Fuel Costs

[Hopeful]

It would be interesting to see how Southwest deals with 2006 fuel costs.

---INDUSTRY NEWS---



From the Tulsa World

---SOUTHWEST FACES RISE IN FUEL COSTS NEXT YEAR---

Southwest Airlines Co. expects fuel costs to rise as much as $600 million next year and may add a surcharge to fares because of the expense, CEO Gary Kelly said Wednesday. The Dallas-based airline has protected 85 percent of its fuel needs for this year at $26 per barrel of crude oil by using financial instruments, known as hedges, that limit the effect of price variations. Next year, Southwest's hedges will decline to 70 percent of its fuel needs at $36 a barrel, Kelly said in a speech to the Aero Club in Washington, D.C. "Even with the great fuel hedge next year, compared to this year, all else being equal, our fuel costs are going to go up $500 million to $600 million," he said. "That's more than all of our earnings for 2004."

Editor's note: The concerted efforts of employees in all work groups have resulted in millions of dollars in fuel savings for American and American Eagle. Access the Fuel Smart section on Jetnet's News page and learn more about the company's fuel saving efforts.

 

[KCFlyer]

It would be interesting to see how Southwest deals with 2006 fuel costs.

---INDUSTRY NEWS---
From the Tulsa World

---SOUTHWEST FACES RISE IN FUEL COSTS NEXT YEAR---

Southwest Airlines Co. expects fuel costs to rise as much as $600 million next year and may add a surcharge to fares because of the expense,

Looks like the question has been answered. The real question is...if Southwest recognizes that fuel costs, despite the lower price for them, requires a surcharge - how many "newly low cost" carriers in or emerging from bankrutpcy, and who are paying market price, will follow suit, or will they underprice SWA and continue to show losses? After all...you can read on just about any aviation forum "Southwest does NOT have the lowest fares". You'd think by now someone might look at that statement, and profits on the income statement and put two and two together. But they don't. Butt's in seats are far more important than profits.

 

[Hopeful]

Good point, KC.

But I am interested in seeing how they approach it. Fare increases, cost cutting with regards to labor, reduce capacity, etc. Also, I believe they will act NOW to offset the future fuel costs. Hedging at today's prices in longer an option.

 

[SWAFA30]

Good point, KC.

But I am interested in seeing how they approach it. Fare increases, cost cutting with regards to labor, reduce capacity, etc. Also, I believe they will act NOW to offset the future fuel costs. Hedging at today's prices in longer an option.

Fare increases are already happening in some markets. Capacity reductions are unlikely...at least in the short term. SWA just announced
additional service in existing markets including additional flighs to New Orleans. As for asking labor for concessions. I don't see that happening anytime soon. I don't think even "the great one" Herb himself could broach the subject without considerable backlash from the unions. The company values its relationship with labor too much to go down the concessionary road until every other option has been exhausted.

Revenue generation seems to be the new focus. Depending on which pundits you listen to, that is the reason behind the move into Denver. Word around the watercooler is that Gary Kelly has said that SWA can no longer afford to avoid large, crowded airports. PHL and DEN could be viewed as evidence of this new line of thought. The point is to go where the money is...if that means sacrificing turn times and sitting in the conga line with everybody else...so be it. The exception of course being DFW.

 

[mrfish3726]

Whatever happens at SWA in reguards to cost, management knows that they can ALWAYS count on labor doing their part to make SWA a profitable company. See that is what the BIG airlines DON"T understand, employee loyalty. This concept has been in place for 30+ years at SWA and the employees won't bite the hand that feeds them.

Herb Keller has always run SWA under these three guide lines:

1. The employees will always come first!

2. The customer will always come second!

3. and the share holders will always come thrid!

Imagine that, what a wonderful business model. No wonder they have been profitable for over 30 years. Does anyone recall SEPT 11th? SWA was the ONLY company that didn't lay off workers. No, instead the employees agreed to give back one day of work a pay period for 6 months to see that everyone remained on the job at SWA. Having employee dedication like that is what will help SWA weather any rising fuel issues PERIOD!

 

[wwtraveler99]

Does anyone recall SEPT 11th? SWA was the ONLY company that didn't lay off workers. No, instead the employees agreed to give back one day of work a pay period for 6 months to see that everyone remained on the job at SWA. Having employee dedication like that is what will help SWA weather any rising fuel issues PERIOD!

Well this is news to me. I never saw a penny taken out of my check. There were some ideas thrown out there by employee groups but to the best of my knowledge nothing ever materialized. I know for sure no one in my work group was asked for any type of wage give back.

 

[KCFlyer]

Well this is news to me. I never saw a penny taken out of my check. There were some ideas thrown out there by employee groups but to the best of my knowledge nothing ever materialized. I know for sure no one in my work group was asked for any type of wage give back.

ww...I read something about this and I can't recall specific details, but I think it was a voluntary effort, but the company could not withhold any pay because of legal reasons. I don't know if donations were permitted. Again, it was so long ago i can't recall the details.

 

[FWAAA]

My prediction: WN will be successful at raising fares - it was successful at increasing unit revenue in the third quarter of this year, although its percentage gains lagged those at AA.

Another prediction: WN will not seek wage give-backs. However, WN employees are facing about a decade of very small wage gains; maybe 1% per year to allow even the LCCs to catch up to their wage scales. Although WN employees are already very productive, look for even more productivity initiatives to help maintain their industry-leading wages.

Capacity is being removed from the high-fare, high-cost legacy system. DL, NW, UA, AA and even US/HP are all slowly removing capacity. Those capacity reductions will help allow fare hikes to stick, resulting in actual unit revenue increases.

 

[wwtraveler99]

ww...I read something about this and I can't recall specific details, but I think it was a voluntary effort, but the company could not withhold any pay because of legal reasons. I don't know if donations were permitted. Again, it was so long ago i can't recall the details.

KC....I am not saying you are wrong, but back in the early 90's (91 or 92) we had a fuel buying program. This allowed employees to deduct a certian amout each pay period for WN's fuel purchase. I know for a fact this did occur. So I am not sure what type of legal restrictions would prevent some sort of wage give back.
As I said before yes there were someideas thrown out there for some sort of concessions.

Anyway here is hoping they will not need to ask for them in the future. But I do need the stock price to hit $18.76 by end of 2Q. (stock options)

 

[ramper_in_las]

Well this is news to me. I never saw a penny taken out of my check. There were some ideas thrown out there by employee groups but to the best of my knowledge nothing ever materialized. I know for sure no one in my work group was asked for any type of wage give back.

shortly after sept. 11 occurred a interstation memo was put out because of the over whelming response of the swa employees wanting to help out our company and the give back is what they came up with. If you didnt hear about it then you needed to look in your station mailbox.

 

[mrfish3726]

Ramper,

Thanks, I was at UniTED when I heard that and had buddies there in your maintenance department that confirmed the fact. WWTravler obviously isn't a team player with the team spirit that exists at SWA??? Every company has them, some MORE than others! SWA management knows without a doubt that it can depend on it's employees during the good and the bad times. Remember that WWTravler! Next time read your company memos and get on board!!!!

 

[WNjetdoc]

Whatever happens at SWA in reguards to cost, management knows that they can ALWAYS count on labor doing their part to make SWA a profitable company. See that is what the BIG airlines DON"T understand, employee loyalty. This concept has been in place for 30+ years at SWA and the employees won't bite the hand that feeds them.

Herb Keller has always run SWA under these three guide lines:

1. The employees will always come first!

2. The customer will always come second!

3. and the share holders will always come thrid!

Imagine that, what a wonderful business model. No wonder they have been profitable for over 30 years. Does anyone recall SEPT 11th? SWA was the ONLY company that didn't lay off workers. No, instead the employees agreed to give back one day of work a pay period for 6 months to see that everyone remained on the job at SWA. Having employee dedication like that is what will help SWA weather any rising fuel issues PERIOD!

mrfish, I agree with your post, except the last paragraph isn't totally accurate. It was a voluntary thing and I think a decent amount of us took them up on it, however you are correct on the info above your last paragraph.

During the time following 9/11 I NEVER ONCE FELT MY JOB WAS IN JEOPARDY. Colleen came out and said that we would sell a/c before we laid ANYONE off!! Thats when I knew this was really a great company. I know it sounds corny but when you know someone has your "6" then you don't mind going the extra mile for them. There are some other things I'd like to add to this but evertime I type it I'm thinking I shouldn't put it down here....regardless this is a great company and I'm very happy to be here.

So I think you're correct mrfish, this company does know that its the employee's that must be first, then everthing else will fall into place. Let me try this....I've only been here for about 10 years and its changed in those 10 years. We were a lot smaller then, heck I was one of the original 5 mechs that opened BWI. There would be nights when it was two of us working RON and having 8 a/c here. Im not saying they were loaded up with maint but even doing simple checks on 8 a/c with two guys is a bit of work, but we didn't mind...we were working for SWA.

Of course as you grow you get more folks, more personalities, more everything. I suppose its normal and we are evolving? I see the company doing things that I worry about, I've seen them hire a "big wig" in Maint. "off the street" from Usair recently. A lot of us are worried about that as we thought we always hired from within for poistions like that. I must admit I was also worried because he worked at U, but then I thought, I worked for U and I didn't bring the culture that I had over here. We have several guys here at BWI that worked for U and they are all great mechs, (well maybe not all, lol), but 95% are. I think the company wants another perspective on things, thus they hired this man as a "big wig". I HAVE to trust what they are doing as they have consistently made pretty wise decisions over the years.

I feel we must keep our culture, even as we grow. We board more passengers than any airline in the WORLD save one or two, and we only fly domestically. We are a pretty dang large airline, even though I've read posts from people saying we are not a "real" airline because we don't fly fatties, (widebody's), or fly internatonal. I think those posts are from people that are bitter.

I wonder sometimes if we will forget where we came from or how we started, and I think that it's important we don't, however we should keep looking forward and growing, doing new and innovative things. We have to find a way to combine both, (keeping our culture while growing), and still be a great airline to work for, as thats what keeps us being what we are, SOUTHWEST AIRLINES.

You lose the employee's heart's then you lose the airline's heart and you just become "ANY COMPANY USA".

 

[ramper_in_las]

I wonder sometimes if we will forget where we came from or how we started, and I think that it's important we don't, however we should keep looking forward and growing, doing new and innovative things. We have to find a way to combine both, (keeping our culture while growing), and still be a great airline to work for, as thats what keeps us being what we are, SOUTHWEST AIRLINES.

I think we are losing our culture in our mega stations. Our priorities have gone gone from having fun at work to how productive we can be. Don't get me wrong I luv my job and i see the bigger picture and for sure its still 100% better working at swa than any regular job i have ever had. B)

 

[wwtraveler99]

Ramper,

Thanks, I was at UniTED when I heard that and had buddies there in your maintenance department that confirmed the fact. WWTravler obviously isn't a team player with the team spirit that exists at SWA??? Every company has them, some MORE than others! SWA management knows without a doubt that it can depend on it's employees during the good and the bad times. Remember that WWTravler! Next time read your company memos and get on board!!!!

Hey Fish,

Show me where I said I wouldn't ever help out a give a little back. All I said was I didn't SEE anything. I did hear people talk about it. So don't get upset with me because of the pay cuts you have had to endure. Believe me I wish no airline employee would have to give back anything. Maybe you management will figure out how tofinally manage your company and you will be spared anymore cuts.

 

[mrfish3726]

WWtravler,

I didn't say anything about pay cuts, now did I? I was just making a point that some at SWA don't seem to be team players is all! If the truth hurts then so be it . No one here at Frontier has taken any pay cuts as I can recall. Your just assumming that and not posting anything factual. We have as good of a management team here at Frontier as you do at SWA.