Didn't see this coming!

[grmach1]

Is Southwest heading for a “Tran” Wreck?

By Matthew DiLallo - March 22, 2012| Tickers: DAL, JBLU, LUV, UAL, LCC| 0 Comments

Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.


This past weekend I had the distinct displeasure of flying on Southwest’s (NYSE: LUV) recently purchased AirTran subsidiary. I had heard that Southwest had acquired them last year and honestly was surprised they were still using the AirTran name. Having flown Southwest for the first time last year, and having a very positive customer experience, I’m very surprised at how un-Southwest AirTran still seamed more than eight months after the merger closed.

As a customer my experience at AirTran was such that I’d never want to fly with them again. From countless unexplained delays to poor communication there wasn’t much that went right with my trip. What was most irritating was being told one thing by one employee only to find out that they didn’t know what they were talking about after the fact. It really made me wonder if Southwest has bitten off more than they can chew as they attempt to merge the two airline cultures. Employees were not clear in their directions to customers and at times were borderline rude or at least very unsympathetic which is the polar opposite to the customer friendly brand that Southwest brand become synonymous with.

Given my experience it made me wonder if Southwest wouldn’t be able to pull this merger off and could possibly be a good short candidate. In doing some research on the company to see if they were having any merger integration problems I was most interested in this statement out of their latest earnings release from CEO Gary Kelly:

"While it will take several years to fully integrate AirTran into Southwest Airlines, I am very proud of the tremendous progress in only eight months' time. We are on track to obtain our single operating certificate this quarter. The Southwest Airlines Pilots' Association and the Air Line Pilots Association took the lead on negotiating a seniority list integration (SLI) agreement that was ratified by both Pilot groups. The Flight Attendants', Mechanics', and Flight Instructors' unions have tentative SLI agreements, currently out for vote by the memberships. As a result of the superb efforts of our People, we are already producing over $200 million of net annualized pre-tax synergies, which is 50 percent of our $400 million target by 2013 (excluding acquisition and integration expenses). For 2011, we realized $80 million in net pre-tax synergies, and the acquisition was modestly accretive to our 2011 results, excluding special items, as planned."

The Company incurred $134 million in expenses (before taxes) associated with the acquisition and integration of AirTran during 2011, including $37 million in fourth quarter 2011. The Company expects total acquisition and integration expenses will be approximately $500 million.

In reading what Kelly had to say it sounds like they are well on track with integration and he is pleased with the progress. I can speak from experience that mergers are a messy business and they do take years to complete. I also can’t blame him for making the deal, less than a year prior to the AirTran purchase we saw the United Continental (NYSE: UAL) merger take place. It appears likely more deals will need to get done as the industry continues to face huge cost headwinds from the price of oil, labor costs and intense competition. I’m not surprised Delta Air Lines (NYSE: DAL), US Airways (NYSE: LCC) and the recently emerged from bankruptcy American Airlines all rumored to be heading exploring mergers of their own. I even found JetBlue's (NASDAQ: JBLU) name attached to some merger rumors on Google.

While I am severely displeased with AirTran and by extension Southwest as a customer, I’m not sure that my experience alone makes them a good short candidate. If anything the rising price of oil will do more damage to the bottom line than one bad customer experience. I’ll chalk this one up to one bad day and leave it at that as Southwest seems to be on very solid footing despite the challenges.

As far as airlines go, Southwest has as much of a fortress of a balance sheet as you’ll find: Rated investment grade by all three ratings agencies, $3.7 billion of cash and investments, leverage of 46% and they are actually profitable. If any airline can succeed in this environment its Southwest as they just have a better competitive position which over time should be improve with the AirTran merger. While I’m not willing to invest a dime of my own money to buy an airline stock, I’m certainly not willing to short Southwest either

 

[superman32870]

Is Southwest heading for a “Tran” Wreck?

By Matthew DiLallo - March 22, 2012| Tickers: DAL, JBLU, LUV, UAL, LCC| 0 Comments

Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.


This past weekend I had the distinct displeasure of flying on Southwest’s (NYSE: LUV) recently purchased AirTran subsidiary. I had heard that Southwest had acquired them last year and honestly was surprised they were still using the AirTran name. Having flown Southwest for the first time last year, and having a very positive customer experience, I’m very surprised at how un-Southwest AirTran still seamed more than eight months after the merger closed.

As a customer my experience at AirTran was such that I’d never want to fly with them again. From countless unexplained delays to poor communication there wasn’t much that went right with my trip. What was most irritating was being told one thing by one employee only to find out that they didn’t know what they were talking about after the fact. It really made me wonder if Southwest has bitten off more than they can chew as they attempt to merge the two airline cultures. Employees were not clear in their directions to customers and at times were borderline rude or at least very unsympathetic which is the polar opposite to the customer friendly brand that Southwest brand become synonymous with.

Given my experience it made me wonder if Southwest wouldn’t be able to pull this merger off and could possibly be a good short candidate. In doing some research on the company to see if they were having any merger integration problems I was most interested in this statement out of their latest earnings release from CEO Gary Kelly:

"While it will take several years to fully integrate AirTran into Southwest Airlines, I am very proud of the tremendous progress in only eight months' time. We are on track to obtain our single operating certificate this quarter. The Southwest Airlines Pilots' Association and the Air Line Pilots Association took the lead on negotiating a seniority list integration (SLI) agreement that was ratified by both Pilot groups. The Flight Attendants', Mechanics', and Flight Instructors' unions have tentative SLI agreements, currently out for vote by the memberships. As a result of the superb efforts of our People, we are already producing over $200 million of net annualized pre-tax synergies, which is 50 percent of our $400 million target by 2013 (excluding acquisition and integration expenses). For 2011, we realized $80 million in net pre-tax synergies, and the acquisition was modestly accretive to our 2011 results, excluding special items, as planned."

The Company incurred $134 million in expenses (before taxes) associated with the acquisition and integration of AirTran during 2011, including $37 million in fourth quarter 2011. The Company expects total acquisition and integration expenses will be approximately $500 million.

In reading what Kelly had to say it sounds like they are well on track with integration and he is pleased with the progress. I can speak from experience that mergers are a messy business and they do take years to complete. I also can’t blame him for making the deal, less than a year prior to the AirTran purchase we saw the United Continental (NYSE: UAL) merger take place. It appears likely more deals will need to get done as the industry continues to face huge cost headwinds from the price of oil, labor costs and intense competition. I’m not surprised Delta Air Lines (NYSE: DAL), US Airways (NYSE: LCC) and the recently emerged from bankruptcy American Airlines all rumored to be heading exploring mergers of their own. I even found JetBlue's (NASDAQ: JBLU) name attached to some merger rumors on Google.

While I am severely displeased with AirTran and by extension Southwest as a customer, I’m not sure that my experience alone makes them a good short candidate. If anything the rising price of oil will do more damage to the bottom line than one bad customer experience. I’ll chalk this one up to one bad day and leave it at that as Southwest seems to be on very solid footing despite the challenges.

As far as airlines go, Southwest has as much of a fortress of a balance sheet as you’ll find: Rated investment grade by all three ratings agencies, $3.7 billion of cash and investments, leverage of 46% and they are actually profitable. If any airline can succeed in this environment its Southwest as they just have a better competitive position which over time should be improve with the AirTran merger. While I’m not willing to invest a dime of my own money to buy an airline stock, I’m certainly not willing to short Southwest either

One of the main problems with not interviewing and just welcoming with open arms. You dont want to interview them, you get the baggage that comes along with it. Now the crappy customer service by AT will now reflect on SW. You must interview the people that deal with the customers!!! Its not rocket science.

 

[gizmo_sc]

This guys post is all over a.net and the readers over there are having a hey day with him. So typical if a passenger has a bad experience they go nuts. Couple months back some lawyer and his girl friend wife to be were on a FL flight and claimed to see a COCKROACH... that info went viral for a short time and now it has died down. DL had a bad time killing and/or losing pets. That also died. As the integration of Wn and FL continues there will be hurdles. Right now the big thing is the reservations system. CS2 is just capable of doing what WN needs, FL system Navatare ( sorry not sure about the spelling) is not capable of running both airlines. So what is next GK has said a new reservation systems is in the works but that takes couple years. Once the ramp and customer service seniority integration has completed I think you will see more and more of FL winding down and WN taking over.

 

[grmach1]

This guys post is all over a.net and the readers over there are having a hey day with him. So typical if a passenger has a bad experience they go nuts. Couple months back some lawyer and his girl friend wife to be were on a FL flight and claimed to see a COCKROACH... that info went viral for a short time and now it has died down. DL had a bad time killing and/or losing pets. That also died. As the integration of Wn and FL continues there will be hurdles. Right now the big thing is the reservations system. CS2 is just capable of doing what WN needs, FL system Navatare ( sorry not sure about the spelling) is not capable of running both airlines. So what is next GK has said a new reservation systems is in the works but that takes couple years. Once the ramp and customer service seniority integration has completed I think you will see more and more of FL winding down and WN taking over.

Funny. Everyone I know that have flown to Atlanta for the airline integration issues have said the same thing. Rude uncaring people. Personally I don't know but the people who told me this are considered very trustworthy. I guess time will tell.

 

[WorldTraveler]

... time will tell whether WN's plan to very slowly integrate the two systems was a good idea but there is no doubt that they have created a second tier system which was bound to affect FL morale.
Compound that with the fact that WN doesn't have the technology to push the merger any further along and they are forced to use existing systems to run an airline that would be best be quickly merged.
Given that many FL people are not now and will not be enjoying many of the fruits of the WN ownership for quite some time but they have lost control of their own future, it isn't surprising that there is a decline in customer service at FL and it will likely only continue.
.
FWIW, FL was running a pretty good operation and delivering what its customers expected based on publicly available data. FL had a viable business model for FL's purposes.

 

[squidly]

This guys post is all over a.net and the readers over there are having a hey day with him. So typical if a passenger has a bad experience they go nuts. Couple months back some lawyer and his girl friend wife to be were on a FL flight and claimed to see a COCKROACH... that info went viral for a short time and now it has died down. DL had a bad time killing and/or losing pets. That also died. As the integration of Wn and FL continues there will be hurdles. Right now the big thing is the reservations system. CS2 is just capable of doing what WN needs, FL system Navatare ( sorry not sure about the spelling) is not capable of running both airlines. So what is next GK has said a new reservation systems is in the works but that takes couple years. Once the ramp and customer service seniority integration has completed I think you will see more and more of FL winding down and WN taking over.

Having flown airtran several times i know first hand what thier attitude is like, thats why their known as the welfare airline. If your breathing they'll give you a job. I agree that they need some sort of probation period, if they are not to be reinterviewed. Hopefully southwest will turn them around or get rid of them. I do know this, that as long as their attitude sucks it reflects back on southwest.

 

[squidly]

... time will tell whether WN's plan to very slowly integrate the two systems was a good idea but there is no doubt that they have created a second tier system which was bound to affect FL morale.
Compound that with the fact that WN doesn't have the technology to push the merger any further along and they are forced to use existing systems to run an airline that would be best be quickly merged.
Given that many FL people are not now and will not be enjoying many of the fruits of the WN ownership for quite some time but they have lost control of their own future, it isn't surprising that there is a decline in customer service at FL and it will likely only continue.
.
FWIW, FL was running a pretty good operation and delivering what its customers expected based on publicly available data. FL had a viable business model for FL's purposes.

where's the truth part ???????

 

[signals]

This guys post is all over a.net and the readers over there are having a hey day with him. So typical if a passenger has a bad experience they go nuts. Couple months back some lawyer and his girl friend wife to be were on a FL flight and claimed to see a COCKROACH... that info went viral for a short time and now it has died down. DL had a bad time killing and/or losing pets. That also died. As the integration of Wn and FL continues there will be hurdles. Right now the big thing is the reservations system. CS2 is just capable of doing what WN needs, FL system Navatare ( sorry not sure about the spelling) is not capable of running both airlines. So what is next GK has said a new reservation systems is in the works but that takes couple years. Once the ramp and customer service seniority integration has completed I think you will see more and more of FL winding down and WN taking over.

There was a case years ago, where a FL flight from San Juan had to be fumigated because it was full of cockroaches.
About a year ago US had a plane full of maggots, caught on peoples' phone cameras.

 

[signals]

... time will tell whether WN's plan to very slowly integrate the two systems was a good idea but there is no doubt that they have created a second tier system which was bound to affect FL morale.
Compound that with the fact that WN doesn't have the technology to push the merger any further along and they are forced to use existing systems to run an airline that would be best be quickly merged.
Given that many FL people are not now and will not be enjoying many of the fruits of the WN ownership for quite some time but they have lost control of their own future, it isn't surprising that there is a decline in customer service at FL and it will likely only continue.
.
FWIW, FL was running a pretty good operation and delivering what its customers expected based on publicly available data. FL had a viable business model for FL's purposes.

Still conversing with buscador,huh?

 

[signals]

Having flown airtran several times i know first hand what thier attitude is like, thats why their known as the welfare airline. If your breathing they'll give you a job. I agree that they need some sort of probation period, if they are not to be reinterviewed. Hopefully southwest will turn them around or get rid of them. I do know this, that as long as their attitude sucks it reflects back on southwest.

I called them AirTrash the trailer park with wings

 

[eolesen]

There was a case years ago, where a FL flight from San Juan had to be fumigated because it was full of cockroaches.
About a year ago US had a plane full of maggots, caught on peoples' phone cameras.

I spent time in Cabin Service Planning --- this stuff happens to every airline flying in/out of the Caribbean and Central America at some point. AA used to have Terminix scheduled to treat airplanes on a regular basis and on call when stuff was reported by flight attendants...

 

[X-U]

If people only knew what went on in restaurants, including very expensive ones...
Or hotels...
Or even their own homes...

 

[buscador]

Still conversing with buscador,huh?

Hey, I have been trying to just be a spectator

 

[buscador]

...


Given that many FL people are not now and will not be enjoying many of the fruits of the WN ownership for quite some time but they have lost control of their own future, it isn't surprising that there is a decline in customer service at FL and it will likely only continue.
.

This seems a little flawed to me,, the so called fruits of WN ownership are The Fruits that SWA employees have worked many years to help Grow, so you think that AT employees should get it all instantaneously?? 50% payraises arent worth waiting for?? The ink isnt even dried yet

Bottom line is that SWA has its wack jobs and bad employees and that comes with human nature and the sheer number of its employees. But every one of those SWA employees and I mean EVERY Single one of them have had to go through a hiring process and work their way up the tree that is providing that Fruit. Not One of them, including Morris had the luxury to get it handed to them. Morris employees had to re-interview and pray they got hired and then go to the bottom. So I guees it would be way to much to ask for those AT employees who(as you say) have lost control of their future to have patience and find the strength to be friendly to their Pax's, to be grateful for this Buyout and to give great customer service? As they are now a reflection of SWA?? Yea I see what your saying, those poor folks.

Wow, give me a %50 payraise and a stronger company and I think I could find the strength to make it, I would have to ability to see the light at the end of the tunnel and yes, I would even be patient! I think losing control of your future is hard to do when you are going to be soon getting Paid WAY more money at a far stronger company and not have the stress of re-interviewing, no probation, or going to the bottom, HAVING a Job at a company many thousands would luv to work for.

Where do I sign up for this Losing control of my future program?? So I understand this horrible program, it includes a %50 payraise, company match of 8+% in my 401k, profit sharing, a much stronger company, much better work rules, hmm , all the things my previous employeer Didnt have! Yea I think you are correct, that is just horrible.... bad customer service to everyone cause its just not worth waiting for

 

[AvTech04]

This seems a little flawed to me,, the so called fruits of WN ownership are The Fruits that SWA employees have worked many years to help Grow, so you think that AT employees should get it all instantaneously?? 50% payraises arent worth waiting for?? The ink isnt even dried yet

Bottom line is that SWA has its wack jobs and bad employees and that comes with human nature and the sheer number of its employees. But every one of those SWA employees and I mean EVERY Single one of them have had to go through a hiring process and work their way up the tree that is providing that Fruit. Not One of them, including Morris had the luxury to get it handed to them. Morris employees had to re-interview and pray they got hired and then go to the bottom. So I guees it would be way to much to ask for those AT employees who(as you say) have lost control of their future to have patience and find the strength to be friendly to their Pax's, to be grateful for this Buyout and to give great customer service? As they are now a reflection of SWA?? Yea I see what your saying, those poor folks.

Wow, give me a %50 payraise and a stronger company and I think I could find the strength to make it, I would have to ability to see the light at the end of the tunnel and yes, I would even be patient! I think losing control of your future is hard to do when you are going to be soon getting Paid WAY more money at a far stronger company and not have the stress of re-interviewing, no probation, or going to the bottom, HAVING a Job at a company many thousands would luv to work for.

Where do I sign up for this Losing control of my future program?? So I understand this horrible program, it includes a %50 payraise, company match of 8+% in my 401k, profit sharing, a much stronger company, much better work rules, hmm , all the things my previous employeer Didnt have! Yea I think you are correct, that is just horrible.... bad customer service to everyone cause its just not worth waiting for

You say that we're back to 8 months ago but yet you're the only one stuck in the past.... Get over it already please!!