Swa May Add Rjs To Fleet

[SWAFA30]

from Bloomberg.com

Southwest Air CEO Says Carrier May Consider Adding Smaller Jets
August 29, 2003 01:00 EDT -- Southwest Airlines Co., the discount carrier that flies only Boeing 737 jetliners to keep costs low, will consider adding smaller aircraft, Chief Executive Officer James Parker said.


http://quote.bloomberg.com/apps/news?pid=c...news&tkr=LUV:US

 

[coolflyingfool]

I would wait to see what size of rj they bring onboard before I pass judgement. I would personally hope that they are looking at the 75-90 seat range of rj. I think they may be looking at these as a way of being able to match any move made by Jetblue. No one knows what Jetblue is going to do with all of their rjs and I think that this could possibly be a good poker move, a bluff, just to force Jetblue to rethink entering some markets because of possible reprisal moves by SWA. Just my 2 cents......

 

[jimntx]

Maybe they are looking at cutting plane size, but "improving service" to some smaller stations. Maybe HOU-AMA (don't jump on this. I'm just using it as an example) can only justify 1 flight/day on 737 (say, 125 pax), but you can fill 2 75-90 seat RJs a day at the same ticket price.

And, yes this would be a good move against JetBlue, but also against the majors as well. It's always been interesting to me that you can make a 100 seat jet profitable in a given market, but not a 120 seater. Doesn't seem like having to have 1 more f/a on-board would make that much difference.

And, there are quite a few stations out there that can only accept RJ-size a/c. SWA is definitely going to be the largest airline if they keep growing this way--particularly if they keep "doing it right" as they have done for the past 25 years.

Gee, are you ready for HOU-CDG on SWA?

 

[lownslow]

Interesting to see any indication that WN might even think of becoming a bit of a follower in the industry by following JetBlue's lead. That said, I'm not sold on these RJ purchases being the best move. WN seems to do just fine into moderately sized stations with 737s. I really only see this opening smaller markets to WN service. However, many of the smaller markets left only have commuter service as it is for a good reason - they simply can't support many point-to-point flights, even at discounted prices. Instead, they get along by funneling passengers to where they can connect - this doesn't fit with the WN model, and would only work to any reasonable degree for cities sending pax to MDW, BWI, PHX, LAS, and maybe a few other large WN stations. That's just my $0.02, though, and I'm no expert.

 

[Boeingguy]

I lifted this off another forum but I thought it a reasonably good post:

>>>I say it is a move that had to be made for the simple reason that there are fewer and fewer untapped metro areas of more than 1m persons (the old threshhold) for LUV to move into with high-frequency 737 service.

In 1996, it was fine to point out how many untapped market there were of more than 1m people that LUV had yet to fly to (great cities like BUF, ALB, BDL, MHT/PVD, ORF...). 7 years later, the only ones left on the list have fortress hubs (DEN, MSP, CLT, ATL, CVG, PIT, PHL, MIA, etc.).

It was also fine to point out that LUV could add interesting transcons like BWI/BDL to OAK/LAS/LAX and semi-transcons like MDW-SEA/PDX/OAK/LAS/LAX/

But those are pretty much tapped out, and if LUV is to tap new markets, it is going to have to be SMALL markets.

Small but prosperous places like DAY, FNT, GRR, FAT, ICT, ROC, SYR, CAK, ROA, TLH, that would love service to BWI, HOU and MDW

Smaller airports in huge markets like TTN (Trenton NJ) and BED (Boston/Route 128),

Or a small share in highly competitive routes such as flying to the other guy\'s hubs on routes like BWI-MIA or MDW-MSP. <<<

 

[JS]

Interesting to see any indication that WN might even think of becoming a bit of a follower in the industry by following JetBlue's lead. That said, I'm not sold on these RJ purchases being the best move. WN seems to do just fine into moderately sized stations with 737s. I really only see this opening smaller markets to WN service. However, many of the smaller markets left only have commuter service as it is for a good reason - they simply can't support many point-to-point flights, even at discounted prices. Instead, they get along by funneling passengers to where they can connect - this doesn't fit with the WN model, and would only work to any reasonable degree for cities sending pax to MDW, BWI, PHX, LAS, and maybe a few other large WN stations. That's just my $0.02, though, and I'm no expert.

Southwest does not really operate point-to-point anymore. It is basically a hub and spoke network, albeit with LOTS of hubs, some small and some large.

Very few markets can support point-to-point service (e.g., DAL-HOU, HOU-SAT, SAT-DAL, BWI-LAX, etc.) All the other markets (e.g., TUS-MCI) require a stop along the way. Adding small planes will work fine with Southwest's system.

 

[Busdrvr]

Southwest does not really operate point-to-point anymore. It is basically a hub and spoke network, albeit with LOTS of hubs, some small and some large.

Very few markets can support point-to-point service (e.g., DAL-HOU, HOU-SAT, SAT-DAL, BWI-LAX, etc.) All the other markets (e.g., TUS-MCI) require a stop along the way. Adding small planes will work fine with Southwest's system.

I agree that SWA is developing into a "hub and spoke". Any move to RJ's is merely a vindication of what some of have been saying all along, there is a limited number of city pairs that can support a point to point system. Having said that, I still don't see it happening, and if it does, sell your stock. Most of SWA's cost advantage is from labor cost savings. Just how do they plan to offer a cheaper product than Mesa, ACA, ASA, Comair, Air Willy, Skywest, ect. Cheaper wages? don't think that's legal outside the borders of mexico or India. 51-100 seats requires two F/A's and two pilots, gate agents, pushback crew, fueler, ect. Pretty much the same folks it takes to launch a Guppy (one less F/A and maybe one less gate agent). all spread out over 50 less pax. Think they'd try a "company within a company" to reduce labor costs?

 

[jimntx]

Am I correct that it is established practice with the airlines now that pilots who fly bigger planes (777, 767) make more than pilots who fly the single aisle planes (MD-80, 737, etc.) for the same airline?

If so, just a thought...

It is also established that flight attendants are paid strictly by seniority. However, pilots are qualified on only 1 a/c at a time whereas within a given airline, most f/as are qualified on ALL or most a/c that the company flies.

To make the RJs economically viable, most airlines separate them out to a subsidiary company that operates on a different FAA certificate so that they can pay pilots and f/as even less.

Could SWA have in mind that they will operate the RJs on the same certificate, but different pay scales for pilots and f/as? And, maybe have a "training program" where you start on the RJs, then "graduate" to the 737 fleet with seniority???

This would create a whole new mess for the majors like AA and Delta that own separate regional airlines.

 

[Busdrvr]

"Am I correct that it is established practice with the airlines now that pilots who fly bigger planes (777, 767) make more than pilots who fly the single aisle planes (MD-80, 737, etc.) for the same airline?

If so, just a thought..."

A Mesa RJ F/O makes in the Range of $17 per FLIGHT hour (approx 17K a year) his first year, and then gets up to the BIG bucks ($28 per hour or approx 28K a year) his second year. the reason that most majors don't "buy and fly" is because the current pay levels for the RJ don't even come close to the "pay line". In other words, DAL, AMR and UAL pilots would GLADLY fly RJ's (no moped stigma), but the payrates, while significantly lower than say a 737, would still excede pilot costs in the minor leagues.


"It is also established that flight attendants are paid strictly by seniority. However, pilots are qualified on only 1 a/c at a time whereas within a given airline, most f/as are qualified on ALL or most a/c that the company flies."

F/A's at the Small jet operators also typically make substantially less. Putting mainline F/A's onboard would also increase costs.

"Could SWA have in mind that they will operate the RJs on the same certificate, but different pay scales for pilots and f/as? And, maybe have a "training program" where you start on the RJs, then "graduate" to the 737 fleet with seniority??? "

Without debating the relative merits of differing training philosophies, it is FACT that SWA saves a SUBSTANTIAL amount of money because of the way pilots are trained. They come to the company with a type-rating. When they upgrade to Capt, they get only a couple Sims, then the rest of the "training is acomplished in the Jet on revenue sorties. they can do this because ALL the captains just finished a few years in the right seat of the same jet. This would likely change (and give SWA crew training cost somewhat consistant with traditional airlines) if the "progression" became Right seat RJ, Right seat 737, left seat RJ, left seat 737. Do you think RS, LS RJ then right seat 737 would be viable? would the right seat of the 737 have to then pay more than RJ Capt? Jetblue can play silly fensing games due to the lack of a union and it's unsustainable growth rate/upgrade time. SWA is simply too big for that. welcome to the big leagues (mature company status).

 

[KCFlyer]

Southwest does not really operate point-to-point anymore. It is basically a hub and spoke network, albeit with LOTS of hubs, some small and some large.

Very few markets can support point-to-point service (e.g., DAL-HOU, HOU-SAT, SAT-DAL, BWI-LAX, etc.) All the other markets (e.g., TUS-MCI) require a stop along the way. Adding small planes will work fine with Southwest's system.

I dunno about that JS. From MCI, I can go to 22 Southwest cities on a nonstop flight. You're right, TUS isn't one of them. Compare that to 2 cities on United, 2 cities on AA, 2 cities on NWA, 3 cities on U, and 4 cities on Delta. And I doubt seriously that 22 fewer seats than a 737-500 is going to allow them to start serving TUS-MCI with a nonstop flight anytime soon.

And I agree with Busdriver on a couple of points - first that I doubt seriously that SWA would accept any kind of "regional jet" outside of a 737-600 configured for 100 seats. I don't see them as "following JetBlue's lead" in that I'm not so sure that JetBlue's lead is the right one. First off, Jetblue admits that their new "regional" jet will increase their operating costs by 14% right off the bat. Eventually, the one big happy family feeling will grow stale, especially among pilot ranks since IMHO, pay rates are going to cause a problem. Then you have the transition costs as the "RJ" pilots move over to the 320's. Considering that Jetblue, though profitable, is running with a breakeven load factor of nearly 80% - you start bumping up costs and you're going to have to either bump up the breakeven load factor, or bump up the ticket prices. Neither are an enviable position to be in, IMHO.

And I agree with Busdriver on his statement:

Having said that, I still don't see it happening, and if it does, sell your stock.

Can't argue with that. One of the things that has made SWA a darling of Wall Street is their consistency in sticking with their business model. Should they begin to emulate the other airlines that are losing money by introducing a new aircraft into the fleet, I think Wall Street will send them a reminder of their displeasure.

 

[Busdrvr]

"And I doubt seriously that 22 fewer seats than a 737-500 is going to allow them to start serving TUS-MCI with a nonstop flight anytime soon."

Right, and I think it disregards SWA's philosophy. they'd rather fly more, larger jets to PHX and you as a customer would usually prefer to share in and enjoy the costs savings with a simple 1 and a half hour drive to TUS. Sphere's of influence!!


"Considering that Jetblue, though profitable, is running with a breakeven load factor of nearly 80% - you start bumping up costs and you're going to have to either bump up the breakeven load factor, or bump up the ticket prices. Neither are an enviable position to be in, IMHO."

HERESY HERESY!!

 

[A10Pilot]

When they upgrade to Capt, they get only a couple Sims, then the rest of the "training is acomplished in the Jet on revenue sorties.

Are you trying to imply something with this statement? Or are you relaying fact? Do SWA pilots continue to get training while flying with passengers onboard?

 

[Busdrvr]

Are you trying to imply something with this statement? Or are you relaying fact? Do SWA pilots continue to get training while flying with passengers onboard?

Don't get your panties in a wad, ALL airlines do a fair amount of training with Pax onboard. It's not like you just showed up at UPT. Most majors transition pilots between aircraft, so some time must be spent familiarizing oneself with a new jet (like going from Guppy to Bus). SWA pilots just need "left handed flying lessons". the "decision making" lessons are learned on IOE. All airlines try to limit the amount of time it's pilots spend NOT generating revenue. this ain't the AF.

 

[PLANES333]

Southwest does not really operate point-to-point anymore. It is basically a hub and spoke network, albeit with LOTS of hubs, some small and some large.

Very few markets can support point-to-point service (e.g., DAL-HOU, HOU-SAT, SAT-DAL, BWI-LAX, etc.) All the other markets (e.g., TUS-MCI) require a stop along the way. Adding small planes will work fine with Southwest's system.

I dunno about that JS. From MCI, I can go to 22 Southwest cities on a nonstop flight. You're right, TUS isn't one of them. Compare that to 2 cities on United, 2 cities on AA, 2 cities on NWA, 3 cities on U, and 4 cities on Delta. And I doubt seriously that 22 fewer seats than a 737-500 is going to allow them to start serving TUS-MCI with a nonstop flight anytime soon.

And I agree with Busdriver on a couple of points - first that I doubt seriously that SWA would accept any kind of "regional jet" outside of a 737-600 configured for 100 seats. I don't see them as "following JetBlue's lead" in that I'm not so sure that JetBlue's lead is the right one. First off, Jetblue admits that their new "regional" jet will increase their operating costs by 14% right off the bat. Eventually, the one big happy family feeling will grow stale, especially among pilot ranks since IMHO, pay rates are going to cause a problem. Then you have the transition costs as the "RJ" pilots move over to the 320's. Considering that Jetblue, though profitable, is running with a breakeven load factor of nearly 80% - you start bumping up costs and you're going to have to either bump up the breakeven load factor, or bump up the ticket prices. Neither are an enviable position to be in, IMHO.

And I agree with Busdriver on his statement:

Can't argue with that. One of the things that has made SWA a darling of Wall Street is their consistency in sticking with their business model. Should they begin to emulate the other airlines that are losing money by introducing a new aircraft into the fleet, I think Wall Street will send them a reminder of their displeasure.

I disagree with you on Jetblue not making the right move on the RJ's. B6 is a whole different animal; it is very different from southwest in many aspects.

For one thing it makes allot of sense for Jetblue to add smaller aircraft because they are noticing that there are many markets, such as MSY that need service to JFK, but do not have enough traffic to support one or more than one A320 flight per day, and it is not cost effective for B6 to operate into a city if they can only operate 1 flight per day, unless it makes sense to do so i.e. red-eyes or in MSY's case it is more of a seasonal market and the number of flights to the city will fluctuate.
When Jetblue looked into adding a smaller aircraft to its fleet, they did look at the A319 and the A318, but the aircraft are still much too large and expensive for what the airline is looking to do with them. When it come to Rjs, especially the 100 seater, the aircraft are very attractive from a cost stand point and an operational stand point.

No, jetblues BELF is not 80%; in fact it is much less than other airlines (especially SONG, which is another story). What would be the BELF on a B6 ERJ?

Let’s look at a JFK-RIC trip of aprox 500mi

ASM: 100 seats X 500mi = 50,000

CASM: looking at Jetblues average seat mile cost which is around 6 cents, when you add 14% (the additional cost they said it will take to operate the RJ) you get around 9 cents.
$.09 X 50,000 gives you a trip cost of $4,500

Cost per seat $4500 / 100 seats = $45

Current average fare to RIC from NYC is $180 one way. If Jetblue charged an average of $180 one way to RIC from JFK, their BELF would be 25%. So in actuality they would only have to fill 25 seats to break even on a trip to RIC from JFK. It makes sense to add the RJ’s if you ask me.

THE PROOF IS IN THE PUDDING; IN THIS CASE ITS BLUEBERRY PUTTING.

 

[mga707]

"And I doubt seriously that 22 fewer seats than a 737-500 is going to allow them to start serving TUS-MCI with a nonstop flight anytime soon."

Right, and I think it disregards SWA's philosophy. they'd rather fly more, larger jets to PHX and you as a customer would usually prefer to share in and enjoy the costs savings with a simple 1 and a half hour drive to TUS. Sphere's of influence!!

Actually, in this particular case I'd much rather take the TUS-MCI one-stop (which I have) and put up with 25 minutes on the ground in ABQ than drive two hours (more realistic time, especially from the E side of TUS) up to the City We Love To Hate.
But you point is well taken: In a few weeks I AM making the dreaded drive up to Hell On Earth in order to get to IND nonstop, rather than making a connection in MDW along with the ABQ stop. Although prices were pretty close (TUS-IND was about ten bucks more), in this case the time savings are worth it.