower LF's than the other airlines?

SWA recorded a 499mil. profit for the year 2006. With this years fuel hedge estimated at a 500 million extra and that is with diminishing hedges you can surmise that last year the hedging was worth a bit more. Exclude the hedging and SWA lost money. So no SWA did not make a profit on low LF. They made a profit on hedges. When they expire at the end of this year and into next, (gradual reduction IIRC) the compensation they receive from hedging will diminish thus showing the lack of effectiveness of their business operations. That is why you see Kelly warning the investors and talking of changes in alliances. The news is going to be a hard pill to swallow for those that can not see a chink in the armor of SWA. I also suspect that for a short period of time the SWA downturn affect to also hit other airline stocks.

 

[lowfareair]

So no SWA did not make a profit on low LF. They made a profit on hedges.

No, WN profited by making smart business decisions. It makes no difference from the fact that US made a profit from slave wages or UA made a prof... never mind.

But as Gary Kelly noted, they do have other alternatives. One possibility is to simply cut down on growth. By doing that they can concentrate on improving their current load factors/yields, as well as retiring some or all of the 733/735s. It would be interesting to know the cost difference between operating the small 735 sub-fleet or replacing them with 73Gs. By doing so they would likely make a smaller maintenance inventory(not much, but it would be some parts they would no longer need), standardize every single plane with 137 seats, and have lower fuel burn even though a higher weight.

The difference between WN and most of the legacies is that there is a fairly strong relationship between employees and management. If management needs cuts, rather than be like most of the other airlines and say "you're taking cuts here, here, and here", they will talk to the employees, see if there is any other productivity advances, then possibly offer early retirement packages to their eldest.

Either way, I'm not concerned about an airline like WN as long as they post a profit. Even posting a loss for one quarter wouldn't bother me provided it is an isolated incident.

 

[magsau]

No, WN profited by making smart business decisions.

IF fuel was cheaper than the SWA hedges what would have been the outcome for SWA? At the real airlines fuel has become the highest outlay of cash, surpassing salaries. If the picture had been different then the real airlines would have made tons of cash.

But unfortunately what you call smart, I call lucky. The fact that they added capacity they could not fill is a big indication of how bad SWA is doing in their business model.

 

[KCFlyer]

IF fuel was cheaper than the SWA hedges what would have been the outcome for SWA? At the real airlines fuel has become the highest outlay of cash, surpassing salaries. If the picture had been different then the real airlines would have made tons of cash.

But unfortunately what you call smart, I call lucky. The fact that they added capacity they could not fill is a big indication of how bad SWA is doing in their business model.

If I were you mags, I'd worry less about Southwest and more about American. After all, AA didn't have SWA's fuel hedges....they haven't filed bankruptcy, they're still funding pensions, AND they're making a profit. While you're so focused on watching SWA...AA is sneaking up behind UAL to put a REAL hurtin' on you.

 

[whatkindoffreshhell]

But unfortunately what you call smart, I call lucky. The fact that they added capacity they could not fill is a big indication of how bad SWA is doing in their business model.

You really got your panties in a bunch over WN, dontcha?

WN has and will continue to enjoy profits whilst the silly & arrogant legacies chase goofy ventures.

Thirty years' of history son. Genuine stuff.

 

[ngneer]

But unfortunately what you call smart, I call lucky.

How many quarters in a row now has SWA been "lucky"?

 

[magsau]

they're still funding pensions,

Buy a newspaper and review the rules governing funding levels of pensions. AA and CO are direct benefactors of the reduction in requirements.

What is the SWA A-plan retirement? I am getting a nice B/C fund and am looking at a nice retirement I appreciate your concern about my welfare. However, I can take care of myself.

How about the war of words that AA and SWA recently had? SWA was touting growth, Arpey said it was irresponsible and low and behold SWA pulls growth. Arpey appears to have SWA in his crosshairs.

If AA is so great, then why did they not get the China authority?

NEXT.

 

[ramper_in_las]

If AA is so great, then why did they not get the China authority?

who filed bk? who didn't? AA is definitely the strongest out of the legacies.

If everyone at UA has Mags outlook I would say they are a bit overconfident.

 

[N924PS]

Buy a newspaper and review the rules governing funding levels of pensions. AA and CO are direct benefactors of the reduction in requirements.

What is the SWA A-plan retirement? I am getting a nice B/C fund and am looking at a nice retirement I appreciate your concern about my welfare. However, I can take care of myself.

How about the war of words that AA and SWA recently had? SWA was touting growth, Arpey said it was irresponsible and low and behold SWA pulls growth. Arpey appears to have SWA in his crosshairs.

If AA is so great, then why did they not get the China authority?

NEXT.

Why have you made it your mission to be the self appointed detractor of Southwest Airlines?

Over the past few years you have wasted considerable bandwidth in an ongoing effort to denigrate that fine company.

Oh, but your day is coming again soon. If not the next bankruptcy of UAL, you will be junior to a USAirways pilot after the next round of consolidation.

 

[magsau]

who filed bk? who didn't? AA is definitely the strongest out of the legacies.

If everyone at UA has Mags outlook I would say they are a bit overconfident.

I have not been here touting the greatness of any one carrier. What I have been trying to do is highlight the truth about SWA.

It would not matter if I worked for another carrier, SWA has existed to the demise of the rest of the industry. Their lack of professionalism as a pilot group (please see the thread in regards to the SWA pilot blogging) and the way they operate is what I don't care for.

SWA is a marketing plan that has done well. As for execution it has only profited as a result of hedging. Those hedging are expiring and SWA is now looking at a balance playing field.

 

[KCFlyer]

Those hedging are expiring and SWA is now looking at a balance playing field.

No, they aren't looking at a balanced playing field. If the playing field were balanced, the US Airline industry would look like this: American, Delta, Northwest, Continental, Southwest, Airtran, JetBlue, America West and some smaller regional carriers. Bankruptcy is not a field leveler...it's a "do over" for bad managment.

 

[BoeingBoy]

What I have been trying to do is highlight the truth about SWA.

Just reading the "facts" in your posts, mags, I'm not sure you'd know the truth about WN if it hit you between the eyes.

There's tons of legitimate info available - no need to "surmise" from the odd headline.....

Jim

 

[magsau]

No, they aren't looking at a balanced playing field. If the playing field were balanced, the US Airline industry would look like this: American, Delta, Northwest, Continental, Southwest, Airtran, JetBlue, America West and some smaller regional carriers. Bankruptcy is not a field leveler...it's a "do over" for bad managment.

What is the Defined benefit plan at SWA? Do they have a fixed income retirement program? Did they not enter the industry at the bottom of the wage scale? Have they not used the other carriers ALPA negotiated contracts to lift their boat?

If you don't care for the BK laws then I suggest YOU advocate changing them. Of your carriers that SHOULD exist you left a couple that have been through BK, some more than once. So you might want to realign your arguement that BK should be an elminator. If that is the case then DL,NW,CO-more than once, AW-more than once. Would not exist. So tell me again about your grand idea?

WN will receive 500mil from hedges this year. If they don't exceed 500mil in profit then they would have lost money. My guess is they won't exceed $500mil.

SWA is a mortal. And seeing them decline is nice.