Why We Cannot Compete With Luv.

Guys:

I do not hate Southwest. I respect everything about Southwest. I am just tired of people comparing a one A/C type domestic carrier only, with a domestic/international corporation who's missions are not apples to apples. Southwest no longer has the cheapest labor. They have employees on par with the seniority of other "legacy carriers." They are heavily unionized. They are starting to show signs of achieving those comonalities with other airlines. My post from last night was just pointing out my frustrations with the cost of fuel, and those fortunate hedges SW had the money for to put in place is their really massive cost advantage right now. Without that cost advantage folks, Southwest is not so extra special any more. That is just my opinion. They have done a great job containing costs since their start about 30 years ago. United Airlines got big and fat and lazy, and UAL took their eye off the ball way too many times. But Southwest is still 50 years younger than UAL and it will be interesting to see what Southwest looks like in the year 2054. Still flying one fleet? Still only domestic? Still got that 25 dollar oil hedge in place?

We are all tired of those that compare Jetblue to more mature airlines with international fleets and routes, with employees more senior than 5 years, and an airplane that actually needs to have its maintenance paid for, instead of taking advantage of the warranties still in place after the sweat deal on on the purchase prices from Airbus. It is very easy when you have no retirees to take care of, and fast growth to satisfy all your employees. But things are slowing down over there as the easy cherry-picking of routes becomes more difficult and all those airplanes start needing heavy checks and those employees start pushing that pay scale up in years. They have already made the mistake of going to another fleet type. Oh no! More training and transition costs. The Wall Street Darling Jetblue's stock has gone from 46 bucks to 21 bucks in the last year. There is a reason for that. Costs are rising and expansion is becoming more difficult. As everyone gets those leather seats and TVs, JetBlue will be just another carrier.

I say again, I do not hate Southwest, or blame them for our problems. Our problems were self inflicted by not containing costs and not reinventing ourselves to compete with these new start-ups.

Domestically, Southwest will always be a competetor. Internationally UAL will always be a competetor. United will adapt domestically, or cease to exist like PanAm. We will never have the cost stucture of Southwest. But the topic of this post about not being able to compete with Southwest? For every passenger that says they love Southwest, I have talked to another that can't stand things like the multiple stops and the lack of seating assignments of Southwest. We can compete. And we will.
 
BigRed1,

I do not believe that anyone is 'slamming' LUV and/or JetBlue.
JMHO, it's in response to the 'management staff' that compares UA to them.

We can compete. And we will.

Take Care,
B) UT
 
BigRed1 said:
It is very easy when you have no retirees to take care of.
[post="186977"][/post]​

Just wait, before long UA own't have retirees to take care of either. :shock:
 
First it was, "all the Legacy Carriers needed to be like LUV," until it was pointed out that LUV is the most heavily unionized airline in the US and the Mechanics pointed out that the LUV guys made more; the argument immediately changed to "LUV mechanics only make more because they don't do most of their heavy maintenance."

Now that UAL has spun off most of their heavy maintenance, will the UAL Mechanics start making what the LUV guys do?

Just a question.
 
Southwest Airlines
Now 33 years old and the nation's sixth-largest airline, the discount giant's no-frills flights are starting to look chintzy as upstarts like JetBlue offer equally low fares, plus frills like satellite TV and assigned seats. Nor does Southwest have an edge in cheap, young nonunion labor any longer. Its attendants' contract resulted in 31% average wage hikes, so that within three years they will be the best paid in the sky, earning up to $56,350 annually. Under the new wage scale, Southwest's overall cost to fly a seat one mile jumped from 7.6 cents to 8.1 cents on June 30, reports Airline Monitor, a trade publication. From 20% to 25% annual growth in the mid-1990s, earnings have fallen an average of 2% annually the past five years. The market may be catching on. Southwest's stock is down 30% the past year to a recent $13.80 per share. Even so, its lofty $10.9 billion market value is more than that of the nation's ten other largest airlines combined.
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From Forbes.com
 
Boomer said:
First it was, "all the Legacy Carriers needed to be like LUV," until it was pointed out that LUV is the most heavily unionized airline in the US and the Mechanics pointed out that the LUV guys made more; the argument immediately changed to "LUV mechanics only make more because they don't do most of their heavy maintenance."

Now that UAL has spun off most of their heavy maintenance, will the UAL Mechanics start making what the LUV guys do?

Just a question.
[post="187185"][/post]​

The UA mechanics can now be paid as much as the LUV guys are LESS the amount of debt incurred to pay employees leading wages in all those unprofitable years.

LUV doesn't have that debt to pay. They haven't had unprofitable years.

Tough, but true. You run up debt, your standard of living must inevitably fall. :(
 
Good, I'm sure that they will look for your support since following emergence from BK most if not all of the debt will have been discharged.
 
You can bet if SWA[LUV] gets into DFW they will start international trips into Mexico and take on AA head to head for the business.
 
The Wall Street Darling Jetblue's stock has gone from 46 bucks to 21 bucks in the last year. There is a reason for that. Costs are rising and expansion is becoming more difficult.

Southwest's stock is down 30% the past year to a recent $13.80 per share.

In case you haven't noticed, all airline stocks are in the toilet Year-To-Date, and primarily for two reasons:

1. OIL
2. Decreasing yields (i.e. passengers paying less for seats).

I would not say that the decline in stock price of any airline is strictly an indication of the markets' reaction to its business plan.

I agree that comparing UAL to LUV is not comparing apples to apples, but it is not an apples to oranges comparison either... Its more like comparing red apples to green apples. That is to say, they have more in common that they have different.

I think part of the problem is that you are hard pressed to find a "successful" legacy airline right now. Sure, some are better off than others, but all are unprofitable. Should CAL acheive profitability first (or whomever) among the legacy group, then they would become a benchmark airline for the legacy group.

At any rate, there is no reason why 'UAL must copy LUV'. The only requirement in the biz world is to return a decent profit to the shareholders. The issue is that in the airline world, the only company that has been able to do that consistently for years and through business cycles is Southwest. In this manner, until another company can match that record, they will be the benchmark. That is why AirTran and jetBlue have been getting that kind of attention... Through this recession, they have shown a demonstrated ability to profit (so far), and thus they look good for the long-term.

I believe that with proper management, UAL can be turned around. So far, management seems to have been wasting time reorganizing (like the amount of time spent on the ATSB loan process with no backup plan) under the assumption things would get better (they did not, fuel went from $35/bbl to $53/bbl). Now that UAL management seems to be focusing on the airline, it should start a slow turnaround. A better economic picture would only accelerate the process.

I think UAL is smart for focusing on its int'l system. It should focus on its profitable strengths. While UAL does have a large and admirable domestic system, if its not profitable, or portions of it are not profitable, they should be fixed (i.e. transformed to profitable) or eliminated.
 
The LCCs all went through a huge growth spurt because the legacies were focused on survival and didn't pay much attention to the competitive environment for a couple years. Now, legacies are realizing that either have to fight to keep their markets or be willing to get out of them.
And notice that Southwest is now looking for growth prospects in US' backyard since they are now the highest cost carrier. WN is no longer trying to open small to medium size cities and compete based on product or reputation. They are beating up the weakest carrier in the industry. Granted, that is part of free market competition but it does tell you that WN isn't having to work as hard to develop new markets as it once did.
And JetBlue is finding that AA, CO, and DL are all willing to defend NYC and the NE (like any reasonable person would think that all three airlines would just roll over and play dead). B6 has some tough choices ahead in finding uses for its nearly 200 aircraft on order.
And AirTran is finding that DL is not rolling over in Atlanta any more and instead is adding capacity in what was long considered the world's most profitable hub. United, is of course, fighting for its markets in IAD and DEN.
Not all of these legacy battles will be successful and they will all take a toll on the legacies as long as their costs are higher than the LCCs but you won't see market share ceded without a fight as it has been for much of the past 3 years.
 
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